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HomeMy WebLinkAboutEconomic Impact Analysis• amber Advisory ECONOMIC IMPACT ANALYSIS 500 Brickell Avenue (Condominium and Retail Development) • - Prepared by - Lambert Advisory, LC - Prepared for - The Related Group March 31, 2004 • • • Economic Impact Analysis — 500 Brickell Avenue Economic Impact Analysis 500 Brickell Avenue Lambert Advisory has completed an Economic Impact Analysis for the development of 500 Brickell Avenue, a mixed -use residential and commercial project located between SE 5th and 6th Streets in the City of Miami. The analysis estimates the tangible direct and indirect economic impacts that will be derived from the construction and operation of the development. This report identifies and quantifies the benefits created by the 500 Brickell Avenue development, and can supplement the major use special permit application to be submitted to the City of Miami. The 500 Brickell Avenue property is situated in the SD-5 and SD-7 zoning districts of downtown Miami, immediately south of the Miami River. The property is adequately accessible to major thoroughfares including US 1, 1-95 and the Palmetto Expressway. The residential and retail 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 will 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 and performance information (i.e., price, absorption, timing, costs) that has been provided by The Related Group. We have not independently verified this information or data. A profile of the project follows, 500 Brickell Avenue Economic Impact Analysis Building Features & Profile General Features Site Size (Net) Building Height Number of Residential Units Retail Space (rentable area) Number of Parking Spaces Detailed Building Profile Gross Building Area (w/parking) Residential FAR Retail FAR Gross Parking Area 1,27 acres 42 stories 633 units 20,497 sq.ft. 857 spaces 1,146,993 sq.ft. 757,986 sq.ft. 20,497 sq.ft. 368,510 sq.ft. Note: Estimates are based upon data provided by The Related Group, and/or calculations made by Lambert Advisory, and may be subject to change. Source: The Related Group, Lambert Advisory, 2004. • • Economic Impact Analysis — 500 Brickell Avenue Development of the 500 Brickell Avenue property is expected to commence in April of 2005. The duration of construction is anticipated to be 22 months, with occupancy planned for April of 2007. Based upon the information provided, construction and subsequent operations of 500 Brickell Avenue 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 and shopper expenditure 3. Long-term building 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 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; the table below shows a summary of estimated development costs, as provided by The Related Group. 500 Brickell Avenue Economic Impact Analysis Development Costs Item Cost Hard Costs $100,000,000 Soft Costs $50,000,000 Total '$i 50,000,000 Source: The Related Group, 2004. • • • Economic Impact Analysis — 500 Brickell Avenue The majority of development -related expenditures will be made in Miami -Dade County, and the City of Miami will capture the lion's share of these expenditures. Labor will account for approximately 60 percent ($60 million) of hard costs, and materials will account for 40 percent ($40 million). Over an estimated 22-month construction period, at an average annual construction wage of $36,7321 in Miami -Dade County, with a benefit/overhead multiplier of 1.4, there will be nearly 636 Full Time Equivalent (FTE) jobs created, Additionally, more than $3 million in professional fees are expected to be paid to Miami area firms (e.g., architecture, engineering, legal). Assuming an average profit margin of 15% and overhead of 30%, approximately $1.65 million in professional wages will be paid out by these firms. Impact and other fees payable to the City and County during the construction period will amount to approximately $3.8 million, which will be available for public expenditures associated with the project including developmental, administrative, permitting, schools, and other costs. 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 development of 500 Brickell Avenue is included in the following table. 1 State of Florida ES-202, third quarter 2003 • • • Economic Impact Analysis — 500 Brickell Avenue 500 Brickell Avenue Economic Impact Analysis Impact and Other Fees Impact Fees: Total City of Miami Development Impact Fee (Ord. 10426) $736,366 City of Miami Development Impact Admin. Fee $22,091 Miami Dade County Schools $1,083,227 TOTAL IMPACT FEES $1,841,684 Other/Non-Impact Fees: City of Miami Bonus Fees' $551,555 Miami Dade W.A.S.A. Connection Fee $892,098 City of Miami Building Permit Fee $159,358 Variance Fee (setbacks) $126,130 Energy Installation Fee $114,699 M.U.S.P Application Fee $45,000 Dade County Code Compliance $75,000 Radon Gas Fee $11,470 Fire Plan Review Fee $10,323 Ground Cover Fee $1,106 Land Use/Zoning, Review for Bldg.Permit $2,000 Certicate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES $ 1,989,024 TOTAL PROJECT FEES $3,830,708 5 Applicable if paid before 9/1/2004. Bonus fees increase to S1,025,379 thereafter. Source: City of Miami Planning, Building & Zoning; Miami Dade County; The Related Group; Greenberg Traurig; Lambert Advisory. Fees included above may be subject to change. 2. Long -Term (On -Going) Resident and Shopper Expenditure Based on demographic and rental housing trends in the area, the 500 Brickell resident base is expected to consist primarily of younger working professionals. Considering the proposed average sale price of $308,000, it is assumed that the residents will be mostly middle and upper income individuals/households with incomes of at least $90,000. Therefore, with a total of 633 households in the building, total personal income for the building is estimated to exceed $56 million. Estimating that approximately half of the owners will relocate from outside the City, the marginal personal income that will flow into the Miami area will exceed $28 million. We have estimated the marginal impact of $28 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 mid-2007. • • Economic Impact Analysis ---- 500 Brickell Avenue 500 Brickell Avenue Area Expenditure Potential (from New -to -Miami 500 Brickell Residents) 2007 Est. Marginal Growth Expenditure Sales Per Square Feet 2007 Square Foot Demanded Type of Good General Merchandise $629,922 $227 2,775 Apparel and Accessories $606,046 $290 2,090 Furniture and Home Equipment $251,202 $227 1,107 Electronic and Appliance Stores $240,261 $200 1,201 Sporting Goods, Books and Music Stores $229,167 $250 917 Miscellaneous Shoppers Goods $349,525 $420 832 Shoppers Goods - Sub -Total $2,306,124 $258 8,922 Food Stores $3,218,505 $422 7,627 Eating & Drinking Establishments $1,991,034 $375 5,309 Health & Personal Care Stores $1,034,494 $407 2,542 Liquor $69,048 $280 247 Convenience Goods - Sub -Total $6 313, 082 $401 16,725 Building Materials $620,690 $115 5,397 Total $9,239,896 $308 30,043 Source: Lambert Advisory, 2004. In addition to the net new expenditures attributable to 500 Brickell residents, the 20,497 square feet of ground -level retail planned will also attract retail expenditure — primarily from the area immediately surrounding the property, with limited additional support from visitors from outside of the area. Assuming that 20 percent of the expenditure in 500 Brickell retail comes from outside the City, and based upon sales per square foot (for Shopper Goods) of $308, dose to $1.3 million will be expended within the City per year which is now going to other areas. 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 and retail space. These include: • Additional employment from operation of the condominium community and stores; • Property tax revenue to the City of Miami and Miami -Dade County; • Increased sales tax revenue from stores to State and County; and • Purchase of goods and services. We estimate that 21 FTE workers will be needed to operate the budding and 20 FTE workers will be employed in the retail stores. Positions such as building managers, parking garage attendants, maintenance staff, retail workers, and security personnel will • • • Economic Impact Analysis — 500 Brickell Avenue need to be filled. At an average Miami -Dade County wage of $35,8202 the operation of the building and stores will create approximately $1.5 million in wages each year. Positions at various skill levels will be made available to area residents. Increased sales tax revenue will result from the operation of the 20,497 square feet of retail space. Assuming the net new retail expenditure in stores totals $1.3 million, approximately $88,000 in additional sales tax will be collected from retail sales. Additionally, an estimated $580,000 in goods and services related to building maintenance will be purchased annually within Miami -Dade. This includes cleaning services, maintenance supplies, utilities, etc. Finally, the development of 500 Brickell Avenue 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 (2003) millage rate of 26.918 (per thousand dollars of value), broken down as follows. 500 Brickell Avenue Economic Impact Analysis Ad Valorem Tax Breakdown tem Annual Millage Taxi City of Miami Operating 8.7625 City of Miami Debt 1.080 School Operations 8.418 School Debt 0.682 Environmental Projects 0.100 S. Florida Water Management 0.597 FIND 0.0385 County Millage 5.969 County Debt 0.285 Children's Trust 0.500 Library 0.486 $1,489,820 $183,624 $1,431,247 $115,955 $17,002 $101,503 $6,546 $1,014,863 $48,466 $85,011 $82,631 TOTAL 26.918 $4,576,65 Source: Miami Dade County Property Appraiser, Lambert Advisory, 2004. Real property is typically assessed at between 80 and 90 percent of Fair Market Value. For this analysis, we calculate ad valorem taxes for 500 Brickell based on a market value of $170 million, or 85 percent of the estimated value of the residential, retail, and parking uses. Accordingly, the development should generate approximately $4.6 million in real property taxes by 2007/8. This represents an estimated net marginal increase of roughly $4.5 million over the ad valorem tax collection the City would receive if the property were valued at current use (assessed in 2003 at $1.6± million). 2 State of Florida ES-202, third quarter 2003 e • • Economic Impact Analysis — 500 Brickell Avenue 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 42 F i t jobs created as a result of building and retail operations are assumed to have a 1.2 multiplier impact of 50 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, • • Economic Impact Analysis - 500 Brickell Avenue 500 Brickell Avenue Economic Impact Analysis Summary, Economic Impacts Impact Short Term Construction Employment & Expenditure Full Time Jobs 636 Direct Wages $23,400,000 Professional Wages (Miami -Dade County) $1,700,000 Impact Fees Toward Public Expenditure $3,800,000 Total Impact, Short Term Const. Employment & Expend. $28,900,000 Long -Term (On -Going) Resident and Shopper Expenditure Marginal Expenditure Growth - Residents (2007/8) $9,200,000 Marginal Expenditure - 550 Brickell Shoppers (2007/8) $1,300,000 Marginal Impact from On -Going Resident and Shopper Expend. $10,500,000 Long -Term (On -Going) Building Employment and Operating Expenditure Full Time Jobs 42 Total Direct Wages Created $1,500,000 Sales Tax from Additional Retail Sales (2007/8) $88,000 Goods & Service Purchased in Miami -Dade County $580,000 Ad Valorem Taxes (2007/8) $4,600,000 Total Impact from On -Going Operations of the Building/Retail $6,700,000 Indirect Flow Through Benefits Full Time Jobs (Indirect) - Miami Dade County 50 Total Indirect Wages Created $1,800,000 Total Flow Through Indirect Benefits $1,800,000 Source: Lambert Advisory, 2004. Based upon the analysis set forth herein, the 500 Brickell project will dearly have a positive economic impact on both the City of Miami and Miami -Dade County. Total employment created during the development phase is approximately 636, with on -going annual employment of 92 FrE jobs. Accordingly, there is an estimated $28.9 million impact from short-term construction employment and expenditures, and a stabilized $17.2 million annual revenue stream from resident/shopper expenditures and building operations (including real property taxes).