Make no little plans

In the 1950 census, Chicago hit its peak population 3.6 million. Few realize that this last spurt of growth was due entirely to the great migration. The African American population increased 220,000 while the white population actually declined by about 3000. 

Ok, 3000 doesn’t seem like much, but when you factor in the rate of natural increase (birth rate – death rate) it constitutes a loss of 750,000 potential Chicagoans.

The first thought is to put this loss down to “white flight”, but that doesn’t hold water.

 Here’s a map. It shows areas of population loss and gain between 1940 and 1950. 

The red portions show the African American communities traced from a 1950 settlement map showing Chicago’s various ethnic communities.

 

Vast losses occurred in tracts where the residents never saw a black man.

The areas of loss have more in common with this map, showing areas of blight.

 Or this one indicating areas of high population density.

The city had been bleeding population to the suburbs for decades. The city of 1950 was a dump. The free market had favored the slumlord since the depression and our neighborhoods were dirty, crowded, smelly, run down places. As soon as the streetcars crossed the city limits, people loaded up their families and moved.

This didn’t escape the notice of the people who drew those maps. They are from the Chicago Plan Commission’s 1942 Master plan for residential land use.

Their plan was to bulldoze the blighted and near blighted areas, and create mini suburbs between the half mile streets, each with its own school and park. The side streets would be cul-de-sacs and the 1/2 miles widened to carry all the traffic. Then, they’d plop shopping centers at the corners.

Here’s their plan for Little Italy.

They write:

WEST SIDE REDEVELOPMENT PLAN. It is possible to create new neighborhoods and better residential patterns near the center of Chicago without scrapping all of the streets and utilities which exist today. This plan for the reconstruction of a West Side Blighted area calls for the demolition of the present obsolete buildings in order to provide much-needed open space for parks around the schools and community centers and ample yards about the residential buildings. Unnecessary streets would be closed to protect the residential sections from traffic hazards, but major through streets of the present would be retained. Heavy traffic would be confined to the super-highways and section-line streets which form the boundaries of this community. Organization of shopping facilities into coordinated centers with parking facilities and access to highways would make them easily available without conflicting with purely residential areas. Residential areas would be built up with apartment buildings three to four-stories in height and with two-story group houses. A moderately high population density would be achieved without crowding of either land or people.

Unencumbered by existing utilities in undeveloped areas, they hope to do away with the grid all together.

Here’s their idea for Scottsdale

They write:

PROPOSED PLAN FOR DEVELOPMENT OF A VACANT AREA IN SOUTHWEST CHICAGO. Here is indicated how an area of now-vacant land comprising over one and one-half square miles on the southwest edge of the city might be subdivided according to the best principles of community design. Curved streets in the interior residential portions discourage dangerous through traffic which is channelized into the bordering super-highways. Schools placed near the centers of the five neighborhoods are so located that small children can reach them without having to cross major traffic arteries. A centrally located high school with an associated athletic field and community park serves the entire community. Adjoining these facilities is a large community shopping center, and smaller neighborhood shopping centers are placed to serve two or more adjoining neighborhoods. The residential areas are separated into sections of apartments, group houses, and single-family dwellings arranged to give each type the maximum advantages of light, air, and open space around the structures. Such a community design illustrates what might be accomplished by creating an integrated community pattern designed to offer the maximum advantages for living.

Apparently the city of the future would look like Elk Grove Village.

Paul K. Dickman

These maps are courtesy of the Hathitrust Digital library, they were digitized by Google from originals in the 

University of Michigan collection
http://wickerblather.blogspot.com/2015/09/make-no-small-plans-5-we-dont-want.html
http://wickerblather.blogspot.com/2015/08/make-no-little-plans-4-if-at-first-you.html
http://wickerblather.blogspot.com/2015/08/make-no-little-plans-3-if-at-first-you.html
http://wickerblather.blogspot.com/2015/08/make-no-little-plans-2-if-at-first-you.html

The sky is falling

A couple of months ago, a blogger by the name of Hertz wrote a piece about Unecessary population loss in Lincoln Park. It got picked up by Crain's and splattered all over the web faster than cat pictures.
You can read it here:

http://www.chicagobusiness.com/article/20150323/OPINION/150329972/who-would-have-guessed-that-lincoln-park-was-seeing-population-loss
or here
http://danielkayhertz.com/2015/03/16/unnecessary-population-loss-on-the-north-side-is-a-problem-for-the-whole-city/

Ordinarily I have better things to do than debunk every blowhard on the internet, but now I have developers spouting it like chapter and verse and I want to go on the record as saying "this is unadulturated BS."

He noticed a slight decline in both the population and the housing unit count for the Lincoln Park community area between the 2000 and 2010 censuses. Rather than look closer at these numbers, he took it as proof of his thesis that zoning is killing the city and now McMansionization sucking up precious dwelling units. Then he ran around like Chicken Little yelling "the sky is falling"

How big were these losses, he didn't say, but the population loss amounted to 204 people (0.3% of the pop)
Given that the city on average lost 6.9% of it's population in the same period, I'd say that's pretty darn good.

http://www.cityofchicago.org/content/dam/city/depts/zlup/Zoning_Main_Page/Publications/Census_2010_Community_Area_Profiles/Census_2010_and_2000_CA_Populations.pdf

The housing loss was a whopping 534 units. But when you drill down to the actual data, the bulk of this loss (over 400 units) occurred in 3 census tracts dominated by the DePaul campus who started expanding and restructuring their planned development just before 2010. Hardly gentrification and more than adequately compensated by this project:
http://www.usa.com/IL0318325002001.html

Smithfield's 1237 West Dorm project. It came on line before the census and is so big it has it's own census block. It housed 481 people, but through the vagaries of census definition it only constitutes 5 housing units.

Here's a chart to illustrate the situation.

The red area indicates LP's unit count, the blue area LP's pop and the green area the city's pop (divided by 40 to bring it into scale)

Hardly the end of the world.

Certainly gentrification has consumed some units but it is a drop in the bucket and not necessarily a bad thing.
Lincoln Park is approaching the Units/mile it was designed for and now it's time to grow up. It's problem is not its unit count but its puny household size of 1.73. It's time to start procreating, maybe then they achieve a higher population density than Albany Park, a mature RS-3 district which, despite a population decline of over 10%, still manages a density 35% higher than Lincoln Park (which for the most part is zoned for densities 3 to 7 times as high).

The article also pines for the glory days of the 1950s but the author seems oblivious to the fact that in the fifties, Lincoln Park was a frickin slum. I imagine he pictures the fifties as all "Leave it to Beaver" and "Happy Days" but it wasn't, it was more like "Blackboard Jungle"
It would never have become a fashionable neighborhood until the Dept of Urban Renewal bulldozed half of it down.
Lets look at one census tract from the 1950 Census of housing.

It had 2447 DUs (it would be more now, until 1960 SROs, Residential Hotels and Rooming houses were each one DU)
300 of them had no heat
10% still used ice boxes and 5% had no refrigeration.
747 had no washroom, 337 had no running water at all.
Those were the days.
By 1970 it was down to 1700 DUs 20% of those were vacant.
You'll be happy to know that they all got running water. But 10 still used an outhouse
In 2010 it was down to 1477 DUs.
The good news is that the median rent went from $20 to $2000.

There is some kind of fantasy that Joseph and Mary are on the west side of Harlem waiting to live in Chicago but there is no room in the inn.
This notion that "if you build it they will come" is a fallacy
In reality we have about 99% of the DUs we had our peak in 1960 and the difference in household size doesn't explain the difference in population.

Except in Lincoln Park. If they got their Household size up to the current Chicago average they would have over 90,000 people living there.

You young people should be humpin' like bunnies. I don't know what the problem is, maybe you should try some candles or scented oils.

Paul K. Dickman


A kindred post for further reading
http://yochicago.com/crains-deeply-misleading-article-on-lincoln-parks-population/38674/

No highway in the sky

You know, I can't go to a meeting, or even have a discussion, about the Bloomingdale trail (AKA The 606) without someone asking the question, "When will they extend it to the river?".

I'm here to tell ya, quit askin'.

The answer to that question is "Not in our life times."

The people building it won't tell you that. When asked, they hem and haw around it like a politician being asked about taxes.
I'm not sure why they do that. One guess is that a lot of money for alternative transportation is backing the construction and they don't want to admit that it is the bicycle version of the Amstutz Highway (AKA The road to nowhere) until they finish this part.

The problem is that on the other side of Ashland the ROW makes a grade crossing with a commuter railway. In fact with two lines of the Metra UP. On the average week day, during park hours, over 130 trains cross there. About 1 train crossing every 8 minutes. A crossing gate isn't an option.

How about a bridge? To build a bridge to clear the bi-level rail cars to ADA standards (slope of 1 in 12 and landings every 30" in rise) will require ramps around 250 feet long. The good news is that there is enough land there to do that and connect to another underused track that crosses over Clybourn and runs directly to the river.

The bad news is that they don't have the headroom.

The expressway crosses over the Bloomingdale line about 60 feet from the Metra tracks. In fact the height of the expressway bridge at this point was designed specifically to to clear the loading guage of a boxcar on the Bloomingdale line. I estimate it to be no more than 20 feet above the railbed. But that doesn't matter, the trail bridge would need at least as much structure gauge to clear the commuter line 60 feet away.

60 feet, one landing. You will have a maximum of 57 inches of headroom when you pass under the Kennedy.

You could build a bridge that rises 10 feet under the expressway, turns 90 deg, goes another 125 feet, turns 90 deg again over the tracks and does it all over on the other side. This is a lot more complicated and involves rights of way they do not own.

In some ways, a viaduct would be a better solution. It only needs to be eight or ten feet deep. That would still be above the street level so drainage would be easy.  But you would need a bridge to support the rails. I can't imagine that happening without interrupting all rail traffic on those lines for at least a couple of weeks, Not bloody likely.

Getting the trail to the east side of the Metra tracks will probably cost more than all the other bridgework on the trail, and CDoT won't be doing much of it. Until a river trail runs all the way downtown, the impetus to fund such an undertaking will not exist.

Accept the 606 for what it is. A nice park, someplace to take a stroll on a sunny morning and maybe a bicycle shortcut from the "K" streets to the Metra station. But it's no highway in the sky.

Paul K. Dickman

Bicycle Birtherism

In Jan of 2014, The Tax Foundation published this study that showed that user fees on cars only paid 51% of road construction costs.
http://taxfoundation.org/article/gasoline-taxes-and-user-fees-pay-only-half-state-local-road-spending

This was bandied all over the Internet by the usual suspects as proof that auto-mobiles are a losing proposition and that non-drivers property taxes are subsidizing the drivers' lifestyle.

For what it's worth the original study was true, but they construed user fees pretty narrowly (MFT, tolls, licenses). That is like saying that the news stand price doesn't cover the cost of publishing magazines. Everyone knows that, like roads, other revenues makes up the bulk of their income.

In fact, the Tax foundation's previous study showed that cars only covered 1/3 of road costs because the felt that licenses and the Federal Motor Fuel Tax were not dispersed proportionately and shouldn't be called user fees.
http://taxfoundation.org/article/gasoline-taxes-and-tolls-pay-only-third-state-local-road-spending

A more in depth study from 2007  looked at a much wider range of revenue sources like sales taxes, fines and income taxes and corporate taxes from the auto and gasoline industries, and even this study showed that income and expenses were pretty close to even until you started adding intangible expenses like the wars in the Middle East.
http://ti.org/delucchiinpress.pdf

That may be how it plays in Peoria, but I'm here to tell you that's not the Chicago way.

Here in the Windy City, the auto-mobile is a major cash cow and my bona fides are as close as the city's 2015 budget.
http://chicityclerk.com/wp-content/uploads/2014/10/2015OV.pdf

I didn't try to track the path of the MFT or the City sticker revenues to their final destinations. That would be a fools errand, and frankly I don't care how the Department of Buildings justifies 6 full time employees being funded by the Illinois motor fuel tax. My approach was simply X amount of income comes from auto-mobile related sources and Y amount is spent on maintaining the roadway.

Income sources include, State, Federal and Municipal Fuel taxes, City sticker revenues, impound fees, Fines for parking and red light/speed camera infractions and a variety of taxes on taxis, parking lots, etc,. I ignored less verifiable sources like sales taxes on gasoline and cars, and property taxes on gas stations and parking lots.

Expenses are simply the gross budgets of CDoT and Streets and San, including infrastructure and administrative costs, minus trash pickup, rat abatement and those infrastructure projects solely for pedestrian, transit or bicycling. Certainly there are other costs, like fire and police calls related to autos, but these departments benefit from the roadway as well. The Fire Dept's budget would be a lot different if they had to limit each stations range to a distance they could transport their equipment on a rickshaw. A few years ago, (to double check a private traffic study), I took a series of rush hour traffic counts on North Ave. An unexpected observation was that 10% of all vehicles and 25% of all heavy vehicles, belonged to the city. Buses, garbage trucks, police cars, Water Dept dump trucks all depend on the pavement to do their job.

But enough of that, Here are the numbers.

Expenses:

+$258,865,234   Streets and San Total budget
- $156,645,516   Less Solid waste (but including street sweeping)
+$598,286,287   CDoT Total budget
 -$206,643,000   Less Bike, Transit, Pedestrian improvements

  $493,863,005  Total Auto spending


Income:
    $99,100,000 State MFT
  $205,100,000 Vehicle tax(Sticker, towing, impound)
  $188,000,000 Transportation taxes (City MFT, Garage, Taxi)
      $6,400,000 Motor Vehicle Lessor Tax
     $4,100,000 Municipal auto rental tax
     $6,400,000 Municipal Parking
  $256,000,000 Fines, Forfeitures, Penalties (auto related)
  $298,800,000 Infrastructure Grants (sourced from Fed or State MFT)

$1,063,900,000 Total Income

$570,037,000 Profit

Just for perspective, top income sources listed in the Budget are:
$1,299,000,000 Airports
$1,150,400,000 Water and Sewer
  $831,500,000 Property Tax Levy

So, the gross revenues collected, make the auto-mobile Chicago's 3rd highest income generator and the profits are on par with the $647,900,000  the city hopes to receive from its share of the State and local Sales taxes.

Paul K. Dickman

NIMBY Cronicles 2, What happened to all the parking?

I moved into Wicker Park over thirty years ago. Back then, a bad parking spot was next door. Kids still played baseball in the street. A truck making deliveries could pull up to the curb and not block traffic, because the streets were wide open.

Nowadays, if I park closer than a block away, it’s a good day.

Like most folks, I blamed the new development. It seemed a good bet. After all, I was standing on the corner at ground zero when the condo bomb went off, All the vacant lots were filled with infill construction, the factories had been turned into loftominiums. North Ave. used to look like Armitage, dotted with single family and small commercial. Now it is lined with four story buildings. Like most folks, I figured that the increased population  used up all of the parking spots.

Then I read a three part article in The Straight Dope by Ed Zotti, called “Where everybody went”

http://chicago.straightdope.com/sdccensus1.php

He had crunched the data from the 2010 census and produced a bunch of maps showing demographic shifts throughout the city.

In part three he had a map showing the change in housing units from 1970 to 2010.

I was squinting at the map, trying to pick out my census tract when I realized something.

Despite my impression of massive development, the number of housing units in Wicker park was pretty much the same as it was in 1970. I went back to part one and looked at the population density in 1980 and 2010 and again I was surprised. The population here is about the same as it was when I got here.

I was still incredulous, and looked at the census data myself. It was true. Here are a couple of graphs I produced from the data for the 8 census tracts that make up Wicker Park.

  

So where have all the cars come from? This is a problem 24 hours a day. They can’t all be day trippers and barflies?

Here’s another graph from 1970 to 2010 stacking the count of resident’s cars over the number of dwelling units.

The answer is clear. We don’t have too many people, we have too many cars.

And look at the timeline, this isn't some fallout from the postwar car culture, this is a pile of buffalo chips we dragged in our shoes.

We tried mandating minimum parking ratios for new construction.

Here’s a graph of our worst tract.

 This tract has probably the highest off street parking ratio in the neighborhood.

Only 5% of the units are in historic buildings with no parking, 15% are in single family homes with 2 car garages and fully 75% of the housing was built after 1990 and has a mandated 1-1 parking minimum. Despite an average parking ratio of at least 1.1 the automobile ratio is 1.3.  And judging by the street parking at least half of the people are using their garages to store lawn furniture

I have come to the conclusion that cars are like goldfish. If you keep feeding them, they will grow until they fill the bowl.

Neighborhoods are  funny things, when they stop growing, they start dying.

We have reached a point where the parking situation is strangling our growth.

That is why I am flexible about reduced parking ratios.

We haven’t room for any more cars. 

Paul K. Dickman

A Cautionary Tale...Redux

Mayor Neri's last gift to Northlake was the O'hareport hotel, an 18 story hotel and convention center next to the Tri-state expressway. The locals figured it to be just another vehicle for mob skim. Lacking a highway exit, it proved to be nearly inaccessible to anyone who didn't already live in town and it closed in June of '72, two years after it opened. It fell into foreclosure and eventually (in 1987) if found a useful life as a retirement home.

In December of 1971, during its tenure as a nearly vacant hotel, a Ford Mustang was found abandoned in the O'hareport Hotel parking lot. It had been reported stolen from the repair lot at Al Piemonte Ford a few months earlier. The car was towed to the insurance office in Freeport, Illinois, about a hundred miles away. When the insurance adjuster popped the trunk, he got a surprise.

In the trunk was the naked body of a man. He had been beaten, strangled and stabbed. A tattoo and fingerprints eventually identified the man as Henry Rufo, a Lombard, Illinois resident who had gone missing about a week before.

Back then, trunk music was bigger than disco. The joke around town was that the mob built the hotel because they were running out of parking spaces at the airport

That was the extent of the news coverage at the time. What we didn't know was that Henry Rufo was in fact Henry LaKey, the prime witness against Battaglia. He had opted out of witness protection and figured that changing his name would be good enough.

Apparently, the feds had been keeping William G. Riley, the developer, in Cleveland. Not long after Joe Shine Amabile's death he leaves protection and shows back up, under his own name, in Denver. This time he has a whole new real estate scam. This one involves "Installment Land Contracts" or what we used to call a "Contract for deed"

If the seller owns the land free and clear, these are straight forward things, but if there is a mortgage on the property, it's another kettle of fish. Banks like to know who owns the property they have lent on and put a due on sale clause in mortgage contracts.

Riley's idea is "what the banks don't know won't hurt them." The original owner just keeps paying the mortgage from the buyer’s payments and pockets the difference. Riley's scheme is even better. He organizes his company (Investment Realty and Mortgage) into separate buying and selling divisions that don't talk to each other. When someone wants to sell a property they go to the buying division and offer it at a price. Then the selling division looks for a buyer. When they find one the property is first sold by contract to Income Realty and then instantly resold to the buyer at a 25% profit.

Riley can get a commission from the seller, gets a piece of the buyer's downpayment, makes the float between all the buyers payments to him and his payments to the seller and puts an accounts receivable asset on his book for his profit on the sale.

Then he capitalizes these receivables by selling bonds.

You can see that this is a house of cards. Eventually, the banks get wind of the sales and start enforcing the due on sale clause.

A law suit ends proving that the banks have every right to demand this payment or to renegotiate the mortgage with the new buyer.

In 1980, to save his scheme, Riley spends his bondholders investments to finance a amendment to the Colorado State Constitution  that would limit the amount of interest the banks can charge on an assumed mortgage. The ballot initiative fails.

Once again, the feds are looking at his books and investors are looking for their money. In 1981 Income Realty goes bankrupt and steps ahead of a 28 count indictment for defrauding investors out of $6 million, Riley takes it on the lam to Santiago, Chile.  A year later, he's found in Florida, under the name of Grover W. Williams, trying to buy some real estate.

He was tried, found guilty, won an appeal and pleads guilty to a related theft. In the end he did about two years plus parole and relocated to Florida where he continued in real estate. He died in 2006.

The NIMBY Cronicles Part 1, Zoning is money.

Developers don’t ask for a zoning change because they have a shining vision of the city’s future. They ask because it puts more cash in their pockets. This is why they submit to public input, because they are asking for free money.

It’s big money and here, I hope to explore exactly how much.

To the developer every development parcel has a highest ultimate value.

Put simply, the highest you can pay for a plot of land is the value of what can be built on it at its highest and best use, minus the cost of construction.

This is not necessarily the market price. If the market price is above this value, it is a bad investment. If the market price is equal to this value, it is still a sound investment to some one who sees it as a long term hold. If the market price is below this value, it gives the developer a chance to make his profit by selling the completed building. This is as it should be; these guys need to eat too.

This price is typically expressed in the form of dollars per buildable square foot. That is, if a lot's price is $1 million and you can build a 20,000 sq feet building, its cost is $50 per buildable sq ft. If the lot next door also costs $1 million but allows you to build 40,000 sq ft, despite the same price its cost is only $25 per buildable sq ft.

All these variables, save one are governed by the vagaries of supply and demand. The highest and best use is governed by zoning.

Zoning wasn't done willy nilly. It is part of grand plan for the city. It was made by intelligent and well meaning men and it’s still a good plan. It sees a crescendo of population and business at the city center tapering off the borders. It has a series of radiating lines that that allow for moderately higher use along transportation corridors, and industrial uses along freight corridors. Still it tapers from downtown out to the burbs.

Back in the day you bought a plot of land and built a house, a store, an apartment building, but mortgages were tough to get and demand and consequently value was driven solely by the end user and his financial state.

With the invention of mortgage backed securities, we increased that pool of demand. This seemed to be a good thing, but when these securities became a widespread investment vehicle, the demand for the securities started to drive the real estate market. Eventually, a residential mortgage was available to anyone with a pulse, so that more mortgages could be created to feed the insatiable thirst for the securities.

This is when the condo was king. When a developer asked for a zoning change it was to slap another condo on top and make more money. This tended to build bigger units maximizing bulk but moderately impacting density. It was easy to figure out the value of a zoning change, it was simply the price of the additional unit minus its construction costs.

With the crash, this changed. Everything is about apartments, at first we thought it was about renter demand, but this isn't really the case. The same investors who were clamouring for securities are looking for somewhere else to invest their money. The demand stems less from people wanting to rent and more from people wanting to buy apartment buildings.

Investors judge a rental property's value by something called the capitalization rate.

Think of an apartment building like a municipal bond.

You invest X dollars and it pays you Y percent each year. Y percent is the Cap Rate.

Detroit bonds are riskier than New York bonds and consequently have to pay a higher Y to attract investors. It is the same with rental property. Some are riskier than others and have to pay more. The dividend the building pays is the profit. i.e. the yearly rental income minus the operating expenses. If a building shows a profit of $50,000 each year and you judge the risk to demand a 10% return, than the most you should pay for the building is $500,000. ($50,000/ 10%)

But here’s the situation, the collapse made other investments riskier or less lucrative and increased demand by REITs, pensions and other bigger investors for rental real estate. This lowered the required cap rate. Now it’s around 5%, so that same building showing the same profit of $50,000 each year is worth $1,000,000.

To get the most out of this boom, the developer wants to maximize the income.

One way is with smaller apartments, but more of them. Imagine you can get $1500 each for two 750 sq ft apt ($2/sqft). To get the same sq ft rate for one 1500 sq ft unit. You need $3000 a month. This jumps a threshold that makes it more difficult to keep rented. You would need to charge less, say $1.75/sqft ($2625) for the larger unit to stay rented.

So, smaller units rent for about 25 cents/sqft more each month. How much could this be worth?  .25 x 12mo / 5% = $60. A zoning request solely for an increase in density with no extra floor space, adds $60 per buildable square foot to the ultimate value of the vacant land.

Other ways to maximize profits include adding amenities, but this is the developers choice and is not dependent on any zoning change. Two ways that are dependent on zoning, are building more square feet, or building taller (units with skyline views rent at a premium)

So, let’s construct a model.

Three standard city lots, initial zoning B3-2

You can build a 4 story mixed use building. 20,625 total sqft

9 residential units + around 8000 sqft retail.

Residential units around 1400 sqft

Good retail in the area commands $20/ft/yr NNN

Retail gross rent $160,000- $2000 expenses Net income $140,000

Retail cap rate (per CBRE) 6%

Investment value of retail $2,333,333

Investment value of retail

Residential gross rent @ $1.75/sqft/mo 29400/unit/year. $264,600 total

Costs, $24,000 taxes $6000 insurance $20,000 maintenance.

Net $214,600

Residential cap rate (per CBRE) 5%

Investment value of residential $4,292,000

Total Value $6,405,433

Construction costs (per RSMeans 4-7 fl apt) $205/ sqft

Total $4,228,125

Ultimate value of undeveloped land $2,177,308

Or $105 per buildable square foot.

Three standard city lots, new zoning B3-3

You can build a 5 story mixed use building. 28,125 total sqft

18 residential units + around 8000 sqft retail.

Residential units around 970 sqft

Good retail in the area commands $20/ft/yr NNN

Retail gross rent $160,000- $2000 expenses Net income $140,000

Retail cap rate (per CBRE) 6%

Investment value of retail $2,333,333

Residential gross rent @ $2.00/sqft/mo $23,400/unit/year. $ 421,200 total

Costs, $28,000 taxes $6000 insurance $22,000 maintenance.

Net $365,200

Residential cap rate 5%

Investment value of residential $7,304.000

Total Value $9,637.333

Construction costs (per RSMeans 4-7 fl apt) $205/ sqft

Total $5,765,625

Ultimate value of undeveloped land $3,871,708

Difference $1,694,400

There it is. A fairly minor zoning change on a fairly small project represents about 1.7 million dollars in additional profits. Probably more than they paid for the land.

If the change is to a B3-5 those numbers add up to $5.2 million, and over $6 million if you add a 25 cent bump in rents for the skyline views on floors 6 & 7