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HomeMy WebLinkAboutSummary Feasibility Study Proposed Mixed-Use Development Briefing November 21 2024Executive Summary of Feasibility Study for Proposed Mixed-Use DevelopmentCity Council Briefing November 21, 2024 Presented and prepared by: Michael P. Cummings, MAI, ISHC Senior Vice President David P. Fuller, MAI Senior Vice President 2Confidential & Proprietary | © 2024CBRE, Inc. Agenda 1. Executive Summary 2. Hotel 3. Multi-Family / Apartments 4. At-Grade Retail 5. Structured Parking 6. Discounted Cash Flow 7. Internal Rate of Return 3Confidential & Proprietary | © 2024CBRE, Inc. VIRGINIA BEACH DEVELOPMENT AUTHORITY Virginia Beach Mixed-Use Development Feasibility Study - Executive Summary The following is a breakdown of the various proposed uses for the subject site. Our research presented in the full reported submitted to the Virginia Beach Development Authority. We note that we have analyzed each proposed use individually and the entire project to determine whether the proposed project is feasible. We have accounted for the existing, latent and induced demand per use and forecasted future cash flows. We have determined that the overall project is feasible and should not materially impact existing supply within the market. 4Confidential & Proprietary | © 2024CBRE, Inc. Virginia Beach Mixed-Use Development Feasibility Study - Executive Summary Hotel We have provided our projections of the occupancy and average daily room rate (ADR) that the proposed Hotel could reasonably be expected to achieve for its first 10+ years of operations. For purposes of this study and report, a 360-room hotel has been considered in our analysis. The following table presents a hypothetical breakdown of the room mix, division of meeting space, food and beverage outlets and amenities for the proposed hotel. Recommended Facilities Property Type Lifestyle Upscale Number of Rooms 360 GBA 216,000 SF GBA per Room 600 SF 100% Guestroom Number SF/Room King Standard Rooms 162 45%320 Double Queen Standard Rooms 126 35%350 King Junior Suites 36 10%480 Double Queen Junior Suites 18 5% 520 King Suites 18 5% 600 Totals 360 100% 350 Meeting Space Potential SF Divisible by Potential Capacity Ballroom 9,000 SF 6 600 Breakout 3,500 SF 4 230 Board Room 2,000 SF 4 130 Pre-Function 3,500 SF 0 230 Totals 18,000 SF 14 1,190 Per Room 50 SF Per Room 50 SF Food and Beverage Potential SF Seats Potential Capacity Signature Restaurant 3,200 SF 160 160 Rooftop Bar 3,200 SF 210 210 Café 400 SF 40 40 Totals 6,800 SF 410 410 Amenities Property In Room Fitness Center Walk In Shower Business Center Iron/Iron board Concierge Minifridge Laundry Valet Safe Parking Garage Sofa Sleeper Ice Machine/Vending Living Area Source: CBRE Hotels The potential guestrooms mix,as well as size and capacity of all the facilities are presented as estimates and standards for illustrative purposes based on comparable, prototypical, and market benchmarks. Upon final planning, the above estimates are likely to change. Projected Opening Date: July 1, 2027. Projected Stabilized Occupancy Rate: 75% Projected Stabilized ADR: $229 Projected Stabilized Net Income: $10.58 million VIRGINIA BEACH DEVELOPMENT AUTHORITY 5Confidential & Proprietary | © 2024CBRE, Inc. Virginia Beach Mixed-Use Development Feasibility Study - Executive Summary Multi-Family Apartments We have provided our projections of the absorption, occupancy and rents for 950 residential units. The following chart shows a summary of the improvements. Improvements Summary and Analysis IMPROVEMENTS SUMMARY AND ANALYSIS Multifamily 4 5 1,844,500 SF 975,625 SF 950 1,350 SF Deck 1,663 2027 Source: Various sources compiled by CBRE Average Unit Size Parking Improvements Year Built Typical Parking Spaces: Functional Utility Number of Units Gross Building Area (975,625SF Apt, 158,220 Retail, 515,530 Parking Deck) (Multi-Family Mid/High Rise)Property Type Net Rentable Area Number of Buildings Number of Stories UNIT MIX Unit Mix/Type Comments No. Units Unit Size (SF) NRA 1BD/1BA 140 14.7% 700 98,000 1BD/1BA 140 14.7% 775 108,500 1BD/1BA 140 14.7% 800 112,000 2BD/2BA 136 14.3% 1,100 149,600 2BD/2BA 136 14.3% 1,150 156,400 2BD/2BA 136 14.3% 1,225 166,600 3BD/2BA 61 6.4% 1,475 89,975 3BD/2BA 61 6.4% 1,550 94,550 Source: Various sources compiled by CBRE Projected Opening Date: July 1, 2027. Projected Leasing Pace: 22 Units Per Month Projected Stabilized Occupancy: 95% Projected Stabilized Average Rent: $2,261 Per Month Projected Stabilized Net Income: $22.39 million VIRGINIA BEACH DEVELOPMENT AUTHORITY 6Confidential & Proprietary | © 2024CBRE, Inc. Virginia Beach Mixed-Use Development Feasibility Study - Executive Summary At-Grade Retail We have provided our projections for the proposed 158,220 square feet of retail space. The proposed retail space is expected to satisfy the demand generated by the 950 residential units, hotel guests and daily visitors to the convention center. Projected Opening Date: July 1, 2027. Projected Stabilized Occupancy: 96% Projected Stabilized Average Rent: $36.75 Per SF Projected Stabilized Net Income: $5.5 million Rendering, not the actual design VIRGINIA BEACH DEVELOPMENT AUTHORITY 7Confidential & Proprietary | © 2024CBRE, Inc. VIRGINIA BEACH DEVELOPMENT AUTHORITY Virginia Beach Mixed-Use Development Feasibility Study - Executive Summary Structured Parking We have provided our projections of the parking associated with the hotel, multi-family units, retail and daily use. In total, there is projected to be approximately 3,500 parking spaces. Out of this total, approximately 1,660+/- spaces will be allocated to the residential units, 400 to the hotel and the 1,500+/- balance to daily use for the Convention Center and/or the Sports Center. Estimated Daily Use Spaces: 1,500 Projected Daily Rate: $15.00 Projected Stabilized Net Income: $3.0 million We note that if the city elects to construct and contribute the 1,500-space parking deck that will be allocated to the Convention Center and/or Sports Center, then the projected income will be removed from the cash flow. 8Confidential & Proprietary | © 2024CBRE, Inc. VIRGINIA BEACH DEVELOPMENT AUTHORITY Virginia Beach Mixed-Use Development Feasibility Study - Executive Summary Discounted Cash Flow The following is the projected discounted cash flow on an As Completed basis. As Complete Cash Flow - Proposed Mixed Use Development, Discounted Cash Flow Analysis, Beginning 07/01/2027 YEAR 1 2 3 4 5 6 7 8 9 10 Reversion Year Ended: 6/30/28 6/30/29 6/30/30 6/30/31 6/30/32 6/30/33 6/30/34 6/30/35 6/30/36 6/30/37 6/30/38 Number of Rooms 360 360 360 360 360 360 360 360 360 360 360 Annual Available Rooms 131,400 131,400 131,400 131,400 131,400 131,400 131,400 131,400 131,400 131,400 131,400 Occupied Rooms 77,526 90,666 98,550 98,550 98,550 98,550 98,550 98,550 98,550 98,550 98,550 Occupancy 59.0% 69.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% Average Rate $216.16 $222.65 $229.33 $236.21 $243.29 $250.59 $258.11 $265.85 $273.83 $282.04 $290.51 REVENUE Rooms $16,758,285 $20,186,632 $22,600,251 $23,278,259 $23,976,606 $24,695,905 $25,436,782 $26,199,885 $26,985,882 $27,795,458 $28,629,322 Food & Beverage 4,667,352 5,425,684 8,955,856 9,224,532 9,501,268 9,786,306 10,079,895 10,382,292 10,693,760 11,014,573 11,345,010 Other Operated Departments 957,482 1,094,411 1,194,114 1,229,938 1,266,836 1,304,841 1,343,986 1,384,306 1,425,835 1,468,610 1,512,668 Miscellaneous Income (Net) 186,694 217,027 477,646 491,975 506,734 521,936 537,594 553,722 570,334 587,444 605,067 Total Operating Revenue $22,569,813 $26,923,754 $33,227,867 $34,224,703 $35,251,444 $36,308,987 $37,398,257 $38,520,204 $39,675,811 $40,866,085 $42,092,067 DEPARTMENTAL EXPENSES Rooms Expense $3,912,171 $4,264,495 $4,537,634 $4,673,763 $4,813,976 $4,958,395 $5,107,147 $5,260,361 $5,418,172 $5,580,717 $5,748,139 Food & Beverage Expense 4,293,813 4,737,967 6,716,892 6,918,399 7,125,951 7,339,729 7,559,921 7,786,719 8,020,320 8,260,930 8,508,758 Other Operated Departments Expense - - - - - - - - - - - Total Departmental Expenses $8,205,984 $9,002,461 $11,254,526 $11,592,161 $11,939,926 $12,298,124 $12,667,068 $13,047,080 $13,438,492 $13,841,647 $14,256,896 DEPARTMENTAL PROFIT $14,363,828 $17,921,293 $21,973,341 $22,632,541 $23,311,518 $24,010,863 $24,731,189 $25,473,125 $26,237,318 $27,024,438 $27,835,171 UNDISTRIBUTED OPERATING EXPENSES Administrative and General $1,952,033 $2,077,414 $2,181,030 $2,246,461 $2,313,855 $2,383,271 $2,454,769 $2,528,412 $2,604,264 $2,682,392 $2,762,864 Information and Telecommunications Systems $195,203 $207,741 $218,103 $224,646 $231,386 $238,327 $245,477 $252,841 $260,426 $268,239 $276,286 Sales and Marketing $1,756,830 $1,869,672 $1,962,927 $2,021,815 $2,082,470 $2,144,944 $2,209,292 $2,275,571 $2,343,838 $2,414,153 $2,486,578 Franchise Fees (Royalty) $837,914 $1,009,332 $1,130,013 $1,163,913 $1,198,830 $1,234,795 $1,271,839 $1,309,994 $1,349,294 $1,389,773 $1,431,466 Property Operations and Maintenance $764,206 $824,551 $872,412 $898,585 $925,542 $953,308 $981,908 $1,011,365 $1,041,706 $1,072,957 $1,105,146 Utilities $784,505 $846,453 $895,586 $922,453 $950,127 $978,631 $1,007,989 $1,038,229 $1,069,376 $1,101,457 $1,134,501 Total Undistributed Expenses $6,290,692 $6,835,163 $7,260,071 $7,477,873 $7,702,209 $7,933,276 $8,171,274 $8,416,412 $8,668,904 $8,928,972 $9,196,841 GROSS OPERATING PROFIT $8,073,136 $11,086,130 $14,713,270 $15,154,668 $15,609,308 $16,077,588 $16,559,915 $17,056,713 $17,568,414 $18,095,466 $18,638,330 Management Fee $902,793 $1,076,950 $1,329,115 $1,368,988 $1,410,058 $1,452,359 $1,495,930 $1,540,808 $1,587,032 $1,634,643 $1,683,683 INCOME BEFORE NON-OPERATING INCOME AND EXPENSES $7,170,344 $10,009,180 $13,384,155 $13,785,680 $14,199,251 $14,625,228 $15,063,985 $15,515,904 $15,981,382 $16,460,823 $16,954,648 NON-OPERATING INCOME AND EXPENSES Property Taxes $1,184,158 $1,219,683 $1,256,273 $1,293,962 $1,332,781 $1,372,764 $1,413,947 $1,456,365 $1,500,056 $1,545,058 $1,591,410 Insurance $411,166 $423,501 $218,103 $224,646 $231,386 $238,327 $245,477 $252,841 $260,426 $268,239 $276,286 Reserve for Replacement $0 $538,475 $1,329,115 $1,368,988 $1,410,058 $1,452,359 $1,495,930 $1,540,808 $1,587,032 $1,634,643 $1,683,683 Total Non-Operating Income and Expenses $1,595,324 $2,181,659 $2,803,491 $2,887,596 $2,974,224 $3,063,451 $3,155,354 $3,250,015 $3,347,515 $3,447,941 $3,551,379 NET INCOME (EBITDA) $5,575,019 $7,827,521 $10,580,664 $10,898,084 $11,225,027 $11,561,778 $11,908,631 $12,265,890 $12,633,866 $13,012,882 $13,403,269 9Confidential & Proprietary | © 2024CBRE, Inc. VIRGINIA BEACH DEVELOPMENT AUTHORITY Virginia Beach Mixed-Use Development Feasibility Study - Executive Summary Internal Rate of Return The calculation of the IRR is based on a total investment (cost) of $490,100,000. Based on this estimated cost to construct the facility, we project an internal rate of return of 12.3%as shown below. Year Hotel Multi-Family Retail Other Parking Total Ending Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Cost Basis ($102,300,000) ($352,000,000) ($35,800,000) ($490,100,000) 6/30/2028 $5,575,019 $21,313,088 $5,647,353 $3,000,000 $35,535,461 6/30/2029 $7,827,521 $21,845,915 $5,737,132 $3,090,000 $38,500,569 6/30/2030 $10,580,664 $22,392,063 $5,505,622 $3,182,700 $41,661,050 6/30/2031 $10,898,084 $23,063,825 $6,196,004 $3,278,181 $43,436,094 6/30/2032 $11,225,027 $23,755,740 $6,852,338 $3,376,526 $45,209,631 6/30/2033 $11,561,778 $24,468,412 $7,316,268 $3,477,822 $46,824,280 6/30/2034 $11,908,631 $25,202,465 $7,819,952 $3,582,157 $48,513,204 6/30/2035 $12,265,890 $25,958,539 $7,823,325 $3,689,622 $49,737,375 6/30/2036 $12,633,866 $26,737,295 $8,611,234 $3,800,310 $51,782,705 6/30/2037 ^$180,769,926 $461,362,542 $140,345,436 $51,864,734 $834,342,638 IRR 12.3% Compiled by CBRE ^ Includes reversionary value Internal Rate of Return of the Proposed Mixed Use Development The 12.3%return is considered above average based on accepted market returns for similar investments. Therefore, we conclude that the construction of the proposed uses is feasible. The conclusions reached are based on our knowledge of the competitive market as of the completion of our fieldwork in June of 2024. As in all studies of this type, the estimated results are based upon competent and efficient management and presume no significant change in the competitive market from that as set forth in this report. 10Confidential & Proprietary | © 2024CBRE, Inc. Thank you