urban center: future project analysis

Feasibility Study Golden Mile Development

Hato Rey Parcel October 25, 2004

URBAN CENTER:

FUTURE PROJECT ANALYSIS

PREPARED BY

ADAM GREENFADER

AXYON

Advanced Solutions For Real Estate Development

2

TABLE OF CONTENTS

GOAL OF THIS STUDY PG 3 ABOUT AXYON PG 3 GENERAL ASSUMPTIONS PG 4 CURRENT ECONOMIC OUTLOOK PG 5 MARKET AREA PG 6 CENSUS DATA PG 6-8 SITE LOCATION PG 9 HATTO REY PG 9-12 HATO REY FUTURE PG 13-14 TREN URBANO PG 14-15 DEVELOPMENT & TRANSPORTATION PG 16 S.W.O.T. ANALYSIS STRENGTHS PG 17-19 WEAKNESS PG 20-21 OPPORTUNITIES PG 21-24 THREATS PG 25-27 CURRENT COMPETITION PG 28-37 HOUSING DEMAND PG 38 FUTURE PROJECTS PG 39-40 TARGET PROFILE PG 41-42 PRICE POINT ANALYSIS PG 43-44 CONCLUSION PG 45 ADDENDUM

A. QUALIFYING GUIDELINES PG 46 B. DESIGN RECCOMENDATIONS PG 47 C. PAST SALES HISTORY PG 48 D. FUTURE PROJECTS PG 49

AXYON


3

Future Trends There are several communities around the Financial District that are taking action and are closing their streets to non-resident vehicular traffic. Baldrich in particular, has already closed its streets. This will increase values in the Baldrich Community and will attract families who would normally not consider Hato Rey as a place of residence.

Baldrich Closing Trend

HATO REY FUTURE The future of Hato Rey looks quite favorable. This is due to the following:

1. Demographic Shifts – Puerto Rico 2. Traffic Blues 3. New Entertainment, Retail, and Commercial Developments 4. Government Density Zoning 5. Environmental Consciousness 6. Transportation Improvements

1. Demographic Shifts – Puerto Rico

Like the United States, the population of Puerto Rico is getting older. As the Baby Boomers´ children leave their homes, the Boomers are finding themselves with “too much space”. Numerous studies have revealed that Baby Boomers in Puerto Rico want “no lawns to cut”, less space to clean, and non-vehicular access to shopping and leisure.

2. Traffic Blues

AXYON


4

In Puerto Rico, long commuting times have become the norm. There are three main municipalities that account for the majority of vehicular circulation in/out of the city during weekdays: Bayamón, Caguas, and Carolina. On an island that is only 35 miles by 100, it is amazing to think that many people regularly leave their homes at 5:15 a.m. in order to be at the office by 9:00 am….for only a 30 mile commute. 3. New Entertainment, Retail, and Commercial Developments Unlike previous decades, Hato Rey is currently undergoing a significant amount of development in entertainment, retail, and commercial uses. Particularly, the new coliseum promises to bring much needed nighttime activity to the area. This will most likely generate ancillary support services, restaurants, bars, and evening retail. Banco Popular, the largest bank in Puerto Rico, is currently undertaking a significant amount of new entertainment, office, and retail development in Hato Rey. This includes 36,000 square feet of restaurant and retail space, 6 movie theatres, 73,000 square feet of commercial space, and various new parking structures. 4. Government Density Zoning: Opportunity The government recently enacted a special overlay zone to increase density in the metropolitan area. This overlay zone should provide financial incentives for inner city development. Consequently, Hato Rey should begin to see increased density, more diverse communities and better land usage. 5. Environmental Consciousness Puerto Ricans today are becoming increasingly aware of their finite land resources and the cost of uncontrolled development on their environment and quality of life. Homebuyers are demanding that developments stop plowing over green areas. This environmental awareness might make homebuyers think twice about living in a community that was once agricultural land. More importantly, they will seek out metropolitan developments that re-forest or are environment friendly. 6. Transportation Improvements Today, Puerto Rico is introducing an “Integrated Transportation System” or ATI. This system includes a coordinated transit effort between a new rail line, bus service, and water taxi or “aqua expreso”. This new investment should begin to address some of the transportation issues that face metropolitan residents.

AXYON


5

TREN URBANO It is projected that by the beginning of 2005 the Tren Urbano will begin to service the metropolitan area. The Tren Urbano is a heavy rail train. A heavy rail train is characterized by its large capacity to transport individuals. It also runs independent of vehicular circulation. The Tren Urbano will operate from Bayamón to Santurce. The Tren Urbano will make a total of 13 stops. It will take approximately 25 minutes to service all the stops. The rail frequency will be approximately every six to eight minutes.

AXYON


6

Daily ridership is initially projected at 30,000-40,000 passengers. The ridership is projected to increase at a rate of 10%-15% per year. The train has capacity to transport over 150,000 people per day. DEVELOPMENT & TRANSPORTATION The suburban development of the last 50 years has created a growing concern on: traffic congestion, long commutes, air pollution, oil prices, farmland depletion, and division of neighborhoods, loss of open space, and the deterioration of social networks. Statistics from the Home Builders Association Transportation Committee reveal that every new home creates 10 new vehicle trips daily. Attempts to alleviate the problem of long travel commutes by constructing more highways almost always has led to more sprawl, and eventually, more congestion. Statistics confirm what every commuter knows intuitively - more cars than ever are on the road. Americans (and Puerto Ricans !) spent 4.5 million hours stuck in commuter traffic, a 325% increase since 1982. Rush hour has grown to six hours a day, twice as long as 1982. Suburban Development: Puerto Rico In the last two decades, Puerto Rico has seen the rise (and perhaps fall) of the suburban communities. A prime example is the Sabanera project in Cidra developed in the early 1990’s by Frederico Stubbe. Many construction lenders at the time did not think Cidra was a viable market for 200 plus homes ranging from $180,000-$285,000. They felt that Cidra was too far from the metropolitan area and that consumers would not make the “sacrifice” and drive. In addition, lenders thought it was not financially feasible to have such large up-front costs in recreational and landscaping facilities. The Sabanera formula was essentially based on the now over-used movie quote from Field of Dreams, “If you build it they will come.” Stubbe built some of the most amazing recreational and green facilities ever seen in Puerto Rico…and he built it before optioning a single home! To the chagrin of the financial institutions that passed on the deal, Sabanera was an amazing success. People stampeded from the city in herds to live in this “wonderful green environment.” In fact, it was such a great concept, that Stubbe went on to develop two other communities with the Sabanera brand. Many other developers were quick to follow Stubble’s formula. Today, however, suburban development continues, but with much less sales success. Many of the initial buyers in Sabanera, for example, sold their homes after several months of struggling with traffic jams. It appears that suburban commuting has become extremely

AXYON


7

burdensome - especially from the Caguas/Cidra market. This is particularly true for middle + income individuals who have children in private schools in the metropolitan area. Re-Birth Urban Center Cities once stigmatized as crime-ridden repositories of the poor, are now being seen as vital, resource rich places. This is in part because urban density creates opportunity for a more diverse mix of amenities than is available in one-dimensional suburban locations. According to Census figures for 2000, research by the Brookings Center on Urban and Metropolitan Policy and the Fannie Mae Foundation, there is currently a dramatic re-birth of urban centers. This rebirth is the result of three major factors: 1. Demographics - Rise in immigration, aging baby boomers, and increase in non-

family households. 2. Aging of suburban developments. 3. New interest in rail travel and avoidance of vehicular transit.

.

AXYON


8

FUTURE PROJECTS There is a strong growth of future projects in Hato Rey. The preponderance of activity can be found in the heart of the Golden Mile district. Below you will find a list of projects and map that will be coming on line in the next several years. Some of the data has been collected from the planning board. Other information is based on conversations with local bankers and planners.

AXYON


9

1. Banco Popular 03cx2-cet000-04533 ARPE. This project was submitted to the planning board in March 2003. It includes the construction of new restaurants, meeting facilities, movie theaters, and approximately 950 new parking spaces. No residential construction was proposed. Approximate cost $25,000,000.

2. Villamil Parking Facilities – This project is currently under construction. No residential component can be observed.

3. University Site (in front Parcel A) – In front of the proposed site, there will be a future project. Local government experts believe this site will be dedicated to the university. No residential component has been identified.

4. Parcel B- This project was recently awarded. It is believed that this site is primarily residential.

5. Duarte Street- 2004-17-0381 JPU Mixed use project on 6.2 Cds. The project includes 120 apartment units. 2,000 square feet of commercial area and 10,000 square feet of institutional space.

6. Pujol Condominiums – In planning stage by same developer of THE COLISIUM. It is rumored that two condominium towers will be built in this vicinity.

7. Rivera Siac Tower - 2004-17-0381-JPU Mixed use project on 2.8 Cds. The proposed development includes 237,000 square feet of commercial space and 69 apartments.

8. Atrium Plaza 1987-17-0866-JGU-T Approved for construction. Residential Condominium project on 1.7CDs with a maximum of 120 residential units.

9. Fonalledas Tower – It is rumored that the Fonalledas family are considering the development of a large scale residential project on this site. No planning board information was available or presented.

10. Parque Loyola III – According to the on-site sales person at Parque Loyola II, a third tower is being designed. This would be on the parcel of land across from tower number 2.

11. Tren Urbano Parcel A – The RFP selection process was recently undertaken. The site area is 4 acres in the heart of Hato Rey. By early 2005 the developer team should be selected.