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Home My WebLink About2016-1219 Document Submitted at Mtg ' r From John Fields john@golden-fields. net 12/18/2016 To Ashland Planning Department and City Council, I am sorry that I won't be able to meet at the stakeholder's meeting or council presentation with Fregonese and Son this coming Monday. I am an advocate for mixed-use buildings and I believe that the citizens of Ashland would accept the density if it can actually produce some affordability, and it is done in a thoughtful and attractive way. If there is going to be public testimony I would like this read into the pubic record. I think the assumptions of the basic land value of $20 to $25 a sq/ft is currently accurate. It could easily escalate over the year of putting this plan together. I believe that the crucial problem we need to address is how to control development costs. Predictability of the development process is our biggest barrier. In a perfect world we could fix our current planning system. Our hopes, which actually were born when John Fregonese was our planning director in the late '70s, have come to a screeching halt. Our planning process is filled with subjective and overdetailed, overlapping regulations. I believe it is collapsing under its own weight. No one can tell you what will be accepted. It is all risk. I don't know what can actually be built anymore in Ashland. Right now I feel Ashland is at a crisis point in being able to process planning and building applications. They are overwhelmed by the complexity and paralyzed and struggle to make decisions. Predictability is critical in controlling the ultimate construction costs. A three story 20,000 sq/ft, mixed-use building with underground parking and the required elevator, sprinkler and construction type will cost more than $200 sq/ft and if you would like to see a Net energy building, more like $300 sq/ft. That price is continually escalating as we get tighter building code requirements and more vigorous code compliance. When you deduct the common circulation space required and the cost of TI improvements for commercial uses on the ground floor, the return on investment (RO1)expected in the normal world of finance is at least 5% and would put the rents at over $24 sq ft (Annual rent at NNN) average between all leased space. We are not getting that kind of rent anywhere except right on the Plaza for small spaces or upstairs luxury condos. I have been struggling with how to bring these kinds of buildings to fruition. I have only created 8 units of one and two bedroom mixed use apartments on Clear Creek. I would have built out the 6 acres that we have been working since 1999, but the numbers don't work, and the downside risk is enormous. Even though I own the land outright. The building that houses Massif at 496 Oak St. pays $18 sq/ft and they are a solid and hard to find tenant that requires 8,500 sq/ft for one user. Plexis just gave up their 11,000 sq/ft gross lease at 340 A st. and that was a $13 sq/ft gross lease (gross means NNN is included) and Plexis still owns the Oak St Tank and Steel building (another 17,000 sq/ft ) which was also just vacated this month. They moved to White City where there is little regulation, lots of parking, no "charm" and they are celebrating with their reduced cost of less than $8 a sq/ft for a 40,000 sq/ft facility. The majority of their employees can no longer afford to live in Ashland and have already moved to Phoenix or Eagle point and with this move they have probably reduced their carbon foot print in reduced commuting impacts by having their workplace move closer to where they actually live. We even pushed OSF to Talent where they found refuge for a larger scale metal building. Page 1 We have no reliable mass transit. People feel they have to drive to work to save time and expect the convenience. The "New" urban dream does not work without a transportation hub. You don't get transportation systems without 5,000 people per sq/mile. We are a long way from that and we are caught in the perennial "chicken and the egg" syndrome in trying to create a historic and a denser urban growth pattern. Not to put down the South end of town, but it is less desirable than the downtown central core. I built the Miller Paint building six or seven years ago. There are ten 1000 sq/ft lofts above 10,000 sq/ft of commercial. That was built when the economy was pretty sluggish. Planning costs, site development, land costs, and turn over time eat up the profit on real-estate. Although I built that as 10 condos (a few owned but the majority are currently renting for $1200 a month each), the construction cost including permits and the structure was only $125 sq/ft. But when you add in the land, the parking, utilities and other site improvements you can see how all the planning delays and an economic downturn, drove the building's owners into bankruptcy. Site development, building and land costs are incredibly sensitive to time delays. It is crippling. Look how long it has taken the commercial development that was built where Hillside Motel was located (Walker and Siskiyou). It was idle for more than 10 years with no original tenant improvements happening. Just sitting there empty. And where the bowling alley was torn down behind the Market of Choice, it is still limping along after 10 years. How many one bedroom units that go for a $1000 a month will we be able to absorb? Right now I am renting the equivalent units for $800 to $900 a month. The demand feels strong. We always have a waiting list. How high could I raise the rents? What if I had underground parking, a building with an elevator, mass transit at the curb, a hip coffee shop down stairs? They were built before mixed use was required to have fire sprinklers. Now sprinklers are required no matter what size the building is. We are talking about a real City to absorb much of this. It might happen someday, but without an expanding economy with a family wage job base, it is going to be very slow. My biggest concern is that we will try to do what we did at Croman. How can we not mention this adjacent neighborhood plan in this discussion? If we disregard the actual economics and need of new buildings and try to force the market to accept the higher end, more capital intensive construction we will be blocking the small scale investment that Ashland is actually looking for. Like I said when Croman headed down a Portland style development pattern, "this is not what Ashland is or what it needs". Maybe in 30 years, but are we that sure of the future? The realities of the economics of real estate is that real improvements depreciate quickly, investment wise. Buildings get remodeled, torn down and the most important thing is that you need to make sure the building stays at full occupancy. Transportation hubs, densities and standards that will not allow incremental development, and meet the pace of our immediate needs, becomes an obstacle to allowing anything to actually happen. Buildings and Cities learn over time. They organically adapt to changing values, technology and need. Ashland is growing at less than 1% a year, and there is a small but growing population that wants a more urban lifestyle. But they don't have money, and I think a lot of people still dream of a yard, a garden, less density and that is why they want to live in a small town. Let me summarize the direction I think we should go. Let's slow down our expenditures for comprehensive overlay zoning and work out how we can make the permitting process for what we have Page 2 much more transparent and much easier to get through. We look for ODOT grant money and seed money for these master-planned projects, but there is a real overhead cost to these explorations. We have a lot of plans sitting on the shelf. They don't get "legs" and they languish, like the railroad district plan, without any action. I feel the current complexity and overlapping regulations and the inherent cost and time it takes to figure out what a developer can actually do is our biggest impediment to affordability. I say stop this dreamy, imagining and fix the very real system that is broken. If we want affordable rental housing I think as a City we need to build it. The idea that there is a carrot that will have private development do the work for us is pretty naive. Either the City will become an active partner, offering real incentives, and commit to building some affordable housing or we should get over our hand wringing guilt. Rather than having an affordable housing staff imagining an affordable unit, we have to build them. The idea that we can create more regulatory barriers (the stick) to force developers to build more affordable housing is ridiculous, and it will only backfire. Developers are building Condos and traveler accommodations because that is the one commodity that has the highest marketable value. Rental housing and the risk of commercial development is less profitable and more risky. Sorry I can't make, the upcoming study session. Let's get down to fixing this broken system and stop putting lipstick on this pig. It's not as much fun, but we have to get past our denial that is crushing the vitality of Ashland. Sincerely, John Fields 845 Oak Street Ashland, Oregon 97520 Page 3