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INC WSIO NARY ZONING ANALYSIS 2 7

Table 13. 125-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

125-Unit 125-Unit 125-Unit 125-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 125 125 125 189
Market Rate Units 125 125 101 165
Affordable Units oO oO 24 24
Parking Aboveground Aboveground Aboveground Aboveground
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 14.71% 15.02% 13.99% 15.07%
NPV ($239,602) $16,370 ($811,805) $78,589
All costs $31,647,288 $31,312,967 $31,312,967 $46,076,832
Land cost $2,662,418 $2,328,097 $2,328,097 $2,328,097
Land cost per unit $21,299 $18,625 $18,625 $12,320
Average cost per unit (inclusive of
land) $253,178 $250,504 $250,504 $243,841
Hard cost construction (exclusive of
land) $231,879 $231,879 $231,879 $231,520
Return on Cost (ROC) 7.36% 7.43% 7.19% 7.45%

CITY OF NASHUA
PAVEMENT MARKINGS PROGRAM

RETROREFLECTIVE THERMOPLASTIC AND PAINT PAVEMENT MARKINGS

Schedule of Prices
IFBO0662-060520 - Change Order 2

dated May 12,2022
Bi
Item # Description Quantity UM Unit Price Total Bid Value
Amount

Ret flective Paint P ki

632.0104 etro reflective Paint Pavement Marking |, 349 c3g.46| Le $0,065 $85,705.00
4 inch tine
R flecti . .

632.0112 etro reflective Paint Pavement Marking 11,000.00 LF $0.72 $7,920.00
12 inch line

632.02 Retro reflective Paint Words/Symbols 2,000.00 SF $1.75 $3,500.00

632.2 Pavement Marking Removal/grinding 500.00 LF $2.50 $1,250.00

Ret flecti i
632.3104 e ro re ective Thermoplastic Payment 500.00 rT $0.55 $275.00
Marking 4 inch line

Retro reflective Thermoplastic Pavement

632.3112 . . . 23,000.00 LF 52.75 $63,250.00
Marking 12 inch line
Retro reflective Thermoplastic
. F ‘ 0.00
632.32 Words/Symbols 0.00 SF $7.00 S
619.1 Maintenance of Traffic 1.00 UNIT} $100.00 $100.00
BID TOTAL $162,000.00
TOTAL BID PRICE WORDS:
One Hundred Sixty-Two Dollars and

Zero Cents

INC WSIO NARY ZONING ANALYSIS 2 8

200-UNIT MULTIFAMILY (STICK) RENTAL DEVELOPMENT

RKG Associates also modeled a larger, 200-unit multifamily rental development program to
understand if larger projects had different financial performance measures. The analysis revealed that
200-unit programs performed similarly to the 125-unit programs. Under the surface parking
assumption, the Current Market/Baseline Scenario yielded an IRR that is above the proposed 15%
minimum return threshold but still well below the current market expectations of 20+% (17.63%).
Incorporating the model inclusionary zoning policy (20% of units committed to affordability) reduces
the Target Return Scenario return by approximately 100 basis points to 13.95% IRR (Table 14). A
bonus density ratio of 1:1 provides sufficient additional market rate units to offset the financial impact
of the model inclusionary zoning policy, ultimately requiring 42 additional market rate units to
compensate for the 40 income-controlled units priced at 80% of AMI.

200-UNIT MULTIFAMILY (PODIUM) RENTAL DEVELOPMENT

The cost of podium parking in the Downtown area has similar impacts on a 200-unit project as it does
on a 125-unit project. The Current Market/Baseline Scenario yields a 15.42% IRR, approximately 220
basis points below the surface parking scenario. The model inclusionary zoning policy negatively
impacts the financial performance of the project, requiring a 2.5:1 bonus density ratio to have the
Inclusionary/Bonus Density Scenario meet the target return threshold of 15% IRR.

INC WSIO NARY ZONING ANALYSIS 2 9

Table 14. 200-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

200-Unit 200-Unit 200-Unit 200-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 200 200 200 242
Market Rate Units 200 200 160 202
Affordable Units oO oO 40 40
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 40 40
Payment in Lieu so so so so
AMI Split 0 0 80% 80%
IRR 17.63% 15.01% 13.95% 14.92%
NPV $3,242,153 $8,236 ($1,343,770) ($114,769)
All costs $45,806,535 $50,030,300 $50,030,300 $58,884,825
Land cost $3,000,000 $7,223,765 $7,223,765 $7,223,765
Land cost per unit $15,000 $36,119 $36,119 $29,899
Average cost per unit (inclusive of
land) $229,033 $250,151 $250,151 $243,723
Hard cost construction (exclusive of
land) $214,033 $214,033 $214,033 $213,824
Return on Cost (ROC) 8.12% 7.43% 7.17% 7.41%

INC WSIO NARY ZONING ANALYSIS 3 0

Table 15. 200-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 Downtown Downtown Downtown Downtown

200-Unit 200-Unit 200-Unit 200-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 200 200 200 297
Market Rate Units 200 200 160 257
Affordable Units oO oO 40 40
Parking Aboveground Aboveground Aboveground Aboveground
Special Permit No No No No
Inclusionary % 0% 0% 20% 20%
Inclusionary Treatment No Inclusionary No Inclusionary Proposed Proposed
Inclusionary Units oO oO 40 40
Payment in Lieu so so so so
AMI Split 0 0 80% 80%
IRR 15.42% 14.99% 13.93% 15.05%
NPV $542,652 ($16,919) ($1,368,926) $97,653
All costs $49,332,308 $50,063,155 $50,063,155 $72,424,393
Land cost $3,000,000 $3,730,847 $3,730,847 $3,730,847
Land cost per unit $15,000 $18,654 $18,654 $12,577
Average cost per unit (inclusive of
land) $246,662 $250,316 $250,316 $244,149
Hard cost construction (exclusive of
land) $231,662 $231,662 $231,662 $231,572
Return on Cost (ROC) 7.54% 7.43% 7.16% 7.44%

POTENTIAL HOUSING TRUST FUNDING STRATEGIES

The proposed payment in lieu of partial inclusionary units detailed earlier in the report can create

some revenue for the City’s housing trust. However, the value differential between market rate and

80% of AMI is not substantial and the number of developments each year likely will be limited. To

this point, RKG Associates was asked to identify some other best practices for creating revenue

sources—particularly consistent revenue sources—for the city to consider. Some potential
recommendations around funding a housing trust fund include:

Transfer tax on property sales — The City of Nashua could levy a surcharge on the sale of
property, levied on the seller, the buyer, or both parties. The surcharge could be a fixed
percentage and allow the city to collect funds when a property changes ownership. The tax
could provide a dependable source of revenue for the affordable housing trust fund. One
caveat with a transfer tax is that they work well in healthy real estate markets with consistent
turnover and sales. In less-healthy housing markets, declining home sales and prices reduce
real estate transfer tax revenues, which consequently reduces funding for the affordable
housing trust fund.

Dedicated millage rate on real property — The current real estate property tax in the City of
Nashua is $20.61 per $1,000 in assessed value. The City of Nashua could add an additional
$.01 as a dedicated tax to fund the Affordable Housing Trust Fund. This penny property tax
would be collected annually and provide a consistent stream of income for the affordable
housing trust. Additionally, the tax would be equitable in the everyone in the city would be
contributing towards ensuring that there is an adequate supply of affordable housing.

Linkage/Impact fees — Linkage/Impact fees attempt to link the production of market-rate real
estate to the production of affordable housing. Under this type of program, the City could
charge developers a fee for each square foot of new market-rate construction and use the funds
to pay for affordable housing. The city could direct the funds specifically toward the
Affordable Housing Trust Fund. The money collected in the trust fund could then be used to
support existing subsidized units, or to build new units across the city.

Development review process fee — For proposed developments which require changes to
zoning or a variance, the city should institute a development review fee. Given that many
developers of market rate units can build beyond established zoning guidelines the city should
institute a fee which is applied to development beyond established maximum densities. The
fee can be assessed on either a per square foot or per unit basis. The money collected from the
fee can be earmarked for the Affordable Housing Trust Fund and can be used to build or
subsidize affordable housing in the City of Nashua.

APPENDIX 1

Baseline Model Assumptions
Revenues Assumptions
Downtown/Amherst/Exit 1 Market Rents
Studio $1,779
1BR $1,860
2BR $2,316
3BR $2,688
Downtown/Amherst/Exit 1 Market Rents per SF
Studio $3.38
1BR $2.44
2BR $2.41
3BR $2.24
Suburban Market Rents
Studio $1,601
1BR $1,674
2BR $2,084
3BR $2,419
Suburban Market Rents per SF
Studio $3.04
1BR $2.20
2BR $2.17
3BR $2.02
Market Sales Values for Single Family/Townhomes
1BR $300,000
2BR $350,000
3BR $550,000
Parking Income (Rental) (per spot) $75
Vacancy Rate (Rental) 5%
Unit Sizing
Size of Multifamily Units in SF
Studio 526
1BR 762
2BR 961
3BR 1,200
Size of Townhomes in SF 1,294
Size of Single-Family Homes in SF 1,853

Development Costs

Construction Costs (PSF)

Fee Simple $165

MF - Stick $185

MF - Podium $215
Special Permit Costs (addition to soft cost) 10%
Soft Costs 20%
Land Costs Per Unit

Single Family $65,000

Townhomes $38,338

25-Unit Multifamily $50,000

125-Unit Multifamily $21,299

200-Unit Multifamily $15,000
Parking Costs (per stall)

Surface $8,000
Parking Ratios

Single Family/Townhome 2.00

Multifamily 1.50

Financing Costs

First Year of Operations 2021
Construction Period 1 year
Inflation Rate 2%
Mortgage Term

Rental (Years) 20

For Sale (Years) 2
interest Rate

Rental 5.50%

For Sale 5.00%
Equity

Rental 25.00%

For Sale 25.00%
Capitalization Rate (Rental) 5.50%
Cost of Sale 2.00%
Reversion (Years)

Rental (Years) 10

For Sale (Years) 1
Stabilization Period (Years) 1
Origination Fee % 1.50%
Developer Operating Expense Ratio (OE/PGI) 25.00%
Discount Rate (NPV) Rental 15.00%
Discount Rate (NPV) For Sale 20.00%

GLOSSARY OF TERMS

Capitalization Rate — Ratio between the net operating income of a property and its sales value

Discount Rate — The interest rate used in discounted cash flow analysis to determine the present
value of future cash flows

Density Bonus - A ordinance mechanism allowing a developer to build a greater number of units
than the existing underlying zoning dictates in exchange for the creation of additional affordable
units

Equity — Initial out-of-pocket investment on the part of developer that is required to obtain
financing

Effective Gross Income — Gross income minus the vacancy collection loss
Fee in-Lieu — Payment made to City to account for fractional affordable unit not built.

Internal Rate of Return - Annualized rate of return sought by a developer based on the project
discounted cashflow

Net Operating Income -— Net income after deducting operating expenses from potential gross
income

Net Present Value — Net value of the initial investment and cashflows generated from a project,
discounted back to the current year

Operating Expenses — Expenses related to operating the building such as maintenance, salaries,
and repairs

Other Income — Income generated from the property aside from rent, this income is parking
revenues for leased spaces

Potential Gross Income — Potential income generated from rental income or sale of a property.
Calculated by multiplying the number of units and rent for each unit

Residual Land Value - The price a developer pays for a piece of land. Generally, involves
calculating the income expectations for the developed land, subtract all expenses associated with
this development, and the remainder is the land residual

Vacancy and Collection Loss — Percent of rent that is uncollectable

Value Gap - Difference in value between a market rate unit and affordable unit