Investment Strategy for

A Development
The University of British Columbia Team
2010 NAIOP Real Estate Challenge
Harbor Properties
 The 2010 University of British Columbia Team would like to thank the following people
who generously shared their time and insights with us:

UBC Team Program Director NAIOP Mentors

Tsur Somerville - Director, UBC Centre for Urban Economics and
Real Estate
UBC Team Advisors
Michael Katz - Principal, Katz Architecture
Mark Monroe - Senior Advisor, UBC Centre for Urban Economics
& Real Estate
Client Contacts
Denny Onslow - President, Harbor Properties
Emi Baldowin - Harbor Properties
Martha Barkman - Harbor Properties
City of Seattle
Robert Scully - Department of Planning and Development
Susan McLain - Department of Planning and Development
Vancouver Mentors
Doug Nordan - Madison Pacific
Hugo Vasquez - Mondevo Real Estate Consulting
Michael Mortensen - Grosvenor Americas
Chris Kay - Fairmont Pacific Development Limited
Team Specific NAIOP Mentors
Marc Gearhart - Opus Northwest LLC
Jason McCalpin – Wells Fargo
CJ Bowles, Broker - CB Richard Ellis
Don Marcy, Attorney - Cairncross & Hempleman
Lee Graeve - Intervest Mortgage
Mike Warfel, Civil Engineer - Parametrix
Eric Lim, Soiles Engineer - Associated Earth Sciences
Valerie Rodrick - Old Republic Title & Escrow
Richard Briscoe, Appraiser - GVA Kidder Matthews
Brian Rockey - Prime Pacific Bank
Other Contacts
Steve Kelly, Director - P3 National Centre of Expertise PWGSC
Gary Nakagawa, Regional Manager - PWGSC
Chris Wood - Northwest Atlantic
Josh Sutton, Executive Director - West Seattle YMCA
Yosh Kasahara – Parklane Homes
Grosvenor Development Team
Concert Land Acquisition Team
and a special “Thank You” to past participants who helped and
inspired us
Peter Russell, Planner - HB Lanarc
Michelle Hamlyn – Parklane Homes
Alicia Chung – Parklane Homes
 Table of Contents

Executive Summary..................................................................................................................................................3
Context......................................................................................................................................................................7
Market Analysis - Supply.........................................................................................................................................11
Market Analysis - Demand.......................................................................................................................................17
West Assemblage Development...............................................................................................................................21
Market Analysis - Risk..............................................................................................................................................33
Strategic Recommendations....................................................................................................................................35
YMCA Catalyst..........................................................................................................................................................39
Summary...................................................................................................................................................................43
Appendix...................................................................................................................................................................45
T
he following Asset Management Plan
directs the Harbor Board of Directors
with strategic recommendations for
the company’s short and long term deci-
sion regarding their land holdings in West
Seattle. Based on extensive analysis of the
current economy, market conditions and
current supply, this strategy addresses the
following two components:
• Existing assets and assemblage
opportunities including the properties
known as the West Assemblage and the
East Assemblage
• Community investment
Ultimately the Catalyst Development Asset
Management Plan will maximize value to
Harbor Developments, while responding
to economic conditions, regulatory con-
straints, and community interests. Sup-
ported by research on the options available
in the recovering economic climate, the
analysis will demonstrate projected eco-
Executive Summary
nomic returns, and a final recommendation
to Harbor for their interests in the develop-
ment site.
The Catalyst Team’s proposal addresses the
Harbor Properties RFP by recognizing:
• Harbor Properties’ commitment to
the West Seattle community, financial
success, and commitment to developing
high quality projects
• The Triangle’s potential as a neigh-
borhood on the cusp of revitalization
• Harbor’s other existing assets and
interests in West Seattle
Balancing Harbor Properties’ priorities and
current economic realities, the Catalyst
Team faces two major questions.
First: What strategy should Harbor
Properties follow for the land options and
adjoining parcels that they own, in order to
best meet company objectives?
Second: How can new development in
West Seattle, which has a low growth and
saturated market, create the City of Seat-
tle’s vision for a vibrant, lively community
with a mix of amenities and uses?
The Catalyst Team explored a variety
of uses for the two parcel assemblies in
West Seattle that can help shape a vibrant
Fauntleroy Triangle district. While an
apartment development would offer the
highest and best use for the site, the finan-
cial analysis shows that such development
is extremely risky and that a single-parcel
1
2
development alone is not enough to create sity development to mitigate market risks, a demand neighborhood. Finally, the smaller
a walkable, liveable community in West similar project on the East Assemblage at a project realized additional cost savings by
Seattle’s Triangle area. higher acquisition price cannot be justified. reducing below-grade parking and instead
For retail, the West Assembly offers a clear using lower cost at-grade parking.
The West Assemblage advantage. Retail frontage along SW Alaska
and 37th Avenue captures increased traffic Given prevailing market conditions,
On the West Assemblage, the Catalyst apartments are the best use of the land.
resulting from the YMCA and the Link.
Team proposes a mixed use, differentiated Nevertheless, despite our risk mitigating
apartment product that consists of ground The Alaskan Flats project mitigates risks. strategies, Alaskan Flats will not reach
level retail, below- and at-grade parking, By opting to not exercise the full density our required hurdle rate of 20% IRR. As a
five floors of residential units comprised of potential of the West Assemblage, the Cata- result, the Catalyst Team recommends that
loft-style homes, and YMCA oriented flex lyst Team realizes similar rates of return on Harbor Properties renegotiate the West
space with an floor area of 67,000 square cost while reducing the project’s leverage Assemblage option price to $1.8 million.
feet (gross above grade). To help mitigate requirements compared to a full build-out
the risk from low demand and uncertainty scenario. The lower density build out, If Harbor is unable to negotiate the recom-
regarding the timing and extent of the coupled with the unique and differentiated mended combined options price or extend
metro area’s economic recovery, the pro- units, minimizes the risk that Alaskan Flats the decision window by extending the op-
posed project is well below the use by right will potentially steal renters from Harbor tion on the site, we advise Harbor Proper-
potential. Properties’ other offerings in this weak
This proposed development concept, Uses and Businesses in the Triangle
named Alaskan Flats, integrates sustain-
ability and green initiatives in a number of
areas including locally specific stormwater
management. Also, the location of Alaskan
Flats is designed to capture the benefits of
new RapidRide for its residents and will
include design features to encourage public
transit use.
The Catalyst Team proposes to develop the
West Assemblage given the site’s advanta-
geous location and market value. The West
Assembly is twice as close to the RapidRide
stop as is to the East. More significantly,
the total cost of the West Assemblage is
$1.8 million lower, with a $32 per square
foot lower price than the East Assemblage.
As the Catalyst Team proposes a lower den-
Executive Summary
ties to not exercise the options on the West Decision Strategy
Assemblage.

East Assemblage
Harbor Properties has one remaining
1-year option extension available on the Purchase Alaskan
East Assemblage. The Catalyst Team rec-
ommends that Harbor exercise the option West Options Flats
at the end of 2010. This will allow Harbor
to track the timing of the local economic Assemblage
and property market recovery. Depend-
ing on market conditions over the next 18
Walk
months, the Catalyst team recommends
exploring the renovation and regeneration
of Seattle West Inn & Suites, a hotel that
currently operates on the optioned parcel.

The Triangle District

Market and site analysis of the Triangle
district indicate that redevelopment of the
YMCA at the heart of the Triangle will serve Purchase
as a catalyst to the Triangle’s complete
redevelopment. As Harbor Properties is Options
invested in the future of West Seattle gen-
erally and the Triangle more specifically,
East Hold
the Catalyst Team suggests that Harbor Hotel Reno
take an active leadership role to enable the
redevelopment of the YMCA that will lead
Assemblage Options
to the complete community that was first
envisioned with the development of Har-
bor’s Link. Walk
Working in partnership with other land-
owners, the City of Seattle, and the YMCA,
Harbor Properties can give the Triangle a
center, an anchor to secure further build
out of the area.
3
4

Executive Summary
S
eattle is located in Washington
State in the northwest of the United
States. Historically, Seattle has been
recognized as one of America’s strongest
economic centers. The Seattle area has
fostered some of North America’s largest
and most successful companies, including
Microsoft, Boeing, Amazon, and Starbucks.
Seattle has experienced annual growth
of 1.6%, which is higher than both Wash-
ington (1.0%) and national (0.95%) rates,
largely due to the influx of in-migration.
The current economic outlook for Seattle is
uncertain, but the city is poised for a swifter
and stronger recovery than other cities
with dominant financial or manufacturing
sectors.
West Seattle
West Seattle is one of Seattle’s oldest neigh-
borhoods, tracing its roots to the 1850s.
Seattle
Context
During the 1940s, the population of West
Seattle surged to 70,000 due to the estab-
lishment of a nearby World War II defense
manufacturing facility. Since then, the
population has increased slowly at a rate of
only 1.1 percent from 2000 to 2009.
Most homes in West Seattle are single
family dwelling units. New development is
bringing significant density to the Junction
and Triangle districts, creating a distinct
vibrancy to West Seattle.
West Seattle offers an established, urban
village that boasts all of the amenities of a
complete community while being a com-
fortable distance from downtown.
West Seattle
The Fauntleroy Triangle District
The Triangle District is the gateway into
West Seattle. Characterized by commercial
and light industrial uses, the Triangle hosts
a lumber yard, food distributor, retirement
home, the American Legion, dry cleaners,
car dealerships, local serving offices, and a
veterinary clinic.
Significantly, the Fauntleroy Triangle is
home to the West Seattle YMCA, which
forms the center of this neighborhood both
literally and metaphorically. The YMCA
is nestled between the West Seattle Golf
Course to the east and the Junction district
to the west.
The Triangle District
5
6
YMCA
The West Seattle YMCA is the most widely
used YMCA facility in Seattle. Approxi-
mately 85,000 people are members of the
West Seattle YMCA, with about 11,000
members using the facility daily. Records
indicate that 80 percent of the YMCA mem-
bers reside in West Seattle and are within a
ten minute drive to the facility. Almost 40
percent of members are aged 30 to 54, and
approximately 65 percent of members earn
more than $50,000 annually. Thus, YMCA
members tend to be wealthier than their
average West Seattle neighbors.
The YMCA facility boasts 35,000 square
feet of recreational space, including a
swimming pool, daycare, gyms, and stu-
dios. In addition, the YMCA leases space in
the Jones Building on 36th Avenue for the
cycling and pilates classes. Although they
expressed interest in leasing over 3,000
square feet of additional studio space in
nearby developments, YMCA’s long term
vision is to increase their overall facility
size to approximately 60,000 square feet.
The Junction
The Junction is the cultural and com-
mercial hub of historic West Seattle.
Characterized by brick façade buildings and
well-aged signs, the Junction is home to
numerous small restaurants, trendy bars,
specialty shops, art boutiques, record stores
and grocers, creating a unique urban village
vibe. The Junction is easily accessible to
pedestrians with well-lit sidewalks. Devel-

Context
opments within the Triangle aim to com- The impact of the proposed RapidRide bus West Seattle Urban Village
plement the well-established businesses line on the Triangle remains. Projections
within the Junction. from the King County Metro Planning The West Seattle Junction Hub Village
Department show that the RapidRide will Neighborhood Plan and Design Guidelines
West Seattle Golf Course are the foundational policy documents
reduce travel time by 10 percent compared
to the 54 local bus currently servicing the guiding any development in the Fauntleroy
The golf course is one of the cornerstones
West Seattle to downtown route. Since the Triangle District. This policy, as one of
of the West Seattle community, recognized
average transit commute is only fifteen seven urban village strategies developed
as one of the best daily fee municipal golf
by the City of Seattle, aims to enhance and
courses in the Pacific Northwest. Renowned minutes, a 10% reduction may not neces-
sarily induce higher transit use. However, a preserve the distinctiveness of West Seattle
architect and championship golfer, Chan-
while also accommodating growth. Critical
dler H. Egan, designed this fully public and successful RapidRide will generate signifi-
cant foot traffic within the Triangle. to this plan is the consideration of Seattle’s
affordable course. Seattle Department of
future multi-modal transportation system.
Planning and Development (DPD) docu-
Regulatory Environment Through the plan, the community envisions
ments show that Seattle plans to upgrade
the Triangle “as a lively center of commu-
the course by constructing a new clubhouse Zoning nity life and an inviting place to live, work,
and practice facility, enhancing the prop-
play and shop” with a neighborhood atmos-
erty and attracting more people to the area. Current zoning for the East and West
phere and emphasis on cultural arts.
Assemblages is Commercial 1 (C1) accord-
Bus Rapid Transit ing to the Seattle’s Land Use Code (SLC). The Triangle District, acts as a subarea and
The new RapidRide bus line has two C1-zoned areas are auto-oriented; they gateway to the West Seattle Junction, is
proposed stops near the Fauntleroy Tri- primarily serve retail and commercial planed as a local serving business center
angle: 39th Avenue and SW Alaska Street services to surrounding neighborhoods. that complements, but does not compete,
and 35th Avenue and Avalon Way. The Typical permitted uses in the C1 district are with the commercial activities on California
two stops are a five and ten minute walk, large supermarkets, building supplies and Avenue. The community would like the
respectively, from the West and East As- household goods, auto sales and repairs, Triangle to better reflect the character of
semblages. The bus line will connect West and apartments. Higher density mixed- the rest of the neighborhood. This will be
Seattle to downtown using Fauntleroy Way used developments are permitted, too, and achieved by improving pedestrian safety
SW, California Avenue SW and State Route do not require a contract rezone unless the and amenities, traffic flow and aesthetic
99. 65 feet maximum height restriction or 4.75 appearance of the Triangle.
floor area ratio are exceeded. Multi-use
RapidRide will average a half-mile stop developments also comply with Neighbor- Regarding future development, the plan
spacing, and where there is no other serv- hood Commercial zoning, which the City calls for higher density, residential mixed
ice, stops will be as close as one quarter- will to propose for this area in the near use and a residential village environ-
mile. Buses will arrive every 10 minutes future. ment. The Triangle urban village will have
during the busiest morning and evening pedestrian-scaled and friendly urban
travel hours. The RapidRide service will to design, including such features as generous
start in 2011. sidewalks, lighting, bike facilities, and safer

7
8
crossings. From a development perspective,
the plan encourages a diversity of housing
types to serve a diversity of residents. Ulti-
mately, the vision for the Triangle District
is a walkable, pedestrian friendly, mixed
use district with street vitality accessible to
immediate and local residents. The zoning
map to the left indicates higher density
in West Seattle concentrated around the
Junction. Nevertheless, the 65 foot height
permitted in the Triangle offers significant
increases in density, as illustrated to the
Current Uses in the Triangle Potential Buildout at 65 ft
left.
Zoning
Green Factor
The Green Factor is a landscaping require-
ment that applies to all C1 zones. It aims
to improve the quality and quantity of
the city’s landscape. The benefits of high-
quality landscaping are both functional and
aesthetic. Urban landscaping reduces and
purifies stormwater, improves air quality,
creates wildlife habitat and reduces the
heat island effect.
The City scores new developments based on
a variety of landscaping elements, allowing
developers flexibility. The 0.3 green fac-
tor in C1 zones requires that 30 percent of
developed parcels must contain plantings,
though not all of the area has to be all on
the ground. For example, the City awards
points for green roofs, vegetated walls, and
tree canopies.

Context
I
n deciding the highest and best use for
the West Assemblage, analysis of the
office, retail, and residential markets
was conducted, as these uses are consistent
with zoning in the Triangle and the City’s
vision for the area. Analysis indicates that
rental housing is the highest and best use.
Office Market
Given the following analysis, office use on
the second floor of the Alaskan Flats, is not
found to be viable.
Economy
With the United States economy still in re-
covery, Seattle CBSA’s key local employers
have continued to contract and cut employ-
ment. Local job cuts are forecasted to be
around 63,000 workers in 2010, compared
to a cut of roughly 28,000 in 2009. This is
estimated to lead to an office employment
cut of 4.7%.
Market Analysis - Supply
Construction
Currently underway is construction of 1.8
million square feet of office space; moreo-
ver, there is an estimated 17 million square
feet in the pipeline. Furthermore, leasing
office space has proven challenging. More
than half of the space that has come online
this year to date remains vacant.
Vacancy
Year over year vacancy for office space has
risen over 4% to approximately 14%. This
significant rise is a function of both corpo-
rate restructuring and steady construction
of new space.
Rent
Office rents in West Seattle have an average
of approximately $16.00 NNN annually
per square foot. However, as the Triangle
is an area in transition, research indicates
that office space in the Triangle would have
a minimum rent of approximately $10.00
NNN per square foot.
Office Units in the Triangle
In our analysis, the Catalyst Team per-
formed a cost-benefit analysis of having
office space on the second level of Alaskan
Flats. Office space would rent for approxi-
mately $0.80 per square foot each month
compared to $1.90-$2.40, which is the
projected rate we expect for residential
units on the second floor. Furthermore, the
9
10
vacancy rate for residential units in West
Seattle is and has historically been below
5%, which is significantly lower than the
Comparable Neighborhoods: Residential Prices
office vacancy rate of above 14%. There-
    fore, it is substantially less risky and more
profitable to lease rental apartments on our
   
second floor instead of local office space.
   
Retail Market
   
Retail units along SW Alaska and 37th
   
Avenue were found to be viable uses.
   
Economy
   
In a stagnating economy, the commercial
market in Seattle is positioned to rebound
alongside consumer confidence. Seattle
CBSA remains in the top ten retail markets
in the United States with cap rates ap-
proaching the 7% to 8% range and vacan-
cies remaining below 8% for the market as
Comparable Neighborhoods: Condominium Prices a whole.

    Downsizing & Decreased Sales

    In 2008 and 2009, national retail sales
plummeted as consumer confidence and
   
disposable incomes decreased. King Coun-
    ty’s retail sales fell by 8.6% in 2008, which
was mild compared to neighboring coun-
   
ties. King County saw a number of national
    anchor tenants “go dark” across Washing-
ton State including JOE’S (823,000 sf),
   
Linens N Things (455,000 sf), and Circuit
City (471,000 sf).

Market Analysis - Supply

 Vacancy Residential Vacancy Rate Trend

Vacancy rates in the Seattle central busi-
ness district (CBD) and Urban Hubs (West
Seattle inclusive) remain low, recorded at 
5.5% in 2009. Vacancy rates are expected
to grow to 6.3% in 2010. Comparatively, the


United States is expected to jump by 1.1% 

in 2010 to 12.1%.
Absorption 

The Seattle CBD and Urban Hubs experi-

enced a period of negative absorption over 
2008, which indicates that the supply of
commercial space is greater than tenant
demand. No substantial construction has 
begun for commercial space and the pre-             
leased space that is under construction will 
likely be offset by further contractions in Apartment Rental Rate Trend
existing tenant leasing.

West Seattle
The West Seattle commercial market is

unique and independent from the Seattle
CBD. It is predominantly characterized by


self-serving local businesses situated along

California Avenue. There is no major shop- 
ping center in West Seattle. However, nu-
merous large centers that are over 250,000
sf gross leasable area (GLA) are within a

10-mile drive. The downtown shopping
district is a fifteen minute drive away.
Current market rents prevailing in West 
Seattle range from $20.00 - $25.00 on             
a NNN basis. The major anchor tenants 
located in West Seattle consist of grocery
stores and general merchandise retail-
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12
Multifamily Vacancy Rates Ground floor with frontage on Alaska SW
Avenue - $25.00 - $27.00 NNN.
    
Comparables:
    
• 4700 Fauntleroy Ave - $24.00 NNN
     • 4700 42nd Ave - $28.00 NNN
     • 4720 42nd Ave - $28.00 NNN

     Ground floor with frontage on 37th or

 
 
Transaction by Unit Type Seattle (2008)


ers, such as Safeway, QFC, Walgreens,
and Macy’s. The local commercial nodes
are all below 250,000 sf GLA except the
Westwood Village Centre which has a GLA
of approximately 400,000 sf and is located
less than four miles from the Triangle.
We strongly believe that there is demand
for commercial space in our development.
As the West Assemblage is only a five
minute walk from the RapidRide stop,
retail space will benefit from increased
Market Analysis - Supply
  
  




pedestrian traffic and residential density.
Additionally, the West Seattle YMCA has
expressed a need for space to expand their
programs. This YMCA space will comple-
ment spaces for sports therapists and
physiotherapists. Furthermore, the com-
mercial retail unit space is crucial to the
revitalization of the Triangle and will play a
key role in its redevelopment.
We forecast that the retail space at our
development will be at the following rents:
36th Avenue SW - $20.00 NNN
The Catalyst Team can justify retail on SW
Alaska and 37th Avenue for the following
reasons:
• Easy access to 37th Ave from of SW
Alaska, which has an 2009 average daily
volume of 10,500+ vehicles
• YMCA will act as anchor tenant
• YMCA currently has 42,000
members
• YMCA has over 11,000 members
visit daily
• Densification of West Assemblage
adds approximately 120 residents
• Completion of leasing the Link adds
400 residents. The Link connects to our
design via a pedestrian greenway
• Rent paid on 37th Ave will be leased
at a discounted rent compared to SW
Alaska, incentivizing rent sensitive ten-
ants to lease on 37th Ave
Residential Market
As a city contained by its natural geogra-
phy, Seattle has an inelastic supply of land.
Supply of Seniors’ Housing
Rent
Max
Residence Type 0- 1000- 2000- Rooms
3000+ Residents
1000 2000 3000
A. Merrill Gardens Mixed
Independent
Assisted
B. Providence Mount St Assisted x 111
Vincent Retirement
Homes
C. Seadrunar Retirement Independent x
Homes

D. The Kenney Mixed

Prebyterian Home Continuing Care x 102 150
Retirement Homes Assisted x 20
E. Fleming Home Assisted x 24
Retirement Homes

F. Daystar at Westwood Mixed

Retirement Homes Independent x 28 34
Assisted x 82 94
G. Fleming Home West ?
Retirement Homes

H. Harmony Gardens Independent x

Care Ctr Retirement
Homes
I. El Dorado West Mixed
Retirement Assisted x 35
Community Congregate x 70 84
J. Boulevard Park Place Independent x
Retirement Homes

K. High West Residence ?

Retirement Homes

L. Linden Lea Lodge Of Independent x

Tukwila Retirement
Homes

Added density will fulfill demand for new
housing and growth. The strategically po-
sitioned Triangle is in a favorable location
next to RapidRide infrastructure, ample
community amenities, and a short com-
mute to downtown. As the economy recov-
ers, West Seattle will be in a strong position
to welcome new residents from within the
city and from out of state who value the
strong sense of community in the area.
West Seattle is a bedroom community for
downtown Seattle. From West Seattle it
is approximately a 20 minute commute
in traffic to the downtown core. Tables on
page 10 list similar communities surround-
ing downtown with similar commute times.
As illustrated, the median home prices
reflect the desirability of living in an urban
setting outside of the downtown core. Our
analysis leads us to believe that:
• Median house prices in West Seat-
tle will rise as the supply of residential
units in these comparable neighbor-
hoods decreases. This rise in prices will
reflect a transition where residents are
looking for bedroom communities that
have similar commutes to the central
business district.
• As West Seattle enters redevelop-
ment and transition, it will become a
more desirable place to live. As West

13
14
Seattle has lower median residential
prices. it will attract younger families
or lower income families that cannot
afford to live in the comparable neigh-
borhoods.
Apartments
Based on our analysis, the Catalyst Team
decided that apartment units are a viable
use in the Triangle. The apartment market
in West Seattle has the potential to provide
a steady supply of new housing for years to
come.
Currently, there are approximately 2.600
rental apartment units in West Seattle.
Within one mile from the Triangle, the
estimated development potential is at least
an additional 900 apartment units.
Although there is competition from cur-
rent and potential supply, there are several
reasons for pursuing apartments:
• Rental rates are favorable and there
is a strong premium for a new differen-
tiated product
• Rental housing is attractive to our
target market of middle-income, single
professionals;
• Harbor Properties’ core competency
is rentals,and they are successful with
this model; and
• Vacancy rates for apartments in
West Seattle is low at 4.5% compared to
7% in Seattle CBSA.
Market Analysis - Supply
Condominiums their primary residence. Finally, future
facility costs associated with elderly care
The Catalyst Team advises against pursuing are extensive.
condominiums as a proposed use in the
Triangle. Condominium prices have held
steady in the Seattle market, staying within
a range of +/-5% over the past ten months.
However, stagnant demand has left seven
to eight months of inventory on the market.
Financing would be impossible to obtain
without pre-selling the units. Moreover,
pre-selling would prove extremely challeng-
ing in the current market, where the aver-
age condominium listed in December 2009
reported a 200-day sales absorption time.
The challenge of selling condominiums is
further compounded in West Seattle where
there are currently over 110 units listed for
sale. These units range from $200 to $400
per square foot.
Seniors’ Housing
Given the aging demographic, senior hous-
ing was analyzed as a potential use. Our
analysis, however, found senior housing
infeasible. Currently, eleven seniors’ hous-
ing complexes exist in West Seattle that
are catering to different levels of care, as
indicated on the table on page 13.
Several of these facilities are reporting
high vacancies, suggesting that the market
is saturated. Moreover, the senior hous-
ing market is more sensitive to economic
conditions than standard rental housing,
because the elderly are often less willing
than younger households to sell or vacate
W
est Seattle is characterized by
population in the 34–65 age
cohort. Within a three mile ra-
dius of the Triangle, the 25-44 age cohort
is estimated to have a population of over
90,273 people making up 34 percent of the
total population in 2009 and 33 percent
of the population in 2014. The median age
of people within a three mile radius of the
Triangle is 37 years old and is projected to
remain constant through 2014.
Within a three mile radius of the Triangle,
there are over 32,800 households of which
the majority are owner-occupied and 40
percent are renter-occupied. Residential
vacancy rates remain at only 4 percent and
increase to six percent as we move 5 miles
from the Triangle. Therefore, despite hav-
ing a highly mobile renter population, the
vacancy rate remains low, indicating that
the Triangle vicinity is a desirable neigh-
borhood to make a home.
Market Analysis - Demand
Finally, West Seattle per capita income is
$33,824, which is $3,046 higher than the
Seattle CBSA per capita income. In 2009,
householders aged 35 to 44 had an average
household income of over $92,000. Almost
half of 25 to 34 year olds earned between
$50,000 and $100,000.
The unemployment rate for Seattle CBSA
jumped 390 basis points to 8.6% between
2008 and 2009; however, this is lower than
the national average of 10.4%. The majority
of job cuts came in the services and con-
struction industries which accounted for
25% and 18% of the total, respectively. As
illustrated in the chart on page 17, employ-
ment figures appear to be recovering. Eco-
nomic forecasters project that the national
unemployment rate will peak in early 2010
around 10.2%.
Target Market
The Alaskan Flats is an innovative product
for the Triangle District. Sophisticated and
rooted in a West Coast style, Alaskan Flats
will appeal to middle income 25 to 44 year
olds who are single or just starting a family.
In a place in transition, it is difficult to
determine the variety and mix of new rent-
ers that will be attracted to such an area as
change takes place. ESRI’s market segment
demographics show the target demographic
groups that are strongly aligned with
the amenities and characteristics of the
Alaskan Flats and surrounding areas. The
15
16
Demographics
Total Population 2009E
Total Population 2014P
Population Change 2009-14P
Average HH Income 2009E $ 72,712 $ 75,058 $ 67,440
Median HH Income 2009E $ 58,973 $ 58,998 $ 49,096
Total Households 2009E
Market Analysis - Demand
three most important criteria for our mar-
ket segments include:
• Medium income
• Median Age
• Housing tenure choice
Using these criteria, the Catalyst Team has
selected the top three demographic seg-
ments that would live in the Alaskan Flats.
They are Trendsetters, Metro Renters, and
Aspiring Young Families.
Trendsetters
This group consists of young, mobile and
diverse urban dwellers. They are educated,
but not well-established in their careers.
Seventy-five percent of this group lives in
West Coast cities, with sixty-eight percent
choosing to rent in urban neighborhoods.
This group is very health conscious and
values nearby urban amenities; eighteen
percent of them do not own a vehicle. They
are the leaders in the consumerism age
and have the latest in electronics and new
clothing.
• Medium Income: $44,000
• Median Age: 35 years
• Housing Tenure Choice: 68% rent
1 Mile 3 Mile 5 Mile Metro Renters
21,704 73,294 244,072
22,064 74,044 250,670 This group is characterized by young, edu-
1.66% 1.02% 2.70% cated professionals who have just begun
their careers in large urban centers. Sixty
percent are employed in professional and
10,212 33,029 110,699 management occupations. This group lives
primarily in rental apartments, choosing to Seattle Population Growth
live with roommates to alleviate the cost of
renting. They hold tenants’ insurance and
enjoy working out at sport clubs and par-
taking in regular outdoor activities.
• Medium Income: $59,000
• Median Age: 34 years
• Housing Tenure Choice: 78% rent
Aspiring Young Families
Young start-up families make up two-thirds
of this group. Roughly sixty percent are
employed in professional and management
occupations. The annual growth for this
segment is above the national average at 1.3
percent. Roughly half of this segment rent,
enjoying a variety of housing from apart-
ments to small, single-family homes based Semi-Annual Change in Non-farm Employment
on their tenure choice. This group spends a 
large proportion of their disposable income
on family- and child-related products, as 
well as computers and electronics. They
enjoy bowling and eating out regularly. 

• Medium Income: $52,000


• Median Age: 30 years
    
• Housing Tenure Choice: 51% rent 

Relationship to Demographics 

Product

Alaskan Flats is a premium product that is
currently unavailable in the West Seattle 
market. The lofts, high ceilings, green roofs,
and garden amenities offered by Alaskan 
Flats are some of the key characteristics
   

17
18
2,000
that will appeal to our more affluent target Change in Age Distribution in West Seattle between 1990 and 2000 (adjusted for age)
market.
1,500
Pricing
Since the Alaskan Flats is a premium prod-
1,000
uct, our projected rental rates are higher
than the average West Seattle rates. As

Population
illustrated by the chart below, we plan to 500
enter the market at price and size points
currently unavailable.
0
Relationship to Harbor’s Market
Through premium pricing, Alaskan Flats -500
aims to avoid cannibalization of Harbor
Properties’ existing assets. Developing a
property in the Triangle, comparable to the -1,000
Link, Mural or similar developments in the

5 to 9
Under 5

10 to 14

15 to 19

20 to 24

25 to 29

30 to 34

35 to 39

40 to 44

45 to 49

50 to 54

55 to 59

60 to 64

65 to 69

70 to 74

75 to 79
surrounding area simply puts added strain
on a well-supplied market segment. Age in 1990
Male Female
The Catalyst Team is also targeting a sepa-
rate market to Harbor Properties’ other $3.00
Alaskan Flats Product and Pricing Comparison
assets. Through The Link’s pet friendly
environment and the building’s car-sharing $2.50
program, it seems that Harbor is target-
ing the following ESRI tapestry segments:
$2.00
Urban Chic, and Metropolitans.
Price per SF

$1.50

$1.00

$0.50

$0.00
500 600 700 800 900 1000 1100 1200 1300
Unit Size (SF)

Market Analysis - Demand Alaskan Flats Mural Link Market Rentals

O
n the West Assemblage, the Catalyst

West Assemblage Development

Team proposes a mixed use; dif-
ferentiated apartment product that
consists of ground level retail, below- and
at-grade parking, 5 floors of residential
units comprised of loft-style homes, and
YMCA oriented flex space. Located near
new rapid transit bus infrastructure, across
from the YMCA and adjacent to the new
Link development, Alaskan Flats will be a
critical step in developing the Triangle.
The Alaskan Flats project involves a variety
of risk mitigations. By opting to not exer-
cise the full density potential of the West
Assemblage, the Catalyst Team realizes
similar rates of return on cost while reduc-
ing the project’s leverage requirements
compared to a full build-out scenario. The
lower density build out, coupled with the
unique and differentiated flavor of the
units, also minimizes the potential for
Alaskan Flats in Context
Alaskan Flats to steal renters from Harbor
Properties’ other offerings in this weak
demand neighborhood. Finally, the project
realizes additional cost savings by reducing
below-grade parking.
It is clear that apartments are the best and
highest use of the land given prevailing
market conditions. Nevertheless despite
our risk mitigating strategies, Alaskan Flats
will not reach our required hurdle rate of
20% IRR. As a result, the Catalyst Team
recommends that Harbor Properties at-
tempt to renegotiate the option price of the
West Assemblage to $1.8 million.
If Harbor is unable to negotiate the recom-
mended combined options price, we advise
Unit Composition
Harbor Properties to not exercise the
options on the West Assemblage.
Vision
High-style residents grounded in West
Seattle’s rich neighborhood – this is
Alaskan Flats. With a simple aesthetic that
is distinctively urban, the Alaskan Flats will
be home to a young community who values
the energetic quality of a metropolitan life-
style layered into a growing urban village.
Wrapped in a keen sense of context defined
through history and inventive architecture,
the Alaskan Flats multifamily and mixed-
use development draws on its surroundings
to represent a contextual response that

Unit Type Size/Unit [SF] Current Count Total Area [SF]

Total Residential n/a 53 48,200

Lofts 1,200 14 16,800

1 BR 600 14 8,400

2 BR Small 800 10 8,000

2 BR Large 1,000 15 15,000

Total Retail 1,143 7 8,000

19
20
meets the city and community vision for
the space.
Inspired by the tone set by the new Link
building, Alaskan Flats will bring a new ur-
banity into the Triangle. A well-developed
public realm with a bioswale and green
street will complement our contemporary
West Coast design and contribute to the vi-
brant street experience with a slower pace,
gentler feel, and without the grit of core
city neighborhoods. Access to the outdoors
Design Precedents and athletic amenities is also unbeatable in
Seattle.
Architecturally, the Alaskan Flats will
respond to three character influences: the
Triangle’s existing industrial heritage, the
Link, and Seattle’s West Coast Modernism.
The Triangle
The current structures in the Triangle are
light industrial with a number of garages
and lumber yards. Historically, the Triangle
has been home to auto repair shops. The
Alaskan Flats will appeal to the rhythm of
these small scale vernacular structures, and
incorporate generous apertures that mimic
the original garage doors, opening the
building to the outside. Drawing from other
localized features, the architectural imagery
connects us to the port through its shipping
container-like forms and industrial detail-
ing.
Complementing the contemporary industri-
al style, the Alaskan Flats will use exposed

West Assemblage Development

timber, referencing the adjacent lumber The West Seattle YMCA

Y
A
uses.

W
Y
O
The Link

R
Pedestrian Mews

E
L
T
N
The Link offers well-articulated massing EXIT

U
A
F
that uses a selection of materials and a
strong street experience.

Line of Building Above

West Coast Modern Style

Lane
This style balances artistic and geometric
architecture with natural materials and Ground Level Parking

38th STREET
Lobby
color palettes that draw from the natural

37th STREET
Sub-Parking Ramp

surroundings. The American Legion

The Link
Design
Dramatic and unique, the Alaskan Flats will Site Plan Sub-Parking Ramp
S. W. A L A S K A
provide homes that enhance the lifestyle of
residents with views to downtown, a walk- Bioswale

able neighborhood with close daily ameni- 70’ 260’

ties, proximity to the outdoors, and an
intimate village community. West Seattle’s
urban village feel offers the best of both
60’
worlds – a 20 minute proximity to down-
town and a home in a great neighborhood
with strong community. underground parking underground parking

Siting South Elevation East Elevation

The Catalyst Team carefully considered

the project’s siting based on research and
analysis that dictated a smaller and more
refined product. With a lower FSR, this
opened opportunities for a more crafted
project. The Alaskan Flats building only
covers half of the buildable land area on the
West Assemblage. The lower floor space
ratio minimizes risk through lower costs
Front View Rear View

21
22
Alaskan Flats Rendering
Alaskan Flats Quick Facts
Performance Measures
Building Effeciency
FAR
Percent Residential of GBA
Percent Retail of GBA
Estimate of Parking Stalls
Building Stats
Lot Size
Gross Buildable Area
Gross Leasable Area
Total Circulation
West Assemblage Development
and a reduced project size, putting fewer
Area [SF] additional units in the market. The unusual
shape of the parcel provided additional
87%
challenges. To address this, the design and
2.34
massing narrows and fronts SW Alaska
72% with a café and convenience store. Stepping
12% down towards the south to maximize solar
gains with rooftop terraces, the building
56
respects the adjacent single family neigh-
borhood, while also providing activation
along SW Alaska.
Area [SF]
Neighborhood Integration
28,725
As a secondary ‘spoke’ off of the Junction
67,200
commercial corridor, the Triangle and
58,700 Alaskan Flats development will comple-
ment the existing uses and character by
8,778
providing space for a number of small
and medium sized retail establishments,
including much needed eating and drinking
venues. Use and density characteristics, as
well as urban design sensitivities encour-
age pedestrian oriented community. Both
market analysis and academic research
have demonstrated that street level retail
is financially appropriate but also criti-
cal for creating a human scaled, walkable
community. This street level commercial
space will include a street café with outdoor
sidewalk seating, a small convenience store,
and other compatible uses – tying into the
YMCA at the heart of the Triangle through
the provision of a ground floor fitness
studio at the north edge of Alaskan Flats
and directly adjacent to the YMCA.
As a hub for young working Seattleites who
enjoy the outdoors and arts culture of West
Seattle, Alaskan Flats will offer a differenti-
ated housing choice in a well-designed
and high quality unit mix. The ample open
space and garden amenities will appeal to
our three demographic groups. In spite of
West Seattle’s strong natural character, the
Triangle lacks natural features and plant-
ings. Drawing from the West Seattle Golf
Course, the community vision, and Alaskan
Flats’ location in a Salmon watershed, the
Catalyst Team seeks to increase the natural
experience in the Triangle. Alaskan Flats
accomplishes this by including stormwater
bioswales, a green street, and rooftop plant-
ings for additional stormwater manage-
ment, and urban agriculture. These features
will both reduce infrastructure costs, as
well as enhance the character and experi- Alaskan Flats 37th Street Perspective
ence of the place. They will also contribute
to a mitigated heat-island effect for this
location.
Uses
The uses in Alaskan Flats consist of resi-
dential, general sales and services, eating
and drinking establishments, and a YMCA
flex space. The project includes seven retail
bays that comprise approximately 8,000
square feet on the ground floor. Two retail
units on the south of the building face SW
Alaska Street. Five retail bays on the east
side of the building face 37th Avenue. The
Catalyst Team determined retail space in
Alaskan Flats by evaluating the need for
retail space within the Triangle and West
Seattle. The YMCA space is located next to
the YMCA in order to maximize the connec-
tion between the West Seattle
YMCA and the flex space within Alaskan
Flats. The Catalyst Team discussed space
requirements with the West Seattle YMCA,
who expressed significant interest in ac- Bioswales
quiring a flex space of approximately 2500
square feet within a potential new develop-
ment.

Sustainability
The Catalyst Development Team recom-
mends several sustainability measures
for the West Assemblage Site. Extensive
research has shown that construction and
new buildings have detrimental impacts on
the environment, both locally and globally.

23
24
Alaskan Flats Green Factor Score
Seattle Green Factor Score
Parcel Size (SF)
Minimum Required Score
Calculated Score*
Green Factor Details
Landscaped Area (SF)
Number of Plantings
Green Roofs (SF)
Visible to Public (SF)
In Food Cultivation(SF)
* Per Green Factor Score Sheet
West Assemblage Development
Nevertheless, the Alaskan Flats project
can minimize resource use and maximize
ecological sustainability while enhancing
both social and economic sustainability.
28,725
The Alaskan Flats will be a sustainable
0.30 project through:
• Green building techniques and
0.40
materials
• Site specific sustainability features
that address:
• Carbon Emissions and Climate
5,500 Change
• Urban Heat Island Effect
163
• Stormwater Management
6,000
• Ecosystem Health
2,500 • Food Systems
2,500 Green Building
The City of Seattle regulates green building
practices mainly through the Green Factor
Policy. We recommend that the Alaskan
Flats Development pursue compliance
through one of the following green building
programs:
• LEED for New Construction, The
U.S. Green Building Institute
• Built Green, Washington State
Green Building Program
• Breathe Easy Homes
Through research and interviews with
industry leaders on construction costing,
we have determined that LEED Silver will
increase our costs by 1.5% and to pursue
a LEED Gold certification will be a 3%
increase. Further, based on the desires of
market demographic we are pursuing the
Catalyst Team has determined that a green
building structure and sustainability fea-
tures are important.
Localized and Contextual Sustainability
Features
At the West Assemblage there is an oppor-
tunity to address site specific sustainability
measures that relates to ecological health,
stormwater management, and placemak-
ing.
The City of Seattle Public Works and Utili-
ties Department has developed a program
called Street Edge Alternatives (SEA) that
aims to create “drainage along streets that
is more like natural drainage than a tra-
ditional piped system.” This pilot project,
started in 2001, has implemented a number
of projects throughout Seattle, including at
the High Point Housing Development just
south of the Triangle.
This type of project is very important in this
location because the Triangle has almost
100% hard impermeable surfaces and it
is near the top of a hill. As a result, the
stormwater runs off the concrete picking up
contaminants, then flows into the sewage
drains and out to the Sound.
The Triangle District is also located in a
Salmon Watershed that feeds the Longfel-
low Creek, a salmon-bearing stream. A
number of organizations in West Seattle,
including the Longfellow Creek Water- Return on Cost for Strategy to Pursue Rezoning
shed Action Project and Friends of Urban 6 Stories 8 Stories

Creeks and Salmon, are actively trying to FSR 4.75 6.00

rehabilitate these ecosystems and increase Total Leasable Area 116,000 SF 146,500 SF
the population of Salmon in this location.
Estimated No. of Parking Stalls 142 160
Proper stormwater management at the
Alaskan Flats can help contribute to this
goal, while also providing a beautiful natu- NOI $1,953,600 $1,946,200

ral experience to residents and visitors. Price @ 7% Cap $27,907,900 $27,802,400

In our design we have proposed a green

Construction - Financing - Cont. -$17,519,500 -$24,130,700
street including a bioswale that is compat-
ible with the Seattle SEA program. This Parking -$4,263,900 -$4,800,000

bioswale buffer will be located between Total Costs -$21,783,400 -$28,930,700

the street and the sidewalk in a modified
and enlarged boulevard. The Alaskan Flats Land Acquisition -$3,481,500 -$3,481,500
design includes gutters and drainage pipes
Total Costs Including Acquisition -$25,264,900 -$32,412,200
that funnel stormwater into the bioswale,
where with gravel and native vegetation
filter the water and recharge the water table Profit $2,643,000 -$4,609,800

and Longfellow Creek Watershed.

Return on Cost 10% -14%
The greenery will help mitigate urban
heat island effect, as vegetation helps to See Appendix for Assumptions (p47)
decrease localized temperatures. In combi-
nation with the Transit Oriented Develop-
ment of the site and a decreased number of
vehicle trips will positively impact carbon
Parking Requirement
emissions in the area as well.
Vehicle Parking Residential Non Residential Total
Development Timeline
Parking Stalls Required (before reductions) 53 26 79

The Catalyst Team recommends waiting Parking Stalls Required after 23.54.015 Reductions 53 3 56
until just before the West Assemblage op-
tion expires before exercising it. Waiting to
exercise the option for the next six months
allows Harbor to monitor the direction of Bicycle Parking Long-term (<4hrs) Short-term (<4hrs) Total
the economy and to capitalize on the time Parking Stalls Required 15 3 17
value of money.
25
26
Development Timeline will become the choice destination. Some of
Year 1 2 3 4 5 the amenities at the Alaskan Flats that will
appeal to our target markets include:
Quarter q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4

West Seattle YMCA Family Pass

West Assemblage
New residents will receive bus passes valid
Option Term 1 for one year. This is an attractive amenity
Design/Engineering for health-conscious and active-lifestyle
Permits/Entitlements renters.
Demolition One Month Trial Bus Pass
Building/Construction
With RapidRide coming to the front door
Garage
of our development, we wish to promote
Above Grade
eco-friendly alternatives for commuting
Marketing tenants. We will offer a one-month free bus
Occupancy pass to new tenants in order to decrease
Residential Stabilized Res. Occ.
carbon emissions and our tenants’ cost of
living.
Retail Stabilized Ret. Occ.

Electronic Bus Schedule Board

East Assemblage
Tenants will benefit from an electronic
Option Term 2 schedule board showing the arrival times
for the bus stop. As a bedroom community
to the Seattle Central Business District, this
Key Decision Points 1 Exercise Option
will benefit tenants that commute to down-
town for work or pleasure.
2 Renegotiate New Purchase Option

The development timeline above illustrates
the estimated development of Alaskan
Flats. Highlights include marketing the
project 6 months before expected project
completion and a stabilized residential
occupancy by end of year 4, at the latest.
Retail occupancy is expected to stabilize
by the 9th quarter, and NOI is expected to
stabilize by the end of year 5.
Promotion
Promotion and marketing of the Alaskan
Flats is essential to the success of this
development. Given the soft growth rate
of households in West Seattle, our main
objective is attracting renters by creating a
sense of place and community. The Trian-
gle District will become an attractive neigh-
borhood to live in, and the Alaskan Flats
Electronic Car Pool Website & Board
An interactive website will allow tenants
to login and list their travel plans. This
feature will decrease the barriers to car-
pooling while fostering community and
responsibility within the Alaskan Flats. The
underground parking in Alaskan Flats also
contains dedicated parking spots for coop-
erative car sharing programs.

West Assemblage Development

 Communal Rooftop Gardens Return on Cost for Strategy for Lower Density Buildout
Full Build-Out Alaskan Flats
Gardening is a pastime that many enjoy;
an increasingly missing amenity in dense FSR 4.75 2.34
urban settings. We intend to change that. Total Leasable Area 116,000 SF 58,700 SF
By building gardening beds on the rooftop
Estimated No. of Parking Stalls 142 56
of the Alaskan Flats, tenants will be able to
“get back to their roots” by growing plants,
vegetables, and herbs at their convenience. NOI $1,953,600 $1,098,400
Furthermore, a restaurant-specific area has Price @ 7% Cap $27,907,900 $15,690,900
been designed on the ground floor.
Alaskan Flats Website Construction - Financing - Cont. -$17,519,500 -$9,736,400
This website will allow tenants to login and Parking -$4,263,900 -$1,215,000
perform multiple functions related to their Total Costs -$21,783,400 -$10,951,400
tenure at the Alaskan Flats. They will be
able to report repairs, pay rent, and post
events electronically. This feature will allow Land -$3,481,500 -$3,481,500
the development to reduce its paper output Total Costs Including Acquisition -$25,277,600 -$14,432,900
while allowing tenants to interact as a com-
munity.
Profit $2,630,300 $1,258,000
Marketing
We plan to utilize multiple methods of Return on Cost 10% 9%
promotion during our initial leasing phase See Appendix for Assumptions (p48)
in order to reach our target market and suggests launching these advertisements potential tenant who signs a one year
minimize potential vacancies. in neighboring cities where we believe we lease.
Print & Paper can capture a portion of potential migra-
tion. Advertisements should be released Site Hoarding – Using our fronting
The Seattle CBSA is one of the most highly simultaneously with our website, allowing space on SW Alaska Avenue, we will
educated areas in the United States. In readers to quickly access information about advertise our project from the begin-
particular, our demographic target places the Alaskan Flats. ning of construction onwards. This will
a high value on education and culture. help generate hype and anticipation for
The Catalyst Team proposes running print Referrals – We will be offering one the development and will highlight the
advertisements in the local and city wide month’s free rent to any tenant who suc- project’s website and offerings.
papers to maximize our penetration of cessfully refers our project to a qualified
potential tenants. Furthermore, the Team
27
28
Financial Viability
To evaluate the financial viability of
Alaskan Flats, the Catalyst Team examined
various permutations of a West Assembly
project, including apartments with an
increased height of 85 or 125 feet, floor
space ratios above and below the zoning
requirement, and an array of other critical
cost components like capitalization rates
and construction costs.
Overall,the Catalyst Team cannot justify
the additional risk of a larger project given
the market conditions. We have little confi-
dence that the commonly cited absorption
rates would apply larger project, as the Tri-
angle experiences slow population growth
and weak demand. We believe that project
with fewer units and larger square footage
differentiates Alaskan Flats from Harbor’s
current holdings. This is significant, as new
developments in the Triangle cannot com-
pete with and poach potential renters from
Harbor’s sister projects.
Rezoning
The City requires a contract rezone for
buildings higher than the 65 foot limit in
the Triangle. As shown in the table on page
25, comparing the return of a maximized
build out at 85 or 125 feet to the Alaskan
Flats demonstrates that a full build out
would not yield a higher return, due to
concrete construction costs and increased
underground parking costs.
West Assemblage Development
Floor Space Ratio
The cost benefit analysis on page 27 illus-
trates the optimal density for the Alaskan
Flats. Compared to the full density build-
out scenario, the Alaskan Flats with a 2.3
FSR will achieve a similar rate of return on
cost.
After calculating height limit and floor
space ratio scenarios, the Alaskan Flats
proves to be a superior solution due to the
following reasons: 1) reduced leverage; 2)
reduced risk; and, 3) differentiation from
other Harbor properties.
Reduced Leverage
By constructing Alaskan Flats at a 2.3 FSR
below the zoning maximum of 4.75 FSR,
the project yields lower absolute profits
compared to the full build out scenario
(costing only $12.7 million compared to
$18.7 million). Lower costs significantly
reduce the amount of leverage required
to undertake Alaskan Flats in the current
market. The potential $6 million in savings
generated from building a lower density
development provides a significant advan-
tage to Harbor Developments.
Alaskan Flats reduces the equity risk expo-
sure of Harbor’s portfolio to a single stand
alone asset while achieving the same rate
of return. Additional liquidity and savings
from construction costs may result in better
construction loan covenants due to ad-
ditional equity reserve captured by Harbor
Properties.
Lastly, reducing the construction costs to
$12.7 million will reduce the level of equity
contribution from $7 million to $5.2 while
maintaining the loan to costs ratio at 65%.
Reduced Risk
Although the full build out scenario yields
similar profit levels, it is questionable if
the market has the capability to absorb the
potential supply of a 4.75 FSR mixed-use
development. Building to full density will
expose the Alaskan Flats project to a signif-
icant amount of additional absorption risk.
Assuming that additional rent concessions
are necessary in order to absorb the full
density model, it is uncertain whether the
project will achieve the additional profit.
Product Differentiation
As Alaskan Flats offers a boutique product
with 53 units, the development differs
from Harbor’s typical apartment product.
Additional rental units supplied by Harbor
properties come with the potential to can-
nibalize renters from Harbor’s already
existing assets in the neighborhood.
Thus, a lower density development com-
bined with additional cash on hand for
Harbor Properties limits the level of risk
exposure for the Alaskan Flats.
Pro forma Summary BOE
The pro forma in the appendix shows posi-
tive net operating income in the first year of
Alaskan Flats occupancy.
 Sensitivity Tables • 1 space per 250 sf of eating and
Alaskan Flats Summary
drinking businesses, no parking re-
Sensitivity analysis on construction costs quired for the first 1,500 sf
for residential, retail, and the YMCA space Areas
indicates that lower residential construc- • 1 space per 350 sf of community
spaces, no parking required for the first Lot Size 28,727 SF
tion costs would have a greater impact on
IRR than a reduction in retail construction 1,500 sf
FSR 2.34
costs. The current residential construction The resulting parking requirement of 56
costs are too high to achieve a 20% lever- stalls can be further reduced. Alaskan Total Built Area 67,200 SF
aged IRR. To overcome this developer’s Flats is eligible for further reductions for
hurdle, we need a decrease in construction transit proximity, shared parking between
costs from $114 per square foot to $88 per residential and commercial use, and car Product Mix
square foot. By contrast, retail construction sharing. Since the Alaskan Flats has a low
cost need to fall from $162 per square foot FSR of 2.2, the development does not need Residential Leasable 48,200 SF
to $70 to reach a 17% leveraged IRR. to exercise any parking reductions. Over
40% of the parking is provided for at grade Retail Leasable 8,000 SF
Our baseline assumption for capitalization
rates at 7% prohibits our return target of and 15,000 square feet is for provided for
underground parking and bike storage. YMCA Leasable 2,500 SF
20% leveraged IRR. The capitalization rate
would need to fall to 6.23% for the entire Exterior parking and a commercial loading
Total Leasable 58,700 SF
development in order for our project to area will be offered on the west face of the
achieve desired return. building as well as extensive street parking Amenity / Common 8,500 SF
on 37th Avenue.
Parking Total Built 67,200 SF
In Seattle, the number of residential units Efficiency 87%
in a building as well as per square foot for
other uses determines a building’s parking
requirement. The parking requirement for
the Alaskan Flats is calculated by adding IRR
residential, retail, dining, and community
use parking requirements: Unlevered 8.8%

• 53 residential spaces Levered 13.9%

• 1 space per 500 sf general sales and
services businesses; no parking required
for the first 1,500 sf Cap Rate

Terminal Cap Rate (Blended) 7.0%

29
30

West Assemblage Development

H
arbor Properties has openly stated

Market Analysis - Risk

a long-term commitment to the
West Seattle neighborhood and is
in a unique situation as a developer and
landlord in the Triangle. Harbor Properties
owns and operates two developments in
the immediate neighborhood. The Mural is
located five blocks west of the Triangle and
is currently leasing 136 residential units.
Further down the pipeline, Harbor has bro-
ken ground on their newest development,
the Link, which will have approximately
200 residential units. It is located directly
west of our West Assemblage. Harbor also
owns two developable lots with multiple
land options, which form the West and East
Assemblages.
Challenges
Harbor’s development of the potential
sites will have substantial impact on their
portfolio of assets. Harbor is faced with
numerous challenges in developing their
interest in the Triangle. Firstly, West Seat-
significant influx of migration to the area, been stalled due to economic, financial, or
the market absorption for residential units legal issues. Currently, there are more than
will be weak at best. This is not a new 900 residential units that could potentially
trend; West Seattle has proven historically come onto the West Seattle market, almost
to be a low growth, stable market. three times the expected growth of 315
households. Furthermore, there are numer-
Rental Oversupply ous parties that have assembled parcels of
land for potential development.
There is an abundance of potential supply
of residential units in West Seattle. Multi-
ple sites in the immediate vicinity are serv-
iced and ready for development but have
Residential (Rental) Absorption Trend





tle market indicators currently do not align 

with continued, extensive development of
residential assets. 

Stagnant Demand

Total households within a five mile radius 2002 2003 2004 2005 2006 2007 2008 2009f 2010f
are expected to only grow by 1% in total be-
tween 2009 and 2014, which corresponds 

to approximately 315 additional households
in the market. Therefore, unless there is a  

31
32
Total Com. Parking
Appraised/ Asset Portfolio
Development Developer Status Res. Units Zoning Transaction
[SF] Stalls
Value
From an asset management standpoint,
Link Harbor Under construction 14,000 200 C1-65 130

2009 Completed –
Harbor Properties must be prudent in
Altamira Capelouto
Stabilized
60,000 157 NC3-85 307
future development of the Triangle. If com-
Construction stopped,
Fauntleroy Place Bluestar
hole in the ground
65,160 184 C1-65 484 $5,787,000 bined, low absorption rates and ambigu-
Mural Harbor
2009 Completed -
5,000 136 NC3-85 130 $3,574,700 ously high potential supply paint a picture
Stabilized

Mastro Michael Mastro 60 NC3-65 $4,334,000

of a weak residential market. Harbor
Properties operates the Mural and will soon
Gateway Centre Bluestar Parked 47,000 100 C1-65 250 $4,300,000
begin leasing the Link. The threat of can-
Spring Hill Bluestar Parked 3,600 93 NC2-65 97 $2,895,000 nibalization from Harbor’s own portfolio of
assets is a significant risk. This is a very real
Total Residential Units: 934 challenge for Harbor Properties, as the de-
Potentially Competing Supply
mographic growth does not indicate growth
to support for more residential units.
Alaska Way Viaduct
The Alaska Way Viaduct is the only fast
Mastro
and direct route between West Seattle and
Downtown. The Washington Department
of Transportation is pursuing replacement
Fauntleroy Place Gateway Center due to concerns over earthquake risks and
Altamira
Link
traffic congestion. The project is projected
to commence in 2011 and expected to take
six years, with a estimated completion in
Mural 2015. The construction period will effec-
tively isolate West Seattle from the Down-
town. Analysis has shown that this will
devalue the West Seattle property market,
and make new development less attractive.

Spring Hill

Market Analysis - Risk

F
or Harbor there are no clear or obvi-
ous actions that would lead them to
successfully developing their interest
in the Triangle at this time. Therefore, we
have devised a strategy that outlines multi-
ple scenarios that are triggered by different
market conditions. It is paramount that
Harbor remains active and open to various
courses of action caused by the progress of
development in the Triangle.
Triggers for developing Alaskan
Flats
• Residential Market Demand and
Absorption
• Residential Cap Rates
• Retail Cap Rates
• Other development in the Triangle
• Redevelopment of the YMCA
• Renegotiated land acquisition price
Jupiter Hotel Precedent
Strategic Recommendations
Asset Management Strategy
West Parcel Owned
Develop free standing commercial use.
East Parcel Owned
Potential for redevelopment, because the
vision for the neighborhood redevelopment
will not include an open lumber yard.
• Lumber Yard – End lease with ten-
ant and renovate lumber storage area
into:
• Lawn bowling centre with con-
cession – appropriate for seniors
housing on 35th Avenue
• New Tenant - Home Garden
Centre - existing competition in
neighborhood
• Bingo Hall – compatible with
seniors housing on 35th Avenue
• Shell space for the YMCA – Pi-
lates and spin class rooms
• Office space – Our strategy is to
continue leasing the office space to the
West Seattle YMCA
Options Strategy
West Options
If the above triggers are not realized by
the option expiry (July 2010) we will not
33
34
TripAdvisor.com review by member A TripAdvisor Member: “the worst place to
stay” 1/5 stars
Wished I would have researched further by reviews but was not expecting how bad this place was,
it looked like something out of the 60’s, filthy walls, ceiling, old furniture, rugs with burns in them,
stinky curtains, bathroom needed repairs everywhere, no screens on the windows, wallpaper from the
70’s and had probably not been cleaned since then, sheets wouldn’t stay on the springy mattress, the
only thing good about it was the location and staff. If not for the reservations, and if I would have seen
the room first I would have not stayed. In the future before we make reservcations [sic], we will be
more carefull [sic] to research the place we hope to sleep comfortably in. Hope someday they will do
some remodeling.
Seattle West Inn & Suites Room Rate # Rooms
Type
Suite < $200 2 expiry
Studio $100 to $199 6
Suite
Budget $80 to $99 24
Economy $59 to $79 22
Total Rooms: 54
TripAdvisor.com review by member TripAdvisor.com review by member
102084: “Disgusting” 1/5 stars IMK: “Stay away!!” 1/5 stars
Checked out after viewing room. This place We planned a trip to Seattle for a Mariner’s
was unacceptable. The room smelled of pun- game and when all downtown hotels were
gent disinfectant. The walls, bedspread, carpet booked we settled for this one because it was
and upholstery had stains. Wallpaper was a short 5-10 minute bus ride to the stadium.
falling off. Cigarette burns on all the furniture. Boy, do we wish we would have done some
Huge chips in porcelain on bathroom sink. research.
Missing baseboard molding. Chair frames with
Don’t be fooled by the photo, this hotel is dirty
chunks of wood missing. All upholstery had
and disgusting. Pulling up we knew we were
tears in it. Just horrible!
in trouble and the rather large sign saying “No
Refunds” was a dead give-away we were in
trouble. Being as we had already paid online
we were forced to stay.
Strategic Recommendations
develop the Alaskan Flats. However, there
is a significant positive difference between
the residual land values and the option
strike prices. Therefore, we believe that by
exercising these options we would be able
to then sell the parcels individually or as a
package for a substantial profit.
East Options
• Seattle West Inn & Suites – exercise
the option and renovate/retrofit the inn
• Renew and extend the options –
readdress the situation over the term to
East Assemblage Vision
The East Assemblage contains an optioned
parcel on which the Seattle West Inn &
Suites currently resides. It has garnered a
100 percent “terrible” rating on TripAdvi-
sor.com, with reviews advising potential
guests to “stay away!” Average room rates
for the hotel fall in the range of $59 to $250
per night, with most rooms costing $99
per night. The Seattle West Inn & Suites is
the only hotel in West Seattle, besides the
6-room Villa Heidelberg bed and breakfast
on 45th Avenue and SW Edmunds Street.
Maintaining a hotel tenant on this site does
make sense. People stay at the motel for
Mariner’s games and golf tournaments.
A renovation of the Seattle West Inn &
Suites could transform the property into
an income earner for Harbor Properties,
while bringing character and activity to The
Triangle.
An example renovation that can inspire a
   
remodeling of the Seattle West Inn & Suites
is Portland’s Jupiter Hotel. The Jupiter    
Hotel is a renovated motor inn, located in
   
a similar neighborhood – both are across
the river from downtown and on a com-    
mercial and light industrial corridor. The
   
Jupiter Hotel has 81 rooms, a 4,000 square
foot meeting and event space, and the   
well-known DougFir Restaurant & Lounge,
which is a late night dinner spot and music   
venue. The Jupiter Hotel pays homage    
to its seedy past by offering $59 “after
midnight” rates and putting a tattoo parlor    
and hair salon in what would traditionally   
be the gift shop. The hotel is a destination,
drawing locals from other neighborhoods Spark Hotel Rendering
to the restaurant and music venue and
vacationers looking for a budget boutique
hotel.
Embracing the motor inn style of the West
Seattle Inn & Suites after a renovation
would fit with the character of The Trian-
gle, while also creating a boutique feel for
The Spark Hotel. The renovated hotel will
also be able to charge higher rates. The
Spark Hotel should also include a confer-
ence space, which has been suggested
by contributors to the West Seattle Blog.
According to the blog, West Seattle lacks
meeting spaces that can accommodate
around 100 people. Finally, incorporating
late night dining and a music venue into the
hotel would make the hotel a destination
and bring 24-hour traffic to The Triangle,
making it feel safer and livelier.

35
36

Strategic Recommendations
T
he Fauntleroy Triangle is poised for
redevelopment. As the gateway into
West Seattle, the local community
wants to see the Triangle revitalized and
integrated into the surrounding neighbor-
hood. City planning also supports a vision
for a vibrant and walkable community.
Moreover, with many older low-rise build-
ings and parking lots, the site is a prime
candidate for redevelopment.
In order to tap into the full potential of the
Triangle however, it first needs a strong
sense of place. Without a welcoming atmos-
phere - in addition to market uncertainty
and a low population growth rate - it is
unlikely that this vision will unfold in the
near future.
The clear center to define the Triangle is the
popular West Seattle YMCA. The YMCA is
centrally situated in the neighborhood and
Current West Seattle YMCA
YMCA Catalyst
provides an opportunity to spark revitaliza-
tion into and anchor the entire Triangle.
If Harbor Properties is committed to West
Seattle and the vision of the Triangle, we
propose that they be a key player in pursu-
ing a strategy for rebuilding and expanding
the YMCA as a mixed-use building. A new
YMCA will invoke positive externalities to
surrounding properties, including Harbor
Properties’ land holdings. Most impor-
tantly, it will draw the necessary pedestrian
flows that will create a lively higher-density
residential and retail district desired by the
neighborhood. It will not only benefit the
immediate Triangle, but also provide im-
mense value to the entire West Seattle area.
YMCA Void
However in order for rebuilding to occur,
all stakeholders must cooperate. The land
owners must come together with the City to
find a way to make this project financially
viable, allowing all developers to share both
the costs and benefits of the project.
As the YMCA estimates that a new devel-
opment would cost $15 million net their
contribution, creating a true sense of place
in the Triangle over a ten-year period could
pay for itself if residential rents increase by
only $0.15 per square foot. The return to
the investment for such a buildout is a 17%
IRR.
YMCA Heart
37
38
YMCA Vision
Ownership
The West Seattle YMCA is located on a
43,125 square foot parcel between 36th
SW Avenue and SW Oregon Street. The
YMCA has fee simple rights to this land. It
is zoned for 4.75 FSR if mixed use, with a
height restriction of 65 feet.
Vision
In order to successfully achieve the vision
articulated by the City and other stakehold-
ers, the new YMCA development must be a
mixed-use building that exceeds the cur-
YMCA Catalyst
rent zoning restrictions for height and FSR.
Currently, if developers build out the Trian-
gle to full, allowable density, the YMCA will
feel like a void, rather than the heart, in the
center of the Triangle.
Urban Design
Since the YMCA is located in the center of
the Triangle, it would merit a higher build-
ing, so that the massing steps up from the
edges of the neighborhood to the center.
Moreover, since the YMCA is at the focal
point of the Triangle, a higher building
would create the visual message that the
YMCA is at the heart of this community.
The YMCA site is the only appropriate
location for a larger building and will spur
strong development for the entire neigh-
borhood. Such development would enhance
the gateway experience, which is one of the
primary goals outlined in the West Seattle
Junction Urban Hub Plan. Other buildings
along the edge would be at a smaller scale
especially those adjacent to the single-
family residential areas.
The main entrance and access to the Current Circulation in The Triangle
YMCA would come from Fauntleroy and
37th, which provides a gateway feature
into the Triangle. Surrounded by a highly-
developed public realm and children’s play Local Road
areas, the YMCA would best be placed on Arterial Road
the first two levels, mixed with various
retail and eating/drinking establishments.
A minimum of two floors of parking would
be needed under the current zoning; and it
should be an underground garage so that
the presence of vehicles in the streetscape is
minimized. In addition, small office, clinic
space or spa area could be used, which
would synergize with the athletic uses in
the building. Finally, there would be four
residential floors above, which could house
270 new residents at the current zoning,
and potentially twice that, with minimal
Proposed Circulation in The Triangle
impacts to the community.
Pedestrian High Street
Pedestrian Flows RapidRide BRT
Pedestrian Only Greeen Street
The City’s vision for the Triangle is a walk-
Local Green Streets
able, pedestrian-oriented neighborhood.
Arterial Road
This vision can be achieved by creating
pedestrian connections and a logical street
design.
Strong connections are an essential
component of a vibrant streetscape. The
streets should tie the Triangle to the larger
neighborhood as well as provide internal
connectivity. With the YMCA redevelop-
ment in mind, we have identified two major
corridors that connect the Triangle to its
surroundings: SW Snoqualmie Street and
SW Alaska Street. Anchored on the west

39
40
66 ft Row, Pedestrian Only. Streetscape for Alaskan Flats North
66 ft Row Streetscape for 37th Avenue
by the YMCA and on the east by the golf
course, we propose that SW Snoqualmie
be a pedestrian-only street that pulls the
greenery and park-feel of the golf course
into the site. The City has already identi-
fied SW Alaska as a future high street that
connects and expands the Junction to the
east. Pedestrian flows can be generated by
concentrating retail along this street.
Throughout the Triangle, the wide rights-of
ways allow for many pedestrian-friendly
design upgrades. Currently, the streets are
car-oriented with wide travel lanes, narrow
sidewalks, and little greenery. The north-
south streets are 80 feet wide allowing for
bike lanes and wide sidewalks in addition
to narrowed travel lanes and street parking.
Furthermore, there is plenty of room for
bioswales, trees, and boulevard plantings.
On the east-west streets, we propose an
asymmetric street section to capitalize on
the sunshine on the north side of the street.
Although not as wide as the north-south
streets, (these rights-of-way are the stand-
ard 66 feet), with narrowed travel lanes
and only one side of street parking, wider
sidewalks, bioswales and trees can again be
easily accommodated.
These street designs result in improved
pedestrian safety, a more enjoyable and
aesthetic pedestrian experience, and great-
er environmental sustainability. They will
draw residents from within the Triangle
and the wider community as they connect

YMCA Catalyst
major community amenities and provide an 80 ft Row Streetscape for SW Alaska
enhanced public realm.

Execution
The YMCA, the City of Seattle, and other
stakeholders in the Triangle can jointly
execute the development. Currently, the
YMCA collects approximately $5 million
annually in donations, which can be al-
located towards a new YMCA facility. The
YMCA requires $15 million in additional
funding to complete a new project.
To encourage redevelopment of the Trian-
gle, the YMCA, landowners, and the City
of Seattle can work together to implement
local improvement charges or industrial
revenue bonds. Local improvement charges
permit Seattle to order improvements on
land and pay for them by collecting ad- Primary Pedestrial Corridors
ditional property taxes on the affected
properties. Local improvement charges
would allow all property owners that would
benefit from improved placemaking in the West Seattle
Triangle to pay for streetscape improve- Golf Course
ments, underground public parking, and
public recreation area on the YMCA site. Junction
The increase in property tax would encour- YMCA
age existing property owners to sell their
property, spurring further development.
Snoqualmie (Pedestian only Green Street)
In addition to local improvement charges,
the City can issue industrial revenue bonds
to finance off-street parking. Finally, the
City can enter into a license agreement SW Alaska (Pedestrian High Street)
where the City partially contributes to the
construction costs in return for public ac-
cess to certain YMCA amenities.
41
42

YMCA Catalyst
T
his Asset Management Plan directs
the Harbor Board of Directors with
strategic recommendations for the
company’s short and long term decision
regarding their land holdings in West Seat-
tle. In summary, the Catalyst Team recom-
mends that Harbor Properties undertake
the following:
Short Term
Aggressively renegotiate the West As-
semblage option before the July 2010
expiration. The Catalyst Team recommends
exercising the option with a strike price of
$1.8 million or lower. At this strike price,
we recommend that Harbor Properties
develop Alaskan Flats. If Harbor Properties
cannot renegotiate the option, the Catalyst
Team recommends walking away from the
option and holding the parcel owned by
Harbor.
Summary
Medium Term
Wait until the end of 2010 to renew the
East Assembly option. Harbor Properties
can monitor market conditions and evalu-
ate the site’s potential while retaining an
interest in the Triangle.
Long Term
Develop partnerships with the West Seattle
YMCA and the City of Seattle to actualize a
better vision for the Triangle.
Rationale
While analysis demonstrates that apart-
ment development is the highest and best
use for the Triangle, even a risk-mitigating
strategy for the Alaskan Flats project can-
not satisfy a 20% IRR. The lower density
development and differentiated product
mix both address soft rental demand and
supply-side risks.
Nevertheless, the Catalyst Team recognizes
that Harbor Properties has invested in
West Seattle and owns property in the
Triangle. Harbor Properties should remain
in the Triangle for the long run, because
disinvestment will hurt the company’s
existing assets. Site analysis of the Trian-
gle indicates that a redeveloped YMCA at
higher density than permitted by zoning
would form a tangible center in the Trian-
gle, creating a sense of place and anchoring
further residential development.
43
44
Strategy Decision Tree
Purchase Alaskan
West Options Flats
Assemblage
Walk
Purchase
Options
East Hold
Hotel Reno
Assemblage Options
Walk
In game theory terminology, Harbor Prop- The Catalyst Team recommends that Har-
erties is the first mover. As the Triangle is bor Properties foster relationships with the
beginning to transform, being a first mover West Seattle YMCA, the City of Seattle, and
is risky. It is not possible to charge higher other property owners in the Triangle to es-
market rents, and desirability to live in the tablish a local improvement charge to help
in Triangle does not yet exist. Therefore, finance redevelopment of the YMCA. The
until the Triangle becomes a desired loca- local improvement charges, collected as an
tion to live, shop or work, there is no ad- assessment on property taxes, could fi-
vantage for Harbor to develop ahead of its nance public recreation area, underground
competition. parking, and streetscape improvements
throughout the Triangle or on the YMCA
site. Increased property tax charges would
Summary
also spur development of the Triangle as
existing uses become unfeasible.
Another solution for Harbor Properties
is to continue purchasing parcels in the
Triangle, especially if land prices fall dur-
ing Alaska Way Viaduct construction. This
strategy allows Harbor to become the major
landowner in the area. While this strategy
involves risk, acquiring assets in the Trian-
gle ensures that Harbor Properties benefits
from the first mover position in revitalizing
the Triangle through YMCA redevelop-
ment.
In summary, the West Assemblage remains
too risky to redevelop and the option price
too high. The Triangle has weak growth
prospects without transformation of the
Triangle as a whole. Also, the status of US
economic recovery is still uncertain. Final-
ly, the Triangle has a large potential supply
of rental housing at the planning, construc-
tion, and semi-completion stages.
Overall
• Development does not make sense at
the current purchase price
• The project does not meet 20% IRR
• High risks do not justify a return less
than 20% IRR
• Seattle’s economy and West Seattle’s
population are growing too slowly
• There is too much competition
Alaskan Flats Product Mix

Appendix
Use SF / Unit No. of Units Monthly Lease Rate Leasable Area (SF)

1st Floor
Retail 1,143 7 $1.58 8,000
Lobby 2,500 n/a n/a 0
YMCA Flex 2,500 1 $0.58 2,500
Covered Parking 2,500 n/a n/a 0
Exterior Parking 9,000 n/a n/a 0
Total Leasable Area 10,500
Total Floor Area (excluding parking) 13,000
Use SF / Unit No. of Units Monthly Lease Rate Leasable Area (SF)

4th Floor
2nd Floor
Lofts 1,200 0 $1.50 0
Lofts 1,200 0 $1.50 0
1 BR 1 Bath 600 3 $2.10 1,800
1 BR 1 Bath 600 7 $2.10 4,200
2 BR Small 800 4 $1.90 3,200
2 BR Small 800 2 $1.90 1,600
2 BR Large 1,000 5 $1.70 5,000
2 BR Large 1,000 5 $1.70 5,000
Circulation/Lobby 1,500 n/a n/a 0
Circulation/Lobby 1,500 n/a n/a 0
Total Leasable Area 10,000
Total Leasable Area 10,800
Total Floor Area 11,500
Total Floor Area 12,300

5th/6th floor
3rd Floor
Lofts 1,200 14 $1.50 16,800
Lofts 1,200 0 $1.50 0
1 BR 1 Bath 600 0 $2.10 0
1 BR 1 Bath 600 4 $2.10 2,400
2 BR Small 800 0 $1.90 0
2 BR Small 800 4 $1.90 3,200
2 BR Large 1,000 0 $1.70 0
2 BR Large 1,000 5 $1.70 5,000
Circulation/Lobby 1,500 n/a n/a 0
Circulation/Lobby 1,500 n/a n/a 0
Total Leasable Area 16,800
Total Leasable Area 10,600
Total Floor Area 18,300
Total Floor Area 12,100

Floor Plans

1st Floor 5th Floor

 Pro Forma

Year 0 1 2 3 4 Year 0 1 2 3 4

Revenue Costs

Residential Construction

Rent $0 $0 $574,500 $1,233,840 $1,233,840 Hard + Parking + Soft -$188,624 -$9,242,593

Vacancy -$28,725 -$57,450 -$57,450 Contingency -$8,216 -$402,595

Opex $0 $0 -$92,495 -$232,806 -$232,806 Demolition -$201,089

NOI Residential $0 $0 $453,281 $939,342 $939,342 Extending Option -$100,000

Permits -$12,685

Retail Acquisition -$3,481,510

Rent $0 $0 $50,160 $100,320 $152,000

Vacancy $0 $0 -$3,160 -$6,320 -$9,576 Total Cost -$3,992,124 -$9,645,187 $0 $0 $0

Opex $0 $0 -$26,400 -$52,800 -$80,000

Opex Recovery $0 $0 $26,400 $52,800 $80,000 Disposition

NOI Retail $0 $0 $47,000 $94,000 $142,424 Disposition $15,690,942

Flex Space Unleveraged Cash Flow

Rent $0 $0 $30,000 $30,000 $30,000 Unleveraged Cash Flow -$3,992,124 -$9,645,187 $516,880 $1,049,942 $16,789,309

Vacancy $0 $0 -$900 -$900 -$900 IRR Unleveraged 8.8% per year

Opex $0 $0 -$12,500 -$12,500 -$12,500

NOI Flex Space $0 $0 $16,600 $16,600 $16,600 Leveraged Cash Flow

Loan Draws During Period $0 $8,387,312 $0

Total NOI $0 $0 $516,880 $1,049,942 $1,098,366 Total Loan Balance $0 $8,387,312 $8,387,312 $8,387,312 $8,387,312

Loan Repayment w/ Interest $0 -$190,347 -$358,977 -$358,977 -$8,387,312

Leveraged Cash Flow -$3,992,124 -$1,448,223 $157,903 $658,184 $8,401,998

IRR Leveraged 13.9% per year

Appendices
Construction Costs Sensitivity Analysis Return on Cost for Strategy to Pursue Rezoning
Residential Retail YMCA Assumptions:

Cost IRR Cost IRR Cost IRR 6 Stories 8 Stories

$75 21.18 % $70 17.38 % $106 14.54 % Retail SF 16,300 15,300

$79 21.38 % $78 17.09 % $111 14.47 % Retail Rent per SF $21.60 $21.60
$84 20.52 % $86 16.78 % $117 14.40 % Residential SF 96,600 128,200
$88 19.61 % $96 16.44 % $123 14.33 %
Residential Rent per SF $21.00 $21.00
$93 18.62 % $107 16.02 % $130 14.25 %
YMCA SF 3,000 3,000
$97 17.57 % $118 15.58 % $137 14.16 %
YMCA Rent per SF $7.00 $7.00
$103 16.43 % $132 15.08 % $144 14.08 %

$108 15.21 % $146 14.52 % $151 13.99 %

Notes:
Parking Assumptions are based on 350sf per stall, costing $17000 ($48 PSF) for grade
$114 13.89 % $162 13.89 % $159 13.89 % level and $30000 ($85 PSF) for underground per stall.
$119 12.53 % $171 13.57 % $167 13.79 %
Average unit assumptions are 900 for the full density buildout senario and 922 for the
$125 11.06 % $179 13.23 % $176 13.69 % Alaskan Flats.
$132 9.46 % $188 12.88 % $184 13.58 % Wood Frame Construction $98PSF
$138 7.73 % $197 12.50 % $194 13.47 %
Above ground concrete $150 PSF
$145 5.83 % $207 12.10 % $203 13.35 %

$152 3.75 % $218 11.68 % $214 13.22 %

$160 1.44 % $229 11.23 % $224 13.09 %

$168 -1.13 % $240 10.75 % $235 12.95 %

Zoning Requirements
  Return on Cost for Strategy for Lower Density Buildout

 Assumptions:

Full Build-Out Alaskan Flats
 
  Retail SF 9,700 8,000
  Residential SF 96,600 48,200

Residential Rent per SF $19 $22
 
 

Notes:

Average unit assumptions are 900 for the full density buildout senario and 922 for the
 
Alaskan Flats.

Wood Frame Construction $98PSF
 
  Above ground concrete $150 PSF

LEED Silver Certification 1.5% Additional Costs
 
$10 additional construction cost inflation (Full Build)

  $20 additional construction cost inflation (Alaskan Flats)

 
 

 


 
 
Capitalization Rate Sensitivity Analysis
  Cap Rate Unlevered IRR Levered IRR
 
 6.25 % 12.12 % 19.89 %

 
6.50 % 10.95 % 17.84 %
 

6.75 % 9.84 % 15.84 %
 
 
7.00 % 8.87 % 13.89 %
 

7.25 % 7.78 % 11.98 %
 
 

7.50 % 6.81 % 10.11 %
 


Appendices
Average Rental Rate Sensitivity Analysis Financial Summary
     
Average NNN
Unlevered IRR Levered IRR
Rental Rate    

$20.60 7.6 % 11.6 %

     
$20.80 7.8 % 12.1 %
   
$21.00 8.1 % 12.5 %
    
$21.20 8.3 % 13.3 %
    
$21.40 8.5 % 13.4 %

$21.60 8.8 % 13.9 %

    
$21.80 9.0 % 14.3 %
    
$22.00 9.2 % 14.8 %

$22.20 9.5 % 15.2 %

     
$22.40 9.7 % 15.6 %
 
$22.60 9.9 % 16.0 %
 

 

    

    

ESRI Tapestry Description for Target Market
ESRI Portion of Portion of
Name Description
Code Study Area USA
L4-23 Trendsetters 10.4% 0.9% Singles; Shared household, 35.3 average age, Middle income
Prof/Mgmt, Some College; Bach/Grad
Multiunit Rentals
Practice yoga, Have renter’s insurance, Own latest electronics—MP3 players, PDAs, Read
Epicurean, fashion magazines, Own/Lease Toyota or Honda
L4-27 Metro Renters 18.4% 1.4% Singles; Shared household, 33.5 average age, Middle income
Prof/Mgmt, Bach/Grad Degree
Multiunit Rentals
Travel by plane frequently, Have renter’s insurance, Play tennis,
Listen to alternative radio, Rent car from Hertz
L7-28 Aspiring Young 3.3% 2.3% Family Mix, 30.4 average age, Middle income
Families Prof/Mgmt/Srvc, Some College; Bach Degree
Multiunits; Townhome
Go to the movies frequently, Use a credit union, Play frisbee, Watch comedies on TV
 The 2010 University of British Columbia Team Biographies:
Mike Blomkamp is in his fourth year in the Bachelor of Commerce Real Estate
program. Mike has played varsity rugby for UBC and is looking forward to a career in
development after graduation in May. His main roles have been building design, market
research and development strategy.
Matt Cunning is a fourth year student in the Real Estate program. He worked on an oil
drilling rig for two years before enrolling in the Bachelor of Commerce program. Matt’s
main area of contribution is in the area of market research, development strategy and
pro forma analysis.
Alex Deng is in his fourth year in the Bachelor of Commerce program with a specializa-
tion in Real Estate and Finance. His primary responsibilities have been the pro forma
construction and economic research of the Seattle area. He is looking forward to gradua-
tion in May and plans to pursue a career in the development industry.
Daniella Fergusson is a graduating Master’s student in the UBC School of Com-
munity and Regional Planning. She has worked in renewable energy and sustainable
local economic development. She is particularly interested in One Planet Communities.
Her main role has been design layout as well as regulatory framework and community
planning research.
Robin Johansson is a fourth year at the Real Estate program. Half-Swedish and
half-Ecuadorian, Robin is ambitious to grow his knowledge of the finance and develop-
ment industries, where he can nurture his entrepreneurial spirit. His role on the team is
primarily focused on the financial and strategic design analysis.
Brandon Markiw is a fourth year student in the Bachelor of Commerce program with a
specialization in Real Estate and Finance. He is a member of the UBC Varsity Golf Team
and plans to graduate May 2011 to pursue a career in development. He is responsible for
pro forma construction and economic research.
Myles Millard is a fourth year student majoring in Finance and Real Estate. This past
summer Myles did commercial banking with TD Bank’s Real Estate Group. Upon gradu-
ation, he hopes to pursue a career where he can foster his skills in both finance and real
estate. His role within the team is primarily focused on the financial analysis.
Stacy Passmore is in her final semester in the School of Community and Regional
Planning where she specializes in Urban Development and Urban Design Planning. Her
interest in community revitalization brought her to the UBC NAIOP team where she has
contributed to the design and zoning elements of the proposal.
Michelle Seto is a fourth-year student specializing in Real Estate. Upon graduation,
she hopes to continue her passion for real estate finance and law by pursuing a combined
law and business degree. Michelle has led the NAIOP team in the project’s zoning and
regulatory strategy.
Anjali Varghese is a Master’s student in the School of Community and Regional Plan-
ning. She is a Professional Engineer and worked with Stantec Consulting in Edmonton.
Anjali is pursuing her interest in urban design, and contributed to the design of the
proposal, as well as supporting demographic research.
Azim Wazeer is in his final year of the Bachelor of Commerce program, majoring in
Real Estate. He spent this past summer completing an internship within Grosvenor
Canada, in their Vancouver office. Within the NAIOP team, Azim has contributed to a
number of different areas and has led the team in the presentations.
Garth White is a fourth year student completing his Bachelor of Commerce degree,
specializing in Finance and Real Estate. Garth is currently working at Northwest Atlantic
Brokerage as a research assistant. His primary role on the team has been in market
research and analysis.