City Council Agenda and Packet 2009 01 12 Joint Meeting

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Highway 42 Market, Feasibility, and Financing Study Final Report December 11, 2008 3. There is significant market potential for residential development within a two mile radius of the Highway 42 revitalization area. The market is maturing and diversifying, given the range of attached and detached products included in active development. There are 535 attached units in the pipeline within the immediate vicinity of the Highway 42 area with another 773 units in Broomfield, including projects within town center developments. The voh~me of attached development in the pipeline suggests the market will support the type of higher density development anticipated for the Highway 42 corridor. The overall Louisville market is strong, given appreciation rates of resale product located in the vicinity of downtown. The growing volume of sales and 8.3 percent annual average price increases have outpaced other submarkets in the metro area. As the current inventory of attached product is absorbed over time and as amenities are established to create a sense of place within the Highway 42 redevelopment area, prices are expected to increase to make development feasible. The planned RTD transit st,atio:n has been viewed by the development community as a catalyzing force that will increasee demand for uses in the study area. However, even without the introduction of transit service, the market for residential development is reasonably strong. Once actives projects north of South Boulder Road as well as those in the vicinity of 96th Street and Tape Drive near buildout (estimated at six to ten years), developers should be able to transfer the market momentum to sites within the study area. This assumes that the City is able to establish connectivity to downtown, provide some civic amenity, and address issues related to the current industrial character. 4. For most uses within the study area, specifically mixed-use and residential development, the market must mature and yield higher rental and sales prices for projects to achieve feasibility. A feasibility model (provided as Appendix A) was developed to test a range of different uses and assumptions, summarized below. Generally, local market conditions must mature before most development options become feasible. One of thE~ uses with potential to achieve the necessary rent thresholds sooner than other is conventional commercial development, assuming a rent threshold of $22 per square foot, capiitali2:ation rate of 7.5 percent, and an FAR of .25 that allows for surface parking. The model shows that the minimum feasibility threshold for residential use requires minimum sales points of $2'85 per square foot, which is higher than current project in the vicinity but is consistent with prices achieved on a limited number of downtown sales. This threshold is reasonable to expect in the future, to the extent amenities similar to downtown can be created i:n the study area. 5