Market Analysis - Malden MA - December 15, 2014

MARKETING STUDY APARTMENT BUILDING MALDEN MA

KATYA HRISTOVA MRED 7236

Table of Contents: I. Executive Summary…………………………………………………….3 II. Physical Attributes……………………………………………………...5 1. Macro Level Site Analysis 2. Property Description 3. Usage

III. Legal Attributes……………………………………………………….12 4. Zoning 5. Municipal programs and incentives

IV. Location Attributes……………………………………...……………17 6. Accessibility and Linkage

V. Economic and Sociological Attributes…………………..…………..20 VI. Market Analysis………………………………………………………22 7. Delineate the Market Segment 8. Market Demand: Estimate and Forecast 9. Market Supply 10. Supply/ Demand Equilibrium Analysis

VII. Feasibility Analysis.…………………………………………………27 VIII. Conclusion………..…………………………………………………30 IX. References.…………….…………………………………………...31 X. Exhibits…..…………………………………………………………..32 XI. Appendix…………………………………………………………........i

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I. Executive Summary The analyzed property, 105 Mountain Ave, Malden MA is located in the downtown district of Malden. The site has a superior location and the following benefits: major roads access, closeness to public transportation, lack of over visibility and major traffic, immediacy to amenities such as post office, police station, city hall, and adjacency to fitness center. It is clustered among other multifamily developments, but yet situated in a green field.

The city of Malden was chosen as a potential area of property development due to its close proximity to the city of Boston and its Economic Base. The location is desirable by young professionals, working in Boston, families with children looking to live in a suburban like environment and yet have all the amenities offered by the city, college students looking for a much more affordable housing, outside of the campus, and empty nesters who have given up ownership of a suburban property in favor of the cultural and recreational activities offered by the town of Malden and the city of Boston. Malden public school system has shown continuous steady progression and can support children from Pre-K through high school. The town offers multiple park locations in support of various outside activities.

105 Mountain Ave is a flat site, easy to construct on, void of any unnecessary improvements, the site does not have any recorded easements or encroachments. It is outside of the 100-year flood plane and is equipped with city sewer, water and electricity. The site is analyzed for a multifamily, 3-story structure with varied apartment configurations and ground parking.

The existing zoning restrictions on the property suggest that a set of zoning variances will be required in order for the site and all future improvements to provide for best return on investment. Such variances include decreasing the number of parking spaces per dwelling unit, decreasing the allowable living area of each dwelling unit and increasing the percentage lot coverage ratio for the principle and secondary structures.

Based on the 1-mile supply and demand analysis, the rental market is saturated with only 2% need for additional rental units. Additional need of rental housing could be accrued due to the increased demand for walkable urbanism and the demand for additional affordable housing units as described in Section III Part 5 of this report. However, if the pool of the market research is expanded within the 7-mile radius, the projections look positive. It is significantly more difficult to appropriate the exact numbers of positive rental growth due to the city and state policymaking, even more so, when such new bylaws are still in the works. Refer to page 14 and 15 of this report. Â

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Malden is part of the flourishing economic base of Middlesex County with median salaries 47% higher than the national. Its labor force has increased twice more than the labor force of the state and 30% more than that of the nation.

Therefore the construction costs in the area are relatively high and so is the overall construction/ development cost of the project.

After performing a thorough financial analysis of the proposed 3-story 18unit apartment structure, we discovered the following: Return on equity (Re) is much lower than anticipated, less than 1%, which suggests that alternative ways of investment could be pursued. The overall return (Ro) also seems low at 4.2%, which does not allow much room for exit, cap required at 3% to realize profit if property is sold after year one of occupancy.

The developer could hold the property for a number of years before the final sale.

However, the debt service coverage ratio is low, 1.08, which poses a problem with obtaining the necessary credit. Most banks require 1.15 to 1.2 DSCR in the Boston area. Refer to Section VII Feasibility Analysis for detailed construction and NOI financial documents.

Alternative Approaches: Alternative to rental housing units is the construction of market rate condominium development. We recommend further market analysis be performed to identify the feasibility of this approach.

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II. Physical Attributes 1. Macro Level Site Analysis The property is located at 105 Mountain Ave in Malden MA 02148.

Malden Redevelopment Authority (MRA) currently owns the property. MRA is located at 200 Pleasant street, Malden MA 02148. The property is classified as vacant land in a Residential B District. MRA can be reached at 781-397-7100.

City of Malden: Malden is situated in the Greater Boston Area. Located in Middlesex County, it is five miles northwest of Boston with a population of approximately 60,000 residents. It is bordered by Melrose on the north, Stoneham on the northwest, Medford on the west, Everett on the south, Revere on the east and Saugus on the northeast. Waitts Mount is the highest point in the city. Malden consists of 5 square miles and is convenient to Boston’s Logan Airport and Routes 1, 16, 93, 99 and 128.

Google maps

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History: In 1640, the Puritans settled in Malden on land purchased in 1629 from the Native American Pennacook Tribe. Located north of the Mystic River, the area was originally known as "Mystic Side" and was part of Charlestown. Malden was incorporated as a separate town on May 2,1649. The name "Malden" was chosen by Joseph Hills, an early settler and landholder, who emigrated from Maldon, England. Malden was incorporated as a city on March 31, 1882 and originally included what are now the adjacent cities of Melrose (until 1850) and Everett (until 1870).

During the American Revolution, the citizenry of Malden were heavily involved in the early resistance of the oppression of Britain and was the first town to petition the colonial government to withdraw from the British Empire.

Transportation: Malden has two MBTA Orange Line stations connecting to all points south. Commuter rail service links Malden to Haverhill via the Reading/Haverhill Commuter Line at Malden Station. MBTA bus service also serves the community. The Malden Center Orange Line Station is the fifth busiest station on the MBTA’s Orange Line system of 18 stations. More than 12,000 commuters use the station on a daily basis.

Recreation: There are approximately 30 park sites throughout the City providing a variety of recreational amenities including tennis courts, basketball courts, playgrounds, ball fields and a skateboard park. Recently renovated Macdonald Stadium includes a 400-meter synthetic running track and a state of the art synthetic turf. Additionally, Malden borders the 56-acre Middlesex Fells Reservation, which boasts many walking, and hiking trails. The twenty-five acre Fellsmere Pond is the historical “Jewel of Malden” and there is also a swimming pool located on Mountain Avenue, which is owned and operated, by the Department of Conservation and Recreation. The expansive Pine Banks Park, operated by a Board of Trustees with equal representation by the Cities of Malden and Melrose, sits on the Malden/Melrose line.

Schools: Malden public school system consists of one Pre-K, five K through 8 and one High School. Malden is also home to Cheverus, a Catholic Pre-K through 8 school, Malden Catholic High School and the Mystic Valley Regional Charter School which includes grades K through 12. Malden is also part of the Northeast Metropolitan Regional School District , which allows high school students to attend the Northeast Metropolitan Regional Vocational School located in Wakefield.

There is also various secondary education institutions located in the City including a Bunker Hill Community College satellite campus as well as several Career Training Schools. Additionally, the Massachusetts Department of Elementary and Secondary Education is headquartered in the downtown.

Conclusion: The city of Malden was chosen as a potential area of property development due to its close proximity to the city of Boston and its

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Economic Base, and superior higher education institutions. The history and character of the place makes the location desirable for young professionals, working in Boston, young families with children looking to live in a suburban like environment and yet have all the amenities offered by the city, college students looking for a much more affordable housing, outside of the campus, and empty nesters who have given up ownership of a large suburban property in favor of the cultural and recreational activities offered by the town of Malden and the city of Boston. The public transportation, already in place, suggests easy commute to the financial district of Boston, museums, shopping and cultural centers. [Exhibit 1]. The public school system has shown continuous steady progression and can support children from Pre-K through high school. The town offers multiple park locations to support various outside activities such a biking, cycling, running and family gatherings. Malden crime rates are consistently low as those of the state of Massachusetts [Exhibit 2].

2. Property Description

PPOPOSED SITE

Google maps

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City of Malden Zoning Map

Identification: Property ID 050 279 909 Location: 105 Mountain Ave., Malden MA 02148 Land Area: 19,957.89 sf Shape and dimensions of the site: The site has an irregular rectangular shape.

Frontage of 83.5 linear feet, the back of the property measures 131.20ft. The west side abuts 5 row style single residences and is approximately 220ft. The east side of the property abuts the US Post Office and its adjacent parking lot.

This side geometry is irregular due to the notching Post Office loading dock.

Topography: The site is primarily flat with slight slope towards Mountain Ave. Within 1mi radius to the northeast, Watts Mountain offers increase in slope and gradual grading change. To the north of the site, slight hill formations covered with seasonal plantation stabilize the soil. The site itself has numerous evergreens and some deciduous trees, which offer superior views.

Obvious Easements or Encroachments: There are no obvious easements or encroachments.

Assessed Value for Tax Purposes: $256,800 Annual Taxes (2013): $3,478

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Flood Zone Designation (Include the FEMA Map Panel Number): 25017C0437E

PROJECT SITE Utilities Available to Site: The site is classified as urban infill and therefore city water, sewer and electrical services are in place at the perimeter of the site.

Improvements on the site to be removed: The site is currently used as a parking lot. Removal of asphalt and underlying course gravel is necessary as well as removal of any interior to the site rainwater drain systems.

Conclusion: The site is located in the downtown district in Malden. It has a superior location valued at $12.86 per square foot. It is outside of the 100-year flood plane zone and served by the existing city storm management system. The site is void of any unnecessary improvements. Its greatest benefits, consistent with its suggestive usage, are: its access, closeness to public transportation, lack of over visibility and major traffic, immediacy to amenities such post office, police station, city hall, and adjacency to fitness center with a natatorium. It is clustered among other multifamily developments. See Supply Delineation.

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3. Usage The site is analyzed as a multifamily, 3-story structure with varied apartment configurations and ground parking. Current statistics show 7.2% increase in overall population and 58.8% of all residents are renters. Therefore, the potential pool of users is approximately 35,500 people within 1 mile of the property and 347,705 people within 7 miles (refer to References, bphc.org). The even topography of the site will allow for easy foundation excavation. The surrounding structures are comparable in building height (2-story post office and 4-story multifamily building), which suggests acceptable soil conditions. The site has street exposure and can provide for additional permit parking. The existing tall greenery at the back can be of significant benefit if apartments are designed with exterior open space (terraces). In consideration of the mean household in Malden, the site can support apartment units starting at $1,400 to $2,400 in rent.

Refer to Supply Delineation.

Examples of best usage multifamily structures:

Example #1: Cloverdale749

Image ©Lorcan O’Herlihy Architects

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Example #2: 63 Compton

Example #3: Tres Picos 97

Image ©Doone Silver Architects

Image ©D+S Arquitectos

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III. Legal Attributes 4. Zoning The current zoning classification for this site is Residential B.

PROPOSED SITE

City of Malden Zoning Map

The majority of Malden is single-family residences with 17% of land area allocated to multifamily and office use, keeping the appeal and the suburban feel of the town. However, its close proximity to Boston and the availability of public transportation have contributed to the increased developers’ interest in the area.

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That and the inability to locate affordable land opportunities within the Greater Boston Area.

Zoning Table 4.1

Density Restrictions:

Zoning Table 4.2

The yellow colored cell requires variance

As per Article 12 of the Malden Zoning ordinances, subsection 400.1.2.5, the allowable height is 35ft above grade level for multifamily residences up to three stories high, inclusive of the third story. The requirement for density is 1,500sf per dwelling unit, as well as 250 sf of open space per dwelling unit.

Parking Requirements:

Zoning Table 4.3

The yellow colored cell requires variance

Two parking spaces are required per apartment unit. There are no requirements for additional visitors parking; therefore none of the units have to be handicap accessible. Â

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Conclusion: The existing zoning restrictions on the property suggest that a set of zoning variances will be required in order for the site and all future improvements to provide for best return on investment. The requirement that there are 1,500sf per dwelling unit will have to be lowed in order to increase the number of apartment units and therefore decrease the cost per square foot of construction. Two parking spaces per dwelling unit is typical for luxurious type apartment units and therefore there is ground for variance to limit this number to 1 parking space per unit. On the other hand, the height requirement seems doable for a three story complex, allowing 11’-8” floor-to-floor height, which is common for residential construction.

This report is contingent upon the successful obtaining of the following recommended variances: - Density Sq/ft per unit: 700sf for an economy unit/ studio, 900sf for 1-bedroom unit, and 1,350sf for 2-bedroom unit.

- Parking Space: 1space per unit.

Based on the existing numbers of rentals stated in Exhibit 4 tables, 40% of the allowable area should be allocated to studio units, approximately 700 gsf each, 40% of allowable area will be 1-bedroom type apartments, approximately 900 gsf each, and 20% will be designed as 2-bedroom type apartments, approximately 1,350 gsf each. Total allowable lot coverage is 15,000 gsf.

Therefore 9 units are studios, 7 units are 1-bedroom apartments, and 2 units are 2-bedroom apartments.

5. Municipal programs and incentives Regional Economic growth: The Economic Development Incentive Program (EDIP) is a tax incentive program designed to foster job creation and stimulate business growth throughout the Commonwealth of Massachusetts. Participating entities may receive state and local tax incentives in exchange for job creation, manufacturing job retention and private investment commitments. The legislation advances two economic development goals through multi-year investments designed to sustain the Commonwealth’s economic growth into the future: expanding opportunity into communities in Massachusetts not yet reached by the state’s economic successes, and the process for awarding TIF benefits has been simplified for municipalities, as the adoption of “TIF plans” and designation “TIF Zones” are no longer required.

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The Mass Works Infrastructure Program (MWIP) provides a one-stop shop for municipalities and other eligible public entities seeking public infrastructure funding to support economic development and job creation. The Program represents an administrative consolidation of six former grant programs: Public Works Economic Development (PWED), Community Development Action Grant (CDAG), Growth Districts Initiative (GDI) Grant Program, Massachusetts Opportunity Relocation and Expansion Program (MORE), Small Town Rural Assistance Program (STRAP), Transit Oriented Development (TOD) Program.

The Mass Works Infrastructure Program provides a one-stop shop for municipalities and other eligible public entities seeking public infrastructure funding to support: Advance economic development or housing opportunities in Gateway Cities (Malden is a gateway city), Complement existing centers of development such as city and town center revitalization projects or mill redevelopment opportunities, Include a mix of commercial and residential development or contribute to a mix of development within an area (with an emphasis on multi-family or small lot single-family residential development), Are consistent with regional land use and development plans; and provide for transportation improvements which enhance roadway safety in small, rural communities. The MWIP is administered by the Executive Office of Housing and Economic Development in cooperation with the Department of Transportation and Executive Office for Administration & Finance.

The Infrastructure Investment Incentive Program or I-Cubed, will finance significant new public infrastructure improvements necessary to support major new private development. The public infrastructure investments will be financed through an innovative cost and risk sharing arrangement among the Commonwealth, the Municipality and the private developer. The new private development will result in new jobs and tax revenue for the Commonwealth and in increased commercial property values and real estate tax revenue for the Municipality District Improvement Financing (DIF) is locally driven program and should be approved by the Economic Assistance Coordinating Council (EACC).

The municipality must define the district and document a development program describing, among other issues, how the DIF will encourage increased residential, commercial and industrial activity within that district. It must also detail the project improvements, financing plans and community benefits. The municipal investment is designed to stimulate private investment, which in turn increases the taxable value of property and generates the incremental taxes. The DIF flexibility empowers municipalities to forward public purpose while assisting their private partners in accomplishing their goals. All cities and towns are eligible to utilize this financing alternative without qualifying as open-blighted, decadent, substandard, or economically impaired.

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According to Boston Globe, Boston needs to build 53,000 housing units by 2030 to keep pace with rapid population growth that is already increasing prices and squeezing out low- and middle-income residents.

The city report by Mayor Martin J. Walsh’s administration, previewed by city officials on Wednesday, calls for $21 billion in private and public construction that would increase Boston’s overall housing stock by 20 percent over the next two decades. During that period, the city’s population is expected to jump by 15 percent. Walsh wants to limit further real estate price inflation by creating 20,000 units for middle-income residents, largely built by private developers. His plan would loosen zoning restrictions and provide financial incentives to encourage construction of taller buildings in outlying neighborhoods and edge cities.

Walsh said that he would seek to concentrate development primarily around existing MBTA stations.

Conclusion: Malden is a gateway city with the potential for a flourishing economy and current unemployment rate below the national average. As part of the Greater Boston Metropolitan Area, Malden has a pretty diverse economic base and a strong political support network. Tax incentive programs in place together with political support for major new private development will stimulate the demand in the area. To facilitate the expansion of new development, public infrastructure support programs are being put in place. The need for additional affordable housing units will help correct inadequate zoning ordinances and allow for greater density. The fundraising of additional resources to support economic growth of gateway cities is one of the priorities of the current state administration.

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IV. Location Attributes 6. Accessibility and Linkage Major roads: The site is located in the Downtown area of Malden. To the south, it is located in close proximity to Route 60, connecting Malden to adjacent neighborhoods, travelling east-west direction. To the east, Route 1, a significant interstate spanning from Main to Florida, encompasses the site. To the west, the site in 15 minutes driving distance to interstate I93, travelling north south and connecting Malden to New Hampshire state due north and Rhode Island state due south. I93 is also the main road to Cape Cod MA, New York City NY, and Hartford CT. The site is 12 minutes driving distance from Mystic River Canal flowing into series of larger canals leading to Quincy Bay and Broad Sound Bay.

Public Transportation: The site is located 14 minutes walking distance from Oak Grove T stop and 11 minutes to the Malden Center T stop on the Orange MBTA line. There are four bus lines connecting the site to the Orange line stops. Refer to MBTA maps below.

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Google map

Google Map

Complimentary uses: The site is in close proximity to the following amenities: Malden Mayor’s Office, Police Department, City Hall, District Court, US Post Office, Malden High School, Malden Public Library, St. Paul’s Church, YMCA fitness center, Day Care Center, local trade school, local boutiques and restaurants. See amenities map below.

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Google map- Complimentary uses

105 Mountain Ave, Malden MA “The Site”

Complimentary uses

Town of Malden view

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V. Economic and Sociological Attributes Economic Attributes: Malden Economic Base (EB) contributes to the growth and development of the Middlesex County EB. A comparative analysis between the state of Massachusetts, The Middlesex County and the country shows that the statistics for the county surpass the economic growth of the state and the country, overall. The Middlesex county median family income is $94,100, 47% higher than the US medium income at $62,900 and 12.4% higher than the state median income registered at $83,700.

Table 5.1

The Labor Force has increased 1.7% between 2011 and 2014, compared to 0.9% for Massachusetts and 1.48% for the country overall. Population growth in Middlesex County has constant increase of 1% for the last three years, compared to 0.7% for the state and the country. Employment has increased in the last three years by 3.2% compared to 2.9% for the state of Massachusetts and 4.6% for the country. Unemployment rate has decreased consistent with that at the state level, and more aggressively than that at the national level. Malden unemployment rate at 4.9% is lower than the state rate at 5.5% and 6.1% for the country. Rate of Bankruptcy has been ranked as 11 in the state (1worse, 14 best) at 1.4% compared to 1.81% for the state and 3.29% for the country overall. Refer to Exhibit 5, gathered from information provided in Appendix B. Conclusion: Malden is part of the flourishing economic base of Middlesex County with median salaries 47% higher than the national. Its labor force has increased twice more than the labor force of the state and 30% more than that of the nation. The region is characterized with increasing population and employment and decreasing unemployment rates. Bankruptcy statistics are among the lowest of the state and three times lower than those of the nation. Â

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Sociological Attributes: The city of Malden is historically a working class town with deep sociological ties to the early settlers and landholders. Real estate development has been somewhat stalled due to the single family zoning restrictions in place and the suppressed economic development of the area: Malden, Chelsea, Revere belt. With the new programs in place, targeting revitalization of MA getaway cities, Malden has the potential to increase density and grow population much more aggressively than the rest of the Boston neighborhoods. Larger employers are concentrated in the areas of specialty foods, steel manufacturing and healthcare services. There are no major export oriented industries within 1mile of the site that can contribute to a significant economic advance of the town. [Appendix A]. However, Malden’s location and proximity to the financial downtown of Boston within 3 to 7 mile radii of the site as well as the availability of reliable public transportation make Malden a desirable bedroom community with many amenities and close by services.

The majority of Malden population is White- American, Indian and Alaskan native, followed by a small percentage of Hispanic or Latino, Asian, and African American residents. Refer to Exhibit 3 for Population Tapestry.

Table 5.2

Conclusion: The primary population of Malden is middle income, Caucasian population with earning power between $50,000 and $150,000 annual income. The majority of the city is occupied by young professionals and families with a single child. The tapestry report of the area shows large numbers of immigration population, Hispanic and Asian. The area is characterized by ethnic and racial diversity. A significant portion of the residents belong to the young, diverse and mobile student population as well as recent graduates, educated professionals who work in substantive jobs.

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VI. Market Analysis 7. Delineate the Market Segment For the purpose of identifying the area of this market analysis, we have concentrated on 1-mile and 7-mile radii, since the 3-mile results fall within the finding of the 1-mile. Below is the map showing the extent of research performed for the identified location.

Table 6.0 Market Analysis Ring Boundaries

1-mile radius: Malden downtown and periphery.

3-mile radius: Malden, Medford, West Revere, North Somerville, East Arlington, East Winchester 7-mile radius: Malden, Medford, Wakefield, Saugus, West Lynn, Revere, Charlestown, Cambridge, Boston, Arlington, Belmont, East Watertown, North Brighton, Southwest Peabody

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8. Market Demand: Estimate and Forecast Identification of primary property user and attributes: The primary targeted users are young professionals, students, couples with a single child, and end of career empty nesters. The targeted age pool is between population 21+ years of age and below 75 years of age.

Current projections indicate future population growth in the 35-44 and 4554 years of age by 1.5% in the next 3 years, while the 25-34 range seems to be decreasing by 2.4% by year 2018.

Single person families comprise the majority of the households in Malden as well as within the 3 and 7 miles radii. Second to single families are married couples with no children or single parents with one child households followed by married couples with a single child. See Exhibit table 4A. These household ratios define the mixture of rental units in demand.

Based on Exhibit Table 4B, obtained through STDB, the percentage of Malden residents who currently rent between the targeted boundary ($1,400 $2,400) is 19% of the total Malden population, equating to approximately 11,471 residents. However, Exhibit Table 4C depicts that within 3 and 7 miles radii, that percentage increases to 30%, equating to 67,577 people.

According to STDB, Exhibit Table 4D, one third or approximately 31% of the total Malden population holds a Bachelor’s degree or higher level of education.

The region has a strong tendency towards renting. Refer to Exhibit Table 4E. 58.8% of all households rent within the 1mi boundary, 51.3% within the 3mi and 56.3% within the 7-mile radius.

71.4% of Malden residents are occupied in the service industry. Only 28.6% hold a managerial position. Therefore, luxury rentals could prove challenging to stabilize even in best economic conditions. However, expanding the pool to 3 and 7 miles radii shows much more promising results. 52.9% of all residents are occupied in the service industry and 47.1% hold a managerial job.

42% of the total population earns more than $75,000 in yearly salary.

Analysis of major demand drivers: The demand drivers are employment growth, population growth, increase in demand for walkable urbanism, increase in GDP growth rate [Appendix D] as well as the demand for additional affordable units. (Refer to page 15 of this report)

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Table 6.1: STDB Demand Analysis Estimate and Forecast

Table 6.2: 1mile Housing Demand Estimate S. Fanning method

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9.

Market Supply

The supply analysis is performed on properties located within the immediate adjacency to the property and 1 mile radius. Findings are summarized in Table 6.3A,B, and C.

Table 6.3A

Table 6.3B

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Table 6.3C

Total Supply Rental Units: 602

10. Supply/ Demand Equilibrium Analysis

Table 6.4

Conclusion: Based on the 1-mile supply and demand analysis, the rental market is saturated with only 2% need for additional rental units. However, this analysis is based on growth of employment and population projections.

Additional need to rental housing will be accrued due to the increased demand for walkable urbanism and the demand for additional affordable housing units.

Boston Metropolitan Area has been stated as number one place for walkable urbanism, see Appendix C, as well as additional 50,000 affordable units are projected within the next 15 years; refer to page 15 of this report.

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VII. Feasibility Analysis Project Pro-forma: Based on the quality of construction materials utilized in the projects described in part II. Physical Attributes, section 3. Usage, Examples 1,2 and 3, Delvecchio Construction Inc., a local builder with comparable experience, quoted the following pricing: $220sf – New Construction including parking on deck.

Construction Pro-Forma:

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Table 7.0 Construction Pro-forma

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Cash Flow/ NOI Pro-forma:

Table 7.1 Property rent data

Table 7.2 Loan Amortization Schedule

Table 7.3 Estimated Property Value

Re (Return on Equity)= Pre Tax Cash Flow/ Equity= 1% Ro (Overall Return)= NOI/ Total Construction Cost= 4.2% (Initial Cap) DSCR= NOI/ Annual Debt= 1.08

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VIII. Conclusion Current Development: The projected rental housing demand, within the 1-mile submarket area as analyzed in this report, is approximately 2% for the next five to six years. Based on the population and employment growth only, this number is somewhat insufficient to indicate reasonable evidence in confirming the need for additional rental housing. However, if the pool of the market research is expanded within the 7-mile radius, the projections look positive. It is significantly more difficult to appropriate the exact numbers of positive rental growth due to the city and state policymaking, even more so, since such new bylaws are still in the works. The need for additional affordable housing as well as the high demand generated by the increased interest in the area as number one place for walkable urbanism suggest future shortage of supply housing. However, current market conditions and the construction pro-forma value of the development discourage any further involvement.

The construction costs in the area are relatively high and therefore so is the overall construction/ development cost of the project. Return on equity is less than 1%, which suggests that alternative ways of investment could be pursued: bonds, stocks. The overall return/ entrance cap seems low at 4.2%, which does not allow much room for exit, cap required at 3% to generate profit. This suggests that the property could be held for a number of years before the sale. The debt service coverage ratio is low, 1.08. This poses a problem with obtaining the necessary credit, 70% of the value. Most banks require 1.15 to 1.2 DSCR. Alternative Approaches: Alternative to rental housing is the development of condominium market rate units. We recommend considering the obtaining of a condo map if the project is further pursued.

Another approach will be to rezone the property, procure the necessary architectural plans and sell the package for future development when the submarket demand conditions change.

A third approach could be increasing the number of rental units and decreasing the number of area per unit. That approach will increase parking significantly. Parking variance will need to be further revised. Close coordination with the city hall building department will be required. However, this approach can only be profitable if the cost per sq ft is lowered as well. A necessary balance between cost per sf and quality of construction on which higher rents are generated should be maintained.

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References:

http://www.cityofmalden.org/department http://malden.patriotproperties.com/default.asp http://www.mass.gov/hed/economic/eohed/bd/econ-development/ http://www.mass.gov/hed/economic/eohed/pro/infrastructure/massworks/ http://www.mass.gov/anf/budget-taxes-and-procurement/cap-finance/icubed/overview-of-i-cubed.html http://www.mass.gov/anf/budget-taxes-and-procurement/cap-finance/i-cubed/ http://www.mass.gov/hed/business/funding/infrastructure/dif/about-the-districtimprovement-financing-dif.html http://www.bostonglobe.com/business/2014/10/09/mayor-says-boston-needsnew-housing-units/L3brQHvt6rvUXk8FrzP7DM/story.html http://lmi2.detma.org/lmi/Top_employer_list.asp?gSTFIPS=25&gCountyCode=00 0071&areatype=05&codeType=10&Command=Goto&Param=1 http://www.tbf.org/news-and-events/news/2012/november/tenth-annual-greaterboston-housing-report-card-predicts-sharp-growth-in-demand http://www.bphc.org/healthdata/health-­‐of-­‐boston-­‐report/Documents/HOB-­‐2012-­‐ 2013/B_HOB12-­‐13_Boston_Section.pdf

http://www.architectmagazine.com/multifamily/cloverdale749_o.aspx

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Exhibit 1: Public Transportation travel times and map

Through the established MBTA network of five different “T” lines, below are the commute times for various amenities: Airport: Orange to Blue: 6 stops: 30 min Museum of Fine Arts: Orange to Red: 6 stops: 30 min Financial District (State Street): Orange: 3 stops: 15 min Boston Aquarium: Orange: 4 stops: 20 min MIT and Harvard campus: Orange to Red: 7 stops: 40 min Prudential Shopping Center: Orange to Green: 5 stops: 25 min Newbury Street (Shops & Restaurants): Orange to Green: 4 stops: 20 min Boston City Hall/ Government Center: Orange to Green: 4 stops: 20 min

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Exhibit 2: Town of Malden Crime rates report

Town of Malden Crime analysis per area.

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Exhibit 3: Malden Tapestry

The majority of Malden residents belong to four main categories of the US Tapestry Segmentation: City Lights, International Marketplace, Urban Melting Pot and Trendsetters.

City Lights: The City Lights segment is composed of diverse neighborhoods situated primarily in the Northeast. This dense urban market is a mixture of housing, household types, and cultures that all share the same city space.

Households include families and singles, similar to the U.S. distribution by household type. With a median age of 38.5 years, the population is slightly older than that of the U.S. Compared to the U.S. population; there are fewer children and slightly more people aged 75 or older. The ethnic or racial diversity is slightly higher than the U.S. level, with higher ratios of Asian, Hispanic, and multiracial populations. City Lights residents earn a good living working in white collar and service occupations.

International Marketplace: Located primarily in cities in “gateway” states on both U.S. coasts, International Marketplace neighborhoods are developing urban markets with a rich blend of cultures and household types. The population is young, with a median age of only 32 years. Approximately 70 percent of the households are families; 44 percent are married couples with children and single parents. International Marketplace is the second most diverse of the Tapestry segments. More than half of the total population is Hispanic; 11.6 percent is Asian, and 7 percent is of two or more races. A high proportion of immigrants, including recent arrivals, live in these neighborhoods.

Urban Melting Pot: Recently settled immigrants live in ethnically rich Urban Melting Pot neighborhoods. More than half of the population is foreign born; half of these have come to the U.S. in the last 10 years. The median age is 36.4 years, slightly younger than the U.S. median of 37.3. Distinctly diverse, more than one in four are Hispanic. Whites represent 47 percent of the population; Asians, 30 percent; and 6 percent are multiracial. Household types are equally

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diverse: 45 percent are married couple families; 30% are singles living alone.

Metro Renters: Due to the young age of the metro renters, they not included in the targeted group age for this property.

Trendsetters: On the cutting edge of urban style, Trendsetters residents are young, diverse, and mobile. More than half the households are singles who live alone or share the rent with a roommate. Families comprise the remainder. With a median age of 34.8 years, this segment is slightly younger than the U.S. median. Ethnically diverse, 13.7 percent of the residents are Asian and 23 percent are Hispanic; both percentages are well above those of the U.S. These residents are educated professionals who work in substantive jobs. Nineteen percent of the residents who are aged 25 years and older hold a graduate degree, 30 percent have earned a bachelor’s degree, and 73 percent have attended college.

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Exhibit 4 – STDB Rental Stats

Exhibit Table 4A

Exhibit Table 4B

Exhibit Table 4C

Exhibit Table 4D

1mile

3miles

7miles

Exhibit Table 4E

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Exhibit 5: Economic Attributes Location Quotients -­‐ FDIC

Table 5.2

Table 5.3

Table 5.4

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