Loading...
HomeMy WebLinkAboutEconomic Study• ECONOMIC IMPACT ANALYSIS LE CHANTICLEER (Condominium and Retail Development) • - Prepared by - Lambert Advisory, LC Prepared for - Sikma Corporation March 4, 2004 • o • Economic Impact Analysis — Le Chanticleer Economic Impact Analysis Le Chanticleer Lambert Advisory has completed an Economic Impact Analysis for the development of Le Chanticleer, a mixed use residential and commercial project located on the southwest corner of Flagler Street and Southwest 6th Avenue, 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 Le Chanticleer development and prepare an estimate of such benefits to the City of Miami. Le Chanticleer property is situated immediately west of Miami's central business district. 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 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. We have completed this analysis on the basis that development and performance information of the project in terms of sale price, absorption, timing, and costs has been provided by Sikma Corporation. As such, we have not independently verified this information or data. Additionally, the economic impact analysis contemplated herein relates only to the condominium and retail components of the development plan; as such, subsequent phases of development (including proposed office space) has not been included as part of this analysis. A profile of the project is as follows. • • • Economic Impact Analysis Le Chanticleer Le Chanticleer 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) Maximum Development Area (FAR) Residential FAR Retail FAR (not inlcuding restaurant) Restaurant FAR Gross Parking Area* 1.80 acres 21 stories 245 units 10,600 sq.ft. 497 spaces 517,184 sq.ft. 303,474 sq.ft. 292,874 sq.ft. 7,500 sq.ft. 3,100 sq.ft. 213,710 sq.ft. Source: Sikma Corporation Note: Estimates above based upon data provided by Sikma Corporation, and/or estimates made by Lambert Advisory, which may be subject to change. General features and building profile is net of proposed office space. Development of Le Chanticleer property is expected to commence construction by mid- 2005. The construction process is anticipated to be approximately eighteen months, with occupancy planned for early 2007, Based upon the information provided, construction and subsequent operations of Le Chanticleer 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 and shopper expenditure • Long -Term operating employment and operating expenditure • Indirect secondary and tertiary 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 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. • • • Economic Impact Analysis — Le Chanticleer 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 as provided by Sikma Corporation (rounded): Development Costs Le Chanticleer Item Cost Hard Costs $ 29,930,000 Soft COstS (includes contingency, profit) $ 8,195,000 Total $ 38,125,000 Note: Hard and soft costs provided by Sikma Corporation; Soft costs include a Housing Trust Fee in the amount of roughly $368,000. 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 ($18.0 million) will be spent in labor and 40 percent ($11.9 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 benefitfoverhead multiplier per worker, there will be nearly 250 Full Time Equivalent (FTE) jobs created over the period, Additionally, it is assumed that more than $750,000 will be spent in professional fees entirely to Miami area firms, Given an average profit margin of 15% and 30°/0 overhead for these firms, this equates to $400,000 in total professional wages. Taxes and impact fees to the City and County during the construction period will be approximately $1.6 million which will be available for public expenditures associated with the project including developmental, administrative, permitting, schools, and other costs. Importantly, the City of Miami Impact Fee (Ordinance 10426) for Le Chanticleer's residential component has reportedly been waived as the property is located within an "exemption" district defined by the City as a community development area, However, the development is subject to a Housing Trust Bonus fee submitted to the City for an 1 State of Florida 2002 ES-202 (Quarterly) • • • Economic Impact Analysis — Le Chanticleer allocation of additional residential square footage. A detail 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 Le Chanticleer is included in the following table: Le Chanticleer Economic Impact Analysis Impact and Other Fees Impact Fees: Total City of Miami Development impact Fee (Ord. 10426) $12,731 City of Miami Development Impact Admin. Fee $382 City of Miami Housing Trust Bonus (Fee) $362,297 Miami Dade County Schools $418,798 TOTAL IMPACT FEES $794,208 Other/Non-Impact Fees: Miami Dade W.A.S.A. Connection Fee $397,555 Building Permit Fee $70,089 Roadway Impact Fee $229,313 Variance Fee (height) $0 Energy Installation Fee $51,718 M.U.S.P Application Fee $45,000 Dade County Code Compliance $19,063 Radon Gas Fee $5,172 Fire Plan Review Fee $4,655 Ground Cover Fee $828 Land Use/Zoning, Review for Bidg.Permit $1,491 Certicate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES S825,169 TOTAL PROJECT FEES $1,619,376 Source: City of Miami Planning, Building & Zoning Dept.; Miami Dade County; Sikma Corporation; Lambert Advisory. Fees included above may be subject to change. On -Going Impact from Tenant and Shopper Expenditure Based upon demographic and rental housing trends in the area, Le Chanticleer resident base is expected to primarily be younger working professionals. Considering the proposed average sale price of $225,000, it is assumed that the residents will comprise mostly middle and upper income individual/households with a 2003 median household income of at least $80,000. Therefore, with a total of 245 households in the building, total personal income for the building is estimated to exceed $19.6 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 $9.8 million, To measure the marginal impact of $9.8 million in household income on retail sales and additional space demanded, we have used the Lambert Advisory Retail Trade Model to develop estimates. The following table provides a summary of additional retail 5 • • • Economic Impact Analysis — Le Chanticleer expenditure and demand for space as a result of development and sale of the units by early 2007. Le Chanticleer Area Expenditure Potential (from Net New Miami - Le Chanticleer Residents) 2007 Est. Marginal Growth Expenditure Sales Per Square Feet 2007 Square Foot Demanded Type of Good General Merchandise $216,719 $227 955 Apparel and Accessories $208,505 $290 719 Furniture and Home Equipment $86,424 $227 381 Electronic and Appliance Stores $82,659 $200 413 Sporting Goods, Books and Music Stores $78,843 $250 315 Miscellaneous Shoppers Goods $120,251 $420 286 Shoppers Goods - Sub -Total $793,400 $258 3,069 Food Stores $1,107,297 $422 2,624 Eating & Drinking Establishments $684,997 $375 1,827 Health & Personal Care Stores $355,908 $407 874 Liquor $23,755 $280 85 Convenience Goods - Sub -Total $2,171,957 $401 5,410 Building Materials $213,543 $115 1,857 Total $3,178,901 $308 10,336 In addition to the impact that Le Chanticleer residents will have both locally and regionally, the development includes 10,600 square feet of retail (and restaurant) that will occupy the ground floor of the building. This additional retail space will primarily attract expenditure from the area surrounding the property, with limited additional support from visitors from outside of the area. Assuming that 20 percent of the expenditure in Le Chanticleer retail comes from outside of the City, and based upon a Sales per Square Foot (for Shopper Goods) of $308, close to $650,000 will be expended within the City per year which is now going to other areas. 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 • • • Economic Impact Analysis — Le Chanticleer We estimate that approximately eight FTE workers will be needed to operate the building and eight FTE workers for the store(s)/restaurant. Skills ranging from building management, parking garage attendants, maintenance staff, retail workers, and security personnel will be required. At an average Miami -Dade County wage of $34,6352 the operation of the building and stores will create approximately $550,000 in wages each year. Jobs created will be available to a wide range of area residents with various skill levels. Increased sales tax revenue would result from the operation of the retail space of 10,600 square feet. Assuming the net new retail expenditure in stores totals $650,000, approximately $42,000 in additional sales tax will be collected from retail sales. Additionally, an estimated $200,000 in goods and services will be purchased on an annual basis within Miami -Dade. This includes cleaning services, maintenance supplies, utilities, etc. Finally, Le Chanticleer 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 26.918 (per thousand dollars of value), broken down as follows: Le Chanticleer Economic Impact Analysis Ad Valorem Tax Breakdown Item Annual Millage Tax 1 City of Miami Operating 8.7625 $419,262 City of Miami Debt 1.080 $51,675 School Operations 8.418 $402,779 School Debt 0.682 $32,632 Environmental Projects 0.100 $4,785 S. Florida Water Management 0.597 $28,565 FIND 0.0385 $1,842 County Millage 5.969 $285,601 County Debt 0.285 $13,636 Children`s Trust 0.500 $23,924 Library 0.486 $23,254 TOTAL 26.918 $1,287,965 Source: Miami Dade County Property Appraiser 2003 Real property is typically assessed at between 80 and 90 percent of Fair Market Value. For this analysis, we estimate ad valorem taxes for The Blue based upon 85 percent of the projected average sale price of $225,000, plus the retail area valued at $110 per square foot, or $48.0 million in assessed value. Therefore, the real property taxes that will be generated annually from the property should approximate $1.3 million by 2007/8. 2 State of Florida 2002 ES-202 (Quarterly) • • • Economic Impact Analysis — Le Chanticleer Accordingly, this represents an estimated net marginal increase of roughly $1.0 million over the ad valorem tax collection the City would receive if the property were valued at an estimated land assessment (or indicated acquisition price) of $5.6± million. 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 eight FTE jobs created as a result of building and retail operations is assumed to have a 1.2 multiplier impact of nine additional jobs. Additional retail employment at the property is expected to add an additional nine jobs from the multiplier impact. 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 - Le Chanticleer Summary Economic Impacts from Le Chanticleer Short Term Construction Employment & Expenditure Impact 250 Full Time Jobs Created Total Direct Wages Created $18,000,000 Additional Professional Wages (Miami -Dade County) $400,000 Impact Fees Toward Public Expenditure $1,620,000 Total Impact from Short Term Const. Employment & Expend, $20,020,000 Impact from On -Going Resident and Shopper Expenditure Impact Marginal Expenditure Growth - Residents (2007) $3,180,000 $650,000 Marginal Expenditure - Le Chanticleer Shoppers (2007) Marginal Impact from On -Going Resident and Shopper Expend. $3,830,000 Impact from On -Going Operations of the Building/Retail Impact Full Time Jobs 16 Total Direct Wages Created $550,000 Sales Tax from Additional Retail Sales (2007) $42,000 $200,000 Goods & Service Purchased in Miami -Dade County Ad Valorem Taxes (2007) $1,290,000 $2,082,000 Total Impact from On -Going Operations of the Building/Retail Indirect Flow Through Benefits - Employment Impact Full Time Jobs (Indirect) - Miami Dade County 16 Total Indirect Wages Created $550,000 Total Flow Through Indirect Benefits $550,000 Based upon the analysis set forth herein, Le Chanticleer 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 250, with on -going annual employment of 36 full-time jobs. Accordingly, there is an estimated $20.0 million impact from short term construction employment and expenditures, and a stabilized $5.8 million annual revenue stream from resident/shopper expenditures and building operations (including real property taxes).