Envision Tomorrow:Envision Tomorrow: Return on Investment ModelReturn on Investment Model

Tulsa, OklahomaTulsa, OklahomaTraining PresentationTraining Presentation

20092009

What is Prototyping?What is Prototyping?

Approach used by innovation leaders Approach used by innovation leaders around the worldaround the world–– IDEO approach: IDEO approach: ““Right, Rapid & RoughRight, Rapid & Rough””–– In developing prototypes In developing prototypes ““creating epiphanies creating epiphanies

and model building go hand in handand model building go hand in hand”” –– The The Art of InnovationArt of Innovation

–– "We make lots and lots of prototypes: the "We make lots and lots of prototypes: the number of solutions we make to get one number of solutions we make to get one solution is quite embarrassing, but it's a solution is quite embarrassing, but it's a healthy part of what we do."healthy part of what we do."

Apple Chief Designer Jonathan Apple Chief Designer Jonathan IveIve

Prototyping is Like Using a Crash Prototyping is Like Using a Crash Test DummyTest Dummy

Creating Building Prototypes:Creating Building Prototypes: Envision Tomorrow Process OverviewEnvision Tomorrow Process Overview

Building Types

Development Types

Scenario Development

Evaluation

Creating Prototype BuildingsCreating Prototype Buildings Building Envelope and FinancialsBuilding Envelope and Financials

Square Footage by UseSquare Footage by UseUnitsUnitsRentsRentsSales PricesSales PricesCostsCostsBuilding ValueBuilding ValueEmploymentEmploymentParkingParking

…Create a Range of Buildings

Using ROI Model…

Building Prototype ModelingBuilding Prototype Modeling

Prototype ExamplesPrototype Examples

Mixed-Use Office 4 Story

Mixed-Use Residential 4 Story

Mixed-Use Rehabilitation

Mixed-Use Office 2 Story

Mixed-Use Residential 2 Story

Restaurant and Hotel

Prototype LibraryPrototype Library

250+ buildingsand growing

ROI ModelROI Model

The ROI model is a way to physically and The ROI model is a way to physically and financially model potential developmentfinancially model potential developmentThe goal is to model feasible development The goal is to model feasible development –– or to see where existing regulations or to see where existing regulations could be optimizedcould be optimized

Overview PageOverview Page

PhysicalPhysical

Parking LayoutsParking Layouts

Parking ParametersParking Parameters

FinancialFinancial

Detailed FinancialDetailed Financial

SummarySummary

Brainstorm: TulsaBrainstorm: Tulsa’’s Prospective s Prospective ROI Model Users and UsesROI Model Users and Uses

UsersUsersCity of TulsaCity of TulsaUniversitiesUniversitiesBusiness improvement Business improvement districtsdistrictsCDCsCDCsMain Street programMain Street programNeighborhood associationsNeighborhood associationsProperty ownersProperty ownersRE developersRE developersBanks/lending institutionsBanks/lending institutions

UsesUsesEvaluate zoning codeEvaluate zoning codeHeath deptHeath deptUse together in a Use together in a database format/ shared database format/ shared webwebEducate users re needed Educate users re needed incentivesincentivesAssist in financing Assist in financing especially in MU especially in MU developmentsdevelopments

Tulsa Example:Tulsa Example: 22 Prototype Buildings22 Prototype Buildings

Original StandardsPrototypes

ApartmentSingle Family Home 5-8K LotSingle Family Home 8-15K Lot

Business ParkMid-Rise Business ParkRetail MallStrip CommercialHeavy IndustrialLight Industrial

New StandardsPrototypes

Cottage Home Townhome Live / Work Neighborhood Grocery (1 Story)Neighborhood Retail (1 Story)Mixed Use Apartments & Retail (2 Story)Mixed Use Retail & Office (2 Story)Mixed Use Retail & Office (3 Story)Mixed Use Residential & Retail (4 Story)High Density Condo or Apartments (5 Story)Office Retail (3 Story)Office Retail (5 Story)Office Retail (10 Story)

New Prototypes: A Richer PalateNew Prototypes: A Richer Palate

The following prototypes The following prototypes were dubbed the were dubbed the ““illegalillegal””usesusesUnder current regulations, Under current regulations, they canthey can’’t really be builtt really be builtHave a broader range of Have a broader range of uses and densities, tend to uses and densities, tend to have smaller footprints, and have smaller footprints, and have lower parking have lower parking requirementsrequirements

Prototype examplePrototype exampleShuttered commercial building

Parcel Size: 14,500 SQFT

New mixed-use building: Three stories of residential over retail, parking in the back

Total area: 37,000 sf

Retail: 3,500 sf

Residential: 11,000 sf (gross) per floor x 3 floors = 33,000 sf (gross)

32-36 total units (800 sf avg.)

Surface parking: 33 stalls

Prototype example Prototype example

Prototype example Prototype example

Prototype example Prototype example

A close-up example along Cherry Street(HP-zoned properties are screened out)

Cherry Street

Example: Cherry Street

Land values by square foot

Selected New Prototypes are applied to test whether redevelopment would occur under new zoning conditions

Property values that are low enough to be feasible will “tip”– indicating that regulatory improvements can help spur infill development

AcresAcres UnitsUnitsLive WorkLive Work 77 4343Condo/AptCondo/Apt 2.82.8 460460Mixed Use Mixed Use ResidentialResidential

11 5050

Office over Office over RetailRetail

1.51.5 44,000 SQFT44,000 SQFT

TotalTotal 12.312.3

Count up potential development sitesCount up potential development sites

$0$2,000,000,000$4,000,000,000$6,000,000,000$8,000,000,000

$10,000,000,000$12,000,000,000$14,000,000,000

Trend

Workshop

Scenario C

Scenario D

Value Addedfrom AllConstruction

Value of Total New ConstructionValue of Total New Construction

Each scenario indicates a different level of new Each scenario indicates a different level of new investment the city will needinvestment the city will need

Vetting the PrototypesVetting the Prototypes

Vetting the PrototypesVetting the Prototypes

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Trend Workshop Scenario C Scenario D

Retail

Office

Industrial(warehouse,flex space,etc.)

New Employment Construction New Employment Construction (Square Feet)(Square Feet)

But Workshop, C, and D will see much greater volumes of But Workshop, C, and D will see much greater volumes of developmentdevelopment

$0$2,000,000,000$4,000,000,000$6,000,000,000$8,000,000,000

$10,000,000,000$12,000,000,000$14,000,000,000

Trend

Workshop

Scenario C

Scenario D

Value Addedfrom AllConstruction

Value Addedfrom Mixed-UseConstruction

Value added from mixedValue added from mixed--use use constructionconstruction

For example, mixedFor example, mixed--use development accounts for nearly use development accounts for nearly 50% of new investment in Scenario D50% of new investment in Scenario D

Vetting the PrototypesVetting the Prototypes

Portland and the Envision Portland and the Envision Tomorrow ProcessTomorrow Process

Created 30 building prototypesCreated 30 building prototypesCapacity analysis of PortlandCapacity analysis of Portland’’s general s general plan is underwayplan is underway–– Testing city redevelopment model Testing city redevelopment model

assumptionsassumptions–– Comparing capacity with MetroComparing capacity with Metro’’s 2035 s 2035

forecastforecast

Building Prototypes Grounded in RealityBuilding Prototypes Grounded in Reality

Eight Portland developer/expert Eight Portland developer/expert interviews were used to calibrate interviews were used to calibrate the ROI Modelthe ROI ModelPrototypes were created based on Prototypes were created based on successful recent development in successful recent development in PortlandPortland

MixedMixed--UseUse

Office (Small Lot)Office (Small Lot)Office (Neighborhood)Office (Neighborhood)Residential (Point Tower)Residential (Point Tower)Residential (Small Units)Residential (Small Units)Residential (FamilyResidential (Family--Sized Units)Sized Units)Residential (Small Lot)Residential (Small Lot)Residential (Perimeter Block)Residential (Perimeter Block)Live/WorkLive/Work

ResidentialResidential

Single Family (Infill and MultiSingle Family (Infill and Multi--Lot Lot Subdivision)Subdivision)TownhomeTownhomeCourtyard HousingCourtyard HousingSkinny HouseSkinny HouseApartment (Small Site)Apartment (Small Site)Neighborhood Corridor ApartmentsNeighborhood Corridor Apartments

Retail and OfficeRetail and Office

High Rise OfficeHigh Rise OfficeMid Rise OfficeMid Rise OfficeLow Rise OfficeLow Rise OfficeRehab/Adaptive ReuseRehab/Adaptive ReuseSmallSmall--Scale RetailScale RetailLarge Format/Big Box RetailLarge Format/Big Box Retail

IndustrialIndustrial

Flex SpaceFlex SpaceIndustrial (1Industrial (1-- and 2and 2--levels)levels)

Portland Portland Tipping Point Tipping Point Analysis Analysis Example:Example:

Gateway AreaGateway Area

““Tipping PointTipping Point”” Redevelopment Redevelopment Opportunity SitesOpportunity SitesParcels with assessed value of less than $750,000 per acre

Approximately 50 acres

< $750,000 per acre

““Tipping PointTipping Point”” Redevelopment Redevelopment Opportunity SitesOpportunity SitesParcels with assessed value of between $750,000 and $1.2 million per acre

Approximately 50 acres

Between $750,000 and $1.2 million/acre

““Tipping PointTipping Point”” Redevelopment Redevelopment Opportunity SitesOpportunity SitesParcels with assessed value of more than $1.2 million per acre

Approximately 150 acres

> $1.2 million/acre

Making Residential Development Making Residential Development Work in GatewayWork in Gateway

We looked at areas in We looked at areas in the CX, RX and EX the CX, RX and EX zoneszonesTypes of feasible Types of feasible buildings given:buildings given:–– Current regulationsCurrent regulations–– Market conditionsMarket conditions

PrototypesPrototypes

Created four basic housing prototypesCreated four basic housing prototypes–– 2 Story Residential2 Story Residential–– 3 Story Residential3 Story Residential–– 6 Story Residential6 Story Residential–– 10 Story Residential10 Story Residential

Rapid prototyping allows us to hone in on Rapid prototyping allows us to hone in on the variables that affect the feasibility of the variables that affect the feasibility of new development in the areanew development in the area

Sample Gateway Prototype: 6 Story ResidentialSample Gateway Prototype: 6 Story Residential 85 units/acre; 1.67 FAR85 units/acre; 1.67 FAR

Option 1:Option 1:SubsidySubsidy

Option 2:Option 2:No subsidy; raise No subsidy; raise rents/sales pricesrents/sales prices

Option 3:Option 3:No subsidy; No subsidy; reduce reduce construction construction costscosts

RentRent $0.90/sf $0.90/sf ($700/month)($700/month)

$1.18/sf (+31%)$1.18/sf (+31%) ($902/month)($902/month)

$0.90/sf $0.90/sf ($700/month)($700/month)

Sales PriceSales Price $151/sf $151/sf ($116,000/unit)($116,000/unit)

$205/sf (+36%)$205/sf (+36%) ($157,000/unit)($157,000/unit)

$151/sf $151/sf ($116,000/unit)($116,000/unit)

Construction Construction CostsCosts

$100/sf$100/sf $100/sf$100/sf $67/sf ($67/sf (--33%)33%)

Subsidy (total)Subsidy (total) $2.8 million$2.8 million $0$0 $0$0

Subsidy (per Subsidy (per unit)unit)

$33,000/unit$33,000/unit $0$0 $0$0

Comparing Per Unit Subsidies by Comparing Per Unit Subsidies by PrototypePrototype

$41,000 $37,000$33,000

$51,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

2 Story 3 Story 6 Story 10 Story

Subsidies required per unit increase significantly when buildingSubsidies required per unit increase significantly when building above 6 stories and above 6 stories and wood frame construction is not possiblewood frame construction is not possible

Conclusion: Conclusion:

Even development at a lower Even development at a lower scale than the zoning allows scale than the zoning allows would significantly increase would significantly increase GatewayGateway’’s housing bases housing base

For example, if the 3 For example, if the 3 story prototype was story prototype was developed on the sites developed on the sites currently valued at less currently valued at less than $750,000/acre than $750,000/acre (about 50 acres of land (about 50 acres of land within analyzed zones), within analyzed zones), about about 2,500 new units2,500 new units could be developedcould be developed

Guided InputsGuided Inputs

Tulsa YMCA Adaptive Reuse ExampleTulsa YMCA Adaptive Reuse Example