Pro forma investment analysis for return on equity and NPV

DCG Corplan determines the maximum value propositions for new or refocused real estate development projects based on real-world economic conditions.

Investment portfolios that are burdened by non-performing real estate can be positively reinforced through creative adaptive use strategies -- a unique means of promoting the value of local properties based on achievable performance measures.

Repositioning assets for adapatve reuse

Our firm evaluates the physical and financial feasibility of your real estate investments and insuring your successful outcome by identifying:

  • Appropriate size and mix of facilities
  • Timing of investment
  • Sources of financing
  • Maximum financial performance
  • Market share and absorption
  • Alternative concepts and approaches

Case Studies

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Market Study for the Conversion of a Former Elementary School in Hopatcong, NJ
Client: Borough of Hopatcong
Location: Hoptacong, NJ

The former location of the Hudson Maxim School in the Borough of Hopatcong, NJ was permanently closed several months ago. The site overlooks Lake Hopatcong, NJ’s largest recreational waterbody. Recognizing the need for a market study to identify the highest and best use of a property for redevelopment, the Borough retained DCG Corplan Consulting LLC in late 2019 to conduct the analysis. Originally built in 1908, Hudson-Maxim School had a capacity of 490 students, the Study Property will be added to the Borough’s “Area in Need of Redevelopment” and is currently zoned R-1 and immediately adjacent to a new Form-Based Code area. This optional regulation sets forth several intriguing uses that may or nor be suitable to the subject property.

DCG Corplan conducted a thorough market analysis which resulted in demand projects for the following:

  • Entertainment/Sports/Recreation: 86,000 sf
  • Housing – owner occupied: 726 units
  • Housing – rental: 138 units
  • Housing – seniors rental: 437 units
  • Lodging: 100 rooms; 1,850 sf of meeting space
  • Office: 62,000 sf
  • Restaurant/Bar: 19,200 sf
  • Retail: 245,400 sf
Final determination was for a mixed-use tourism business-oriented development that will serve as a catalyst for further investment in the area. The facility will feature an exhibition space with movie theater, 50-room boutique hotel, loft-style creative office space, 95-seat rooftop restaurant with outdoor balcony, and targeted retail space for outfitting, boating, and recreational products. Parking for about 250 spaces will require construction of a 4-story parking garage plus paving of front yard area.

Total project cost of $9.1 million, with value at stabilized occupancy of $16.9 million. For the developer, a positive outcome can be expected, producing a profit margin of 27% or 2.0 multiple of invested equity. For the Borough, a sales price of $640,000 of the Study Property should produce a property tax revenue of $417,300 per year starting in year five.

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Raritan Rental Apartment Development – Rental Price Points Analysis
Client: Accurate Builders and Developers
Location: Raritan, NJ

A NJ real estate developer was seeking market confirmation of assumed rental rates for a housing development adjacent to a NJ Transit rail station. This Transit-Oriented-Development would create 267-unit market rate and affordable housing units in a mdi-rise configuration. DCG Corplan was retained to establish review the market potential and verify rental price planned for the project.

TDemographic analysis on a 15-minute drive time from the project site have been was performed, yielding the following conclusions:

  • Market analysis indicates that Raritan is a working-class area that has good economic fundamentals.
  • There is a Hispanic and Asian presence in the area that can provide the foundation for a unique cultural experience and flavor that may be a catalyst for gentrification.
  • Year 2017 median household income for the 15-minute drive time minutes region is $100,167. Using the 3 to 1 ratio of income to rent, this figure, for most landlords, would qualify for an apartment rental of $2,782 per month.
A 9% increase in household income by year 2022 would result in a figure of $109,360 that could translate into a rental capability of $3,038 per month. The most common product in current inventory of eight nearby projects is a 2 bed/2 bath unit of 1,271 SF, renting for $2,349 per month, or $1.85 PSF. The secondary product is a 1 bed/ 1 bath unit of 882 SF, renting for $1,880, or $2.13 PSF. Low income is defined as at or below 50 percent of median family income. A 2017 rental that would satisfy a low-income family would be $1,750 per month, with the 2 bed/2 bath model be considered as the standard for affordable housing.

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Market-Based Assessment of a City-Owned
40±Acre Parcel

Client: City of Miami Gardens
Location: Miami Gardens, FL

In response to a direct request from the client, the DCG Corplan project team analyzed the development potential of a public property for a Florida municipality in advance of marketing the site to the development community. Team member Norman E. Taylor and Associates, LLC (NETA) led the effort, with DCG Corplan providing market analysis, conceptualization, and economic impact evaluation.

The City of Miami Gardens, driven by a need to improve the appearance and vitality of one of its main thoroughfares, Northwest 27th Avenue between the Miami‐Dade County border line and NW 183rd Street, began by establishing an Entertainment Overlay District to capitalize on a hub including sports, gaming and entertainment.

The Mayor, City Council, and other City leaders envisioned this development to be a true “downtown” Miami Gardens connecting other assets stretched along the NW 27th Avenue Corridor. The Entertainment Overlay District’s features will drive the core of an attractive and aesthetically pleasing “City Center”.

Study parameters included gaging market demand for a variety of key drivers:

  • Entertainment/Sports/Recreation
  • Retail/Office
  • Hotel Lodging/Restaurant
A financial analysis of a conceptual multipart development on the 40±acre site assumes the inclusion of rental housing, office and commercial space, retail, upscale lodging, restaurants/bar, restaurants, live entertainment, a movie theater, and sports and recreation activity. This scenario involves enhanced tax revenues flowing to the City, while new jobs are created. A finically viable internal rate of return of 13.0% (unleveraged) is projected for the investment.

Overall, the development costs are estimated at $289 million. A six-year (6) construction cycle is anticipated and total economic impacts to the City of Miami Gardens are calculated at $223 million by year six (in 2018 dollars). First year impacts are estimated at $33 million plus the sale revenue of $15 million for the property. A total of 2,146 new jobs are forecasted to be needed over the development period.

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Office Market Comparison Study for the Katy Area Economic Development Council
Client: Katy Area Economic Development Council
Location: Katy, TX

Following tremendous job growth in Houston's energy sector, the Katy Area Economic Development Council (KAEDC) sought consultant assistance to identify opportunities to develop new office products to further attract business. KAEDC identified five office submarkets in the greater Houston area as direct competition to the Katy Area Submarket These are:

  • East Fort Bend County / Sugar Land
  • Katy Freeway East
  • San Felipe/Voss
  • Westchase
  • The Woodlands

DCG Corplan was engaged to evaluate what methods a site selector would employ when evaluating markets for shortlisting for their corporate office clients and how the Katy Area would compete.

Review of available real estate, interviews with brokers, and calculation of total costs indicate that the Katy Area submarket emerges as the number one location for a 200-person headquarters office location.

Operational factors considered included office rental, parking charges, electric power costs, telecommunications, and incentives. The shortlist of top three submarkets for corporate site selectors are as follows:

  • Katy Area
  • Westchase
  • East Fort Bend Co./Sugar Land

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Market / Feasibility Study for the Development of the Science Park Digital Century Center
Client: University Heights Science Center
Location: Newark, NJ

University Heights Science Park, Inc. (UHSP) retained DCG Corplan Consulting LLC to evaluate the market feasibility of developing the first speculative office / laboratory building for the newly created Science Park in the university section of the City of Newark, and to project future needs of the Park in light of emerging technologies. In order to complete this assignment, a two-phase report was developed.

The first task required an analysis of the market, the design of the spatial program, and a financial pro forma needed to prove out the viability of the Digital Century Center (DCC) as a speculative high-technology building and centerpiece for the park. The DCC presented the opportunity to meet the growing needs of high-technology industries, not just within the Science Park, but for the overall northern New Jersey marketplace. By also providing state-of- the-art exhibit and meeting facilities for future members of this elite community, the DCC will also be assisting in the promotion and evolution of Science Park concept.

A fully developed building program and financial analysis has led to the successful implementation of the 100,000 sf DCC facility.The second task evaluated the emerging technology trends that Science Park must be able to support and specific recommendations for future development phasing for the project. Interviews were conducted with leading technologists, accompanied by as in-depth investigation of 14 competing science parks across the country to determine new areas of prevalent research and commercialization for the future build-out of more than 1 million sf of new high-tech space.

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Strategic Reassessment of the Teleport property in Staten Island, NY
Client: Port Authority of NY and NJ
Location: Staten Island, NY

Created in 1984, the Port Authority’s Teleport was hailed as a highly innovative gateway for regional, interstate and international communications. Although still providing minimal up- and down-link satellite connectivity, the prevalence of fiber optics in telecommunications is rendering the Teleport’s original unique technological advantage somewhat obsolete.

The Port Authority engaged DCG Corplan to evaluate the strategic advantages of continuing operations of the Teleport in light of the changing dynamics of the local market and technology demand. The site’s fiber network was viewed as a vital link to the business community, and with continuing expansion of the fiber network at Teleport, the location was determined to offer primary data back-up and “hot” or “warm” site disaster relief to the extensive New York financial marketplace.

DCG Corplan conducted a series of “highest and best use” development scenarios in order to prove Teleport’s role as a viable real estate asset. The analysis included the following:

  • High-tech Office Park vs General Use
  • Light Industrial
  • Retail (big box)
  • Data Center
  • Other Uses

Using a unique scoring system, DCG Corplan concluded that Teleport’s future would consists of a mix of data center, flex R & D buildings with a technology incubator, and a more intensified office development footprint. The recommended model would increase employment to as many as 3,240 jobs and create a positive cash flow over the next 25 years of operation. A new approach to branding and marketing the Teleport as technology park (TechPort) was also encouraged.

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Washington Manor Senior Long-Term Care Residence – Development Feasibility Analysis
Client:Private development group
Location: West Orange, NJ

A local property owner sought development alternatives for an underutilized 1.5-acre parcel. Preliminary discussions revealed the need for a long-term senior care residence in this area of Essex County. The site consisted of 6 contiguous parcels and two nearby parcels to be used for parking. By special arrangement with the municipality, an abandoned public park adjacent to the site would be renovated and joined into the open space for the project.

Detailed market analysis and maximum building envelope studies revealed an opportunity to construct 106 units of mixed-level care in a new four-story building. The site was well served by mass transit bus lines with stops for inter-city commuting. The central shopping area was two blocks west of the property, with full service food markets, convenience stores, drug store, community activity centers, museums, and a host of services that the senior resident would find useful.

A local architect prepared schematic designs for the building that blended with the character of the surrounding neighborhood. The project featured a u-shaped footprint encompassing a lushly landscaped private courtyard. The main function room was large enough to support 200-seated individuals, and other ground-floor amenities included a senior day care facility and ancillary retail space.

A preliminary letter of endorsement was obtained from the Township Mayor; however, local board of adjustment approval would be required for a needed height variance. Overall costs for this nearly 80,000 square foot were calculated at just below $7 million. Ownership of the property would continue with the present property owner though construction, whereupon the developer would enter into a master lease agreement for a period of 25 years.

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Market Analysis and Feasibility Study for Proposed Hotel and Conference Center and Master Plan
Client:City of Rahway Dept. of Economic Development
Location: Rahway, NJ

The City of Rahway sought assistance in determining the feasibility of a conference/hotel center to support major corporations within the Rahway area, thereby enhancing the community's already robust economic development achievements. DCG Corplan Consulting LLC was retained to perform a market analysis and feasibility study to determine the size and site requirements of proposed facility.

Merck & Company, of particular importance to the City of Rahway, operates a major pharmaceutical manufacturing/research & development facility, and other large firms such as General Motors and Tosco/Bayway Refining are located in neighboring Linden. The City had plans to acquire and redevelop an underutilized site to accommodate the project, and two site areas were under evaluation for potential selection.

The study consisted of a review of the general market characteristics, hotel supply, demand and market penetration analyses, recommended facilities design, site review, and a detailed financial pro forma and projection.

Results of the analysis revealed the need for a boutique 50-room hotel and 5,000 square feet of conference space. Site review indicated one of the two subject sites more developable, and the building footprint could support a three-story 40,000 square foot facility.

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UPS Industrial Facility Technology Business Park Market Study
Client:United Parcel Service
Location: Fairfield, CT

A leading delivery and shipping company had acquired a formed steel foundry building with the intent of using the property as a major service depot. A subsequent decision was made to establish this function in another nearby location, and the subject property was released as surplus.

The property was analyzed for its potential alternative uses as industrial, commercial, residential, and sports/recreational, each provided with detailed financial statements. An initial environmental review by a DCG2C sub-consultant revealed no on-going air and water quality problems, however, a full-scale environmental investigation study was recommended prior to development or sale. It was concluded that a planned business park would provide the highest return to investors within five years. The company was presented with a joint venture plan that would allow for continued ownership of the property, with equity takedowns by a development partner on a parcel-by-parcel subdivision basis.

The recommended plan called for conversion of a portion of the plant into a fully automated warehouse for dead record storage for insurance companies and defense contractors located in the area, plus speculative develop0ment of “flex” manufacturing buildings supported by a contract-based research and development laboratory.

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Aviation Assembly Plant Conversion - Market Analysis & Reuse Study
Client:Maryland Dept. of Transportation
Location: Hagerstown, MD

A defense contractor had employed hundreds of workers in the production of military aircraft at this location for many years. Upon loss of its contract, the company offered to sell the land and buildings at a “low” price to assist the economically distressed Maryland community’s efforts to find a replacement payroll.

The state agency engaged the consultants to determine whether the company’s offer was consistent with the market value. Upon inspection of the property, it became evident that some serious environmental issues would have to be resolved, and present configuration of the plant was not conducive to multi-tenant use.

Independent analysis of the labor market and other operating costs, however, indicated that the location would be attractive to a wide variety of identified types of high- technology manufacturing and non-manufacturing activities within the ¾ million square foot facility.

The company agreed to correct the observed problems in disposal of its plating wastes as a condition of sale to the state agency. Recommended changes were made in the central HVAC system along with configuration modifications to the plant and offices.

Currently, plant space is being leased to a number of smaller high-tech manufacturing and distribution firms, and the offices are occupied by support operations of a major financial institution.

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BASF Corp. Mixed-Use Technology Park Brownfields Reuse Market Study
Client:BASF Corp.
Location: Wyandotte, MI

For almost 100 years prior to acquisition by a foreign direct investor, this 84-acre waterfront industrial site had been used by the purchased company and its predecessors for chemical processing. DCG Corplan principals conducted market research to determine the extent of demand for residential, recreational, commercial, and industrial development in the local area. Review of historic records confirmed that a small portion of the site had never been occupied by processing facilities, but environmental problems were suspected to be prevalent throughout most of the property. Subsequent engineering studies confirmed these conditions.

Community pressures for conversion to non-income producing uses were averted, and a joint venture was formed with a developer to convert the property into a mixed-use business park. The clean sector of the site was devoted to high-rise housing and office use, and the balance of the property was designed for industrial and warehouse occupancy.

To meet the requirements for long-term monitoring of the pollution hazards, the company would continue to own the land and the venture would lease to tenants with the landowner providing full indemnification against environmental damage claims.

The buildings plan was oriented to minimize its visual effect on boating and riverfront pedestrian uses, which were also accommodated by the development plan. Parkland on capped clean fill over the most polluted portions of the site satisfied community needs.

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Trenton UEZ Underutilized Industrial Properties - Brownfields Inventory & Reuse Study
Client: City of Trenton Dept. of Economic Development
Location: Trenton, NJ

Between 1890 and 1920, Trenton, NJ had been a major manufacturing center, employing an estimated 50,000 workers. Today, however, large portions of the city remain economically depressed, dominated by vacant and underutilized factories with suspected environmental contamination.

DCG Corplan was retained to conduct an in-depth analysis of the city’s Urban Enterprise Zone to provide a detailed inventory of all vacant industrial parcels over 1 acre in size. The study required (1) the production of a Geographic Information System (GIS); (2) an in-depth facilities assessment of the potentials for reuse of over 120 existing buildings based on a projection of practical industrial uses suitable to the market; and, (3) a Phase 1 environmental investigation of 10 sites identified as having potential for redevelopment.

State and city official, realtors, developers and property owners have enthusiastically embraced the project findings and recommendations. Since completion of the study, numerous small manufacturers have been attracted to the city.

DCG Corplan is credited as developing the first strategic method for assembling brownfields into viable development parcels based on the hierarchical ranking of environmental risk factors.

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Colgate Building – Hotel/Conference Center Conversion Development Feasibility Analysis<!--
Client: Colgate Family Trust
Location: New York, NY

DCG Corplan Consulting principals were engaged to analyze the potential to convert the 26-story Colgate-Palmolive building at 300 Park Avenue in New York City into a first-rate hotel capable of competing with the Plaza and Waldorf-Astoria for business conference and lodging.

A detailed market analysis reviewed the anticipated occupancy level, rack rates, market penetration, branding potential, and construction timing required to achieve the stabilized occupancy objective. Several nearby corporations were polled for their interest in private-use conference facilities.

Architectural studies performed by Skidmore, Owings and Merrill indicated the building alterations needed to convert the large floor plate into a manageable footprint for hotel use. Construction cost estimates were prepared that considered partial or full renovations, as well as additional floor area available from an underutilized zoning envelope.

Financial pro forma were generated that calculated the return on investment over a fifteen-year period, inclusive of sale or re-investments at various date intervals. Outcome of the study revealed that hotel occupancy levels and room rates were insufficient at the time to justify a $500,000 per room renovation cost. Recommendations were made to the owner to abandon this scenario in favor of total office rehabilitation of the structure.

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Phoenix City Square – Office/Hotel/Conference Center Market Analysis
Client: Phoenix City Square Dept.
Location: Phoenix, AZ

Phoenix City Square, the largest mixed-use office center in Arizona, was to undergo a major redevelopment to capture the influx of business relocation to the southwest.

The developer engaged DCG Corplan Consulting principals to provide an analysis of the Phoenix office market and to guide the client into “best practices” rehabilitation of a vacant office tower. The study also required the identification of potential corporate tenants as pre-qualified prospects.

With an inventory of over 840,000 square feet of office space, the project was to be doubled in size by year 2005. The assignment included the projection of demand and potential costs of expanding the 171-room business hotel.

As a result, several corporate leases have been successfully negotiated and the project is on track toward its ultimate build-out.

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Economic Feasibility and Marketability Study of the Villages at Lincoln Harbor (Riva Pointe)
Client: Hartz Development Corp.
Location: Weehawken, NJ

This assignment for Hartz Mountain Industries required a practical determination on the feasibility for a major mixed--use development at Lincoln Harbor, a waterfront site adjacent to the helix serving the Lincoln Tunnel. Planning called for 1.8 million square feet of office space, some associated retail space, and 250 luxury residential units on a pier overlooking Manhattan.

The City of Weehawken, however, refused to rezone the property without an independent confirmation of the project’s economic feasibility. The challenges were to quantify the demand and determine that prospective tenants would be willing to pay the indicated rentals, giving consideration to the project’s orientation and planned amenities.

In an extensive evaluation, the analyses for the office space component included detailed reviews of the labor market, the real estate market, acceptability by tenants of the location, competition of other projects, and the potential retail absorption. Conclusions: a new Class A office development could capture sufficient critical mass to permit development of the proposed 1.8 million square feet of office space at the proposed rentals. The limited retail space proposed could be supported entirely by the on-site office population.

Construction of luxury housing on a Hudson River pier was the most controversial aspect of the project. Following a series of market investigations, it was concluded that The Villages (later renamed Riva Pointe) had a distinctive advantage of timing, brisk sales of 250 units could be anticipated, and sales prices of $200 per square foot would be fully compatible with the market. Construction was permitted at Lincoln Harbor and the project is one of the most successful projects along the Hudson River waterfront.

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American Wood Products Associations – Joint Exposition Center Market & Development Feasibility Analysis
Client: Memphis Chamber of Commerce
Location: Memphis, TN

Commercial office space building owners in Memphis were seeking assistance to fill vacancy in downtown buildings. DCG Corplan Consulting principals were engaged to develop a marketing plan to attract the headquarters operations of national associations.

Interviews with eighteen forest, paper, and wood products associations revealed the need for a new exposition and conference center. A site search in for the proposed facility resulted in the selection of experimental timberland for hardwoods known as the Agricenter International.

A development program was generated that proposed a two-story, 48,000 sf structure of meeting, office, exhibit, and library space.Built almost entirely of wood, the center’ s theme was to be a celebration of the American woodworker’s art. Timber, paper products, furniture, and hardwoods would all be represented no only in specific exhibits but also by an expression in architecture and interior furnishings.

The concentration in Memphis of the associations to from across the country would not only serve the Class A downtown office vacancy needs, but provide needed housing demand in the vicinity.

The project has met with enthusiastic support, and funding is currently being sought.

Feasibility Analysis

In order to make the right decision about a real estate investment a feasibility study should be conducted that assesses the market strength, evaluates competitive supply, and carefully forecasts demand for the prospective occupancy.

DCG Corplan's feasibility analyses comprises four key components:

MARKET -- Economic demographic review.
DEMAND -- Sustainable market share / absorption.
SUPPLY -- Current and downstream competition.
PRO FORMA -- Financial viability and alternatives.

Market Review

An initial Market Conditions analysis will evaluate the economic and demographic characteristics of the local market area, utilizing published sources.

DCG Corplan’s investigation includes:

  • Local area/County/Regional population demographics
  • Education and training
  • Employment and labor
  • Income
  • Transportation
  • Construction costs
  • Housing, commercial or industrial rents or prices
  • Utility rates
  • Property taxes
  • Per capita retail sales

Demand Study

The goal of a demand analysis is to quantify market share and absorption. Indicators of potential growth identified in the Supply analysis will be further explored accompanied by interviews with key executives of major companies within the market area to determine the local demand and special requirements.

DCG Corplan projects occupancy penetration factors, estimates sustainable facility size, and calculates the fair market absorption for the subject property. Our GIS technology allows us to track changes in wealth and income, new trends in population dynamics, and other important demand drivers over a wide geographic areas to find the right location for your development.

Supply Study

A Supply analysis will determine the extent to which proposed facilities will be competitive. Similar facilities within the market area should be reviewed with the objective of determining the extent of competition, along with planned additions to supply and indicators of potential growth.

DCG Corplan employs a unique scoring system to determine general supply trends, and compare rental and sales price points. Comparative projects are evaluated through a comparison of geographic variables that equalize the inequities of market conditions.

Our market-driven research reveals how downstream projects will influence the supply picture and your project's development potential. Discussions with local developers, realtors and owners will shed light on the most appropriate means of positioning facilities or properties for specific economic development initiatives.

Pro Forma

Critical for any risk venture, detailed financial analysis is the ultimate test for reward or failure.

DCG Corplan's Pro Forma analysis of cash flow, debt services and tax depreciation evaluates performance for at least seven years utilizing rental rates developed from the supply and demand analyses. Development funding and ownership options are explored, such as public-private partnership, grants and tax credits, and other financing vehicles to determine your best outcome. Our analysis includes:

  • Rental and other revenue
  • Administrative and general expenses
  • Marketing expenses
  • Operating and maintenance expenses
  • Net operating income summary
  • 10-year cash flow pro forma with ROI and NPV