The URL can be used to link to this page

Home My WebLink AboutSS3 - Financial Evaluation and Framework for Future Inclusionary Housing Ordinance (PA2022-045)Q �EwPpRT CITY OF O � z NEWPORT BEACH <,FORN'P City Council Staff Report March 22, 2022 Agenda Item No. SS4 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Seimone Jurjis, Community Development Director - 949-644-3232, sjurjis@newportbeachca.gov PREPARED BY: Jaime Murillo, Principal Planner, jmurillo@newportbeachca.gov 949-644-3209 TITLE: Financial Evaluation and Framework for Future Inclusionary Housing Ordinance (PA2022-045) ABSTRACT: As directed by Policy Action 1K (Inclusionary Housing Policy) of the City of Newport Beach's (City's) recently adopted 2021-2029 Housing Element, the City is in the process of developing an inclusionary housing ordinance and evaluating the financial impacts that an ordinance may have on housing development and the parameters that will make it most effective. Keyser Marston Associates, Inc. (KMA) was engaged to assist in evaluating the potential for reinstating a citywide inclusionary housing ordinance, including the preparation of a financial evaluation. Staff will provide the City Council with the findings of the KMA financial evaluation and request input for the framework of the future inclusionary housing ordinance. RECOMMENDATION: Provide staff direction for framework of the future inclusionary housing ordinance, including the inclusionary housing percentage, applicability of the ordinance and alternatives for compliance. DISCUSSION: At the September 14, 2021 City Council study session, staff presented on the subject of developing an inclusionary housing ordinance. At the study session, the City Council requested more information on how an inclusionary ordinance would financially impact future housing projects. The City Council directed staff to conduct a financial evaluation on what terms of an ordinance can be financially supportable and report back to the City Council. SS3-1 Financial Evaluation and Framework for Future Inclusionary Housing Ordinance (PA2022-045) March 22, 2022 Page 2 Staff engaged with KMA to prepare the financial evaluation. The KMA financial evaluation identifies the supportable inclusionary housing program requirements that balance the interests of property owners and developers against the City's need for affordable housing. The financial evaluation includes a legal background of inclusionary housing programs in California, anticipated financial impacts that inclusionary requirements would have on both ownership housing and rental housing projects in Newport Beach, recommendations for a supportable inclusionary housing percentage, and recommended in -lieu fee payment that a developer can pay as an alternative to on-site construction. FISCAL IMPACT The potential fiscal impacts of an inclusionary housing ordinance are detailed in the KMA financial evaluation. NOTICING: 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). In addition, the City issued a News Splash on February 18, 2022, providing advanced notice of this study session item, and making the Draft Inclusionary Housing: Financial Evaluation prepared by KMA available for public review and comment. ATTACHMENTS: Attachment A — Draft KMA Inclusionary Housing: Financial Evaluation www.newportbeachca.gov/inclusionary Attachment B — Correspondence SS3-2 Attachment A Draft KMA Inclusionary Housing: Financial Evaluation www.newportbeachca.gov/inclusionary SS3-3 Tim KEYSER MARSTON ASSOCIATEST. IONARY HOUSING: MAL EVALUATION Prepared for: City of Newport Beach Prepared by: Keyser Marston Associates, Inc. February 17, 2022 ILYJ TABLE OF CONTENTS EXECUTIVE SUMMARY...............................................................................................................1 A. BACKGROUND..................................................................................................................................... 1 B. PUBLIC POLICY OBJECTIVES.................................................................................................................... 1 C. INCLUSIONARY HOUSING PROGRAM DESIGN............................................................................................. 1 D. POLICY ISSUES FOR CONSIDERATION......................................................................................................... 2 E. FINANCIAL ANALYSES............................................................................................................................ 3 F. FINDINGS............................................................................................................................................5 BACKGROUND INFORMATION...................................................................................................7 A. KEY COURT CASES................................................................................................................................ 7 B. KEY LEGISLATION: AB 1505.................................................................................................................. 9 C. INCLUSIONARY HOUSING PROGRAM CHARACTERISTICS.............................................................................. 10 D. STATE DENSITY BONUS AND INCLUSIONARY HOUSING REQUIREMENTS......................................................... 13 E. STRUCTURING ISSUES.......................................................................................................................... 14 METHODOLOGY.......................................................................................................................15 A. PARAMETERS.....................................................................................................................................15 B. PROGRAM FOUNDATION..................................................................................................................... 16 C. FINANCIAL EVALUATION STRUCTURE...................................................................................................... 19 D. FINANCIAL EVALUATION ORGANIZATION................................................................................................. 19 OWNERSHIP HOUSING ANALYSES............................................................................................21 A. CREATION OF PROTOTYPE PROJECTS...................................................................................................... 21 B. PRO FORMA ANALYSES....................................................................................................................... 21 C. SUMMARY: OWNERSHIP HOUSING DEVELOPMENT ANALYSES..................................................................... 32 D. RECOMMENDED INCLUSIONARY HOUSING REQUIREMENT.......................................................................... 34 Inclusionary Housing: Financial Evaluation Page i Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 TABLE OF CONTENTS V. APARTMENT DEVELOPMENT ANALYSIS....................................................................................35 A. BASIC REQUIREMENTS......................................................................................................................... 35 B. CREATION OF PROTOTYPE PROJECTS...................................................................................................... 35 C. PRO FORMA ANALYSES....................................................................................................................... 36 D. SUMMARY: APARTMENT DEVELOPMENT ANALYSES.................................................................................. 50 E. SECTION 65915 DENSITY BONUS......................................................................................................... 52 F. RECOMMENDED INCLUSIONARY HOUSING REQUIREMENT.......................................................................... 52 VI. IN -LIEU FEE ANALYSES.............................................................................................................54 A. OWNERSHIP HOUSING DEVELOPMENT................................................................................................... 54 B. APARTMENT DEVELOPMENT................................................................................................................. 55 VII. SUMMARY...............................................................................................................................57 Inclusionary Housing: Financial Evaluation Page ii Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 ATTACHMENTS Attachment 1: Inclusionary Housing Program Surveys Appendix A: California Appendix B: Orange, Los Angeles and San Diego Counties Attachment 2: Affordable Housing Cost Calculation Methodologies Appendix A: Affordable Sales Price Calculation Methodology Appendix B: Affordable Rent Calculation Methodology Attachment 3: Ownership Housing Development Appendix A: Home Sales Surveys Appendix B: Affordable Sales Price Calculations Exhibit I Coyote Canyon Prototype Exhibit II Dover Westcliff Prototype Exhibit III West Newport Mesa & Banning Ranch Prototype Appendix C: Pro Forma Analyses — Coyote Canyon Prototype Exhibit I Market Rate Scenario Exhibit II Recommended Requirement: 8% Moderate Income Units Exhibit III 5% Moderate Income Scenario Exhibit IV 10% Moderate Income Scenario Exhibit V 15% Moderate Income Scenario Exhibit VI 20% Moderate Income Scenario Appendix D: Pro Forma Analyses — Dover Westcliff Prototype Exhibit I Market Rate Scenario Exhibit II Recommended Requirement: 8% Moderate Income Units Exhibit III 5% Moderate Income Scenario Exhibit IV 10% Moderate Income Scenario Exhibit V 15% Moderate Income Scenario Exhibit VI 20% Moderate Income Scenario Inclusionary Housing: Financial Evaluation Page iii Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 ATTACHMENTS Attachment 3: Ownership Housing Development (Continued) Appendix E: Pro Forma Analyses: West Newport Mesa & Banning Ranch Prototype Exhibit I Market Rate Scenario Exhibit 11 Recommended Requirement: 8% Moderate Income Units Exhibit 111 5% Moderate Income Scenario Exhibit IV 10% Moderate Income Scenario Exhibit V 15% Moderate Income Scenario Exhibit VI 20% Moderate Income Scenario Attachment 4: Apartment Development Appendix A: Rent Surveys Appendix B: Affordable Rent Calculations Appendix C: Pro Forma Analyses — Airport Area Prototype Exhibit I Market Rate Scenario Exhibit II Base Recommended Requirement: 7% Low Income Units Exhibit III 50% Section 65915 Density Bonus Scenario Exhibit IV 5% Low Income Scenario Exhibit V 10% Low Income Scenario Exhibit VI 15% Low Income Scenario Exhibit VII 20% Low Income Scenario Appendix D: Pro Forma Analyses — Coyote Canyon Prototype Exhibit I Market Rate Scenario Exhibit II Base Recommended Requirement: 7% Low Income Units Exhibit III 50% Section 65915 Density Bonus Scenario Exhibit IV 5% Low Income Scenario Exhibit V 10% Low Income Scenario Exhibit VI 15% Low Income Scenario Exhibit VII 20% Low Income Scenario Inclusionary Housing: Financial Evaluation Page iv Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 ATTACHMENTS Attachment 4: Apartment Development (Continued) Appendix E: Pro Forma Analyses — Newport Center Prototype Exhibit I Market Rate Scenario Exhibit 11 Base Recommended Requirement: 7% Low Income Units Exhibit 111 50% Section 65915 Density Bonus Scenario Exhibit IV 5% Low Income Scenario Exhibit V 10% Low Income Scenario Exhibit VI 15% Low Income Scenario Exhibit VII 20% Low Income Scenario Appendix F: Pro Forma Analyses —West Newport Mesa & Banning Ranch Prototype Exhibit I Market Rate Scenario Exhibit II Base Recommended Requirement: 7% Low Income Units Exhibit III 50% Section 65915 Density Bonus Scenario Exhibit IV 5% Low Income Scenario Exhibit V 10% Low Income Scenario Exhibit VI 15% Low Income Scenario Exhibit VII 20% Low Income Scenario Attachment 5: In -Lieu Fee Analysis Appendix A: Ownership Housing Development Appendix B: Apartment Development Inclusionary Housing: Financial Evaluation Page v Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 I. EXECUTIVE SUMMARY A. Background Keyser Marston Associates, Inc. (KMA) was engaged by Sagecrest Planning + Environmental at the request of the City of Newport Beach (City) to assist in evaluating the potential for reinstating a citywide Inclusionary Housing program. By way of background, the KMA Los Angeles office has assisted 31 cities and counties with their Inclusionary Housing programs over the past 20 years. KMA's analyses reflect a real world perspective based on the firm's core experience in real estate development economics, real estate transactions, and developer negotiations services. KMA was engaged to prepare an Inclusionary Housing: Financial Evaluation (Financial Evaluation) to identify the supportable Inclusionary Housing program requirements. The primary function of the Financial Evaluation is to identify Inclusionary Housing requirements that balance the interests of property owners and developers against the City's need for affordable housing. The KMA evaluation methodology has been continually evolving over the past 20 years. Each study is tailored to reflect the specific characteristics of the jurisdiction being evaluated. B. Public Policy Objectives Inclusionary Housing programs are subject to both statutory parameters imposed by the State Legislature and the rulings in the court cases that have challenged Inclusionary Housing programs over the past 30+ years. These statutes and court rulings are described in Section II of this Financial Evaluation. It is important to understand the constraints and opportunities that are created by these statutes and court rulings. C. Inclusionary Housing Program Design in California Building Industry Association v. City of San Jose, 61 Cal 4t" 435 (San Jose) the court found that the imposition of Inclusionary Housing requirements is a valid exercise of a jurisdiction's zoning powers. However, the San Jose ruling also imposed the following limitations to the requirements that jurisdictions can impose: Inclusionary Housing: Financial Evaluation Page 1 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Inclusionary Housing requirements cannot be confiscatory; and Inclusionary Housing requirements cannot deprive a property owner of a fair and reasonable return on their investment. The court did not provide criteria under which jurisdictions can evaluate these limitations. As a result, each jurisdiction is left to create an evaluation methodology that balances the interests of property owners, developers and the jurisdiction's need for affordable housing. It is KMA's practice to take a conservative approach in establishing price controls in order to comport with the court's ruling. The first step in designing an Inclusionary Housing program is to identify the factors that will be considered in defining the program's goals. A common measurement is the unmet need for affordable housing. In this Financial Evaluation the findings presented in the City's Draft Sixth Cycle Housing Element (Draft Housing Element) have been used for this purpose. The HCD Review Draft August 2021 City of Newport Beach 2021 — 2029 Housing Element (Draft Housing Element) findings indicate that the City needs to focus on attracting development that serves households at the lower income levels. However, in creating an Inclusionary Housing program it is also important to evaluate the impact the restrictions will have on the developers of market rate housing projects to ensure that onerous requirements are not imposed. U. Policy Issues for Consideration The following policy decisions need to be made as part of the Inclusionary Housing program adoption process: The minimum project size that will trigger the Inclusionary Housing requirements. The target income and affordability standards to be applied. The allowable options for fulfilling the Inclusionary Housing requirements. Typical options include: Inclusionary Housing: Financial Evaluation Page 2 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Providing the Inclusionary Units within the market rate project that triggered the requirement. b. Production of the Inclusionary Units in an off-site location. A payment to the City in lieu of producing required Inclusionary Units. d. Dedication of land to the City for the subsequent development of the required Inclusionary Units. e. The acquisition and rehabilitation of existing apartment units. E. Financial Analyses Each unit in a market rate project that is required to be set with income and affordability restrictions creates an impact on the project economics. This is called the "Affordability Gap", which is defined as difference between the achievable market rate sales price or rent and the allowable sales price or rent for each Inclusionary Unit. This Financial Evaluation uses pro forma analyses to estimate the Affordability Gaps generated at varying income and affordability levels. Location specific prototypes were created in five focus areas throughout Newport Beach. A focus area approach was applied to evaluate the conditions in areas with a disparate mix of physical and economic characteristics. The focus areas are: Focus Areas Studied Inclusionary Housing: Financial Evaluation Airport Area Newport Center Area Coyote Canyon Area West Newport Mesa & Banning Ranch Area 1 Dover Westcliff Area The pro forma analyses of prototype projects that were created using the following resources: 1 The West Newport Mesa and Banning Ranch Areas were combined in this Financial Evaluation due to the areas' proximity to one another and the limited amount of residential development activity to evaluate. Inclusionary Housing: Financial Evaluation Page 3 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 The Draft Housing Element; Development plans that were submitted to the City's Planning Division; and The residential projects identified in KMA's market surveys. The Affordability Gaps associated with the Inclusionary Housing options being tested are estimated in the pro forma analyses. The results are then evaluated to identify requirements that balance the interests of the property owner, the developer, and the City's unmet need for affordable housing. It has been KMA's experience that the following series of events occurs following the enaction of an Inclusionary Housing program: Profits are reduced for developers that have already purchased land. Developers that have not purchased land attempt to bargain for a lower land price. Some property owners are reluctant to accept the fact that their land value has decreased, and they defer selling the property until prices increase. It is KMA's assumption that if the City chooses to reinstate an Inclusionary Housing program that the requirements will not be imposed on projects that have already entered into the City approval process. This should provide relief to developers that purchased property prior to the reinstatement of an Inclusionary Housing program. In recognition of this assumption, KMA has placed the most weight on the following impacts: The reduction in property acquisition cost that would need to be achieved to offset the impact created by the proposed income and affordability requirements; and 2. The increase in market rate sales prices/rents that would be needed to offset the proposed requirements. Inclusionary Housing: Financial Evaluation Page 4 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 F. Findings SUPPORTABLE INCLUSIONARY HOUSING REQUIREMENTS Based on the results of the Financial Evaluation KMA concluded that the following Inclusionary Housing requirements can be supported on a citywide basis: Supportable Inclusionary Housing Production Requirements Ownership Housing Development 8% Moderate Income Apartment Development 50 or More Units 2 15% Very Low Income Fewer than 50 Units 7% Low Income SUPPORTABLE IN -LIEU FEES An in -lieu fee option is typically offered as part of an Inclusionary Housing program. In the Financial Evaluation, KMA pegged the in -lieu fee payment amount to the Affordability Gaps identified in the pro forma analyses that were used to evaluate the supportable Inclusionary Housing obligations. The resulting in lieu fee amounts are estimated as follows: In -Lieu Fees Associated with the Supportable Inclusionary Housing Requirements Ownership Housing Development West Newport Mesa Coyote Canyon Dover Westcliff & Banning Ranch In -Lieu Fee Per Inclusionary Unit $767,800 $1,296,700 $944,200 In -Lieu Fee Per Market Rate Unit in a 100% Market Rate Project $59,720 $86,450 $70,820 In -Lieu Fee Per Square Foot of Saleable Area in a 100% Market Rate Project $37.30 $40.00 $33.80 2 The pro forma analyses of prototype projects found that projects that can make use of the California Government Code Section 65915 et seq. (Section 65915) density bonus on a cost efficient basis can support a 15% very low income Inclusionary Housing requirement. Inclusionary Housing: Financial Evaluation Page 5 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 In -Lieu Fees Associated with the Supportable Inclusionary Housing Requirements Apartment Development 3 3 The in -lieu fee amounts are based on the assumption that a 7% very low income Inclusionary Housing requirement is applied. Inclusionary Housing: Financial Evaluation Page 6 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 West Newport Mesa & Banning Airport Area Coyote Canyon Dover Westcliff Ranch In -Lieu Fee Per Inclusionary Unit $516,000 $487,000 $861,000 $521,000 In -Lieu Fee Per Market Rate Unit in a $36,690 $34,790 $60,990 $37,660 100% Market Rate Project In -Lieu Fee Per Square Foot of Leasable $38.30 $36.60 $50.30 $38.50 Area in a 100% Market Rate Project 3 The in -lieu fee amounts are based on the assumption that a 7% very low income Inclusionary Housing requirement is applied. Inclusionary Housing: Financial Evaluation Page 6 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 BACKGROUND INFORMATION This section describes the basic parameters that guide Inclusionary Housing programs throughout California. Key Court Cases It is important to review the key legal cases that guide the creation and implementation of Inclusionary Housing programs. A chronological summary of the relevant decisions follows. PALMER CASE In 2009, the California Court of Appeal ruled in Palmer/Sixth Street Properties L.P. v. City of Los Angeles, 175 Cal. App. 4t" 1396 (Palmer), that the local affordable housing requirements being imposed by the City of Los Angeles violated the Costa -Hawkins Apartment Housing Act (Costa -Hawkins). Specifically, Costa -Hawkins allows landlords to set the initial monthly rent for a new unit, and then to increase the monthly rent to the market level each time a unit is vacated. The Court found that the imposition of long-term income and affordability restrictions on apartment units is a violation of this provision. It is commonly believed that the Palmer ruling prohibited jurisdictions from requiring developers to provide affordable apartment units as a part of an Inclusionary Housing program. In an effort to comply with Palmer, jurisdictions generally took one of the following actions: The jurisdiction eliminated the requirement that market rate apartment projects provide affordable apartment units; or The jurisdiction replaced affordable housing production models with a linkage or impact fee methodology; or The jurisdiction imposed affordable housing requirements as part of negotiated Development Agreements for apartment projects. Inclusionary Housing: Financial Evaluation Page 7 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 SAN JOSE CASE Planning Considerations In 2015, the California Supreme Court ruled in the San Jose case that Inclusionary Housing programs should be viewed as use restrictions that are a valid exercise of a jurisdiction's zoning powers. Specifically, the Court found that Inclusionary Housing requirements are a planning tool rather than an exaction. This is interpreted to mean that an in -lieu fee payment option that is included in an Inclusionary Housing program, that includes an affordable housing production requirement, is not subject to the AB 1600 nexus requirements imposed by the "Mitigation Fee Act".' Limitations As part of the San Jose case ruling the court imposed the following limitations on price controls imposed by Inclusionary Housing programs: The requirements cannot be "Confiscatory"; and The requirements cannot deprive a property owner of a fair and reasonable return on their investment. The court did not provide criteria under which jurisdictions can determine whether proposed price controls are confiscatory and/or they deprive a property owner of a fair and reasonable return. As a result, each jurisdiction is left to create an evaluation methodology that balances the interests of property owners, developers and the jurisdiction's need for affordable housing. It is KMA's practice to take a conservative approach in establishing the price controls that comport with the court's ruling. The San Jose ruling that Inclusionary Housing programs are not an exaction applies to both ownership housing and apartment development. However, the San Jose case did not overturn the limitations Palmer imposed on Inclusionary Housing programs for apartment projects. These limitations were not removed until Assembly Bill (AB) 1505 was adopted on September 29, 2017. 4 The Mitigation Fee Act is codified in California Government Code §66000 et seq. Inclusionary Housing: Financial Evaluation Page 8 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 3. Key Legislation: AB 1505 AB 1505, which is otherwise known as the "Palmer Fix", was signed into law on September 29, 2017. AB 1505 amended Section 65850 of the California Government Code and added Section 65850.01. This legislation provides jurisdictions with the ability to adopt programs that impose Inclusionary Housing requirements on apartment projects. ROLE OF THE CALIFORNIA DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT (HCD) Section 65850.01 does not place a cap on the percentage of units that can be subject to income and affordability restrictions. However, Section 65850.01 (a) gives HCD the authority to review the restrictions imposed by an Inclusionary Housing program on apartment developments if it requires that more than 15% of the units to be restricted to households earning less than 80% of the area median income (AMI), and if one of the following conditions applies: The jurisdiction has failed to meet at least 75% of its Regional Housing Needs Assessment (RHNA) allocation for above moderate income units. This test is measured on a pro -rated basis over the planning period, which is set at a minimum of five years; or HCD finds that the jurisdiction has not submitted their housing element report for at least two consecutive years. The City has fulfilled the requirements imposed by both of the standards identified above. As such, HCD does not have authority under Section 65850.01 (a) to review the Inclusionary Housing requirements the City proposes to impose on apartment development. However, in a technical guidance memorandum dated October 21, 2019, HCD reaffirmed its authority to review Inclusionary Housing ordinances as part of its review of a jurisdiction's Housing Element. California Government Code Section 65583 (a) (Section 65583 (a)) requires the City to analyze potential and actual constraints being placed on the development of housing. If the City chooses to impose a greater than 15% affordability requirement and/or deeper affordability standards on apartment Inclusionary Housing: Financial Evaluation Page 9 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 development, HCD can potentially extend and complicate the approval process for the City's Sixth Cycle Housing Element. ADDITIONAL AB 1505 REQUIREMENTS Section 65850 (g) requires jurisdictions to provide alternative means of fulfilling the affordable housing requirements imposed on apartment projects by an Inclusionary Housing program. Options that can be provided to developers include, but are not limited to: Off-site construction of "Inclusionary Units"; Payment of a fee in -lieu of producing Inclusionary Units; Land donation; and 4. The acquisition and rehabilitation of existing units. C. Inclusionary Housing Program Characteristics Over 170 jurisdictions in California currently include an Inclusionary Housing program as a component in their overall affordable housing strategy. While the unifying foundation of these programs is the objective to attract affordable housing development, the characteristics of these programs vary widely from jurisdiction -to -jurisdiction. To assist the City in evaluating options for creating an Inclusionary Housing program it is useful to identify the elements that are typically included in Inclusionary Housing programs being implemented in California jurisdictions. To that end, KMA compiled information on 79 Inclusionary Housing programs being implemented throughout California. The survey information is presented in Attachment 1: Table 1 presents the survey results for the 79 jurisdictions; and Table 2 provides more in depth information for the jurisdictions located in Orange, Los Angeles and San Diego Counties. Inclusionary Housing: Financial Evaluation Page 10 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 The survey results can be summarized as follows: In California, the majority of Inclusionary Housing programs include a threshold project size below which projects are not subject to the Inclusionary Housing requirements. Common thresholds fall between three and 10 units. Five units is the median threshold project size of the programs included in the KMA survey. The income and affordability standards imposed by Inclusionary Housing programs vary widely throughout California. The majority of programs have established standards in the range of 10% to 20% of the units in projects that will be subject to the requirements. However, the following policy variations are commonly found: The threshold standards are varied as a reflection of the depth of the affordability being required. b. Inclusionary Housing requirements have a disproportionate impact on smaller projects, because there are fewer market rate units available to spread the impact created by the income and affordability standards. A sliding scale requirement is sometimes used to mitigate these impacts. C. The length of the covenant period imposed on Inclusionary Units varies from jurisdiction -to -jurisdiction. California Health and Safety Code (H&SC) Section 33413 applies covenant periods of 45 years for ownership housing units and 55 years for apartment units. These standards are commonly used, but both shorter and longer covenant periods are imposed throughout Inclusionary Housing programs in California. Inclusionary Housing programs focus on the production of affordable housing units by imposing specific affordable housing requirements on new development. To comply with the findings in the San Jose case, and the requirements imposed by Sections 65850 and 65850.01, Inclusionary Housing programs must offer developers a range of options for fulfilling the affordable housing requirements. The most common options offered to developers are: Inclusionary Housing: Financial Evaluation Page 11 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Construction of a defined percentage of Inclusionary Unit units within the new market rate residential project; Construction of a defined percentage of Inclusionary Unit units in a project located in an off-site location; Payment of a fee in lieu of producing Inclusionary Units that the jurisdiction will subsequently use to assist in the development of affordable housing units within the community; 4. The donation of property to the jurisdiction that is appropriate for the development of affordable housing; and The acquisition and rehabilitation of existing units. The key advantages associated with providing off-site and in -lieu fee options are that the Inclusionary Housing requirements can be transferred to developers that have experience in constructing affordable housing projects. This is advantageous for the following reasons: Affordable housing developers have specific expertise in the development and operation of affordable housing projects. 2. Dedicated affordable housing projects have access to public funding sources that provide a more cost-efficient way to achieve deeper affordability than can be supported by an Inclusionary Housing requirement. A representative sample of programs that are targeted to dedicated affordable housing projects are: Funds that are awarded by the United States Department of Housing and Urban Development (HUD) such as the Community Development Block Grant program; b. The funds allocated to the City by HCD under the Permanent Local Housing Allocation (PLHA) for Senate Bill 2 (Chapter 364, Statutes of 2017); The federal and state Low -Income Housing Tax Credits (Tax Credits) offered under Internal Revenue Code Section 42; Inclusionary Housing: Financial Evaluation Page 12 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 d. State funding sources such as the Affordable Housing and Sustainable Communities (AHSC) Program; and e. The Orange County Housing and Community Development Department and the Orange County Housing Authority (OCHA) assistance programs. I State Density Bonus and Inclusionary Housing Requirements A tool that is commonly used to reduce the financial impact associated with the imposition of Inclusionary Housing requirements is the Section 65815 density bonus. Section 65915 requires jurisdictions to provide density bonuses based on a sliding scale ranging from 5% to 50% depending on the magnitude of the income and affordability restrictions being imposed. Section 65915 requires the City to adopt an ordinance that specifies how it will comply with the State mandated density bonus requirements. The City's adopted ordinance is included in Newport Beach Municipal Code Chapter 20.32, and it was last amended in 2010. Section 65915 has been amended by the State Legislature several times since 2010, and Chapter 20.32 has not been amended to reflect those modifications. Until such time as the modifications are amended into the City's density bonus ordinance, State law will automatically prevail over any inconsistencies between State law and Chapter 20.32. In July 2013 the First District Court of Appeal held that jurisdictions must agree to count the affordable units used to fulfill the Section 65915 density bonus requirements towards the Inclusionary Housing requirements that will be imposed on a project.5 Based on that ruling, a developer must be allowed to use the same affordable units to fulfill both the Inclusionary Housing requirements and the Section 65915 requirements. However, in order to exercise this option, the developer must apply the more stringent of the two programs' requirements. The Section 65915 density bonus can act to materially reduce the financial impacts created by Inclusionary Housing requirements. For that reason, the City should recognize that if Inclusionary 'Latinos Unidos del Valle de Napa y Solano v. County of Napa, 217 Cal. App. 4t" 1160 (Napa). Inclusionary Housing: Financial Evaluation Page 13 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Housing requirements are imposed it is highly likely that many developers will request Section 65915 density bonuses. It is also important to understand that the City is required to grant a developer's request for the statutorily established density bonus along with the requisite number of concessions and incentives, as well as any necessary development standards reductions or waivers.' Structuring Issues As discussed previously, the court in the Son Jose case found that the imposition of Inclusionary Housing requirements is a valid exercise of the City's zoning powers rather than an exaction. Subsequently, Sections 65850 and 65850.01 amended the California Government Code to expressly allow Inclusionary Housing requirements to be imposed on apartment projects. In structuring an Inclusionary Housing program it is important to remember that the following limitations that the courts and the State Legislature have placed on price controls imposed Inclusionary Housing programs: Inclusionary Housing requirements cannot be confiscatory or deprive a property owner of a fair and reasonable return on their investment. Section 65583 (a) requires the City to analyze potential and actual constraints being placed on the development of housing. Within that context, it is important to recognize that the requirements imposed by an Inclusionary Housing program can only be expected to fulfill a small portion of the unmet need for affordable housing in Newport Beach. 6 Section 65915 (d) (1) identifies three conditions under which requested incentives or concessions can be denied. However, this does not relieve the City of the obligation to grant the number of incentives or concessions that the project is entitled to under Section 65915 (d) (2). Inclusionary Housing: Financial Evaluation Page 14 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 III. METHODOLOGY The purpose of this Financial Evaluation is to evaluate the financial feasibility of imposing Inclusionary Housing requirements on residential development in Newport Beach. The financial feasibility analysis is comprised of the following steps: A. Parameters As the first step in the evaluation process it is necessary to identify the parameters that will be applied in the analysis. One measurement is the RHNA, which is used as a tool in the Housing Element process. The Sixth Cycle RHNA Allocation Plan covers the period between 2021 and 2029, and the Newport Beach allocations are detailed in the following table: Sixth Cycle RHNA Allocation Projections October 2021 through October 2029 Income Category Total Obligation % of Total Very Low 1,456 30% Low 930 19% Moderate 1,050 22% Above Moderate 1,409 29% Totals 4,845 100% Notable factors to be considered are: 1. By far, the largest identified unmet need for affordable housing falls in the very low and low income categories, and 2. The Draft Housing Element indicates that planned growth, and projects in the approval process, will provide a sufficient number of above moderate income units to fulfill the Sixth Cycle RHNA allocation. Inclusionary Housing: Financial Evaluation Page 15 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 These factors indicate that the City needs to focus on attracting development that serves households at the lower income levels. However, in creating an Inclusionary Housing program it is also important to evaluate the impact the restrictions will have on the developers of market rate housing projects to ensure that onerous requirements are not imposed. Another key parameter in the evaluation is that a mix of physical and economic characteristics are exhibited within different areas within Newport Beach. To reflect this, the Financial Evaluation studied the following focus areas that are identified in the Draft Housing Element: Focus Areas Studied Inclusionary Housing: Financial Evaluation Airport Area Coyote Canyon Area Dover Westcliff Area B. Program Foundation Newport Center Area West Newport Mesa & Banning Ranch Area The courts have held that affordable housing is a "public benefit," and that locally imposed Inclusionary Housing programs are a legitimate means of providing this public benefit. The courts have tempered this with the requirement that the Inclusionary Housing obligations cannot be confiscatory, and they cannot deprive a property owner of a fair and reasonable return on their investment. To date, the courts have not provided guidance for determining how these limitations should be measured. As a result it is necessary for each jurisdiction to create a methodology for testing the financial impacts associated with proposed Inclusionary Housing requirements. It is KMA's practice to take a conservative approach in establishing price controls that comport with the San Jose court's ruling. The KMA approach is based on pro forma analyses of prototype projects that reflect the development types exhibited within the jurisdiction. The KMA methodology has been continually evolving over the past 20 years, and each financial evaluation is tailored to reflect the specific characteristics of the jurisdiction in which KMA is performing the evaluation. Inclusionary Housing: Financial Evaluation Page 16 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 DEVELOPMENT PROTOTYPES The pro forma analyses that KMA has prepared are based on prototype residential developments. To assist in creating the development prototypes, KMA reviewed the following: 1. The Draft Housing Element; 2. Development plans that were submitted to the City's Planning Division; and The residential projects identified in KMA's market surveys. It is important to understand that the prototypes used in the Financial Evaluation do not represent actual projects. Instead, the prototypes represent composites of projects that have recently been developed or proposed in Newport Beach and the results of KMA market surveys. In some instances the development scope will be at a density that is actually less than the maximum density allowed by the City's zoning code or that is identified in the Draft Housing Element. This reflects site characteristics and development types being exhibited. PRO FORMA ANALYSIS EVALUATION TESTS It has been KMA's experience that the following series of events occurs following the enaction of an Inclusionary Housing program: Profits are reduced for developers that have already purchased land. Developers that have not purchased land attempt to bargain for a lower land price. Some property owners are reluctant to accept the fact that their land value has decreased, and they defer selling the property until prices increase. Each of these three factors is relevant in the assessment of the impact created by the imposition of Inclusionary Housing obligations. However, it is KMA's assumption that if the City chooses to reinstate an Inclusionary Housing program the requirements will not be imposed on projects that have already Inclusionary Housing: Financial Evaluation Page 17 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 entered into the City approval process. This should provide relief to developers that purchased property prior to the reinstatement of an Inclusionary Housing program. In recognition of this assumption, KMA has placed the most weight on the following impacts: The reduction in property acquisition cost that would need to be achieved to offset the impact created by the proposed income and affordability requirements; and The increase in market rate sales prices and rents that would be needed to offset the proposed requirements. The preceding tests are used to balance the impacts that the enaction of an Inclusionary Housing program has on developers and property owners. Specifically, the goals are: To minimize the reduction in supportable land values so that there will not be a disincentive for property owners to sell their properties; and To impose requirements of a magnitude that can be offset by near-term increases in achievable market rate sales prices and rents. It is important to understand that every proposed project embodies unique characteristics. It is therefore KMA's opinion that a conservative approach should be used in establishing the Inclusionary Housing requirements. To that end, the benchmarks KMA used in evaluating potential requirements are: Benchmark Evaluation Standards Inclusionary Housing Evaluation Reduction in property acquisition cost needed to offset the 25% impact created by the Inclusionary Housing requirements. The increase in market rate sales prices and rents that would be 6% needed to offset the proposed requirements. Inclusionary Housing: Financial Evaluation Page 18 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 KMA evaluates the results of these tests in order to develop a comprehensive perspective on the financial impacts created by Inclusionary Housing requirements. These analyses collaboratively inform the KMA conclusions as to the Inclusionary Housing requirements that can be supported. C. Financial Evaluation Structure The analysis structure applied by KMA can be described as follows: KMA prepared financial analyses to assist in creating recommended Inclusionary Housing requirements that balance the interests of property owners and developers against the public benefit created by the production of affordable housing units. 2. In general terms, the financial impact associated with fulfilling Inclusionary Housing requirements within market rate projects is equal to the difference between the achievable market rate sales prices or rents and the allowable sales prices or rents for the Inclusionary Units. This is known as the Affordability Gap. The KMA financial analyses identify the range of Inclusionary Housing production requirements that can be supported. 117). Financial Evaluation Organization The following sections of this Financial Evaluation describe the assumptions, analysis and findings related to ownership housing and apartment developments. The analyses are supported by the following Attachments and Appendices: Attachment 2: Affordable Housing Cost Calculation Methodology Appendix A Affordable Sales Price Calculation Methodology Appendix B Affordable Rent Calculation Methodology Inclusionary Housing: Financial Evaluation Page 19 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Attachment 3: Ownership Housing Development Appendix A Market Surveys Appendix B Affordable Sales Price Calculations Appendix C Pro Forma Analyses: Coyote Canyon Prototype Appendix D Pro Forma Analyses: Dover Westcliff Prototype Appendix E Pro Forma Analyses: West Newport Mesa & Banning Ranch Prototype Attachment 4: Apartment Development Appendix A Rent Surveys Appendix B Affordable Rent Calculations Appendix C Pro Forma Analyses: Airport Prototype Appendix D Pro Forma Analyses: Coyote Canyon Prototype Appendix E Pro Forma Analyses: Newport Center Prototype Appendix F Pro Forma Analyses: West Newport Mesa & Banning Ranch Prototype Attachment 5: In -Lieu Fee Analyses Appendix A Ownership Housing Development Appendix B Apartment Development Inclusionary Housing: Financial Evaluation Page 20 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 IV. OWNERSHIP HOUSING ANALYSES Creation of Prototype Projects The Draft Housing Element states that Newport Beach has median home values that are 2.7 times higher than the median home value in Orange County as a whole, and the highest home values exhibited by the surrounding cities. Recognizing the premium home prices, and to assist in creating reasonable Inclusionary Housing requirements, the following standards were applied to all the ownership housing development prototypes used in this Financial Evaluation: The prototypes are comprised solely of single family attached ownership housing projects; and The affordability standards are set at the moderate income level. Prototypes were evaluated for ownership housing development in the following areas:' Coyote Canyon Area; 2. Dover Westcliff Area; and West Newport Mesa and Banning Ranch Area. B. Pro Forma Analyses To assist in establishing the Inclusionary Housing production requirements that can be supported, KMA prepared the following pro forma analyses for the prototype ownership housing projects in each focus le -PAN A prototype in which 100% of the units are sold at unrestricted market rate prices; and A prototype that includes a moderate income component. ' The Airport and Newport Center areas were excluded from this analysis because i a significant amount of ownership housing development is not anticipated to occur in these areas. Inclusionary Housing: Financial Evaluation Page 21 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 The 100% market rate unit ownership housing development scenarios provide baselines against which to measure the impacts associated with affordable housing requirements. The pro forma analyses for the 100% market rate unit scenarios are organized as follows: Pro Forma Analysis — Market Rate Scenario Ownership Housing Development Prototypes Table 1: Estimated Development Costs Table 2: Projected Net Sales Revenue Table 3: Projected Developer Profit The estimated developer profit for each of the 100% market rate scenarios is used as the benchmark profit for the purpose of estimating the impacts created by the imposition of Inclusionary Housing obligations. The resulting financial gaps represent the impact created by the requirements being tested. The pro forma analyses for the moderate income scenarios are organized as follows: Pro Forma Analysis — Moderate Income Inclusionary Housing Component Ownership Housing Development Prototypes Table 1: Estimated Development Costs Table 2: Projected Net Sales Revenue Table 3: Inclusionary Housing Impacts KMA measured the financial impacts created by the imposition of Inclusionary Housing requirements using the tools described previously in this Financial Evaluation. These tools were used to identify the moderate income requirement that could be feasibly imposed on ownership housing developments. COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT ANALYSIS The pro forma analysis for the Coyote Canyon prototype ownership housing development is provided in Attachment 3: Appendix C. A map of the Coyote Canyon area, and a summary of the development scope are presented on the following page. Inclusionary Housing: Financial Evaluation Page 22 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 t. I NI .41 '��i . �leR':"� r�'i - •'' �e � r •; .:a •- ;moi s , - Ar� � . Estimated Development Costs: Coyote Canyon Prototype Ownership Housing Development The total development cost for the Coyote Canyon prototype ownership housing development is estimated at $84.2 million. This equates to $936,000 per unit, or $585 per square foot of gross building area (GBA). Projected Market Rate Sales Prices: Coyote Canyon Prototype Ownership Housing Development To assist in projecting the achievable market rate sales prices, KMA compiled sales data for homes in the general vicinity of Coyote Canyon. The search for projects to use as value indicators was constrained by the fact that the area was formerly occupied by a landfill, and just recently became available for development. As shown in Attachment 3: Appendix A — Exhibit I, the home sales used in this analysis are all drawn from within the adjacent canyon areas in the City of Irvine. It is also important to note that the homes included in the survey were developed during the period between 2002 and 2005. To reflect the premium values typically applied to newly constructed homes, KMA applied a 10% increase to the average sales prices per square foot of saleable area derived from the survey. The market rate sales prices that were applied in the Coyote Canyon ownership housing development prototype analysis are presented in the following table: Projected Market Rate Sales Prices Coyote Canyon Prototype Ownership Housing Development Two -Bedroom Units $953,200 Three -Bedroom Units $1,320,100 Average Price Per Square Foot of Saleable Area $710 Inclusionary Housing: Financial Evaluation Page 24 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Affordable Sales Price Calculations: Coyote Canyon Prototype Ownership Housing Development Based on the Affordable Sales Price calculation methodology described in Attachment 2: Appendix A, and the calculations presented in Attachment 3: Appendix B — Exhibit I, the Affordable Sales Prices for the Coyote Canyon prototype ownership housing development are: Affordable Sales Price Estimates Coyote Canyon Prototype Ownership Housing Development Two -Bedroom Units $381,200 Three -Bedroom Units $356,600 Findings: Coyote Canyon Prototype Ownership Housing Development The results of these KMA analyses of the Coyote Canyon prototype ownership housing development can be summarized as follows: 1. The developer profit for the market rate scenario is estimated at 14.8%. An 8% moderate income requirement can be supported. The financial impacts estimated in the KMA analyses are summarized in the following table: 8% Moderate Income Inclusionary Housing Requirement Coyote Canyon Prototype Inclusionary Housing Evaluation Reduction in property acquisition cost needed to offset the 14% impact created by the Inclusionary Housing requirements. The increase in market rate sales prices that would be needed 4.9% to offset the proposed requirements. Inclusionary Housing: Financial Evaluation Page 25 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT ANALYSIS The pro forma analysis for the Dover Westcliff prototype ownership housing development is provided in Attachment 3: Appendix D. A map of the area and a development scope follow: Development Scope Summary Dover Westcliff Prototype Ownership Housing Development Site Area (Acres) 1.5 Unit Mix Total Number of Units 30 Three -Bedroom Units 18 Density (Units Per Acre) 20 Four -Bedroom Units 12 Parking 2 -Car Attached Garages Inclusionary Housing: Financial Evaluation Page 26 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Estimated Development Costs: Dover Westcliff Prototype Ownership Housing Development The development costs for the Dover Westcliff prototype ownership housing development are estimated at $40.8 million. This equates to $1.36 million per unit, or $630 per square foot of GBA. Projected Market Rate Sales Prices: Dover Westcliff Prototype Ownership Housing Development Two single family attached ownership housing developments were recently completed in the Dover Westcliff area. The sales prices for these homes served as the primary resource for projecting the achievable market rate sales prices in this area. The market survey is presented in Attachment 3: Appendix A — Exhibit II. Based on the survey results, the market rate sales prices used in the analysis are presented in the following table: Projected Market Rate Sales Prices Dover Westcliff Prototype Ownership Housing Development Three -Bedroom Units $1,517,900 Four -Bedroom Units $1,742,500 Average Price Per Square Foot of Saleable Area $744 Affordable Sales Price Calculations: Dover Westcliff Prototype Ownership Housing Development Based on the Affordable Sales Price calculation methodology described in Attachment 2: Appendix A, and the calculations presented in Attachment 3: Appendix B — Exhibit II, the Affordable Sales Prices for the Dover Westcliff prototype ownership housing development are: Inclusionary Housing: Financial Evaluation Page 27 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Affordable Sales Price Estimates Dover Westcliff Prototype Ownership Housing Development Three -Bedroom Units $316,000 Four -Bedroom Units $303,500 Findings: Dover Westcliff Prototype Ownership Housing Development The results of these KMA analyses of the Dover Westcliff prototype ownership housing development can be summarized as follows: The developer profit for the market rate scenario is estimated at 11.6%. An 8% moderate income requirement can be supported. The financial impacts estimated in the KMA analyses are summarized in the following table: 8% Moderate Income Inclusionary Housing Requirement Dover Westcliff Prototype Ownership Housing Development Reduction in property acquisition cost needed to offset the 15% impact created by the Inclusionary Housing requirements. The increase in market rate sales prices that would be needed 5.3% to offset the proposed requirements. WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT ANALYSIS The pro forma analysis for the West Newport Mesa & Banning Ranch prototype ownership housing development is provided in Attachment 3: Appendix E. Maps of the two areas are presented on the following page. Inclusionary Housing: Financial Evaluation Page 28 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 WEST NEWPORT MESA AREA MAP BANNING RANCH AREA MAP —0�Ioto Inclusionary Housing: Financial Evaluation Page 29 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 The development scope for the West Newport Mesa & Banning Ranch prototype ownership housing project is summarized in the following table: Development Scope Summary West Newport Mesa & Banning Ranch Prototype Ownership Housing Development Site Area (Acres) 6 Unit Mix Total Number of Units 120 Three -Bedroom Units 42 Density (Units Per Acre) 20 Four -Bedroom Units 78 Parking 2 -Car Attached Garages Estimated Development Costs: West Newport Mesa & Banning Ranch Prototype Ownership Housing Development The development costs for the West Newport Mesa & Banning Ranch prototype ownership housing development are estimated at $133.7 million. This equates to $1,114,000 per unit, or $532 per square foot of GBA. Projected Market Rate Sales Prices: West Newport Mesa & Banning Ranch Prototype Ownership Housing Development An 81 unit ownership project was recently developed in the vicinity of Placentia Avenue and West 16th Street. In addition, multiple ownership housing projects have been developed in the western section of Costa Mesa, which borders the West Newport Mesa & Banning Ranch area. These projects provide the best representation of new home values that is currently available for projects in the vicinity. The survey is presented in Attachment 3: Appendix A — Exhibit III, and the sales prices applied in the analysis are presented in the following table. Inclusionary Housing: Financial Evaluation Page 30 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Projected Market Rate Sales Prices West Newport Mesa & Banning Ranch Prototype Ownership Housing Development Three -Bedroom Units $1,227,700 Four -Bedroom Units $1,373,200 Average Price Per Square Foot $631 of Saleable Area Banning Ranch encompasses over 400 acres of vacant land. A 1,375 unit master plan development application was submitted to the California Coastal Commission in 2012. This plan was ultimately rejected, and there is a continuing effort by the Banning Ranch Conservancy to maintain the area in its current state. Affordable Sales Price Calculations: West Newport Mesa & Banning Ranch Prototype Ownership Housing Development Based on the Affordable Sales Price calculation methodology described in Attachment 2: Appendix A, and the calculations presented in Attachment 3: Appendix B — Exhibit III, the Affordable Sales Prices for the West Newport Mesa & Banning Ranch prototype ownership housing development are: Affordable Sales Price Estimates West Newport Mesa & Banning Ranch Prototype Ownership Housing Development Three -Bedroom Units $375,700 Four -Bedroom Units $379,300 Findings: West Newport Mesa & Banning Ranch Prototype Ownership Housing Development The results of these KMA analyses of the West Newport Mesa & Banning Ranch prototype ownership housing development can be summarized as follows: Inclusionary Housing: Financial Evaluation Page 31 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 The developer profit for the market rate scenario is estimated at 12.2%. An 8% moderate income requirement can be supported. The financial impacts estimated in the KMA analyses are summarized in the following table: 8% Moderate Income Inclusionary Housing Requirement West Newport Mesa & Banning Ranch Prototype Ownership Housing Development Reduction in property acquisition cost needed to offset the 17% impact created by the Inclusionary Housing requirements. The increase in market rate sales prices and rents that would be 5.2%needed to offset the proposed requirements. C. Summary: Ownership Housing Development Analyses The preceding section of this Financial Evaluation used pro forma analyses of prototype ownership housing development projects to assist in identifying the Inclusionary Housing production requirements that can currently be supported. The focus areas that were evaluated are: Coyote Canyon Area; Dover Westcliff Area; and 3. West Newport Mesa & Banning Ranch Area. Based on the results of the ownership housing development analyses KMA concluded that an 8% moderate income requirement can be supported in the three focus areas that were evaluated. This conclusion is based on the following findings related to the three focus areas that were tested: The needed reduction in property acquisition costs ranges from 14% to 17%. This is significantly lower than the 25% benchmark that was applied in this analysis. Inclusionary Housing: Financial Evaluation Page 32 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 2. The increase in market rate prices needed to offset impact the Inclusionary Housing requirement ranges from 4.9% to 5.3%. This range is well within the 6% benchmark used in this analysis. For reference purposes, the City also requested that KMA prepare pro forma analyses for moderate income Inclusionary Housing production requirements ranging from 5% to 20%. These analyses illustrate the range of financial impacts projected to be generated under the varying Inclusionary Housing production requirements. The results of these analyses are summarized in the following table. SUMMARY: ALTERNATIVE INCLUSIONARY HOUSING PRODUCTION REQUIREMENTS MODERATE INCOME STANDARDS OWNERSHIP HOUSING DEVELOPMENT PROTOTYPES West Newport Mesa Coyote Canyon Dover Westcliff & Banning Ranch Prototype Prototype Prototype I. Project Description A. Site Area (Sf) 217,800 65,340 261,360 B. Density (Units/Acre) 18 20 20 C. Total Units 90 30 120 Developer Profit - Market Rate Scenario 1 14.8% 11.6% 12.2% III. Alternative Inclusionary Housing Requirements A. Property Acquisition Cost Reduction 5% Moderate Income Requirement 10.0% 7.0% 11.0% 8% Moderate Income Requirement 14.0% 15.0% 17.0% 10% Moderate Income Requirement 18.0% 21.0% 22.0% 15% Moderate Income Requirement 29.0% 36.0% 33.0% 20% Moderate Income Requirement 38.0% 43.0% 44.0% B. % Price Increase to Offset Impact 5% Moderate Income Requirement 3.3% 2.3% 3.4% 8% Moderate Income Requirement 4.9% 5.3% 5.2% 10% Moderate Income Requirement 6.5% 8.0% 7.1% 15% Moderate Income Requirement 11.1% 14.5% 11.3% 20% Moderate Income Requirement 15.1% 17.9% 16.0% 1 As a % of Total Development Cost. Inclusionary Housing: Financial Evaluation Page 33 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 5% MODERATE INCOME INCLUSIONARY HOUSING REQUIREMENT The analysis of a 5% moderate income Inclusionary Housing requirement generates impacts that are significantly lower than the benchmarks applied in the KMA evaluation. Thus, it is a clear that a 5% moderate income Inclusionary Housing requirement for ownership housing development projects can be supported. 10% MODERATE INCOME INCLUSIONARY HOUSING REQUIREMENT The imposition of a 10% moderate income requirement meets the 25% benchmark KMA set for the property acquisition cost reduction test. However, the percentage increase in market rate prices needed to offset the impact created by a 10% requirement are materially higher than the 6% benchmark applied in the KMA evaluation. 15% AND 20% MODERATE INCOME INCLUSIONARY HOUSING REQUIREMENTS The imposition of 15% and 20% moderate income Inclusionary Housing requirements exceeds both the benchmarks being applied by significant amounts. In fact, under the 20% moderate income Inclusionary Housing requirement, the impact created by the income and affordability standards effectively eliminates any developer profit. �. Recommended Inclusionary Housing Requirement As discussed previously, KMA takes a conservative approach in setting benchmark impact standards for evaluating the impact created by income and affordability controls. Based on our financial analyses, it is KMA's recommendation than an 8% moderate income Inclusionary Housing requirement be imposed. Recognizing that the court did not establish evaluation standards for determining whether a requirement is confiscatory or that it deprives a property owner of a fair and reasonable return on their investment, it is conceivable that a 10% moderate income requirement could be imposed. However, that standard only meets one of the benchmark tests that KMA applied in the analysis. Inclusionary Housing: Financial Evaluation Page 34 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 V. APARTMENT DEVELOPMENT ANALYSIS %. Basic Requirements With the passage of AB 1505, jurisdictions were once again allowed to impose Inclusionary Housing requirements on apartment development projects. However, in its October 21, 2019 technical memorandum HCD asserted the following: HCD's authority to review Inclusionary Housing ordinances as part of the Housing Element review process; and 2. That a 15% standard, at an income threshold no more stringent than 80% of AMI, would not trigger an HCD review of a jurisdiction's Inclusionary Housing program. Based on these factors, the apartment development analysis assumes that the Inclusionary Housing requirements will be set at the low income level. B. Creation of Prototype Projects The apartment development prototypes used in this analysis were created based on the results of the KMA market surveys, and a review of projects that have recently been proposed or constructed in Newport Beach. The KMA market surveys were also used to estimate the achievable market rate rents for the prototype units. Prototypes were evaluated for apartment development in the following areas:8 Airport Area; 2. Coyote Canyon Area; Newport Center Area; and s The Dover Westcliff Area was excluded from this portion of the analysis, because of the characteristics of the potential development sites are not conducive to large scale development. Inclusionary Housing: Financial Evaluation Page 35 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 4. West Newport Mesa and Banning Ranch Area. C. Pro Forma Analyses MARKET RATE SCENARIO The 100% market rate unit apartment development prototypes provide baselines against which to measure the impacts associated with affordable housing requirements. The pro forma analyses for the 100% market rate unit scenarios are organized as follows: Pro Forma Analysis - 100% Market Rate Scenario Apartment Development Prototypes Table 1: Estimated Development Costs Table 2: Estimated Stabilized Net Operating Income Table 3: Estimated Developer Return The stabilized return on investment generated by the 100% market rate scenarios is used as the benchmark return for the purpose of estimating the impacts created by the imposition of Inclusionary Housing obligations. Using the measurement tools that were described in the ownership housing development section of this report, KMA estimated the financial impacts created by the imposition of low income Inclusionary Housing requirements on apartment development. AFFORDABLE ROUSING SCENARIOS To assist in establishing the Inclusionary Housing production requirements that can be supported, KMA created prototype development scopes that comport with each development site's base zoning requirements and that include a low income component. KMA also created Section 65915 density bonus prototypes that maximize the supportable Inclusionary Housing requirement, while minimizing the financial impact created by the requirement. The Section 65915 (f) (2) density bonus affordability standards are applied in this analysis. This Section provides a 50% density bonus to projects in which at least 15% of the units allowed under the Inclusionary Housing: Financial Evaluation Page 36 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 property's base zoning standards are set aside for very low income households.' Under the Napa ruling, the City must allow very low income units to be counted towards the fulfillment of requirements that are set at higher income categories. The pro forma analyses for the affordable housing scenarios are organized as follows: Pro Forma Analysis — Inclusionary Housing Component Apartment Development Prototypes Table 1: Estimated Development Costs Table 2: Estimated Stabilized Net Operating Income Table 3: Inclusionary Housing Impacts The Affordable Rent calculation methodology is described in Attachment 2: Appendix B. Using the H&SC Section 50053 rent calculation methodology, the affordable rents will not vary from area to area. The affordable rent calculations are detailed in Attachment 4: Appendix B, and are presented in the following table: 9 Section 65915 (f) (1) allows a project to receive a 50% density bonus if 24% of the base zoning units are set aside for low income households. However, absent a requirement imposed by another source, the 15% very low income standard generates less financial impact than a 24% low income standard. Inclusionary Housing: Financial Evaluation Page 37 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Affordable Rents Apartment Development Prototypes Number of Very Low Bedrooms Low Income Income 0 $1,054 $867 1 $1,203 $990 2 $1,334 $1,094 3 $1,464 $1,197 9 Section 65915 (f) (1) allows a project to receive a 50% density bonus if 24% of the base zoning units are set aside for low income households. However, absent a requirement imposed by another source, the 15% very low income standard generates less financial impact than a 24% low income standard. Inclusionary Housing: Financial Evaluation Page 37 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 AIRPORT AREA PROTOTYPE IMPARTMENT DEVELOPMENT ANALYSIS The pro forma analysis for the Airport Area prototype apartment development is provided in Attachment 4: Appendix C. A map of the Airport area follows: The development scope for the Airport Area prototype apartment development is summarized in the following table: Development Scope Summary Airport Area Prototype Apartment Development Site Area (Acres) 10 Unit Mix Density (Units Per Acre) 45 Studio Units 23 Parking One -Bedroom Units 212 At Grade Spaces 225 Two -Bedroom Units 215 Above Ground Spaces 900 Total Number of Units 450 Inclusionary Housing: Financial Evaluation Page 38 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Estimated Development Costs: Airport Area Prototype Apartment Development The development costs for the Airport Area prototype apartment development are estimated at $318.5 million. This equates to $708,000 per unit, or $555 per square foot of GBA. Projected Market Rate Rents: Airport Area Apartment Development The 458 unit One Uptown Newport project was completed in 2019, and three additional large scale apartment projects are currently in the planning stages. These projects are being developed under the Planned Community process. It is likely that large scale projects will continue to dominate the apartment development within the Airport Area. The market survey is presented in Attachment 4: Appendix A — Exhibit I. The resulting rents that were applied in the prototype analysis are summarized in the following table: Projected Market Rate Rents Airport Area Prototype Apartment Development Studio Units $2,780 One -Bedroom Units $3,511 Two -Bedroom Units $4,019 Average Monthly Rent Per Square Foot of Leasable Area $3.88 Inclusionary Housing: Financial Evaluation Page 39 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Findings: Airport Area Apartment Prototype Development The KMA pro forma analysis of the Airport Area prototype apartment development generated a 4.5% estimated stabilized return on investment. This serves as the benchmark by which the two affordability scenarios were measured. The analysis of a low income scenario that is developed in accordance with the property's base zoning requirements supported an 7% inclusionary housing requirement. The financial impacts associated with this scenario are presented in the following table: 7% Low Income Inclusionary Housing Requirement Airport Area Prototype Apartment Development Reduction in property acquisition cost needed to offset the 20% impact created by the Inclusionary Housing requirements. The increase in market rate rents that would be needed to 5.2% offset the proposed requirements. The pro forma analysis of the Section 65915 density bonus prototype indicates that the 50% density bonus and statutorily provided concessions or incentives offset the impacts created by the requirement to set aside 15% of the base zoning units for very low income households. Thus, it is KMA's conclusion that a 15% very low income requirement can be supported by projects that can make use of the density bonus on an efficient basis. COYOTE CANYON PROTOTYPE APARTMENT DEVELOPMENT ANALYSIS The pro forma analysis for the Coyote Canyon prototype apartment development is provided in Attachment 4: Appendix D. A map of the Coyote Canyon area, and a summary of the development scope, are presented on the following page. Inclusionary Housing: Financial Evaluation Page 40 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Development Scope Summary Coyote Canyon Prototype Apartment Development Site Area (Acres) 7 Unit Mix Density (Units Per Acre) 40 Studio Units 98 Parking One -Bedroom Units 154 At Grade Spaces 140 Two -Bedroom Units 28 Above Ground Spaces 560 Total Number of Units 280 Inclusionary Housing: Financial Evaluation Page 41 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Estimated Development Costs: Coyote Canyon Prototype Apartment Development The development costs for the Coyote Canyon prototype apartment development are estimated at $193.8 million. This equates to $692,000 per unit, or $547 per square foot of GBA. Projected Market Rate Rents: Coyote Canyon Prototype Apartment Development To assist in projecting the achievable market rate apartment rents, KMA compiled rent data for an apartment project located within the Coyote Canyon area, and for apartment projects located in Newport Beach and Irvine in the general vicinity of Coyote Canyon. These projects were all developed between 1998 and 2003. The market survey is presented in Attachment 4: Appendix A — Exhibit II. The resulting rents that were applied in the prototype analysis are summarized in the following table: Projected Market Rate Rents Coyote Canyon Prototype Apartment Development One -Bedroom Units $3,349 Two -Bedroom Units $3,593 Three -Bedroom Units $4,421 Average Monthly Rent Per Square Foot of Leasable Area $3.78 Inclusionary Housing: Financial Evaluation Page 42 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Findings: Coyote Canyon Prototype Apartment Development The KMA pro forma analysis of the Coyote Canyon prototype apartment development generated a 4.4% estimated stabilized return on investment. This serves as the benchmark by which the two affordability scenarios were measured. The analysis of a low income scenario that is developed in accordance with the property's base zoning requirements supported an 7% inclusionary housing requirement. The financial impacts associated with this scenario are presented in the following table: 7% Low Income Inclusionary Housing Requirement Coyote Canyon Prototype Apartment Development Reduction in property acquisition cost needed to offset the 21% impact created by the Inclusionary Housing requirements. The increase in market rate rents that would be needed to 5.1% offset the proposed requirements. The pro forma analysis results indicate that the stabilized return on investment generated by the 50% Section 65915 density bonus scenario is approximately equal to the estimated return for the 100% market rate scenario. Thus, it is KMA's conclusion that a 15% very low income requirement can be supported by projects that can make use of the density bonus on an efficient basis. NEWPORT CENTER PROTOTYPE APARTMENT DEVELOPMENT ANALYSIS The pro forma analysis for the Newport Center prototype apartment development is provided in Attachment 4: Appendix E. A map of the Newport Center area, and a summary of the development scope, are presented on the following page. Inclusionary Housing: Financial Evaluation Page 43 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 0 4-O � .tom �:: ' n 41F ji' ED e 4 No Estimated Development Costs: Newport Center Prototype Apartment Development The development costs for the Newport Center prototype apartment development are estimated at $258.7 million. This equates to $1,078,000 per unit, or $667 per square foot of GBA. This cost estimate reflects the premium quality nature of apartment development in the Newport Center area. Projected Market Rate Rents: Newport Center Prototype Apartment Development To assist in projecting the achievable market rate apartment rents, KMA compiled rent data for three apartment projects located in and around the Newport Center area. One project was constructed in 2017, one project was completely renovated in 2015, and one project was constructed in 1997. The market survey is presented in Attachment 4: Appendix A — Exhibit III. The resulting rents that were applied in the prototype analysis are summarized in the following table: Projected Market Rate Rents Newport Center Prototype Apartment Development One -Bedroom Units $4,652 Two -Bedroom Units $6,569 Three -Bedroom Units $7,002 Average Monthly Rent Per Square Foot of Leasable Area $4.98 Inclusionary Housing: Financial Evaluation Page 45 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Findings: Newport Center Prototype Apartment Development The KMA pro forma analysis of the Newport Center prototype apartment development generated a 5.1% estimated stabilized return on investment. This serves as the benchmark by which the two affordability scenarios were measured. The analysis of a low income scenario that is developed in accordance with the property's base zoning requirements supported an 7% inclusionary housing requirement. The financial impacts associated with this scenario are presented in the following table: 7% Low Income Inclusionary Housing Requirement Newport Center Prototype Apartment Development Reduction in property acquisition cost needed to offset the 19/ impact created by the Inclusionary Housing requirements. The increase in market rate rents that would be needed to 5.9% offset the proposed requirements. The pro forma analysis results indicate that the estimated stabilized return on investment for the 50% density bonus scenario is actually projected to be higher than the return generated by the 100% market rate scenario. Thus, it is KMA's conclusion that a 15% very low income requirement can be supported by projects that can make use of the density bonus on an efficient basis. WEST NEWPORT MESA & BANNING RANCH APARTMENT DEVELOPMENT ANALYSIS The pro forma analysis for the West Newport Mesa & Banning Ranch prototype apartment development is provided in Attachment 4: Appendix F. Maps of the two areas are presented on the following page. Inclusionary Housing: Financial Evaluation Page 46 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 WEST NEWPORT MESA AREA MAP BANNING RANCH AREA MAP —0�Ioto Inclusionary Housing: Financial Evaluation Page 47 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 A summary of the development scope is presented in the following table: Development Scope Summary West Newport Mesa & Banning Ranch Prototype Apartment Development Site Area (Acres) 2.5 Unit Mix Density (Units Per Acre) 33 Studio Units 8 Parking One -Bedroom Units 42 At Grade Spaces 42 Two -Bedroom Units 33 Above Ground Spaces 166 Total Number of Units 83 Estimated Development Costs: West Newport Mesa & Banning Ranch Prototype Apartment Development The development costs for the West Newport Mesa & Banning Ranch prototype apartment development are estimated at $58.9 million. This equates to $710,000 per unit, or $545 per square foot of GBA. Projected Market Rate Rents: West Newport Mesa & Banning Ranch Prototype Apartment Development KMA's did not discover any new apartment development in the West Newport Mesa area, and as discussed previously, there is currently no development in the Banning Ranch area. KMA ultimately surveyed recently constructed apartment projects in Costa Mesa to serve as a surrogate for the West Newport Mesa & Banning Ranch area. The market survey is presented in Attachment 4: Appendix A — Exhibit IV. The resulting rents that were applied in the prototype analysis are summarized in the following table: Inclusionary Housing: Financial Evaluation Page 48 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Projected Market Rate Rents West Newport Mesa & Banning Ranch Prototype Apartment Development Studio Units $2,665 One -Bedroom Units $3,745 Two -Bedroom Units $4,002 Average Monthly Rent Per $3.82 Square Foot of Leasable Area Findings: West Newport Mesa & Banning Ranch Prototype Apartment Development The KMA pro forma analysis of the West Newport Mesa & Banning Ranch prototype apartment development generated a 4.5% estimated stabilized return on investment. This serves as the benchmark by which the two affordability scenarios were measured. The analysis of a low income scenario that is developed in accordance with the property's base zoning requirements supported an 7% inclusionary housing requirement. The financial impacts associated with this scenario are presented in the following table: 7% Low Income Inclusionary Housing Requirement West Newport Mesa & Banning Ranch Prototype Reduction in property acquisition cost needed to offset the 18% impact created by the Inclusionary Housing requirements. The increase in market rate rents that would be needed to 5.2% offset the proposed requirements. The pro forma analysis results indicate that the estimated stabilized return on investment for the 50% density bonus scenario is actually projected to be higher than the return generated by the 100% market rate scenario. Thus, it is KMA's conclusion that a 15% very low income requirement can be supported by projects that can make use of the density bonus on an efficient basis. Inclusionary Housing: Financial Evaluation Page 49 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Summary: Apartment Development Analyses The preceding section of this Financial Evaluation used pro forma analyses of prototype apartment development projects to assist in identifying the Inclusionary Housing production requirements that can currently be supported. The focus areas that were evaluated are: Airport Area; Coyote Canyon Area; Newport Center Area; and 4. West Newport Mesa & Banning Ranch Area. KMA's primary analysis is based on prototype apartment development projects that comport with the base zoning code standards imposed on the development sites. Under that assumption, the results of the analyses indicate that a 7% low income requirement can be supported.10 This conclusion is based on the following results from the four focus areas that were tested: The needed reduction in property acquisition costs ranges from 18% to 21%. The results in each focus area are lower than the 25% benchmark used in this analysis. The increase in market rate rents needed to offset impact the Inclusionary Housing requirement ranges from 5.2% to 5.9%. In each focus area the needed increases are less than the 6% benchmark used in this analysis. At the City's request, KMA prepared pro forma analyses for low income Inclusionary Housing production requirements ranging from 5% to 20% to compare the financial impacts generated at each affordable housing set aside requirement. The results of these analyses are summarized in the following table. 11 In the Airport and Coyote Canyon Areas an 8% low income Inclusionary Housing requirement met both benchmark tests. However, KMA concluded that the efficiency associated with applying a consistent citywide standard outweighs the relatively minor increase in requirements that could potentially be imposed in these two focus areas. Inclusionary Housing: Financial Evaluation Page 50 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 SUMMARY: ALTERNATIVE INCLUSIONARY HOUSING PRODUCTION REQUIREMENTS LOW INCOME STANDARD APARTMENT DEVELOPMENT PROTOTYPES Alternative Inclusionary Housing Reauirements A. Property Acquisition Cost Reduction 5% Low Income Requirement 14.7% 14.7% 12.9% West Newport 7% Low Income Requirement Airport Area Coyote Canyon Newport Center Mesa & Banning 10% Low Income Requirement Prototype Prototype Prototype Ranch Prototype 15% Low Income Requirement 43.1% 44.5% 39.2% I. Project Description 20% Low Income Requirement 57.2% 59.5% 52.7% A. Site Area (Sf) 435,600 304,920 261,360 108,900 B. Density (Units/Acre) 45 40 40 33 C. Total Units 450 280 240 83 II. Return on Total Investment - Mkt Rate Scenario 4.5% 4.4% 5.1% 4.5% Alternative Inclusionary Housing Reauirements A. Property Acquisition Cost Reduction 5% Low Income Requirement 14.7% 14.7% 12.9% 13.3% 7% Low Income Requirement 20.2% 21.2% 18.7% 18.5% 10% Low Income Requirement 28.7% 29.7% 26.3% 25.1% 15% Low Income Requirement 43.1% 44.5% 39.2% 38.3% 20% Low Income Requirement 57.2% 59.5% 52.7% 53.7% B. % Rent Increase to Offset Impact 5% Low Income Requirement 3.7% 3.4% 4.0% 3.7% 7% Low Income Requirement 5.2% 5.1% 5.9% 5.2% 10% Low Income Requirement 7.6% 7.3% 8.6% 7.2% 15% Low Income Requirement 12.1% 11.6% 13.6% 11.7% 20% Low Income Requirement 17.0% 16.6% 19.4% 17.6% 5% LOW INCOME INCLUSIONARY HOUSING REQUIREMENT The analysis of a 5% low income Inclusionary Housing requirement generates impacts that are significantly lower than both benchmarks applied in the KMA evaluation. Thus, it is a clear that a 5% low income Inclusionary Housing requirement for apartment development projects can be supported. 10%, 15% AND 20% LOW INCOME INCLUSIONARY HOUSING REQUIREMENTS The impacts created by Inclusionary Housing requirements set at 10%, 15% and 20% exceed both benchmark tests by significant margins. Inclusionary Housing: Financial Evaluation Page 51 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 Section 65915 Density Bonus It is important to remember that there is an incentive for developers that are subject to Inclusionary Housing obligations to use the Section 65915 density bonus to mitigate the impacts created by the income and affordability controls. For the purposes of this analysis, KMA assumed that typically developers would choose to set aside 15% of the base zoning units for very low income households in return for receiving a 50% density bonus." The density bonus percentage that can be used on an efficient basis is dependent on the characteristics of the development site. For the purposes of this analysis KMA assumed that the 50% density bonus could be used on a cost efficient basis. Under that assumption, in each focus area the benefits created by the density bonus and the statutorily provided concessions or incentives offset the financial impacts created by allocating 15% of the base zoning units to very low income households. As discussed previously, to adhere to HCD guidance, KMA is recommending that the Inclusionary Housing production requirements for apartment development be set at the low income level. However, in accordance with the ruling in the Napa case, a developer must be allowed use very low income units being provided to fulfill Section 65915 density bonus requirements to also fulfill a low income Inclusionary Housing requirement imposed by the City. r. Recommended Inclusionary Housing Requirement It is clear that the use of the Section 65915 density bonus can potentially mitigate the impacts of Inclusionary Housing requirements of set at up to 15% of a site's base zoning standards. However, it is also important to understand that a density bonus cannot be used efficiently on all development sites. This is particularly an issue for small development sites or for projects in which increased density would require a more expensive construction or parking type. 11 A 50% density bonus is also provided for projects that allocate 24% of the base zoning units to low income households. However, it is mathematically advantageous to select the 15% very low income option. Inclusionary Housing: Financial Evaluation Page 52 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 In light of these factors KMA recommends that the base Inclusionary Housing requirement be set as follow: A 15% very low income requirement should be imposed on projects that consist of 50 or more units. Projects with fewer than 50 units should be provided with the option to fulfill a 7% low income requirement or to pay a fee in lieu of producing Inclusionary Units. In all four focus areas evaluated in this analysis, a requirement of this magnitude met both the benchmark standards that were applied by KMA. Given the conservative approach taken by KMA, it is reasonable to conclude that a requirement of this magnitude is not confiscatory and that it will not deprive a property owner of a fair and reasonable return on their investment. Inclusionary Housing: Financial Evaluation Page 53 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 VI. IN -LIEU FEE ANALYSES The following in -lieu fee analyses are provided to assist the City in creating specific in -lieu fee policies to be applied as part of an Inclusionary Housing program. KMA estimated the supportable in -lieu fee amounts based on the Affordability Gaps associated with the on-site development of Inclusionary Units within market rate ownership housing and apartment projects. This section of the Financial Evaluation provides estimates of the in -lieu fees that would need to be charged in order to attract a developer to produce the required number of affordable units in off-site locations. The results can be used to create in -lieu fee schedules, or the format can be used to develop a methodology for calculating the in -lieu fee on a case by case basis. A. Ownership Housing Development The KMA in -lieu fee estimates for ownership housing development projects are presented in Attachment 5: Appendix A. The pro forma analyses presented in the Ownership Housing Development Analysis section of this Financial Evaluation support an 8% moderate income Inclusionary Housing requirement. The KMA in -lieu fee estimates for ownership housing development are summarized in the following table: Supportable Inclusionary Housing Requirements and Related In -Lieu Fees Ownership Housing Development West Newport Mesa Coyote Canyon Dover Westcliff & Banning Ranch Moderate Income Unit Percentage 8% g% g% In -Lieu Fee Per Inclusionary Unit $767,800 $1,296,700 $944,200 In -Lieu Fee Per Market Rate Unit in a 100% Market Rate Project $59,720 $86,450 $70,820 In -Lieu Fee Per Square Foot of Saleable $37.30 $40.00 $33.80 Area in a 100% Market Rate Project Inclusionary Housing: Financial Evaluation Page 54 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 KMA estimated the supportable in -lieu fee amounts for apartment development based on the Affordability Gaps associated with the on-site development of Inclusionary Units within market rate apartment projects. The Affordability Gaps for apartment units are estimated in Attachment 5: Appendix B using the following methodology: KMA prepared the analyses based on the 7% low income Inclusionary Housing requirements that are supported by the apartment development pro forma analyses. The differences between the estimated achievable market rate rents and the defined Affordable Rents were calculated. KMA assumed that the property taxes for projects that include designated affordable housing units would be based on a lower assessed value than a 100% market rate project due to the reduction in net operating income that would be generated by the project. KMA deducted this lower property tax expense from the estimated rent difference. 4. The "Net Annual Rent Difference Per Inclusionary Unit" is equal to the "Annual Rent Difference Per Inclusionary Unit" minus the property tax savings. The "Affordability Gap Per Inclusionary Unit" is equal to Annual Rent Difference Per Inclusionary Unit capitalized at the benchmark returns derived from the pro forma analyses of the market rate scenarios. 6. The Affordability Gaps Per Inclusionary Unit were translated into in -lieu fees per square foot of leasable area. Inclusionary Housing: Financial Evaluation Page 55 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 The KMA in -lieu fee estimates for apartment development projects are presented in Attachment 5: Appendix B., and summarized in the following table: Supportable Inclusionary Housing Requirements and Related In -Lieu Fees Apartment Development Low Income Unit Percentage In -Lieu Fee Per Inclusionary Unit In -Lieu Fee Per Market Rate Unit in a 100% Market Rate Project In -Lieu Fee Per Square Foot of Leasable Area in a 100% Market Rate Project Airport Area Coyote Canyon Dover Westcliff 7% $516,000 $36,690 $38.30 7% $487,000 $34,790 $36.60 7% $861,000 $60,990 $50.30 West Newport Mesa & Banning Ranch 7% $521,000 $37,660 $38.50 Inclusionary Housing: Financial Evaluation Page 56 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 VII. SI', The Financial Evaluation assumptions and findings are summarized in Summary Tables 1, 2 and 3 that are presented on the following three pages. Based on the results of the Financial Evaluation analyses, KMA recommends that the Inclusionary Housing production requirements be set at the following percentages: Recommended Inclusionary Housing Production Requirements Ownership Housing Development 8% Moderate Income Apartment Development 7% Low Income The recommended Inclusionary Housing requirements are based on the following factors: The courts have not provided guidance for defining the meaning of confiscatory or a reasonable return on a property owner's investment. Using a conservative approach, KMA created benchmark impacts against which potential Inclusionary Housing requirements would be measured. The recommended Inclusionary Housing requirements are based on the pro forma analyses KMA undertook as part of this Financial Evaluation. When these requirements were applied, the prototype projects in each focus area achieved the benchmark standards that KMA created. It is important to note that the percentages identified above are tied to the production of the Inclusionary Units on site within a market rate residential development. A detailed set of policy recommendations for the alternative means of fulfilling the Inclusionary Housing requirements will be presented in a separate memorandum. These recommendations will be guided by input provided by the City staff and the City Council. Inclusionary Housing: Financial Evaluation Page 57 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 SUMMARY TABLE #1 OWNERSHIP HOUSING DEVELOPMENT PROTOTYPES Inclusionary Housing: Financial Evaluation Page 58 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 West Newport Mesa Coyote Canyon Dover Westcliff & Banning Ranch Prototype Prototype Prototype I. Project Description A. Site Area (Acres) 5.0 1.5 6.0 B. Density (Units/Acre) 18 20 20 C. Unit Mix Two -Bedroom Units 45 0 0 Three -Bedroom Units 45 18 42 Four -Bedroom Units 0 12 78 Total Units 90 30 120 D. Gross Building Area Square Feet 144,000 64,800 251,400 Per Unit 1,600 2,160 2,095 E. Parking Spaces Per Unit 2.0 2.0 2.0 II. Development Costs - Market Rate Scenario Total Development Cost $84,227,000 $40,838,000 $133,695,000 Per Unit $936,000 $1,361,000 $1,114,000 Per Square Foot of GBA $585 $630 $532 III. Market Rate Sales Price Per Unit Two -Bedroom Units $953,200 Three -Bedroom Units $1,320,100 $1,517,900 $1,227,700 Four -Bedroom Units $1,742,500 $1,373,200 IV. Affordable Sales Price - Moderate Income Units Two -Bedroom Units $381,200 Three -Bedroom Units $356,600 $316,000 $375,700 Four -Bedroom Units $303,500 $379,300 V. Average Affordability Gap Per Inclusionary Unit $767,800 $1,296,700 $944,200 VI. Developer Profit - Market Rate Scenario As a % of Total Development Cost 14.8% 11.6% 12.2% VII. Inclusionary Housing Percentage 8% 8% 8% VIII. In -Lieu Fee Per Sf of Total Saleable Area $37.30 $40.00 $33.80 Inclusionary Housing: Financial Evaluation Page 58 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 SUMMARY TABLE #2 APARTMENT DEVELOPMENT PROTOTYPES: ZONING COMPLIANT SCENARIOS I. Project Description A. Site Area (Acres) B. Density (Units/Acre) C. Unit Mix Studio Units One -Bedroom Units Two -Bedroom Units Three -Bedroom Units Total Units D. Gross Building Area E. Total Leasable Area Square Feet Per Unit F. Parking Spaces Per Unit II. Development Costs - Market Rate Scenario Total Development Cost Per Unit Per Square Foot of GBA III. Market Rate Rents Per Unit Studio Units One -Bedroom Units Two -Bedroom Units Three -Bedroom Units IV. Affordable Rents - Low Income Units Studio Units One -Bedroom Units Two -Bedroom Units Three -Bedroom Units V. Average Affordability Gap Per Inclusionary Unit VI. ROTI - Market Rate Scenario 1 VII. Inclusionary Housing Percentage VIII. In -Lieu Fee Per Per Square Foot of Leasable Area 1 ROTI = Return on Total Investment. $867 West Newport Airport Area Coyote Canyon Newport Center Mesa & Banning Prototype Prototype Prototype Ranch Prototype $1,197 $1,197 10.0 7.0 6.0 2.5 45 40 40 33 23 0 0 8 212 98 72 42 215 154 144 33 0 28 24 0 450 280 240 83 574,200 354,667 388,000 108,200 430,650 266,000 291,000 81,150 957 950 1,213 978 2.5 2.5 2.5 2.5 $318,541,000 $193,826,000 $258,738,000 $58,923,000 $708,000 $692,000 $1,078,000 $710,000 $555 $547 $667 $545 $2,780 $2,665 $3,511 $3,349 $4,652 $3,745 $4,019 $3,593 $6,569 $4,002 $4,421 $7,002 $867 $867 $990 $990 $990 $990 $1,094 $1,094 $1,094 $1,094 $1,197 $1,197 $516,000 $487,000 $861,000 $521,000 4.5% 4.4% 5.1% 4.5% 7% 7% 7% 7% $38.30 $36.60 $50.30 $38.50 Inclusionary Housing: Financial Evaluation Page 59 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 SUMMARY TABLE #3 APARTMENT DEVELOPMENT PROTOTYPES: §65915 DENSITY BONUS SCENARIOS I. Project Description A. Site Area (Acres) B. Density (Units/Acre) C. Unit Mix Studio Units One -Bedroom Units Two -Bedroom Units Three -Bedroom Units Total Units D. Gross Building Area E. Total Leasable Area Square Feet Per Unit F. Parking Spaces Per Unit II. Development Costs Total Development Cost Per Unit Per Square Foot of GBA III. Market Rate Rents Per Unit Studio Units One -Bedroom Units Two -Bedroom Units Three -Bedroom Units IV. Percentage of Very Low Income Units V. Return on Total Investment Market Rate Scenario Density Bonus Scenario $2,780 West Newport Airport Area Coyote Canyon Newport Center Mesa & Banning Prototype Prototype Prototype Ranch Prototype $4,421 $7,002 NA 10.0 7.0 6.0 2.5 68 60 60 50 34 0 0 13 317 147 108 62 324 231 216 50 0 42 36 0 675 420 360 125 862,133 532,000 582,000 162,733 646,600 399,000 436,500 122,050 958 950 1,213 976 1.7 1.7 1.7 1.7 $437,801,000 $268,271,000 $333,851,000 $74,444,000 $649,000 $639,000 $927,000 $596,000 $508 $504 $574 $457 $2,780 $2,665 $3,511 $3,349 $4,652 $3,745 $4,019 $3,593 $6,569 $4,002 $4,421 $7,002 NA 1 15% 15% 15% 15% Z 4.5% 4.4% 5.1% 4.5% 4.5% 4.4% 5.1% 4.5% 1 The income restriction is set at the very -low income level to maximize the benefits provided by the State Density Bonus. The requirement is based on the number of units allowed by a zoning compliant project and must be counted towards fulfillment of a low income Inclusionary Housing requirements. z See SUMMARY TABLE #2. Based on the zoning compliant development scopes. Inclusionary Housing: Financial Evaluation Page 60 Keyser Marston Associates, Inc. 2111003.NB / 19003.001.001 February 17, 2022 ATTACHMENT 1 INCLUSIONARY HOUSING PROGRAM SURVEYS INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey Page 1 of 10 APPENDIX A INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Page 2 of 10 Rental Development Ownership Development On-site % Threshold Covnenant Threshold Covnenant Jurisdiction Compliance Options Set Aside % Varies Project Size % of AMI Period Project Size % of AMI Period I. Inclusionary Requirements: Both Rental and Ownership Projects Create on-site units; create off-site units; preserve or rehab Alban Y 15% Yes 5 Perpetual 5 Perpetual existing g; pay in -lieu fee; donate land housing; Create on-site units; create off-site units; pay in -lieu fee; 9% at 120% & 6% 9% at 120% & 6% Alhambra 15% No 7 7 donate land at 80% at 80% Avalon Create on-site units; create off-site units; pay in -lieu fee 20% No 4 55 4 55 Create on-site units; create off-site units; preserve or rehab Brea 10% No 20 Not defined 55 20 120% 45 existing housing; pay in -lieu fee; donate land Create on-site units; create off-site units; preserve or rehab Campbell 15% No 55 120% 45 existing housing; pay in -lieu fee; donate land Capitola Create on-site units; pay in -lieu fee 15% Yes 7 120% Life of Bldg Create units; pay in -lieu fee. City Council may approve Carlsbad 15% No 1 Low 55 1 Low 30 additional alternative fulfillment options. Create on-site units; create off-site units; preserve or rehab existing housing; pay in -lieu fee; donate land. Excludes area 5% @ Low /5% @ 5% @ Low / 5% @ Chula Vista 10% No 50 Life of Bldg 50 Life of Bldg west of 1-805 identified as "Area of Low/Moderate Income Mod Mod Concentration". Colma Create on-site units; pay in -lieu fee 20% No 5 55 5 45 Create on-site units; create off-site units; preserve or rehab Concord 10% Yes 5 55 5 45 existing housing; pay in -lieu fee Create on-site units; create off-site units; pay in -lieu fee; Contra Costa County donate land. Program requirements are only applied in 15% No 5 5 3 designated areas. Coronado Create units; pay in -lieu fee 20% No 2 Low 2 Mod 1-7 units pays in -lieu fee. Create on-site units; create off-site Cupertino ° 15/o No 7 ° ° 50/° /80% 99 7 ° ° 50%/120% 99 units; pay impact/linkage fee; donate land Create on-site units; preserve or rehab existing housing; pay Davis 5% to 25% No 5 80%° Perpetual 5 120% Perpetual in -lieu fee; donate land Create on-site units; create off-site units; pay in -lieu fee; Dublin 12.5% No 20 55 20 55 donate land Emeryville Create on-site units; pay impact/linkage fee 12%/20% No 55 10 55 Create on-site units; create off-site units; create ADU's; 10% VL or 15% 10% VL or 15% Encinitas 10%/15% No 7 Perpetual 7 Perpetual preserve at -risk units; pay in -lieu fee; donate land Low Low Has a production option, but the in -lieu fee option is more 18% to Fremont No 2 30% to 110%2 0 30/ 0 to 110/ cost effective 21.6% Fort Bragg Create on-site units 10% to 20% 5 80%/120% 5 100%/120% 15 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Page 2 of 10 APPENDIX A INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Page 3 of 10 Rental Development Ownership Development On-site% Threshold Covnenant Threshold Covnenant Jurisdiction Compliance Options Set Aside % Varies Project Size % of AMI Period Project Size % of AMI Period Create on-site units; create off-site units; pay in -lieu fee; pay 6%/7.5%- 3% @ 50%/ 3% @ Hayward No 2 55 2 110% 45 impact/linkage fee; donate land 10% 60% Create on-site units; create off-site units; preserve or rehab Huntington Beach 10%No 3 ° 80/ 55 3 120% 45 existing housing; pay in -lieu fee Projects with fewer than 50 units can create on-site units; create off-site units; preserve or rehab existing housing; pay 50%, 80% & 120% 50%, 80% & 120% Irvine 15% No 50 30 50 30 in -lieu fee; donate land. Projects with 50+ units must produce Defined credits Defined credits the affordable units on site. Create on-site units; create off-site units; pay in -lieu fee; 9% Mod / 6% VL & La Habra 15% No 10 55 10 110% 45 acquisition/rehabilitation. Low Long Beach Create on-site units; pay in -lieu fee; donate land 11%/10% No 10 50% 55 10 110% 45 Create on-site units; create off-site units. Program Los Altos 10% No 10 30 10 30 requirements are only imposed in designated areas. Menlo Park Create on-site units; create off-site units; pay in -lieu fee 10% Yes 5 80%/120% 5 80%/120% Mill Valley Create on-site units 25% Yes 4 120% Perpetual 4 120% Perpetual Create on-site units; create off-site units Program Nevada County No 20 30 20 30 requirements are only applied in designated areas. Create on-site units; create off-site units; preserve or rehab Oceanside existing housing; pay in -lieu fee; donate land; purchase 10% No 3 Low 55 3 Mod 55 credits from another project. Create on-site units; create off-site units; pay in -lieu fee in 5% @ VL / 5% Oxnard 10% No 10 55 10 Low 20 limited circumstances Low Create on-site units; create off-site units; pay in -lieu fee; Pacifica 15% No 8 55 8 45 donate land Create on-site units; create off-site units; preserve or rehab Palo Alto 15% Yes 59 59 existing housing; pay in -lieu fee Create on-site units; create off-site units; preserve or rehab 5% @50%; 5% @ Pasadena 20% No 1 Perpetual p 1 110% 45 existing housing; pay in -lieu fee; donate land 80%; 10% @ 120% Petaluma Create on-site units; pay in -lieu fee; donate land 15% No 30 30 Create on-site units; create off-site units; pay in -lieu fee; Pleasanton donate land; credit transfers; other alternate methods of 15% Yes 15 15 Perpetual compliance Create on-site units; create off-site units; pay in -lieu fee; 13%/7%- Pomona Yes 3 120% Perpetual 3 120% 45 donate land 11% Create on-site units; create off-site units; preserve or rehab Redwood City units; pay impact/linkage fee; donate land No 5 30 5 30 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Page 3 of 10 APPENDIX A INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Rental Development Ownership Development On-site % Threshold Covnenant Threshold Covnenant Jurisdiction Compliance Options Set Aside % Varies Project Size % of AMI Period Project Size % of AMI Period No 1 80% 1 80% No 10 55 10 45 No 10 10% @ 60% 55 10 10% @ 100% / 15 15%%120% Yes 10 55% to 110% 10 80% to 130% 5% @50%; 5% @ Yes 10 Perpetual 10 120% Perpetual 60%; 5% @ 100% No 2 55 2 55 1, 2 or 11 Coastal: 15% at Yes depending Low or 15% at 55 on subarea Mod San Mateo County Has a production option, but the in -lieu fee option is more 10% Sacramento County cost effective 10% Life of Bldg Create on-site units; create off-site units; preserve or rehab Create on-site units; pay in -lieu fee San Bruno existing housing; pay in -lieu fee; donate land 15% Create on-site units; create off-site units; rehabilitate existing Only applies to changes in land use and zoning designations. units, SRO hotel rooms, or conversion of guest rooms; pay m - 45 San Diego lieu fee; donate land. The amended requirements were 10% to 15% Santa Ana approved in 2020 and are being phased in over five years. 15%/10% No Create on-site units; create off-site units; pay in -lieu fee. Ful 15% to 20% San Francisco schedule goes into effect in 2023 for rental and 2025 for / 15% to ownership. 26% @ 80% Create on-site units; create off-site units; preserve or rehab Perpetual San Jose units; in -lieu fee; donate land; credit transfers; reduction for 15% 2 deeper affordability 55 San Juan Capistrano Create on-site units; create off-site units; preserve or rehab 10% No Multiple subareas and requirements. Create on-site units; Mod SLO County create off-site units; preserve or rehab existing housing; pay 15% in -lieu fee; donate land No 1 80% 1 80% No 10 55 10 45 No 10 10% @ 60% 55 10 10% @ 100% / 15 15%%120% Yes 10 55% to 110% 10 80% to 130% 5% @50%; 5% @ Yes 10 Perpetual 10 120% Perpetual 60%; 5% @ 100% No 2 55 2 55 1, 2 or 11 Coastal: 15% at Yes depending Low or 15% at 55 on subarea Mod San Mateo County Create on-site units 10% Yes 11 80% Life of Bldg San Rafael Create on-site units; pay in -lieu fee 10% No 2 120-150% AMI Only applies to changes in land use and zoning designations. 120% 45 2 10% @ 50%/ 15% Santa Ana 120% 15%/10% No 5 90/ restarts 55 120% to 200% Create on-site units; off-site units; pay in -lieu fee resale @ 80% 120% Perpetual Create on-site units; create off-site units; pay in -lieu fee for 1 50%, 80% & 120% 2 55 Santa Barbara (City) Defined credits 10%/15% No 5 Mod 90 to 9 & fractional units; donate land Create on-site units; create off-site units; pay in -lieu fee; Santa Cruz 15% Yes 2 80% Perpetual donate land Create on-site units; create off-site units; pay in -lieu fee; 50%,80% & 120% Santa Monica 5% to 30% Yes 2 55 donate land Defined credits 15% Low or 10% Santa Paula Create on-site units; create off-site units; pay in -lieu fee 10% to 17% Yes 10 55 VL Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Coastal A: 5% VL; 5% Low; 5% Mod, 1, 2 or 11 5% 120-150% AMI. Coastal: 45 depending Coastal: 15% Low Inland: on subarea Inland: 2% VL; 2% Perpetuity Low; 2% Mod; 2% 120-150% AMI 11 120% 45 2 120% 5 120% 45 90/ restarts 1 120% to 200% on each resale 2 120% Perpetual 50%, 80% & 120% 2 55 Defined credits 10 45 Page 4 of 10 APPENDIX A INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Page 5 of 10 Rental Development Ownership Development On-site % Threshold Covnenant Threshold Covnenant Jurisdiction Compliance Options Set Aside % Varies Project Size % of AMI Period Project Size % of AMI Period Has a production option, but the in -lieu fee option is more 5% to 8%/ 5% @ 50% or 8% Santa Rosa No 1 2 110% cost effective 10% @ 60% Sonoma Create on-site units 25% Yes 5 120% 55 5 120% 55 Create on-site units; create off-site units; pay in -lieu fee; Sonoma County a 20% Yes a 60% 55 o 80% 30 donate land Create on-site units; create off-site units; preserve or rehab South San Francisco 20% No 4 55 4 55 existing housing; pay in -lieu fee Create on-site units; create off-site units; pay in -lieu fee; 5% @50%; 10% @ Sunnyvale 15.0% No 7 55 7 100% 30 donate land, unit conversion, other proposals 60% Tiburon Create on-site units; create off-site units; pay in -lieu fee 15% 3 Perpetual 3 Perpetual Union City Create on-site units; create off-site units; pay in -lieu fee 15% No 7 7 Create on-site units; create off-site units; preserve or rehab 5% @50%; 5% @ West Sacramento 10% No 5 55 5 70% 45 existing housing; pay in -lieu fee; donate land 60% Create on-site units; create off-site units; pay in -lieu fee for 2- West Hollywood 20% No 2 Low / Mod Perpetual 2 Low / Mod Perpetual 10 unit projects Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Page 5 of 10 APPENDIX A INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Page 6 of 10 Rental Development Ownership Development On-site % Threshold Covnenant Threshold Covnenant Jurisdiction Compliance Options Set Aside % Varies Project Size % of AMI Period Project Size % of AMI Period II. Inclusionary Requirements: Ownership Projects Only Alameda Create on-site units; create off-site units; pay in -lieu fee 5% No 5 59 Carpinteria Create on-site units; pay in -lieu fee in limited circumstances 12% No 5 200% 30 Danville Create on-site units; pay in -lieu fee 10% Yes 7 110% 20 Create on-site units; create off-site units; pay in -lieu fee; 3% @ VL/7% @ Folsom 10% No 10 donate land; acq/rehab; other proposals Low Lafayette Z Create on-site units; create off-site units 15% No 2 45 Monterey Create on-site units; donate land 20% No 6 Perpetual Mountain View Create on-site units; pay in -lieu fee 10% No 3 100% 55 Rohnert Park Create on-site units; create off-site units; pay in -lieu fee 15% No 5 55 Create on-site units; create off-site units; pay in -lieu fee; San Clemente donate land; or a combination recommended by the 4% No 6 50% Community Development Director. San Leandro Create on-site units; pay in -lieu fee 15% Yes 55 Create on-site units; create off-site units; pay in -lieu fee; San Mateo County 20% No 5 55 donate land 5-19: 1 Mod / 20+: South Coast: 2.5% 45 - restarts VL; 2.5% Low; 5% up to 90 Create on-site units; create off-site units in the coastal zone; Mod; 5% Wkfrce Santa Barbara County 5%-15% Yes 5 pay in -lieu fee for certain unit types Santa Ynez: No W kfce Santa Maria & Lompoc: 2.5% VL & 2.5 Low Create on-site units; create off-site rental units; pay in -lieu Thousand Oaks 10% No 5 Mod 45 fee Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Page 6 of 10 APPENDIX A INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Page 7 of 10 Rental Development Ownership Development On-site % Threshold Covnenant Threshold Covnenant Jurisdiction Compliance Options Set Aside % Varies Project Size % of AMI Period Project Size % of AMI Period III. Inclusionary for Ownership Projects & Impact Fee for Rental Protects Berkeley Create on-site units; pay in -lieu fee 20% No 5 80% Perpetual Create on-site units; create off-site units; pay impact/linkage San Carlos 15/0 Yes 55 2 45 fee Create on-site units; create off-site units; preserve or rehab existing housing; pay in -lieu fee; pay impact/linkage fee; Truckee 15% No 7 Perpetual 7 Perpetual donate land. Requirements vary by zones, neighborhoods or districts. IV. Mandatory Inclusionary for Ownership Projects & Voluntary Inclusionary for Rental Projects Pittsburg Create on-site units; pay in -lieu fee 15% Yes 5 Salinas Create on-site units; create off-site units; donate land 20% No 10 30 San Juan Bautista Create on-site units; pay impact/linkage fee 6% San Luis Obispo Create on-site units; pay in -lieu fee; donate land 3% Yes 55 5 45 Create on-site units; create off-site units; preserve or rehab San Marcos 15% No 55 120% 55 existing housing; pay in -lieu fee; donate land Create on-site units; create off-site units; preserve or rehab Solana Beach 15% No 5 55 5 45 existing housing; pay impact/linkage fee V. Rental Projects Only Create on-site units; create off-site units; pay in -lieu fee; Glendale 15%No 8 60% 55 donate land Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; Incl Survey Page 7 of 10 APPENDIX B INCLUSIONARY HOUSING PROGRAM SURVEYS - LOS ANGELES, ORANGE AND SAN DIEGO COUNTIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Rental Development Ownership Development On-site % Threshold Covnenant Threshold Covnenant Jurisdiction Compliance Options Set Aside % Varies Project Size % of AMI Period Project Size % of AMI Period In -Lieu Fee I. Inclusionary Requirements: Both Rental and Ownership Projects Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; OC_LA_SD Page 8 of 10 9% at 9% at 120% & 120% & Rental @ $14.30/SF Alhambra On-site or pay in -lieu fee. 15% No 7 6% at 80% 7 6% at Ownership @ $30.00/SF 80% Create on-site units; create off - site units; preserve or rehab Calculated per project. Based on Brea existing housing; pay in -lieu 10% No 20 55 20 120% 10 the Affordability Gap fee; donate land Available up to 6 units. $4,515 Carlsbad Create units; pay in -lieu fee 15% No 7 Low 7 Low per market rate unit Create on-site units; create off- site units; preserve or rehab existing housing; pay in -lieu 5% @Low/ S%@ In -lieu fee is based on the Chula Vista fee; donate land. Excludes area 10% No 50 Life of Bldg 50 Low/ S% Life of Bldg median home price minus the 5% @ Mod west of 1-805 identified as @ Mod affordable home price "Area of Low/Moderate Income Concentration". In -lieu fee paid by right. $7,000 Coronado Create units; pay in lieu fee 20% No 2 Low 2 Mod per market rate unit Create on-site units; create off In -lieu fee is calculated on a Encinitas site units; create ADU's; 10%/15% No 7 10% VL or Perpetual 7 10% VL or Perpetual basis based preserve at -risk units; pay in- 15% Low 15% Low project -by -project on the affordability gap. lieu fee; donate land Sliding Scale: 3 to 30 units. In - Lieu Fee allowed for projects up Create on-site units; create off- to 100 units. Rental: $3.58 to Huntington Beach site units; preserve or rehab 10% No 3 80% 55 3 120% 45 $35.80/SF Ownership: $2.54 to existing housing; pay in -lieu fee $25.36/SF. The per SF measurement caps at 2,000 SF. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; OC_LA_SD Page 8 of 10 APPENDIX B INCLUSIONARY HOUSING PROGRAM SURVEYS - LOS ANGELES, ORANGE AND SAN DIEGO COUNTIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Jurisdiction Compliance Options On-site % Set Aside % Varies Rental Development Threshold Covnenant Ownership Development Threshold Covnenant Project Size % of AMI Period Project Size % of AMI Period In -Lieu Fee Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; OC_LA_SD Page 9 of 10 Projects with fewer than 50 units can create on-site units; create off-site units; preserve 50%, 80% 50%, 80% & Calculated per project. Based or rehab existing housing; pay & 120% Irvine 15% No 50 120% Defined 30 50 30 on an equivalent value in -lieu fee; donate land. Defined credits calculation Projects with 50+ units must credits produce the affordable units on site. Create on-site units; create off- Calculated per project. Based La Habra site units; pay in -lieu fee; 15% No 10 9% Mod / 6% 55 10 110% 45 on the estimated construction acquisition/rehabilitation. VL &Low cost to produce the unit. Create on-site units; pay in -lieu Rental @ $38.00/SF Lon Long Beach fee; donate land 11% 10% / No 10 50% 55 10 ° 120% 45 Ownership @ $29.10/SF Create on-site units; create off- site units; preserve or rehab In -lieu fee paid by right. The fee Oceanside existing g; pay in -lieu housing; 10% No 3 Low 55 3 Mod 55 is set at $8.82/SF. fee; donate land; purchase credits from another project. Create on-site units; create off- 5% @50%; Sliding scale by sub -area & Pasadena site units; preserve or rehab 20% No 1 5% @ 80%; 1 110% 45 project size. Low at $34.19/SF & existing housing; pay in -lieu 10% @ 120% High at $73.52/SF fee; donate land Create on-site units; create off- Rental @ $9.30/SF Single Pomona site units; pay in -lieu fee; 13%/7%- Yes 3 120% Perpetual 3 120% 45 Family @ $11.40/SF donate land 11% Condominiums @ $9.30/SF Create on-site units; create off - 120 or In 2024 the in lieu fee will be set San Diego site units; pay in -lieu fee; 10% to 15% No 10 50% or 80% 55 120% 1 a $25/SF donate land Create on-site units; create off- Based on 90% of the site units; preserve or rehab Affordability Gap, which is San Juan Capistrano existing housing; pay in -lieu 10% No 2 55 2 55 updated monthly based on fee; donate land benchmark market prices Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; OC_LA_SD Page 9 of 10 APPENDIX B INCLUSIONARY HOUSING PROGRAM SURVEYS - LOS ANGELES, ORANGE AND SAN DIEGO COUNTIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Jurisdiction Rental Development Ownership Development On-site % Threshold Covnenant Threshold Covnenant Compliance Options Set Aside % Varies Project Size % of AMI Period Project Size % of AMI Period In -Lieu Fee Only applies to changes in land use and zoning designations. 10% @ 50%/ Fewer than 20 Units @ $5/SF Santa Ana 15% No Create on-site units; off-site 5 55 15% @ 60% 5 120% 45 20+ Units @ $15/SF units; pay in -lieu fee Create on-site units; create off- 50%, 80% & 50%,80% & 120% Rental @ $35.70/SF Santa Monica site units; pay in -lieu fee; 5% to 30% Yes 2 120% Defined 55 2 55 Defined Ownership @ $41.70/SF donate land credits credits Create on-site units; create off- Low / Sliding scale: 2 Units @ West Hollywood site units; pay in -lieu fee for 2- 20% No 2 Low / Mod Perpetual 2 Perpetual $13.63/SF - 10 Units @ 10 units projects Mod $29.23/SF sionary Requirements: Ownership Projects Only Create on-site units; create off- site units; pay in -lieu fee; Based on the Affordability Gap donate land; or a combination San Clemente 4% No 6 50% associated with a prototype recommended by the Community Development 1,100 SF unit. Director. sionary Requirements: Rental Projects Only Create on-site units; create off - Glendale site units; pay in -lieu fee; 15% No 8 60% 55 Sliding scale: 8 Units @ $28.71/SF 21 Units @ $55/SF donate land Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 Inclusionary Survey; OC_LA_SD Page 10 of 10 ATTACHMENT 2 AFFORDABLE HOUSING COST CALCULATION METHODOLOGIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA APPENDIX A AFFORDABLE SALES PRICE CALCULATION METHODOLOGY The Affordable Sales Price calculations are based on the following assumptions: The household income information used in the calculations is based on 2021 income statistics for Orange County as a whole. The household incomes for moderate income households are produced and distributed annually by the California Department of Housing and Community Development (HCD). The Affordable Sales Price estimates are based on the calculation methodology imposed by California Health and Safety Code (H&SC) Section 50052.5. The elements included in the Affordable Sales Price calculations are described in the following sections of this Attachment. HOUSEHOLD SIZE For the sole purposes of calculating Affordable Sales Prices, H&SC Section 50052.5 sets household sizes based on the number of bedrooms in the home plus one.' H&SC Section 50052.5 refers to this as "the family size appropriate for the unit." This is not an occupancy cap; it is a benchmark that creates a consistent Affordable Sales Price calculation methodology. HOUSEHOLD INCOME For moderate income households, H&SC Section 50052.5 calculates the Affordable Sales Prices based on 110% of area median income (AMI) for a household size equal to the number of bedrooms in the home plus one. This measurement is only used for setting the Affordable Sales Prices. Households with incomes of up to 120% of AMI would qualify to reside in moderate income units. INCOME ALLOCATED TO HOUSING -RELATED EXPENSES For moderate income households H&SC Section 50052.5 allocates 35% of the benchmark household income to the payment of housing -related expenses. 1 For example, the imputed household size for a three-bedroom unit is four persons. Affordable Housing Cost Calculation Methodologies Page 1 Inclusionary Housing: Financial Evaluation February 17, 2022 HOUSING -RELATED EXPENSES Based on research undertaken by KMA, the variable housing related expense assumptions used in this analysis are presented in the following table: Variable Housing Related Expenses Ownership Housing Development Prototypes Monthly HOA, Monthly Utilities Insurance & Allowances 2 Maintenance Two -Bedroom Units $206 $300 Three -Bedroom Units $271 $350 Four -Bedroom Units $345 $400 The property tax expense estimate is based on 1.10% of the home's estimated market rate sales price. This assumes that the City will allow the homes to be resold on an unrestricted basis in return for the City receiving a share of the equity appreciation received by the home owner. SUPPORTABLE MORTGAGE AMOUNT The mortgage amounts used in the Affordable Sales Price calculations are estimated using the income available after the other housing -related expenses are paid. The mortgage terms used in this Financial Evaluation were based on a 30 -year fully amortizing loan at a 3.87% interest rate. 3 titl'YLHMARK DOWN PAYMENT KMA set the benchmark down payment at 5% of the estimated Affordable Sales Price. A down payment of this magnitude is commonly allowed by affordable housing programs. 'Utilities allowances are based on utilities costs comprised of gas heating, cooking and water heating; basic electric; air conditioning; and water, sewer and trash services. The allowances are based on the Orange County Housing Authority schedule effective as of December 1, 2021. 3 Based on a 50 basis points premium applied to the Bankrate site average APR as of January 1, 2022 (1't Quarter 2022) for a fixed interest rate loan with a 30 -year amortization period. Affordable Housing Cost Calculation Methodologies Page 2 Inclusionary Housing: Financial Evaluation February 17, 2022 APPENDIX B AFFORDABLE RENT CALCULATION METHODOLOGY The Affordable Rent calculations are based on the following assumptions: For the purposes of this Financial Evaluation, the maximum Affordable Rents for the Inclusionary Unit units were calculated based on the standards imposed by H&SC Section 50053. The calculations are presented in Attachment 3: Appendix B, and the assumptions and results can be summarized as follows: The household income information used in the calculations is based on 2021 income statistics for Orange County as a whole. The household incomes are published annually by HUD and are distributed by HCD. The Affordable Rent estimates are based on the calculation methodology imposed by H&SC Section 50053. The elements included in the Affordable Rent calculations are as follows: The household size appropriate for the unit is based on the H&SC Section 50052.5 standard of the number of bedrooms in the home plus one. As discussed previously, this is a benchmark for calculation purposes only. It is neither an occupancy minimum nor a maximum. For the purposes of setting the Affordable Rents, the household income is set at 50% of AMI for very low income households and 60% of AMI for low income households. Thirty percent (30%) of defined household income is allocated to housing -related expenses. 4. The following monthly utilities allowances were applied in this analysis.4 4 Utilities allowances are based on utilities costs comprised of gas heating, cooking and water heating; basic electric; and air conditioning. The allowances are based on the Orange County Housing Authority schedule effective as of December 1, 2021. Affordable Housing Cost Calculation Methodologies Page 3 Inclusionary Housing: Financial Evaluation February 17, 2022 Utilities Allowances Apartment Development Number of Monthly Utilities Bedrooms Allowances 0 $67 1 $77 2 $107 3 $137 Affordable Housing Cost Calculation Methodologies Page 4 Inclusionary Housing: Financial Evaluation February 17, 2022 ATTACHMENT 3 OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; ATT 3 TITLE Page 1 of 88 APPENDIX A MARKET SURVEYS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; App A Titles Page 2 of 88 APPENDIX A - EXHIBIT I HOME SALES SURVEY i COYOTE CANYON AREA OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Address Unit Size (SF) Two -Bedroom Units Sales Price Total Per SF Year Built 66 Clouds Irvine 92603 1,216 $975,000 $802 2004 152 Coral Rose Irvine 92603 1,280 $786,000 $614 2004 140 Coral Rose Irvine 92603 1,391 $780,000 $561 2004 127 Danbrook Irvine 92603 1,489 $765,000 $514 2004 46 Gingerwood Irvine 92603 1,586 $960,000 $605 2004 145 Roadrunner Irvine 92603 1,586 $923,000 $582 2004 123 Roadrunner Irvine 92603 1,622 $765,000 $472 2004 143 Roadrunner Irvine 92603 1,643 $925,000 $563 2004 95 Canyoncrest Irvine 92603 1,116 $833,000 $746 2003 120 Jadestone Irvine 92603 1,234 $740,000 $600 2003 262 Coral Rose Irvine 92603 1,234 $690,000 $559 2003 225 Coral Rose Irvine 92603 1,268 $785,000 $619 2003 260 Coral Rose Irvine 92603 1,268 $768,000 $606 2003 112 Coral Rose Irvine 92603 1,391 $731,500 $526 2003 208 Coral Rose Irvine 92603 1,489 $681,500 $458 2003 153 Roadrunner #244 Irvine 92603 1,610 $995,000 $618 2003 71 Gingerwood Irvine 92603 1,622 $812,500 $501 2003 53 Gingerwood Irvine 92603 1,622 $795,000 $490 2003 219 Lonetree Irvine 92603 1,622 $800,000 $493 2003 16 Shade Tree Irvine 92603 2,438 $1,662,500 $682 2003 Minimum 1,116 $681,500 $458 2003 Maximum 2,438 $1,662,500 $802 2004 Average 1,486 $858,700 $578 2003 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; Home Sales_CC Page 3 of 88 APPENDIX A - EXHIBIT I HOME SALES SURVEY i COYOTE CANYON AREA OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA II. Address Unit Size (SF) Three -Bedroom Units Sales Price Total Per SF Year Built 103 Danbrook Irvine 92603 1,416 $793,000 $560 2005 64 Clouds Vw Irvine 92603 1,333 $1,060,000 $795 2004 203 Danbrook Irvine 92603 1,416 $970,000 $685 2004 142 White Flower Irvine 92603 1,570 $1,385,000 $882 2004 21 Gardenpath Irvine 92603 1,628 $1,400,000 $860 2004 47 Gardenpath Irvine 92603 1,628 $1,435,000 $881 2004 61 Bower Tree Irvine 92603 1,628 $1,280,000 $786 2004 109 Roadrunner Irvine 92603 1,859 $940,000 $506 2004 65 Arborside Irvine 92603 1,913 $1,925,000 $1,006 2004 53 Shade Tree Irvine 92603 2,438 $1,380,000 $566 2004 202 Coral Rose Irvine 92603 1,416 $950,000 $671 2003 254 Coral Rose Irvine 92603 1,416 $765,000 $540 2003 41 Gardenpath Irvine 92603 1,548 $1,320,000 $853 2003 12 Arborside Irvine 92603 1,548 $980,000 $633 2003 53 Bellwind Irvine 92603 1,548 $1,350,000 $872 2003 77 Gingerwood Irvine 92603 1,610 $1,068,000 $663 2003 206 Lonetree #267 Irvine 92603 1,643 $850,000 $517 2003 133 Roadrunner Irvine 92603 1,859 $1,055,888 $568 2003 47 Gingerwood Irvine 92603 1,859 $1,008,000 $542 2003 49 Bower Tree Irvine 92603 1,859 $1,530,000 $823 2003 67 Shade Tree Irvine 92603 2,038 $1,245,000 $611 2003 77 Canyoncrest Irvine 92603 1,333 $1,080,000 $810 2002 Minimum 1,333 $765,000 $506 2002 Maximum 2,438 $1,925,000 $1,006 2005 Average 1,659 $1,171,400 $706 2003 1 Based on a Redfin search of home sales occurring between November 2020 and November 2021. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; Home Sales_CC Page 4 of 88 APPENDIX A - EXHIBIT II HOME SALES SURVEY i DOVER SHORES & WESTCLIFF AREA OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. New Attached Home Sales 1 Number of Bedrooms Sales Price Unit Size (SF) # of Units Total Per SF Isle at Mariner Shores - Intracorp 2 Bedrooms + Flex 1,683 6 $1,250,000 $743 3 Bedrooms 1,685 6 $1,445,000 $858 3 Bedrooms 1,732 12 $1,410,000 $814 4 Bedrooms 1,836 12 $1,479,000 $806 Minimum 1,683 $1,250,000 $743 Maximum 1,836 $1,479,000 $858 Weighted Average 1,750 $1,412,167 $807 Cay at Mariner Shores - Shea Homes 3 Bedrooms 2,091 13 $1,664,400 $796 3 Bedrooms 2,588 13 $1,734,100 $670 4 Bedrooms 2,484 13 $1,829,700 $737 4 Bedrooms 2,828 13 $1,892,000 $669 Minimum 2,091 $1,664,400 $669 Maximum 2,828 $1,892,000 $796 Weighted Average 2,498 $1,780,050 $713 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; Home Sales_D W Page 5 of 88 APPENDIX A - EXHIBIT II HOME SALES SURVEY 1 DOVER SHORES & WESTCLIFF AREA OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA II. Detached Home Resales 1 1 Based on a Zonda report prepared by Meyers Research on 11/9/21, and information derived from the Intracorp & Shea Homes websites z Based on a Redfin search of home sales occurring between November 2020 and November 2021. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; Home Sales_D W Page 6 of 88 Sales Price Address Unit Size (SF) Total Per SF Year Built Four -Bedroom Units 2100 E Linda Ln Newport Beach 92660 3,110 $3,900,000 $1,254 2021 1227 Sussex Ln Newport Beach 92660 2,757 $3,400,000 $1,233 2019 2024 Nautilus Ln Newport Beach 92660 5,017 $5,300,000 $1,056 2019 2018 Diana Ln Newport Beach 92660 2,167 $2,560,000 $1,181 2018 1429 Santiago Dr Newport Beach 92660 4,900 $4,200,000 $857 2018 1817 Glenwood Ln Newport Beach 92660 3,688 $2,750,000 $746 2012 1000 Kings Rd Newport Beach 92663 4,279 $3,700,000 $865 2003 327 Snug Harbor Rd Newport Beach 92663 4,000 $3,650,000 $913 2000 2732 Circle Dr Newport Beach 92663 3,624 $3,695,500 $1,020 1946 Minimum 2,167 $2,560,000 $746 1946 Maximum 5,017 $5,300,000 $1,254 2021 Average 3,727 $3,683,900 $988 2006 Five -Bedroom Units 1612 Highland Dr Newport Beach 92660 4,120 $4,175,000 $1,013 2021 625 Saint James Rd Newport Beach 92663 5,222 $6,000,000 $1,149 2021 1409 Priscilla Ln Newport Beach 92660 3,880 $3,686,000 $950 2020 1744 Skylark Ln Newport Beach 92660 4,120 $4,350,000 $1,056 2020 306 Signal Rd Newport Beach 92663 7,400 $9,375,000 $1,267 2020 2027 Santiago Dr Newport Beach 92660 4,029 $3,425,000 $850 2018 1827 Mariners Dr Newport Beach 92660 4,030 $2,900,000 $720 2018 403 Kings Rd Newport Beach 92663 6,802 $9,995,000 $1,469 2014 2751 Bayshore Dr Newport Beach 92663 4,050 $6,400,000 $1,580 2013 920 Kings Rd Newport Beach 92663 6,835 $7,200,000 $1,053 2009 1921 Windward Ln Newport Beach 92660 5,250 $4,525,000 $862 2007 1633 Highland Dr Newport Beach 92660 4,271 $2,995,000 $701 2004 306 Snug Harbor Rd Newport Beach 92663 4,808 $4,577,625 $952 2003 1106 Nottingham Rd Newport Beach 92660 4,951 $5,375,000 $1,086 2000 Minimum 3,880 $2,900,000 $701 2000 Maximum 7,400 $9,995,000 $1,580 2021 Average 4,983 $5,355,600 $1,075 2013 1 Based on a Zonda report prepared by Meyers Research on 11/9/21, and information derived from the Intracorp & Shea Homes websites z Based on a Redfin search of home sales occurring between November 2020 and November 2021. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; Home Sales_D W Page 6 of 88 APPENDIX A - EXHIBIT III HOME SALES SURVEY 1 WEST NEWPORT MESA & BANNING RANCH AREAS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Address I. Pacific Coast Highway Adjacent -Single Family Homes z Sales Price Unit Size (SF) Total Per SF Year Built Three -Bedroom Units 255 Walnut St Newport Beach 92663 2,226 $1,767,500 $794 1967 514 Canal St Newport Beach 92663 1,710 $1,999,999 $1,170 1965 337 Colton St Newport Beach 92663 1,100 $1,288,000 $1,171 1964 320 Colton St Newport Beach 92663 1,654 $1,580,000 $955 1964 347 Walnut St Newport Beach 92663 1,059 $1,400,000 $1,322 1962 305 Walnut St Newport Beach 92663 1,507 $1,340,000 $889 1962 416 62nd St Newport Beach 92663 2,466 $1,950,000 $791 1962 441 Prospect St Newport Beach 92663 2,485 $2,000,000 $805 1961 488 Prospect St Newport Beach 92663 1,414 $1,525,000 $1,079 1960 Minimum 1,059 $1,288,000 $791 1960 Maximum 2,485 $2,000,000 $1,322 1967 Average 1,736 $1,650,100 $951 1963 Four -Bedroom Units 355 Walnut St Newport Beach 92663 2,502 $2,650,000 $1,059 2018 218 Walnut St Newport Beach 92663 2,044 $1,944,500 $951 1965 1 Canal Cir Newport Beach 92663 1,914 $2,400,000 $1,254 1963 315 Lugonia St Newport Beach 92663 2,755 $2,475,000 $898 1962 234 Prospect St Newport Beach 92663 1,734 $1,675,000 $966 1961 226 62nd St Newport Beach 92663 1,565 $1,585,000 $1,013 1960 235 Cedar St Newport Beach 92663 1,835 $1,650,000 $899 1960 Minimum 1,565 $1,585,000 $898 1960 Maximum 2,755 $2,650,000 $1,254 2018 Average 2,050 $2,054,200 $1,002 1970 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; Home Sales_WNM BR Page 7 of 88 APPENDIX A - EXHIBIT III HOME SALES SURVEY 1 WEST NEWPORT MESA & BANNING RANCH AREAS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Address II. Inland - Newport Beach & Costa Mesa Homes Sales Price Unit Size (SF) Total Per SF Year Built Three -Bedroom Units 18 Ebb Tide Cir Newport Beach 92663 1,708 1,045,000 $612 2020 77 Ebb Tide Cir Newport Beach 92663 1,829 1,065,000 $582 2018 77 Ebb Tide Cir Newport Beach 92663 1,843 1,065,000 $578 2018 36 Ebb Tide Cir Newport Beach 92663 1,708 1,066,173 $624 2020 85 Ebb Tide Cir Newport Beach 92663 1,719 1,100,000 $640 2018 31 Ebb Tide Cir Newport Beach 92663 1,719 1,165,000 $678 2017 74 Ebb Tide Cir Newport Beach 92663 1,863 1,167,500 $627 2018 7 Ebb Tide Cir Newport Beach 92663 1,719 1,225,000 $713 2017 3 Ebb Tide Cir Newport Beach 92663 1,719 1,250,000 $727 2017 49 Ebb Tide Cir Newport Beach 92663 2,228 1,575,000 $707 2018 1811 Coastal Way Costa Mesa 92627 1,873 $947,500 $506 2014 1804 Ocean Ct Costa Mesa 92627 1,873 $1,020,000 $545 2014 787 Windward Way Costa Mesa 92627 2,042 $1,053,000 $516 2016 1016 Bridgewater Way Costa Mesa 92627 1,877 $1,055,000 $562 2017 1009 Somerton Dr Costa Mesa 92627 1,877 $1,085,000 $578 2016 799 Windward Way Costa Mesa 92627 2,042 $1,100,000 $539 2016 1609 Somerton Dr Costa Mesa 92627 1,896 $1,175,000 $620 2017 1606 Somerton Dr Costa Mesa 92627 1,896 $1,200,000 $633 2017 1613 Somerton Dr Costa Mesa 92627 1,877 $1,370,000 $730 2017 Minimum 1,708 $947,500 $506 2014 Maximum 2,228 $1,575,000 $730 2020 Average 1,858 $1,143,600 $615 2017 Four -Bedroom Units 10 Ebb Tide Cir Newport Beach 92663 1,809 1,096,000 $606 2020 38 Ebb Tide Cir Newport Beach 92663 1,864 1,105,500 $593 2018 15 Ebb Tide Cir Newport Beach 92663 2,229 1,120,000 $502 2019 43 Ebb Tide Cir Newport Beach 92663 1,863 1,150,000 $617 2017 23 Ebb Tide Cir Newport Beach 92663 1,843 1,158,000 $628 2017 47 Ebb Tide Cir Newport Beach 92663 1,864 1,160,000 $622 2017 81 Ebb Tide Newport Beach 92626 2,229 1,180,000 $529 2019 30 Ebb Tide Cir Newport Beach 92663 1,863 1,210,000 $649 2020 26 Ebb Tide Cir Newport Beach 92663 1,863 1,300,000 $698 2020 60 Ebb Tide Cir Newport Beach 92663 2,210 1,485,000 $672 2018 2 Ebb Tide Newport Beach 92663 2,228 1,560,000 $700 2020 2 Ebb Tide Cir Newport Beach 92663 2,229 1,560,000 $700 2019 53 Ebb Tide Cir Newport Beach 92663 2,228 1,625,000 $729 2018 1832 Peninsula PI Costa Mesa 92627 1,756 $930,000 $530 1990 1870 Parkcrest Dr Costa Mesa 92627 1,880 $1,025,000 $545 1971 1052 Hampton Dr Costa Mesa 92627 1,869 $1,080,000 $578 2016 1058 Hampton Dr Costa Mesa 92627 1,869 $1,100,000 $589 2016 1886 Parkcrest Dr Costa Mesa 92627 1,880 $1,160,000 $617 1971 1022 Bridgewater Way Costa Mesa 92627 1,869 $1,200,000 $642 2018 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; Home Sales_WNM BR Page 8 of 88 APPENDIX A - EXHIBIT III HOME SALES SURVEY 1 WEST NEWPORT MESA & BANNING RANCH AREAS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Address 1897 Parkview Cir Costa Mesa 1641 Bridgewater Way Costa Mesa Sales Price Unit Size (SF) Total 92627 1,880 $1,235,000 92627 2,274 $1,525,000 Per SF Year Built $657 1971 $671 2017 Minimum 1,756 $930,000 $502 1971 Maximum 2,274 $1,625,000 $729 2020 Average 1,981 $1,236,400 $624 2010 1 Based on a Redfin search of home sales occurring between November 2020 and November 2021. z These homes are primarily located in Newport Shores. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; Home Sales_WNM BR Page 9 of 88 APPENDIX B AFFORDABLE SALES PRICE CALCULATIONS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; App B Titles Page 10 of 88 APPENDIX B - EXHIBIT I AFFORDABLE SALES PRICE CALCULATIONS i COYOTE CANYON PROTOTYPE 2021 INCOME STANDARDS - MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA 1 Based on 2021 Orange County household incomes published by the California Housing & Community Development Department (HCD). The Affordable Sales Price calculations are based on the California Health and Safety Code Section 50052.5 methodology. z Based in part on the results of the home sales survey. 3 Under the California Health & Safety Code Section 50052.5 calculation methodology, the benchmark household size is set at the number of bedrooms in the unit plus one. This benchmark is used solely for the purposes of calculating the Affordable Sales Price. It is neither an occupancy cap nor a floor. 4 Utilities allowances are based on the Orange County Housing Authority utility allowance schedule effective as of 12/1/21. Assumes: Gas Heating, Gas Cooking, Gas Water Heater, Basic Electric, Air Conditioning, Water, Sewer,and Trash. s Based on the Income Allotted to Housing minus the following: Annual Utilities Allowance; HOA, Maintenance & Insurance; and Property Taxes @ 1.10% of Market Rate Sales Price. 6 Based on a 50 basis points premium applied to the Bankrate site average as of January 1, 2022 (1st Quarter 2022) for a fixed -interest rate loan with a 30 -year amortization period. Prepared by: Keyser Marston Associates File name: 2 17 22 NB Own; ASP Page 11 of 88 Two -Bedroom Three -Bedroom Units Units I. General Assumptions Estimated Market Rate Sales Price z $953,200 $1,320,100 Area Median Income 3 $96,050 $106,700 Annual Utilities Allowance 4 $2,472 $3,252 HOA, Maintenance & Insurance $3,600 $4,200 II. Affordable Sales Price Calculations A. Affordable Sales Price Based on 110% AMI Benchmark Annual Household Income $105,655 $117,370 Income Allotted to Housing @ 35% of Income $36,980 $41,080 B. Property Taxes @ 1.10% of Market Rate Sales Price $10,490 $14,520 C. Income Available for Mortgage s $20,418 $19,108 D. Affordable Sales Price Supportable Mtg @ 3.87% Interest 6 $362,100 $338,800 Home Buyer Down Payment @ 5% of ASP 19,100 17,800 Affordable Sales Price $381,200 $356,600 1 Based on 2021 Orange County household incomes published by the California Housing & Community Development Department (HCD). The Affordable Sales Price calculations are based on the California Health and Safety Code Section 50052.5 methodology. z Based in part on the results of the home sales survey. 3 Under the California Health & Safety Code Section 50052.5 calculation methodology, the benchmark household size is set at the number of bedrooms in the unit plus one. This benchmark is used solely for the purposes of calculating the Affordable Sales Price. It is neither an occupancy cap nor a floor. 4 Utilities allowances are based on the Orange County Housing Authority utility allowance schedule effective as of 12/1/21. Assumes: Gas Heating, Gas Cooking, Gas Water Heater, Basic Electric, Air Conditioning, Water, Sewer,and Trash. s Based on the Income Allotted to Housing minus the following: Annual Utilities Allowance; HOA, Maintenance & Insurance; and Property Taxes @ 1.10% of Market Rate Sales Price. 6 Based on a 50 basis points premium applied to the Bankrate site average as of January 1, 2022 (1st Quarter 2022) for a fixed -interest rate loan with a 30 -year amortization period. Prepared by: Keyser Marston Associates File name: 2 17 22 NB Own; ASP Page 11 of 88 APPENDIX B - EXHIBIT II AFFORDABLE SALES PRICE CALCULATIONS i DOVER WESTCLIFF PROTOTYPE 2021 INCOME STANDARDS - MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Three -Bedroom Four -Bedroom Units Units General Assumptions Estimated Market Rate Sales Price z $1,517,900 $1,742,500 Area Median Income 3 $106,700 $115,250 Annual Utilities Allowance 4 $3,252 $4,140 HOA, Maintenance & Insurance $4,200 $4,800 II. Affordable Sales Price Calculations A. Affordable Sales Price Based on 110% AMI Benchmark Annual Household Income $117,370 $126,775 Income Allotted to Housing @ 35% of Income $41,080 $44,370 B. Property Taxes @ 1.10% of Market Rate Sales Price $16,700 $19,170 C. Income Available for Mortgage s $16,928 $16,260 D. Affordable Sales Price Supportable Mtg @ 3.87% Interest 6 $300,200 $288,300 Home Buyer Down Payment @ 5% of ASP 15,800 15,200 Affordable Sales Price $316,000 $303,500 1 Based on 2021 Orange County household incomes published by the California Housing & Community Development Department (HCD). The Affordable Sales Price calculations are based on the California Health and Safety Code Section 50052.5 methodology. z Based in part on the results of the home sales survey. 3 Under the California Health & Safety Code Section 50052.5 calculation methodology, the benchmark household size is set at the number of bedrooms in the unit plus one. This benchmark is used solely for the purposes of calculating the Affordable Sales Price. It is neither an occupancy cap nor a floor. 4 Utilities allowances are based on the Orange County Housing Authority utility allowance schedule effective as of 12/1/21. Assumes: Gas Heating, Gas Cooking, Gas Water Heater, Basic Electric, Air Conditioning, Water, Sewer,and Trash. s Based on the Income Allotted to Housing minus the following: Annual Utilities Allowance; HOA, Maintenance & Insurance; and Property Taxes @ 1.10% of Market Rate Sales Price. 6 Based on a 50 basis points premium applied to the Bankrate site average as of January 1, 2022 (1st Quarter 2022) for a fixed -interest rate loan with a 30 -year amortization period. Prepared by: Keyser Marston Associates File name: 2 17 22 NB Own; ASP Page 12 of 88 APPENDIX B - EXHIBIT III AFFORDABLE SALES PRICE CALCULATIONS i WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 2021 INCOME STANDARDS - MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA 1 Based on 2021 Orange County household incomes published by the California Housing & Community Development Department (HCD). The Affordable Sales Price calculations are based on the California Health and Safety Code Section 50052.5 methodology. z Based in part on the results of the home sales survey. 3 Under the California Health & Safety Code Section 50052.5 calculation methodology, the benchmark household size is set at the number of bedrooms in the unit plus one. This benchmark is used solely for the purposes of calculating the Affordable Sales Price. It is neither an occupancy cap nor a floor. 4 Utilities allowances are based on the Orange County Housing Authority utility allowance schedule effective as of 12/1/21. Assumes: Gas Heating, Gas Cooking, Gas Water Heater, Basic Electric, Air Conditioning, Water, Sewer,and Trash. 6 Based on the Income Allotted to Housing minus the following: Annual Utilities Allowance; HOA, Maintenance & Insurance; and Property Taxes @ 1.10% of Market Rate Sales Price. 6 Based on a 50 basis points premium applied to the Bankrate site average as of January 1, 2022 (1st Quarter 2022) for a fixed -interest rate loan with a 30 -year amortization period. Prepared by: Keyser Marston Associates File name: 2 17 22 NB Own; ASP Page 13 of 88 Three -Bedroom Four -Bedroom Units Units I. General Assumptions Estimated Market Rate Sales Price z $1,227,700 $1,373,200 Area Median Income 3 $106,700 $115,250 Annual Utilities Allowance 4 $3,252 $4,140 HOA, Maintenance & Insurance $4,200 $4,800 II. Affordable Sales Price Calculations A. Affordable Sales Price Based on 110% AMI Benchmark Annual Household Income $117,370 $126,775 Income Allotted to Housing @ 35% of Income $41,080 $44,370 B. Property Taxes @ 1.10% of Market Rate Sales Price $13,500 $15,110 C. Income Available for Mortgage s $20,128 $20,320 D. Affordable Sales Price Supportable Mtg @ 3.87% Interest 6 $356,900 $360,300 Home Buyer Down Payment @ 5% of ASP 18,800 19,000 Affordable Sales Price $375,700 $379,300 1 Based on 2021 Orange County household incomes published by the California Housing & Community Development Department (HCD). The Affordable Sales Price calculations are based on the California Health and Safety Code Section 50052.5 methodology. z Based in part on the results of the home sales survey. 3 Under the California Health & Safety Code Section 50052.5 calculation methodology, the benchmark household size is set at the number of bedrooms in the unit plus one. This benchmark is used solely for the purposes of calculating the Affordable Sales Price. It is neither an occupancy cap nor a floor. 4 Utilities allowances are based on the Orange County Housing Authority utility allowance schedule effective as of 12/1/21. Assumes: Gas Heating, Gas Cooking, Gas Water Heater, Basic Electric, Air Conditioning, Water, Sewer,and Trash. 6 Based on the Income Allotted to Housing minus the following: Annual Utilities Allowance; HOA, Maintenance & Insurance; and Property Taxes @ 1.10% of Market Rate Sales Price. 6 Based on a 50 basis points premium applied to the Bankrate site average as of January 1, 2022 (1st Quarter 2022) for a fixed -interest rate loan with a 30 -year amortization period. Prepared by: Keyser Marston Associates File name: 2 17 22 NB Own; ASP Page 13 of 88 APPENDIX C PRO FORMA ANALYSES COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; APP C Titles Page 14 of 88 APPENDIX C - EXHIBIT I PRO FORMA ANALYSIS MARKET RATE SCENARIO COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC Mkt Page 15 of 88 APPENDIX C - EXHIBIT I - TABLE 1 ESTIMATED DEVELOPMENT COSTS MARKET RATE SCENARIO COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs z On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 6 Loan Origination Fees Total Financing Costs V 217,800 Sf of Land $150 /Sf of Land 217,800 Sf of Land $30 /Sf of Land $6,534,000 180 Spaces $0 /Space 0 144,000 Sf of GBA $160 /Sf of GBA 23,040,000 20% Other Direct Costs 5,915,000 6.0% Direct Costs 90 Units $70,000 /Unit 1.5% Direct Costs 90 Units $5,000 /Unit 3.0% Gross Sales Revenue 5.0% Other Indirect Costs $2,129,000 6,300,000 532,000 450,000 3,069,000 624,000 $2,233,000 60.0% Loan to Cost 1.5 Points 731,000 $32,670,000 $35,489,000 $13,104,000 $2,964,000 Total Construction Cost 90 Units $573,000 /Unit $51,557,000 Total Development Cost 90 Units $936,000 /Unit $84,227,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. z Based on the estimated costs for similar uses. 3 Assumes that the required parking is provided in attached garages. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on estimates presented in the August 2021 draft Housing Element. 6 Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 12 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC Mkt Page 16 of 88 APPENDIX C - EXHIBIT I - TABLE 2 PROJECTED NET SALES REVENUE MARKET RATE SCENARIO COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Sales Revenue 1 Two -Bedroom Units Three -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales 45 Units @ 953,200 /Unit $42,894,000 45 Units @ 1,320,100 /Unit 59,405,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $3,069,000 2,046,000 511,000 $102,299,000 ($5,626,000) III. I Net Revenue $96,673,000 1 Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $710 per square foot of saleable area. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC Mkt Page 17 of 88 APPENDIX C - EXHIBIT I - TABLE 3 PROJECTED DEVELOPER PROFIT MARKET RATE SCENARIO COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Net Revenue See APPENDIX C - EXHIBIT I - TABLE 2 $96,673,000 II. Total Development Cost See APPENDIX C - EXHIBIT I - TABLE 1 $84,227,000 III. I Developer Profit 14.8% Total Development Cost $12,446,000 Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC Mkt Page 18 of 88 APPENDIX C - EXHIBIT II PRO FORMA ANALYSIS RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC Base Mod Page 19 of 88 APPENDIX C - EXHIBIT II - TABLE 1 ESTIMATED DEVELOPMENT COSTS COYOTE CANYON PROTOTYPE RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 217,800 Sf of Land $150 /Sf of Land 217,800 Sf of Land $30 /Sf of Land $6,534,000 180 Spaces $0 /Space 0 144,000 Sf of GBA $160 /Sf of GBA 23,040,000 20% Other Direct Costs 5,915,000 6.0% Direct Costs 90 Units $70,000 /Unit 1.5% Direct Costs 90 Units $5,000 /Unit 90 Units $34,100 /Unit 5.0% Other Indirect Costs $2,129,000 6,300,000 532,000 450,000 3,069,000 624,000 $2,035,000 60.0% Loan to Cost 1.5 Points 690,000 $32,670,000 $35,489,000 $13,104,000 $2,725,000 Total Construction Cost 90 Units $570,000 /Unit $51,318,000 Total Development Cost 90 Units $933,000 /Unit $83,988,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 11 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC Base Mod Page 20 of 88 APPENDIX C - EXHIBIT II - TABLE 2 PROJECTED NET SALES REVENUE COYOTE CANYON PROTOTYPE RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Two -Bedroom Units Three -Bedroom Units Moderate Income Units Two -Bedroom Units Three -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I 2 41 Units @ $953,200 /Unit $39,081,000 42 Units @ $1,320,100 /Unit 55,444,000 4 Units @ $381,200 /Unit 1,525,000 3 Units @ $356,600 /Unit 1,070,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $2,914,000 1,942,000 486,000 $97,120,000 ($5,342,000) III. I Net Revenue $91,778,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $711 per square foot of saleable area. 2 See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC Base Mod Page 21 of 88 APPENDIX C - EXHIBIT II - TABLE 3 INCLUSIONARY HOUSING IMPACTS COYOTE CANYON PROTOTYPE RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX C - EXHIBIT II - TABLE 2 (Less) Threshold Developer Profit i 14.8% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX C - EXHIBIT II - TABLE 1 $91,778,000 ($12,411,000) $79,367,000 $83,988,000 Total Financial Impact ($4,621,000; Property Acquisition Cost Reduction 14% of Estimated Current Acquisition Prices Developer Profit 9.3% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 4.9% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC Base Mod Page 22 of 88 APPENDIX C - EXHIBIT III PRO FORMA ANALYSIS 5% MODERATE INCOME SCENARIO COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 5% Mod Page 23 of 88 APPENDIX C - EXHIBIT III - TABLE 1 ESTIMATED DEVELOPMENT COSTS COYOTE CANYON PROTOTYPE 5% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 5 6 7 217,800 Sf of Land $150 /Sf of Land 217,800 Sf of Land $30 /Sf of Land $6,534,000 180 Spaces $0 /Space 0 144,000 Sf of GBA $160 /Sf of GBA 23,040,000 20% Other Direct Costs 5,915,000 6.0% Direct Costs 90 Units $70,000 /Unit 1.5% Direct Costs 90 Units $5,000 /Unit 90 Units $34,100 /Unit 5.0% Other Indirect Costs $2,129,000 6,300,000 532,000 450,000 3,069,000 624,000 $2,084,000 60.0% Loan to Cost 1.5 Points 702,000 $32,670,000 $35,489,000 $13,104,000 $2,786,000 Total Construction Cost 90 Units $571,000 /Unit $51,379,000 Total Development Cost 90 Units $934,000 /Unit $84,049,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 11 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 5% Mod Page 24 of 88 APPENDIX C - EXHIBIT III - TABLE 2 PROJECTED NET SALES REVENUE COYOTE CANYON PROTOTYPE 5% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Two -Bedroom Units Three -Bedroom Units Moderate Income Units Two -Bedroom Units Three -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I 2 42 Units @ $953,200 /Unit $40,034,000 43 Units @ $1,320,100 /Unit 56,764,000 3 Units @ $381,200 /Unit 1,144,000 2 Units @ $356,600 /Unit 713,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $2,960,000 1,973,000 493,000 $98,655,000 ($5,426,000) III. I Net Revenue $93,229,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $711 per square foot of saleable area. 2 See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 5% Mod Page 25 of 88 APPENDIX C - EXHIBIT III - TABLE 3 INCLUSIONARY HOUSING IMPACTS COYOTE CANYON PROTOTYPE 5% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX C - EXHIBIT III - TABLE 2 (Less) Threshold Developer Profit i 14.8% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX C - EXHIBIT III - TABLE 1 $93,229,000 ($12,420,000) $80,809,000 $84,049,000 Total Financial Impact ($3,240,000; Property Acquisition Cost Reduction 10% of Estimated Current Acquisition Prices Developer Profit 10.9% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 3.3% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 5% Mod Page 26 of 88 APPENDIX C - EXHIBIT IV PRO FORMA ANALYSIS 10% MODERATE INCOME SCENARIO COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 10% Mod Page 27 of 88 APPENDIX C - EXHIBIT IV - TABLE 1 ESTIMATED DEVELOPMENT COSTS COYOTE CANYON PROTOTYPE 10% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 217,800 Sf of Land $150 /Sf of Land 217,800 Sf of Land $30 /Sf of Land $6,534,000 180 Spaces $0 /Space 0 144,000 Sf of GBA $160 /Sf of GBA 23,040,000 20% Other Direct Costs 5,915,000 6.0% Direct Costs 90 Units $70,000 /Unit 1.5% Direct Costs 90 Units $5,000 /Unit 90 Units $34,100 /Unit 5.0% Other Indirect Costs $2,129,000 6,300,000 532,000 450,000 3,069,000 624,000 $1,986,000 60.0% Loan to Cost 1.5 Points 678,000 $32,670,000 $35,489,000 $13,104,000 $2,664,000 Total Construction Cost 90 Units $570,000 /Unit $51,257,000 Total Development Cost 90 Units $933,000 /Unit $83,927,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 11 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 10% Mod Page 28 of 88 APPENDIX C - EXHIBIT IV - TABLE 2 PROJECTED NET SALES REVENUE COYOTE CANYON PROTOTYPE 10% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Two -Bedroom Units Three -Bedroom Units Moderate Income Units Two -Bedroom Units Three -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I 2 40 Units @ $953,200 /Unit $38,128,000 41 Units @ $1,320,100 /Unit 54,124,000 5 Units @ $381,200 /Unit 1,906,000 4 Units @ $356,600 /Unit 1,426,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $2,868,000 1,912,000 478,000 $95,584,000 ($5,258,000) III. I Net Revenue $90,326,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $711 per square foot of saleable area. 2 See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 10% Mod Page 29 of 88 APPENDIX C - EXHIBIT IV - TABLE 3 INCLUSIONARY HOUSING IMPACTS COYOTE CANYON PROTOTYPE 10% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX C - EXHIBIT IV - TABLE 2 (Less) Threshold Developer Profit i 14.8% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX C - EXHIBIT IV - TABLE 1 $90,326,000 ($12,402,000) $77,924,000 $83,927,000 Total Financial Impact ($6,003,000; Property Acquisition Cost Reduction 18% of Estimated Current Acquisition Prices Developer Profit 7.6% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 6.5% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 10% Mod Page 30 of 88 APPENDIX C - EXHIBIT V PRO FORMA ANALYSIS 15% MODERATE INCOME SCENARIO COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 15% Mod Page 31 of 88 APPENDIX C - EXHIBIT V - TABLE 1 ESTIMATED DEVELOPMENT COSTS COYOTE CANYON PROTOTYPE 15% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 5 6 7 217,800 Sf of Land $150 /Sf of Land 217,800 Sf of Land $30 /Sf of Land $6,534,000 180 Spaces $0 /Space 0 144,000 Sf of GBA $160 /Sf of GBA 23,040,000 20% Other Direct Costs 5,915,000 6.0% Direct Costs 90 Units $70,000 /Unit 1.5% Direct Costs 90 Units $5,000 /Unit 90 Units $34,100 /Unit 5.0% Other Indirect Costs $2,129,000 6,300,000 532,000 450,000 3,069,000 624,000 $1,834,000 60.0% Loan to Cost 1.5 Points 646,000 $32,670,000 $35,489,000 $13,104,000 $2,480,000 Total Construction Cost 90 Units $567,000 /Unit $51,073,000 Total Development Cost 90 Units $930,000 /Unit $83,743,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 10 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 15% Mod Page 32 of 88 APPENDIX C - EXHIBIT V - TABLE 2 PROJECTED NET SALES REVENUE COYOTE CANYON PROTOTYPE 15% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Two -Bedroom Units Three -Bedroom Units Moderate Income Units Two -Bedroom Units Three -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I 2 38 Units @ $953,200 /Unit $36,222,000 38 Units @ $1,320,100 /Unit 50,164,000 7 Units @ $381,200 /Unit 2,668,000 7 Units @ $356,600 /Unit 2,496,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $2,747,000 1,831,000 458,000 $91,550,000 ($5,036,000) III. I Net Revenue $86,514,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $710 per square foot of saleable area. 2 See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 15% Mod Page 33 of 88 APPENDIX C - EXHIBIT V - TABLE 3 INCLUSIONARY HOUSING IMPACTS COYOTE CANYON PROTOTYPE 15% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX C - EXHIBIT V - TABLE 2 (Less) Threshold Developer Profit i 14.8% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX C - EXHIBIT V - TABLE 1 $86,514,000 ($12,374,000) $74,140,000 $83,743,000 Total Financial Impact ($9,603,000; Property Acquisition Cost Reduction 29% of Estimated Current Acquisition Prices Developer Profit 3.3% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 11.1% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 15% Mod Page 34 of 88 APPENDIX C - EXHIBIT VI PRO FORMA ANALYSIS 20% MODERATE INCOME SCENARIO COYOTE CANYON PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 20% Mod Page 35 of 88 APPENDIX C - EXHIBIT VI - TABLE 1 ESTIMATED DEVELOPMENT COSTS COYOTE CANYON PROTOTYPE 20% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 217,800 Sf of Land $150 /Sf of Land 217,800 Sf of Land $30 /Sf of Land $6,534,000 180 Spaces $0 /Space 0 144,000 Sf of GBA $160 /Sf of GBA 23,040,000 20% Other Direct Costs 5,915,000 6.0% Direct Costs 90 Units $70,000 /Unit 1.5% Direct Costs 90 Units $5,000 /Unit 90 Units $34,100 /Unit 5.0% Other Indirect Costs $2,129,000 6,300,000 532,000 450,000 3,069,000 624,000 $1,717,000 60.0% Loan to Cost 1.5 Points 620,000 $32,670,000 $35,489,000 $13,104,000 $2,337,000 Total Construction Cost 90 Units $566,000 /Unit $50,930,000 Total Development Cost 90 Units $929,000 /Unit $83,600,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 10 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 20% Mod Page 36 of 88 APPENDIX C - EXHIBIT VI - TABLE 2 PROJECTED NET SALES REVENUE COYOTE CANYON PROTOTYPE 20% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Two -Bedroom Units Three -Bedroom Units Moderate Income Units Two -Bedroom Units Three -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I 2 36 Units @ $953,200 /Unit $34,315,000 36 Units @ $1,320,100 /Unit 47,524,000 9 Units @ $381,200 /Unit 3,431,000 9 Units @ $356,600 /Unit 3,209,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $2,654,000 1,770,000 442,000 $88,479,000 ($4,866,000) III. I Net Revenue $83,613,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $710 per square foot of saleable area. 2 See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 20% Mod Page 37 of 88 APPENDIX C - EXHIBIT VI - TABLE 3 INCLUSIONARY HOUSING IMPACTS COYOTE CANYON PROTOTYPE 20% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX C - EXHIBIT VI - TABLE 2 (Less) Threshold Developer Profit i 14.8% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX C - EXHIBIT VI - TABLE 1 $83,613,000 ($12,353,000) $71,260,000 $83,600,000 Total Financial Impact ($12,340,000; Property Acquisition Cost Reduction 38% of Estimated Current Acquisition Prices Developer Profit 0.0% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 15.1% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf CC 20% Mod Page 38 of 88 APPENDIX D PRO FORMA ANALYSES DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; APP D Titles Page 39 of 88 APPENDIX D - EXHIBIT I PRO FORMA ANALYSIS MARKET RATE SCENARIO DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW Mkt Page 40 of 88 APPENDIX D - EXHIBIT I - TABLE 1 ESTIMATED DEVELOPMENT COSTS MARKET RATE SCENARIO DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Land Acquisition & Infrastructure Costs 1 II. Direct Costs z On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 6 Loan Origination Fees Total Financing Costs V 65,340 Sf of Land $250 /Sf of Land 65,340 Sf of Land $30 /Sf of Land $1,960,000 60 Spaces $0 /Space 0 64,800 Sf of GBA $200 /Sf of GBA 12,960,000 20% Other Direct Costs 2,984,000 6.0% Direct Costs 30 Units $70,000 /Unit 1.5% Direct Costs 30 Units $5,000 /Unit 3.0% Gross Sales Revenue 5.0% Other Indirect Costs 60.0% Loan to Cost 1.5 Points $16,335,000 $17,904,000 $1,074,000 2,100,000 269,000 150,000 1,447,000 252,000 $5,292,000 $951,000 356,000 $1,307,000 Total Construction Cost 30 Units $817,000 /Unit $24,503,000 Total Development Cost 30 Units $1,361,000 /Unit $40,838,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. z Based on the estimated costs for similar uses. 3 Assumes that the required parking is provided in attached garages. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on estimates presented in the August 2021 draft Housing Element. 6 Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 5 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW Mkt Page 41 of 88 APPENDIX D - EXHIBIT I - TABLE 2 PROJECTED NET SALES REVENUE MARKET RATE SCENARIO DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Sales Revenue 1 Three -Bedroom Units 18 Units @ $1,517,900 /Unit $27,322,000 Four -Bedroom Units 12 Units @ $1,742,500 /Unit 20,910,000 Total Gross Sales Revenue $48,232,000 II. Cost of Sales Commissions 3.0% Gross Sales Revenue $1,447,000 Closing 2.0% Gross Sales Revenue 965,000 Warranty 0.5% Gross Sales Revenue 241,000 Total Cost of Sales ($2,653,000) III. I Net Revenue $45,579,000 1 Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $744 per square foot of saleable area. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW Mkt Page 42 of 88 APPENDIX D - EXHIBIT I - TABLE 3 PROJECTED DEVELOPER PROFIT MARKET RATE SCENARIO DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Net Revenue See APPENDIX D - EXHIBIT I - TABLE 2 $45,579,000 II. Total Development Cost See APPENDIX D - EXHIBIT I - TABLE 1 $40,838,000 III. I Developer Profit 11.6% Total Development Cost $4,741,000 Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW Mkt Page 43 of 88 APPENDIX D - EXHIBIT II PRO FORMA ANALYSIS RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW Base Mod Page 44 of 88 APPENDIX D - EXHIBIT II - TABLE 1 ESTIMATED DEVELOPMENT COSTS DOVER WESTCLIFF PROTOTYPE RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 5 6 7 65,340 Sf of Land $250 /Sf of Land 65,340 Sf of Land $30 /Sf of Land $1,960,000 60 Spaces $0 /Space 0 64,800 Sf of GBA $200 /Sf of GBA 12,960,000 20% Other Direct Costs 2,984,000 6.0% Direct Costs 30 Units $70,000 /Unit 1.5% Direct Costs 30 Units $5,000 /Unit 30 Units $48,233 /Unit 5.0% Other Indirect Costs 60.0% Loan to Cost 1.5 Points $16,335,000 $17,904,000 $1,074,000 2,100,000 269,000 150,000 1,447,000 252,000 $5,292,000 $873,000 334,000 $1,207,000 Total Construction Cost 30 Units $813,000 /Unit $24,403,000 Total Development Cost 30 Units $1,358,000 /Unit $40,738,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 5 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW Base Mod Page 45 of 88 APPENDIX D - EXHIBIT II - TABLE 2 PROJECTED NET SALES REVENUE DOVER WESTCLIFF PROTOTYPE RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Three -Bedroom Units Four -Bedroom Units Moderate Income Units Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I z 17 Units @ $1,517,900 /Unit $25,804,000 11 Units @ $1,742,500 /Unit 19,168,000 1 Unit @ $316,000 /Unit 316,000 1 Unit @ $303,500 /Unit 304,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $1,368,000 912,000 228,000 $45,592,000 ($2,508,000) III. I Net Revenue $43,084,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $745 per square foot of saleable area. z See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW Base Mod Page 46 of 88 APPENDIX D - EXHIBIT II - TABLE 3 INCLUSIONARY HOUSING IMPACTS DOVER WESTCLIFF PROTOTYPE RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX D - EXHIBIT II - TABLE 2 (Less) Threshold Developer Profit i 11.6% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX D - EXHIBIT II - TABLE 1 $43,084,000 ($4,729,000) $38,355,000 $40,738,000 Total Financial Impact ($2,383,000; Property Acquisition Cost Reduction 15% of Estimated Current Acquisition Prices Developer Profit 5.8% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 5.3% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW Base Mod Page 47 of 88 APPENDIX D - EXHIBIT III PRO FORMA ANALYSIS 5% MODERATE INCOME SCENARIO DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 5% Mod Page 48 of 88 APPENDIX D - EXHIBIT III - TABLE 1 ESTIMATED DEVELOPMENT COSTS DOVER WESTCLIFF PROTOTYPE 5% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 5 6 7 65,340 Sf of Land $250 /Sf of Land 65,340 Sf of Land $30 /Sf of Land $1,960,000 60 Spaces $0 /Space 0 64,800 Sf of GBA $200 /Sf of GBA 12,960,000 20% Other Direct Costs 2,984,000 6.0% Direct Costs 30 Units $70,000 /Unit 1.5% Direct Costs 30 Units $5,000 /Unit 30 Units $48,233 /Unit 5.0% Other Indirect Costs 60.0% Loan to Cost 1.5 Points $16,335,000 $17,904,000 $1,074,000 2,100,000 269,000 150,000 1,447,000 252,000 $5,292,000 $912,000 345,000 $1,257,000 Total Construction Cost 30 Units $815,000 /Unit $24,453,000 Total Development Cost 30 Units $1,360,000 /Unit $40,788,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 5 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 5% Mod Page 49 of 88 APPENDIX D - EXHIBIT III - TABLE 2 PROJECTED NET SALES REVENUE DOVER WESTCLIFF PROTOTYPE 5% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Three -Bedroom Units Four -Bedroom Units Moderate Income Units Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I 2 17 Units @ $1,517,900 /Unit $25,804,000 12 Units @ $1,742,500 /Unit 20,910,000 1 Unit @ $316,000 /Unit 316,000 0 Units @ $303,500 /Unit 0 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $1,411,000 941,000 235,000 $47,030,000 ($2,587,000) III. I Net Revenue $44,443,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $744 per square foot of saleable area. 2 See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 5% Mod Page 50 of 88 APPENDIX D - EXHIBIT III - TABLE 3 INCLUSIONARY HOUSING IMPACTS DOVER WESTCLIFF PROTOTYPE 5% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX D - EXHIBIT III - TABLE 2 (Less) Threshold Developer Profit i 11.6% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX D - EXHIBIT III - TABLE 1 $44,443,000 ($4,735,000) $39,708,000 $40,788,000 Total Financial Impact ($1,080,000; Property Acquisition Cost Reduction 7% of Estimated Current Acquisition Prices Developer Profit 9.0% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 2.3% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 5% Mod Page 51 of 88 APPENDIX D - EXHIBIT IV PRO FORMA ANALYSIS 10% MODERATE INCOME SCENARIO DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 10% Mod Page 52 of 88 APPENDIX D - EXHIBIT IV - TABLE 1 ESTIMATED DEVELOPMENT COSTS DOVER WESTCLIFF PROTOTYPE 10% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 5 6 7 65,340 Sf of Land $250 /Sf of Land 65,340 Sf of Land $30 /Sf of Land $1,960,000 60 Spaces $0 /Space 0 64,800 Sf of GBA $200 /Sf of GBA 12,960,000 20% Other Direct Costs 2,984,000 6.0% Direct Costs 30 Units $70,000 /Unit 1.5% Direct Costs 30 Units $5,000 /Unit 30 Units $48,233 /Unit 5.0% Other Indirect Costs 60.0% Loan to Cost 1.5 Points $16,335,000 $17,904,000 $1,074,000 2,100,000 269,000 150,000 1,447,000 252,000 $5,292,000 $839,000 325,000 $1,164,000 Total Construction Cost 30 Units $812,000 /Unit $24,360,000 Total Development Cost 30 Units $1,357,000 /Unit $40,695,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 5 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 10% Mod Page 53 of 88 APPENDIX D - EXHIBIT IV - TABLE 2 PROJECTED NET SALES REVENUE DOVER WESTCLIFF PROTOTYPE 10% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Three -Bedroom Units Four -Bedroom Units Moderate Income Units Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales 11 z 16 Units @ $1,517,900 /Unit $24,286,000 11 Units @ $1,742,500 /Unit 19,168,000 2 Units @ $316,000 /Unit 632,000 1 Unit @ $303,500 /Unit 304,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $1,332,000 888,000 222,000 $44,390,000 ($2,442,000) III. I Net Revenue $41,948,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $744 per square foot of saleable area. z See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 10% Mod Page 54 of 88 APPENDIX D - EXHIBIT IV - TABLE 3 INCLUSIONARY HOUSING IMPACTS DOVER WESTCLIFF PROTOTYPE 10% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX D - EXHIBIT IV - TABLE 2 (Less) Threshold Developer Profit i 11.6% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX D - EXHIBIT IV - TABLE 1 $41,948,000 ($4,724,000) $37,224,000 $40,695,000 Total Financial Impact ($3,471,000; Property Acquisition Cost Reduction 21% of Estimated Current Acquisition Prices Developer Profit 3.1% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 8.0% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 10% Mod Page 55 of 88 APPENDIX D - EXHIBIT V PRO FORMA ANALYSIS 15% MODERATE INCOME SCENARIO DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 15% Mod Page 56 of 88 APPENDIX D - EXHIBIT V - TABLE 1 ESTIMATED DEVELOPMENT COSTS DOVER WESTCLIFF PROTOTYPE 15% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 5 6 7 65,340 Sf of Land $250 /Sf of Land 65,340 Sf of Land $30 /Sf of Land $1,960,000 60 Spaces $0 /Space 0 64,800 Sf of GBA $200 /Sf of GBA 12,960,000 20% Other Direct Costs 2,984,000 6.0% Direct Costs 30 Units $70,000 /Unit 1.5% Direct Costs 30 Units $5,000 /Unit 30 Units $48,233 /Unit 5.0% Other Indirect Costs 60.0% Loan to Cost 1.5 Points $16,335,000 $17,904,000 $1,074,000 2,100,000 269,000 150,000 1,447,000 252,000 $5,292,000 $754,000 303,000 $1,057,000 Total Construction Cost 30 Units $808,000 /Unit $24,253,000 Total Development Cost 30 Units $1,353,000 /Unit $40,588,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 4 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 15% Mod Page 57 of 88 APPENDIX D - EXHIBIT V - TABLE 2 PROJECTED NET SALES REVENUE DOVER WESTCLIFF PROTOTYPE 15% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Three -Bedroom Units Four -Bedroom Units Moderate Income Units Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I 2 15 Units @ $1,517,900 /Unit $22,769,000 10 Units @ $1,742,500 /Unit 17,425,000 3 Units @ $316,000 /Unit 948,000 2 Units @ $303,500 /Unit 607,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $1,252,000 835,000 209,000 $41,749,000 ($2,296,000) III. I Net Revenue $39,453,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $744 per square foot of saleable area. 2 See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 15% Mod Page 58 of 88 APPENDIX D - EXHIBIT V - TABLE 3 INCLUSIONARY HOUSING IMPACTS DOVER WESTCLIFF PROTOTYPE 15% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX D - EXHIBIT V - TABLE 2 (Less) Threshold Developer Profit i 11.6% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX D - EXHIBIT V - TABLE 1 $39,453,000 ($4,712,000) $34,741,000 $40,588,000 Total Financial Impact ($5,847,000; Property Acquisition Cost Reduction 36% of Estimated Current Acquisition Prices Developer Profit -2.8% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 14.5% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 15% Mod Page 59 of 88 APPENDIX D - EXHIBIT VI PRO FORMA ANALYSIS 20% MODERATE INCOME SCENARIO DOVER WESTCLIFF PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 20% Mod Page 60 of 88 APPENDIX D - EXHIBIT VI - TABLE 1 ESTIMATED DEVELOPMENT COSTS DOVER WESTCLIFF PROTOTYPE 20% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 65,340 Sf of Land $250 /Sf of Land 65,340 Sf of Land $30 /Sf of Land $1,960,000 60 Spaces $0 /Space 0 64,800 Sf of GBA $200 /Sf of GBA 12,960,000 20% Other Direct Costs 2,984,000 6.0% Direct Costs 30 Units $70,000 /Unit 1.5% Direct Costs 30 Units $5,000 /Unit 30 Units $48,233 /Unit 5.0% Other Indirect Costs 60.0% Loan to Cost 1.5 Points $16,335,000 $17,904,000 $1,074,000 2,100,000 269,000 150,000 1,447,000 252,000 $5,292,000 $721,000 293,000 $1,014,000 Total Construction Cost 30 Units $807,000 /Unit $24,210,000 Total Development Cost 30 Units $1,352,000 /Unit $40,545,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 4 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 20% Mod Page 61 of 88 APPENDIX D - EXHIBIT VI - TABLE 2 PROJECTED NET SALES REVENUE DOVER WESTCLIFF PROTOTYPE 20% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Three -Bedroom Units Four -Bedroom Units Moderate Income Units Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales 11 z 14 Units @ $1,517,900 /Unit $21,251,000 10 Units @ $1,742,500 /Unit 17,425,000 4 Units @ $316,000 /Unit 1,264,000 2 Units @ $303,500 /Unit 607,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $1,216,000 811,000 203,000 $40,547,000 ($2,230,000) III. I Net Revenue $38,317,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $744 per square foot of saleable area. z See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 20% Mod Page 62 of 88 APPENDIX D - EXHIBIT VI - TABLE 3 INCLUSIONARY HOUSING IMPACTS DOVER WESTCLIFF PROTOTYPE 20% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX D - EXHIBIT VI - TABLE 2 (Less) Threshold Developer Profit i 11.6% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX D - EXHIBIT VI - TABLE 1 $38,317,000 ($4,707,000) $33,610,000 $40,545,000 Total Financial Impact ($6,935,000; Property Acquisition Cost Reduction 42% of Estimated Current Acquisition Prices Developer Profit -5.5% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 17.9% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf DW 20% Mod Page 63 of 88 APPENDIX E PRO FORMA ANALYSES WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; APP E Titles Page 64 of 88 APPENDIX E - EXHIBIT I PRO FORMA ANALYSIS MARKET RATE SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU Mkt Page 65 of 88 APPENDIX E - EXHIBIT I - TABLE 1 ESTIMATED DEVELOPMENT COSTS MARKET RATE SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs z On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 6 Loan Origination Fees Total Financing Costs V 261,360 Sf of Land $175 /Sf of Land 261,360 Sf of Land $30 /Sf of Land $7,841,000 240 Spaces $0 /Space 0 251,400 Sf of GBA $180 /Sf of GBA 45,252,000 20% Other Direct Costs 10,619,000 6.0% Direct Costs 120 Units $70,000 /Unit 1.5% Direct Costs 120 Units $5,000 /Unit 3.0% Gross Sales Revenue 5.0% Other Indirect Costs $3,823,000 8,400,000 956,000 600,000 4,760,000 927,000 $3,619,000 60.0% Loan to Cost 1.5 Points 1,160,000 $45,738,000 $63,712,000 $19,466,000 $4,779,000 Total Construction Cost 120 Units $733,000 /Unit $87,957,000 Total Development Cost 120 Units $1,114,000 /Unit $133,695,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. z Based on the estimated costs for similar uses. 3 Assumes that the required parking is provided in attached garages. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on estimates presented in the August 2021 draft Housing Element. 6 Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 15 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU Mkt Page 66 of 88 APPENDIX E - EXHIBIT I - TABLE 2 PROJECTED NET SALES REVENUE MARKET RATE SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Sales Revenue i Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales 42 Units @ $1,227,700 /Unit 78 Units @ $1,373,200 /Unit 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $51,563,000 107,110,000 $4,760,000 3,173,000 793,000 $158,673,000 ($8,726,000) III. I Net Revenue $149,947,000 1 Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $631 per square foot of saleable area. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU Mkt Page 67 of 88 APPENDIX E - EXHIBIT I - TABLE 3 PROJECTED DEVELOPER PROFIT MARKET RATE SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Net Revenue See APPENDIX E - EXHIBIT I - TABLE 2 $149,947,000 II. Total Development Cost See APPENDIX E - EXHIBIT I - TABLE 1 $133,695,000 III. I Developer Profit 12.2% Total Development Cost $16,252,000 Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU Mkt Page 68 of 88 APPENDIX E - EXHIBIT II PRO FORMA ANALYSIS RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU Base Mod Page 69 of 88 APPENDIX E - EXHIBIT II - TABLE 1 ESTIMATED DEVELOPMENT COSTS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 261,360 Sf of Land $175 /Sf of Land 261,360 Sf of Land $30 /Sf of Land $7,841,000 240 Spaces $0 /Space 0 251,400 Sf of GBA $180 /Sf of GBA 45,252,000 20% Other Direct Costs 10,619,000 6.0% Direct Costs 120 Units $70,000 /Unit 1.5% Direct Costs 120 Units $5,000 /Unit 120 Units $39,667 /Unit 5.0% Other Indirect Costs $3,823,000 8,400,000 956,000 600,000 4,760,000 927,000 $3,261,000 60.0% Loan to Cost 1.5 Points 1,090,000 $45,738,000 $63,712,000 $19,466,000 $4,351,000 Total Construction Cost 120 Units $729,000 /Unit $87,529,000 Total Development Cost 120 Units $1,111,000 /Unit $133,267,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 14 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU Base Mod Page 70 of 88 APPENDIX E - EXHIBIT II - TABLE 2 PROJECTED NET SALES REVENUE WEST NEWPORT MESA & BANNING RANCH PROTOTYPE RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Three -Bedroom Units Four -Bedroom Units Moderate Income Units Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I 2 39 Units @ $1,227,700 /Unit $47,880,000 72 Units @ $1,373,200 /Unit 98,870,000 3 Units @ $375,700 /Unit 1,127,000 6 Units @ $379,300 /Unit 2,276,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $4,505,000 3,003,000 751,000 $150,153,000 ($8,259,000) III. I Net Revenue $141,894,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $631 per square foot of saleable area. 2 See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU Base Mod Page 71 of 88 APPENDIX E - EXHIBIT II - TABLE 3 INCLUSIONARY HOUSING IMPACTS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE RECOMMENDED REQUIREMENT: 8% MODERATE INCOME UNITS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX E - EXHIBIT II - TABLE 2 (Less) Threshold Developer Profit i 12.2% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX E - EXHIBIT II - TABLE 1 $141,894,000 ($16,200,000) $125,694,000 $133,267,000 Total Financial Impact ($7,573,000; Property Acquisition Cost Reduction 17% of Estimated Current Acquisition Prices Developer Profit 6.5% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 5.2% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU Base Mod Page 72 of 88 APPENDIX E - EXHIBIT III PRO FORMA ANALYSIS 5% MODERATE INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 5% Mod Page 73 of 88 APPENDIX E - EXHIBIT III - TABLE 1 ESTIMATED DEVELOPMENT COSTS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 5% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 261,360 Sf of Land $175 /Sf of Land 261,360 Sf of Land $30 /Sf of Land $7,841,000 240 Spaces $0 /Space 0 251,400 Sf of GBA $180 /Sf of GBA 45,252,000 20% Other Direct Costs 10,619,000 6.0% Direct Costs 120 Units $70,000 /Unit 1.5% Direct Costs 120 Units $5,000 /Unit 120 Units $39,667 /Unit 5.0% Other Indirect Costs $3,823,000 8,400,000 956,000 600,000 4,760,000 927,000 $3,387,000 60.0% Loan to Cost 1.5 Points 1,115,000 $45,738,000 $63,712,000 $19,466,000 $4,502,000 Total Construction Cost 120 Units $731,000 /Unit $87,680,000 Total Development Cost 120 Units $1,112,000 /Unit $133,418,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 15 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 5% Mod Page 74 of 88 APPENDIX E - EXHIBIT III - TABLE 2 PROJECTED NET SALES REVENUE WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 5% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Three -Bedroom Units Four -Bedroom Units Moderate Income Units Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I 2 40 Units @ $1,227,700 /Unit $49,108,000 74 Units @ $1,373,200 /Unit 101,617,000 2 Units @ $375,700 /Unit 751,000 4 Units @ $379,300 /Unit 1,517,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $4,590,000 3,060,000 765,000 $152,993,000 ($8,415,000) III. I Net Revenue $144,578,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $631 per square foot of saleable area. 2 See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 5% Mod Page 75 of 88 APPENDIX E - EXHIBIT III - TABLE 3 INCLUSIONARY HOUSING IMPACTS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 5% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX E - EXHIBIT III - TABLE 2 (Less) Threshold Developer Profit i 12.2% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX E - EXHIBIT III - TABLE 1 $144,578,000 ($16,218,000) $128,360,000 $133,418,000 Total Financial Impact ($5,058,000; Property Acquisition Cost Reduction 11% of Estimated Current Acquisition Prices Developer Profit 8.4% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 3.4% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 5% Mod Page 76 of 88 APPENDIX E - EXHIBIT IV PRO FORMA ANALYSIS 10% MODERATE INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 10% Mod Page 77 of 88 APPENDIX E - EXHIBIT IV - TABLE 1 ESTIMATED DEVELOPMENT COSTS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 10% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 261,360 Sf of Land $175 /Sf of Land 261,360 Sf of Land $30 /Sf of Land $7,841,000 240 Spaces $0 /Space 0 251,400 Sf of GBA $180 /Sf of GBA 45,252,000 20% Other Direct Costs 10,619,000 6.0% Direct Costs 120 Units $70,000 /Unit 1.5% Direct Costs 120 Units $5,000 /Unit 120 Units $39,667 /Unit 5.0% Other Indirect Costs $3,823,000 8,400,000 956,000 600,000 4,760,000 927,000 $3,160,000 60.0% Loan to Cost 1.5 Points 1,070,000 $45,738,000 $63,712,000 $19,466,000 $4,230,000 Total Construction Cost 120 Units $728,000 /Unit $87,408,000 Total Development Cost 120 Units $1,110,000 /Unit $133,146,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 14 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 10% Mod Page 78 of 88 APPENDIX E - EXHIBIT IV - TABLE 2 PROJECTED NET SALES REVENUE WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 10% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Three -Bedroom Units Four -Bedroom Units Moderate Income Units Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales 11 z 38 Units @ $1,227,700 /Unit $46,653,000 70 Units @ $1,373,200 /Unit 96,124,000 4 Units @ $375,700 /Unit 1,503,000 8 Units @ $379,300 /Unit 3,034,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $4,419,000 2,946,000 737,000 $147,314,000 ($8,102,000) III. I Net Revenue $139,212,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $631 per square foot of saleable area. z See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 10% Mod Page 79 of 88 APPENDIX E - EXHIBIT IV - TABLE 3 INCLUSIONARY HOUSING IMPACTS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 10% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX E - EXHIBIT IV - TABLE 2 (Less) Threshold Developer Profit i 12.2% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX E - EXHIBIT IV - TABLE 1 $139,212,000 ( $16,185,000) $123,027,000 $133,146,000 Total Financial Impact ($10,119,000; Property Acquisition Cost Reduction 22% of Estimated Current Acquisition Prices Developer Profit 4.6% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 7.1% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 10% Mod Page 80 of 88 APPENDIX E - EXHIBIT V PRO FORMA ANALYSIS 15% MODERATE INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 15% Mod Page 81 of 88 APPENDIX E - EXHIBIT V - TABLE 1 ESTIMATED DEVELOPMENT COSTS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 15% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 261,360 Sf of Land $175 /Sf of Land 261,360 Sf of Land $30 /Sf of Land $7,841,000 240 Spaces $0 /Space 0 251,400 Sf of GBA $180 /Sf of GBA 45,252,000 20% Other Direct Costs 10,619,000 6.0% Direct Costs 120 Units $70,000 /Unit 1.5% Direct Costs 120 Units $5,000 /Unit 120 Units $39,667 /Unit 5.0% Other Indirect Costs $3,823,000 8,400,000 956,000 600,000 4,760,000 927,000 $2,922,000 60.0% Loan to Cost 1.5 Points 1,024,000 $45,738,000 $63,712,000 $19,466,000 $3,946,000 Total Construction Cost 120 Units $726,000 /Unit $87,124,000 Total Development Cost 120 Units $1,107,000 /Unit $132,862,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 13 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 15% Mod Page 82 of 88 APPENDIX E - EXHIBIT V - TABLE 2 PROJECTED NET SALES REVENUE WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 15% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Three -Bedroom Units Four -Bedroom Units Moderate Income Units Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales I 2 36 Units @ $1,227,700 /Unit $44,197,000 66 Units @ $1,373,200 /Unit 90,631,000 6 Units @ $375,700 /Unit 2,254,000 12 Units @ $379,300 /Unit 4,552,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $4,249,000 2,833,000 708,000 $141,634,000 ($7,790,000) III. I Net Revenue $133,844,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $631 per square foot of saleable area. 2 See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 15% Mod Page 83 of 88 APPENDIX E - EXHIBIT V - TABLE 3 INCLUSIONARY HOUSING IMPACTS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 15% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX E - EXHIBIT V - TABLE 2 (Less) Threshold Developer Profit i 12.2% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX E - EXHIBIT V - TABLE 1 $133,844,000 ( $16,151,000) $117,693,000 $132,862,000 Total Financial Impact ($15,169,000; Property Acquisition Cost Reduction 33% of Estimated Current Acquisition Prices Developer Profit 0.7% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 11.3% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 15% Mod Page 84 of 88 APPENDIX E - EXHIBIT VI PRO FORMA ANALYSIS 20% MODERATE INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 20% Mod Page 85 of 88 APPENDIX E - EXHIBIT VI - TABLE 1 ESTIMATED DEVELOPMENT COSTS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 20% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Land Acquisition & Infrastructure Costs 1 II. Direct Costs 2 On -Site Improvements/Landscaping Parking 3 Building Costs Contractor/DC Contingency Allow 4 Total Direct Costs III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee 6 Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 261,360 Sf of Land $175 /Sf of Land 261,360 Sf of Land $30 /Sf of Land $7,841,000 240 Spaces $0 /Space 0 251,400 Sf of GBA $180 /Sf of GBA 45,252,000 20% Other Direct Costs 10,619,000 6.0% Direct Costs 120 Units $70,000 /Unit 1.5% Direct Costs 120 Units $5,000 /Unit 120 Units $39,667 /Unit 5.0% Other Indirect Costs $3,823,000 8,400,000 956,000 600,000 4,760,000 927,000 $2,708,000 60.0% Loan to Cost 1.5 Points 979,000 $45,738,000 $63,712,000 $19,466,000 $3,687,000 Total Construction Cost 120 Units $724,000 /Unit $86,865,000 Total Development Cost 120 Units $1,105,000 /Unit $132,603,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. Assumes that the required parking is provided in attached garages. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on estimates presented in the August 2021 draft Housing Element. Based on the Developer Fee per unit generated by the MARKET RATE SCENARIO Assumes a 3.0% interest cost for debt; an 18 month construction period after receipt of entitlements; a 13 month absorption period; 30% of the units are presold and close during first month after completion; and 1.5 points for loan origination fees. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 20% Mod Page 86 of 88 APPENDIX E - EXHIBIT VI - TABLE 2 PROJECTED NET SALES REVENUE WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 20% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Gross Sales Revenue Market Rate Units Three -Bedroom Units Four -Bedroom Units Moderate Income Units Three -Bedroom Units Four -Bedroom Units Total Gross Sales Revenue II. Cost of Sales Commissions Closing Warranty Total Cost of Sales 11 z 34 Units @ $1,227,700 /Unit $41,742,000 62 Units @ $1,373,200 /Unit 85,138,000 8 Units @ $375,700 /Unit 3,006,000 16 Units @ $379,300 /Unit 6,069,000 3.0% Gross Sales Revenue 2.0% Gross Sales Revenue 0.5% Gross Sales Revenue $4,079,000 2,719,000 680,000 $135,955,000 ($7,478,000) III. I Net Revenue $128,477,000 i Based in part on a sales survey undertaken by KMA in September 2021. See APPENDIX A - EXHIBIT III. The weighted average sales price equates to $631 per square foot of saleable area. z See APPENDIX B - EXHIBIT I. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 20% Mod Page 87 of 88 APPENDIX E - EXHIBIT VI - TABLE 3 INCLUSIONARY HOUSING IMPACTS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE 20% MODERATE INCOME SCENARIO OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Funds Available for Development Costs Net Revenue See APPENDIX E - EXHIBIT VI - TABLE 2 (Less) Threshold Developer Profit i 12.2% Total Development Cost Total Funds Available for Development Costs II. Total Development Cost See APPENDIX E - EXHIBIT VI - TABLE 1 $128,477,000 ( $16,119,000) $112,358,000 $132,603,000 Total Financial Impact ($20,245,000; Property Acquisition Cost Reduction 44% of Estimated Current Acquisition Prices Developer Profit -3.1% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 16.0% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; Pf WNU 20% Mod Page 88 of 88 ATTACHMENT 4 APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; ATT 4 TITLE Page 1 of 126 APPENDIX A RENT SURVEYS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; App A Titles Page 2 of 126 APPENDIX A - EXHIBIT I RENT SURVEY - 4 & 5 STAR PROPERTIES AIRPORT AREA APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Average Effective Rent Unit Size Name Address Subarea # of Units (SF) Total Per SF Year Built I. Studio Units One Uptown Newport 4201 Jamboree Rd Airport 44 586 $2,715 $4.63 2019 Newport Bluffs 100 Vilaggio Multiple 35 549 $2,429 $4.42 1999 Minimum 549 $2,429 $4.42 Maximum 586 $2,715 $4.63 Weighted Average 570 $2,588 $4.54 II. One -Bedroom Units One Uptown Newport 4201 Jamboree Rd Airport 299 746 $3,274 $4.39 Baypointe 2500 Baypointe Dr Multiple 93 841 $3,364 $4.00 1998 Newport Bluffs 100 Vilaggio Multiple 391 791 $3,153 $3.99 Minimum 746 $3,153 $3.99 Maximum 841 $3,364 $4.39 Weighted Average 780 $3,224 $4.14 III. Two -Bedroom Units One Uptown Newport 4201 Jamboree Rd Airport 115 1,173 $4,847 $4.13 Newport Bluffs 100 Vilaggio Multiple 469 1,129 $3,946 $3.50 Baypointe 2500 Baypointe Dr Multiple 207 1,141 $3,795 $3.33 Minimum 1,129 $3,795 $3.33 Maximum 1,173 $4,847 $4.13 Weighted Average 1,139 $4,037 $3.54 IV. Three -Bedroom Units Newport Bluffs 100 Vilaggio Multiple 157 1,355 $4,992 $3.68 Source: Costar; October 2021 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent Page 3 of 126 APPENDIX A - EXHIBIT II RENT SURVEY - 4 & 5 STAR PROPERTIES COYOTE CANYON AREA APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Average Effective Rent Unit Size Name Address Subarea # of Units (SF) Total Per SF Year Built Studio Units Newport Bluffs 100 Vilaggio Multiple 35 549 $2,429 $4.42 1999 Minimum 549 $2,429 $4.42 Maximum 549 $2,429 $4.42 Weighted Average 549 $2,429 $4.42 II. One -Bedroom Units Turtle Ridge 100 Turtle Crest Dr Coyote Cyn 236 732 $3,064 $4.19 2003 Newport Ridge 1 White Cap Ln Coyote Cyn 167 873 $3,391 $3.88 1994 Turtle Rock Canyon 100 Stonecliff Aisle Coyote Cyn 30 830 $2,928 $3.53 1991 Baypointe 2500 Baypointe Dr Multiple 93 841 $3,364 $4.00 1998 Newport Bluffs 100 Vilaggio Multiple 391 791 $3,153 $3.99 Minimum 732 $2,928 $3.53 Maximum 873 $3,391 $4.19 Weighted Average 797 $3,187 $4.01 Source: Costar; October 2021 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent Page 4 of 126 APPENDIX A - EXHIBIT II RENT SURVEY - 4 & 5 STAR PROPERTIES COYOTE CANYON AREA APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Source: Costar; October 2021 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent Page 5 of 126 Average Effective Rent Unit Size Name Address Subarea # of Units (SF) Total Per SF Year Built III. Two -Bedroom Units Bordeaux 1 Ambroise - Bordeaux Coyote Cyn 111 1,402 $4,698 $3.35 2001 Turtle Ridge 100 Turtle Crest Dr Coyote Cyn 200 1,088 $3,909 $3.59 Newport Ridge 1 White Cap Ln Coyote Cyn 345 1,097 $3,916 $3.57 Turtle Rock Canyon 100 Stonecliff Aisle Coyote Cyn 165 1,116 $3,804 $3.41 Newport Bluffs 100 Vilaggio Multiple 469 1,129 $3,946 $3.50 Baypointe 2500 Baypointe Dr Multiple 207 1,141 $3,795 $3.33 Minimum 1,088 $3,795 $3.33 Maximum 1,402 $4,698 $3.59 Weighted Average 1,137 $3,953 $3.48 IV. Three -Bedroom Units Turtle Rock Canyon 100 Stonecliff Aisle Coyote Cyn 22 1,309 $4,304 $3.29 Bordeaux 1 Ambroise - Bordeaux Coyote Cyn 80 1,656 $5,284 $3.19 Newport Bluffs 100 Vilaggio Multiple 157 1,355 $4,992 $3.68 Minimum 1,309 $4,304 $3.19 Maximum 1,656 $5,284 $3.68 Weighted Average 1,444 $5,024 $3.50 Source: Costar; October 2021 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent Page 5 of 126 APPENDIX A - EXHIBIT III RENT SURVEY - 4 & 5 STAR PROPERTIES NEWPORT CENTER AREA APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Average Effective Rent Unit Size Name Address Subarea # of Units (SF) Total Per SF Year Built One -Bedroom Units Villas Fashion Island 1000 San Joaquin Plz Newport Ctr 199 1,032 $4,924 $4.77 2017 Promontory Point 200 Promontory Dr W Newport Ctr 190 891 $3,652 $4.10 1973/2015 The Colony 5100 Colony Plz Newport Ctr 51 1,068 $3,598 $3.37 1997 Minimum 891 $3,598 $3.37 Maximum 1,068 $4,924 $4.77 Weighted Average 975 $4,221 $4.32 II. Two -Bedroom Units Villas Fashion Island 1000 San Joaquin Plz Newport Ctr 234 1,349 $6,817 $5.05 Promontory Point 200 Promontory Dr W Newport Ctr 330 1,247 $4,482 $3.59 The Colony 5100 Colony Plz Newport Ctr 194 1,391 $4,267 $3.07 Minimum 1,247 $4,267 $3.07 Maximum 1,391 $6,817 $5.05 Weighted Average 1,315 $5,148 $3.91 III. Three -Bedroom Units Villas Fashion Island 1000 San Joaquin Plz Newport Ctr 91 1,389 $6,947 $5.00 Minimum 1,389 $6,947 $5.00 Maximum 1,389 $6,947 $5.00 Weighted Average 1,389 $6,947 $5.00 Source: Costar; October 2021 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent Page 6 of 126 APPENDIX A - EXHIBIT IV RENT SURVEY - 4 & 5 STAR PROPERTIES WEST NEWPORT MESA & BANNING RANCH SUBAREA' APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Minimum 745 $2,844 $2.65 Maximum 1,124 $3,681 $4.28 Weighted Average 1,002 $3,253 $3.33 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent Page 7 of 126 Average Effective Rent Unit Size Name Address Subarea # of Units (SF) Total Per SF Year Built I. Studio Units 580 Anton 580 Anton Blvd Costa Mesa 5 506 $3,036 $6.00 2018 Baker Block 125 Baker St E Costa Mesa 31 623 $2,610 $4.19 2018 Minimum 506 $2,610 $4.19 Maximum 623 $3,036 $6.00 Weighted Average 607 $2,669 $4.44 II. One -Bedroom Units 580 Anton 580 Anton Blvd Costa Mesa 165 745 $3,189 $4.28 Baker Block 125 Baker St E Costa Mesa 108 789 $3,283 $4.16 Blue Sol 421 Bernard St Costa Mesa 73 771 $2,719 $3.53 2014 Azulon at Mesa Verde 1500 Mesa Verde Dr E Costa Mesa 132 779 $2,340 $3.00 2014 Minimum 745 $2,340 $3.00 Maximum 789 $3,283 $4.28 Weighted Average 768 $2,904 $3.79 III. Two -Bedroom Units 580 Anton 580 Anton Blvd Costa Mesa 80 745 $3,189 $4.28 Baker Block 125 Baker St E Costa Mesa 93 1,124 $3,681 $3.27 Blue Sol 421 Bernard St Costa Mesa 30 1,110 $3,224 $2.90 Azulon at Mesa Verde 1500 Mesa Verde Dr E Costa Mesa 83 1,075 $2,844 $2.65 Minimum 745 $2,844 $2.65 Maximum 1,124 $3,681 $4.28 Weighted Average 1,002 $3,253 $3.33 Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent Page 7 of 126 APPENDIX A - EXHIBIT IV RENT SURVEY - 4 & 5 STAR PROPERTIES WEST NEWPORT MESA & BANNING RANCH SUBAREA' APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA IV Average Effective Rent Unit Size Name Address Subarea # of Units (SF) Total Per SF Year Built Three -Bedroom Units Baker Block 125 Baker St E Costa Mesa 8 1,452 $3,972 $2.74 Blue Sol 421 Bernard St Costa Mesa 10 1,448 $3,776 $2.61 Minimum 1,448 $3,776 $2.61 Maximum 1,452 $3,972 $2.74 Weighted Average 1,450 $3,863 $2.66 i Based on data provided from a October 2021 Costar search. Costa Mesa projects constructed after 2010 were used as a surrogate due to a lack of new development in the subarea. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent Page 8 of 126 APPENDIX B AFFORDABLE RENT CALCULATIONS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; App B Titles Page 9 of 126 APPENDIX B AFFORDABLE RENT CALCULATIONS 2021 INCOME STANDARDS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA 1 Based on the 2021 Orange County household incomes published by the California Housing & Community Development Department (HCD). The benchmark household size is set at the number of bedrooms in the unit plus one. z Based on the Orange County Housing Authority utilities allowances effective as of 12/1/21. Assumes: Gas Heating, Gas Cooking, and Gas Water Heater; Basic Electric; and Air Conditioning. 3 Based on the California Health & Safety Code Section 50053 calculation methodology. Prepared by: Keyser Marston Associates File name: 2 17 22 NB Rent; Aff Rent Page 10 of 126 One -Bedroom Two -Bedroom Three - Studio Units Units Units Bedroom Units I. General Assumptions Area Median Income (AMI) 1 $74,700 $85,350 $96,050 $106,700 Monthly Utilities Allowance z $67 $77 $107 $137 II. Affordable Rent Calculations 3 A. Low Income - Rent Based on 60% AMI Benchmark Annual Household Income $44,820 $51,210 $57,630 $64,020 Percentage of Income Allotted to Housing Expenses 30% 30% 30% 30% Monthly Income Available for Housing Expenses $1,121 $1,280 $1,441 $1,601 (Less) Monthly Utilities Allowance (67) (77) (107) (137) Maximum Allowable Rent $1,054 $1,203 $1,334 $1,464 B. Very Low Income - Rent Based on 50% AMI Benchmark Annual Household Income $37,350 $42,675 $48,025 $53,350 Percentage of Income Allotted to Housing Expenses 30% 30% 30% 30% Monthly Income Available for Housing Expenses $934 $1,067 $1,201 $1,334 (Less) Monthly Utilities Allowance (67) (77) (107) (137) Maximum Allowable Rent $867 $990 $1,094 $1,197 1 Based on the 2021 Orange County household incomes published by the California Housing & Community Development Department (HCD). The benchmark household size is set at the number of bedrooms in the unit plus one. z Based on the Orange County Housing Authority utilities allowances effective as of 12/1/21. Assumes: Gas Heating, Gas Cooking, and Gas Water Heater; Basic Electric; and Air Conditioning. 3 Based on the California Health & Safety Code Section 50053 calculation methodology. Prepared by: Keyser Marston Associates File name: 2 17 22 NB Rent; Aff Rent Page 10 of 126 APPENDIX C PRO FORMA ANALYSES AIRPORT AREA PROTOTYPE APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; App C Title Page 11 of 126 APPENDIX C - EXHIBIT I PRO FORMA ANALYSIS MARKET RATE SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport Mkt Page 12 of 126 APPENDIX C - EXHIBIT I - TABLE 1 ESTIMATED DEVELOPMENT COSTS MARKET RATE SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 435,600 Sf of Land 2 $5,000 435,600 Sf of Land 3 /Space 225 Spaces 900 Spaces 574,200 Sf of GBA 4 20% Other Direct Costs 574,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 1 2 3 4 5 6 7 6% Direct Costs 450 Units 2% Direct Costs 450 Units 5% Direct Costs 5% Other Indirect Costs 6 $80,586,000 Cost 7 $237,955,000 Cost 60% Loan to Cost $185 /Sf of Land $80,586,000 $30 /Sf of Land $13,068,000 $5,000 /Space 1,125,000 $25,000 /Space 22,500,000 $180 /Sf of GBA 103,356,000 28,010,000 $293 /Sf of GBA $168,059,000 $10,084,000 $68,000 /Unit 30,600,000 3,361,000 $2,500 /Unit 1,125,000 8,403,000 2,679,000 3.6% Avg Rate $4,352,000 3.6% Avg Rate 6,425,000 1.5 Points 2,867,000 $56,252,000 $13,644,000 Total Construction Cost 450 Units $529,000 /Unit $237,955,000 Total Development Cost 450 Units $708,000 /Unit $318,541,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport Mkt Page 13 of 126 APPENDIX C - EXHIBIT I - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME MARKET RATE SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 23 Units @ $2,780 /Unit/Month $767,000 One -Bedroom Units 212 Units @ $3,511 /Unit/Month 8,932,000 Two -Bedroom Units 215 Units @ $4,019 /Unit/Month 10,370,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Miscellaneous Income 450 Units @ $75 /Unit/Month 405,000 Total Gross Income $20,474,000 Vacancy & Collection Allowance 5% Gross Income (1,024,000) II. Effective Gross Income $19,450,000 III. Operating Expenses General Operating Expenses 450 Units @ $4,500 /Unit $2,025,000 Property Taxes 450 Units @ $7,000 /Unit 3,130,000 Replacement Reserve Deposits 450 Units @ $150 /Unit 68,000 Total Operating Expenses ($5,223,000) IV. I Stabilized Net Operating Income $14,227,000 1 Based in part on the rent survey presented in APPENDIX A - EXHIBIT I. The weighted average monthly rent equates to $3.88 per square foot of leasable area. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport Mkt Page 14 of 126 APPENDIX C - EXHIBIT I - TABLE 3 ESTIMATED STABILIZED RETURN ON INVESTMENT MARKET RATE SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Stabilized Net Operating Income See APPENDIX C - EXHIBIT I - TABLE 2 $14,227,000 II. Total Development Cost See APPENDIX C - EXHIBIT I - TABLE 1 $318,541,000 III. I Estimated Stabilized Return on Investment 4.5% Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport Mkt Page 15 of 126 APPENDIX C - EXHIBIT II PRO FORMA ANALYSIS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport Base Low Page 16 of 126 APPENDIX C - EXHIBIT II - TABLE 1 ESTIMATED DEVELOPMENT COSTS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 435,600 Sf of Land 2 $5,000 435,600 Sf of Land 3 /Space 225 Spaces 900 Spaces 574,200 Sf of GBA 4 20% Other Direct Costs 574,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 5 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 450 Units 2% Direct Costs 450 Units 5% Direct Costs 5% Other Indirect Costs 6 $79,704,900 Cost 7 $237,904,000 Cost 60% Loan to Cost $185 /Sf of Land $80,586,000 $30 /Sf of Land $13,068,000 $5,000 /Space 1,125,000 $25,000 /Space 22,500,000 $180 /Sf of GBA 103,356,000 28,010,000 $293 /Sf of GBA $168,059,000 $10,084,000 $68,000 /Unit 30,600,000 3,361,000 $2,500 /Unit 1,125,000 8,403,000 2,679,000 3.6% Avg Rate $4,304,000 3.6% Avg Rate 6,423,000 1.5 Points 2,866,000 $56,252,000 $13,593,000 Total Construction Cost 450 Units $529,000 /Unit $237,904,000 Total Development Cost 450 Units $708,000 /Unit $318,490,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport Base Low Page 17 of 126 APPENDIX C - EXHIBIT II - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 21 Units @ $2,780 /Unit/Month $701,000 One -Bedroom Units 197 Units @ $3,511 /Unit/Month 8,300,000 Two -Bedroom Units 200 Units @ $4,019 /Unit/Month 9,647,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Low Income Units z Studio Units 2 Units @ $1,054 /Unit/Month 25,000 One -Bedroom Units 15 Units @ $1,203 /Unit/Month 217,000 Two -Bedroom Units 15 Units @ $1,334 /Unit/Month 240,000 Three -Bedroom Units 0 Units @ $1,464 /Unit/Month 0 C. Miscellaneous Income 450 Units @ $75 /Unit/Month 405,000 Total Gross Income $19,535,000 Vacancy & Collection Allowance 5% Gross Income (977,000) II. Effective Gross Income $18,558,000 III. Operating Expenses General Operating Expenses 450 Units @ $4,500 /Unit $2,025,000 Property Taxes 450 Units @ $6,600 /Unit 2,969,000 Replacement Reserve Deposits 450 Units @ $150 /Unit 68,000 Total Operating Expenses 450 Units @ $11,249 /Unit ($5,062,000) IV. I Stabilized Net Operating Income $13,496,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT I. The weighted average monthly rent equates to $3.88 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport Base Low Page 18 of 126 APPENDIX C - EXHIBIT II - TABLE 3 INCLUSIONARY HOUSING IMPACTS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX C - EXHIBIT II - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX C - EXHIBIT II - TABLE 1 $13,496,000 4.47% $302,174,000 $318,490,000 Total Financial Impact ($16,316,000) Property Acquisition Cost Reduction 20% of Estimated Current Acquisition Prices Developer Return 4.2% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 5.2% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport Base Low Page 19 of 126 APPENDIX C - EXHIBIT III PRO FORMA ANALYSIS DENSITY BONUS SCENARIO AIRPORT AREA PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport DB Page 20 of 126 APPENDIX C - EXHIBIT III - TABLE 1 ESTIMATED DEVELOPMENT COSTS DENSITY BONUS SCENARIO AIRPORT AREA PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Property Acquisition Costs 1 435,600 Sf of Land $185 /Sf of Land $80,586,000 II. Direct Costs z On -Site Improvements/Landscaping 435,600 Sf of Land $30 /Sf of Land $13,068,000 Parking 3 At -Grade Spaces 0 Spaces $5,000 /Space 0 Above -Ground Spaces 833 Spaces $25,000 /Space 20,813,000 Semi -Subterranean Spaces 167 Spaces $35,000 /Space 5,828,000 Building Costs 862,133 Sf of GBA $200 /Sf of GBA 172,427,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 42,427,000 Total Direct Costs 862,133 Sf of GBA $295 /Sf of GBA $254,563,000 III. Indirect Costs Architecture, Engineering & Consulting 6% Direct Costs $15,274,000 Public Permits & Fees s 675 Units $68,000 /Unit 45,900,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 5,091,000 Marketing 675 Units $2,500 /Unit 1,688,000 Developer Fee 5% Direct Costs 12,728,000 Soft Cost Contingency Allowance 5% Other Indirect Costs 4,034,000 Total Indirect Costs $84,715,000 IV. Financing Costs Interest During Construction Land 6 $80,586,000 Cost 3.6% Avg Rate $4,352,000 Construction 7 $357,215,000 Cost 3.6% Avg Rate 9,645,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 3,940,000 Total Financing Costs $17,937,000 V. otal Construction Cost 675 Units $529,000 /Unit $357,215,000 otal Development Cost 675 Units $649,000 /Unit $437,801,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. z Based on the estimated costs for similar uses. 3 Section 65915 (p) requires jurisdictions to allow projects to meet statutorily established parking standards. For marketability reasons, KMA set the parking standards at 1.0 space per Studio Units unit; 1.0 space per One -Bedroom Units unit; 2.0 spaces per Two -Bedroom Units unit; and 2.0 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport DB Page 21 of 126 APPENDIX C - EXHIBIT III - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME DENSITY BONUS SCENARIO AIRPORT AREA PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 31 Units @ $2,780 /Unit/Month $1,034,000 One -Bedroom Units 285 Units @ $3,511 /Unit/Month 12,008,000 Two -Bedroom Units 291 Units @ $4,019 /Unit/Month 14,036,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Density Bonus Units z Studio Units 3 Units @ $867 /Unit/Month 31,000 One -Bedroom Units 32 Units @ $990 /Unit/Month 380,000 Two -Bedroom Units 33 Units @ $1,094 /Unit/Month 433,000 Three -Bedroom Units 0 Units @ $1,197 /Unit/Month 0 C. Miscellaneous Income 675 Units @ $75 /Unit/Month 608,000 Total Gross Income $28,530,000 Vacancy & Collection Allowance 5% Gross Income (1,427,000) II. Effective Gross Income $27,103,000 III. Operating Expenses General Operating Expenses 675 Units @ $4,500 /Unit $3,037,500 Property Taxes 675 Units @ $6,400 /Unit 4,322,000 Replacement Reserve Deposits 675 Units @ $150 /Unit 101,000 Total Operating Expenses 675 Units @ $11,053 /Unit ($7,460,500) IV. I Stabilized Net Operating Income $19,642,500 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT I. The weighted average monthly rent equates to $3.88 per square foot of leasable area. z Under Section 65915 (f) (2), 15% of the Base Units are set aside for very -low income households. Section 65915 (c) (1) (B) (i) calculates very low income rents based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport DB Page 22 of 126 APPENDIX C - EXHIBIT III - TABLE 3 INCLUSIONARY HOUSING IMPACTS DENSITY BONUS SCENARIO AIRPORT AREA PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX C - EXHIBIT III - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX C - EXHIBIT III - TABLE 1 $19,642,500 4.47% $439,793,000 $437,801,000 Total Financial Impact $1,992,000 Property Acquisition Cost Reduction 0% of Estimated Current Acquisition Prices Developer Return 4.49% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 0.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport DB Page 23 of 126 APPENDIX C - EXHIBIT IV PRO FORMA ANALYSIS 5% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 5% Low Page 24 of 126 APPENDIX C - EXHIBIT IV - TABLE 1 ESTIMATED DEVELOPMENT COSTS 5% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 435,600 Sf of Land 2 $5,000 435,600 Sf of Land 3 /Space 225 Spaces 900 Spaces 574,200 Sf of GBA 4 20% Other Direct Costs 574,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 450 Units 2% Direct Costs 450 Units 5% Direct Costs 5% Other Indirect Costs 6 $79,949,400 Cost 7 $237,919,000 Cost 60% Loan to Cost $185 /Sf of Land $80,586,000 $30 /Sf of Land $13,068,000 $5,000 /Space 1,125,000 $25,000 /Space 22,500,000 $180 /Sf of GBA 103,356,000 28,010,000 $293 /Sf of GBA $168,059,000 $10,084,000 $68,000 /Unit 30,600,000 3,361,000 $2,500 /Unit 1,125,000 8,403,000 2,679,000 3.6% Avg Rate $4,317,000 3.6% Avg Rate 6,424,000 1.5 Points 2,867,000 $56,252,000 $13,608,000 Total Construction Cost 450 Units $529,000 /Unit $237,919,000 Total Development Cost 450 Units $708,000 /Unit $318,505,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 5% Low Page 25 of 126 APPENDIX C - EXHIBIT IV - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 5% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 22 Units @ $2,780 /Unit/Month $734,000 One -Bedroom Units 201 Units @ $3,511 /Unit/Month 8,469,000 Two -Bedroom Units 204 Units @ $4,019 /Unit/Month 9,839,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Low Income Units z Studio Units 1 Unit @ $1,054 /Unit/Month 13,000 One -Bedroom Units 11 Units @ $1,203 /Unit/Month 159,000 Two -Bedroom Units 11 Units @ $1,334 /Unit/Month 176,000 Three -Bedroom Units 0 Units @ $1,464 /Unit/Month 0 C. Miscellaneous Income 450 Units @ $75 /Unit/Month 405,000 Total Gross Income $19,795,000 Vacancy & Collection Allowance 5% Gross Income (990,000) II. Effective Gross Income $18,805,000 III. Operating Expenses General Operating Expenses 450 Units @ $4,500 /Unit $2,025,000 Property Taxes 450 Units @ $6,700 /Unit 3,014,000 Replacement Reserve Deposits 450 Units @ $150 /Unit 68,000 Total Operating Expenses 450 Units @ $11,349 /Unit ($5,107,000) IV. I Stabilized Net Operating Income $13,698,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT I. The weighted average monthly rent equates to $3.88 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 5% Low Page 26 of 126 APPENDIX C - EXHIBIT IV - TABLE 3 INCLUSIONARY HOUSING IMPACTS 5% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX C - EXHIBIT IV - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX C - EXHIBIT IV - TABLE 1 $13,698,000 4.47% $306,697,000 $318,505,000 Total Financial Impact ($11,808,000) Property Acquisition Cost Reduction 15% of Estimated Current Acquisition Prices Developer Return 4.3% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 3.7% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 5% Low Page 27 of 126 APPENDIX C - EXHIBIT V PRO FORMA ANALYSIS 10% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 10% Low Page 28 of 126 APPENDIX C - EXHIBIT V - TABLE 1 ESTIMATED DEVELOPMENT COSTS 10% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 435,600 Sf of Land 2 $5,000 435,600 Sf of Land 3 /Space 225 Spaces 900 Spaces 574,200 Sf of GBA 4 20% Other Direct Costs 574,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 450 Units 2% Direct Costs 450 Units 5% Direct Costs 5% Other Indirect Costs 6 $79,336,100 Cost 7 $237,884,000 Cost 60% Loan to Cost $185 /Sf of Land $80,586,000 $30 /Sf of Land $13,068,000 $5,000 /Space 1,125,000 $25,000 /Space 22,500,000 $180 /Sf of GBA 103,356,000 28,010,000 $293 /Sf of GBA $168,059,000 $10,084,000 $68,000 /Unit 30,600,000 3,361,000 $2,500 /Unit 1,125,000 8,403,000 2,679,000 3.6% Avg Rate $4,284,000 3.6% Avg Rate 6,423,000 1.5 Points 2,866,000 $56,252,000 $13,573,000 Total Construction Cost 450 Units $529,000 /Unit $237,884,000 Total Development Cost 450 Units $708,000 /Unit $318,470,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 10% Low Page 29 of 126 APPENDIX C - EXHIBIT V - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 10% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 21 Units @ $2,780 /Unit/Month $701,000 One -Bedroom Units 191 Units @ $3,511 /Unit/Month 8,047,000 Two -Bedroom Units 193 Units @ $4,019 /Unit/Month 9,309,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Low Income Units z Studio Units 2 Units @ $1,054 /Unit/Month 25,000 One -Bedroom Units 21 Units @ $1,203 /Unit/Month 303,000 Two -Bedroom Units 22 Units @ $1,334 /Unit/Month 352,000 Three -Bedroom Units 0 Units @ $1,464 /Unit/Month 0 C. Miscellaneous Income 450 Units @ $75 /Unit/Month 405,000 Total Gross Income $19,142,000 Vacancy & Collection Allowance 5% Gross Income (957,000) II. Effective Gross Income $18,185,000 III. Operating Expenses General Operating Expenses 450 Units @ $4,500 /Unit $2,025,000 Property Taxes 450 Units @ $6,400 /Unit 2,902,000 Replacement Reserve Deposits 450 Units @ $150 /Unit 68,000 Total Operating Expenses 450 Units @ $11,100 /Unit ($4,995,000) IV. I Stabilized Net Operating Income $13,190,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT I. The weighted average monthly rent equates to $3.88 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 10% Low Page 30 of 126 APPENDIX C - EXHIBIT V - TABLE 3 INCLUSIONARY HOUSING IMPACTS 10% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX C - EXHIBIT V - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX C - EXHIBIT V - TABLE 1 $13,190,000 4.47% $295,323,000 $318,470,000 Total Financial Impact ($23,147,000) Property Acquisition Cost Reduction 29% of Estimated Current Acquisition Prices Developer Return 4.1% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 7.6% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 10% Low Page 31 of 126 APPENDIX C - EXHIBIT VI PRO FORMA ANALYSIS 15% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 15% Low Page 32 of 126 APPENDIX C - EXHIBIT VI - TABLE 1 ESTIMATED DEVELOPMENT COSTS 15% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 435,600 Sf of Land 2 $5,000 435,600 Sf of Land 3 /Space 225 Spaces 900 Spaces 574,200 Sf of GBA 4 20% Other Direct Costs 574,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 450 Units 2% Direct Costs 450 Units 5% Direct Costs 5% Other Indirect Costs 6 $78,709,200 Cost 7 $237,849,000 Cost 60% Loan to Cost $185 /Sf of Land $80,586,000 $30 /Sf of Land $13,068,000 $5,000 /Space 1,125,000 $25,000 /Space 22,500,000 $180 /Sf of GBA 103,356,000 28,010,000 $293 /Sf of GBA $168,059,000 $10,084,000 $68,000 /Unit 30,600,000 3,361,000 $2,500 /Unit 1,125,000 8,403,000 2,679,000 3.6% Avg Rate $4,250,000 3.6% Avg Rate 6,422,000 1.5 Points 2,866,000 $56,252,000 $13,538,000 Total Construction Cost 450 Units $529,000 /Unit $237,849,000 Total Development Cost 450 Units $708,000 /Unit $318,435,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 15% Low Page 33 of 126 APPENDIX C - EXHIBIT VI - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 15% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 19 Units @ $2,780 /Unit/Month $634,000 One -Bedroom Units 180 Units @ $3,511 /Unit/Month 7,584,000 Two -Bedroom Units 183 Units @ $4,019 /Unit/Month 8,827,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Low Income Units z Studio Units 4 Units @ $1,054 /Unit/Month 51,000 One -Bedroom Units 32 Units @ $1,203 /Unit/Month 462,000 Two -Bedroom Units 32 Units @ $1,334 /Unit/Month 512,000 Three -Bedroom Units 0 Units @ $1,464 /Unit/Month 0 C. Miscellaneous Income 450 Units @ $75 /Unit/Month 405,000 Total Gross Income $18,475,000 Vacancy & Collection Allowance 5% Gross Income (924,000) II. Effective Gross Income $17,551,000 III. Operating Expenses General Operating Expenses 450 Units @ $4,500 /Unit $2,025,000 Property Taxes 450 Units @ $6,200 /Unit 2,788,000 Replacement Reserve Deposits 450 Units @ $150 /Unit 68,000 Total Operating Expenses 450 Units @ $10,847 /Unit ($4,881,000) IV. I Stabilized Net Operating Income $12,670,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT I. The weighted average monthly rent equates to $3.88 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 15% Low Page 34 of 126 APPENDIX C - EXHIBIT VI - TABLE 3 INCLUSIONARY HOUSING IMPACTS 15% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX C - EXHIBIT VI - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX C - EXHIBIT VI - TABLE 1 $12,670,000 4.47% $283,680,000 $318,435,000 Total Financial Impact ($34,755,000) Property Acquisition Cost Reduction 43% of Estimated Current Acquisition Prices Developer Return 4.0% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 12.1% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 15% Low Page 35 of 126 APPENDIX C - EXHIBIT VII PRO FORMA ANALYSIS 20% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 20% Low Page 36 of 126 APPENDIX C - EXHIBIT VII - TABLE 1 ESTIMATED DEVELOPMENT COSTS 20% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 435,600 Sf of Land 2 $5,000 435,600 Sf of Land 3 /Space 225 Spaces 900 Spaces 574,200 Sf of GBA 4 20% Other Direct Costs 574,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 450 Units 2% Direct Costs 450 Units 5% Direct Costs 5% Other Indirect Costs 6 $78,095,600 Cost 7 $237,815,000 Cost 60% Loan to Cost $185 /Sf of Land $80,586,000 $30 /Sf of Land $13,068,000 $5,000 /Space 1,125,000 $25,000 /Space 22,500,000 $180 /Sf of GBA 103,356,000 28,010,000 $293 /Sf of GBA $168,059,000 $10,084,000 $68,000 /Unit 30,600,000 3,361,000 $2,500 /Unit 1,125,000 8,403,000 2,679,000 3.6% Avg Rate $4,217,000 3.6% Avg Rate 6,421,000 1.5 Points 2,866,000 $56,252,000 $13,504,000 Total Construction Cost 450 Units $528,000 /Unit $237,815,000 Total Development Cost 450 Units $708,000 /Unit $318,401,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 20% Low Page 37 of 126 APPENDIX C - EXHIBIT VII - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 20% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 18 Units @ $2,780 /Unit/Month $600,000 One -Bedroom Units 170 Units @ $3,511 /Unit/Month 7,162,000 Two -Bedroom Units 172 Units @ $4,019 /Unit/Month 8,296,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Low Income Units z Studio Units 5 Units @ $1,054 /Unit/Month 63,000 One -Bedroom Units 42 Units @ $1,203 /Unit/Month 606,000 Two -Bedroom Units 43 Units @ $1,334 /Unit/Month 688,000 Three -Bedroom Units 0 Units @ $1,464 /Unit/Month 0 C. Miscellaneous Income 450 Units @ $75 /Unit/Month 405,000 Total Gross Income $17,820,000 Vacancy & Collection Allowance 5% Gross Income (891,000) II. Effective Gross Income $16,929,000 III. Operating Expenses General Operating Expenses 450 Units @ $4,500 /Unit $2,025,000 Property Taxes 450 Units @ $5,900 /Unit 2,675,000 Replacement Reserve Deposits 450 Units @ $150 /Unit 68,000 Total Operating Expenses 450 Units @ $10,596 /Unit ($4,768,000) IV. I Stabilized Net Operating Income $12,161,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT I. The weighted average monthly rent equates to $3.88 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 20% Low Page 38 of 126 APPENDIX C - EXHIBIT VII - TABLE 3 INCLUSIONARY HOUSING IMPACTS 20% LOW INCOME SCENARIO AIRPORT AREA PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX C - EXHIBIT VII - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX C - EXHIBIT VII - TABLE 1 $12,161,000 4.47% $272,283,000 $318,401,000 Total Financial Impact ($46,118,000) Property Acquisition Cost Reduction 57% of Estimated Current Acquisition Prices Developer Return 3.8% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 17.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Airport 20% Low Page 39 of 126 APPENDIX D PRO FORMA ANALYSES COYOTE CANYON PROTOTYPE APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; App D Title Page 40 of 126 APPENDIX D - EXHIBIT I PRO FORMA ANALYSIS MARKET RATE SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC Mkt Page 41 of 126 APPENDIX D - EXHIBIT I - TABLE 1 ESTIMATED DEVELOPMENT COSTS MARKET RATE SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 304,920 Sf of Land 2 $5,000 304,920 Sf of Land 3 /Space 140 Spaces 560 Spaces 354,667 Sf of GBA 4 20% Other Direct Costs 354,667 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 6% Direct Costs 280 Units 2% Direct Costs 280 Units 5% Direct Costs 5% Other Indirect Costs 6 $45,738,000 Cost 7 $148,088,000 Cost 60% Loan to Cost $150 /Sf of Land $45,738,000 $30 /Sf of Land $9,148,000 $5,000 /Space 700,000 $25,000 /Space 14,000,000 $180 /Sf of GBA 63,840,000 17,538,000 $297 /Sf of GBA $105,226,000 $6,314,000 $68,000 /Unit 19,040,000 2,105,000 $1,000 /Unit 280,000 5,261,000 1,650,000 3.6% Avg Rate $2,470,000 3.6% Avg Rate 3,998,000 1.5 Points 1,744,000 $34,650,000 $8,212,000 Total Construction Cost 280 Units $529,000 /Unit $148,088,000 Total Development Cost 280 Units $692,000 /Unit $193,826,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC Mkt Page 42 of 126 APPENDIX D - EXHIBIT I - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME MARKET RATE SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 98 Units @ $3,349 /Unit/Month 3,938,000 Two -Bedroom Units 154 Units @ $3593 /Unit/Month 6,640,000 Three -Bedroom Units 28 Units @ $4,421 /Unit/Month 1,485,000 B. Miscellaneous Income 280 Units @ $75 /Unit/Month 252,000 Total Gross Income $12,315,000 Vacancy & Collection Allowance 5% Gross Income (616,000) II. Effective Gross Income $11,699,000 III. Operating Expenses General Operating Expenses 280 Units @ $4,500 /Unit $1,260,000 Property Taxes 280 Units @ $6,700 /Unit 1,875,000 Replacement Reserve Deposits 280 Units @ $150 /Unit 42,000 Total Operating Expenses ($3,177,000) IV. I Stabilized Net Operating Income $8,522,000 1 Based in part on the rent survey presented in APPENDIX A - EXHIBIT II. The weighted average monthly rent equates to $3.78 per square foot of leasable area. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC Mkt Page 43 of 126 APPENDIX D - EXHIBIT I - TABLE 3 ESTIMATED STABILIZED RETURN ON INVESTMENT MARKET RATE SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Stabilized Net Operating Income See APPENDIX D - EXHIBIT I - TABLE 2 $8,522,000 II. Total Development Cost See APPENDIX D - EXHIBIT I - TABLE 1 $193,826,000 III. I Estimated Stabilized Return on Investment 4.4% Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC Mkt Page 44 of 126 APPENDIX D - EXHIBIT II PRO FORMA ANALYSIS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC Base Low Page 45 of 126 APPENDIX D - EXHIBIT II - TABLE 1 ESTIMATED DEVELOPMENT COSTS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 304,920 Sf of Land 2 $5,000 304,920 Sf of Land 3 /Space 140 Spaces 560 Spaces 354,667 Sf of GBA 4 20% Other Direct Costs 354,667 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 280 Units 2% Direct Costs 280 Units 5% Direct Costs 5% Other Indirect Costs 6 $45,213,800 Cost 7 $148,060,000 Cost 60% Loan to Cost $150 /Sf of Land $45,738,000 $30 /Sf of Land $9,148,000 $5,000 /Space 700,000 $25,000 /Space 14,000,000 $180 /Sf of GBA 63,840,000 17,538,000 $297 /Sf of GBA $105,226,000 $6,314,000 $68,000 /Unit 19,040,000 2,105,000 $1,000 /Unit 280,000 5,261,000 1,650,000 3.6% Avg Rate $2,442,000 3.6% Avg Rate 3,998,000 1.5 Points 1,744,000 $34,650,000 $8,184,000 Total Construction Cost 280 Units $529,000 /Unit $148,060,000 Total Development Cost 280 Units $692,000 /Unit $193,798,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC Base Low Page 46 of 126 APPENDIX D - EXHIBIT II - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 91 Units @ $3,349 /Unit/Month 3,657,000 Two -Bedroom Units 143 Units @ $3,593 /Unit/Month 6,165,000 Three -Bedroom Units 26 Units @ $4,421 /Unit/Month 1,379,000 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 7 Units @ $1,203 /Unit/Month 101,000 Two -Bedroom Units 11 Units @ $1,334 /Unit/Month 176,000 Three -Bedroom Units 2 Units @ $1,464 /Unit/Month 35,000 C. Miscellaneous Income 280 Units @ $75 /Unit/Month 252,000 Total Gross Income $11,765,000 Vacancy & Collection Allowance 5% Gross Income (588,000) II. Effective Gross Income $11,177,000 III. Operating Expenses General Operating Expenses 280 Units @ $4,500 /Unit $1,260,000 Property Taxes 280 Units @ $6,400 /Unit 1,781,000 Replacement Reserve Deposits 280 Units @ $150 /Unit 42,000 Total Operating Expenses 280 Units @ $11,011 /Unit ($3,083,000) IV. I Stabilized Net Operating Income $8,094,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT II. The weighted average monthly rent equates to $3.78 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC Base Low Page 47 of 126 APPENDIX D - EXHIBIT II - TABLE 3 INCLUSIONARY HOUSING IMPACTS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX D - EXHIBIT II - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX D - EXHIBIT II - TABLE 1 $8,094,000 4.40% $184,091,000 $193,798,000 Total Financial Impact ($9,707,000) Property Acquisition Cost Reduction 21% of Estimated Current Acquisition Prices Developer Return 4.2% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 5.1% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC Base Low Page 48 of 126 APPENDIX D - EXHIBIT III PRO FORMA ANALYSIS DENSITY BONUS SCENARIO COYOTE CANYON PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC DB Page 49 of 126 APPENDIX D - EXHIBIT III - TABLE 1 ESTIMATED DEVELOPMENT COSTS DENSITY BONUS SCENARIO COYOTE CANYON PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Property Acquisition Costs 1 304,920 Sf of Land $150 /Sf of Land $45,738,000 II. Direct Costs z On -Site Improvements/Landscaping 304,920 Sf of Land $30 /Sf of Land $9,148,000 Parking 3 At -Grade Spaces 0 Spaces $5,000 /Space 0 Above -Ground Spaces 693 Spaces $25,000 /Space 17,325,000 Semi -Subterranean Spaces 0 Spaces $35,000 /Space 0 Building Costs 532,000 Sf of GBA $200 /Sf of GBA 106,400,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 26,575,000 Total Direct Costs 532,000 Sf of GBA $300 /Sf of GBA $159,448,000 III. Indirect Costs Architecture, Engineering & Consulting 6% Direct Costs $9,567,000 Public Permits & Fees s 420 Units $68,000 /Unit 28,560,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 3,189,000 Marketing 420 Units $1,000 /Unit 420,000 Developer Fee 5% Direct Costs 7,972,000 Soft Cost Contingency Allowance 5% Other Indirect Costs 2,485,000 Total Indirect Costs $52,193,000 IV. Financing Costs Interest During Construction Land 6 $45,738,000 Cost 3.6% Avg Rate $2,470,000 Construction 7 $222,533,000 Cost 3.6% Avg Rate 6,008,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 2,414,000 Total Financing Costs $10,892,000 V. Total Construction Cost 420 Units $530,000 /Unit $222,533,000 Total Development Cost 420 Units $639,000 /Unit $268,271,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. z Based on the estimated costs for similar uses. 3 Section 65915 (p) requires jurisdictions to allow projects to meet statutorily established parking standards. For marketability reasons, KMA set the parking standards at 1.0 space per Studio Units unit; 1.0 space per One -Bedroom Units unit; 2.0 spaces per Two -Bedroom Units unit; and 2.0 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC DB Page 50 of 126 APPENDIX D - EXHIBIT III - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME DENSITY BONUS SCENARIO COYOTE CANYON PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 132 Units @ $3,349 /Unit/Month 5,304,000 Two -Bedroom Units 208 Units @ $3,593 /Unit/Month 8,968,000 Three -Bedroom Units 38 Units @ $4,421 /Unit/Month 2,016,000 B. Density Bonus Units z Studio Units 0 Units @ $867 /Unit/Month 0 One -Bedroom Units 15 Units @ $990 /Unit/Month 178,000 Two -Bedroom Units 23 Units @ $1,094 /Unit/Month 302,000 Three -Bedroom Units 4 Units @ $1,197 /Unit/Month 57,000 C. Miscellaneous Income 420 Units @ $75 /Unit/Month 378,000 Total Gross Income $17,203,000 Vacancy & Collection Allowance 5% Gross Income (860,000) II. Effective Gross Income $16,343,000 III. Operating Expenses General Operating Expenses 420 Units @ $4,500 /Unit $1,890,000 Property Taxes 420 Units @ $6,200 /Unit 2,595,000 Replacement Reserve Deposits 420 Units @ $150 /Unit 63,000 Total Operating Expenses 420 Units @ $10,829 /Unit ($4,548,000) IV. I Stabilized Net Operating Income $11,795,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT II. The weighted average monthly rent equates to $3.78 per square foot of leasable area. z Under Section 65915 (f) (2), 15% of the Base Units are set aside for very -low income households. Section 65915 (c) (1) (B) (i) calculates very low income rents based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC DB Page 51 of 126 APPENDIX D - EXHIBIT III - TABLE 3 INCLUSIONARY HOUSING IMPACTS DENSITY BONUS SCENARIO COYOTE CANYON PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX D - EXHIBIT III - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX D - EXHIBIT III - TABLE 1 $11,795,000 4.40% $268,268,000 $268,271,000 Total Financial Impact ($3,000) Property Acquisition Cost Reduction 0% of Estimated Current Acquisition Prices Developer Return 4.40% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 0.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC DB Page 52 of 126 APPENDIX D - EXHIBIT IV PRO FORMA ANALYSIS 5% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 5% Low Page 53 of 126 APPENDIX D - EXHIBIT IV - TABLE 1 ESTIMATED DEVELOPMENT COSTS 5% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 304,920 Sf of Land 2 $5,000 304,920 Sf of Land 3 /Space 140 Spaces 560 Spaces 354,667 Sf of GBA 4 20% Other Direct Costs 354,667 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 280 Units 2% Direct Costs 280 Units 5% Direct Costs 5% Other Indirect Costs 6 $45,374,300 Cost 7 $148,068,000 Cost 60% Loan to Cost $150 /Sf of Land $45,738,000 $30 /Sf of Land $9,148,000 $5,000 /Space 700,000 $25,000 /Space 14,000,000 $180 /Sf of GBA 63,840,000 17,538,000 $297 /Sf of GBA $105,226,000 $6,314,000 $68,000 /Unit 19,040,000 2,105,000 $1,000 /Unit 280,000 5,261,000 1,650,000 3.6% Avg Rate $2,450,000 3.6% Avg Rate 3,998,000 1.5 Points 1,744,000 $34,650,000 $8,192,000 Total Construction Cost 280 Units $529,000 /Unit $148,068,000 Total Development Cost 280 Units $692,000 /Unit $193,806,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 5% Low Page 54 of 126 APPENDIX D - EXHIBIT IV - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 5% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 93 Units @ $3,349 /Unit/Month 3,737,000 Two -Bedroom Units 146 Units @ $3,593 /Unit/Month 6,295,000 Three -Bedroom Units 27 Units @ $4,421 /Unit/Month 1,432,000 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 5 Units @ $1,203 /Unit/Month 72,000 Two -Bedroom Units 8 Units @ $1,334 /Unit/Month 128,000 Three -Bedroom Units 1 Unit @ $1,464 /Unit/Month 18,000 C. Miscellaneous Income 280 Units @ $75 /Unit/Month 252,000 Total Gross Income $11,934,000 Vacancy & Collection Allowance 5% Gross Income (597,000) II. Effective Gross Income $11,337,000 III. Operating Expenses General Operating Expenses 280 Units @ $4,500 /Unit $1,260,000 Property Taxes 280 Units @ $6,500 /Unit 1,810,000 Replacement Reserve Deposits 280 Units @ $150 /Unit 42,000 Total Operating Expenses 280 Units @ $11,114 /Unit ($3,112,000) IV. I Stabilized Net Operating Income $8,225,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT II. The weighted average monthly rent equates to $3.78 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 5% Low Page 55 of 126 APPENDIX D - EXHIBIT IV - TABLE 3 INCLUSIONARY HOUSING IMPACTS 5% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX D - EXHIBIT IV - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX D - EXHIBIT IV - TABLE 1 $8,225,000 4.40% $187,071,000 $193,806,000 Total Financial Impact ($6,735,000) Property Acquisition Cost Reduction 15% of Estimated Current Acquisition Prices Developer Return 4.2% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 3.4% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 5% Low Page 56 of 126 APPENDIX D - EXHIBIT V PRO FORMA ANALYSIS 10% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 10% Low Page 57 of 126 APPENDIX D - EXHIBIT V - TABLE 1 ESTIMATED DEVELOPMENT COSTS 10% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 304,920 Sf of Land 2 $5,000 304,920 Sf of Land 3 /Space 140 Spaces 560 Spaces 354,667 Sf of GBA 4 20% Other Direct Costs 354,667 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 280 Units 2% Direct Costs 280 Units 5% Direct Costs 5% Other Indirect Costs 6 $45,003,200 Cost 7 $148,047,000 Cost 60% Loan to Cost $150 /Sf of Land $45,738,000 $30 /Sf of Land $9,148,000 $5,000 /Space 700,000 $25,000 /Space 14,000,000 $180 /Sf of GBA 63,840,000 17,538,000 $297 /Sf of GBA $105,226,000 $6,314,000 $68,000 /Unit 19,040,000 2,105,000 $1,000 /Unit 280,000 5,261,000 1,650,000 3.6% Avg Rate $2,430,000 3.6% Avg Rate 3,997,000 1.5 Points 1,744,000 $34,650,000 $8,171,000 Total Construction Cost 280 Units $529,000 /Unit $148,047,000 Total Development Cost 280 Units $692,000 /Unit $193,785,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 10% Low Page 58 of 126 APPENDIX D - EXHIBIT V - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 10% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 88 Units @ $3,349 /Unit/Month 3,536,000 Two -Bedroom Units 139 Units @ $3,593 /Unit/Month 5,993,000 Three -Bedroom Units 25 Units @ $4,421 /Unit/Month 1,326,000 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 10 Units @ $1,203 /Unit/Month 144,000 Two -Bedroom Units 15 Units @ $1,334 /Unit/Month 240,000 Three -Bedroom Units 3 Units @ $1,464 /Unit/Month 53,000 C. Miscellaneous Income 280 Units @ $75 /Unit/Month 252,000 Total Gross Income $11,544,000 Vacancy & Collection Allowance 5% Gross Income (577,000) II. Effective Gross Income $10,967,000 III. Operating Expenses General Operating Expenses 280 Units @ $4,500 /Unit $1,260,000 Property Taxes 280 Units @ $6,200 /Unit 1,743,000 Replacement Reserve Deposits 280 Units @ $150 /Unit 42,000 Total Operating Expenses 280 Units @ $10,875 /Unit ($3,045,000) IV. I Stabilized Net Operating Income $7,922,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT II. The weighted average monthly rent equates to $3.78 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 10% Low Page 59 of 126 APPENDIX D - EXHIBIT V - TABLE 3 INCLUSIONARY HOUSING IMPACTS 10% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX D - EXHIBIT V - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX D - EXHIBIT V - TABLE 1 $7,922,000 4.40% $180,179,000 $193,785,000 Total Financial Impact ($13,606,000) Property Acquisition Cost Reduction 30% of Estimated Current Acquisition Prices Developer Return 4.1% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 7.3% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 10% Low Page 60 of 126 APPENDIX D - EXHIBIT VI PRO FORMA ANALYSIS 15% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 15% Low Page 61 of 126 APPENDIX D - EXHIBIT VI - TABLE 1 ESTIMATED DEVELOPMENT COSTS 15% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 304,920 Sf of Land 2 $5,000 304,920 Sf of Land 3 /Space 140 Spaces 560 Spaces 354,667 Sf of GBA 4 20% Other Direct Costs 354,667 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 280 Units 2% Direct Costs 280 Units 5% Direct Costs 5% Other Indirect Costs 6 $44,639,500 Cost 7 $148,028,000 Cost 60% Loan to Cost $150 /Sf of Land $45,738,000 $30 /Sf of Land $9,148,000 $5,000 /Space 700,000 $25,000 /Space 14,000,000 $180 /Sf of GBA 63,840,000 17,538,000 $297 /Sf of GBA $105,226,000 $6,314,000 $68,000 /Unit 19,040,000 2,105,000 $1,000 /Unit 280,000 5,261,000 1,650,000 3.6% Avg Rate $2,411,000 3.6% Avg Rate 3,997,000 1.5 Points 1,744,000 $34,650,000 $8,152,000 Total Construction Cost 280 Units $529,000 /Unit $148,028,000 Total Development Cost 280 Units $692,000 /Unit $193,766,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 15% Low Page 62 of 126 APPENDIX D - EXHIBIT VI - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 15% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 83 Units @ $3,349 /Unit/Month 3,335,000 Two -Bedroom Units 131 Units @ $3,593 /Unit/Month 5,648,000 Three -Bedroom Units 24 Units @ $4,421 /Unit/Month 1,273,000 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 15 Units @ $1,203 /Unit/Month 217,000 Two -Bedroom Units 23 Units @ $1,334 /Unit/Month 368,000 Three -Bedroom Units 4 Units @ $1,464 /Unit/Month 70,000 C. Miscellaneous Income 280 Units @ $75 /Unit/Month 252,000 Total Gross Income $11,163,000 Vacancy & Collection Allowance 5% Gross Income (558,000) II. Effective Gross Income $10,605,000 III. Operating Expenses General Operating Expenses 280 Units @ $4,500 /Unit $1,260,000 Property Taxes 280 Units @ $6,000 /Unit 1,678,000 Replacement Reserve Deposits 280 Units @ $150 /Unit 42,000 Total Operating Expenses 280 Units @ $10,643 /Unit ($2,980,000) IV. I Stabilized Net Operating Income $7,625,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT II. The weighted average monthly rent equates to $3.78 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 15% Low Page 63 of 126 APPENDIX D - EXHIBIT VI - TABLE 3 INCLUSIONARY HOUSING IMPACTS 15% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX D - EXHIBIT VI - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX D - EXHIBIT VI - TABLE 1 $7,625,000 4.40% $173,424,000 $193,766,000 Total Financial Impact ($20,342,000) Property Acquisition Cost Reduction 44% of Estimated Current Acquisition Prices Developer Return 3.9% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 11.6% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 15% Low Page 64 of 126 APPENDIX D - EXHIBIT VII PRO FORMA ANALYSIS 20% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 20% Low Page 65 of 126 APPENDIX D - EXHIBIT VII - TABLE 1 ESTIMATED DEVELOPMENT COSTS 20% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 304,920 Sf of Land 2 $5,000 304,920 Sf of Land 3 /Space 140 Spaces 560 Spaces 354,667 Sf of GBA 4 20% Other Direct Costs 354,667 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 280 Units 2% Direct Costs 280 Units 5% Direct Costs 5% Other Indirect Costs 6 $44,267,300 Cost 7 $148,006,000 Cost 60% Loan to Cost $150 /Sf of Land $45,738,000 $30 /Sf of Land $9,148,000 $5,000 /Space 700,000 $25,000 /Space 14,000,000 $180 /Sf of GBA 63,840,000 17,538,000 $297 /Sf of GBA $105,226,000 $6,314,000 $68,000 /Unit 19,040,000 2,105,000 $1,000 /Unit 280,000 5,261,000 1,650,000 3.6% Avg Rate $2,390,000 3.6% Avg Rate 3,996,000 1.5 Points 1,744,000 $34,650,000 $8,130,000 Total Construction Cost 280 Units $529,000 /Unit $148,006,000 Total Development Cost 280 Units $692,000 /Unit $193,744,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 20% Low Page 66 of 126 APPENDIX D - EXHIBIT VII - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 20% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 78 Units @ $3,349 /Unit/Month 3,134,000 Two -Bedroom Units 124 Units @ $3,593 /Unit/Month 5,346,000 Three -Bedroom Units 22 Units @ $4,421 /Unit/Month 1,167,000 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 20 Units @ $1,203 /Unit/Month 289,000 Two -Bedroom Units 30 Units @ $1,334 /Unit/Month 480,000 Three -Bedroom Units 6 Units @ $1,464 /Unit/Month 105,000 C. Miscellaneous Income 280 Units @ $75 /Unit/Month 252,000 Total Gross Income $10,773,000 Vacancy & Collection Allowance 5% Gross Income (539,000) II. Effective Gross Income $10,234,000 III. Operating Expenses General Operating Expenses 280 Units @ $4,500 /Unit $1,260,000 Property Taxes 280 Units @ $5,800 /Unit 1,611,000 Replacement Reserve Deposits 280 Units @ $150 /Unit 42,000 Total Operating Expenses 280 Units @ $10,404 /Unit ($2,913,000) IV. I Stabilized Net Operating Income $7,321,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT II. The weighted average monthly rent equates to $3.78 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 20% Low Page 67 of 126 APPENDIX D - EXHIBIT VII - TABLE 3 INCLUSIONARY HOUSING IMPACTS 20% LOW INCOME SCENARIO COYOTE CANYON PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX D - EXHIBIT VII - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX D - EXHIBIT VII - TABLE 1 $7,321,000 4.40% $166,510,000 $193,744,000 Total Financial Impact ($27,234,000) Property Acquisition Cost Reduction 60% of Estimated Current Acquisition Prices Developer Return 3.8% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 16.6% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF CC 20% Low Page 68 of 126 APPENDIX E PRO FORMA ANALYSES NEWPORT CENTER PROTOTYPE APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; App E Title Page 69 of 126 APPENDIX E - EXHIBIT I PRO FORMA ANALYSIS MARKET RATE SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr Mkt Page 70 of 126 APPENDIX E - EXHIBIT I - TABLE 1 ESTIMATED DEVELOPMENT COSTS MARKET RATE SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 261,360 Sf of Land 2 $5,000 261,360 Sf of Land 3 /Space 120 Spaces 480 Spaces 388,000 Sf of GBA 4 20% Other Direct Costs 388,000 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 6% Direct Costs 240 Units 2% Direct Costs 240 Units 5% Direct Costs 5% Other Indirect Costs 6 $78,408,000 Cost 7 $180,330,000 Cost 60% Loan to Cost $300 /Sf of Land $78,408,000 $40 /Sf of Land $10,454,000 $5,000 /Space 600,000 $25,000 /Space 12,000,000 $225 /Sf of GBA 87,300,000 22,071,000 $341 /Sf of GBA $132,425,000 $7,946,000 $68,000 /Unit 16,320,000 2,649,000 $5,000 /Unit 1,200,000 6,621,000 1,737,000 3.6% Avg Rate $4,234,000 3.6% Avg Rate 4,869,000 1.5 Points 2,329,000 $36,473,000 $11,432,000 Total Construction Cost 240 Units $751,000 /Unit $180,330,000 Total Development Cost 240 Units $1,078,000 /Unit $258,738,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr Mkt Page 71 of 126 APPENDIX E - EXHIBIT I - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME MARKET RATE SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 72 Units @ $4,652 /Unit/Month 4,019,000 Two -Bedroom Units 144 Units @ $6,569 /Unit/Month 11,352,000 Three -Bedroom Units 24 Units @ $7,002 /Unit/Month 2,017,000 B. Miscellaneous Income 240 Units @ $300 /Unit/Month 864,000 Total Gross Income $18,252,000 Vacancy & Collection Allowance 5% Gross Income (913,000) II. Effective Gross Income $17,339,000 III. Operating Expenses General Operating Expenses 240 Units @ $4,500 /Unit $1,080,000 Property Taxes 240 Units @ $12,200 /Unit 2,925,000 Replacement Reserve Deposits 240 Units @ $150 /Unit 36,000 Total Operating Expenses ($4,041,000) IV. I Stabilized Net Operating Income $13,298,000 1 Based in part on the rent survey presented in APPENDIX A - EXHIBIT III. The weighted average monthly rent equates to $4.98 per square foot of leasable area. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr Mkt Page 72 of 126 APPENDIX E - EXHIBIT I - TABLE 3 ESTIMATED STABILIZED RETURN ON INVESTMENT MARKET RATE SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Stabilized Net Operating Income See APPENDIX E - EXHIBIT I - TABLE 2 $13,298,000 II. Total Development Cost See APPENDIX E - EXHIBIT I - TABLE 1 $258,738,000 III. I Estimated Stabilized Return on Investment 5.1% Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr Mkt Page 73 of 126 APPENDIX E - EXHIBIT II PRO FORMA ANALYSIS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr Base Low Page 74 of 126 APPENDIX E - EXHIBIT II - TABLE 1 ESTIMATED DEVELOPMENT COSTS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 261,360 Sf of Land 2 $5,000 261,360 Sf of Land 3 /Space 120 Spaces 480 Spaces 388,000 Sf of GBA 4 20% Other Direct Costs 388,000 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 240 Units 2% Direct Costs 240 Units 5% Direct Costs 5% Other Indirect Costs 6 $77,618,200 Cost 7 $180,285,000 Cost 60% Loan to Cost $300 /Sf of Land $78,408,000 $40 /Sf of Land $10,454,000 $5,000 /Space 600,000 $25,000 /Space 12,000,000 $225 /Sf of GBA 87,300,000 22,071,000 $341 /Sf of GBA $132,425,000 $7,946,000 $68,000 /Unit 16,320,000 2,649,000 $5,000 /Unit 1,200,000 6,621,000 1,737,000 3.6% Avg Rate $4,191,000 3.6% Avg Rate 4,868,000 1.5 Points 2,328,000 $36,473,000 $11,387,000 Total Construction Cost 240 Units $751,000 /Unit $180,285,000 Total Development Cost 240 Units $1,078,000 /Unit $258,693,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr Base Low Page 75 of 126 APPENDIX E - EXHIBIT II - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 67 Units @ $4,652 /Unit/Month 3,740,000 Two -Bedroom Units 134 Units @ $6,569 /Unit/Month 10,564,000 Three -Bedroom Units 22 Units @ $7,002 /Unit/Month 1,849,000 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 5 Units @ $1,203 /Unit/Month 72,000 Two -Bedroom Units 10 Units @ $1,334 /Unit/Month 160,000 Three -Bedroom Units 2 Units @ $1,464 /Unit/Month 35,000 C. Miscellaneous Income 240 Units @ $300 /Unit/Month 864,000 Total Gross Income $17,284,000 Vacancy & Collection Allowance 5% Gross Income (864,000) II. Effective Gross Income $16,420,000 III. Operating Expenses General Operating Expenses 240 Units @ $4,500 /Unit $1,080,000 Property Taxes 240 Units @ $11,500 /Unit 2,760,000 Replacement Reserve Deposits 240 Units @ $150 /Unit 36,000 Total Operating Expenses 240 Units @ $16,150 /Unit ($3,876,000) IV. I Stabilized Net Operating Income $12,544,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT III. The weighted average monthly rent equates to $4.98 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr Base Low Page 76 of 126 APPENDIX E - EXHIBIT II - TABLE 3 INCLUSIONARY HOUSING IMPACTS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX E - EXHIBIT II - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX E - EXHIBIT II - TABLE 1 $12,544,000 5.14% $244,067,000 $258,693,000 Total Financial Impact ($14,626,000) Property Acquisition Cost Reduction 19% of Estimated Current Acquisition Prices Developer Return 4.8% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 5.9% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr Base Low Page 77 of 126 APPENDIX E - EXHIBIT III PRO FORMA ANALYSIS DENSITY BONUS SCENARIO NEWPORT CENTER PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr DB Page 78 of 126 APPENDIX E - EXHIBIT III - TABLE 1 ESTIMATED DEVELOPMENT COSTS DENSITY BONUS SCENARIO NEWPORT CENTER PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Property Acquisition Costs 1 261,360 Sf of Land $300 /Sf of Land $78,408,000 II. Direct Costs z On -Site Improvements/Landscaping 261,360 Sf of Land $40 /Sf of Land $10,454,000 Parking 3 At -Grade Spaces 0 Spaces $5,000 /Space 0 Above -Ground Spaces 612 Spaces $25,000 /Space 15,300,000 Semi -Subterranean Spaces 0 Spaces $35,000 /Space 0 Building Costs 582,000 Sf of GBA $225 /Sf of GBA 130,950,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 31,341,000 Total Direct Costs 582,000 Sf of GBA $323 /Sf of GBA $188,045,000 III. Indirect Costs Architecture, Engineering & Consulting 6% Direct Costs $11,283,000 Public Permits & Fees s 360 Units $68,000 /Unit 24,480,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 3,761,000 Marketing 360 Units $5,000 /Unit 1,800,000 Developer Fee 5% Direct Costs 9,402,000 Soft Cost Contingency Allowance 5% Other Indirect Costs 2,536,000 Total Indirect Costs $53,262,000 IV. Financing Costs Interest During Construction Land 6 $78,408,000 Cost 3.6% Avg Rate $4,234,000 Construction 7 $255,443,000 Cost 3.6% Avg Rate 6,897,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 3,005,000 Total Financing Costs $14,136,000 V. Total Construction Cost 360 Units $710,000 /Unit $255,443,000 Total Development Cost 360 Units $927,000 /Unit $333,851,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. z Based on the estimated costs for similar uses. 3 Section 65915 (p) requires jurisdictions to allow projects to meet statutorily established parking standards. For marketability reasons, KMA set the parking standards at 1.0 space per Studio Units unit; 1.0 space per One -Bedroom Units unit; 2.0 spaces per Two -Bedroom Units unit; and 2.0 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr DB Page 79 of 126 APPENDIX E - EXHIBIT III - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME DENSITY BONUS SCENARIO NEWPORT CENTER PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 97 Units @ $4,652 /Unit/Month 5,415,000 Two -Bedroom Units 194 Units @ $6,569 /Unit/Month 15,294,000 Three -Bedroom Units 32 Units @ $7,002 /Unit/Month 2,689,000 B. Density Bonus Units z Studio Units 0 Units @ $867 /Unit/Month 0 One -Bedroom Units 11 Units @ $990 /Unit/Month 131,000 Two -Bedroom Units 22 Units @ $1,094 /Unit/Month 289,000 Three -Bedroom Units 4 Units @ $1,197 /Unit/Month 57,000 C. Miscellaneous Income 360 Units @ $300 /Unit/Month 1,296,000 Total Gross Income $25,171,000 Vacancy & Collection Allowance 5% Gross Income (1,259,000) II. Effective Gross Income $23,912,000 III. Operating Expenses General Operating Expenses 360 Units @ $4,500 /Unit $1,620,000 Property Taxes 360 Units @ $11,100 /Unit 4,010,000 Replacement Reserve Deposits 360 Units @ $150 /Unit 54,000 Total Operating Expenses 360 Units @ $15,789 /Unit ($5,684,000) IV. I Stabilized Net Operating Income $18,228,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT III. The weighted average monthly rent equates to $4.98 per square foot of leasable area. z Under Section 65915 (f) (2), 15% of the Base Units are set aside for very -low income households. Section 65915 (c) (1) (B) (i) calculates very low income rents based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr DB Page 80 of 126 APPENDIX E - EXHIBIT III - TABLE 3 INCLUSIONARY HOUSING IMPACTS DENSITY BONUS SCENARIO NEWPORT CENTER PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX E - EXHIBIT III - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX E - EXHIBIT III - TABLE 1 $18,228,000 5.14% $354,661,000 $333,851,000 Total Financial Impact $20,810,000 Property Acquisition Cost Reduction 0% of Estimated Current Acquisition Prices Developer Return 5.46% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 0.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr DB Page 81 of 126 APPENDIX E - EXHIBIT IV PRO FORMA ANALYSIS 5% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 5% Low Page 82 of 126 APPENDIX E - EXHIBIT IV - TABLE 1 ESTIMATED DEVELOPMENT COSTS 5% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 261,360 Sf of Land 2 $5,000 261,360 Sf of Land 3 /Space 120 Spaces 480 Spaces 388,000 Sf of GBA 4 20% Other Direct Costs 388,000 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 240 Units 2% Direct Costs 240 Units 5% Direct Costs 5% Other Indirect Costs 6 $77,860,200 Cost 7 $180,298,000 Cost 60% Loan to Cost $300 /Sf of Land $78,408,000 $40 /Sf of Land $10,454,000 $5,000 /Space 600,000 $25,000 /Space 12,000,000 $225 /Sf of GBA 87,300,000 22,071,000 $341 /Sf of GBA $132,425,000 $7,946,000 $68,000 /Unit 16,320,000 2,649,000 $5,000 /Unit 1,200,000 6,621,000 1,737,000 3.6% Avg Rate $4,204,000 3.6% Avg Rate 4,868,000 1.5 Points 2,328,000 $36,473,000 $11,400,000 Total Construction Cost 240 Units $751,000 /Unit $180,298,000 Total Development Cost 240 Units $1,078,000 /Unit $258,706,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 5% Low Page 83 of 126 APPENDIX E - EXHIBIT IV - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 5% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 68 Units @ $4,652 /Unit/Month 3,796,000 Two -Bedroom Units 137 Units @ $6,569 /Unit/Month 10,800,000 Three -Bedroom Units 23 Units @ $7,002 /Unit/Month 1,933,000 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 4 Units @ $1,203 /Unit/Month 58,000 Two -Bedroom Units 7 Units @ $1,334 /Unit/Month 112,000 Three -Bedroom Units 1 Unit @ $1,464 /Unit/Month 18,000 C. Miscellaneous Income 240 Units @ $300 /Unit/Month 864,000 Total Gross Income $17,581,000 Vacancy & Collection Allowance 5% Gross Income (879,000) II. Effective Gross Income $16,702,000 III. Operating Expenses General Operating Expenses 240 Units @ $4,500 /Unit $1,080,000 Property Taxes 240 Units @ $11,700 /Unit 2,811,000 Replacement Reserve Deposits 240 Units @ $150 /Unit 36,000 Total Operating Expenses 240 Units @ $16,363 /Unit ($3,927,000) IV. I Stabilized Net Operating Income $12,775,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT III. The weighted average monthly rent equates to $4.98 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 5% Low Page 84 of 126 APPENDIX E - EXHIBIT IV - TABLE 3 INCLUSIONARY HOUSING IMPACTS 5% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX E - EXHIBIT IV - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX E - EXHIBIT IV - TABLE 1 $12,775,000 5.14% $248,562,000 $258,706,000 Total Financial Impact ($10,144,000) Property Acquisition Cost Reduction 13% of Estimated Current Acquisition Prices Developer Return 4.9% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 4.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 5% Low Page 85 of 126 APPENDIX E - EXHIBIT V PRO FORMA ANALYSIS 10% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 10% Low Page 86 of 126 APPENDIX E - EXHIBIT V - TABLE 1 ESTIMATED DEVELOPMENT COSTS 10% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 261,360 Sf of Land 2 $5,000 261,360 Sf of Land 3 /Space 120 Spaces 480 Spaces 388,000 Sf of GBA 4 20% Other Direct Costs 388,000 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 240 Units 2% Direct Costs 240 Units 5% Direct Costs 5% Other Indirect Costs 6 $77,294,500 Cost 7 $180,267,000 Cost 60% Loan to Cost $300 /Sf of Land $78,408,000 $40 /Sf of Land $10,454,000 $5,000 /Space 600,000 $25,000 /Space 12,000,000 $225 /Sf of GBA 87,300,000 22,071,000 $341 /Sf of GBA $132,425,000 $7,946,000 $68,000 /Unit 16,320,000 2,649,000 $5,000 /Unit 1,200,000 6,621,000 1,737,000 3.6% Avg Rate $4,174,000 3.6% Avg Rate 4,867,000 1.5 Points 2,328,000 $36,473,000 $11,369,000 Total Construction Cost 240 Units $751,000 /Unit $180,267,000 Total Development Cost 240 Units $1,078,000 /Unit $258,675,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 10% Low Page 87 of 126 APPENDIX E - EXHIBIT V - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 10% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 65 Units @ $4,652 /Unit/Month 3,629,000 Two -Bedroom Units 129 Units @ $6,569 /Unit/Month 10,169,000 Three -Bedroom Units 22 Units @ $7,002 /Unit/Month 1,849,000 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 7 Units @ $1,203 /Unit/Month 101,000 Two -Bedroom Units 15 Units @ $1,334 /Unit/Month 240,000 Three -Bedroom Units 2 Units @ $1,464 /Unit/Month 35,000 C. Miscellaneous Income 240 Units @ $300 /Unit/Month 864,000 Total Gross Income $16,887,000 Vacancy & Collection Allowance 5% Gross Income (844,000) II. Effective Gross Income $16,043,000 III. Operating Expenses General Operating Expenses 240 Units @ $4,500 /Unit $1,080,000 Property Taxes 240 Units @ $11,200 /Unit 2,692,000 Replacement Reserve Deposits 240 Units @ $150 /Unit 36,000 Total Operating Expenses 240 Units @ $15,867 /Unit ($3,808,000) IV. I Stabilized Net Operating Income $12,235,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT III. The weighted average monthly rent equates to $4.98 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 10% Low Page 88 of 126 APPENDIX E - EXHIBIT V - TABLE 3 INCLUSIONARY HOUSING IMPACTS 10% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX E - EXHIBIT V - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX E - EXHIBIT V - TABLE 1 $12,235,000 5.14% $238,055,000 $258,675,000 Total Financial Impact ($20,620,000) Property Acquisition Cost Reduction 26% of Estimated Current Acquisition Prices Developer Return 4.7% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 8.6% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 10% Low Page 89 of 126 APPENDIX E - EXHIBIT VI PRO FORMA ANALYSIS 15% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 15% Low Page 90 of 126 APPENDIX E - EXHIBIT VI - TABLE 1 ESTIMATED DEVELOPMENT COSTS 15% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 261,360 Sf of Land 2 $5,000 261,360 Sf of Land 3 /Space 120 Spaces 480 Spaces 388,000 Sf of GBA 4 20% Other Direct Costs 388,000 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 240 Units 2% Direct Costs 240 Units 5% Direct Costs 5% Other Indirect Costs 6 $76,746,600 Cost 7 $180,237,000 Cost 60% Loan to Cost $300 /Sf of Land $78,408,000 $40 /Sf of Land $10,454,000 $5,000 /Space 600,000 $25,000 /Space 12,000,000 $225 /Sf of GBA 87,300,000 22,071,000 $341 /Sf of GBA $132,425,000 $7,946,000 $68,000 /Unit 16,320,000 2,649,000 $5,000 /Unit 1,200,000 6,621,000 1,737,000 3.6% Avg Rate $4,144,000 3.6% Avg Rate 4,866,000 1.5 Points 2,328,000 $36,473,000 $11,338,000 Total Construction Cost 240 Units $751,000 /Unit $180,236,000 Total Development Cost 240 Units $1,078,000 /Unit $258,644,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 15% Low Page 91 of 126 APPENDIX E - EXHIBIT VI - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 15% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 61 Units @ $4,652 /Unit/Month 3,405,000 Two -Bedroom Units 122 Units @ $6,569 /Unit/Month 9,618,000 Three -Bedroom Units 21 Units @ $7,002 /Unit/Month 1,765,000 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 11 Units @ $1,203 /Unit/Month 159,000 Two -Bedroom Units 22 Units @ $1,334 /Unit/Month 352,000 Three -Bedroom Units 3 Units @ $1,464 /Unit/Month 53,000 C. Miscellaneous Income 240 Units @ $300 /Unit/Month 864,000 Total Gross Income $16,216,000 Vacancy & Collection Allowance 5% Gross Income (811,000) II. Effective Gross Income $15,405,000 III. Operating Expenses General Operating Expenses 240 Units @ $4,500 /Unit $1,080,000 Property Taxes 240 Units @ $10,700 /Unit 2,577,000 Replacement Reserve Deposits 240 Units @ $150 /Unit 36,000 Total Operating Expenses 240 Units @ $15,388 /Unit ($3,693,000) IV. I Stabilized Net Operating Income $11,712,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT III. The weighted average monthly rent equates to $4.98 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 15% Low Page 92 of 126 APPENDIX E - EXHIBIT VI - TABLE 3 INCLUSIONARY HOUSING IMPACTS 15% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX E - EXHIBIT VI - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX E - EXHIBIT VI - TABLE 1 $11,712,000 5.14% $227,879,000 $258,644,000 Total Financial Impact ($30,765,000) Property Acquisition Cost Reduction 39% of Estimated Current Acquisition Prices Developer Return 4.5% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 13.6% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 15% Low Page 93 of 126 APPENDIX E - EXHIBIT VII PRO FORMA ANALYSIS 20% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 20% Low Page 94 of 126 APPENDIX E - EXHIBIT VII - TABLE 1 ESTIMATED DEVELOPMENT COSTS 20% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 261,360 Sf of Land 2 $5,000 261,360 Sf of Land 3 /Space 120 Spaces 480 Spaces 388,000 Sf of GBA 4 20% Other Direct Costs 388,000 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land Construction Loan Origination Fees Total Financing Costs V 6% Direct Costs 240 Units 2% Direct Costs 240 Units 5% Direct Costs 5% Other Indirect Costs 6 $76,177,800 Cost 7 $180,206,000 Cost 60% Loan to Cost $300 /Sf of Land $78,408,000 $40 /Sf of Land $10,454,000 $5,000 /Space 600,000 $25,000 /Space 12,000,000 $225 /Sf of GBA 87,300,000 22,071,000 $341 /Sf of GBA $132,425,000 $7,946,000 $68,000 /Unit 16,320,000 2,649,000 $5,000 /Unit 1,200,000 6,621,000 1,737,000 3.6% Avg Rate $4,114,000 3.6% Avg Rate 4,866,000 1.5 Points 2,328,000 $36,473,000 $11,308,000 Total Construction Cost 240 Units $751,000 /Unit $180,206,000 Total Development Cost 240 Units $1,078,000 /Unit $258,614,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 20% Low Page 95 of 126 APPENDIX E - EXHIBIT VII - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 20% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 0 Units @ $0 /Unit/Month $0 One -Bedroom Units 58 Units @ $4,652 /Unit/Month 3,238,000 Two -Bedroom Units 115 Units @ $6,569 /Unit/Month 9,066,000 Three -Bedroom Units 19 Units @ $7,002 /Unit/Month 1,596,000 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 14 Units @ $1,203 /Unit/Month 202,000 Two -Bedroom Units 29 Units @ $1,334 /Unit/Month 464,000 Three -Bedroom Units 5 Units @ $1,464 /Unit/Month 88,000 C. Miscellaneous Income 240 Units @ $300 /Unit/Month 864,000 Total Gross Income $15,518,000 Vacancy & Collection Allowance 5% Gross Income (776,000) II. Effective Gross Income $14,742,000 III. Operating Expenses General Operating Expenses 240 Units @ $4,500 /Unit $1,080,000 Property Taxes 240 Units @ $10,200 /Unit 2,457,000 Replacement Reserve Deposits 240 Units @ $150 /Unit 36,000 Total Operating Expenses 240 Units @ $14,888 /Unit ($3,573,000) IV. I Stabilized Net Operating Income $11,169,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT III. The weighted average monthly rent equates to $4.98 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 20% Low Page 96 of 126 APPENDIX E - EXHIBIT VII - TABLE 3 INCLUSIONARY HOUSING IMPACTS 20% LOW INCOME SCENARIO NEWPORT CENTER PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX E - EXHIBIT VII - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX E - EXHIBIT VII - TABLE 1 $11,169,000 5.14% $217,314,000 $258,614,000 Total Financial Impact ($41,300,000) Property Acquisition Cost Reduction 53% of Estimated Current Acquisition Prices Developer Return 4.3% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 19.4% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF Nwp Ctr 20% Low Page 97 of 126 APPENDIX F PRO FORMA ANALYSES WEST NEWPORT MESA & BANNING RANCH PROTOTYPE APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; App F Title Page 98 of 126 APPENDIX F - EXHIBIT I PRO FORMA ANALYSIS MARKET RATE SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM Mkt Page 99 of 126 APPENDIX F - EXHIBIT I - TABLE 1 ESTIMATED DEVELOPMENT COSTS MARKET RATE SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 108,900 Sf of Land 2 $5,000 108,900 Sf of Land 3 /Space 42 Spaces 166 Spaces 108,200 Sf of GBA 4 20% Other Direct Costs 108,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land 6 Construction 7 Loan Origination Fees Total Financing Costs V 1 2 3 4 s 6 7 6% Direct Costs 83 Units 2% Direct Costs 83 Units 5% Direct Costs 5% Other Indirect Costs $16,335,000 Cost $42,588,000 Cost 60% Loan to Cost $150 /Sf of Land $16,335,000 $30 /Sf of Land $3,267,000 $5,000 /Space 210,000 $25,000 /Space 4,150,000 $160 /Sf of GBA 17,312,000 4,988,000 $277 /Sf of GBA $29,927,000 $1,796,000 $68,000 /Unit 5,644,000 599,000 $1,000 /Unit 83,000 1,496,000 481,000 3.6% Avg Rate $882,000 3.6% Avg Rate 1,150,000 1.5 Points 530,000 $10,099,000 $2,562,000 Total Construction Cost 83 Units $513,000 /Unit $42,588,000 Total Development Cost 83 Units $710,000 /Unit $58,923,000 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. Based on the estimated costs for similar uses. The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM Mkt Page 100 of 126 APPENDIX F - EXHIBIT I - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME MARKET RATE SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 8 Units @ $2,665 /Unit/Month $256,000 One -Bedroom Units 42 Units @ $3,745 /Unit/Month 1,888,000 Two -Bedroom Units 33 Units @ $4,002 /Unit/Month 1,585,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Miscellaneous Income 83 Units @ $75 /Unit/Month 75,000 Total Gross Income $3,804,000 Vacancy & Collection Allowance 5% Gross Income (190,000) II. Effective Gross Income $3,614,000 III. Operating Expenses General Operating Expenses 83 Units @ $4,500 /Unit $374,000 Property Taxes 83 Units @ $7,000 /Unit 582,000 Replacement Reserve Deposits 83 Units @ $150 /Unit 12,000 Total Operating Expenses ($968,000) IV. I Stabilized Net Operating Income $2,646,000 1 Based in part on the rent survey presented in APPENDIX A - EXHIBIT IV. The weighted average monthly rent equates to $3.83 per square foot of leasable area. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM Mkt Page 101 of 126 APPENDIX F - EXHIBIT I - TABLE 3 ESTIMATED STABILIZED RETURN ON INVESTMENT MARKET RATE SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Stabilized Net Operating Income See APPENDIX F - EXHIBIT I - TABLE 2 $2,646,000 II. Total Development Cost See APPENDIX F - EXHIBIT I - TABLE 1 $58,923,000 III. I Estimated Stabilized Return on Investment 4.5% Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM Mkt Page 102 of 126 APPENDIX F - EXHIBIT II PRO FORMA ANALYSIS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM Base Low Page 103 of 126 APPENDIX F - EXHIBIT II - TABLE 1 ESTIMATED DEVELOPMENT COSTS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 108,900 Sf of Land 2 $5,000 108,900 Sf of Land 3 /Space 42 Spaces 166 Spaces 108,200 Sf of GBA 4 20% Other Direct Costs 108,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land 6 Construction 7 Loan Origination Fees Total Financing Costs V 6% Direct Costs 83 Units 2% Direct Costs 83 Units 5% Direct Costs 5% Other Indirect Costs $16,171,900 Cost $42,579,000 Cost 60% Loan to Cost $150 /Sf of Land $16,335,000 $30 /Sf of Land $3,267,000 $5,000 /Space 210,000 $25,000 /Space 4,150,000 $160 /Sf of GBA 17,312,000 4,988,000 $277 /Sf of GBA $29,927,000 $1,796,000 $68,000 /Unit 5,644,000 599,000 $1,000 /Unit 83,000 1,496,000 481,000 3.6% Avg Rate $873,000 3.6% Avg Rate 1,150,000 1.5 Points 530,000 $10,099,000 $2,553,000 Total Construction Cost 83 Units $513,000 /Unit $42,579,000 Total Development Cost 83 Units $710,000 /Unit $58,914,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM Base Low Page 104 of 126 APPENDIX F - EXHIBIT II - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 7 Units @ $2,665 /Unit/Month $224,000 One -Bedroom Units 39 Units @ $3,745 /Unit/Month 1,753,000 Two -Bedroom Units 31 Units @ $4,002 /Unit/Month 1,489,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Low Income Units z Studio Units 1 Unit @ $1,054 /Unit/Month 13,000 One -Bedroom Units 3 Units @ $1,203 /Unit/Month 43,000 Two -Bedroom Units 2 Units @ $1,334 /Unit/Month 32,000 Three -Bedroom Units 0 Units @ $1,464 /Unit/Month 0 C. Miscellaneous Income 83 Units @ $75 /Unit/Month 75,000 Total Gross Income $3,629,000 Vacancy & Collection Allowance 5% Gross Income (181,000) II. Effective Gross Income $3,448,000 III. Operating Expenses General Operating Expenses 83 Units @ $4,500 /Unit $374,000 Property Taxes 83 Units @ $6,700 /Unit 552,000 Replacement Reserve Deposits 83 Units @ $150 /Unit 12,000 Total Operating Expenses 83 Units @ $11,301 /Unit ($938,000) IV. I Stabilized Net Operating Income $2,510,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT IV. The weighted average monthly rent equates to $3.82 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM Base Low Page 105 of 126 APPENDIX F - EXHIBIT II - TABLE 3 INCLUSIONARY HOUSING IMPACTS RECOMMENDED REQUIREMENT: 7% LOW INCOME UNITS WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX F - EXHIBIT II - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX F - EXHIBIT II - TABLE 1 $2,510,000 4.49% $55,894,000 $58,914,000 Total Financial Impact ($3,020,000) Property Acquisition Cost Reduction 18% of Estimated Current Acquisition Prices Developer Return 4.3% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 5.2% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM Base Low Page 106 of 126 APPENDIX F - EXHIBIT III PRO FORMA ANALYSIS DENSITY BONUS SCENARIO r NEWPORT MESA & BANNING RANCH PROTOTYPE: 50% SECTION 65915 DENSITY BC APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM DB Page 107 of 126 APPENDIX F - EXHIBIT III - TABLE 1 ESTIMATED DEVELOPMENT COSTS DENSITY BONUS SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Property Acquisition Costs 1 108,900 Sf of Land $150 /Sf of Land $16,335,000 II. Direct Costs z On -Site Improvements/Landscaping 108,900 Sf of Land $30 /Sf of Land $3,267,000 Parking 3 At -Grade Spaces 0 Spaces $5,000 /Space 0 Above -Ground Spaces 175 Spaces $25,000 /Space 4,375,000 Semi -Subterranean Spaces 0 Spaces $35,000 /Space 0 Building Costs 162,733 Sf of GBA $160 /Sf of GBA 26,037,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 6,736,000 Total Direct Costs 162,733 Sf of GBA $248 /Sf of GBA $40,415,000 III. Indirect Costs Architecture, Engineering & Consulting 6% Direct Costs $2,425,000 Public Permits & Fees s 125 Units $68,000 /Unit 8,500,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 808,000 Marketing 125 Units $1,000 /Unit 125,000 Developer Fee 5% Direct Costs 2,021,000 Soft Cost Contingency Allowance 5% Other Indirect Costs 694,000 Total Indirect Costs $14,573,000 IV. Financing Costs Interest During Construction Land 6 $16,335,000 Cost 3.6% Avg Rate $882,000 Construction 7 $58,109,000 Cost 3.6% Avg Rate 1,569,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 670,000 Total Financing Costs $3,121,000 V. Total Construction Cost 125 Units $465,000 /Unit $58,109,000 Total Development Cost 125 Units $596,000 /Unit $74,444,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. z Based on the estimated costs for similar uses. 3 Section 65915 (p) requires jurisdictions to allow projects to meet statutorily established parking standards. For marketability reasons, KMA set the parking standards at 1.0 space per Studio Units unit; 1.0 space per One -Bedroom Units unit; 2.0 spaces per Two -Bedroom Units unit; and 2.0 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM DB Page 108 of 126 APPENDIX F - EXHIBIT III - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME DENSITY BONUS SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 12 Units @ $2,665 /Unit/Month $384,000 One -Bedroom Units 55 Units @ $3,745 /Unit/Month 2,472,000 Two -Bedroom Units 45 Units @ $4,002 /Unit/Month 2,161,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Density Bonus Units z Studio Units 1 Unit @ $867 /Unit/Month 10,000 One -Bedroom Units 7 Units @ $990 /Unit/Month 83,000 Two -Bedroom Units 5 Units @ $1,094 /Unit/Month 66,000 Three -Bedroom Units 0 Units @ $1,197 /Unit/Month 0 C. Miscellaneous Income 125 Units @ $75 /Unit/Month 113,000 Total Gross Income $5,289,000 Vacancy & Collection Allowance 5% Gross Income (264,000) II. Effective Gross Income $5,025,000 III. Operating Expenses General Operating Expenses 125 Units @ $4,500 /Unit $563,000 Property Taxes 125 Units @ $6,400 /Unit 801,000 Replacement Reserve Deposits 125 Units @ $150 /Unit 19,000 Total Operating Expenses 125 Units @ $11,064 /Unit ($1,383,000) IV. I Stabilized Net Operating Income $3,642,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT II. The weighted average monthly rent equates to $3.82 per square foot of leasable area. z Under Section 65915 (f) (2), 15% of the Base Units are set aside for very -low income households. Section 65915 (c) (1) (B) (i) calculates very low income rents based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM DB Page 109 of 126 APPENDIX F - EXHIBIT III - TABLE 3 INCLUSIONARY HOUSING IMPACTS DENSITY BONUS SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: 50% SECTION 65915 DENSITY BONUS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX F - EXHIBIT III - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX F - EXHIBIT III - TABLE 1 $3,642,000 4.49% $81,103,000 $74,444,000 Total Financial Impact $6,659,000 Property Acquisition Cost Reduction 0% of Estimated Current Acquisition Prices Developer Return 4.89% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 0.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM DB Page 110 of 126 APPENDIX F - EXHIBIT IV PRO FORMA ANALYSIS 5% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 5% Low Page 111 of 126 APPENDIX F - EXHIBIT IV - TABLE 1 ESTIMATED DEVELOPMENT COSTS 5% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 108,900 Sf of Land 2 $5,000 108,900 Sf of Land 3 /Space 42 Spaces 166 Spaces 108,200 Sf of GBA 4 20% Other Direct Costs 108,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land 6 Construction 7 Loan Origination Fees Total Financing Costs V 6% Direct Costs 83 Units 2% Direct Costs 83 Units 5% Direct Costs 5% Other Indirect Costs $16,217,500 Cost $42,582,000 Cost 60% Loan to Cost $150 /Sf of Land $16,335,000 $30 /Sf of Land $3,267,000 $5,000 /Space 210,000 $25,000 /Space 4,150,000 $160 /Sf of GBA 17,312,000 4,988,000 $277 /Sf of GBA $29,927,000 $1,796,000 $68,000 /Unit 5,644,000 599,000 $1,000 /Unit 83,000 1,496,000 481,000 3.6% Avg Rate $876,000 3.6% Avg Rate 1,150,000 1.5 Points 530,000 $10,099,000 $2,556,000 Total Construction Cost 83 Units $513,000 /Unit $42,582,000 Total Development Cost 83 Units $710,000 /Unit $58,917,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 5% Low Page 112 of 126 APPENDIX F - EXHIBIT IV - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 5% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 8 Units @ $2,665 /Unit/Month $256,000 One -Bedroom Units 40 Units @ $3,745 /Unit/Month 1,798,000 Two -Bedroom Units 31 Units @ $4,002 /Unit/Month 1,489,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Low Income Units z Studio Units 0 Units @ $1,054 /Unit/Month 0 One -Bedroom Units 2 Units @ $1,203 /Unit/Month 29,000 Two -Bedroom Units 2 Units @ $1,334 /Unit/Month 32,000 Three -Bedroom Units 0 Units @ $1,464 /Unit/Month 0 C. Miscellaneous Income 83 Units @ $75 /Unit/Month 75,000 Total Gross Income $3,679,000 Vacancy & Collection Allowance 5% Gross Income (184,000) II. Effective Gross Income $3,495,000 III. Operating Expenses General Operating Expenses 83 Units @ $4,500 /Unit $374,000 Property Taxes 83 Units @ $6,800 /Unit 561,000 Replacement Reserve Deposits 83 Units @ $150 /Unit 12,000 Total Operating Expenses 83 Units @ $11,410 /Unit ($947,000) IV. I Stabilized Net Operating Income $2,548,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT IV. The weighted average monthly rent equates to $3.83 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 5% Low Page 113 of 126 APPENDIX F - EXHIBIT IV - TABLE 3 INCLUSIONARY HOUSING IMPACTS 5% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX F - EXHIBIT IV - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX F - EXHIBIT IV - TABLE 1 $2,548,000 4.49% $56,741,000 $58,917,000 Total Financial Impact ($2,176,000) Property Acquisition Cost Reduction 13% of Estimated Current Acquisition Prices Developer Return 4.3% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 3.7% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 5% Low Page 114 of 126 APPENDIX F - EXHIBIT V PRO FORMA ANALYSIS 10% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 10% Low Page 115 of 126 APPENDIX F - EXHIBIT V - TABLE 1 ESTIMATED DEVELOPMENT COSTS 10% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 108,900 Sf of Land 2 $5,000 108,900 Sf of Land 3 /Space 42 Spaces 166 Spaces 108,200 Sf of GBA 4 20% Other Direct Costs 108,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land 6 Construction 7 Loan Origination Fees Total Financing Costs V 6% Direct Costs 83 Units 2% Direct Costs 83 Units 5% Direct Costs 5% Other Indirect Costs $16,113,200 Cost $42,576,000 Cost 60% Loan to Cost $150 /Sf of Land $16,335,000 $30 /Sf of Land $3,267,000 $5,000 /Space 210,000 $25,000 /Space 4,150,000 $160 /Sf of GBA 17,312,000 4,988,000 $277 /Sf of GBA $29,927,000 $1,796,000 $68,000 /Unit 5,644,000 599,000 $1,000 /Unit 83,000 1,496,000 481,000 3.6% Avg Rate $870,000 3.6% Avg Rate 1,150,000 1.5 Points 530,000 $10,099,000 $2,550,000 Total Construction Cost 83 Units $513,000 /Unit $42,576,000 Total Development Cost 83 Units $710,000 /Unit $58,911,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 10% Low Page 116 of 126 APPENDIX F - EXHIBIT V - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 10% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 7 Units @ $2,665 /Unit/Month $224,000 One -Bedroom Units 38 Units @ $3,745 /Unit/Month 1,708,000 Two -Bedroom Units 30 Units @ $4,002 /Unit/Month 1,441,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Low Income Units z Studio Units 1 Unit @ $1,054 /Unit/Month 13,000 One -Bedroom Units 4 Units @ $1,203 /Unit/Month 58,000 Two -Bedroom Units 3 Units @ $1,334 /Unit/Month 48,000 Three -Bedroom Units 0 Units @ $1,464 /Unit/Month 0 C. Miscellaneous Income 83 Units @ $75 /Unit/Month 75,000 Total Gross Income $3,567,000 Vacancy & Collection Allowance 5% Gross Income (178,000) II. Effective Gross Income $3,389,000 III. Operating Expenses General Operating Expenses 83 Units @ $4,500 /Unit $374,000 Property Taxes 83 Units @ $6,500 /Unit 542,000 Replacement Reserve Deposits 83 Units @ $150 /Unit 12,000 Total Operating Expenses 83 Units @ $11,181 /Unit ($928,000) IV. I Stabilized Net Operating Income $2,461,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT IV. The weighted average monthly rent equates to $3.83 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 10% Low Page 117 of 126 APPENDIX F - EXHIBIT V - TABLE 3 INCLUSIONARY HOUSING IMPACTS 10% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX F - EXHIBIT V - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX F - EXHIBIT V - TABLE 1 $2,461,000 4.49% $54,803,000 $58,911,000 Total Financial Impact ($4,108,000) Property Acquisition Cost Reduction 25% of Estimated Current Acquisition Prices Developer Return 4.2% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 7.2% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 10% Low Page 118 of 126 APPENDIX F - EXHIBIT VI PRO FORMA ANALYSIS 15% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 15% Low Page 119 of 126 APPENDIX F - EXHIBIT VI - TABLE 1 ESTIMATED DEVELOPMENT COSTS 15% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 108,900 Sf of Land 2 $5,000 108,900 Sf of Land 3 /Space 42 Spaces 166 Spaces 108,200 Sf of GBA 4 20% Other Direct Costs 108,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land 6 Construction 7 Loan Origination Fees Total Financing Costs V 6% Direct Costs 83 Units 2% Direct Costs 83 Units 5% Direct Costs 5% Other Indirect Costs $15,997,000 Cost $42,569,000 Cost 60% Loan to Cost $150 /Sf of Land $16,335,000 $30 /Sf of Land $3,267,000 $5,000 /Space 210,000 $25,000 /Space 4,150,000 $160 /Sf of GBA 17,312,000 4,988,000 $277 /Sf of GBA $29,927,000 $1,796,000 $68,000 /Unit 5,644,000 599,000 $1,000 /Unit 83,000 1,496,000 481,000 3.6% Avg Rate $864,000 3.6% Avg Rate 1,149,000 1.5 Points 530,000 $10,099,000 $2,543,000 Total Construction Cost 83 Units $513,000 /Unit $42,569,000 Total Development Cost 83 Units $710,000 /Unit $58,904,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 15% Low Page 120 of 126 APPENDIX F - EXHIBIT VI - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 15% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 7 Units @ $2,665 /Unit/Month $224,000 One -Bedroom Units 36 Units @ $3,745 /Unit/Month 1,618,000 Two -Bedroom Units 28 Units @ $4,002 /Unit/Month 1,345,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Low Income Units z Studio Units 1 Unit @ $1,054 /Unit/Month 13,000 One -Bedroom Units 6 Units @ $1,203 /Unit/Month 87,000 Two -Bedroom Units 5 Units @ $1,334 /Unit/Month 80,000 Three -Bedroom Units 0 Units @ $1,464 /Unit/Month 0 C. Miscellaneous Income 83 Units @ $75 /Unit/Month 75,000 Total Gross Income $3,442,000 Vacancy & Collection Allowance 5% Gross Income (172,000) II. Effective Gross Income $3,270,000 III. Operating Expenses General Operating Expenses 83 Units @ $4,500 /Unit $374,000 Property Taxes 83 Units @ $6,300 /Unit 520,000 Replacement Reserve Deposits 83 Units @ $150 /Unit 12,000 Total Operating Expenses 83 Units @ $10,916 /Unit ($906,000) IV. I Stabilized Net Operating Income $2,364,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT IV. The weighted average monthly rent equates to $3.83 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 15% Low Page 121 of 126 APPENDIX F - EXHIBIT VI - TABLE 3 INCLUSIONARY HOUSING IMPACTS 15% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX F - EXHIBIT VI - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX F - EXHIBIT VI - TABLE 1 $2,364,000 4.49% $52,643,000 $58,904,000 Total Financial Impact ($6,261,000) Property Acquisition Cost Reduction 38% of Estimated Current Acquisition Prices Developer Return 4.0% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 11.7% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 15% Low Page 122 of 126 APPENDIX F - EXHIBIT VII PRO FORMA ANALYSIS 20% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 20% Low Page 123 of 126 APPENDIX F - EXHIBIT VII - TABLE 1 ESTIMATED DEVELOPMENT COSTS 20% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Property Acquisition Costs II. Direct Costs On -Site Improvements/Landscaping Parking At -Grade Spaces Above -Ground Spaces Building Costs Contractor/DC Contingency Allow Total Direct Costs 1 108,900 Sf of Land 2 $5,000 108,900 Sf of Land 3 /Space 42 Spaces 166 Spaces 108,200 Sf of GBA 4 20% Other Direct Costs 108,200 Sf of GBA III. Indirect Costs Architecture, Engineering & Consulting Public Permits & Fees 6 Taxes, Insurance, Legal & Accounting Marketing Developer Fee Soft Cost Contingency Allowance Total Indirect Costs IV. Financing Costs Interest During Construction Land 6 Construction 7 Loan Origination Fees Total Financing Costs V 6% Direct Costs 83 Units 2% Direct Costs 83 Units 5% Direct Costs 5% Other Indirect Costs $15,861,500 Cost $42,562,000 Cost 60% Loan to Cost $150 /Sf of Land $16,335,000 $30 /Sf of Land $3,267,000 $5,000 /Space 210,000 $25,000 /Space 4,150,000 $160 /Sf of GBA 17,312,000 4,988,000 $277 /Sf of GBA $29,927,000 $1,796,000 $68,000 /Unit 5,644,000 599,000 $1,000 /Unit 83,000 1,496,000 481,000 3.6% Avg Rate $857,000 3.6% Avg Rate 1,149,000 1.5 Points 530,000 $10,099,000 $2,536,000 Total Construction Cost 83 Units $513,000 /Unit $42,562,000 Total Development Cost 83 Units $710,000 /Unit $58,897,000 1 Estimated in part based on a sales survey of properties available for residential development in Newport Beach. 2 Based on the estimated costs for similar uses. 3 The base requirement is for 2.0 spaces per unit plus 0.50 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. s Based on the public permits and fees estimates and impact fee estimates provided in the August 2021 draft Housing Element. 6 Based on an 18 month construction period following receipt of entitlements, and a 100% average outstanding loan balance. 7 Based on an 18 month construction period following receipt of entitlements, and a 50% average outstanding loan balance. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 20% Low Page 124 of 126 APPENDIX F - EXHIBIT VII - TABLE 2 ESTIMATED STABILIZED NET OPERATING INCOME 20% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Gross Income A. Market Rate Units i Studio Units 6 Units @ $2,665 /Unit/Month $192,000 One -Bedroom Units 34 Units @ $3,745 /Unit/Month 1,528,000 Two -Bedroom Units 26 Units @ $4,002 /Unit/Month 1,249,000 Three -Bedroom Units 0 Units @ $0 /Unit/Month 0 B. Low Income Units z Studio Units 2 Units @ $1,054 /Unit/Month 25,000 One -Bedroom Units 8 Units @ $1,203 /Unit/Month 116,000 Two -Bedroom Units 7 Units @ $1,334 /Unit/Month 112,000 Three -Bedroom Units 0 Units @ $1,464 /Unit/Month 0 C. Miscellaneous Income 83 Units @ $75 /Unit/Month 75,000 Total Gross Income $3,297,000 Vacancy & Collection Allowance 5% Gross Income (165,000) II. Effective Gross Income $3,132,000 III. Operating Expenses General Operating Expenses 83 Units @ $4,500 /Unit $374,000 Property Taxes 83 Units @ $6,000 /Unit 495,000 Replacement Reserve Deposits 83 Units @ $150 /Unit 12,000 Total Operating Expenses 83 Units @ $10,614 /Unit ($881,000) IV. I Stabilized Net Operating Income $2,251,000 i Based in part on the rent survey presented in APPENDIX A - EXHIBIT IV. The weighted average monthly rent equates to $3.83 per square foot of leasable area. z Under Section 50053, the low income rent calculations are based on household income at 60% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 20% Low Page 125 of 126 APPENDIX F - EXHIBIT VII - TABLE 3 INCLUSIONARY HOUSING IMPACTS 20% LOW INCOME SCENARIO WEST NEWPORT MESA & BANNING RANCH PROTOTYPE: ZONING COMPLIANT APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA I. Supportable Investment Stabilized Net Operating Income See APPENDIX F - EXHIBIT VII - TABLE 2 Threshold Return on Total Investment i Total Supportable Investment II. Total Development Cost See APPENDIX F - EXHIBIT VII - TABLE 1 $2,251,000 4.49% $50,127,000 $58,897,000 Total Financial Impact ($8,770,000) Property Acquisition Cost Reduction 54% of Estimated Current Acquisition Prices Developer Return 3.8% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 17.6% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE SCENARIO. Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; PF WNM 20% Low Page 126 of 126 ATTACHMENT 5 IN -LIEU FEE CALCULATIONS INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Own; ATT 5 TITLE Page 1 of 5 APPENDIX A IN -LIEU FEE CALCULATIONS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; App A ILF Page 2 of 5 APPENDIX A IN -LIEU FEE CALCULATIONS OWNERSHIP HOUSING DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA 1 The market rate sales prices are drawn from the pro forma analyses. z See APPENDIX B - EXHIBIT I, APPENDIX B - EXHIBIT II, and APPENDIX B - EXHIBIT III. 3 Based on the unit mix distribution applied in the pro forma analyses. 4 Based on the weighted average difference between the market rate prices and the Affordable Sales Prices. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; ILF Page 3 of 5 West Newport Mesa Coyote Canyon Dover Westcliff & Banning Ranch Prototype Prototype Prototype I. Sales Price Difference A. Two -Bedroom Units Market Rate Sales Price 1 $953,200 Affordable Sales Price z 381,200 Difference $572,000 B. Three -Bedroom Units Market Rate Sales Price 1 $1,320,100 $1,517,900 $1,227,700 Affordable Sales Price z 356,600 316,000 375,700 Difference $963,500 $1,201,900 $852,000 C. Four -Bedroom Units Market Rate Sales Price 1 $1,742,500 $1,373,200 Affordable Sales Price z 303,500 379,300 Difference $1,439,000 $993,900 II. Distribution of Total Units 3 Two -Bedroom Units 50% Three -Bedroom Units 50% 60% 35% Four -Bedroom Units 40% 65% III. Assumptions Total Units 90 30 120 Total Saleable Area 144,000 64,800 251,400 Weighted Avg Unit Size (Sf) 1,600 2,160 21100 Inclusionary Housing Percentage 8% 8% 8% Inclusionary Units 7 2 9 Affordability Gap Per Inclusionary Unit 4 $767,800 $1,296,700 $944,200 IV. In -Lieu Fee Total In -Lieu Fee $5,374,600 $2,593,400 $8,497,800 Per Total Unit in the Project $59,720 $86,450 $70,820 Per Sf of Total Saleable Area $37.30 $40.00 $33.80 1 The market rate sales prices are drawn from the pro forma analyses. z See APPENDIX B - EXHIBIT I, APPENDIX B - EXHIBIT II, and APPENDIX B - EXHIBIT III. 3 Based on the unit mix distribution applied in the pro forma analyses. 4 Based on the weighted average difference between the market rate prices and the Affordable Sales Prices. Prepared by: Keyser Marston Associates, Inc. File Name: 2 17 22 NB Own; ILF Page 3 of 5 APPENDIX B IN -LIEU FEE CALCULATIONS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA Prepared by: Keyser Marston Associates, Inc. File name: 2 17 22 NB Rent; App B ILF Titles Page 4 of 5 APPENDIX B IN -LIEU FEE CALCULATIONS APARTMENT DEVELOPMENT INCLUSIONARY HOUSING: FINANCIAL EVALUATION NEWPORT BEACH, CALIFORNIA 1 The market rents are drawn from the pro forma analyses. The Affordable Rents are based on the H&SC Section 50053 calculation methodology. (See APPENDIX B). z Based on the unit mix distribution applied in the pro forma analyses. 3 Based on the rent differential capitalized at a 5.0% rate to establish the value, and a 1.10% property tax rate. 4 Based on the Inclusionary Housing percentage obligation supported by the pro forma analyses. s Based on the Annual Rent Difference Per Inclusionary Unit capitalized at the Threshold Return on Total Investment. Prepared by: Keyser Marston Associates File name: 2 17 22 NB Rent; ILF Page 5 of 5 West Newport Airport Area Coyote Canyon Newport Center Mesa & Banning Prototype Prototype Prototype Ranch Prototype I. Rent Difference 1 A. Studio Units Market Rate Units $2,780 $0 $0 $2,665 Inclusionary Units 1,054 0 0 1,054 Difference $1,726 $0 $0 $1,611 B. One -Bedroom Units Market Rate Units $3,511 $3,349 $4,652 $3,745 Inclusionary Units 1,203 1,203 1,203 1,203 Difference $2,308 $ 2,145 $3,449 $2,542 C. Two -Bedroom Units Market Rate Units $4,019 $3,593 $6,569 $4,002 Inclusionary Units 1,334 1,334 1,334 1,334 Difference $2,686 $2,259 $5,236 $2,668 D. Three -Bedroom Units Market Rate Units $0 $4,421 $7,002 $0 Inclusionary Units 0 1,464 1,464 0 Difference $0 $2,957 $5,539 $0 II. Distribution of Total Units z Studio Units S% 0% 0% 10% One -Bedroom Units 47% 35% 30% 50% Two -Bedroom Units 48% SS% 60% 40% Three -Bedroom Units 0% 10% 10% 0% III. Annual Rent Difference Per Inclusionary Unit $29,521 $27,469 $56,758 $29,993 Less: Property Tax Difference 3 (6,490) (6,040) (12,490) (6,600) Net Annual Rent Difference Per Inclusionary Unit $23,031 $21,429 $44,268 $23,393 IV. Assumptions Total Units 450 280 240 83 Total Leasable Area 430,650 266,000 291,000 81,150 Weighted Average Unit Size (Sf) 957 950 1,213 978 Inclusionary Housing Percentage 4 7% 7% 7% 7% Inclusionary Units 32 20 17 6 Affordability Gap Per Inclusionary Unit s $516,000 $487,000 $861,000 $521,000 V. In -Lieu Fee Total In -Lieu Fee $16,512,000 $9,740,000 $14,637,000 $3,126,000 Per Total Unit in the Project $36,690 $34,790 $60,990 $37,660 Per Square Foot of Total Leasable Area $38.30 $36.60 $50.30 $38.50 1 The market rents are drawn from the pro forma analyses. The Affordable Rents are based on the H&SC Section 50053 calculation methodology. (See APPENDIX B). z Based on the unit mix distribution applied in the pro forma analyses. 3 Based on the rent differential capitalized at a 5.0% rate to establish the value, and a 1.10% property tax rate. 4 Based on the Inclusionary Housing percentage obligation supported by the pro forma analyses. s Based on the Annual Rent Difference Per Inclusionary Unit capitalized at the Threshold Return on Total Investment. Prepared by: Keyser Marston Associates File name: 2 17 22 NB Rent; ILF Page 5 of 5 It ATTACHMENT B 11 BUILDING I N DUSTRY OF SOUTH ERN CALIFORNIA, INC. BIR ORANGE COUNTY CHAPTER March 22, 2022 EXECUTIVE COMMITTEE Dear Mayor and Council, PRESIDENT Mayor Kevin Muldoon ERIC NELSON City of Newport Beach TRUMARK HOMES 100 Civic Center Drive Newport Beach, CA 92660 ht VICE PRESIDENT crisis created by lack of supply. This is a problem that wasn't created overnight, and it cannot BROOKE DOI be solved with fees made exclusively for housing producers. Comprehensive solutions are SHEA HOMES Dear Mayor and Council, TREASURER JAMES O'MALLEY On behalf of the Building Industry Association of Southern California - Orange County SHOPOFF REALTY INVESTMENTS Chapter, I write to express our concerns with the Inclusionary Housing: Financial Evaluation, as completed by Keyser Marston Associates (KMA). California is in the midst of a housing SECRETARY crisis created by lack of supply. This is a problem that wasn't created overnight, and it cannot MEGAN ELTRINGHAM THE NEW HOME COMPANY be solved with fees made exclusively for housing producers. Comprehensive solutions are necessary. TRADE CONTRACTOR VP ALAN BOUDREAU To that end, the City of Newport Beach has demonstrated successful production of affordable BOUDREAU PIPELINE housing during RHNA's 5' Cycle without the need for an inclusionary policy. In its 2021 Housing Permit Report Card, the OC Register scored Newport Beach as an overall B+ with ASSOCIATE MEMBER VP A's in both Very Low Income and Low Income housing production. Based on these facts, it MARK HIMMELSTEIN is clear that Newport Beach's existing approach has been successful in creating affordable NEWMEYER & DILLION, LLP homes, especially for those households most in need. MEMBER AT LARGE It is also critically important to note that a departure from past success, in line with KMA PETER VANEK INTREGALCOMMUNITIES suggestions, will result in significant new densities for Newport Beach. The recommended 15% Very Low Income inclusionary requirement for large rental projects is predicated on all such projects being awarded a 50% density bonus and multiple exemptions from local IMMEDIATE PAST PRESIDENT SUNTI KUMJIM development/zoning standards, including parking. Given the city's past successes in MBK RENTAL LIVING producing lower income housing, it seems premature to adopt an inclusionary housing VICE PRESIDENT, OC CHAPTER ordinance at this time, especially one that increases large project density by 50%. ADAM WOOD BIAOC In light of the aforementioned, we propose the City defer consideration of inclusionary zoning to, at a minimum, be considered in conjunction with new zoning drafted to implement the recently adopted Housing Element and sufficient time has transpired to determine whether the City's tried and true affordable housing approach is no longer sufficient to address the City's RHNA. Sincerely, Adam Wood Vice President BIA/SC — Orange County Chapter 17192 MURPHY AVE #14445, IRVINE, CA 92623 949-553-9500 I BIAOC.COM SS3-4