465 Baltic / Columbia MS. RED Jessy yang

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JESSY YANG COLUMBIA UNIVERSITY MS RED ’19 APRIL 2019

465 BALTIC



CONTENTS EXECUTIVE SUMMARY

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GOWANUS REZONING FRAMEWORK

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TRANSPORTATION AND ACCESSIBILITY

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DEMOGRAPHICS

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NEIGHBORHOOD HIGHLIGHT

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H&BU ANALYSIS

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MARKET Rental

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Retail

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PIPELINE AND FUTURE PROJECTION

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DEVELOPMENT CONCEPT, DESIGN

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PROGRAM

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ZONING

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FLOOR PLAN

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MARKETING STRATEGY

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DEAL METRICS+ FINANCIAL ANALYSIS

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RISKS+MITIGANTS

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INVESTEMENT HIGHLIGHT 7 YEARS HOLDING UNLEVERED IRR 9.8% LEVERED IRR 15.1% LP IRR 14% LP EM 2.48X EQUITY NEEDED $ 7.7 M

LAND ACQUISITION PRICE $ 378 PSF TOTAL DEVELOPMENT AREA 40,067 ST TOTAL UNITS: 38 UNITS MARKET RATE UNITS: 26 UNITS AFFORDABLE UNITS: 12 UNITS RETAIL (SUPERMARKET): 6000 SQFT 465 BALTIC STREET

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EXECUTIVE SUMMARY 465 Baltic is a village for young professionals and entrepreneurs. The project introduces a 10-story residential building incorporated the idea of “work and lifestyle” with amenities such as gym, residence lounge, event space, and a boutique food market on the ground floor. Each unit features with terraces, balconies in the double height duplex. The unique duplex system frees the traditional corridor and utilizes the space accessing residence as amenities of working and social station. The duplex system not only reflects the neighborhood history of brownstones and lofts, and also responds to the desire for socializing while maintaining one’s privacy in a luxury rental market. The average rent per square footage for market units is $5.84, with 30% of the units set aside for affordable housing.

Gowanus, the new hip area and hidden gem situated between Carroll Gardens and Park Slope, is transforming to a vibrant and artsy neighborhood while maintaining its industrial vibe with classic rowhouses, converted warehouses, and new developments. With its inherent charm, the rezoning will revitalize the waterfront like its precedent: Williamsburg and Greenpoint waterfronts redevelopments, which remold industrial neighborhoods into the most desirable living neighborhood. Developers such as The Hudson Companies, Jonathan Rose Companies, and Bluestone Organization are all seeking to put its name in this multi-use territory. 465 Baltic Street is the perfect project for smaller-scale development around the neighborhood: It is proximate to the Gowanus Canal and the future commercial corridor of 4th Avenue. The programs echo with the redevelopment plan and gain zoning Bonus. Moreso, the space features satisfy the space trend, cater to its demographics, and optimize the revenue.

We are raising $7.7 million in LP equity for a seven-year investment with IRR of 14.0%. It is a unique opportunity to engage the thriving market and to participate in a development that celebrates a new way of living. 5

COLUMBIA UNIVERSITY MS.RED JESSY YANG


NOW TO THE FUTURE:GOWANUS REZONING FRAMEWORK With the goal to re-activate the industrial area and foster a sustainable neighborhood from, the Gowanus Rezoning Framework is thorough and engaging proposition. As colored in the framework map, different approaches were planned for various uses, which is estimated to result in a vibrant and balanced mix of uses. As recently estimated, city estimated that the Gowanus Rezoning will create 8,200 new apartments by 2035, 3,000 of which will be affordable. Enhanced Mixed-Use (covering 465 Baltic) : The majority of the area are planned to have mixed-use properties to encourage a live-workand-play environment. Local services & businesses and improvement to public realm are welcome. Meanwhile preservation of local qualities is important too. Canal Waterfront: A waterfront esplanade is the main target. A clean and green environment and high accessibility by public are some of the most development consideration. The unique nature of the Canal will welcome creative commercial use, artist and maker space. Industrial & Commercial: Although the area will cease to be an industrial-heavy hub, but some of the light and flex industrial uses will be maintained to promote jobs and stimulate related commercial activities. The industrial uses are planned mostly on the southern end of the Canal.

Gowanus Rezoning Proposal Map The Gowanus Canal will become the centerpiece of a green, resilient neighborhood with new, sustainable, mixeduse development boasting more open space, parks, and community resources.

Reduce Parking and Loading Requirements Reduce accessory residential parking requirements and non-residential loading requirement, allow for more flexible shared parking options and convert parking to active commercial uses on 4th Avenue Mixed Use Floor Area Regulations ensure a desirable mix of residential, commercial, light-industrial, arts-related and production uses 465 BALTIC STREET

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465 Baltic


ACCESSIBLE AREA + EASY-TO-REACH TRANSPORTATION Although Gowanus area is still underdeveloped compared to the surrounding neighborhoods, it is well-connected by public transit of subway and buses (6 bus lines nearby) and is both walkable and bikeable. Commute time from 465 Baltic to some major workplaces is 30 mins’ subway to Midtown Manhattan, 17 mins’ subway to Dumbo and 20 mins’ walk to Downtown Brooklyn.

Smith-Ninth Streets (F and G); Fourth Avenue-Ninth Street (R, F and G full time, D and N part-time); Union Street-Fourth Avenue (R full time, D and N part-time); and Prospect Avenue (R full time, D and N part-time). The location is right adjacent to the Gowanus Canal and 4th Avenue. Despite its adjacency to the two primary redevelopment belt, the site enjoys a decent

The subway stations in the neighborhood are

Accessible Subway Network within 0.5-mile radius: • • • •

Lines Available:

Barclay Center Bergan St. Caroll St. Union St.

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6 bus lines nearby B65/B37/B103/B57/B63/B61

Well-Connected Bike Path: • •

3 Citibike Stations All within 2 blocks

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


Rendering by Brooklyn Llandscape Architecture Firm

Gowanus and Boerum Hill are where: • More residents in Gowanus are self-employed than in New York City as a whole, 13.7% compared to 9.8%. • The number of businesses in Gowanus has grown almost 44% since 2000, in large part by the resurgence of wholesalers and craft makers. • More than 50% of the over-25years old population in Gowanus has at least a Bachelor’s degree, making the area one of the most educated neighborhoods in New York City.

The Trendy Stores in Boreum Hill

•Young residence population in Boerum Hill with an average age of 35. •Boerum Hill has a comparatively higher female population (53.6%) and higher percentage of married residents (36%). •Boerum Hill has a higher average & medium household income of$159,058 & $107,766.

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The Rich Neighborhood of Gowanus + Boerum Hill


465 Baltic

Entertainment & Activities

Groceries

-Barclay Center -Strong Rope Brewery -Brooklyn Fencing Academy -Axe Throwing -Brooklyn Escape Room -Rooftop Films -Royal Palm Shuffle Board Club -NY Kids Club – Park Slope -Brooklyn Boulder -Gotham Archery -Court 16 BK – Kids’ Tennis

-Whole Foods -Trader Joe’s -Stop & Shop -Key Food Supermarkets -C-Town Supermarkets -Union Market -Warren Grocery -Brooklyn Fare

Gowanus Bat Cave/Architect: Herzog & de Meuron

Galleries

Vibrant Area with Activities + Art Scenes w

-NIHIL Gallery -Site: Brooklyn -Gowanus Projects -Ti Art Gallery -New York Transit Museum -Brooklyn Arts Fellowship 11

-Trestle Projects -MF Gallery -State of the Art Gallery -440 Gallery -The Invisible Dog Art Center -Ground Floor Gallery COLUMBIA UNIVERSITY MS.RED JESSY YANG


H&BU ANALYSIS Property valuation:

Building costs:

Retail and office buildings within Gowanus were transacted at $636 psf and $694 psf respectively in 2018 (TERRACRG Commercial Realty Group), which were among the highest in Brooklyn, especially for office in Downtown Brooklyn where connects to Downtown Manhattan. The demand for office properties in Brooklyn remained strong last year. However, the transactions, square footage, and dollar value are all declining for a shortage of inventory. As a result, the price per square footage is surging up in 2018. Multi-family assets still won the highest rate in Gowanus, even with the strong commercial market. The residential transactions are around $1,000 per square footage.

The construction costs for office and retail are from $489 to $600 per square footage. Retail construction varies for different types of tenants, and it usually requires expertise for a different type of retail properties to determine its features and meet the space requirements. The construction costs for multifamily are the lowest among all asset classes, standing at $390 on a psf basis. The design and layout for the multifamily building of this size and location should not be substantially higher than the average in the market. Hotel construction costs the highest among the asset classes, according to Arcadis’s latest construction costs report in 2018. The construction cost of the hotel, on average, is more than $645 per square footage. It is unlikely to reach the highest RevPar and occupancy for the site’s location, making it not feasible to make up for the high amount of construction cost.

As for retail transactions, 527 million in transaction volume in 2018 led to a 51% increase from 2017. The top two retail transactions in 2017 were from Gowanus. For the hotel, it is hard to weigh its value for lacking transactions in Gowanus. The cap rate is setting the highest for the assumption that the hotel is the riskiest asset class.

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Rendering of potential development along Gowanus Canal by Marvel Architects

Rendering of possible bankside designs by Scape

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


MARKET: Strong Rental Market

According to the Street East Brooklyn Rental Report, the rents in Brooklyn continued to climb— the StreetEasy Brooklyn Rent Index increased 1.6 percent. The rental rate in south Brooklyn is growing, whereas Brooklyn overall remains stable. From the larger scale, the Brooklyn residential rental market continues to persevere despite the thousands of new rental units being delivered in Downtown Brooklyn. The facts that the lease-up periods are short and the absorption rate is strong both show that Brooklyn rental market is desirable for tenants.

trast, the year over year growth was 40.3% from 2018-2019). Those indicators show that the rental market in Brooklyn is robust. All price tried index moved higher for the demand shifted from the sales market to the rental market. According to the Elliman Report, new development rentals comprised 22.9% of the overall activities with a concession market share of 72.7%. While existing rentals comprised 77.1% of activities and a concession market share of 33.8%. The net effective median rent also rising annually for four straight months

The average Brooklyn Rental Price is $3,209, while the median Rental Price is $2,900 in March 2019, which shows there is a luxury rental apartment market. The MoM and YoY both went up by 0.6% and 3.2% for average rental price, and the median went up by 0.2% in MoM and 5.5% in YoY. The Price per Square Footage also went up with incredible speed from February 2019 to March 2019. It only took one month for the number of new leases to grow by 26.4% from February to March this year ( 277 new leases-72% of the total number of new leases in the past year. In con465 BALTIC STREET

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Studio - Highest PPSF According to the data of the Elliman Report of March 2019, average and median rental price for a studio is decreasing from February to March by 4.8% , yet for YoY, the rate is still increasing for both average and median. The number of new leases signed is rising since February, and the percentage is higher than the YoY increase for the result of the price drop. In both 1-Bed and 2-Bed, the average and median rent prices both increasing. The total new lease signed for 1-Bed and 2-Bed are substantially higher than studio type. However, the studio remains the room type in which the PPSF basis is the highest.

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


Zoom in—Like the rental trend in Brooklyn, Market in Gowanus is going up The analysis look into Gowanus rental market and also takes both Gowanus and Boerum Hill neighborhood into account, for our site is in the conjunction area of both neighborhoods. Though still lower than Manhattan overall, the Median Asking Rent in both Gownas and Boerum Hill are higher than Williamsburg— the formal industrial region just like Gowanus— which rebirth as a hip area after rezoning. As the chart shows, Boerum Hill and Gowanus have a similar trend. In Jan 2019, Gowanus surpassed Boe-rum Hill by 4.3%. Though the Median Asking Rent for both Gowanus and Boerum Hill fluctuated for the last year, the trend shows that rent is going upwards.

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


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Residence Comps in the adjusted percentage and the growth rate, we only charge 3% of the premium for our duplex. We can be more aggressive, yet as the pilot project, we don’t want to deviate from the market. Our rental rate per square footage is at $ 5.84, and two bigger units of 1000 square footage are at $5.91. As the requirement of HPD, 30% of the units will be available to renters making 80%of AMI.

Depends on the square footage, we allocate and compare the duplex size to the average size of bedrooms in the comps; and apply the comparable unit type to the market (See Chart). There are four types of rent in our project, set by the comparison of the comps. Our duplexes are built with size more prominent than the average 1-bed size in our comps set, and are well accommodated for two beds. One rental 1-bed duplex unit in 223 Park Slope charges a 16.6% premium compared to its typical one-bed. After factoring 465 BALTIC STREET

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363 Bond Street

267 Pacific St


Retail Trendy restaurants, bars and a few commercial developments around the neighborhood, located at the mixed-use developments and public promenades along the waterfront in particular. There will be an increase in foot traffic, for it will reshape the neighborhood to a Dumbo-like neighborhood, resulting in the demand for space or retailers. Whole Foods Market has set its foot in the neighborhood along with a waterfront promenade in The Lightstone Group’s two-building mixed residential and retail project ( 254,214 square footage) at 363-365 Bond Street. We are looking for a boutique supermarket tenant smaller than the operator like whole food, which usually occupies the space around 30,000 sqft. The boutique supermarket will satisfy the niche market of local area for even though there are trader joes and wholefood around, to walk to those location will be 15 minutes or more. The closest market will be C-MarkThe market portion is at 6,000 square footage, which is the right size for those smaller operators who focus on elite residential community and providing selections of quality food. The approach of offering fresh and seasonal groceries at approachable prices, with the perks and services of a neighborhood grocer, differentiates them from the supermarkets’ major operator. The strategy matches the brand and image of our building and is appealing to our targeting audience. Moreso, providing such program in our building will bring in the fresh bonus and gain FAR. Brooklyn Fare and Union Market are around 15 minutes of walking distance from the site to the North, And there are no such boutique markets around Gowanus redeveloping area. Bringing such tenants into our project will not only help to bring foot traffic but also form the image of the building. The rent charges by the comps -Brooklyn Fare and Union Market are at $40 per square footage in 2008 and $70 per square footage in 2017. Factored in their superior locations and yearly growth rate for the lease of Brooklyn Fare is signed in 2008, our set rate for supermarket retail tenant is projected to be $50 per square footage. 465 BALTIC STREET

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Whole Foods Trader Joe’s

Brooklyn Fare

 Union Market

0.5 Mile

C TOWN

Union Market

21 Whole Foods

COLUMBIA UNIVERSITY MS.RED JESSY YANG


PIPELINE AND FUTURE PROJECTION As developers project the upsides of the rezoning of Gowanus redevelopment, the projects filing in 2018 around the area are with the number of 1,144 of dwelling units around 15 minutes walking radiance of our site ( subtract those projects which deliver less than ten dwelling units. The project with the most dominant number of dwelling units are18 Sixth Avenue and 308 Living Stone Street; However, they are located around Atlantic Avenue, which is north of our site and away from the Gowanus redevelopment area.

465 BALTIC STREET

As for the future projection of rent, we look at Williamsburg for a similar rezoning process. to the data from StreetEasy, after 5 years of rezoning in 2005, the inventory was still going upward and the rent rose by 20%. The median rent, however, stays around the same level of approximately $3000 despite the inventory grows more than ten times comparing to the number 10 years ago. With this precedent, we project the trend would be similar to the neighborhood of our site.

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According to the CBRE cap rate survey in 2018, the cap rate pricing in Class A asset of Tier one market ( such as New York City) are typically stable. We are using 4.5% for our underwritting.

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


DEVELOPMENT CONCEPT, DESIGN AND FUNCTIONAL PROGRAM Gowanus is the neighborhood of young professionals, entrepreneurs, and creative businesses. The median age is 34.9, more than 75% holds a bachelor’s degree, and the median household income is $113,781— much higher than in NYC ($55,191). 13.7% of the residents in Gowanus are self-employed (9.8% in New York). By choosing to live in 465 Baltic Street, the residents choose not only their home but also a way of life. A Village of Lifestyle in a Green Neighborhood The 7,500 square footage lot of this project is located in Gowanus, Brooklyn, undergoing rezoning and becoming a green and resilient neighborhood. The rezoning proposal pushes for mixed-use development and affordable housing. With the relocation of young professionals and the trend of work and living lifestyle, we aim to pursue this project as a luxury rental while setting aside affordable units to echo with the rezoning proposal and shape the living environment into a dynamic experience. The Residence: Duplex Utilizing the modular duplex system that is already widely applied to the two-family townhouses, the project is working the modular duplex to decrease the construction cost and take advantage of double-height floors to create a more transparent and flexible space organization. By utilizing duplex in our floor plan, we replace serving corridor with sharing spaces for co-working and social function and gain the quality housing bonus to get the FAR bonus, for we serve no more than 11 units each floor.

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LUXURY RENTAL MARKET

With the high MHI and the high rate in the local rental index, the market will support the rate of luxury duplex units. As the Gowanus Redevelopment moves forward, the rate growth will be beneficial for charing the duplex’s potential premium.

MARKET

SPACE TREND

HISTORY

The History Context: We would be able to utilize the serving corridor as an amenity in the duplex system with the character of the space history in the neighborhood: the double-height of loft converted from industrial properties and the differentiation between living and bedroom level of a brownstone building.

FLEXIBLE USE

BRWON STONE TOWN HOUSE

SHARING/ COLLABRATIVE VS. PRIVACY

INDUSTRIAL-LOFT

Image: Inside Out

The demographics of the neighborhood are perfect for our duplex. The young professionals and entrepreneurs can enjoy a residence with the community’s engagement while maintaining independent and private boundaries.

Brown Stone Townhouses 25

COLUMBIA UNIVERSITY MS.RED JESSY YANG


Lower Living Level of the duplex

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The Working and Social Statation in each floor


Traditional courtyards in residential building is shared by each residence to provide shared social space for the residents only. The Working and Social Station functions as inner courtyard to provide each unit the exclusive shared space.

Module A Module B Module C Working/ Social Station There are three types of modules. Each type of module contains the double-height duplex. With the double-height floor, the shared station becomes a closed inner courtyard.

Bedroom Level Living Level

The upper level of duplex provides privacy, and the lower level is the living area where connects the residence to the social porch of the working / social station.

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


The ten stories residential consist of 8 stories of residential, which utilize the duplex modular system. The duplex system allows residents to have a private area in the upper level, whereas the lower level acts the social porch where connect with the neighbors. The shared space is the working station when you need to get out of your apartment and catch deadlines, or the mini-lobby when friends visit.

outwards. The second level will have an event space expanding to the rear yard garden, and below the garden, another open plaza is there. 465 Baltic also offers the outdoor living experience— every unit will be featuring a balcony facing outwards. The second level will have an event space expanding to the rear yard garden, and below the garden, another open plaza is there. With the multiple layers of greens, the boutique food market on the first floor also provides a

465 Baltic also offers the outdoor living experience— every unit will be featuring a balcony facing

iagram m n

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ZONING According to Gowanus’s rezoning proposal, the lot is located at the M1(3)/ R6A district with 7500 square footage of the lot size. It is within the scope of the Fresh Zone and Quality Housing Requirement. The project utilizes the Fresh Zone bonus and Quality Housing to push the building height and FAR. Whereas the original maximum R6A building height is 60 feet, the rezoning proposal and quality housing requirement push maximum to 65 feet, along with the FRESH Zone bonus floor height (+15 ft ), our building could be pushed to 100 feet height. However, we decide to still keep our building lower at 85 feet in height to be in harmony with our neighborhood.

ing plan allows decreasing the parking requirement from 50% to 20% of the DU. We waive the parking requirement for locating in the transit zone, and our supermarket size is also smaller than which need to provide parking under fresh zone regulation.

The density factor is 680 square footage for the quality housing requirement, which confines the maximum unit numbers (39 units). The ground floor market allows us to acquire the Fresh Zone bonus and add additional 6000 square feet for the floor area, the Quality Housing bonus of 1, 841 square footage allows us to pursue higher building square footage. ( Quality Housing buildings with an elevated ground floor entered by stairs, ramp, or lift with apartments on the first floor can have some zoning deduction: 100 square feet for every 1 foot above the curb of the first floor. The maximum deduction is 500 square feet. Under the qualify housing requirement, 465 Baltic is eligible for 50% of corridor floor area deduction, for we serve no more than 11 units in the corridor of each floor. With an efficiency of 85%, the maximum of the Gross Floor Area for our building is 40,067square footage. The parking requirement in the proposed rezonFRESH Zone Details: By pursuing the FRESH Zone bonus, we are eligible for both zoning and financial incentive. The financial incentives provided by NYCIDA, including Real Estate Tax Reductions, Sale Tax Exemption, and Mortgage Recording Tax Deferral. Zoning incentives are provided through the City Planning, and the proposed grocery stores located within the FRESH zoning area are eligible as of right.

•No parking required for grocery stores up to 40,000 square feet in commercial districts that permit residential buildings with ground-floor retail •First 15,000 square feet of retail grocery space exempt from parking in other Commercial and Light Manufacturing districts To accommodate the additional floor area. CPC could allow an increase in the maximum building height, up to 15 feet, to accommodate the additional floor area by authorizing. We are pursuing the extra 15 feet to compensate for the floor space of the ground floor groceries.

Additional Development Rights • One additional square foot of residential floor area in mixed-use buildings for every square foot provided for a grocery store, up to a 20,000 square foot limit. Parking Reduction 29

COLUMBIA UNIVERSITY MS.RED JESSY YANG


Ground Level LifestyleMarket (6000square feet): The lifestyle market allows us to get the FRESH zone bonus and a boutique of the food market that supplies quality food and experience fit for the neighborhood’s needs. We are applying the quality housing requirement to lift the building 6 feet higher than the ground, and the space under at grade is open as a plaza and connect to the rear yard. With the entrance of the parking sitting in front of the plaza, the plaza forms the courtyard with sittings.

• Right Size for bountique Market Operator • Mimimum requirement to get the Fresh Zone Bonus Comps: Brooklyn Fare /$40 Sqft ( signed in 2008) Union Market / $70 per square footage (Signed in 2017) Factored in their superior locations and yearly growth rate, our set rate for supermarket retail tenant is projected to be $50 per square footage

465 Baltic Street

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Lobby+Bike Room -535 SF Retail - 6000 SF Amenities -2322 SF Retail Hard Cost -$376.64 /PSF Retail Rent - 55/Annual PSF

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


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Second Floor The Second floor provides amenities and a gathering space for large groups of people. Not only the indoor event space, the outdoor garden is also located at the level and connects to the event space.


Residence The total number of units is 38, aligned with the density factor restriction (maximum of 39 units). We utilized the duplex for the floor plate relatively small, to ensure the concept of emerging the work and living lifestyle. The duplex system provides more flexibility in the floor area with different lev-

els. There are a double-height ceiling and an inner corridor that overlooks the working/ social station.

Level 3-6

Living Level

Bedroom Level

Level 7-10

Living Level

Bedroom Level


Common Space functions as co-working/ mini lobby/ Residence lounge exculsive to the residence in each floor

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


TOTAL UNITS: 38

Residential 31,210 Sqft 12 Units of Module A $4,497 (770 sqft) $5.84/PSF 12 Units of Module B $1,280 (616 sqft) Affordable 30% 12 Units of Module C $ 3,714 (636 sqft) $5.84/PSF 2 Units of Module D $ 5,914 (1000 sqft) $5.91/PSF Residential Hard Cost

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$365/PSF

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


CONSTRUCTION AND SCHEDULE With the combination of elegant glass bricks and industrial steel veneers, the storefront is with openness and a sense of fluidity. For the upper residential part, we use pre-fab concrete as the units are very regular, systematic, and symmetrical. The exterior facade with the balcony remains the most expensive part of building hard cost (wood, vinyl clad, casement, insulated glass, 6’-0” x 4’-0”). The estimated blended hard cost for the entire project is $366 per square footage( Residential hard cost is at $365 PPSF, and the ground and second floor is at $376.64 PPSF from RSMeans Estimation).

CONSTRUCTION BUDGET

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Consturction Schedule

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


MARKETING STRATEGY Since there is no such product on the market, the marketing strategy and advertising are critical to the project. We set our marketing budget to 3 %, using channels like NYC Link, Press, Social Media such as Instagram and Facebook to deliver a series of images to raise our target audience’s curiosity. Unlike traditional real estate that shows the rendering of interiors, our goal is to arouse interest and then create a narrative that echoes with our targeting audiences. The goal is to encourage them to explore what life is like in 465 Baltic.

PR Channel Social Media • Facebook • Instagram • Youtube Local Press • The Real Deal • New York YIMBY • New York l Metro Local Advertisement • NYC Link - street kiosk • Subway advertisement • Bus Stop advertisement • Spotify Flyers • Local residents/neighbors • Local Universities • Local brokers Parnetship

Brand Identity

1.Obligo - management Provides security deposit services - guarantor

Target demographics

2. Ollie - social aspect & post-maintenance • Provides exclusive social events & activities offers in NYC • Provides maintenance services

• Young professional, millennials • Age between 20-35 • Self-employed & startups

Narritves of Target Audience

3. Smorgasburg • Holds promotions for local food vendors • Food provider for events held at 465 Baltic • Partnership with local universities

1 Eugene, aged 30, is a young professional from Singapore who just immigrated to the United States. He doesn’t want to deal with the hassle of paying utility bills, grocery shopping, or cleaning his home due to his hectic 60 hour work week at an architectural office in Dumbo. He chose to live in one of our projects for the ability to simplify his life and allow him to relax when he is home.

4. Loal University 1 month concession to tenants through local universities in partnership 5. Local resident benefit 1 month concession to tenants with local resident proof

2 Brooklyn, aged 29, is an aspiring artist who is finishing her MFA from PRATT. Previously she went to work in an investment bank in Wallstreet for 4 years. She burned out from her financial job and changed her career in searching for happiness through breeze in her art. 465 BALTIC STREET

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Example Layout of Campaign 2

Example Layout of Campaign 1

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COLUMBIA UNIVERSITY MS.RED JESSY YANG


DEAL METRICS+ FINANCIAL ANALYSIS Our project delivers an overall 15.1% IRR and an equity multiple of 2.67x after the effect of debt. The assumptions used for summary as below:

2020, for we projected the length of ULURP would be 18 months. The development period is set to be 18 months.

LOAN

PROJECT COSTS

Construction Loan LTC at 65% with the rate of LIBOR+4% m and Permanent Loan LTV at an interest rate at 70% with an interest rate of 4.5%

We underwrote the hard costs at $366 per square footage, which is slightly higher than typical lower-rise multifamily developments in New York City. The luxury rental will cost more to support a higher quality of building and fully furnished units. To emphasize the design, we use glass casement for the exterior part of the facade, and it also pushes the hard cost. Soft costs account for 20.9% of the total development budget.

LAND ACQUISITION The site across the street is sold at $208.8 on 4/9/2018. The range of price for the transaction amount of developable land varies on a large scale. According to the market data providing by LavaMap, the most comparable transaction of land around the neighborhood is 462 Baltic Street. The transaction amount is $1,556,000 at $208.8 per square footage basis. The other transaction is 553 Sackett Street at $682 per square footage, which is more than three times higher than 462 Baltic Street. However, 553 Sackett Street is located right by the Gowanus Canal, which will be the major residential corridor for the redevelopment plan. As a land comp, 462 Baltic Street is most relevant for it is located across the street from our site. We are using the assumption of $208 PSF for current FAR ( The FAR for M1-2 is 2) to set the price for FAR3.6, which is the proposed FAR in Gowanus rezoning draft.

LEASE-UP+ SALE We set our lease-up period for six months, which is longer than the lease-up period around the area. Our units are fewer to be conservative, for there is no comparable building set as all-duplex in our pioneer project. If we can reach shorten our lease-up period to 3 months, the IRR will be effectively pushed to 16.96%. HOLDING PERIOD The holding period is set at 7 years. The basis is increased by 10% if the taxpayer holds the investment in the Opportunity Fund for at least 5 years; and by an additional 5% incremental if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation. If we exit at 10 years after stabilization, the IRR would be low at 12.8%.

ANALYSIS DATE Due to the uncertainty of the rezoning proposal, we ask the investor to make the capital commitment upfront yet only to draw the capital in Oct

Sources and Uses 465 BALTIC STREET

42


RISKS+MITIGANTS To maximize the benefit, we set the holding period at 7 years for not only the better performance of IRR but also for the 15% exemption.

RISK 1 GOWANUS ZONING PROPOSAL The project bases on the Gowanus rezoning proposal, which is still hanging in the air.

ALTERNATIVE EXIT STRATEGY

MITIGANT The uncertainty poses a shadow on our project. However, we can still go throw the ULUPR process without the zoning proposal since the adjacent neighborhood is pushing density and building height.

We can also hold for five years to gain the IRR of 17.78%, and get the exclusion of 10% basis by holding the investment in the Opportunity Fund for 5 years.

RISK 2 DUPLEX There are no comps for an all-duplex building. It is hard to determine if the rate is acceptable for the market. MITIGANT Being a pilot project might be risky, but it is also unique and without a competitor. There are two bedrooms in all the units—despite the rate might be slightly higher. Yet, factoring in the project delivery time and per square footage basis, we charge the rent similar ( in square footage) than the two-beds units in the comps. The project delivery date is projected to be in 2022; the rise of the rent rate in the comps will make our project more competitive.

RISK 3 LAND PRICE The land price of the area is with considerable fluctuation. If the land price goes up, our project might not profit. MITIGANT The reason that the land price goes up might be the optimistic projection of the Gowanus Rezoning Plan’s upside. We can either choose to push the capital endorsement later to prevent the risk of putting the capital upfront and hold for the long-term. However, the region is already on the way to revitalize, and if purchasing in an earlier stage at a lower price, we can anticipate an upside in the future and will be able to choose to sell the land with premium.

43

COLUMBIA UNIVERSITY MS.RED JESSY YANG


APPENDICES

ASSUMPTIONS PROJECT DESCRIPTION

ACQUISITION & EXIT

Investment Name

465 Baltic St.

Property Type

Land Price

Residential + Retail

City

New York

Borough

Brooklyn

Zip Code

11217

Land Area

7,500 SF

FAR after rezoning( commercial)

3.60

Bonus-Quality housing

1841

Total ZFA

34,841 SF

Bonus- Fresh Zonne

6000

FAR before rezoning( commercial)

2

Acquisition Cost Carrying costs Exit Cap Rate Exit Cost Per Buildable Square Footage

MASSING OVERVIEW

CONSTRUCTION & PERM LOAN

ZFA

34,841 SF 15% Gross Up

GSF

LTC

40,067 SF

Construction Loan Int Rate

535 SF

Lobby+bike

Construction Period

Retail

6,000 SF

Hard costs

Amenities

2,322 SF

Hard costs

Residential

31,210 SF

Net Resi area

85% Efficiency

26,529 SF

Net Retail area

85% Efficiency

5,100 SF

Hard Cost Contingency Construction Portion in Y1 Construction Portion in Y2 Soft costs

TIMING - With ULURP

Month

Soft Cost Contingency

Date

Current Date

Upfront payment

31-Mar-2019

ULURP Length

Remaining construction periods

18 Months

Analysis Start Date

Month 1

30-Sep-2020 Discount Rate

Development Length Development End Date

Month 18

30-Mar-2022

Month 24

30-Sep-2022

Lease-up Period Operation Length

84 Months

7.0 Years

Exit Date

Month 108

30-Sep-2029

Module A

Amortization Term Interest Rate

6 Months

Stabilization Date (Const. Loan Payoff)

465 BALTIC STREET Lease-up Velocity

LTV

18 Months

Month 18

Month 19 2

44

DSCR Debt Yield

Month 20

Month 21

Month 22

Month 23

2

2

2

2


PSF (LOT) $378

Total

Income and Operation Assumptions

$2,835,000 2.0% 5.0% 4.50% 3.0%

65% Floating

L + 4.00% 18 Months

PPSF ModuleA

$5.84

Module B

N/A

Module C

$5.84

Module D

Average Rent

$5.86

$5.91 Total

Unit Size

Number of Units Monthly Rent

ModuleA

770 SF

12

$4,497

$53,965

Module B

616 SF

12

$1,280

$15,360

Module C

636 SF

12

$3,714

$44,574

Module D

1,000 SF

2

$5,914

$11,828

Average

756

Total Unit

$3,309 38

$366 10.0% 60%

Vacancy rate

3.0%

40%

Rental rate increase

2.0% annually

Expense inflation

2.0% annually

5.0%

Management fee

2.0% EGI

10%

Operating Expenses

90%

s

Operating

$7,000 per unit 10.0%

Capex reserve Retail rent psf

$5 per month

9.0% 70% 30 Fixed

Month 24 7

Permanent loan Loan amount by DSCR

$19,665,400

4.5%

Loan amount by debt yield

$20,497,719

1.20

Loan amount by LTV

$18,880,383

7.0%

Maximum loan

$18,880,383

45

COLUMBIA UNIVERSITY MS.RED JESSY YANG


DEVELOPMENT BUDGET

Development Budget Total number of units

38

Gross Square Footage

40,067

Land Square Footage

7500 $ per GSF

% of total budget

1 Land Acquisition

$2,835,000

$378

11.7% 0.2%

Acquisition costs

2.0%

$56,700

$1.42

Carrying costs

5.0%

$141,750

$3.54

$3,033,450

$76

12.5%

$14,653,588

$366

60.5%

$1,465,359

$36.57

6.1%

$16,118,947

$402

66.6%

Arch+ Engineering

$967,137

$24.14

6.0%

Planning and Permits

$644,758

$16.09

4.0%

Closing costs

$805,947

$20.11

5.0%

Marketing

$483,568

$12.07

3.0%

Legal fees

$967,137

$24.14

6.0%

Broker fee

$644,758

$16.09

4.0%

Total land acqusiition costs

0.6%

2 HARD COSTS Construction hard costs Hard Cost Contingency

10.0%

Total hard costs 3 SOFT COSTS

Developer fees

1.0%

$161,189

$4

0.7%

Financing fee

1.0%

$155,990

$4

0.6%

Soft Cost Contingency

5.0%

Total soft costs Total development budget before reserve

$6

1.0%

$126

20.9%

$604

100.0%

$24,216,607

4 INTEREST RESERVES

$581,631

$14.52

5 OPERATING RESERVES

$236,569

$5.90

TOTAL DEVELOPMENT BUDGET

465 BALTIC STREET

$233,725 $5,064,210

46

$25,034,808


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47

COLUMBIA UNIVERSITY MS.RED JESSY YANG


SENSITIVITY

Land Price 15.11%

$228

$278

$328

$378

$428

$478

$528

3.50%

24.28%

23.15%

22.11%

21.14%

20.24%

19.39%

18.60%

4.00%

21.44%

20.32%

19.29%

18.33%

17.44%

16.60%

15.82%

4.50%

17.95%

16.93%

15.99%

15.11%

14.29%

13.51%

12.79%

5.00%

14.38%

13.51%

12.69%

11.93%

11.20%

10.52%

9.87%

5.50%

11.53%

10.75%

10.02%

9.33%

8.68%

8.06%

7.47%

LEVERED IRR

Exit Cap

c Rent PPSF #REF!

$5.30

$5.40

$5.60

$5.84

$5.90

$6.10

$6.20

8.00

10.45%

10.93%

11.90%

13.08%

13.37%

14.35%

14.85%

7.00

10.43%

10.91%

11.88%

13.05%

13.34%

14.32%

14.81%

6.00

11.87%

12.46%

13.65%

15.11%

15.48%

16.74%

17.38%

3.00

12.64%

13.24%

14.46%

15.96%

16.34%

17.63%

18.29%

1.00

12.72%

13.32%

14.55%

16.05%

16.43%

17.72%

18.38%

LEVERED IRR

Lease Up Period

Holding Periods 1

3

5

7

8

9

10

#REF!

12

36

60

84

96

108

120

4.00%

44.21%

28.00%

21.70%

18.33%

17.17%

16.23%

15.27%

4.25%

37.62%

24.87%

19.78%

17.00%

15.77%

14.78%

13.96%

4.50%

31.26%

21.80%

17.78%

15.11%

14.18%

13.43%

12.80%

4.75%

25.07%

18.51%

15.29%

13.43%

12.77%

12.23%

11.77%

5.00%

18.69%

14.94%

13.07%

11.93%

11.50%

11.15%

10.84%

YEARS MONTHS

Exit Cap

465 BALTIC STREET

48


49

COLUMBIA UNIVERSITY MS.RED JESSY YANG


465 BALTIC STREET

50


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