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HomeMy WebLinkAboutagenda.council.worksession.20100907C� THE Ory of ASPEN MEMORANDUM TO: Mayor and City Council FROM: Chris Everson, Affordable Housing Project Manager THRU: Scott Miller, Capital Asset Director DATE OF MEMO: September 3, 2010 MEETING DATE: September 7, 2010 RE: Burlingame Phase II Phasing and Demand REQUEST OF COUNCIL: Direction requested PREVIOUS COUNCIL ACTION: On July 12, 2010, City Council formalized conceptual approval of major elements of the Burlingame Phase II concept master plan. BACKGROUND: On August 17, 2010, staff provided City Council with an update on the 50% Detail Design plans. At that time, it was suggested that staff return on September 7 to discuss potential phasing for the construction of the development, and staff was instructed to bring proformas for the various phasing scenarios being considered. DISCUSSION: In considering construction phasing options for Burlingame Phase II, the design team has recognized the following issues: ❖ Phasing of unit deliveries is more than just a construction management challenge ❖ Construction efficiency is desirable to keep costs down Financial constraints must be considered ❖ Care must be taken to avoid flooding the market (demand concerns) It is desirable to minimize impacts to the neighborhood ❖ Flexibility is desirable in case of external forces ❖ If implementation must stop, a livable community should remain ❖ Individual phasing scenarios may be good at addressing some priorities, but not all Although there are a number of more complex ways of looking at potential phasing options, this memo will focus on only four simplified phasing options A, B, C and D as follows: Page 1 of 5 C� THE CITY or ASPFN Op tion A: Construct and deliver 167 units in a single construction mobilization effort lasting approximately 36 months with no breaks. A 36 month schedule would ma ximize construction efficiencies and minimiz the duration of neighborhood impacts, but would also put 167 new housing units on the market on a schedule that may not provide adequate opportunity for market absorption and could thus prove more costly than any savings that could result from the construction efficiencies that come with building all at once. Staff understands that City Council is not interested in building the whole Phase II development at once, but this scenario provides a baseline understanding of the cost impacts of building more quickly as opposed to building more slowly. Op tion B: Construct and deliver two separate groups of approximately 83 units each, utilizing two separate construction mobilization efforts with a gap of 5 years between each of the two construction efforts. Constructing two groups of approximately 83 units each in two separate construction efforts would still provide a large enough scale of construction to create a high level of construction efficiency. In between the two construction efforts, a five -year stop is assumed, during which time a livable community will be left for homeowners to enjoy. Construction impacts will adversely affect the neighborhood during the second construction effort, but the market will have five years to fully absorb the first group of units before the second construction effort would begin. In the event that market absorption occurred sooner, the second construction effort could be kicked off sooner. If the market absorption takes longer than anticipated, the second construction effort could be delayed until the entire first group of units has been purchased. lion C: Construct and deliver three separate groups of approximately 55 units each, utilizing three separate construction mobilization efforts with a gap of 1 year between each of the three construction efforts. Constructing three groups of approximately 55 units each in three separate construction efforts would provide some construction efficiency, but the burden of construction impacts would be shared by many more families. In between the three construction efforts, there would be two 1- year construction stops during which time a livable community would be left for homeowners to enjoy. Construction impacts would adversely affect the neighborhood during the second and third construction efforts, but the market would have a year to bounce back from the first group of 55 units and a second break of an additional year to absorb the second group of 55 units. If the market absorption takes longer than anticipated at any time, the next construction effort could be delayed until the entire group of previously delivered units has been purchased. Page 2 of 5 C� THE CnY of ASPEN Op tion D: Construct and deliver four separate groups of approximately 42 units each, utilizing four separate construction mobilization efforts with a gap of 1 year between each of the four construction efforts. Constructing four groups of approximately 42 units each in four separate construction efforts would create the least construction efficiency of the options presented here. The burden of construction impacts would borne by hundreds of families. During each of the I -year construction stops between each delivery of approximately 42 units, a livable community would be left for homeowners to enjoy. The market would have a year to bounce back from each group of approximately 42 units delivered. If the market absorption takes longer than anticipated at any time, the next construction effort could be delayed until the entire group of previously delivered units has been purchased. Proforma Assumptions: Assumptions in the proformas below include a July 2011 construction start with 3% per year escalation on all costs and 2% per year escalation on all sales revenues. Additional assumptions for all proformas shown here include revenues resulting from a category mix equivalent to Burlingame Phase I. Financing costs would be in addition to costs shown. All of the proformas assume 100% site grading and utility installation occurs up front. Although many of these factors are impossible to accurately predict, they are nonetheless held constant for all of the proformas presented in this memo. Economic factors will undoubtedly affect the accuracy of the proformas below, but the intent of comparing these proformas is to give Council an idea of how different phasing options might affect overall project performance. The proformas below are based on the 50% Detail Design plans created by OZ Architecture and the 50% Detail Design estimate created by Haselden Construction and additionally based on due diligence regarding soft costs, fees, cash flows and contingencies by Owner's Agent, Rider Levett Bucknall and are subject to change as the design continues to be developed. These proformas are based on current working estimates and cannot be guaranteed at this time. Extensive detail is available upon request. The team is currently in the process of creating 100% Detail Design plans which will be the basis for a 100% Detail Design estimate and GMP proposal from Haselden Construction. Page 3 of 5 70 THE Clry of ASPEN Burlingame Ranch Phase it Comparison of Phasing Scenario Protect Estimates nw.2 aeptemier2010 Estimates for Phase II construction Phasing Options Phase 1 Option A Option B Option C Option D (Actual Q 91 (1 Sequence @ (2 Sequenoes @ (3 Sequences @ (4 Sequences Q Units) 197 units) -83 nits ea) -55 units ea) -42 units es) Proposed direction: In the case of each construction phasing scenario, there is no way of knowing how the market will respond to the first group of units delivered. A detailed market study utilizing a combination of survey questions and market data could try to predict how the market would respond, but relying on such a study may prove as precarious as relying on recent Aspen/Pitkin County Housing Authority lottery bid counts. The purpose of the housing lottery is to provide a fair chance for local workers to obtain housing given high demand and low supply. The question of adequate demand as it relates to what might be the appropriate size of any first delivery of units at Burlingame Phase II creates the potential for a situation where supply could outweigh demand — the opposite situation for which one would employ the use of a lottery. Related to the question of whether or not adequate demand exists, one recent suggestion is to avoid the use of a lottery and to pre -sell units to local workers who would be required to qualify with APCHA and place a deposit on a housing unit. The original suggestion was, for the sake of fairness, to open up the first 80 units (roughly half of Burlingame Phase II) for pre -sale and to offer the balance of units via lottery. The size of the first group of units to be constructed and Page 4 of 5 Prior Incurred Soft Costs (Sunk costs Incurred at the time of Phase 1) 1,078,404 1,078,404 1,078,404 1,078,404 2010 Planning 8 Design Budget 2,451,880 2,451,880 2,451,880 2,451,880 2011 Planning a Design Budget 1,500,000 1,500,000 1,500,000 1,500,000 a] rf � non Offsite Infrastructure (Sunk Costs incurred at the time of Phase 1) 4,295,377 4,285,377 4,295,377 4,295,377 Mitigation Projects (Sunk Costs incurred at the time of Phase l) 3,563,104 3,563,104 3,563,104 3,583,104 Offsi[e Storm Sewer(ModiFCation to existing) 305,000 305,000 305,000 305,000 Site Infrestucture -Gas Supply (Estimate by Haselden Construction) 100,000 100,000 100,000 100,000 Site Infrastucture - Electrical Underground (Estimate from utilities Dept) 300,000 300,000 300,000 300,000 Site Infrastructure - Electrical Supply (Estimate from Utilities Dept) 750,000 �e�".Et�.r��l' �!rfical GpnsiNphpn, );1g4aldeltE!{ilate 750,000 750,000 750,000 Proposed direction: In the case of each construction phasing scenario, there is no way of knowing how the market will respond to the first group of units delivered. A detailed market study utilizing a combination of survey questions and market data could try to predict how the market would respond, but relying on such a study may prove as precarious as relying on recent Aspen/Pitkin County Housing Authority lottery bid counts. The purpose of the housing lottery is to provide a fair chance for local workers to obtain housing given high demand and low supply. The question of adequate demand as it relates to what might be the appropriate size of any first delivery of units at Burlingame Phase II creates the potential for a situation where supply could outweigh demand — the opposite situation for which one would employ the use of a lottery. Related to the question of whether or not adequate demand exists, one recent suggestion is to avoid the use of a lottery and to pre -sell units to local workers who would be required to qualify with APCHA and place a deposit on a housing unit. The original suggestion was, for the sake of fairness, to open up the first 80 units (roughly half of Burlingame Phase II) for pre -sale and to offer the balance of units via lottery. The size of the first group of units to be constructed and Page 4 of 5 7LJ THE CrrY of ASPEN delivered could be based upon the number of units that could be pre -sold in such an effort. Utilizing such a system may help the community address the question of demand and how to appropriately size the fast delivery of units at Burlingame Phase II. FINANCIAL /BUDGET IMPACTS: The current scope of work for the Burlingame Phase H Integrated Project Delivery team does not include a marketing campaign for the pre -sale of housing units. If Council were to direct staff to work with the Housing Authority to design such a pre -sales effort, additional costs would need to be estimated and a marketing component would likely need to be added to the effort. Additionally, the IPD design team is closing in on its completion of 100% Detail Design and needs approval to begin work on the Implementation Documents phase of the design effort which will take the team through PUD approval and will deliver buildable plans to the City. The IPD team consultant contracts were set up, at the request of City Council, to run through 100% Detail Design and to have the ability to add the Implementation Documents phase of the design by addendum. The 2010 IPD design effort is substantially under budget, and revenues are greater than originally projected. Staff requests that Council direct staff to place the Implementation Documents phase of the IPD team consultant contracts on the next available consent calendar. ENVIRONMENTAL IMPACTS: Please review the above statements on construction impacts. RECOMMENDED ACTION: Staff requests direction from Council to pursue consensus with APCHA and Pitkin County for the described pre -sales effort. Additionally, staff requests direction from Council to place the IPD team contract addenda for the Implementation Documents phase of the Burlingame Phase H IPD design effort on the next available consent calendar. CITY MANAGER ATTACHMENTS: Exhibit A: PowerPoint Presentation Page 5 of 5 Burlingame Ranch Phase II Integrated Project Delivery Design Construction Phasin Aspen City Council Work Session September 7, 2010 ❖ On August 17, 2010 Council was presented with information about: 1. Unit floor plans 2. Site landscape / unit owner patio areas 3. Architectural character 4. Snow drop / public safety 5. Mechanical systems recommendation 6. Construction phasing At that work session, staff was directed to return on Sept 7 with construction phasing options including estimates for each of the phasing options. Today's agenda: 1. Construction Phasing 2. Proposed Direction Quick review: Higher -speed ❖ Greatest cost efficiency ❖ Greatest risk of over - supply ❖ Lowest ability to adapt to external forces ❖ Shortest duration of neighborhood impacts ❖ Highest intensity of neighborhood impacts ❖ Least flexibility ❖ Medium cost efficiency ❖ Measured risk of over - supply ❖ Ability to adapt to external forces ❖ Balance of duration and intensity of neighborhood impacts ❖ Balanced Flexibility Lower -speed implementation ❖ Lowest cost efficiency ❖ Lowest risk of over - supply ❖ Greatest ability to adapt to external forces ❖ Longest duration of neighborhood impacts ❖ Lowest intensity of neighborhood impacts ❖ Greatest flexibility Construction Phasing: Continuum Although there are many options and details related to each construction phasing option, for the purposes of simplifying today's high -level discussion, the phasing options have been simplified to the following: Option A: Construct and deliver 167 units in a single construction mobilization effort lasting approximately 36 months with no breaks. (This option is shown only for baseline proforma comparison.) Option B: Construct and deliver two separate groups of approximately 83 units each, utilizing two separate construction mobilization efforts with a gap of 5 years between each of the two construction efforts. Option C: Construct and deliver three separate groups of approximately 55 units each, utilizing three separate construction mobilization efforts with a gap of 1 year between each of the three construction efforts. Option D: Construct and deliver four separate groups of approximately 42 units each, utilizing four separate construction mobilization efforts with a gap of 1 year between each of the four construction efforts. Construction Phasing: Simplified ❖July 2011 construction start ❖ 3% per year escalation on all costs ❖ 2% per year escalation on all sales revenues ❖ 100% site grading and utility installation occur up -front ❖ Category mix equivalent to Burlingame Phase I ****Financing costs are not included Although many of these factors are impossible to accurately predict, they are nonetheless held constant for all of the proformas presented in this memo. Economic factors will undoubtedly affect the accuracy of the proformas below, but the intent of comparing these proformas is to give Council an idea of how different phasing options might affect overall project performance. The proformas below are based on the 50% Detail Design plans created by OZ Architecture and the 50% Detail Design estimate created by Haselden Construction and additionally based on due diligence regarding soft costs, fees, cash flows and contingencies by Owner's Agent, Rider Levett Bucknall and are subject to change as the design continues to be developed. These proformas are based on current working estimates and cannot be guaranteed at this time. Extensive detail is available upon request. The IPD team is currently in the process of creating 100% Detail Design plans which will be the basis for a 100% Detail Design estimate and GMP proposal from Haselden Construction. Construction Phasing: Proforma Assumptions Burlingame Ranch Phase 11 Comparison of Phasing Scenario Project Estimates far. 2 Sepien*w 2010 1 Estimates for Phase 11 Construction Phasing Options I Phase 1 Option A Option O Option C Option D (A CUMI 1@ 91 (1 sequence a (2 Sequences a (3 Sequences @ (4 Sequences I@ Units) 167 units) -63 nits ea) -55 units as) -42 urns ea) Prior Incurred Soft Costs (Sunk costs incurred atthetimeofPhase1) 1,078,404 I.G74404 1,076.404 1AM404 2010 Planning ti: Design Budget 2.451.880 2,451,,880 2,461,880 2,451,850 2011 Planning 8 Design Budget _....._ _.,. ._ „�.. ..... 1.3 00,000 ... .. ,..�,:— 1.50D 1 500„000 1,5M,000 .uu ^spa++. ...✓x. r flvamiS' ••"SF1Tf.4 R14 AS•- X^�"_MSE CIWte Inias4uct re (Smic Costs ivarrred at the tine of Phase 1) Mligation Projects (Sunk Costs incurred at the time of Phase 1) Ofisia SGenn Sewer (Modification to existing) Silo ifirastuct re- Gas Supply ( rnste by Haselden Construction) Sibs triastudure- Electrical Underground (Estwrate from Uses Dept) 42951377 4.285.377 3,5631104 3,583,104 306,006 305.000 100.000 100.000 300.000 300,000 750,000 750,000 4296.377 4296,377 3,563,104 3,-AM104 305.000 306,1)00 100.000 108;000 300,000 300,000 Ste iriastruchra - Electrical Supply (Estimate from Militias Construction Phasing: Proformas Burlingame Ranch Phase II Estimated Project Cost N TOTAL ESTIMATED UNITSALES REVENUES ETOiAL ESTIMATED SUBSIDY f frf frr Fl. . - 012011104:11 N rfr frr f rfr rrr F 057, f 1 I l i Total Project Cost and Subsidy Phase 1 Option A Option a Option C Option D [Actum' OLD 91Unftsl t1 Sequence CD 167 units) (2SequencestR 93 nits es) J3' SequencesLD - SS units 14 Sequences Lb -42 units eal eal Burlingame Stanch Phase II Estimated Project Cost (Per Unit) 1• TOTAL ESTIMATED SALES REVENUE PER UNIT ■TOTAL ESTIMATED SUBSIDY PER UNIT iw;wu soDn4o $578,210 $618,126 $563,435 $620,416 $641,499 SWAIM 4W.I= 30f1AW 2WAW 1W.00o M1 phase 1 Option A Option B Option G Option D (Actual 0 91 Units) tl Sequence 0187 units) (ZSequences i@ ^83 nits w) [3Sequenoes 0 ^55 units m) 145e;uenoes 0 —42 units my Per Unit Cost and Subsidy 1) Staff requests direction from Council to pursue consensus with APCHA and Pitkin County for the pre - sales effort described in the attached memo to Council. 2) Staff requests direction from Council to place the IPD team contract addenda for the Implementation Documents phase of the Burlingame Phase II IPD design effort on the next available consent calendar. Proposed Direction