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HomeMy WebLinkAboutIII.4. Economic Impact Studyj- LambertA d vis o ry ECONOMIC IMPACT ANALYSIS 1700 BISCAYNE - Prepared by - Lambert Advisory, LLC - Prepared for - Midgard Management, Inc. June 29, 2007 Economic ImpactAnalysis —1700 Biscayne Economic Impact Analysis 1700 Biscayne Lambert Advisory has completed an economic impact analysis for the development of 1700 Biscayne, a mixed-use residential, hotel and retail (commercial) project located at 1700 Biscayne Boulevard in the City of Miami. The analysis provides a measurement of the tangible direct and indirect economic impacts that will be derived from the construction and operation of the development. This report identifies certain benefits created by the proposed 1700 Biscayne developments and can supplement the major use special permit application to be submitted to the City of Miami. The 1700 Biscayne property is situated in the SD -6 High Density Residential zoning district and is adequately accessible to major thoroughfares, including I-95. The residential, hotel and commercial development will have a positive impact on the surrounding community in terms of taxes, jobs, and general investment generated, and will also enhance the area's commercial/retail demand. This development should help maintain economic stability within the area and attract on-going investment during the next several years. We have completed this analysis on the basis of development related information provided by Midgard Management (herein referred to as Developer) and/or its professional representatives. The analysis herein considers Phase 1 of a potential two- phase development; development plans for subsequent phases have yet to be determined. Accordingly, Lambert Advisory was not provided with detailed development characteristics (e.g., physical property data), construction cost estimates, and/or operating performance assumptions for Phase 1 either. Therefore, Lambert has generalized estimates for certain site/development characteristics, cost and operating assumptions as necessary and noted as such. Additionally, Lambert Advisory was not provided a development timeline; therefore, for purposes of this analysis, we assume a 36 -month development timeline from project commencement_ to completion. Considering this, our analysis has been prepared to reflect the economic impact — on an order -of -magnitude basis — of the total project upon completion, assumed to be mid- to late- 2010. Residential, hotel, and commercial valuation and related fees stated herein are presented in current (2007) dollars. Importantly, the assumptions set forth herein are subject to change. Lambert does not attest to the accuracy of these assumptions and estimates; we have not independently verified this information. As such, the estimates herein should not be relied upon beyond the scope of this analysis. The 1700 Biscayne development represents a proposed master plan including: 613 residential (condominium) units; 289 hotel rooms; 149,086 square feet of retail space; and, roughly 1,418 total parking spaces. The development is planned within two high- rise buildings, at a maximum 55 stories. A profile of the project follows. 7 Economic Impact Analysis —1700 Biscayne 1700 Biscayne Economic Impact Analysis Buildinq Features & Profile General Features Site Size (Net) 2.37 Building Height (maximum) 55 stories Number of Residential Units 613 units Hotel Rooms 289 units Retail Space (not incl, Restaurant) 149,086 sq.ft, Number of Parking Spaces 1,418 spaces General Building Profile Gross Building Area (w/out parking, back -of -house) 1,098,929 sq.ft. Residential FAR (estimated) 909,396 sq.ft. Commercial (Retail) FAR (estimated) 149,098 sq.ft, Hotel FAR (estimated) 185,838 sq.ft. Estimated Gross Parking Area 605,440 sq.ft. Note: Select building features based upon data provided by Developer' "Estimated" figures prepared by Lambert Advisory. The analysis herein assumes that development of the 1700 Biscayne property is expected to commence mid- to late 2007 and is anticipated to be completed in 36 months. Based upon the information provided and/or estimates derived, construction and subsequent operations the development will generate considerable benefits to the immediate area, the City of Miami, and the metro -Miami community. There are four key areas in which the project will provide positive economic impacts: 1. Short-term construction employment and expenditure 2. Long-term residential, visitor and shopper expenditure/fees 3. Long-term building and retail employment and operating expenditure 4. Indirect flow-through benefits (real estate and retail) For both short-term and long-term impacts, which are detailed in the following analysis, the economic benefit to the area is the result of projected increases in revenue from primary sources, including employment, wages, and taxes. Accordingly, the impact from these key sources comes from two distinct measures: • Direct Expenditures — disbursements for site acquisition and development (hard and soft costs) • Indirect Expenditures — net additional expenditures that flow into the local economy as a result of the new development 3 Economic Impact Analysis —1700 Biscayne Estimates of the tangible impacts from direct and indirect expenditures are captured by this analysis. However, potential intangible impacts — such as the project's ability to serve as a catalyst for future development in the immediate area — are not included, as they are nearly impossible to quantify. Economic impacts from the four key sources are detailed in the following sections. 1. Short -Term Construction Employment and Expenditure The impact from short-term construction employment and expenditure is directly associated with the project's development. Lambert Advisory was not provided with any detailed construction cost estimates. Therefore, the residential and commercial development cost and timeline assumptions below are based upon general data provided by Developer, with all factors (e.g., hard and soft cost breakdown) estimated by Lambert Advisory. The table below shows a summary of estimated development costs: 1700 Biscayne Economic Impact Analysis Development Costs Item Cost Hard Costs $439,600,000 Soft Costs $65,900,000 Total $505,500,000 Source: Estimated The majority of development -related expenditures will be made in Miami -Dade County, and the City of Miami will capture a significant share of these expenditures. Labor will account for approximately 60 percent ($264 million) of hard costs, and materials will account for 40 percent ($175 million). Over an estimated 36 -month construction period, at an average annual construction wage of $41,308 1 in Miami -Dade County, with a benefit/overhead multiplier of 1.4, there will be nearly 1,520 Full Time Equivalent (FTE) jobs created. Additionally, $10.1 million in professional fees are estimated to be paid to Miami area firms (e.g., architecture, engineering, legal). Assuming an average profit margin of 15% and overhead of 30%, approximately $5.6 million in professional wages will be paid out by these firms. Impact and other fees payable to the City and County during the construction and development period will amount to approximately $5.2 million, which will be available for public expenditures associated with the project including developmental, ' State of Florida ES -202, annualized wage based upon third quarter 2006 Construction wages 4 Economic Impact Analysis —1700 Biscayne administrative, permitting, schools, and other Costs2. Note, this does not include additional "impact" fees to the City from Affordable Housing, PUD, and/or Retail Bonuses that may be paid by Developer to conform to certain regulatory (zoning) requirements. A detailed profile of impact fees and other relevant non -impact fees paid to the City and/or Miami -Dade County as a result of the 1700 Biscayne is included in the following table. 1700 Biscayne Economic Impact Analysis Impact and Other Fees Impact Fees: Total City of Miami Development Impact Fee (Ord. 10426) $1,032,990 City of Miami Development Impact Admin. Fee $30,990 Miami Dade County Roads $896,629 Miami Dade County Schools $1,209,982 $3,170,590 Other/Non-Impact Fees; City of Miami Bonus Fees $0 Miami Dade W.A.S.A. Connection Fee $930,054 City of Miami Building Permit Fee $583,414 Energy Installation Fee $166,393 M.U.S.P Application Fee $45,000 Dade County Code Compliance $252,754 Radon Gas Fee $16,639 Fire Plan Review Fee $14,975 Ground Cover Fee (estimated) $2,068 Land Use/Zoning, Review for Building Permit $2,000 Certificate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES $ 2,013,582 TOTAL PROJECT FEES $5,184,172 Source: City of Miami Planning, Building & Zoning; Miami Dade County; Developer; Lambert Advisory. Fees above are subject to change. 2 Lambert Advisory calculates impact and other fees based upon physical characteristics of the development (as provided by Developer) utilizing impact/other fee factors provided by the City of Miami and/or Miami Dade County. There.may be items for which additional fees may be collected by the City/County (e.g., Tree Trust) and/or State (e.g., Energy Conservation) that have not been included herein. As a result, there will be some variation between the impact and other fees provided herein and the actual fees that may be paid upon commencement of the development process including estimate for City of Miami Bonus Fees. Economic Impact Analysis —1700 Biscayne 2. Long -Term (On -Going) Resident, Visitor and Shopper Expenditure/ Fees The 1700 Biscayne development will generate long term area -wide expenditure from residents living in the development, hotel guests, retail shoppers, and retail workers/tenants within the building. Following is a summary of expenditure by demand component: Resident; There are 613 condominium units assumed to be occupied be a mix of primary and second home residents. For this analysis, we assume that 50 percent of the 1700 Biscayne resident will be primary residents such as working professionals and/or empty nesters and 50 percent will be second home residents spending an average of 6± months in the residence. Considering the proposed development plan, we estimate an average sale price of at least $400,000, which would indicate high income individuals/households with incomes of at least $150,000. Presuming that approximately half of the primary and second homeowners will relocate from outside the City, nearly $34.5 million of marginal personal income will flow into Miami. We have estimated the marginal impact of $34.5 million in household income on retail sales and space demanded, using the Lambert Advisory Retail Trade Model. The following table provides a summary of additional retail expenditure and demand for space as a result of development and sale of the units by 2010, and indicates potentially net marginal expenditure of $11.4 million, or demand for net new retail space within the City of approximately 37,100 square feet. 1700 Biscayne Area Expenditure Potential (from New -to -Miami 1700 Biscayne Residents) 2010 Estimated Marginal Expenditure Growth Sales per Square Feet Type of Good 2010 Square Foot Demanded General Merchandise $777,775 '$227 3,426 Apparel and Accessories $748,295 $290 2,580 Furniture and Home Equipment $310,163 $227 1,366 Electronic and Appliance Stores $296,653 $200 1,483 Sporting Goods, Books and Music Stores $282,956 $250 1,132 Miscellaneous Shoppers Goods $431,564 $420 1,028 Shoppers Goods - Sub -Total $2,847,407 $258 11,016 Food Stores $3,973,939 $422 9,417 Eating & Drinking Establishments $2,458,360 $375 6,556 Health & Personal Care Stores $1,277,306 $407 3,138 Liquor $85,255 $280 304 Convenience Goods - Sub -Total $7,794,861 $401 19,415 Building Materials $766,376 $115 6,664 Total $11,408,644 $308 37,095 Source: Lambert Advisory, 2007 0 Economic Impact Analysis —1700 Biscayne Retail., The 149,098 square feet of retail planned within 1700 Biscayne development will also attract expenditure —. the largest share of which will come from persons within central Miami Dade County area. Assuming that at least 50 percent of the expenditure in 1700 Biscayne retail comes from outside the City, and based upon an average sales per square foot (for Shopper Goods and Eating and Drinking Establishments) of roughly $320, nearly $24 million will be expended within the City per year which is now going to other areas, with nearly $1.7 million in additional State sales tax collections. Hotel.- 1700 Biscayne will incorporate a 289 -room hotel into the mixed use development. The property is planned to be a luxury resort with amenities including spa and business center. For this analysis, we assume food and beverage services will be operating through the planned restaurant; therefore, additional sales and employment associated with this revenue component is included in the retail analysis above. Based upon our general understanding of hotel market conditions in Miami Dade County, and specifically the downtown submarket, we assume that the hotel inventory will have an average annual occupancy of 70 percent (or 76,40 occupied room nights), with an average daily rate (ADR) of approximately $225. Therefore, the hotel will generate roughly $17.1 million in revenue from which select taxes and fees will be collected by the City and/or County (discussed further below). Furthermore, based upon a comprehensive hotel guest survey Lambert Advisory completed for the Miami Downtown Authority (DDA) in 2003, we estimate (marking to 2007 $'s) each hotel room (with an average double occupancy) spends an average of $100 per visit in retail/restaurant expenditure, $125 per visit in retail (shopping) purchases, $58 per visit in local transportation, and $32 per visit sporting events and entertainment within the City. Therefore, each occupied hotel room spends on average approximately $315 per visit (outside of hotel room charge), or nearly $24 million in visitor expenditure in the Miami area of which 30 percent is estimated to be net new to the area (or $8 million). 3. Long -Term (On -Going) Building Employment and Operating Expenditure There are a number of areas where positive public benefits or economic impacts will result from the on-going operation of the residential, hotel and retail space. These include: • Additional employment from operation of the condominium community, hotel, restaurant and stores; • Property tax revenue to the City of Miami and Miami -Dade County; • Increased sales tax and Bed Tax revenue from the hotel, stores, and restaurant to State and County; • Occupational License/Fees; and, • Purchase of goods and services. Employment from Operations. We estimate full time equivalent workers (FTE) needed to operate the mixed-use building including management, maintenance staff, parking attendants, security and general service as follows: 7 Economic Impact Analysis — 1700 Biscayne use FTE Ratio FTE Condominium Units 1 per 30± units 30 Retail 1 per 1,000± sq.ft. 200 Hotel (Four-star) 1.25± per room 240 Total 470 With a total of 470 FTE jobs, at an average Miami -Dade County wage of $41,2083 the operation of the building and stores will create approximately $19.4 million in wages each year. Positions at various skill levels will be made available to area residents. Goods and Services from Operations; Additionally, an estimated $2.3 million in net new goods and services related to building maintenance will be purchased annually within Miami -Dade. This includes cleaning services, maintenance supplies, utilities, etc. "Bed Tax's Additionally, the City of Miami and/or Miami Dade County are among the primary beneficiaries of a 6.0 percent Tourist and Convention Development Tax (or Bed Tax), which is comprised of the Convention Development Tax (3%), Tourist Development Tax (2%), and Professional Sports Facilities Franchise Tax. Based upon estimated ADR and occupancy rates, the total Bed Tax generated from 1700 Biscayne is estimated to be $1.0 million per annum. Occupational Fees/License: The City will benefit from Occupational License fees and Certificates of Use from the business occupying the retail and restaurant space. The City has a comprehensive fee schedule for determining Occupational License rates for various types of professional businesses. Although it is very difficult at this point to determine the precise composition of the tenant mix that will determine Occupational License fees to the City, we estimate that there will be 28 retail tenants occupying the building of which 50 percent are estimated to be net new businesses to Miami (or 14 net new companies). Assuming that the average Occupational License fee per company is approximately $1,000, the City will generate $18,000 per year in annual fees. Certificate of Use permits are charged to each business and comprise Fire/Safety fee which is fixed at $50 for each business, and Supplemental Waste fees which approximates $0.25 to $0.30 per square foot of space. Considering this, Certificate of Use fees are estimated to generate roughly $70,000 per year to the City. Ad Valorem Tax: Finally, the 1700 Biscayne property will provide significant benefit to the City and County by way of real property and personal property (ad valorem) taxes. The tax amount is based upon the County Tax Collector's (2006) millage rate of 24.6443 (per thousand dollars of value), broken down as follows. s State of Florida ES -202, annualized wage based upon third quarter 2006 All Industry wages 8 Economic Impact Analysis —1700 1700 Biscayne Economic Impact Analysis Ad Valorem Tax Breakdown Item Millage Annual Tax City of Miami Operating 8.3745 $3,492,531 City of Miami Debt 0.621 $258,984 School Operations 7.691 $3,207,482 School Debt 0,414 $172,656 Environmental Projects 0.100 $41,704 South Florida Water Management 0,597 $248,975 FIND 0.0385 $16,056 County Millage 5.615 $2,341,700 County Debt 0.285 $118,857 Children's Trust 0.422 $176,117 Library 0.486 $202,683 TOTAL 24.6443 $10,277,746 Source: Miami Dade County Property Appraiser, Lambert Advisory, 2006. Real property is typically assessed at between 80 and 90 percent of Fair Market Value. For the purposes of this analysis, we calculate ad valorem taxes for 1700 Biscayne based on total construction value of $505 million. Accordingly, the development should generate approximately $10.2 million in real property taxes by 2010. I Economic Impact Analysis —1700 Biscayne 4. Indirect Flow -Through Benefits There will be a number of long term indirect flow-through benefits beyond construction from the project, particularly from the increase in retail and operations employment. The 470 FTE jobs created as a result of building and retail operations are assumed to have a 1.2 multiplier impact of 564 additional jobs. This multiplier is derived from the U.S. Department of Commerce's 1999 RIMS II model, and identifies indirect secondary and tertiary impacts created throughout the region due to the "ripple effect" of the primary employment. 10 Economic Impact Analysis —1700 Biscayne 1700 Biscayne Economic Impact Analysis Summary, Economic Impacts (2010) Impact Short Term Construction Employment & Expenditure Full Time Jobs 1,520 Direct Wages $188,400,000 Professional Wages (Miami -Dade County) $5,600,000 Impact Fees Toward Public Expenditure $5,200,000 Total Impact, Short Term Const. Employment & Expenditure $199,100,000 Long -Term (On -Going) Resident, Visitor and Shopper Expenditure Marginal Expenditure Growth — Residents $11,400,000 Marginal Expenditure — Retail $24,000,000 Marginal Expenditure — Hotel Guest $8,000,000 Marginal Impact from On -Going Resident Expenditure $43,400,000 Long -Term (On -Going) Building Employment and Operating Expenditure Full Time Jobs 470 Total Direct Wages Created $19,370,000 Sales Tax from Additional Retail Sales $1,700,000 Goods & Service Purchased in Miami -Dade County $2,200,000 Certificate of Use/Occupational License (City and County - 2010) $80,000 Total "Bed Tax" Revenue $1,000,000 Ad Valorem Taxes (2015) $10,300,000 Total Impact from On -Going Operations of the Building/Retail $34,600,000 Indirect Flow Through Benefits Full Time Jobs (Indirect) — Miami Dade County 564 Total Indirect Wages Created $23,240,000 Total Flow ThroughIndirect Benefits $23,200,000 Source: Lambert Advisory; Figures above stated in 2007 $'s. Based upon the analysis set forth herein, the 1700 Biscayne project will clearly have a positive economic impact on both the City of Miami and Miami -Dade County. Total employment created during the development phase is more than 1,500, with on-going annual employment of 470 FTE jobs. Accordingly, there is an estimated $225 million impact from short-term construction employment and expenditures, and a stabilized $85± million annual revenue stream from resident/worker/shopper expenditures and building operations (including real property taxes). There are an additional 564 workers creating $23.2 million in wages from as a result of indirect flow-through benefits. 11