HomeMy WebLinkAboutSubmittal-Neisen Kasdin-Economic Impact Analysis - Magic City Innovation DistrictI Submitted into the public
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ADVISORY
ECONOMIC IMPACT ANALYSIS:
MAGIC CITY INNOVATION DISTRICT
- Prepared by -
Lambert Advisory, LLC
- Prepared for -
MCD Miami, LLC
October 2018
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Economic Impact Analysis
Magic City Innovation District
Introduction and Summary of Key Findings
Economic Impact Analysis — Magic City Innovation District
Submitted into the public F
record fqr ite (S)
on 11 CdYClerk
Lambert Advisory has completed an updated economic impact analysis for the proposed
development of Magic City Innovation District, a large-scale mixed use residential and commercial
project located in the City of Miami's Little Haiti neighborhood. The analysis estimates the tangible
direct and indirect economic impacts that will be derived from the construction and operation of
the development and based upon the inputs and assumptions set forth herein. This report
identifies and quantifies the benefits created by the proposed Magic City Innovation District
development within Miami -Dade County and the City of Miami. The methodology, assumptions,
and analysis governing this document are detailed in the Methodology, Analysis and Results section
below, with a summary of economic benefit headlines as follows:
• For all phases of the proposed 16 -year development period, there will be an estimated 584
short term construction jobs average annually, which will create more than $520 million in
short term construction wages and expenditure aggregated during this period -
o including an estimated $42 million in permit and impact fees;
There will be an estimated $188 million annual marginal expenditure generated from
residents, hotel visitors, retail patrons, and office tenants upon stabilized operations;
• The proposed development will generate an estimated total of $237 million in net new ad
valorem tax revenue during the 16 -year period from project commencement (in 2019) to
project build-out/stabilized operations (in 2034) in 2018 dollars.
o Upon stabilized operations, the proposed development will generate more than $37
million in marginal annual ad valorem taxes (in 2018 dollars), $1.3 million in Hotel
Bed Tax Revenue, and $4.0 million in total sales tax collections; and,
The development will create more than 11,680 direct and indirect full-time jobs and
approximately $640 million in direct and indirect wages annually related to building
employment and operating expenditures.
Methodology, Analysis and Results
The Magic City Innovation District property is situated in the City of Miami's Little Haiti
neighborhood, and generally bounded on the north at NE 63rd Street, on the east by the rail road
tracks and NE 4th Court, on the south by NE 60th Street, and on the west by NE 2nd Avenue. The
property is adequately accessible to major thoroughfares, including I-95, I-195, and US 1. The
proposed residential, hotel, retail, and office 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 existing 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 generalized development and performance
information (i.e., development program by use, development timing, development costs, residential
and commercial sales/rental rates, absorption/occupancy, and other operating performance
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y Innovation District
measures) that is estimated based upon information provided by MCD Miami, LLC (Developer).
Importantly, Lambert has not independently verified through a market study, or otherwise, the
development cost and/or operating performance data and cannot attest to the accuracy of those
estimates herein. Given the level of variability in development details at this point in time, the
analysis herein is being prepared on an order -of -magnitude basis.
The analysis herein has been prepared to reflect the economic impact of development related
activity upon completion within a 16 -year development timeframe (from current date), and for the
purposes of this analysis assumes the period in which the recurring economic impacts from the vast
majority of the residential and commercial uses will be derived from operations. The economic
impacts as stated herein from construction and operation of the Magic City Innovation District
development are presented in current (2018) dollars. Any change in development and/or
operating assumptions from those utilized as part of this analysis can have a material impact on the
direct and in -direct economic indicators stated herein.
The overall development master plan contemplated for this analysis includes: 2,630 residential
units; 432 hotel rooms; 1.98 million square feet of net office space; 344,548 square feet of net retail
space; and 101,669 square feet of storage. There will be 5,690 garage parking spaces supporting
the subject development.
A profile of the project follows:
Figure 1: Magic City Innovation District - Site & Building Summary Profile
Source: MCD Miami, LLC
Residential Units
2,630
units
Hotel Rooms
432
rooms
Office Space (net)
1,987,686
sq.ft.
Retail Space (net):
344,548
sq.ft.
Expo/Storage (net)
101,669
sq.ft.
Parking Spaces:
6,081
spaces
As noted, construction of Magic City Innovation District is projected to be completed within a
sixteen -year timeframe. Based upon the information provided and estimates made, construction
and subsequent operations of Magic City Innovation District will generate considerable benefits to
the immediate area, the City of Miami, and the broader Miami -Dade County 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, worker and visitor expenditure
3. Long-term building employment and operating expenditure
4. Indirect flow-through benefits (employment)
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:
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• Direct Expenditures - disbursements for site acquisition and development (hard and soft costs),
resident/worker/visitor expenditure, and expenditures associated with the operation of the
grounds and building
• 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:
Figure 2: Magic City Innovation District - Summary of Development Costs
Source: MCD Miami, LLC
Hard Costs $1,132,000,000
Soft Costs $433,000,000
Total $1,565,000,000
Note: Development costs do not include land cost
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 ($680 million) of hard costs, and materials will
account for 40 percent ($452 million). At an average annual construction wage of $53,7281 in
Miami -Dade County, with a benefit/overhead multiplier of 1.3, there will be approximately 608 Full
Time Equivalent (FTE) jobs created average annually over the 16 -year development timeline; or,
9,700 FTE jobs in aggregate during the construction period.
Additionally, over $30 million in professional fees (or approximately 2.0 percent of total
development costs excluding land) 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 $17 million in professional wages will be paid out by these firms.
The proposed development will generate significant Impact and other fees payable to the City and
County during the construction period which will be available for public expenditures associated
with the project including roadways, schools, parks, developmental, administrative, permitting, and
other costs. It is very difficult at this point to determine the impact fee and other fees since many of
these costs are dependent upon certain utility and design components that underlie the fee
I Florida Department of Economic Opportunity, QECW 0' Quarter 2017
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Economic Impact Analysis — Magic Cihi Innovation District
calculation (ie. the number of seats in a restaurant determines gallons per day of water/sewer
utilization and, in turn, the associated water and sewer connection fees). Nonetheless, based upon
an understanding of impact fees related to large-scale mixed-use development, the impact fees are
estimated to be more than $42 million over the construction period, and more than half of these
fees should be received by the City of Miami.
2. Long -Term (On -Going) Resident, Shopper, Employment and Visitor Expenditure
The Magic City Innovation District development will generate long term area -wide expenditure
from residents living in the development, shoppers and hotel guests visiting the property, and office
and workers/tenants within the building. Following is a summary of expenditure by demand
component:
Residential. The Magic City Innovation District development contemplates new, quality
housing for its existing neighborhood resident base, as well as for the growing community in
and around the area. The development plan envisions 2,630 units accommodating a broad
range of tenants. It is estimated that the Magic City Innovation District will primarily serve
families with average household income generally between $55,000 and $75,000. Therefore,
with a total of approximately 2,630 households in the building (at 95 percent stabilized
occupancy), total personal income for the building is estimated to be nearly $187 million.
However, a portion of this expenditure represents residents who currently reside within the
City limits and simply moving from one location within the City (or Downtown area) to another.
In the effort to quantify the level of housing demand the Magic City Innovation District will
generate from new residents outside of the City, Lambert had discussions with select residential
industry representatives serving the greater Downtown Miami area. Although we were unable
to gather detailed statistical data from these representatives, cursory discussions point to
relative consensus that a minimum of approximately 50+ percent of the resident base moving
into the greater Downtown area is from outside of the City. Considering this, we assume that
half of the tenants within Magic City Innovation District will relocate from outside of the City,
or, nearly $94 million of marginal personal income will flow into Miami.
We have estimated the marginal impact of $94 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 Magic City Innovation District apartments upon stabilized operations (in 2018 $'s) and
indicates potential net new demand for retail space of approximately 56,000 square feet.
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F_conomic Impact Analysis — Magic City Innovation District
Figure 3: Magic City Innovation District - Area Expenditure Potential (from New -to -Miami
Magic City Innovation District Residents)
General Merchandise
$1,236,800
$300
4,123
Apparel and Accessories
$638,484
$330
1,935
Furniture and Home Equipment
$174,368
$270
646
Electronic and Appliance Stores
$170,694
$350
488
Sporting Goods, Books and Music Stores
$83,082
$280
297
Miscellaneous Shoppers/Other Goods
$365,390
$325
1,127
Shoppers Goods - Sub -Total
$2,668,818
$310
8,615
Food Stores
$4,994,888
$300
16,650
Eating & Drinking Establishments
$9,189,455
$395
23,264
Health & Personal Care Stores
$2,144,454
$385
5,570
Convenience Goods - Sub -Total
$16,328,797
$359
45,484
Building Materials $258,432 $127 2,043
$19,256,046 $343 56,142
Retail: The roughly 345,000 square feet (net) of retail/showroom planned will also attract
retail expenditure. Given its potential positioning as a destination property, it is assumed that
at least 50 percent of the expenditure in Magic City Innovation District retail will come from
outside the City, and based upon an average sales per square foot (for Shopper Goods and
Eating and Drinking Establishments) of $340, approximately $60 million will be expended
within the City per year which is now going to other areas - assuming 95 annual stabilized
occupancy.
Hotel. For the 432 hotel rooms, we assume that the hotel inventory in total will have an
average annual occupancy of 70 percent (or more than 110,000 occupied annual room nights),
with an average daily rate of $230. Furthermore, based upon a hotel guest surveys completed
by Lambert Advisory for the Miami Downtown Development Authority (DDA) during the past
several years, we estimate 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 (for an average 2-3 night length of
stay), or nearly $26 million in additional marginal visitor expenditure in the Miami area
assuming 50 percent of the expenditure is net new hotel demand to Miami and 25 percent is
already captured in the Magic City Innovation District retail (as described above).
Office: The development proposes approximately 1.98 million total rentable office square feet,
which we assume will operate at a stabilized 10 percent vacancy factor. Based upon recent
office metrics studies for the Miami DDA, and on a conservative basis, there is an average 230
square feet per employee for office space. Considering this, Magic City Innovation District office
space will accommodate approximately 5,700 workers. Based upon data published by the
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Economic Impact Analysis —Magic City Innovation District
Urban Land Institute (ULI) in a 2011 office worker survey, the average downtown office worker
spends roughly $5,790 annually on goods and services during the work day. Assuming that up
to 70 percent of new office tenants will be new to Miami, and accounting for the potential that
50 percent of this retail expenditure is already captured in the Magic City Innovation District
retail, total additional worker expenditures are estimated to be nearly $7.8 million.
Expo/Storage: The 101,000 square feet of expo/storage will provide a key amenity to the
overall master plan. The primary economic benefit for this use will be fiscal -related (ad
valorem tax), as type facilities generally require marginal employment and operating costs.
In sum, there is estimated to be more than $188 million in net new retail expenditure annually from
the proposed Magic City Innovation District development, and summarized as follows:
Figure 4: Summary of Retail Expenditure Generated (by Use) from Magic City Innovation
District Upon Stabilized Operations
USE EXPENDITURE
Residential
$94,000,000
Retail
$60,000,000
Hotel
$26,000,000
Office
$7,800,000
Expo/Storage
n/a
TOTAL
$187,800,000
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 residential buildings, retail, office and hotel
facilities;
Property tax revenue to the City of Miami and Miami County, as well as Sales Tax to the
State; and
Purchase of goods and services.
As summarized above, we estimated employment for office to derive expenditure for those specific
uses. However, there will also be employment from operation of the residential buildings, retail
space, and hotel. We estimate that 88 FTE workers will be needed to operate the residential
buildings (1 worker per 30+ units), approximately 950 FTE workers will be employed in the retail
stores (based upon a general estimate of mix of space indicating 1 worker per 150 square feet for
restaurants and 1 worker per 450 square feet for retail), and 215 hotel employees (0.5 workers per
room). Positions such as building managers, parking garage attendants, maintenance staff, and
security personnel will need to be filled. At an average Miami County wage of $54,8522 the
operation of the buildings and related private employment will generate approximately $345
million in wages each year. Positions at various skill levels will be made available to area residents.
2 Florida Department of Economic Opportunity, QECW 4t" Quarter 2017
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Economic Impact Analysis — Magic City Innovation District
Figure 5: Summary of Net New Employment (by Use) and Direct Wages Created by Magic City
Innovation District Upon Stabilized Operations
USE Emnlovment
Residential
0.1
Retail
950
Hotel
215
Office
5.700
TOTAL - Direct Employment
6,953
Average Annual Wages (All)
$54,842
TOTAL - Direct Wages (rd)
$380,000,000
Increased State and local sales tax revenue will result from the operation of the 345,000 square feet
of new retail space. Assuming the net new retail expenditure in stores totals $55 million,
approximately $4.0 million in additional sales tax will be collected from retail sales.
Importantly, 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 Magic City Innovation District is estimated to be $1.3 million per annum.
Finally, the development of Magic City Innovation District will provide significant benefit to the City
and County by way of real property and personal property (ad valorem) taxes. The tax amount is
-Y based upon the County Tax Collector's (2018) millage rate which totals 20.9454 (per thousand
dollars of value) which is allocated to all taxing authorities based upon their individual millage
allocation.3 Specific to the City of Miami, the applicable millage rate for both operating and debt
totals 8.03 (per thousand dollars of value).
Based upon the Magic City master plan financial evaluation prepared by MCD Miami, the
development will generate an estimated total of $237 million in net new ad valorem tax revenue
during the 16 -year period from project commencement (in 2019) to project build-out/stabilized
operations (in 2034) in 2018 dollars. Accordingly, the City of Miami will generate an estimated $90
million in net new ad valorem tax revenue during the same period in 2018 dollars. Lastly, upon
stabilized operations in 2034 and periods thereafter, the Magic City development will generate an
estimated total $23.3 million per year to the County, and $14.3 million per year to the City (in 2018
dollars).4
Figure 6: Summary of Net New Ad Valorem Tax Revenue Created by Magic City Innovation
District
Period
City of Miami
Dade County
Total
16 -Year Buildout
$90.0 million
$147.0 million
$237.0 million
Annual -Stabilized Operations
$14.3 m....,,n
$213.32 ...11lion
$37.6 i'?'iiiiion
3 If proposed budget change is adopted
The methodology to determine Net Present Value (NPV) utilizes an average 2.145 percent inflation rate, which is the average rate of inflation
calculated from the US Bureau of Labor Statistics from 1998 to 2017.
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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 residential and commercial building operations and employment.
This multiplier is derived from Lambert's long-term use and experience with an input-output
model developed by IMPLAN, among the most recognized economic impact modeling systems
in the US providing complete and extremely detailed Social Accounting Matrices (SAM) and
Multiplier Models of local economies.
Based upon our assessment of the IMPLAN modeling processes, development and building
operations are assumed to have a 0.68 multiplier impact. Considering this, the roughly 6,950 FTE
jobs created as a result of residential and commercial operations are estimated to create 4,730
additional jobs. A summary of both short term and long term (recurring) economic impacts from
the proposed Magic City Innovation District development is summarized in the following table.
Figure 7: Magic City Innovation District - Summary of Economic Impacts (Rounded)
rt Term Construction Employment & Expenditure
Full Time Jobs (Average Annual During All Development Phases) 608
Direct Wages (Aggregated During All Development Phases) $520,000,000
Professional Wages (Aggregated During All Development Phases) $17,200,000
Impact Fees Toward Public Expenditure $42,000,000
Total Impact, Short Term Const. Employment & Expenditure $579,200,000
Long -Term (On -Going) Resident and Commerical Expenditure
Marginal Expenditure Growth — Residents $94,000,000
Marginal Expenditure — Retail, Hotel, Exhibition, Office, Industrial $94,000,000
Marginal Impact from On -Going Resident, Commercial Expenditure $188,000,000
Long -Term (On -Going) Building Employment and Operating Expenditure
Full Time Jobs (Annual) 6,950
Total Direct Wages Created $380,000,000
Sales Tax from Additional Retail Sales $4,100,000
Hotel Bed Tax $1,300,000
Total Net Ad Valorem Taxes upon Stabilization (2018's) $37,500,000
Total Impact from On -Going Operations of the Buildings $413,900,000
Indirect Flow Through Benefits
Full Time Jobs (Indirect) — Miami Dade County 4,730
Total Indirect Wages Created $259,200,000
Total Flow Through Indirect Benefits $259,200,000
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