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Seat Pleasant, MD Redevelopment Opportunities Appendix F-J Appendix F Steven Bernard Spring 2019 Capstone – District Line Final Paper May 18th, 2021 1 Table of Contents 1. General Context a. History b. Market Information c. Community Input d. Existing Site e. Surrounding Site f. Proposed Program 2. Market Analysis a. Macroeconomic Conditions b. Site Location & Access c. Site Characteristics & Zoning d. Demographic Data e. Residential Demand Analysis f. Residential Supply Analysis g. Comparable Residential Rental Data h. Residential Rental Conclusions i. Retail Market Survey j. Retail Opportunities 3. Project Design 4. Sustainability 5. Zoning & Planning a. The Application and Approval Process b. Site-specific Concerns c. Community Stakeholder Buy-in 6. Construction a. Schedule b. Budget 2 c. Contractor 7. Marketing and Management a. Marketing Plan b. Lease-up c. Operations 8. Finances a. Budget Recap b. Sources c. Pro Forma Assumptions d. Valuation and Disposition. e. Investment Results f. Sensitivity Analyses 9. Conclusion 3 1. General Context: (a.) History: An exciting development project plans to bring new apartments and retail options to the city of Seat Pleasant, Maryland. Seat Pleasant is a small city just over the eastern border of Washington DC, in Prince George’s County. This city began to take shape in the late 1800s, when the first streetcar from Washington DC crossed into Prince George’s County. Then around the turn of the century, two major railroad lines also converged in present-day Seat Pleasant’s District Line Station. Riders could take the DC streetcar to District Line and connect to trains to Annapolis or Chesapeake Beach, further south. In 1906 this growing junction town formally adopted the name of Seat Pleasant, though the city would not be incorporated until 1931. It was around this same time that the popularity of the automobile began putting railroads out of business. Ultimately, the train to Annapolis ceased its operations and its right of way was paved over for car traffic. That right of way is today’s Martin Luther King Jr Highway, and the location of this new development. The post-war period, from about 1940 to 1970 saw the population of Seat Pleasant go from only 1,500 people to nearly 7,000. The 1980’s brought the Addison Road metro station, which further spurred development in the surrounding area. But the population of the city began to decline and today it is just under 5,000 people. The 2018 Master Plan describes Seat Pleasant as a “small, predominately African-American, and multi-generational” community (page 36). Development has stalled but the community is committed to setting ambitious long-range 4 improvement plans. We believe that this new project will be a critical first step in gaining momentum. (b.) Market Information: We looked at data from the US Census bureau in order to better understand the demographics of Seat Pleasant. What we found from the 2019 American Community Survey is that Seat Pleasant’s population is 4,739 people, comprised of 1,842 households averaging 2.56 persons in size. Married couples lead 27.2% of these households while 72.2% of households are led by a single adult, 51.7% of them being women. It was found that the median age was 45 years old, a decade older than the DC Metro median age of 34.2. The median annual income was $55,370, which is significantly lower than the metro median of $92,266 per year. The median home value in Seat Pleasant is $200,291 with 43.7% of the homes in the greater census track being valued between $200,000 and $299,000. The most common type of housing are single-family detached homes. There are some garden style apartments but no mid- to high-rise multi-family properties. Much of the existing housing stock is over 50 years old; 58.1% of housing units were built before 1969. Overall, 89.1% of all housing units were built over 20 years ago (prior to 1999). Most of the homes in Seat Pleasant are 3+ bedrooms (61.6%), with some 2-bedroom units (32.8%) and very few 1-bedroom units (8.10%). The data describes a working-class community with modest incomes and an aging housing stock. We also wanted to understand the existing retail marketplace in the area. In surveying the current market conditions, we found a large proportion of fast-food restaurants, other budget- friendly national chains, and independent take-out restaurants. Data obtained from Esri 5 showed that there are opportunities in many industry sectors, as demonstrated from large sums of leakage from the market area. We looked at 5-, 10-, and 15-minute drive radiuses from the site for specific industry sectors. We believe there are exciting opportunities in clothing and accessories; restaurants; and office, stationery, and gifts. (c) Community Input: In addition to reviewing available market data, we wanted to carefully review and listen to the community’s input. The 2018 Seat Pleasant master Plan and the feedback we received at a community meeting were valuable resources in understanding what their long-term development goals were. Notable goals that we gleaned from the master plan are to grow and diversify the tax base, to integrate smart city principles into the fabric of the city, and to increase density. Priorities that we heard from attendees of the community meeting, many of which were also included on the master plan, include increased walkability, more healthy food options, affordability, safer streets, better dining, and housing that will attract more young people. (d.) Existing site: The site for this new project includes two separate buildings across three parcels from 5922 to 5950 Martin Luther King Jr Highway. All together the site is 3.39 acres. Two of the parcels are owned by the CVS corporation, who is also a major tenant. The other parcel is owned by Hundal and Randhawa Inc and has a strip of retail comprised of a laundromat, a local restaurant, and a liquor store. All three parcels are zoned Mixed Use Infill (M-U-I) which allows for significant programming and density flexibility. The site is 0.8 miles (17-minute walk) to the Capital Heights 6 metro station and 1.1 miles (24-minute walk) to the Addison Road station. Two bus lines stop directly in front of the site. The 18 Route connects Takoma Langley Transit center to the Addison Road metro station and the A12 Route connects Capital Plaza to the Addison Road metro station. Anticipated challenges include the existing tenants’ leases. Even if we are able to acquire the parcels from the owners, some tenants may have a number of years remaining in their contract and may be unwilling to vacate early. In the case of CVS, we hope to negotiate an agreement to purchase their land and lease our new retail space back to them. Also of concern is the provision of adequate off-street parking. The cost of subterranean parking makes in impractical if we want to keep market rate rents within reach of middle-income renters. However, there wouldn’t be enough space for surface parking if we build a mixed-use project with adequate returns on the cost of the land. We aim to incorporate discreet structured parking at or just below the minimum requirements and will potentially have to request a zoning variance. (e) Surrounding Sites: The area around the site is comprised of various uses. The backside of the site, opposite Martin Luther King Jr Highway, meets a residential neighborhood of modest single-family homes. To the West, there is a public school and, to the West, garden style apartments. Across the street, on the other side of Martin Luther King Jr Highway, there is additional strip-style and stand- alone retail with surface parking. The primary challenge here is making the project harmonious with these surrounding uses. A new building should fit within the context of neighboring homes, making the site along G Street 7 not suited for a mid-rise product. We will also need to be particularly cognizant of increased automobile traffic and retail delivery trucks in the area of the school, especially during the arrival and departure times of students. (f) Proposed Program: The proposed program that we’ve come up with is based on where we found the community’s development goals to align with our feasibility analyses. Named after that fabled train station, District Line will be a mixed-use project of apartments over retail. The project will be two buildings separated by a public plaza and promenade. Retail spaces along Martin Luther King Jr Highway will be aimed at a family style restaurant, healthy fast casual restaurants, a café, and boutique clothing and accessories retailers. Each building will have hidden parking behind the retail store fronts with landscaped roofs. The three floors of residential units will be along Martin Luther King Jr Highway, with lower profile walk-up units along G Street to compliment the homes on that street. 2. Market Analysis The subject site is 5922 to 5950 Martin Luther King Jr Highway in Seat Pleasant, Maryland. The site currently has two separate, single-story retail buildings with surrounding surface parking. The city of Seat Pleasant sits just over the eastern border of Washing DC and wishes to transition to a more mixed-income, higher density community. Their goals are documented in the city’s 2018 Master Plan and in a community meeting that I attended on February 2nd, 2020. 8 A market analysis has been conducted to assess where those priorities align with current and projected market conditions. (a) Macroeconomic Conditions: Seat Pleasant is locating within Prince George’s County, Maryland.