Such a project is not feasible. The site is simply not large enough to warrant an apartment development and generate acceptable financial returns. The subject site does have the market depth and rent levels to warrant proceeding with analysis of the site. The parking ratio (spaces per unit) in the city’s multi-family zoning categories ranges from 1.5 in downtown to around 1.9 outside of downtown. In our experience, providing less than 2 spaces per unit can lead to problems as visitors and second cars are prevalent in luxury apartments. However, in this case we used a minimum ratio of 1.27, which is aggressive.
The maximum construction type or building code for apartments in the downtown four stories of wood frame. Five stories or higher with structural steel is too expensive currently given the highest apartment rents in the city. Given market and financing conditions at the time of the taking, steel construction was not feasible. Therefore, the massing study for the subject site indicates support for a maximum of 36 apartments in a four-story structure over 46 surface level parking spaces. The projected return on equity would be very low at around 4%. The economies of construction and operations suffer significantly for a development of this size. We have never developed an apartment community of less than 100 units, and I am not aware of an apartment project of less than 75 units which has been built in this area in the last 10 years.
In my opinion, the site is not suitable for apartment development because not enough units can be feasibly developed to make the site viable.
The expert is a senior vice president of a real estate development company that has developed more than 20 apartment communities.
