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CHANGE ORDER
SUMMARY

CHANGE IN CONTRACT PRICE

Original Contract Price:

$248,570

CHANGE IN CONTRACT TIMES

Original Contract Times:

Completion Date: June 30, 2021

Net Changes from previously approved Change Orders

$162,000

Net Changes from previously approved Change Orders

Completion Date: June 30, 2022

Coniract Price prior to this Change Order:

$410,570

Contract Times prior to this Change Order:

Completion Date: June 30, 2022

Increase (Decrease) of this Change Order:

$162,000

increase (Decrease} of this Change Order:

Completion Date: June 30, 2023

Contract Price with all approved Change Orders:

$572,570

Contract Times with all approved Change Orders:

Completion Date: June 30, 2023

RECOMMENDED BY:

By:
“ DPW Streets
{Authorized Signature}
Jon Ibarra
Title: DPW Streets - Superintendent

Date: S/ / ¢/ 20 22-

Change Order #2
IFB0662-060520

ACCEPTED BY: ACCEPTED BY:
By: By:
KS Corporation Owner
{Authorized Signature} {Authorized Signature}
James W Douchess
Title: Title: Mayor, City of Nashua
Date: Date:
2 of 2

City of Nashua Pavement Markings Program

INC WSIO NARY ZONING ANALYSIS 1 8

10-UNIT SINGLE FAMILY OWNERSHIP DEVELOPMENT

The 10-unit single family ownership development scenario offers an assessment of how inclusionary
zoning could impact the existing development landscape for smaller-scale ownership projects. Table
8 presents the results of the four scenarios tested. Under the current market/baseline scenario
assumptions, a 10-unit single family development yielded a 42.80% IRR assuming the market-quoted
$65,000 land value per unit. This return is more than double the expected return of 20% but only a net
present value of $228,295, meaning the smaller scale of the project creates greater sensitivity in
calculating the return levels. Adjusting the land costs to achieve the expected 20% return on
ownership projects resulted in a per-unit cost of $89,971. Effectively, this differential shows how
market assumptions can create variability in the financial performance of a real estate deal.

To understand financial sensitivity toward the model inclusionary zoning policy, RKG tested
inclusionary zoning requirements of 10% of the units to be priced at 80% of AMI. Under the scenario,
that means one of the 10 new units would be required to be sold at a fixed price affordable to a
household earning 80% of AMI. This single change reduced the IRR of the project from 20% to slightly
below 2% with a net present value of -$191,545. In short, requiring incomed-controlled thresholds in
smaller, homeownership projects have a substantial impact on the financial feasibility of the project.

That said, the inclusionary/bonus density analysis revealed that allowing the developer to build an
additional unit (11 instead of 10), provided sufficient value to return the project to the minimum return
threshold. In other words, implementing a 1:1 bonus ratio for each unit required to be income
controlled created a sufficient financial benefit to mitigate the financial impact of the affordable unit.
As seen in the table, the IRR for this scenario is 21.62% and the NPV is $18,017.

25-UNIT MULTIFAMILY (STICK) RENTAL DEVELOPMENT

The 25-unit multifamily (stick) rental development scenario reveals how inclusionary zoning could
impact smaller rental housing development projects outside downtown Nashua. Table 9 presents the
results of the analysis. The market-based assumptions under the current market/baseline scenario
yields an IRR of 13.58% based on the market pricing assumption of $50,000 per unit land value. This
return is less than the expected return of 15% for rental projects, and well below current market
expectations of 20%+. To reach the 15% IRR return level requires a land price of $36,803 per unit (as
detailed in the second scenario). In other words, the market is not strong enough to support a market
rate only project at the anticipated land values for smaller multifamily projects. Land costs need to be
reduced (either through greater density and/or a financial inducement) to meet market return
expectations

RKG Associates applied the model inclusionary zoning policy to the second scenario to understand
developer sensitivity toward inclusionary zoning. Under the scenario, 23 market rate units and two
affordable unit at 80% AMI would be required. As seen in the table, the impact to the developer of
having to provide the affordable unit is negative, resulting in an IRR of 14.34% and a NPV of -$108,064.
The reason the NPV is negative is because of the loss of revenue (the value gap) between delivering a
market rate unit versus an affordable unit. From the developer’s standpoint, the inability to realize

INC WSIO NARY ZONING ANALYSIS 1 9

full value from the affordable unit, which has a similar cost to that of a market unit, results in a
financial loss.

The Inclusionary/Bonus Density Scenario reveals that a 1:1 bonus density would result in having an
IRR that met the proposed minimum return threshold. The table reveals that adding one market rate
unit would nearly achieve the expected financial return (IRR of 14.93% and NPV of -$11,689.

INC WSIO NARY ZONING ANALYSIS 2 0

Table 8. 10-Unit Ownership Development

Inclusionary 80%

Inclusionary AMI W/ Adjusted
No Inclusionary | 80% AMI W/ | Land Value and
Adjusted Land | Adjusted Land | Bonus Market
No Inclusionary | Value Value Units

Location Suburban Suburban Suburban Suburban

Unit Style Single Family Single Family Single Family Single Family

Unit Type Owner Owner Owner Owner

Construction Type Fee Simple Fee Simple Fee Simple Fee Simple

Construction Cost $165 $165 $165 $165

Number of Units 10 10 10 "1

Market Rate Units 10 10 9 10

Affordable Units oO 0 1 1

Parking Surface Surface Surface Surface

Special Permit No No No No

Inclusionary % 0% 0% 10% 10%

Inclusionary Treatment No Inclusionary | No Inclusionary Proposed Proposed

Inclusionary Units O 0 1 1

Payment in Lieu so so so so

AMI Split 0 O 80% 80%

IRR 42.80% 20.01% 1.84% 21.62%

NPV $228,295 $127 ($191,545) $18,017

All costs $4,665,797 $4,915,502 $4,915,502 $5,177,723

Land cost $650,000 $899,705 $899,705 $899,705

Land cost per unit $65,000 $89,971 $89,971 $84,559

Average cost per unit (inclusive of land) $466,580 $491,550 $491,550 $486,628

Hard cost construction (exclusive of land) | $401,580 $401,580 $401,580 $402,069

Return on Cost (ROC) 15.52% 9.65% 4.97% 10.07%

INC WSIO NARY ZONING ANALYSIS 2 1

Table 9. 25-Unit Multifamily (Stick) Rental Development

No _Inclusionary

Inclusionary 80%

Inclusionary 80%
AMI W/ Adjusted
Land Value and

Adjusted Land | AMI W/ Adjusted | Bonus Market

No Inclusionary Value Land Value Units
Location Amherst/Exit 1 Amherst/Exit 1 Amherst/Exit 1 Amherst/Exit 1

25-Unit 25-Unit 25-Unit 25-Unit
Unit Style Multifamily Multifamily Multifamily Multifamily
Unit Type Rental Rental Rental Rental
Construction Type MF - Stick Only MF - Stick Only MF - Stick Only MF - Stick Only
Construction Cost $185 $185 $185 $185
Number of Units 25 25 25 26
Market Rate Units 25 25 23 24
Affordable Units oO oO 2 2
Parking Surface Surface Surface Surface
Special Permit No No No No
Inclusionary % 0% 0% 10% 10%
Inclusionary Treatment No Inclusionary No Inclusionary Proposed Proposed
Inclusionary Units 0 O 2 2
Payment in Lieu so so $18,219 $18,219
AMI Split oO oO 80% 80%
IRR 13.58% 15.08% 14.34% 14.93%
NPV ($239,329) $13,268 ($108,064) ($11,689)
All costs $6,626,402 $6,296,489 $6,296,489 $6,409,734
Land cost $1,250,000 $920,087 $920,087 $920,087
Land cost per unit $50,000 $36,803 $36,803 $35,885
Average cost per unit (inclusive of
land) $265,056 $251,860 $251,860 $249,990
Hard cost construction (exclusive of
land) $215,056 $215,056 $215,056 $214,105
Return on Cost (ROC) 7.08% 7.45% 7.29% 7.44%

INC WSIO NARY ZONING ANALYSIS 2 2

25-UNIT MULTIFAMILY (PODIUM) RENTAL DEVELOPMENT

The impact of requiring podium parking on small rental housing developments is substantial. The
Current Market/Baseline Scenario yields 11.70% IRR assuming a $50,000 land value per unit. The net
present value difference to the surface parking assumption is nearly $340,000 due to the much higher
costs of podium parking instead of surface spaces. As a result, the land value per unit would need to
be $19,587 per unit to meet the proposed return threshold.

Because the inclusionary policy is the same for this and the previous program, the relative financial
impact of the inclusionary zoning policy for the podium programs is like the surface parking program.
The Inclusionary Policy Scenario yields a 14.28% IRR and a -$117,178 NPV.

However, the bonus density needed to return the inclusionary zoning scenario to the proposed market
return threshold differs to the surface parking scenario. The higher costs of parking additional units
reduce the financial benefit of each new market rate unit. As a result, a podium parked scenario would
require a 2:1 bonus density to make the IZ scenario return to the proposed market return threshold.
Under this scenario, adding four market rate units would be required to achieve the expected financial
return of 15%.

50-UNIT TOWNHOUSE OWNERSHIP DEVELOPMENT

City staff wanted a larger single family attached program modeled in addition to a smaller detached
program. For this program, RKG Associates modeled a 50-unit townhouse-style development. Based
on the market assumption of a $38,338 per unit land cost, a 50-unit townhouse development yields a
52.17% IRR, with a NPV of almost $1.4 million. Based on current market performance metrics, this
development program could support land prices approximately $30,000 higher than current averages
($68,596) and still yield a 20% IRR (Table 11).

Because this program has 50 units, it triggers the second level of inclusionary requirement (15%). As
a result, the development program would need 7.5 income-controlled units priced to be affordable to
a household earning 80% of AMI. As noted earlier, the RKG Associates model apportions any
fractional units to a payment into the City’s housing trust equaling the market value differential
between a market rate unit and the income-controlled unit. Thus, the Inclusionary Policy Scenario
includes seven income-controlled units and a cash payment of $48,880 (50% of the value differential
of $97,760). The impact of the inclusionary zoning policy is substantial, with an expected IRR of 6.13%
and a NPV of -$1,218.294. The value differential between market rate ownership and income-
controlled ownership is greater than rental housing.

As aresult, the Inclusionary/Bonus Density Scenario indicates a bonus density program would require
a 2.5:1 ratio to income-controlled units to make the inclusionary scenario meet the modeled return
expectation threshold. The project would require an additional 19 market rate units to account for the
seven units priced to households earning 80% of AMI.

INC WSIO NARY ZONING ANALYSIS 2 3

Table 10. 25-Unit Multifamily (Podium) Rental Development

No _Inclusionary

Inclusionary 80%

Inclusionary 80%
AMI W/ Adjusted
Land Value and

Adjusted Land | AMI W/ Adjusted | Bonus Market

No Inclusionary Value Land Value Units
Location Downtown Downtown Downtown Downtown

25-Unit 25-Unit 25-Unit 25-Unit
Unit Style Multifamily Multifamily Multifamily Multifamily
Unit Type Rental Rental Rental Rental
Construction Type MF - Podium MF - Podium MF - Podium MF - Podium
Construction Cost $215 $215 $215 $215
Number of Units 25 25 25 29
Market Rate Units 25 25 23 27
Affordable Units Oo Oo 2 2
Parking Aboveground Aboveground Aboveground Aboveground
Special Permit No No No No
Inclusionary % 0% 0% 10% 10%
Inclusionary Treatment No Inclusionary No Inclusionary Proposed Proposed
Inclusionary Units 0 O 2 2
Payment in Lieu so so $18,219 $18,219
AMI Split oO oO 80% 80%
IRR 11.70% 15.03% 14.28% 15.03%
NPV ($577,986) $4,155 ($117,178) $6,263
All costs $7,068,716 $6,308,391 $6,308,391 $7,090,351
Land cost $1,250,000 $489,675 $489,675 $489,675
Land cost per unit $50,000 $19,587 $19,587 $17,118
Average cost per unit (inclusive of
land) $282,749 $252,336 $252,336 $247,859
Hard cost construction (exclusive of
land) $232,749 $232,749 $232,749 $230,741
Return on Cost (ROC) 6.64% 7.44% 7.28% 7.46%

Table 11. 50-Unit Townhome Ownership Development

INC WSIO NARY ZONING ANALYSIS 2 4

Inclusionary 80%

Inclusionary AMI W/ Adjusted
No Inclusionary | 80% AMI W/ | Land Value and
Adjusted Land | Adjusted Land | Bonus Market
No Inclusionary | Value Value Units
Location Suburban Suburban Suburban Suburban
Unit Style Townhomes Townhomes Townhomes Townhomes
Unit Type Owner Owner Owner Owner
Construction Type Fee Simple Fee Simple Fee Simple Fee Simple
Construction Cost $165 $165 $165 $165
Number of Units 50 50 50 69
Market Rate Units 50 50 43 62
Affordable Units oO oO 7 7
Parking Surface Surface Surface Surface
Special Permit No No No No
Inclusionary % 0% 0% 15% 15%
Inclusionary Treatment No Inclusionary | No Inclusionary Proposed Proposed
Inclusionary Units oO oO 7 7
Payment in Lieu so so $48,880 $48,880
AMI Split 0 O 80% 80%
IRR 52.17% 20.00% -6.13% 19.10%
NPV $1,382,541 $118 ($1,218,294) ($55,247)
All costs $20,026,402 $21,539,314 $21,539,314 $28,354,949
Land cost $1,916,898 $3,429,810 $3,429,810 $3,429,810
Land cost per unit $38,338 $68,596 $68,596 $49,707
Average cost per unit (inclusive of land) $400,528 $430,786 $430,786 $410,941
Hard cost construction (exclusive of land) | $362,190 $362,190 $362,190 $361,234
Return on Cost (ROC) 17.93% 9.65% 3.13% 9.62%

INC WSIO NARY ZONING ANALYSIS 2 5

125-UNIT MULTIFAMILY (STICK) RENTAL DEVELOPMENT

The next four scenarios focus on larger multifamily rental developments. The first program includes
125 units of multifamily rental housing developed in the Amherst/Exit 1 area. For this program, RKG
Associates assumed that all parking will be surface space. The Current Market/Baseline Scenario
resulted in in IRR of 16.85% based on the current market average of $21,299 per unit land costs. This
performance level is above the modeled minimum threshold of 15%, but well below the current
market expectations of 20%+ returns. This is consistent with current practices, which developers seek
incentives from the City (i.e., additional density and/or financial inducements0 to increase return
levels. Based on the modeled 15% IRR return threshold, land costs could be as high as $36,944 per
unit (Table 12).

The Inclusionary Policy Scenario would require the program to commit 20% of all units to be priced
affordably to households earning 80% of AMI. As a result, IRR is reduced by over 100 basis points
(13.91%) and create a negative impact on the value of the program exceeding $870,000. The
Inclusionary/Bonus Density Scenario reveals that this program would require a 1.5:1 bonus density
ratio (35 additional market rate units to accommodate the 25 income-controlled units) to return the
program to the tested minimum return threshold.

125-UNIT MULTIFAMILY (PODIUM) RENTAL DEVELOPMENT

This program assumes the 125-unit rental development is in the Downtown area and requires podium
parking instead of surface parking. The higher cost of the parking has a negative impact on all
scenarios. The Current Market/Baseline Scenario yields an IRR of 14.71%, more than 210 basis points
below the surface parked scenario. As a result, the current market pricing of $21,299 per unit for land
does not meet the modeled minimum return threshold. In this scenario, land values would need to
be $18,625 to meet the minimum return threshold of 15% (Table 13).

The impact of the model inclusionary zoning policy has a similar impact for this scenario as the
previous scenario, reducing IRR by approximately 100 basis points. However, the Inclusionary/Bonus
Density Scenario reveals that the higher cost of parking in Downtown would require a much higher
bonus density ratio to offset the income-controlled unit requirement. With podium parking the bonus
density would need to have a 2.5:1 ratio to return the Inclusionary Policy Scenario to the minimum
return threshold of 15% IRR.

INC WSIO NARY ZONING ANALYSIS 2 6

Table 12. 125-Unit Multifamily (Stick) Rental Development

No = Inclusionary

Inclusionary 80%

Inclusionary 80%
AMI W/ Adjusted
Land Value and

Adjusted Land | AMI W/ Adjusted | Bonus Market

No Inclusionary Value Land Value Units
Location Amherst/Exit 1 Amherst/Exit 1 Amherst/Exit 1 Amherst/Exit 1

125-Unit 125-Unit 125-Unit 125-Unit
Unit Style Multifamily Multifamily Multifamily Multifamily
Unit Type Rental Rental Rental Rental
Construction Type MF - Stick Only MF - Stick Only MF - Stick Only MF - Stick Only
Construction Cost $185 $185 $185 $185
Number of Units 125 125 125 160
Market Rate Units 125 125 101 136
Affordable Units oO oO 24 24
Parking Surface Surface Surface Surface
Special Permit No No No No
Inclusionary % 0% 0% 20% 20%
Inclusionary Treatment No Inclusionary No Inclusionary Proposed Proposed
Inclusionary Units oO oO 24 24
Payment in Lieu $0 $0 $36,438 $36,438
AMI Split 0 oO 80% 80%
IRR 16.85% 14.94% 13.91% 15.01%
NPV $1,448,804 ($48,481) ($876,656) $14,989
All costs $29,442,087 $31,397,668 $31,397,668 $38,914,180
Land cost $2,662,418 $4,617,998 $4,617,998 $4,617,998
Land cost per unit $21,299 $36,944 $36,944 $28,823
Average cost per unit (inclusive of
land) $235,537 $251,181 $251,181 $242,879
Hard cost construction (exclusive of
land) $214,237 $214,237 $214,237 $214,056
Return on Cost (ROC) 7.91% 7.41% 7.17% 7.44%