Just like, you know, least minimum variance, you know, what, how can we, how can we approach
least minimum variance? And so we started there. And, you know, given that the 76 unit is a 649,
any units that you take off are going to lower that. Yeah. And just when you mentioned least
minimum variance that was in terms of the height correct that if you took off the fourth floor
which is 42 correct you now be under the you'd be now the whole project would be 32 feet
right below so that's why that's right okay and i assume you also looked at it just to see
if there was some way to objection he's leading we we looked at it because we were asked to look
at mr fellman do your question please and let's see if we can't move this witness along no it was
You were looking at least minimum variance, correct?
Correct.
We asked you to look at that, correct?
You asked us to look at least minimum variance.
So we came up with that scenario as a way to test that.
So when Mr. Masters asked Mr. Roller, was it possible to build a building that was 40?
And Mr. Roller, he said, yes, it is possible to build a building with 40 units from a design
perspective.
Is it possible from an economic perspective to build a building that has 40 units on these
four properties?
uh not and deliver a return you would basically lose money
so i assume most developers wouldn't build a building that they would lose money correct
correct okay excuse me excuse me what what would the rents be in your analysis so we so this the
rents that we ran were uh rents that we received from uh the the consultant that the client had
hired last year. And we, we bumped them up slightly based on what's happening in the marketplace.
But 275 a square foot, it was the market rent that we used. And that's based on the unit size
and what we're also experiencing in the project that we were, you know, currently operating close
by. And also included affordable housing component, 20% was affordable.
so is it possible to increase the rents over the period of time
you know it's possible but as developers you know when you're running a viability analysis you've
got to be cautious with how aggressive you get with rents because you don't know if you'll
achieve them so we we have to go by what what's happening in the marketplace so did you project
it out over 10 years we did we did and thank you yeah we projected it out over
10 years increasing the rent 3% per year increasing expenses as well but that
yes we did run that thank you more questions mr. office you also looked at
our building the seven units as approved and what did you conclude it's barely
uh it barely works what do you mean from a well in other words it comes in at a six four nine and
you know part of the reason for that is you know across the board construction costs are high
You know, part of the reason for that is, you know, across the board, construction costs are high.
We use the same rent as we did in the 63.
But you're spreading that those sunk costs, the 1.4 million in acquisition, as well as the site costs over more units.
So it enables the project to to get a better yield, a better cash on cost.
So your conclusion, if we went below the 76, we basically would be done a non-viable project.
Correct.
Yeah, I mean, it's relative. If you drop two units, for example, it might be a 6.4 and it starts to become unviable.
We're already below the 6.5 that you recommend, correct?
That's right. And so when you approach banks with a project with a cash on cost of 6.49, it's going to take a lot of work to get an institution, a bank to lend you the money.
great i would uh i'll stop there um hi um mr uh helpless so um i have a bunch of questions for
you let's start with the acquisition cost um why is there an acquisition cost on this property
uh well we were we were given information from the client that
when they purchased the property, they were given a cost for just the building that is there that
they bought, as well as the rest of the site, and that the variance of the two was approximately
$1.4 million after the final purchase and closing costs, et cetera, and carry costs.
so when mr galley bought the property back i think as 2008 um you were given the information
that he paid 1.4 million for that for those parcels of land correct um i'm going to show you
the actual payment that he made which is two hundred thousand dollars yes i object that's
that's that is not that is what's put on a tax certificate mr feldman mr feldman i gave you a
of leeway mr masters proceed can i um get the screen access please
mr feldman letting me take the screen please sure
Um, Mr. Hawkins, I'm showing you a real estate transfer tax certification from the sale from
Park Pleasant to Chester Realty.
um this is um the chester realty is the entity that owns the parcels that are um at issue here
where the where the rta1 um should be the development but instead it's said to some
multifamily um you see that the actual cash consideration was two hundred thousand dollars
Um, and, uh, that, uh, was here in December, 2012. Um, I also have, um, hang on.
This is, um, from the opinion, um, in litigation called Gelly versus Park Pleasant. It's a U.S.
District Court of Eastern District of Pennsylvania decision from 2011. This was a case where Mr.
Galley and the owners of Park Pleasant were fighting about the terms of his purchase of
their nursing home and the surrounding land. And in the case, in the highlighted area, it shows
on July 14, 2008, Galley and Park Pleasant executed a purchase and sale agreement in which
Park Pleasant agreed to sell Galley the facility, certain parcels of land adjacent to the facility,
and substantially all of the assets of Park Pleasant related to the facility for $7.8 million.
The purchase price contemplated was $6.8 million for the facility and $1 million for the land.
But eventually, as we saw, Mr. Halkwis, Mr. Galley only paid $200,000 for that land.
So let's go back to...
Steve, Mr. Masters, was there an address on that land, that address?
What was the address?
Hang on.
now the what prior the document before oh the the text thing all right yeah sure is there an
oh the the tax thing all right yeah sure is there an address for that yeah
address for that yeah
property location c attached i do not have the attachment
so we can definitely supply that um you know to the board for sure because we're going to
be submitting our findings and conclusions. So, all right, let's go back to your...
Okay, we're going to go back to the parameters. So, acquisition costs.
If we, why would you be adding an acquisition cost that was paid in 2012, no matter what amount it was, into your analysis?
Because you have to factor in that cost that's part of the cost of a development project.
You have to buy the land.
Even though it's a stranded cost from over 10 years ago.
Absolutely.
Okay. So now if we change the cost from $1.4 million to $200,000, does that change any of your cash on cost viability calculations?
Yeah. So, okay. It does, to answer your question.
Let's look at the one for the rental for the duplexes. You have a residential efficiency
rating here for the apartments at 72%, for the duplexes at 90%, and these apartments for 71%.
Can you define what the residential efficiency is and why you have different figures for the
duplexes for the large unit? Sure. The residential efficiency is basically the
leasable square feet divided by the gross square feet. And that's a factor that we always look at
as we analyze development projects. And the 90 percent or the 72 percent is based on the actual
drawing. The 71 percent is based on the actual drawings in which we did take off of the floor
plans we were provided to determine the net square feet. 90 percent on the duplexes is a number that
We don't have plans for the duplexes, but it's based on our experience.
And that's the common stair that goes up that takes away square footage from the project.
So a higher number is better for efficiency in this case, right?
Correct.
Yep, absolutely.
So now we have a lower number for acquisition costs.
That's also better also, right?
Correct.
I object.
That has not been established.
To have a lower acquisition cost is always better.
That's correct, but if you're situating it, if you have to pay less for property,
isn't that better than paying more? Yeah. I mean, can we just confirm that, Mr. Hawquist,
if you pay less for property, that's considered better than paying more for it?
Correct. Okay. So the total cost for the rental will be different because of the lower acquisition
cost, but on the sale, the total cost of the project loss will also be different, right?
Correct. Yeah. Okay. So if we have, if 1.4 million minus 200,000 gives us a variation of 1.2 million,
is that correct? Yes, it is. Okay. So then if we take 1.2 million and we, sorry,
let's try to make this cooperate here and we um look at the bottom um profit cost and profit
loss statement wouldn't that allow the the sale of these duplexes to be in the black and to be
profitable uh it would be profitable but not to a percent if you're going if you're making three
percent on a development project that's not considered viable no bank would finance that
okay did you take into account any financing or subsidies for affordable housing on the duplexes
we did not okay and when you do take into account such subsidies does that change the calculation
for uh the viability of a project we did it would it conceivably would we did not run that so i can't
really comment okay um but you can't say that if there was affordable housing subsidies that that
but it may render the project more viable than it would be without those subsidies.
It's possible.
So in other words, we can't really determine from your table at this point
whether the duplexes are viable or not viable because you didn't...
whether the duplexes are viable or not viable because you didn't factor in all the possible
factors that needed to be put into it. So we did run the project. When we run
viability analyses, we look at two ways of running for acquisition. One is the actual cost you paid
for the property. And one is the fair market value or the appraised value of what that property would
be if you have that information. If you don't have that information, it's what our experience says
that, for example, in a duplex world, what you would typically pay for a duplex per unit.
So we ran it two ways. We ran it fair market value, and then we also ran it at what we were
told the purchase price was. I don't have knowledge of what you were presenting earlier.
We also, in terms of the actual, you know, what's listed as the, for tax purposes or whatever the reasons were, the purchase price, we also run it with zero acquisition.
And when we do that, the reason we do that is we want to understand the impact that the acquisition is having on the overall deal.
So when we ran it at zero acquisition cost, it still didn't work.
Okay, let's talk about the store water.
The duplexes still didn't work.
Let's talk about the store water costs.
Yeah. So did you factor in using any green stormwater infrastructure like green roofs?
Yes. Where is that in your analysis? In the construction cost.
Excuse me. Excuse me. Excuse me. Excuse me. The percentage for the stormwater,
what was it in your total cost? Well, you mean the incentive as far as the
reduction no the total project cost you in your construction cost you something the storm water
cost you something what percentage of that the storm water was um i have to check my estimate
but i think it was 300 000 350 000 something like that so that's about five percent six percent
something like that thank you all right mr thanks mr hulkwuss that's the 300 to 350 000
that's for the duplex project or for the multi-family uh the multi-family was slightly
higher because it was a larger system but we're still displacing 20 000 square feet of area there
was no design done by a civil engineer on the duplexes to determine the exact size based on
our experience uh of these types of projects including the project that we're doing uh
currently the 22 townhomes uh that's the that's the the number that we uh assigned to that but
the 22 townhomes that you're doing you're doing gray infrastructure not green infrastructure is
that correct we were uh the 22 townhomes we at one time had a stormwater management system
gray yeah a cistern which is quite expensive and we're now doing uh green which involves
uh pervious paving um and um you know a different way to manage your utility so um
okay but in this case in this case mr hotquist we're talking about we're talking about um like
twin homes, where all of the yard is permeable grass. And the only impervious part of the
development is the roof. Is that correct? Correct. And the pavement. And the driveway,
I suppose. And the driveway. Yeah, I did a takeoff of the square footage of the
buildings themselves and all the paving that was shown on the plan, which was 20,000 square feet,
which exceeds the threshold for stormwater. And basically what I was told by Mr. Roller was that
we would need a stormwater basin. So we assigned a cost for that stormwater basin.
That's a gray basin. Right. But if in fact there was a, let's say, I'm not even conceding that
there is necessary to have a stormwater management system with these small structures. But if there
was, and we put a green roof on there, then we wouldn't even have to redo the paving to permeable
because we wouldn't need a stormwater management system at that point.
Would that be your understanding?
Well, I mean, I'm not a civil engineer.
I have a rough idea of what we experience,
but I can't really comment on whether or not we would,
that there's adequate square footage on the roof or green roof
to displace a stormwater management system.
I mean, I don't know, do you build single family homes?
Okay. Have you ever seen a stormwater management plan for a single-family home?
Right. These are basically the footprint of a single-family home. Is that correct?
That's correct. Right. So why would there be a stormwater management plan?
That's correct.
Right. So why would there be a stormwater management plan?
Uh, because your development exceeds the square footage, uh, uh, if these are subdivided in each
of these homes as a separate. Steve, he explained it because the collective earth disturbance that
happens on this, on a site, you can't just, okay. Okay. You can't, you can't just, you can't just,
this is not one rta one lot this is 36 000 square feet of property that is being okay all right i'll
thank you i understand that but mr howquez you basically are choosing further add and i can
wait wait a minute wait a minute wait a minute let mr masters continue mr felden i'm going to
give you a chance for a recross okay um so mr howquez so you you've said that you basically
are baking in the higher numbers for stormwater management for these projects because you're
putting in gray cisterns and not using green infrastructure. That's what I heard you say?