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Draft Memorandum lune 11, 2013 EPSP Alternatives Infrastructure Cost Burden Review Page 5 Development Value The Cost Burden Review analysis considers the potential market value of various development types envisioned by the EPSP, including residential, retail, office, and industrial/flex uses (see Appendix Figure 2 for detailed market value assumptions). EPS assumes real estate values that are typical of the Pleasanton real estate market. At this point, the alternatives do not specify detailed product types, formats, or market positioning. This analysis relies on value assumptions that are representative of new development projects. These values are generally conservative, with the analysis seeking to avoid overestimation of building values and supportable infrastructure cost. Additional valuation considerations were applied in the analysis of higher-density housing, affordable housing, industrial/flex uses, destination uses, and city service uses, as discussed below. EPS relies on variety of sources to estimate real estate values, including current market data concerning residential and commercial transactions occurring in the City and surrounding areas. In particular, EPS reviewed residential sales data from The Gregory Group and commercial sales data from CoStar Group. EPS also considered real estate values developed as part of continuing work on the Fiscal Impact Analysis of the City of Pleasanton General Plan, to ensure basic consistency. The Specific Plan alternatives call for a significant component of the housing program to be developed at approximately 30 dwelling units per acre in Alternatives 2 and 3, while Alternatives 5 and 6 reflect higher proportion of low density residential in the 4 to 8 dwelling units per acre range. Based on guidance from the EPSP team, EPS assumes that the 30 dwelling units per acre product will be rental and affordable housing is provided within this category. The analysis assumes that the affordable units will represent 15 percent of the total residential program. To be conservative, EPS assumes that the affordable housing included in the EPSP alternatives will not contribute to funding of the infrastructure costs. That is, affordable housing is valued at zero for the purposes of this initial infrastructure cost burden screen. The Specific Plan alternatives call for between 1.1 million and 2.3 million square feet of industrial/flex space. The relative magnitude of this particular use within the overall program makes it critical to the infrastructure feasibility evaluation. To address this notion, the EPS analysis conservatively assumes that infrastructure/flex value is at the lower end of the value spectrum, $95 per square foot (the observed range of value is roughly $95 to $500 per square foot). The assumption of low-value industrial/flex reflects an $8 million soil mitigation cost required to support new industrial/flex development'. This value also reflect!: uncertainty associated with the specific nature of the industrial/flex space development as well as the probability that such a large amount of industrial/flex space could be developed over a longer- term time horizon. To the extent that certain real estate product types do nct generate sufficient economic value to allow for a "fair share" contribution to project-wide infrastructure costs, the overall Project feasibility will be more challenging. I Given that the soil mitigation cost applies predominantly to industrial uses, it is netted out of finished industrial value for the purpose of this analysis. In the subsequent more detailed analysis, this cost will be netted out of industrial land value. P:11 x1000\121O9OEasdAeasantonlRepor dInfraswcture Burden Memorandum\Draft 4(6.I0)1121090 Inframm061013.doex