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Advisory
ECONOMIC IMPACT ANALYSIS
SEVEN 7
- Prepared by -
Lambert Advisory, LC
- Prepared for -
Seven Land Development, LLC
March 2006
Economic Impact Analysis Seven 7
Economic Impact Analysis
Seven 7
Lambert Advisory has completed an economic impact analysis for the development of
Seven 7, a condominium project with approximately 5,000 square feet of
retail/commercial space located at 2728 N.E. 2nd Avenue in the City of Miami, FL. 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 Seven 7 development, and can supplement the
major use special permit application to be submitted to the City of Miami.
The Seven 7 property is located just north of the northern boundaries of downtown
Miami, and is accessible to major thoroughfares, including I-95 and I-395. The
residential 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.
We have completed this analysis on the basis of development and performance
information (i.e., price, absorption, timing, costs) that has been provided by Seven Land
Development, LLC (Seven Land); Lambert has not independently verified this
information or data and furthermore cannot attest to the accuracy of these estimates
and as such should not be relied upon beyond the scope of this analysis.
A profile of the project follows.
Seven 7
Economic Impact Analysis
Building Features & Profile
Site Size (Net) 0.72 acres
Building Height (Floors) 18 Floors
Number of Residential Units 88 units
Parking 138 spaces
Residential FAR
New Commercial (Retail)
Gross Building Area (w/parking)
93,195 sq.ft.
5,013 sq.ft.
203,038 sq.ft.
Source: Seven Land, Lambert Advisory, 2006.
Construction of Seven 7 is expected to commence in Third Quarter 2006, with a period
of 22 months. Occupancy is planned for Third Quarter 2008.
Based upon the information provided and estimates made, construction and subsequent
operations of Seven 7 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:
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Economic Impact Analysis Seven 7
1. Short-term construction employment and expenditure
2. Long-term residential 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 (not including land):
Seven 7
Economic Impact Analysis
Development Costs
Item Cost
Hard Costs $21,100,000
Soft Costs $3,450,000
Total $24,550,000
Source/Note: Development costs (rounded) above provided by
Seven Land and may be subject to change. Lambert Advisory has
not verified the accuracy of this information.
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 ($12.6 million) of hard costs, and
materials will account for 40 percent ($8.4 million). Over an estimated 22-month
construction period, at an average annual construction wage of $54,1801 in Miami -Dade
County, with a benefit/overhead multiplier of 1.4, there will be 91 Full Time Equivalent
(FTE) jobs created.
State of Florida ES-202, Second Quarter 2005 (Building Construction)
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Economic Impact Analysis Seven 7
Additionally, over $500,000 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 percent and overhead of 30 percent, nearly $275,000 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 $560,000, which will be available for public expenditures
associated with the project including developmental, administrative, permitting, schools,
and other costs2. 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 Seven 7 is
included in the following table.
Seven 7
Economic Impact Analysis
Impact and Other Fees
Impact Fees:
City of Miami Development Impact Fee (Ord. 10426)
City of Miami Development Impact Admin. Fee
Miami Dade County Roads
Miami Dade County Schools
Total
$93,531
$2,806
$89,247
$139,409
$324,993
Other/Non-Impact Fees:
City of Miami Bonus Fees $0
Miami Dade W.A.S.A. Connection Fee $124,776
City of Miami Building Permit Fee $28,905
Energy Installation Fee $18,014
M.U.S.P Application Fee $45,000
Dade County Code Compliance $12,275
Radon Gas Fee $1,801
Fire Plan Review Fee $1,621
Ground Cover Fee $626
Land Use/Zoning, Review for Building Permit $2,000
Certificate of Occupancy $250
Application Fee $35
TOTAL OTHER FEES $ 235,304
TOTAL PROJECT FEES $560,297
Source: City of Miami Planning, Building & Zoning; Miami Dade County; Seven Land;
Lambert Advisory. Fees above may be 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 (eg. Tree Trust) and/or State (eg. Energy Conservation) that has 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.
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Economic Impact Analysis Seven 7
2. Long -Term (On -Going) Resident Expenditure
Based on demographic and for -sale housing trends in the area, the Seven 7 resident
base is expected to consist primarily of younger working professionals. Considering the
proposed average sale price of roughly $500,000, it is assumed that the residents will be
mostly middle and upper income individuals/households with incomes of at least
$110,000. Therefore, with a total of 88 households in the building, total personal
income for the building is estimated to be nearly $9.6 million. Estimating that
approximately half of the owners will relocate from outside the City, and accounting for
a slight reduction for second home (non resident buyers), over $4.8 million of marginal
personal income will flow into Miami.
We have estimated the marginal impact of $4.8 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 of the apartments by 2009.
Seven 7
Area Expenditure Potential (from New -to -Seven Residents)
2009
Type of Good
Estimated Marginal
Expenditure Growth
2010
Sales per
Square Foot
Square Feet
Demanded
General Merchandise
Apparel and Accessories
Furniture and Home Equipment
Electronic and Appliance Stores
Sporting Goods, Books and Music Stores
Miscellaneous Shoppers Goods
Shoppers Goods - Sub -Total
Food Stores
Eating & Drinking Establishments
Health & Personal Care Stores
Liquor
Convenience Goods - Sub -Total
Building Materials
Total
$109,173
$105,035
$43,536
$41,640
$39,717
$60,577
$227
$290
$227
$200
$250
$420
481
362
192
208
159
144
$399,680
$557,806
$345,071
$179,291
$11, 967
$258
$422
$375
$407
$280
1,546
1,322
920
441
43
$1, 094,135
$107,573
$401
$115
2,725
935
$1,601,387
$308
5,207
Source: Lambert Advisory, 2006
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Economic Impact Analysis Seven 7
In addition to the net new expenditures attributable to Seven 7 residents, the 5,013
square feet of new 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 Seven 7 retail
comes from outside the City, and based upon sales per square foot of $308,
approximately $335,000 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 development. These include:
• Additional employment from operation of the condominium community and
stores;
• Property tax revenue to the City of Miami and Miami -Dade County; and
• Purchase of goods and services.
We estimate that three FTE workers will be needed to operate the building and five FTE
workers will be employed in the retail stores. Positions such as building managers,
parking garage attendants, maintenance staff, and security personnel will need to be
filled. At an average Miami -Dade County wage of $39,7403 the operation of the building
will generate approximately $320,000 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 5,013 square feet of
new retail space. Assuming the net new retail expenditure in stores totals $335,000,
approximately $24,000 in additional sales tax will be collected from retail sales.
Additionally, an estimated $175,000 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 Seven 7 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 (2005) millage rate of 25.4728 (per
thousand dollars of value), broken down as follows.
State of Florida ES-202, Second Quarter 2005
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Economic Impact Analysis Seven 7
Seven 7
Economic Impact Analysis
Ad Valorem Tax Breakdown
Item
Millage Annual Tax
City of Miami Operating 8.4995 $335,254
City of Miami Debt 0.765 $30,175
School Operations 7.947 $313,461
School Debt 0.491 $19,367
Environmental Projects 0.100 $3,944
South Florida Water Management 0.597 $23,548
FIND 0.0385 $1,519
County Millage 5.835 $230,155
County Debt 0.285 $11,242
Children's Trust 0.429 $16,921
Library 0.486 $19,170
TOTAL 25.473 $1,004,755
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 Seven 7 based on
85 percent of total sales proceeds (unit sale value). Accordingly, the development
should generate approximately $1.0 million in real property taxes by 2009. This
represents an estimated net marginal increase of roughly $1.8+ million over the ad
valorem tax collection the City would receive if the property were valued at current use.
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 building operations and retail employment. The 8
FTE jobs created as a result of building and retail operations are assumed to have a 1.2
multiplier impact of 10 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.
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Economic Impact Analysis — Seven 7
Seven 7
Economic Impact Analysis
Summary, Economic Impacts
Impact
Short Term Construction Employment & Expenditure
Full Time Jobs 91
Direct Wages $9,000,000
Professional Wages (Miami -Dade County) $300,000
Impact Fees Toward Public Expenditure $600,000
Total Impact, Short Term Const. Employment & Expenditure $9,900,000
Long -Term (On -Going) Resident Expenditure
Marginal Expenditure Growth — Residents (2009) $5,400,000
Marginal Impact from On -Going Resident Expenditure $5,400,000
Long -Term (On -Going) Building Employment and Operating Expenditure
Full Time Jobs 8
Total Direct Wages Created $430,000
Sales Tax from Additional Retail Sales (2009) $23,000
Goods & Service Purchased in Miami -Dade County $100,000
Ad Valorem Taxes (2009) $1,000,000
Total Impact from On -Going Operations of the Building/Retail $1,600,000
Indirect Flow Through Benefits
Full Time Jobs (Indirect) — Miami Dade County 10
Total Indirect Wages Created $540,000
Total Flow Through Indirect Benefits $540,000
Source: Lambert Advisory, 2006.
Based upon the analysis set forth herein, the Seven 7 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 91, with on -going annual
employment of 18 FTE jobs. Accordingly, there is an estimated $10.0± million impact
from short-term construction employment and expenditures, and a stabilized $7.0±
million annual revenue stream from resident expenditures and building operations
(including real property taxes).
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