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HomeMy WebLinkAboutEconomic Impact Analysis• ambert Advisory ECONOMIC IMPACT ANALYSIS GALLERY ART CONDOMINIUM - 333 BISCAYNE (Condominium Development) • - Prepared by - LambertAdv/sary, LC - Prepared for - H&H Development May 4, 2004 • • Economic Impact Analysis — Gallery Art — 333 Biscayne Economic Impact Analysis Gallery Art Condominium Lambert Advisory has completed an Economic Impact Analysis for the development of Gallery Art Condominium, a residential project located at 333 N.E. 24th Street, in the City of Miami. The analysis contemplates the tangible direct and indirect economic impact which will be derived from the construction and operation of the development. The objective is to identify various benefits created by the Gallery Art development and prepare an estimate of such benefits to the City of Miami. In preparing this analysis, Lambert Advisory was provided site plans, development schematics, general construction cost estimates, development timeline, and summary proforma assumptions. For purposes of this analysis, Lambert does not attest to the accuracy of this information and any changes to the assumptions may have a material impact on the results provided herein. The Gallery Art development is situated on the northern fringes of downtown Miami, immediately west of Biscayne Bay. The property is adequately accessible to major thoroughfares including Biscayne Boulevard, I-95 and the Palmetto Expressway. The residential development will have a positive impact on the surrounding community in terms of taxes and jobs generated, general investment, as well as enhance the area's commercial/retail demand. This development will at the least help maintain economic stability within the area and, if successful, attract on -going investment during the next several years. A profile of the project is as follows Gallery Art Condominium Building Features & Profile General Features Site Size (Gross) Building Height Number of Residential Units Retail Space (rentable area) Number of Parking Spaces Detailed Building Profile Gross Building Area (w/parking) Maximum Development Area (FAR) Residential Area Lobby/Admin. Area Gross Parking Area* n/a acres 17 stories 166 units 0 sq.ft. 208 spaces 374,000 sq.ft. 175,000 sq.ft. 167,000 sq.ft. 5,000 sq.ft. 85,000 sq.ft. Source: H&H Development Note: Lambert Advisory was provided development plans and physical characteristics for the Gallery Art development. The analysis herein relies upon data provided by H&H, and/or estimates made by Lambert, which may be subject to change. • • Economic Impact Analysis — Gallery Art — 333 Biscayne The development of the Gallery Art property is expected to commence construction by the fourth quarter of 2004. The construction process is anticipated to be approximately eighteen months, with occupancy planned for the first quarter of 2006. Based upon the information provided and assumptions made, construction and subsequent operations of the Gallery Art development will generate considerable benefits to the immediate area, the City of Miami and the metro -Miami community. There are four key areas where the project will provide positive economic benefit: • Short -Term construction employment and expenditure • Long -Term owner expenditure • Long -Term operating employment and operating expenditure • Indirect secondary and tertiary flow through benefits (real estate) 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 increase in revenue from primary sources including employment, wages, and taxes. Accordingly, the impact from these key sources comes from two distinct measures: 1.) Direct Expenditures — include disbursements for site acquisition and development (hard and soft costs); and, 2.) Indirect Expenditures -- net additional expenditures that flow into the local economy as a result of the new development. We have made an attempt to quantify the tangible impacts from direct and indirect expenditures. However, potential intangible impacts such as the project's ability to serve as a catalyst for future development in the immediate area is not included in the analysis since it is almost impossible to capture these ethereal aspects of the project in numbers. The following analysis sets forth the economic impact the four key sources as follows: Impact from Short -Term Construction Employment and Expenditure The impact from short-term construction employment and expenditure is directly associated`with the project's development; the following table details estimated development costs either provided by H&H Development or estimated by Lambert Advisory (rounded): • • • Economic Impact Analysis — Gallery Art — 333 Biscayne Development Costs Gallery Art Condominium Item Cost Hard Costs $ 22,000,000 Soft Costs (includes contingency, profit) $ $ 10,000,000 Total $ 32,000,000 While the vast majority of expenditure of each of these items will be made within Miami - Dade County, the City of Miami will capture a significant share of the outflow from development. Of hard costs, approximately 60 percent ($•13.2 million) will be spent in labor and 40 percent ($8.8 million) in materials. Over an estimated 18 month construction period at an average annual construction wage of $34,420 in Miami -Dade County' and a 1.4 times benefit/overhead multiplier per worker, there will be nearly 185 Full Time Equivalent (FTE) jobs created over the period. Additionally, it is assumed that more than $1.8 million will be spent in professional fees entirely to Miami area firms. Given an average profit margin of 15% and 30% overhead for these firms, this equates to $1.0 million in total professional wages. Taxes and impact fees to the City and County during the construction period will be approximately $965,000 which will be available for public expenditures associated with the project including developmental, administrative, permitting, schools, and other costs. A detail profile of impact fees and other relevant non -impact fees paid to the City and Miami -Dade County as a result of the development of Gallery Art is included in the following table: State of Florida 2002 ES-202 (Quarterly) • • Economic Impact Analysis — Gallery Art — 333 Biscayne Gallery Art Condominium Economic Impact Analysis impact and Other Fees Impact Fees: Total City of Miami Development Impact Fee (Ord. 10426) $156,813 City ..of..Miami ..Development .Impact Admin..Fee $4,704 Miami Dade County Schools $254,898 TOTAL IMPACT FEES $416,415 Other/Non-Impact Fees: Miami Dade W.A.S.A. Connection Fee $234,165 Building Permit Fee $31,144 Roadway Impact Fee $160,030 Variance Fee (height) $11,690 Energy Installation Fee $22,240 M.U.S.P Application Fee $65,000 Dade County Code Compliance $16,000 Radon Gas Fee $2,224 Fire Plan Review Fee $2,002 Ground Cover Fee $828 Land Use/Zoning, Review for Bldg.Permit $786 Certicate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES $546,393 TOTAL PROJECT FEES $962,809 Source: City of Miami Planning, Building & Zoning Dept.; Miami Dade County; H&H Development Note: Lambert Advisory was provided development plans and physical characteristics for the Gallery Art development. The analysis herein relies upon data provided by H&H, and/or estimates made by Lambert, which may be subject to change. On -Going Impact from Tenant and Shopper Expenditure Based,upon demographic and condominium sales trends inthe area, Gallery Art resident basis expected to primarily be younger working professionals. Considering the estimated proposed average sale price of $300,000, it is assumed that the residents will comprise mostly middle to upper -middle income individual/households with a 2003 median household income of at least $85,000. Therefore, with a total of 166 households in the building, total personal income for the building is estimated to exceed $14.1 million. Assuming 50 percent of the owners will be new residents to the City, the marginal added personal income to flow into the Miami area is in the range of $7.0 million. To measure the marginal impact of $7.0 million in household income on retail sales and additional space demanded, we have used the Lambert Advisory Retail Trade Model to develop estimates. The full model is included as an Attachment to this report, but the following table highlights additional retail expenditure and demand for space as a result of development and sale of the units by 2007. • • • Economic Impact Analysis --- Gallery Art --- 333 Biscayne Area Expenditure Potential (From Net New Miami — Gallery Art Residents) 2007 Gallery Art Condominium Area Expenditure Potential (from Net New Miami - Gallery Art Residents) 2007 Est. Marginal Growth Expenditure Sales Per Square Feet 2007 Square Foot Demanded Type of Good General Merchandise $154,799 $227 682 Apparel and Accessories $148,932 $290 514 Furniture and Home Equipment $61,731 $227 272 Electronic and Appliance Stores $59,042 $200 295 Sporting Goods, Books and Music Stores $56,316 $250 225 Miscellaneous Shoppers Goods $85,894 $420 205 Shoppers Goods - Sub -Total $566, 715 $258 2,192 Food Stores $790,926 $422 1,874 Eating & Drinking Establishments $489,283 $375 1,305 Health & Personal Care Stores $254,220 $407 625 Liquor $16,968 $280 61 Convenience Goods - Sub -Tot& $1,551,398 $401 3,864 Building Materials $152,531 $115 1,326 Total $2,270,643 $308 7,383 Impact from On -Going Operations of the Building There are a number of areas where there will be positive public benefit or economic impact from the on -going operation of the residential and retail space. These include: • Additional Employment from Operation of the Condominium Community and Store • ' Property Tax Revenue to the City of Miami and Miami -Dade County • Increased Sales Tax Revenue from Store to State and County • Purchase of Goods and Services We estimate that approximately seven FTE workers will be needed to operate the building. Skills ranging from building management, parking garage attendants, maintenance staff, and security personnel will be required. At an average Miami -Dade County wage of $34,635' the operation of the building and stores will create approximately $243,000 in wages each year. Jobs created will be available to a wide range of area residents with various skill levels. Additionally, an estimated $150,000 in goods and services will be purchased on an annual basis within Miami -Dade. This includes cleaning services, maintenance supplies, utilities, etc. 2 State of Florida 2002 ES-202 (Quarterly) • • • Economic Impact Analysis — Gallery Art — 333 Biscayne Finally, the Gallery Art development 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 26.9155 (per thousand dollars of value), broken down as follows: Gallery Art Condoninium Economic impact Analysis Ad Valorem Tax Breakdown Item Annual Millage Tax, City of Miami Operating 8.762 $370,895 City of Miami Debt 1.080 $45,716 School Operations 8.418 $356,334 School Debt 0.682 $28,869 Environmental Projects 0.100 $4,233 S. Florida Water Management 0.597 $25,271 FIND 0.0385 $1,630 County Millage 5.967 $252,583 County Debt 0.285 $12,064 Children's Trust 0.5 $21,165 Library 0.486 $20,572 TOTAL 26.9155 $1,139,333 Source: Dade Miami Dade County Property Appraiser Real property is typically assessed at between 80 and 90 percent of Fair Market Value. For this analysis, we estimate ad valorem taxes for Gallery Art based upon 85 percent of the projected average sale price of $300,000, which for this analysis includes the value of the retail area, or $42.3 million in assessed value. Therefore, the real property taxes that will be generated annually from the property should be roughly $1.14 million by 2007. 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 7 FTE jobs created as a result of building and retail operations is assumed to have a 1.2 multiplier impact of eight additional jobs. All multipliers are derived from the U.S. Department of Commerce's 1999 RIMS II model. These are indirect secondary and tertiary impacts which are created as the ripple impact of the primary employment related to the operation of the building and new retail space which will be felt throughout the region. • • • Economic Impact Analysis — Gallery Art — 333 Biscayne Summary Economic Impacts from Gallery Art Condominiums Short Term Construction Employment & Expenditure Impact Full Time Jobs Created 185 Total Direct Wages Created $13,200,000 Additional Professional Wages (Miami -Dade County) $1,100,000 Impact Fees Toward Public Expenditure $965,000 Total Impact from Short Term Const, Employment & Expend. $15,265,000 Impact from On-Goig Resident and Shopper Expenditure Impact Marginal Expenditure Growth — Residents (2007) $2,270,000 Other Expenditure $0 Marginal Impact from On -Going Resident and Shopper Expend. $2,270,000 Im act from On-Goin O erations of the Buildin /Retail Im act Full Time .Jobs 7 Total Direct Wages Created $243,000 Goods & Service Purchased in Miami -Dade County $150,000 $1,139,000 Ad Valorem Taxes Total Impact from On -Going Operations of the Building/Retail $1,532,000 Indirect Flow Through Benefits — Employment Impact Full Time Jobs Indirect) — Miami Dade County 8 Total Indirect Wages Created $275,000 Total Flow Through Indirect Benefits, $275,000 Based, upon the analysis set forth herein, the Gallery Art 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 approximately 185, with on -going annual employment of 15 full-time jobs. Accordingly, there is an estimated $15.3 million impact from short term construction employment and expenditures, and a stabilized $3.8 million annual revenue stream from resident/shopper expenditures and building operations (including real property taxes).