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Envision Tomorrow:
Return on Investment Model

      Tulsa, Oklahoma
     Training Presentation
             2009
What is Prototyping?
Approach used by innovation leaders
around the world
– IDEO approach: “Right, Rapid & Rough”
– In developing prototypes “creating epiphanies
  and model building go hand in hand” – The
  Art of Innovation
– "We make lots and lots of prototypes: the
  number of solutions we make to get one
  solution is quite embarrassing, but it's a
  healthy part of what we do."
    Apple Chief Designer Jonathan Ive
Prototyping is Like Using a Crash
          Test Dummy
Creating Building Prototypes:
 Envision Tomorrow Process Overview




Building   Development     Scenario    Evaluation
 Types        Types      Development
Creating Prototype Buildings
     Building Envelope and Financials

Square Footage by Use                      Using ROI
                                           Model…
Units
Rents
Sales Prices
Costs                              …Create a
Building Value                     Range of
                                   Buildings

Employment
Parking
Building Prototype Modeling
Prototype Examples



Mixed-Use Residential   Mixed-Use Residential   Mixed-Use Rehabilitation
       2 Story                 4 Story




                                                  Restaurant and Hotel
     Mixed-Use Office     Mixed-Use Office
          2 Story              4 Story
Prototype Library

250+
buildings
and
growing
ROI Model
The ROI model is a way to physically and
financially model potential development
The goal is to model feasible development
– or to see where existing regulations
could be optimized
Overview Page
Physical
Parking Layouts
Parking Parameters
Financial
Detailed Financial
Summary
Brainstorm: Tulsa’s Prospective
    ROI Model Users and Uses
Users                         Uses
 City of Tulsa                 Evaluate zoning code
 Universities                  Heath dept
 Business improvement          Use together in a
 districts
                               database format/ shared
 CDCs                          web
 Main Street program
                               Educate users re needed
 Neighborhood associations
                               incentives
 Property owners
                               Assist in financing
 RE developers
                               especially in MU
 Banks/lending institutions    developments
Tulsa Example:
               22 Prototype Buildings
Original Standards             New Standards
Prototypes                     Prototypes

Apartment                      Cottage Home
Single Family Home 5-8K Lot    Townhome
Single Family Home 8-15K Lot   Live / Work
                               Neighborhood Grocery (1 Story)
Business Park                  Neighborhood Retail (1 Story)
Mid-Rise Business Park         Mixed Use Apartments & Retail (2 Story)
Retail Mall                    Mixed Use Retail & Office (2 Story)
Strip Commercial               Mixed Use Retail & Office (3 Story)
Heavy Industrial               Mixed Use Residential & Retail (4 Story)
Light Industrial               High Density Condo or Apartments (5 Story)
                               Office Retail (3 Story)
                               Office Retail (5 Story)
                               Office Retail (10 Story)
New Prototypes: A Richer Palate

The following prototypes
were dubbed the “illegal”
uses
Under current regulations,
they can’t really be built
Have a broader range of
uses and densities, tend to
have smaller footprints, and
have lower parking
requirements
Prototype example
Shuttered
commercial
building

Parcel Size:
14,500 SQFT
Prototype example
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
Example: Cherry Street
A close-up example along Cherry Street
(HP-zoned properties are screened out)




                         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
Count up potential development sites




               Acres      Units
 Live Work       7         43
 Condo/Apt      2.8       460
 Mixed Use       1         50
 Residential
 Office over    1.5    44,000 SQFT
   Retail
   Total       12.3
Vetting the Prototypes
Each scenario indicates a different level of new
investment the city will need

   Value of Total New Construction
$14,000,000,000
$12,000,000,000
$10,000,000,000
 $8,000,000,000
                                                               Value Added
 $6,000,000,000                                                from All
 $4,000,000,000                                                Construction
 $2,000,000,000
             $0
                                             C
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Vetting the Prototypes
But Workshop, C, and D will see much greater volumes of
development
        New Employment Construction
              (Square Feet)
  12,000,000
                                                         Retail
  10,000,000

   8,000,000
                                                         Office
   6,000,000

   4,000,000
                                                         Industrial
   2,000,000                                             (warehouse,
                                                         flex space,
          0                                              etc.)
                Trend   Workshop Scenario C Scenario D
Vetting the Prototypes
For example, mixed-use development accounts for nearly
50% of new investment in Scenario D
       Value added from mixed-use
               construction
$14,000,000,000
$12,000,000,000
                                                               Value Added
$10,000,000,000                                                from All
 $8,000,000,000                                                Construction
 $6,000,000,000
 $4,000,000,000
                                                               Value Added
 $2,000,000,000                                                from Mixed-Use
             $0                                                Construction
                                             C
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Portland and the Envision
       Tomorrow Process

Created 30 building prototypes
Capacity analysis of Portland’s general
plan is underway
– Testing city redevelopment model
  assumptions
– Comparing capacity with Metro’s 2035
  forecast
Building Prototypes Grounded in Reality

 Eight Portland developer/expert
 interviews were used to calibrate
 the ROI Model
 Prototypes were created based on
 successful recent development in
 Portland
Mixed-Use
Office (Small Lot)
Office (Neighborhood)
Residential (Point Tower)
Residential (Small Units)
Residential (Family-Sized Units)
Residential (Small Lot)
Residential (Perimeter Block)
Live/Work
Residential
Single Family (Infill and Multi-Lot
Subdivision)
Townhome
Courtyard Housing
Skinny House
Apartment (Small Site)
Neighborhood Corridor Apartments
Retail and Office
High Rise Office
Mid Rise Office
Low Rise Office
Rehab/Adaptive Reuse
Small-Scale Retail
Large Format/Big Box Retail
Industrial
Flex Space
Industrial (1- and 2-levels)
Portland
Tipping Point
Analysis
Example:
Gateway Area
< $750,000 per acre

“Tipping Point”
Redevelopment
Opportunity Sites
Parcels with assessed
value of less than
$750,000 per acre


Approximately 50 acres
Between
                         $750,000 and $1.2
“Tipping Point”          million/acre

Redevelopment
Opportunity Sites
Parcels with assessed
value of between
$750,000 and $1.2
million per acre


Approximately 50 acres
> $1.2 million/acre
“Tipping Point”
Redevelopment
Opportunity Sites
Parcels with assessed
value of more than $1.2
million per acre


Approximately 150
acres
Making Residential Development
       Work in Gateway
We looked at areas in
the CX, RX and EX
zones
Types of feasible
buildings given:
– Current regulations
– Market conditions
Prototypes
Created four basic housing prototypes
– 2 Story Residential
– 3 Story Residential
– 6 Story Residential
– 10 Story Residential
Rapid prototyping allows us to hone in on
the variables that affect the feasibility of
new development in the area
Sample Gateway Prototype: 6 Story Residential
                      85 units/acre; 1.67 FAR

                  Option 1:      Option 2:            Option 3:
                  Subsidy        No subsidy; raise    No subsidy;
                                 rents/sales prices   reduce
                                                      construction
                                                      costs
Rent              $0.90/sf       $1.18/sf (+31%)      $0.90/sf
                  ($700/month)   ($902/month)         ($700/month)
Sales Price       $151/sf         $205/sf (+36%) $151/sf
                  ($116,000/unit) ($157,000/unit) ($116,000/unit)
Construction      $100/sf        $100/sf              $67/sf (-33%)
Costs
Subsidy (total)   $2.8 million   $0                   $0

Subsidy (per      $33,000/unit   $0                   $0
unit)
Comparing Per Unit Subsidies by
               Prototype
Subsidies required per unit increase significantly when building above 6 stories and
wood frame construction is not possible

   $60,000
                                                       $51,000
   $50,000
              $41,000
                            $37,000
   $40,000                               $33,000
   $30,000

   $20,000

   $10,000

        $0
                2 Story      3 Story      6 Story      10 Story
Conclusion:
Even development at a lower
scale than the zoning allows
would significantly increase
Gateway’s housing base

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

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Tulsa ROI Training Presentation 111209

  • 1. Envision Tomorrow: Return on Investment Model Tulsa, Oklahoma Training Presentation 2009
  • 2. What is Prototyping? Approach used by innovation leaders around the world – IDEO approach: “Right, Rapid & Rough” – In developing prototypes “creating epiphanies and model building go hand in hand” – The Art of Innovation – "We make lots and lots of prototypes: the number of solutions we make to get one solution is quite embarrassing, but it's a healthy part of what we do." Apple Chief Designer Jonathan Ive
  • 3. Prototyping is Like Using a Crash Test Dummy
  • 4. Creating Building Prototypes: Envision Tomorrow Process Overview Building Development Scenario Evaluation Types Types Development
  • 5. Creating Prototype Buildings Building Envelope and Financials Square Footage by Use Using ROI Model… Units Rents Sales Prices Costs …Create a Building Value Range of Buildings Employment Parking
  • 7.
  • 8. Prototype Examples Mixed-Use Residential Mixed-Use Residential Mixed-Use Rehabilitation 2 Story 4 Story Restaurant and Hotel Mixed-Use Office Mixed-Use Office 2 Story 4 Story
  • 10. ROI Model The ROI model is a way to physically and financially model potential development The goal is to model feasible development – or to see where existing regulations could be optimized
  • 18. Brainstorm: Tulsa’s Prospective ROI Model Users and Uses Users Uses City of Tulsa Evaluate zoning code Universities Heath dept Business improvement Use together in a districts database format/ shared CDCs web Main Street program Educate users re needed Neighborhood associations incentives Property owners Assist in financing RE developers especially in MU Banks/lending institutions developments
  • 19. Tulsa Example: 22 Prototype Buildings Original Standards New Standards Prototypes Prototypes Apartment Cottage Home Single Family Home 5-8K Lot Townhome Single Family Home 8-15K Lot Live / Work Neighborhood Grocery (1 Story) Business Park Neighborhood Retail (1 Story) Mid-Rise Business Park Mixed Use Apartments & Retail (2 Story) Retail Mall Mixed Use Retail & Office (2 Story) Strip Commercial Mixed Use Retail & Office (3 Story) Heavy Industrial Mixed Use Residential & Retail (4 Story) Light Industrial High Density Condo or Apartments (5 Story) Office Retail (3 Story) Office Retail (5 Story) Office Retail (10 Story)
  • 20. New Prototypes: A Richer Palate The following prototypes were dubbed the “illegal” uses Under current regulations, they can’t really be built Have a broader range of uses and densities, tend to have smaller footprints, and have lower parking requirements
  • 22. Prototype example 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
  • 25. Example: Cherry Street A close-up example along Cherry Street (HP-zoned properties are screened out) Cherry Street
  • 26. Land values by square foot
  • 27. Selected New Prototypes are applied to test whether redevelopment would occur under new zoning conditions
  • 28. Property values that are low enough to be feasible will “tip”– indicating that regulatory improvements can help spur infill development
  • 29. Count up potential development sites Acres Units Live Work 7 43 Condo/Apt 2.8 460 Mixed Use 1 50 Residential Office over 1.5 44,000 SQFT Retail Total 12.3
  • 30. Vetting the Prototypes Each scenario indicates a different level of new investment the city will need Value of Total New Construction $14,000,000,000 $12,000,000,000 $10,000,000,000 $8,000,000,000 Value Added $6,000,000,000 from All $4,000,000,000 Construction $2,000,000,000 $0 C d p D ho en io io ar Tr ks ar en en or W Sc Sc
  • 31. Vetting the Prototypes But Workshop, C, and D will see much greater volumes of development New Employment Construction (Square Feet) 12,000,000 Retail 10,000,000 8,000,000 Office 6,000,000 4,000,000 Industrial 2,000,000 (warehouse, flex space, 0 etc.) Trend Workshop Scenario C Scenario D
  • 32. Vetting the Prototypes For example, mixed-use development accounts for nearly 50% of new investment in Scenario D Value added from mixed-use construction $14,000,000,000 $12,000,000,000 Value Added $10,000,000,000 from All $8,000,000,000 Construction $6,000,000,000 $4,000,000,000 Value Added $2,000,000,000 from Mixed-Use $0 Construction C d p D ho en io io ar Tr ks ar en en or W Sc Sc
  • 33. Portland and the Envision Tomorrow Process Created 30 building prototypes Capacity analysis of Portland’s general plan is underway – Testing city redevelopment model assumptions – Comparing capacity with Metro’s 2035 forecast
  • 34. Building Prototypes Grounded in Reality Eight Portland developer/expert interviews were used to calibrate the ROI Model Prototypes were created based on successful recent development in Portland
  • 35.
  • 36. Mixed-Use Office (Small Lot) Office (Neighborhood) Residential (Point Tower) Residential (Small Units) Residential (Family-Sized Units) Residential (Small Lot) Residential (Perimeter Block) Live/Work
  • 37. Residential Single Family (Infill and Multi-Lot Subdivision) Townhome Courtyard Housing Skinny House Apartment (Small Site) Neighborhood Corridor Apartments
  • 38. Retail and Office High Rise Office Mid Rise Office Low Rise Office Rehab/Adaptive Reuse Small-Scale Retail Large Format/Big Box Retail
  • 41. < $750,000 per acre “Tipping Point” Redevelopment Opportunity Sites Parcels with assessed value of less than $750,000 per acre Approximately 50 acres
  • 42. Between $750,000 and $1.2 “Tipping Point” million/acre Redevelopment Opportunity Sites Parcels with assessed value of between $750,000 and $1.2 million per acre Approximately 50 acres
  • 43. > $1.2 million/acre “Tipping Point” Redevelopment Opportunity Sites Parcels with assessed value of more than $1.2 million per acre Approximately 150 acres
  • 44. Making Residential Development Work in Gateway We looked at areas in the CX, RX and EX zones Types of feasible buildings given: – Current regulations – Market conditions
  • 45. Prototypes Created four basic housing prototypes – 2 Story Residential – 3 Story Residential – 6 Story Residential – 10 Story Residential Rapid prototyping allows us to hone in on the variables that affect the feasibility of new development in the area
  • 46. Sample Gateway Prototype: 6 Story Residential 85 units/acre; 1.67 FAR Option 1: Option 2: Option 3: Subsidy No subsidy; raise No subsidy; rents/sales prices reduce construction costs Rent $0.90/sf $1.18/sf (+31%) $0.90/sf ($700/month) ($902/month) ($700/month) Sales Price $151/sf $205/sf (+36%) $151/sf ($116,000/unit) ($157,000/unit) ($116,000/unit) Construction $100/sf $100/sf $67/sf (-33%) Costs Subsidy (total) $2.8 million $0 $0 Subsidy (per $33,000/unit $0 $0 unit)
  • 47. Comparing Per Unit Subsidies by Prototype Subsidies required per unit increase significantly when building above 6 stories and wood frame construction is not possible $60,000 $51,000 $50,000 $41,000 $37,000 $40,000 $33,000 $30,000 $20,000 $10,000 $0 2 Story 3 Story 6 Story 10 Story
  • 48. Conclusion: Even development at a lower scale than the zoning allows would significantly increase Gateway’s housing base For example, if the 3 story prototype was developed on the sites currently valued at less than $750,000/acre (about 50 acres of land within analyzed zones), about 2,500 new units could be developed
  • 49. Guided Inputs Tulsa YMCA Adaptive Reuse Example