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2023.01.24 Agenda Packet - Special Joint Meeting
Special Joint Meeting of the City Council and Planning Commission Agenda Tuesday, January 24, 2023 5:30 PM Windmill Community Room, Diamond Bar City Hall 21810 Copley Drive, Diamond Bar, CA 91765 PUBLIC ADVISORY: Consistent with State Assembly Bill 361, members of the City Council and Planning Commission may be present or participate telephonically. Members of the public are encouraged to participate and address the City Council and Commission during the public comment portion of the meeting either in person or via teleconference. If you would like to attend the meeting in person, please note that face coverings are recommended. How to Observe the Meeting From Home: The public can observe the meeting by calling +1 (914) 614-3221, Access Code: 788-841-926 OR visit: https://attendee.gotowebinar.com/register/3830145885407184217. How to Submit Public Comment: The public may provide public comment by attending the meeting in person, by sending an email, or by logging into the teleconference. Please send email public comments to the City Clerk at cityclerk@DiamondBarCA.gov by 4:00 p.m. on the day of the meeting and indicate in the Subject Line “FOR PUBLIC COMMENT.” Written comments will be distributed to the Council Members and Commissioners, noted for the record at the meeting and posted on the City’s official age nda webpage as soon as reasonably practicable (found here: http://diamondbarca.iqm2.com/Citizens/Default.aspx). The public may log into the meeting through this link: https://attendee.gotowebinar.com/register/3830145885407184217. Members of the public will be called upon one at a time during the Public Comment portion of the agenda. Speakers are limited to five minutes per agenda item, unless the Mayor determines otherwise. American Disability Act Accommodations: Pursuant to the Executive Order, and in compliance with the Americans with Disabilities Act, if you need special assistance to participate in the Council Meeting, please contact the City Clerk’s Office (909) 839- 7010 within 72 hours of the meeting. City Council video recordings with transcription will be available upon request the day following the Council Meeting. The City of Diamond Bar thanks you in advance for taking all precautions to prevent spreading the COVID-19 virus. RUTH M. LOW Council Member CHIA TENG Council Member STEVE TYE Council Member ANDREW CHOU Mayor STAN LIU Mayor Pro Tem City Manager Dan Fox • City Attorney Omar Sandoval • City Clerk Kristina Santana DIAMOND BAR CITY COUNCIL MEETING RULES Welcome to the meeting of the Diamond Bar City Council. Meetings are open to the public and are broadcast on Spectrum Cable Channel 3 and Frontier FiOS television Channel 47. You are invited to attend and participate. Copies of staff reports or other written documentation relating to agenda items are on file and available for public inspection by contacting the Office of the City Clerk. If requested, the agenda will be made available in an alternative format to a person with disability as required by Section 202 of the Americans with Disabilities Act of 1990. If you have questions regarding an agenda item, please contact the City Clerk at (909) 839-7010 during regular business hours. PUBLIC INPUT Members of the public may address the Council on any item of business on the agenda during the time the item is taken up by the Council. In addition, members of the public may, during the Public Comment period address the Council on any Consent Calendar item or any matter not on the agenda and within the Council’s subject matter jurisdiction. Any material to be submitted to the City Council at the meeting should be submitted through the City Clerk. Speakers are limited to five minutes per agenda item, unless the Mayor determines otherwise. The Mayor may adjust this time limit depending on the number of people wishing to speak, the complexity of the matter, the length of the agenda, the hour and any other relevant consideration. Speakers may address the Council only once on an agenda item, except during public hearings, when the applicant/appellant may be afforded a rebuttal. Public comments must be directed to the City Council. A person who disrupts the orderly conduct of the meeting after being warned by the Mayor or the Mayor’s designee that their behavior is disrupting the meeting, may result in the person being removed from the meeting. INFORMATION RELATING TO AGENDAS AND ACTIONS OF THE COUNCIL Agendas for regular City Council meetings are available 72 hours prior to the meeting and are posted in the City’s regular posting locations, on DBTV Channel 3, Spectrum Cable Channel 3, Frontier FiOS television Channel 47 and on the City’s website at www.diamondbarca.gov. The City Council may take action on any item listed on the agenda. HELPFUL PHONE NUMBERS Copies of agendas, rules of the Council, Video of meetings: (909) 839-7010 Computer access to agendas: www.diamondbarca.gov General information: (909) 839-7000 Written materials distributed to the City Council within 72 hours of the City Council meeting are available for public inspection immediately upon distribution in the City Clerk’s Office at 21810 Copley Dr., Diamond Bar, California, during normal business hours. THIS MEETING IS BEING RECORDED AND BY PARTICIPATING VIA TELECONFERENCE, YOU ARE GIVING YOUR PERMISSION TO BE TELEVISED. THIS MEETING WILL BE RE-BROADCAST EVERY SATURDAY AND SUNDAY AT 9:00 A.M. AND ALTERNATE TUESDAYS AT 8:00 P.M. AND IS ALSO AVAILABLE FOR LIVE VIEWING AT HTTPS://ATTENDEE.GOTOWEBINAR.COM/REGISTER/3830145885407184217 AND ARCHIVED VIEWING ON THE CITY’S WEB SITE AT WWW.DIAMONDBARCA.GOV. CITY OF DIAMOND BAR SPECIAL JOINT MEETING OF THE CITY COUNCIL AND PLANNING COMMISSION AGENDA January 24, 2023 1. CALL TO ORDER 5:30 p.m. 2. ROLL CALL City Council: Ruth M. Low, Chia Teng, Steve Tye, Mayor Pro Tem Stan Liu, Mayor Andrew Chou Commissioners: Naila Barlas, Mahendra Garg, William Rawlings, Vice Chair Kenneth Mok, Chair Raymond Wolfe 3. STUDY SESSION 3.1 TOWN CENTER SPECIFIC PLAN – DISCUSSION OF ALTERNATIVE LAND USE STRATEGIES Recommended Actions: Receive the staff and consultant presentations; receive public comments; and provide direction as necessary and appropriate. 4. ADJOURNMENT Agenda #: 3.1 Meeting Date: January 24, 2023 CITY COUNCIL STUDY SESSION REPORT TCSP STUDY SESSION | January 24, 2023 Page 1 of 7 RECOMMENDED ACTION: Receive the staff and consultant presentations; receive public comments; and provide direction as necessary and appropriate. INTRODUCTION: Tonight’s joint meeting provides the first formal opportunity for the project team to share with the City Council and Planning Commission the work that has been completed and underway during the first six months of the Town Center planning effort. The purpose of this evening’s discussion is twofold: 1. To bring the Council and Commission up to date on the tasks completed on the Town Center Specific Plan (TCSP) thus far, as well as the work that the project team is currently engaged in; and 2. To invite feedback and direction on any of the topics discussed. Staff wishes to hear if the Council Members and Commissioners feel that the project team is on the right track with respect to their expectations and community’s input; or if course corrections should be taken to align the project with those expectations. RECAP: General Plan 2040 The vision to create a downtown in Diamond Bar began to take shape during the General Plan Update process that kicked off in 2016. Early in the process, residents expressed a desire to establish a downtown, or “Town Center” in Diamond Bar: a walkable “place” with entertainment, retail, restaurants, community gathering spaces and urban housing opportunities. Participants in the General Plan Update process cited various examples of thriving historic, revitalized and newly created downtowns in nearby communities that they patronize regularly, including Brea, Chino Hills, Claremont, Fullerton and Monrovia. Several sites within the City were initially identified and discussed as potential locations for the Town Center. Ultimately, the 45-acre 3.1 Packet Pg. 4 TCSP STUDY SESSION | January 24, 2023 Page 2 of 7 commercial district along Diamond Bar Boulevard, between Golden Springs Drive and the SR-60 Freeway would be designated as the Town Center Mixed-Use Focus Area in the General Plan, which was adopted by the City Council in December 2019. Urban Land Institute TAP Moving ahead to 2021, the City engaged the Los Angeles Chapter of the Urban Land Institute (ULI-LA) to assemble a Technical Assistance Panel (TAP) to gain a better understanding of the market possibilities, economic development strategies, and other tools that should be deployed to implement the General Plan’s vision for the Town Center. The TAP—which was comprised of practitioners in planning, architecture, development, economics and land use law—convened during the week of April 12-16, 2021. Among the key takeaways from the TAP process were that the panel agreed that the City’s vision for the Town Center is viable, and provided recommendations to achieve the vision, including creating a Specific Plan to guide and regulate the development of the Town Center. The TAP’s findings were published in a ULI-LA report in June of 2021. Specific Plan In May 2022, the City entered into a Consultant Services Agreement for Torti Gallas + Partners to prepare the TCSP. Over the past summer, the following major tasks were completed: • Late June 2022 - The TCSP website was launched (www.downtown4db.com) to keep the public informed about the project and upcoming events. To date, the website has more than 460 subscribers that have signed up to receive email and text alerts. • July 21, 2022 - A community workshop was held at the Diamond Bar Center to introduce the City’s constituents to the Specific Plan process. The attendees participated in group activities designed to encourage an open exchange of ideas about the desired look, feel and palette of land uses for the new downtown. More than 100 Diamond Bar residents attended the workshop. • August 22-26, 2022 - A weeklong design charrette took place at the City Hall Windmill room. The design exercise kicked off by incorporating the public input from the prior month’s workshop into drawings and sketches. During that week, the Torti Gallas team turned the Windmill Room into a public design studio, during which visitors could stop in, meet with the architects and designers, critique the design concepts, and even mark up the design team’s drawings, or provide their own sketches. During the charrette, as well as the weeks leading up to it, the project team conducted stakeholder interviews with most of the Town Center property owners and community leaders. Evening presentations took place on the Monday, Wednesday and Friday of the charrette to share with the public how the design concepts and alternatives evolved over the course of the weeklong exercise. • September 2022 - An Existing Conditions & Market Demand Analysis (Attachment 2) was completed to assess the demographic and market factors that will provide both 3.1 Packet Pg. 5 TCSP STUDY SESSION | January 24, 2023 Page 3 of 7 the opportunities and constraints to be addressed in order to achieve the long-term vision for the Town Center. Infrastructure assessments were also performed that will lead to the formulation of public improvement plans and criteria to support the redevelopment of the study area. DISCUSSION: Alternative Specific Plan layouts The information, data and ideas amassed primarily during the community workshop, design charrette and stakeholder interviews coalesced into four alternate street and block layouts for the Town Center (numbered 1, 2a, 2b and 4), which are illustrated Attachment 1. Common features among these alternatives include a “main street” or esplanade that runs along the Sprouts, Ross and Providence frontages; at least two new cross streets that divide the Diamond Bar Boulevard corridor into smaller blocks and strengthen the connection between the east and west sides of the corridor; and a “Civic Building,” which accommodate such uses as a community center, cinema, performing arts center, etc. The Civic Building is presented as a “bouncing ball,” so that its eventual location (should it become a reality) does not have to be determined yet. Alternates 2a, 2b and 4 also feature a grand stairway that connects the higher-elevation properties along Golden Springs Drive to the lower-elevation properties to the north. Influences for this feature include the Spanish Steps in Rome. The grand stairway connects to the esplanade, and is oriented to open up a vista to the San Gabriel Mountains. The project team proposes that Alternate 4 be selected as the Preferred Alternative, at least in terms of its street and block layout, because it seems to express the desired “downtown feel” in the most effective manner. Residential and Commercial Buildout Numbers General Plan 2040 and ULI TAP Report The current General Plan established a maximum residential density of 20 dwelling units per acre and a floor-to-area ratio (FAR) of 1.5. These policies limit the area’s residential buildout to 900 dwelling units, while facilitating upwards of 1.8 million square feet of commercial space. However, the conclusions reached in the TAP report were that there may never be sufficient demand to support commercial development of such a magnitude, and at the current density limit of 20 units per acre, developers would not likely be able to find it economically feasible to incorporate commercial floor space into their projects, let alone the public spaces and amenities that are key to Diamond Bar’s vision for the Town Center. The TAP’s speculative pro forma suggests that a more feasible buildout scenario would consist of about 1,500 residential units (averaging 33.3 units per acre) and about 600,000 square feet of commercial space. The TAP report concluded that such a mix 3.1 Packet Pg. 6 TCSP STUDY SESSION | January 24, 2023 Page 4 of 7 would realize a positive net fiscal impact to the City in increased property and sales tax revenues. Moreover, because the residential component of a mixed-use development is what largely subsidizes the project’s infrastructure and other required improvement costs, the private sector can be expected to deliver higher-quality public realm amenities when more residential units are allowed. Housing Element The recently-adopted and State-certified Housing Element Update requires the City to commit to rezoning the Town Center Mixed Use District to allow residential development at a density of 30 units per acre1, which would yield a residential buildout of 1,350 units. Incidentally, the other two mixed-use districts established in the General Plan already allow residential development at a density of 30 units per acre.) Market Demand Analysis and Stakeholder Feedback RCLCO Real Estate Consulting prepared a Market Demand Analysis (Attachment 2) in September 2022 for the Town Center planning area (RCLCO also prepared the preliminary economic analysis for the ULI TAP). RCLCO’s recommended development program for the Town Center includes 1,875 housing units and approximately 446,000 square feet of commercial space at buildout. The TCSP consultant team conducted stakeholder interviews with most of the project area property owners during the week of the charrette. The responses from owners with development experience indicated that they would not consider redeveloping their properties if they were limited to 30 residential units per acre. TCSP Program Alternatives Torti Gallas developed three programmatic alternatives to provide staff, the public and the City decisionmakers some insight as to how different intensities of buildout might be reflected in the built environment. Site diagrams for each alternative are provided in Attachment 3. • Scenario 1 consists of approximately 1,350 residences, 403,000 square feet of commercial space and 97 hotel rooms (i.e., the current Best Western hotel). The residential count reflects the minimum overall density of 30 units per acre required pursuant to the Housing Element. • Scenario 2 consists of approximately 1,800 residences, 402,000 square feet of commercial space and 97 hotel rooms. The residential count is based on RCLCO’s recommended development program in its September 2022 Market Demand Analysis. • Scenario 3 consists of approximately 2,055 residences, 419,000 square feet of commercial space and, again, 97 hotel rooms. The residential unit count was arrived at following further consultation with RCLCO as the maximum residential 1 Rezoning can be accomplished through a Specific Plan, which will be the case with the TCSP. 3.1 Packet Pg. 7 TCSP STUDY SESSION | January 24, 2023 Page 5 of 7 buildout the market may be able to bear. Staff proposes that 2,055 dwelling units should be used as the maximum residential development capacity for CEQA purposes. Even if the Specific Plan is ultimately approved with a lower residential buildout limit, the “worst case” scenario should be evaluated for potential environmental impacts. Residential Density vs. Residential Buildout Cap Regardless of how many residential dwellings the City Council ultimately approves when the TCSP is adopted, there are two basic regulatory approaches to allocating residential development in the Town Center: • The first would be to establish a fixed density for each development. For example, if the maximum allowable residential density in a mixed-use project is 40 units per acre, and a developer submits an application for a five-acre site, then a maximum of 200 dwelling units would be permissible on the project site.2 The maximum buildout for the Town Center in this scenario would be 1,800 dwelling units. • The second approach would be to establish the buildout cap for the TCSP project area as a whole, but not expressly limit the density on individual mixed-use projects. In this scenario, individual projects can be built at higher densities, but still be limited by other development standards, such as height, parking, open space requirements, street dedications, etc. If the buildout cap is 1,800 units, the average density throughout the Town Center would be 40 units per acre—as it would be in the first example—but individual projects would be built at a variety of densities. As development progresses, a variety of housing types and densities are likely to materialize throughout the Town Center, from mid-rise apartments, to rowhouses, and possibly senior housing. This diversity would be driven by market forces that evolve over time. As such, staff’s preferred approach in the Specific Plan regulations is to allow flexibility in the densities of individual projects, provided that the to-be-determined buildout number is not exceeded. Regulations limiting the height, mass and bulk of buildings will control the density of projects, but staff will also study placing an upper limit on the number of units per acre for individual developments. Affordable Housing The Housing Element commits the City to facilitate the production of housing for low- and very low-income households through its zoning regulations. Income categories and affordable housing costs are summarized in the table below: 2 For the sake of simplification, this example does not consider the additional density that must be granted under State law if low-, very-low and/or extremely-low housing units are proposed. 3.1 Packet Pg. 8 TCSP STUDY SESSION | January 24, 2023 Page 6 of 7 2020 County Median Income = $77,300 Income Limits* Affordable Rent Affordable Price (est.) Extremely Low (<30%) $33,800 $845 * Very Low (31-50%) $56,300 $1,407 * Low (51-80%) $90,100 $2,252 * Moderate (81-120%) $92,750 $2,319 $375,000 Above moderate (120%+) Over $92,750 Over $2,319 Over $375,000 Assumptions: -Based on a family of 4 and 2020 State income limits -30% of gross income for rent or principal, interest, taxes & insurance plus utility allowance -10% down payment, 3.75% interest, 1.25% taxes & insurance, $300 HOA dues * Because of State adjustments in high housing cost areas, some of these income limits are higher than the percentages of median income Source: Cal. HCD; JHD Planning LLC, Diamond Bar Sixth Cycle Housing Element California Density Bonus Law provides a complex set of incentives to encourage developers to build affordable housing, along with a complex set of “concessions” from zoning regulations that cities must allow based on the theory that such concessions will make the production of affordable housing economically feasible. A Guide to the California Density Bonus Law (Attachment 4) provides a detailed overview and explanation of how developers can implement the law’s provisions into their projects. Despite these State-mandated provisions to incentivize the production of affordable housing, for-profit developers remain reluctant to incorporate income-restricted units into their projects. For this reason, several California cities have adopted “inclusionary housing” ordinances. Local inclusionary housing laws mandate that some percentage of residential developments be restricted for sale or rent to lower-income households, along with covenants to maintain those restrictions for 30 or more years. Staff proposes to incorporate inclusionary housing requirements into the TCSP regulations. Road Diet During the community workshop and design charrette, the concept of placing the segment of Diamond Bar Boulevard through the Town Center on a “road diet” received a good deal of interest. The typical objective of a road diet is to reduce the width of roadway pavement to accommodate other functions, such as wider sidewalks and other pedestrian amenities, safer bicycle paths, and beautification. The implementation of road diets can also run afoul of motorists when lanes are reduced and congestion increases, as the news media has reported in recent years. The project team is currently evaluating how the current Complete Streets design for the Town Center segment of Diamond Bar can be modified to accommodate the Town Center’s future street and block grid. The team is also studying road diet opportunities for Diamond Bar Boulevard that will make the street more walkable without reducing lanes. Ideas under consideration include narrowing or eliminating the center medians and reducing the widths of the travel lanes. Preliminary concepts will be presented during the joint meeting for discussion and feedback. 3.1 Packet Pg. 9 TCSP STUDY SESSION | January 24, 2023 Page 7 of 7 NEXT STEPS: A second Community Workshop is anticipated to be held in the spring to show how the public’s input from the first workshop, design charrette and surveys has been addressed through plans, renderings draft regulations and design guidelines. Meanwhile, the traffic consultants are completing the technical analyses needed to commence the CEQA process. Staff also recommends at least one more joint study session within the next few months, prior to the publication of the draft Specific Plan and EIR documents. The project remains on schedule, and the team is working toward scheduling adoption hearings by the end of the year. Prepared by: _________________________ Greg Gubman, AICP Community Development Director Attachments: 1. 3.1.a Site and Architectural Concepts for the Town Center 2. 3.1.b Existing Conditions & Market Demand Analysis 3. 3.1.c Illustrative Project Buildout Scenarios 4. 3.1.d Guide to the California Density Bonus Law by Goetz & Sakai 3.1 Packet Pg. 10 Town Center Specific Plan Study Session –January 24, 2023 3.1.a Packet Pg. 11 1.Make the Town Center a Great Neighborhood with a Sense of Place 2.Physical Design and Programming supports Health and Wellbeing 3.Make the Place Walkable 4.Provide for Car-Lite / Car-Optional Living 5.Great Public Spaces, Parks and Regenerative Landscapes 6.Accommodate a Range of Densities, Housing Types and Level of Affordability 7.Provide Flexibility for the Future –Particularly for Retail and Commercial Space 8.Developable in Phases List of Goals 3.1.a Packet Pg. 12 Opportunity:Make a Great Neighborhood w/ Sense of Place Downtown Pasadena Downtown Brea Old Town Monrovia Claremont Village 3.1.a Packet Pg. 13 State Street, Santa Barbara, CA Generous sidewalks Street Trees Spatial Enclosure Opportunity Make Walkable Sidewalks 3.1.a Packet Pg. 14 Diamond Bar Boulevard - Proposed 3.1.a Packet Pg. 15 Alternate 1Alternate 1 Civic Building 3.1.a Packet Pg. 16 Alternate 2a - Esplanade Civic Building 3.1.a Packet Pg. 17 A Main Street 3.1.a Packet Pg. 18 Alternate 2B - Esplanade Civic Building 3.1.a Packet Pg. 19 An Esplanade 3.1.a Packet Pg. 20 Alternate 4 3.1.a Packet Pg. 21 Alternate 4 –Public Space 3.1.a Packet Pg. 22 Suggested Preferred Plan 3.1.a Packet Pg. 23 Aerial View of Proposed Town Green 3.1.a Packet Pg. 24 Diamond Bar Blvd. Existing 3.1.a Packet Pg. 25 Diamond Bar Blvd. improvements -Vision 3.1.a Packet Pg. 26 Diamond Bar Blvd. improvements –Road Diet Concept Total crossing distance reduced from 86’ to 65’ 3.1.a Packet Pg. 27 Diamond Bar Boulevard -Existing 3.1.a Packet Pg. 28 Diamond Bar Boulevard - Proposed 3.1.a Packet Pg. 29 Paseo Colorado, PasadenaParagon, Monrovia 3.1.a Packet Pg. 30 Trio Apartments, Pasadena Del Mar Station, Pasadena 3.1.a Packet Pg. 31 Malden Station, Fullerton Metro Village, Baldwin Park 3.1.a Packet Pg. 32 EXISTING CONDITIONS & MARKET DEMAND ANALYSIS DIAMOND BAR TOWN CENTER DIAMOND BAR, CALIFORNIA Prepared for Torti Gallas + Partners September 6, 2022 3.1.b Packet Pg. 33 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 2 Since 1967,RCLCO has been the “first call”for real estate developers,investors,the public sector,and non-real estate companies and organizations seeking strategic and tactical advice regarding property investment,planning,and development. RCLCO leverages quantitative analytics and a strategic planning framework to provide end-to-end business planning and implementation solutions at an entity,portfolio,or project level.With the insights and experience gained over 50 years and thousands of projects–touching over $5B of real estate activity each year–RCLCO brings success to all product types across the United States and around the world. Learn more about RCLCO at www.RCLCO.com. ABOUT RCLCO REPORT AUTHORS Project Director: Derek Wyatt,Managing Director ►P:(310)203-3035 |E:DWYATT@RCLCO.COM Project Manager: Jordan LaMarche,Vice President ►P:(310)752-9032 |E:JLAMARCHE@RCLCO.COM Additional Authors: Tyler Fischer,Associate 3.1.b Packet Pg. 34 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 3 CONTENTS KEY FINDINGS 4 REGIONAL OVERVIEW 10 DEMOGRAPHICS & EXISTING CONDITIONS 14 MULTIFAMILY COMPETITIVE ENVIRONMENT 31 FOR-SALE COMPETITIVE ENVIRONMENT 44 SENIOR HOUSING 50 RETAIL MARKET OVERVIEW 54 HOSPITALITY COMPETITIVE MARKET 65 OFFICE COMPETITIVE MARKET 70 DISCLAIMERS 74 3.1.b Packet Pg. 35 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 4 KEY FINDINGS 3.1.b Packet Pg. 36 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 5 BACKGROUND & OBJECTIVES BACKGROUND & OBJECTIVES Torti Gallas +Partners (“Client”)was retained by the City of Diamond Bar to prepare the Town Center Specific Plan (TCSP).The TCSP will serve as a long-range plan to transform an aging commercial area into a mixed-use urban village.RCLCO has been commissioned as a sub-consultant by Torti Gallas +Partners to complete a market demand analysis,fiscal impact analysis,and existing conditions analysis. RCLCO is providing initial findings relevant to the existing conditions of the Diamond Bar Town Center,the City of Diamond Bar,as well as an analysis of broader market trends. This component of the study focuses specifically on housing,population,demographic, and social characteristics,economic conditions and factors,and local business conditions. RCLO also identified economic and demographic drivers of growth,how they impact the quantity and quality of demand for residential and commercial land uses,and where that demand most desires to locate.The interrelationship of these factors inform an assessment of supply-demand dynamics underpinning the optimal development potential for the Town Center. 3.1.b Packet Pg. 37 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 6 MARKET OPPORTUNITY THE SUBJECT SITE IS HIGHLY ACCESSIBLE AND WELL- POSITIONED IN AN AFFLUENT CITY IN THE GROWING SAN GABRIEL VALLEY ►The proposed Diamond Bar Town Center is located adjacent to California 57 and California 60 providing convenient access to the rest of the San Gabriel Valley to the west,Orange County to the south,and the Inland Empire to the east.The site benefits from strong visibility along the highway,as well as positioning along major thoroughfares Diamond Bar Blvd and Golden Springs Dr.within the City of Diamond Bar. ►Given the city’s current lack of a central retail corridor or true town center,the Diamond Bar Town Center has the opportunity to capture a broad demand pool for retail,dining,hospitality,and multifamily housing with limited competition. ►Diamond Bar is a highly affluent city with over 67%of residents earning more than $75,000 annually,significantly higher than the San Gabriel Valley (52%)and Los Angeles County (50%).Average household incomes within Diamond Bar are also substantially greater than surrounding areas at nearly $130,000 annually compared to $104,000 in the San Gabriel Valley and $105,000 in Los Angeles County. ►Households earning over $200,000 annually are the fastest growing segment within Diamond Bar while all households earning less than $100,000 are projected to shrink over the next five years as the area grows increasingly affluent. STRONG OPPORTUNITY FOR RESIDENTIAL –TOWN CENTER COULD SUPPORT OVER 2,000 HOUSING UNITS ►Development of new housing in Diamond Bar has been limited over the past two decades.No new apartment communities have delivered in the city since 1989 and building permits within the City decreased precipitously between 1980 and 2000 before receding again following the financial crisis in 2008. ►The limited inventory of apartments within Diamond Bar has led to historically low vacancies of just 0.8%.Tight vacancies combined with strong rent growth averaging 5.3%between 2017 and 2021 indicate strong demand for new multifamily housing. ►While these analyses typically utilize historical patterns of new construction and housing demand to project future demand,RCLCO believes the market has been underdeveloped for several decades and harbors inherent unmet demand.The aging population of Diamond Bar is resultant of a lack of new housing and the introduction of a highly stratified and master-planned housing program should induce the latent demand within the region that has been building. ►The proposed program includes diversified rental housing options ranging including 360 workforce apartments,440 standard apartments,320 premium apartments,125 rental townhomes,180 senior housing units,and 310 affordable units (50%AMI).RCLCO recommends each product type be sized such that it achieves stabilization in two years with staggered delivery dates. ►The for-sale program at the Subject Site includes 200 townhomes and 120 stacked flat condominiums.RCLCO projects that staggered sales of each product type are likely to be completely absorbed over ten years. 3.1.b Packet Pg. 38 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 7 MARKET OPPORTUNITY A VIBRANT RETAIL CORE IS THE FOUNDATION OF SUCCESSFUL MIXED-USE TOWN CENTERS ►The retail market in the San Gabriel Valley is strong with vacancies currently at 4.9%and average lease rates of nearly $27 NNN per square foot.In Diamond Bar,NNN lease rates are 28%higher than the surrounding Southeast San Gabriel Valley,$25.16 compared to $19.70 per square foot.However,retail rents in the existing Diamond Bar Town Center are much lower at just $18.80 per square foot. ►Diamond Bar has experienced limited retail deliveries since 2010 which has reduced vacancies to just 6.7%as the area enjoyed strong,positive net absorption over the past decade. ►Retail space in mixed-use developments benefits from synergies created through the on-site housing and increased demand from the broader community generated through careful programming.Comparable retail town centers,such as NoHo West in Los Angeles,Alhambra Place,Santana Row in San Jose,and Center Street Anaheim,are performing well,attracting notable tenants and achieving rents up to $50 NNN per square foot per year on average. ►RCLCO’s analysis suggests the Diamond Bar Town Center should reposition some existing retail as a ground-floor retail component of proposed multifamily housing.The approximately 125,000 square feet of ground-floor retail would likely be oriented towards residents with retail,grocery,and services programming.An additional 321,000 square feet of retail is proposed as the front- facing,retail town center.The town center would benefit from an entertainment anchor,such as a movie theater,as a focal point,increasing the draw to the area and inducing additional demand. ►The careful programming and reorientation of retail at the Diamond Bar Town Center creates the opportunity to generate significantly higher retail rents. HOTEL COMPLEMENTS THE MIXED-USE ORIENTATION OF THE SITE ►The existing hotel at the Diamond Bar Town Center,the Best Western Diamond Bar Hotel &Suites,is a 97-room midscale hotel.Constructed in 1988,the Best Western is one of the older hotel properties in the area,but is well positioned off the highway to provide good visibility and accessibility to the future Diamond Bar Town Center. ►The current hospitality pipeline for the Southeast San Gabriel Valley is historically large with one property with 148 rooms under construction and an additional five properties in various stages of planning,representing an additional 576 hotel rooms. ►While the existing Best Western Diamond Bar could potentially reposition as a more elevated brand and increase the number of rooms offered,the historically outsized pipeline presents additional challenges as the property would likely face increased competition in the higher tier as properties begin to deliver. ►RCLCO analyzed demand for hotel rooms in the Southeast San Gabriel Valley and projects that there is demand for 220 rooms in excess of existing and planned hotels over the next decade.However,given the existing hotel property and the outsized pipeline,RCLCO does not recommend adding additional hotel space to the Diamond Bar Town Center. OFFICE MARKET FUNDAMENTALS INDICATE POOR OPPORTUNITY AT THE DIAMOND BAR TOWN CENTER ►Current market dynamics do not appear to support office space at the Diamond Bar Town Center.Office vacancies in Diamond Bar have been rising since 2018 and are currently at a historic high of 12.2%with negative net absorption over each of the previous four years.Further,office development in Diamond Bar has been limited over the past decade,indicating that it is not a recent oversaturation of product leading to increasing vacancies.As such,RCLCO does not recommend including new office space in the Diamond Bar Town Center. 3.1.b Packet Pg. 39 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 8 SITE CONTEXT Image Source: Esri STRENGTHS ►Affluent Neighborhood:The average household income in Diamond Bar in 2021 was just under $130,000,far exceeding the average household income of $104,000 in the San Gabriel Valley,and $113,000 in Los Angeles County.With strong median home values and affluent,middle-aged residents,Diamond Bar presents a strong opportunity for the Diamond Bar Town Center to capture spending from this key demographic. ►Visibility and Access:Located adjacent to two major area freeways,California 60 and California 57,the Diamond Bar Town Center is visible and accessible from major freeways.Further,the site is easily accessible to residents of the San Gabriel Valley as well as the eastern portions of San Bernardino and Riverside counties. OPPORTUNITIES ►Limited Multifamily Housing:Diamond Bar has not had the delivery of new multifamily rental product in over 15 years and currently only has 500 market-rate multifamily rental units across three properties.Given the mixed-use concept,the Diamond Bar Town Center redevelopment has the opportunity to deliver high-quality multifamily units that should provide synergies across the retail offerings. ►Retail Gap:The City of Diamond Bar is currently underserved with retail establishments.Average retail sales per capita,per Esri,in Los Angeles County is approximately $14,000 annually compared to just over $10,000 per capita annually in Diamond Bar.With neighboring cities,Covina ($21,000),San Dimas ($16,000),and West Covina ($14,000)generating much greater retail sales per capita,the Diamond Bar Town Center is positioned to capture a greater portion of local spending and fill a sizeable retail gap in the city of Diamond Bar. CHALLENGES ►Community Serving Retail:Retail establishments currently located in the Diamond Bar Town Center are largely community and commuter serving.The majority of these business do not attract patronage from outside the immediate Diamond Bar area,and those that do are likely capturing spending from commuters due largely to the site’s proximity to several major freeways (McDonald’s,Chevron,Shell,7-Eleven).The retail offerings at the site will likely need to be elevated and represent a broader array of shopping options to transform the site into a retail destination. Map of Diamond Bar Town Center 3.1.b Packet Pg. 40 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 9 RECOMMENDED DEVELOPMENT PROGRAM Source: RCLCO THERE IS A STRONG OPPORTUNITY FOR THE DIAMOND BAR TOWN CENTER TO BE DEVELOPED AS A RESIDENTIAL ANCHORED, MIXED-USE DISTRICT WITH COMPLEMENTARY RETAIL SPACE AND HOTEL ROOMS ►RCLCO believes the Subject Site can support over 1,200 market-rate rental units,310 affordable rental units,and 320 for-sale properties over the next decade. ►The site is proposed to be developed with a movie theater as a central point within the retail center to draw unmet cultural demand. ACHIEVABLE POSITIONING (RENT/PRICE) TEN YEAR MARKET POTENTIAL RESIDENTIAL USES Market Rate Apartments (p. 31)360 Workforce apartments, 440 standard apartments, 320 premium apartments, and 125 rental townhomes $2,890 per month 1,245 units $3.34 per square foot Average 865 square feet Affordable Apartments (p.31)310 affordable units -20% of all housing units allocated to affordable housing at 50% AMI $1,225 per month 310 units $1.57 per square foot Average 780 square feet For-Sale (p. 44)200 For-sale townhomes and 120 stacked flat condos $977,000 320 units $576 per square foot Average 1,695 square feet Total 1,875 units Average 995 square feet NON-TRADITIONAL RESIDENTIAL Senior Housing (p. 50)$4,025 per month 180 units $5.59 per square foot Average 720 square feet COMMERCIAL USES Retail (p. 54) Retail town center anchored around a movie theater/large gym with increased entertainment & services, restaurant, and grocery space $3.00-$4.00/SF/Mo. NNN 321,300 square feet Ground-floor retail at multifamily properties with street-level retail, grocery, and service spaces. $3.00-$4.00/SF/Mo. NNN 125,000 square feet Total 446,300 square feet Hotel (p. 66)Existing Hotel (Diamond Bar Best Western)$140 ADR 97 Rooms 3.1.b Packet Pg. 41 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 10 REGIONAL OVERVIEW 3.1.b Packet Pg. 42 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 11 LOS ANGELES EXPERIENCED SIGNIFICANT JOB LOSSES DURING IN 2020 BUT DEMONSTRATED A STRONG RECOVERY IN 2021 AND IS PROJECTED TO OUTPACE THE COUNTRY OVER THE NEXT FIVE YEARS ►Between 2011 and 2019,Los Angeles County added over 937,000 jobs,translating to average annual job growth of 1.8%per year.In comparison,the country as a whole demonstrated average annual job growth of just 1.6%during this same period. ►Los Angeles County lost nearly 539,000 jobs in 2020 following the start of the COVID-19 pandemic,representing a 9%downturn in job growth compared to just 6%nationally. However,Los Angeles County enjoyed job growth of 3.1%in 2021 surpassing the national average of 2.8%.Further,Los Angeles County is projected to average job growth of 2.0%over the next five years versus just 1.4%nationally during the same period. REGIONAL EMPLOYMENT GROWTH Source: Moody’s Analytics; RCLCO -10% -8% -6% -4% -2% 0% 2% 4% 6% -600 -500 -400 -300 -200 -100 0 100 200 300 400 Annual Growth RateAnnual Growth (000s)Historical Growth - Los Angeles County Growth Rate - Los Angeles County Growth Rate - National Historical and Projected Employment Growth, 1992-2026; Los Angeles County 3.1.b Packet Pg. 43 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 12 LOS ANGELES COUNTY EMPLOYMENT IS PROJECTED TO GROW BY 6.2% OVER THE NEXT DECADE WITH CONTINUED RECOVERY IN LEISURE & HOSPITALITY AND PROFESSIONAL & BUSINESS SERVICES SECTORS ►Education &health services surpassed trade,transportation,&utilities as the largest employment sector in Los Angeles County in 2020,and is projected to grow an additional 7.7%between 2022 and 2031. ►The recovery and continued growth of the leisure &hospitality sector is projected to account for over 273,000 jobs by 2031. ►The construction industry is projected to retract by approximately 12%over the next decade,representing a loss of over 20,000 jobs in the field. REGIONAL EMPLOYMENT Source: Moody’s Analytics, RCLCO Historic Projected Employment by Industry, 1991-2031; Los Angeles County Employment Growth and Distribution by Industry 2010-2031 Los Angeles County 0 200 400 600 800 1,000 1,200 1,400 Total Employment (000s)Edu. & Health Services Trade, Transp. & Utilities Prof. & Business Services Leisure & Hospitality Government Manufacturing Financial Activities Information INDUSTRY SHARE OF GROWTH (2010- 2021) FORECASTED GROWTH (2022-2031) TOTAL DISTRIBUTION (2021) Edu. & Health Services 28.0%7.7%18.3% Prof. & Business Services 23.7%8.3%16.2% Construction 46.0%-12.4%4.3% Trade, Transp. & Utilities 7.9%-0.1%18.2% Leisure & Hospitality 10.0%23.7%10.3% Information 11.0%6.8%4.0% Financial Activities 3.9%3.6%5.6% Other Services 1.2%9.1%3.1% Natural Resources -40.2%2.0%0.0% Government -2.5%5.9%12.2% Manufacturing -13.7%-1.9%7.8% TOTAL 10.9%6.2%100.0% 3.1.b Packet Pg. 44 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 13 GEOGRAPHY DEFINITIONS Source: Esri WITHIN THE SOUTHEASTERN PORTION OF THE SAN GABRIEL VALLEY AND BORDERING SAN BERNARDINO COUNTY, THE DIAMOND BAR TOWN CENTER IS LOCATED IN THE AFFLUENT SUBURB OF DIAMOND BAR. THE SITE IS WELL LOCATED NEAR MULTIPLE FREEWAYS, PROVIDING HIGH VISIBILITY AND CONVENIENT ACCESS TO THE BROADER LOS ANGELES REGION KEY City of Diamond Bar Diamond Bar Town Center KEY San Gabriel Valley Southeast San Gabriel Valley (Zip Codes: 91765, 91766, 91768, 91789) Map of San Gabriel Valley, Southeast San Gabriel Valley, and Diamond Bar Map of Diamond Bar and Diamond Bar Town Center 3.1.b Packet Pg. 45 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 14 DEMOGRAPHICS & EXISTING CONDITIONS 3.1.b Packet Pg. 46 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 15 IN DEPTH DEMOGRAPHICS Source: Esri; RCLCO DIAMOND BAR IS A HIGHLY AFFLUENT CITY WITH A SIGNIFICANT PROPORTION OF HOUSEHOLDS (52.7%) EARNING GREATER THAN $100,000 ANNUALLY AND A RENTER PROPENSITY (19.8%) MUCH LOWER THAN SURROUNDING COMMUNITIES (31.1%+) Note: The Competitive Market Area above is the geography defined on page 16. CHARACTERISTIC DIAMOND BAR SE SAN GABRIEL VALLEY SAN GABRIEL VALLEY LOS ANGELES COUNTY CALIFORNIA POPULATION 2000 56,737 197,582 1,857,838 9,519,135 33,871,648 2010 55,544 195,804 1,865,973 9,818,605 37,253,956 2021 55,942 199,842 1,902,943 10,108,711 39,476,705 2026 55,867 200,534 1,913,564 10,229,558 40,507,842 Growth Rate (2000-2010)-0.2%-0.1%0.0%0.3%1.0% Growth Rate (2010-2021)0.1%0.2%0.2%0.3%0.5% Growth Rate (2021-2026)0.0%0.1%0.1%0.2%0.5% Per Capita Income (2021)$41,876 $29,394 $31,567 $34,684 $38,272 HOUSEHOLDS 2000 17,758 52,943 556,576 3,133,720 11,502,870 2010 17,880 53,556 566,873 3,241,204 12,577,498 2021 17,992 54,487 576,979 3,328,361 13,283,432 2026 17,912 54,498 578,785 3,366,546 13,615,954 Growth Rate (2000-2010)0.1%0.1%0.2%0.3%0.9% Growth Rate (2010-2021)0.1%0.2%0.2%0.2%0.5% Growth Rate (2021-2026)-0.1%0.0%0.1%0.2%0.5% Average Household Size (2021)3.11 3.67 3.30 3.04 2.97 Average Household Income (2021)$129,776 $107,499 $104,060 $105,124 $113,468 HOUSEHOLDS AGE DISTRIBUTION (2021) Under 35 11.7%16.3%15.9%19.4%19.4% 35-54 35.7%38.0%37.3%38.2%36.2% Over 55 52.7%45.7%46.8%42.5%44.4% HOUSEHOLDS INCOME DISTRIBUTION (2021) Under $50,000 20.4%29.5%31.7%34.4%31.6% $50,000-$99,999 25.1%29.1%29.6%28.5%27.7% Over $100,000 54.4%41.3%38.7%37.1%40.6% HOUSEHOLD RENTER PROPENSITY Renter Propensity (2000)17.4%28.1%41.6%52.1%43.1% Renter Propensity (2010)18.9%29.8%42.2%52.3%44.1% Renter Propensity (2021)19.8%31.4%43.6%54.0%44.3% Renter Propensity (2026)19.5%31.1%43.4%54.3%44.2% 3.1.b Packet Pg. 47 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 16 DEMOGRAPHIC OVERVIEW Source: Esri; RCLCO THE COMPETITIVE MARKET AREA HAS A LOWER RENTER PROPENSITY THAN LOS ANGELES AS A WHOLE, BUT A MUCH GREATER PROPORTION OF HOUSEHOLDS EARNING OVER $50K WITH A SLIGHTLY LARGER AVERAGE HOUSEHOLD SIZE Tenure (2021)Average Household Income (2021) Average Household Size (2021)Annual Household Growth Rate Note: The Competitive Market Area above is the geography defined on page 16. 80.2%68.6%56.4%46.0%55.7% 19.8%31.4%43.6%54.0%44.3% Diamond Bar Southeastern San Gabriel Valley San Gabriel Valley Los Angeles County California Rent Own 3.11 3.67 3.30 3.04 2.97 Diamond Bar Southeastern San Gabriel Valley San Gabriel Valley Los Angeles County California 0.1%0.1%0.2%0.3%0.9%0.1%0.2%0.2%0.2%0.5%-0.1%0.0%0.1%0.2%0.5%Diamond Bar Southeastern San Gabriel Valley San Gabriel Valley Los Angeles County California 2000-2010 2010-2021 2021-2026 $129,776 $107,499 $104,060 $105,124 $113,468 Diamond Bar Southeastern San Gabriel Valley San Gabriel Valley Los Angeles County California 3.1.b Packet Pg. 48 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 171.1%10.6%16.5%19.2%24.9%18.6%9.1%2.2%13.8%18.1%19.2%19.7%15.3%11.7%3.1%16.3%19.2%19.0%18.5%13.7%10.3%0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% <25 25-34 35-44 45-54 55-64 65-74 75+ Diamond Bar San Gabriel Valley Los Angeles County HOUSEHOLDS BY AGE Source: Esri; RCLCO DIAMOND BAR HOUSEHOLDS SKEW OLDER, WITH 43.5% OF HOUSEHOLDS BETWEEN 55 AND 74; COMPARED TO 35.5% IN THE SAN GABRIEL VALLEY, AND 32.2% IN ALL OF LOS ANGELES COUNTY Household Distribution by Age (2021) 3.1.b Packet Pg. 49 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 18 DIAMOND BAR HAS AN AFFLUENT HOUSEHOLD BASE WITH 54.4% OF HOUSEHOLDS EARNING OVER $100,000; COMPARED TO 38.7% IN THE SAN GABRIEL VALLEY, AND 37.7% IN ALL OF LOS ANGELES COUNTY 4.9%3.1%5.9%6.6%12.4%12.7%24.5%14.4%15.5%7.8%7.0%6.9%10.0%16.2%13.4%18.9%9.3%10.5%9.7%7.4%7.3%10.1%15.8%12.7%17.1%8.6%11.5%0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Diamond Bar San Gabriel Valley Los Angeles County HOUSEHOLDS BY INCOME Source: Esri; RCLCO Household Distribution by Income (2021) 3.1.b Packet Pg. 50 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 19 DIAMOND BAR DEMOGRAPHIC DISTRIBUTION Median Age by Census Tract Diamond Bar, 2021 Household Growth by Census Tract, Diamond Bar, 2010 -2021 KEY 50 and Over 45 –49 40 –44 35 –39 Under 35 Median Household Income by Census Tract, Diamond Bar, 2021 KEY $200,000+ $150,000 -$199,999 $100,000 -$149,999 $50,000 -$99,999 Under $50,000 KEY > 3% 2% -3% 1% -2% 0% -1% < 0% Diamond Bar Town Center Source: Esri; RCLCO HOUSEHOLD GROWTH IN DIAMOND BAR HAS BEEN LIMITED OVER THE LAST DECADE AS THE CITY IS AN ESTABLISHED SUBURB. DIAMOND BAR HAS A HIGH PROPORTION OF HOUSEHOLDS EARNING BETWEEN $150,000 AND $199,999 AND RESIDENTS ARE GENERALLY BETWEEN THE AGES OF 40 AND 49, SKEWING OLDER AND MORE AFFLUENT THAN SURROUNDING AREAS 3.1.b Packet Pg. 51 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 20 STRENGTH OF PREDOMINANCE >65% of the Block Group <20% of the Block Group ETHNICITY Source: Esri; RCLCO THE ASIAN COMMUNITY ACCOUNTS FOR 56% OF DIAMOND BAR RESIDENTS, A FAR GREATER PROPORTION THAN IN THE SURROUNDING SAN GABRIEL VALLEY AND LOS ANGELES AS A WHOLE KEY Hispanic Population White Population Asian Population Black Population Non-Hispanic Multiple Race Population DIAMOND BAR SOUTHEAST SAN GABRIEL VALLEY SAN GABRIEL VALLEY LOS ANGELES COUNTY NUMBER OF RESIDENTS % OF TOTAL NUMBER OF RESIDENTS % OF TOTAL NUMBER OF RESIDENTS % OF TOTAL NUMBER OF RESIDENTS % OF TOTAL White Population 16,652 30%75,197 38%837,046 44%4,898,203 48% Black Population 2,081 4%8,904 4%64,633 3%826,820 8% American Indian Population 172 0%1,449 1%14,175 1%70,842 1% Asian Population 31,331 56%64,541 32%510,609 27%1,525,640 15% Pacific Islander Population 105 0%332 0%2,248 0%25,898 0% Some Other Race Population 3,256 6%40,711 20%394,054 21%2,262,171 22% Multiple Races Population 2,347 4%8,708 4%80,195 4%499,137 5% Total Population 55,942 100%199,842 100%1,902,943 100%10,108,711 100% Households 17,992 54,487 576,979 3,328,361 Population by Race (2021) Diamond Bar and Surrounding Area Diamond Bar Town Center 3.1.b Packet Pg. 52 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 21 DEMOGRAPHIC DIVERSITY Source: Esri; RCLCO DIAMOND BAR HAS A DIVERSITY INDEX OF 73, INDICATING A STRONG DEGREE OF DIVERSITY, THOUGH LOWER THAN NEARBY COMMUNITIES OF WEST COVINA, COVINA, AND POMONA Demographics by Geography (2021) . 56% 32%27% 15% 30% 38%44% 48% 6% 20%21% 22% 4%4%3%8% 4%4%4%5%0%1%1%1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% DIAMOND BAR SOUTHEAST SAN GABRIEL VALLEY SAN GABRIEL VALLEY LOS ANGELES COUNTY Asian Population White Population Some Other Race Population Black Population Multiple Races Population American Indian Population Diversity Index by Census Tract Diamond Bar and Surrounding Areas; 2021 KEY 80 & Greater 60 –79 40 –59 20 –39 Under 20 Note: The Census Diversity Index indicates the probability that two people chosen at random will be from different race and ethnic groups. Diamond Bar Town Center 3.1.b Packet Pg. 53 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 22 THE VAST MAJORITY (93%) OF DIAMOND BAR RESIDENTS WORK OUTSIDE OF THE CITY, WITH A SIGNIFICANT PORTION (41%) COMMUTING BETWEEN 10 AND 24 MILES TO WORK. HIGHER-DENSITY BUSINESS CORES ALONG CA-60, DOWNTOWN LOS ANGELES, AND ANAHEIM ARE KEY EMPLOYMENT CENTERS FOR DIAMOND BAR RESIDENTS DIAMOND BAR LIVE/WORK TRENDS INFLOW/OUTFLOW JOB COUNTS COUNT SHARE Employed in the Selection Area 21,023 100% Employed in the Selection Area but Living Outside 19,428 92.4% Employed and Living in the Selection Area 1,595 7.6% Living in the Selection Area 22,456 100% Living in the Selection Area but Employed Outside 20,861 92.9% Living and Employed in the Selection Area 1,595 7.1% Work Patterns, 2019 Diamond Bar Employment Locations of Residents, 2019 Diamond Bar and Los Angeles County MAP KEY Jobs/Sq. Mile 724 –1,127 409 –723 185 –408 50 –184 5 –49 COMMUTE DISTANCE OF DIAMOND BAR RESIDENTS COUNT SHARE TOTAL PRIMARY JOBS 22,456 100% Less than 10 miles 7,868 35.0% 10 to 24 miles 9,111 40.6% 25 to 50 miles 3,790 16.9% Greater than 50 miles 1,687 7.5% Diamond Bar Town Center Source: Census on the Map; Esri; RCLCO 3.1.b Packet Pg. 54 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 23 EMPLOYMENT IN DIAMOND BAR IS CONCENTRATED ALONG CA-60 AND DIAMOND BAR BOULEVARD ►The majority of employees commute into Diamond Bar,with only 1,600 Diamond Bar residents working within the city.Workers are generally between the ages of 30 and 54 (53%)and are heavily concentrated in the professional services industry (47%). ►Though employment in Diamond Bar is concentrated in the professional services industry,the employer landscape is more broadly distributed.Major employers in Diamond Bar are South Coast Air Quality Management (786 employees),Walnut Valley Unified School District (520 employees),and Travelers (401 employees). Niagara Bottling is another major employer in Diamond Bar,and was anticipated to have approximately 700 employees by 2019. ►Greater than 92%of residents of Diamond Bar commute outside of the city for work and a nearly equivalent number of workers commute to Diamond Bar from the surrounding area. DIAMOND BAR LIVE/WORK TRENDS PRIMARY JOBS COUNT SHARE Employed in the Selection Area 21,023 100% Worker Age Age 29 or younger 4,679 22.2% Age 30 to 54 11,217 53.4% Age 55 or older 5,133 24.4% Heat Map of Diamond Bar Employment, 2019 Source: City of Diamond Bar; Census on the Map; Esri; RCLCO Employment by Sector, 2019 Diamond Bar 17% 17% 47% 15% 5% Manufacturing and Logistics Retail, Hospitality, and Other Services Professional Services Healthcare and Education Government MAP KEY Jobs/Sq. Mile 6,783 –10,595 3,818 –6,782 1,700 –3,817 429 –1,699 5 –428 Diamond Bar Town Center 3.1.b Packet Pg. 55 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 24 EMPLOYMENT IN DIAMOND BAR IS VARIED ACROSS JOB CATEGORIES, HOWEVER THERE IS CURRENTLY A LACK OF RETAIL SPACES RELATIVE TO NEARBY COMMUNITIES. MANUFACTURING AND LOGISTICS AND, TO A LESSER EXTENT, PROFESSIONAL SERVICES COMPRISE THE MAJORITY OF JOBS IN THE DIAMOND BAR AREA EMPLOYMENT IN DIAMOND BAR Source: US Census; RCLCO, Inspired by Employment in America, 2014 –Robert Manduca KEY JOB CATEGORIES MANUFACTURING AND LOGISTICS PROFESSIONAL SERVICES HEALTHCARE AND EDUCATION RETAIL, HOSPITALITY, AND OTHER SERVICES GOVERNMENT Diamond Bar Town Center Employment by Sector, 2019; Diamond Bar and Surrounding Communities 3.1.b Packet Pg. 56 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 25 DIAMOND BAR TOWN CENTER RETAIL TENANTS Source: CoStar; RCLCO PARCEL # OF BUSINESSES SQUARE FEET OCCUPIED SF OCCUPIED %PRIMARY TENANT(S) 1 0 0 0 N/A Vacant 2 1 54,473 54,473 100%Best Western Diamond Bar Hotel 3 1 8,483 8,483 100%Aashiana Restaurant 4 1 2,145 2,145 100%Brown Rice Thai 5 1 4,246 4,246 100%Diamond Palace Chinese Seafood 6 1 6,975 6,975 100%Tire Choice 7 1 3,372 3,372 100%Carl's Jr. 8 1 3,746 3,746 100%McDonald's 9 5 100,702 73,084 73%Sprouts Farmers Market / Ross Dress for Less 10 1 2,000 2,000 100%Pump Station 11 1 2,000 2,000 100%76 Gas Station 12 13 46,598 45,302 97%Ace Hardware / AutoZone 13 14 49,326 34,507 70%Local Restaurants and Service Oriented Businesses 14 13 41,281 37,281 90%Local Restaurants and Service Oriented Businesses 15 14 20,134 16,784 83%Medical and Service Oriented Businesses 16 1 6,538 6,538 100%Chevron Gas Station 17 8 20,528 20,528 100%Encore Teppan / Diamond Bar Montessori Academy 18 2 6,538 6,538 100%Shell Gas Station / 7-Eleven 19 3 10,500 10,500 100%Taco Bell / Leslie's Pool Supply / Diamond Bar Beauty 20 1 32,750 32,750 100%Smart & Final Extra! 21 3 62,399 56,399 90%CVS 22 1 2,600 2,600 100%Mobil Gas Station 23 5 7,420 7,420 100%Village Dental 24 7 11,562 10,212 88%Service Oriented Businesses TOTAL 99 506,316 447,883 88% Map of Diamond Bar Town Center Parcels BUSINESS LOCATIONS ALONG GOLDEN SPRINGS DRIVE ARE LARGELY SERVICE ORIENTED WITH THE MAJORITY OF TRADITIONAL RETAIL FOUND ON DIAMOND BAR BOULEVARD. GENTLE SPRINGS LANE PROVIDES ACCESS TO SEVERAL RESTAURANTS AND THE BEST WESTERN HOTEL 3.1.b Packet Pg. 57 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 26 ALMOST HALF OF ALL TRAFFIC TO EXISTING DIAMOND BAR TOWN CENTER ORIGINATES FROM WITHIN DIAMOND BAR ►The retail visitor analyses were performed utilizing data from SafeGraph which provides a sample of cell phone data for over 18 million places of interest (POIs)where the cell phone was located for at least four minutes. »The left graph shows that the most visited locations at the Diamond Bar Town Center are McDonald’s (11%),CVS (6%),the Shell gas station (5%),and The Habit Burger Grill (5%). »The right graph displays the home location of visitors to the Diamond Bar Town Center.For the most part these visitors stem from the greater southeast San Gabriel Valley area and parts of southwestern San Bernardino County. »The census block groups that comprise Diamond Bar,and those immediately bordering the city,account for approximately 47%of all visitors to the Diamond Bar Town Center. EXISTING RETAIL VISITORS Source: SafeGraph, ArcGis, RCLCO ESTIMATED VISITS PERCENTAGE >84% of the Block Group <4% of the Block Group Map of Estimated Visit Percentage by Retailer -2022 Map of Diamond Bar Town Center Visitors by Origin (Block Group of Residence) -2022 ESTIMATED VISITS PERCENTAGE >11% of Diamond Bar Town Center Traffic <1% of Diamond Bar Town Center Traffic Diamond Bar Town Center 3.1.b Packet Pg. 58 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 27 SCHOOLS Source: GreatSchools.com The Diamond Bar Town Center is located in the Pomona Unified School District (PUSD) with Lorbeer Middle School nearby on the corner of Diamond Bar Boulevard and Golden Springs Drive.The PUSD,which supports over 23,000 students as of 2022,is comprised of 30 elementary,14 middle,and 11 high schools. The City of Diamond Bar also features another school district,the Walnut Valley Unified School District (WVUSD).Supporting nearly 14,000 students,the WVUSD is comprised of 10 elementary schools,four middle schools,and four high schools. Over 93%of schools in the WVUSD are rated above average.A small proportion of PUSD schools are located in Diamond Bar and are largely ranked above average despite the majority of PUSD schools outside of Diamond Bar being below average Great Schools Rating, 2022 Diamond Bar Schools Diamond Bar Town Center MAP KEY SCHOOL NAME SCHOOL DISTRICT GREAT SCHOOLS RATING ELEMENTARY SCHOOLS 1 Maple Hill Elementary School WVUSD 10 2 Pantera Elementary School PUSD 9 3 Quail Summit Elementary School WVUSD 9 4 Evergreen Elementary School WVUSD 8 5 Walnut Elementary School WVUSD 8 6 Golden Springs Elementary School PUSD 7 7 Castle Rock Elementary School WVUSD 7 8 Armstrong Elementary School PUSD 6 MIDDLE SCHOOLS 8 Chaparral Middle School WVUSD 8 9 South Pointe Middle School WVUSD 8 10 Lorbeer Middle School PUSD 5 HIGH SCHOOLS 11 Diamond Bar High School WVUSD 10 12 Diamond Ranch High School PUSD 7 3.1.b Packet Pg. 59 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 28 BUILDING PERMITS Source: U.S. Department of Housing and Urban Development; RCLCO NEW DEVELOPMENT IN DIAMOND BAR HAS BEEN LIMITED OVER THE PAST TWO DECADES AND IS SHRINKING AS A PROPORTION OF DEVELOPMENT IN THE SAN GABRIEL VALLEY ►After declining from the late 1980s until the early 2000s,building permits rapidly increased in the San Gabriel Valley until the financial crisis of 2008-2009. ►Despite the number of units from building permits in the San Gabriel Valley beginning to reach pre-financial crisis levels,permits in Diamond Bar as a proportion of permits in the San Gabriel Valley have averaged just 1.7%over the past decade. ►Since 1980,permits for only 12 multifamily units (for the Willow Heights development in 2015)have been permitted in Diamond Bar,representing just 1% of all permits,compared to permits for over 1,100 single-family units. Residential Building Permits Comparison; Southeast San Gabriel Valley and Diamond Bar; 1990 -2021 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 1980 1985 1990 1995 2000 2005 2010 2015 2020 Units in Single-Family Structures Units in All Multi-Family Structures Building Permits by Year; San Gabriel Valley; 1980-2021 1% 2% 8% 5%5% 3% 6% 4% 1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 0 500 1000 1500 2000 2500 3000 3500 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Diamond Bar Southeast San Gabriel Valley Diamond Bar as a Proportion of SE SGV Total Units 3.1.b Packet Pg. 60 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 29 MAP KEY UC P&P SQUARE FOOTAGE <100,000 >1,000,000 Diamond Bar Town Center NEW DEVELOPMENT IN THE SAN GABRIEL VALLEY IS CONCENTRATED ALONG HIGHWAYS AND IN WESTERN PORTIONS OF THE MARKET AREA ►There are numerous multifamily developments both currently under construction and proposed,the majority of which are concentrated in the western half of the San Gabriel Valley ►Industrial development is being developed predominantly in Irwindale and the City of Industry while hospitality spaces have been proposed throughout the San Gabriel Valley, with several currently under construction. PIPELINE IN SAN GABRIEL VALLEY Source: US Census; CoStar; RCLCO Under Construction and Planned and Proposed Developments, August 2022; San Gabriel Valley KEY TYPE COUNT UC SF P&P SF TOTAL SF Retail 49 151,885 599,996 751,881 Hospitality 30 446,187 1,290,591 1,736,778 Office 25 141,219 1,194,395 1,335,614 Flex 1 0 100,748 100,748 Industrial 30 2,237,232 2,798,512 5,035,744 Multi-Family 69 3,517,588 6,639,777 10,157,365 Health Care 1 0 60,000 60,000 Student 1 300,000 0 300,000 Specialty 2 217,413 0 217,413 Diamond Bar 4 0 101,187 101,187 TOTAL 208 7,011,524 12,684,019 19,695,543 . . 3.1.b Packet Pg. 61 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 30 ADDRESS CITY TYPE RBA YEAR BUILT UNDER CONSTRUCTION 20922 Currier Rd City Of Industry Industrial 147,490 2022 2027 Rancho Valley Dr Pomona Hospitality 50,000 2022 508 W Mission Blvd Pomona Multi-Family 40,000 2022 2801 S Towne Ave Pomona Industrial 37,690 2022 1300 W Mission Blvd Pomona Multi-Family 30,536 2022 21921 Industry Way City Of Industry Industrial 1,000,720 2023 584 Humane Way Pomona Retail 6,600 2023 TOTAL 1,313,036 PLANNED/PROPOSED 1925 W Holt Ave Pomona Multi-Family 200,000 2023 6 Innovation Way Pomona Office 125,000 2023 888 S Brea Canyon Dr Diamond Bar Office 46,000 2023 701 S Garey Ave Pomona Retail 36,942 2023 21935-21985 Valley Blvd Walnut Retail 8,400 2023 888 W Mission Blvd Pomona Retail 8,320 2023 2705 S Towne Ave Pomona Retail 7,050 2023 868 S Brea Canyon Rd Diamond Bar Retail 6,500 2023 21925 Valley Blvd Walnut Retail 4,200 2023 21905 Valley Blvd Walnut Retail 4,150 2023 850 Brea Canyon Rd Diamond Bar Hospitality 44,687 2024 55 Rancho Camino Dr Pomona Hospitality 40,000 2025 55 Rancho Camino Dr Pomona Hospitality 10,000 2025 Gillette Rd Pomona Hospitality 42,656 2026 Grand Ave City Of Industry Industrial 240,500 Unknown Grand Ave City Of Industry Industrial 606,480 Unknown Grand Ave City Of Industry Industrial 694,400 Unknown 8 Innovation Way Pomona Office 125,000 Unknown 3 Kellogg Dr Pomona Flex 100,748 Unknown TOTAL 2,351,033 THERE IS A GROWING PIPELINE IN THE SOUTHEAST SAN GABRIEL VALLEY CONTAINING A RANGE OF PLANNED AND PROPOSED PROJECTS, BUT A RELATIVELY LIMITED PIPELINE OF DEVELOPMENTS WITHIN DIAMOND BAR. PROJECT PIPELINE IN SOUTHEAST SAN GABRIEL VALLEY Source: US Census; CoStar; RCLCO Under Construction and Planned and Proposed Developments, August 2022; Southeast San Gabriel Valley KEY PROPERTY TYPE Retail Hospitality Office Flex Industrial Multi-Family UC P&P Square Footage <100,000 >1,000,000 . .Diamond Bar Town Center 3.1.b Packet Pg. 62 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 31 RENTAL RESIDENTIAL ANALYSIS 3.1.b Packet Pg. 63 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 32 APARTMENT MARKET OVERVIEW DIAMOND BAR IS CHARACTERIZED BY LOW-DENSITY, SINGLE-FAMILY HOUSING WITH A NEAR ABSENCE OF MULTIFAMILY HOUSING ►With just 500 multifamily units in Diamond Bar and a population of roughly 56,000,there is approximately one apartment unit per 112 residents of the city.Comparatively,the Southeast San Gabriel Valley (excluding Diamond Bar)has twice as many apartments per capita with one apartment unit per 56 residents and a total population of nearly 144,000 (from 2,576 apartment units). ►Diamond Bar has not experienced the delivery of new multifamily product since 1989,while the Southeast San Gabriel Valley region delivered three properties between 2019 and 2021,totaling 104 units. ►Given the highly limited inventory,apartment vacancy in Diamond Bar has remained below 1%since 2020,a 15-year historic low. ►While rent growth in Diamond Bar has been marginally lower than in the Southeast San Gabriel Valley,both in the short-term and long-term,as of July 2022 rents in Diamond Bar are 19%higher than Southeast San Gabriel Valley. DIAMOND BAR SOUTHEAST SAN GABRIEL VALLEY SAN GABRIEL VALLEY CURRENT CHARACTERISTICS (2022 YTD) Properties 3 52 1,037 Units 500 3,076 56,606 Avg. Effective Rent $2,420 $2,039 $2,098 Vacancy 0.8%2.1%2.9% SHORT-TERM TRENDS (2017-2021) Avg. Rent Growth 5.3%5.7%4.2% Avg. Vacancy 3.9%3.6%3.8% Avg. Net Absorption 3 32 609 Avg. Completions 0 21 286 LONG-TERM TRENDS (2007-2021) Avg. Rent Growth 2.6%2.7%2.5% Avg. Vacancy 4.8%4.1%4.5% Avg. Net Absorption 1 11 344 Avg. Completions 0 7 292 Source: CoStar; RCLCO Map of Diamond Bar and Southeast San Gabriel Valley Note: Includes market-rate properties with 20 units or more 3.1.b Packet Pg. 64 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 33 -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% -25 -20 -15 -10 -5 0 5 10 15 20 25 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD Vacancy / Rent GrowthUnitsChange in Inventory Net Absorption Vacancy Effective Rent Growth APARTMENT MARKET TRENDS –DIAMOND BAR WITH A LIMITED APARTMENT INVENTORY AND NO CHANGE IN MULTIFAMILY INVENTORY IN OVER 20 YEARS, THE DIAMOND BAR MULTIFAMILY RENTAL MARKET EXPERIENCED RAPIDLY DECREASING VACANCIES OF 0.8% AND 0.6%, AND RECORD EFFECTIVE RENT GROWTH OF 6.6% AND 13.9%, IN 2020 AND 2021, RESPECTIVELY. ►The limited supply of new housing,as shown by the lack of new development and tight vacancy rates,combined with significant rent growth is making Diamond Bar a less affordable place to live. ►By developing more housing,Diamond Bar will likely achieve greater diversity,particularly among younger demographics currently lacking in the city. Source: CoStar; RCLCO Completion, Absorption, Vacancy, and Rent Growth; Apartment Competitive Market Area; Diamond Bar 2007-2022 YTD 3.1.b Packet Pg. 65 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 34 COMPARABLE MARKET -RATE APARTMENT COMMUNITIES Source: Axiometrics; CoStar; RCLCO APARTMENTS IN THE COMPETITIVE SET ARE GENERALLY OLDER, PARTICULARLY COMMUNITIES WITHIN THE SOUTHEAST SAN GABRIEL VALLEY RCLCO identified nine market-rate apartment communities,five of which are in the competitive market area of Southeast San Gabriel Valley.The other four communities,located in Pomona,San Dimas,and La Verne were included to provide a basis of comparison against more recently delivered product.The Gabriel is the newest community and achieves near the highest rents per square foot,largely due to the quality of execution and the property’s location.Walnut Ridge II,despite being the second older community in the competitive set,achieves the highest per square foot rents primarily due to the smaller size of the units at the community. The competitive properties range in scale from 136 to 501 units and ask average monthly rents of $2,632 with an average unit size of 869 square feet ($3.03/SF). MAP KEY COMMUNITY NAME YEAR BUILT YEAR LAST RENO. # OF STORIES MARKET RATE UNITS OCC. RATE AVG. SIZE (SF) AVG. ASKING RENT AVG. ASKING $/SF 1 Avalon San Dimas 2014 N/A 3 156 99%971 $2,861 $2.95 2 Walnut Ridge II 1983 N/A 2 464 98%754 $2,452 $3.25 3 Eaves Phillips Ranch 1990 N/A 3 501 100%994 $2,829 $2.85 4 The Hills of Diamond Bar 1979 2016 2 203 99%933 $2,765 $2.96 5 La Verne Village 2014 N/A 3 172 98%930 $2,736 $2.94 6 The Gabriel 2022 N/A 4 312 18%890 $2,810 $3.16 7 Diamond Bar Village 1987 N/A 2 136 99%863 $2,371 $2.75 8 Monterey Station 2014 N/A 4 349 94%727 $2,261 $3.11 9 Emerald Pointe 1989 N/A 2 160 98%843 $2,720 $3.23 AVERAGE 1999 2016 3 273 98%869 $2,632 $3.03 Comparable Apartment Communities Southeast San Gabriel Valley, August 2022 Subject Site 3.1.b Packet Pg. 66 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 35 COMPARABLE MARKET -RATE APARTMENT COMMUNITIES Source: CoStar; RCLCO WE RECOMMEND PRICING UNITS AT THE SUBJECT SITE AT THE TOP OF THE MARKET FOR MULTIFAMILY RENTALS Our recommended pricing would position the Subject Site above all competitive properties in the Southeast San Gabriel Valley.Based on our pricing adjustment analysis: ►The workforce program should be priced at an average monthly rent of $2,315 for an average unit size of 710 square feet ►The standard apartment program should be priced at $2,820 per month on average for an average 790 square foot unit ►The premium apartments should be priced at $3,245 per month on average for an average 990 square foot unit ►The townhome units should average $3,905 per month for an average unit size of 1,270 square feet $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 200 400 600 800 1,000 1,200 1,400 1,600Asking RentUnit Size (SF) Subject Site - Standard Subject Site - Workforce Subject Site - Premium Subject Site - Townhome Avalon San Dimas Walnut Ridge II Eaves Phillips Ranch The Hills of Diamond Bar La Verne Village The Gabriel Diamond Bar Village Monterey Station Emerald Pointe Linear Trend of Average Rent to Average Unit Size Relationship 3.1.b Packet Pg. 67 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 36 COMPARABLE MARKET -RATE APARTMENT COMMUNITIES Source: CoStar; RCLCO WE RECOMMEND A MIX OF MULTIFAMILY PRODUCT THAT RANGES IN SIZE, LAYOUT, AND QUALITY OF FINISH TO CAPTURE DEMAND FROM ALL MARKET SEGMENTS MAP KEY 1 2 3 4 5 6 7 8 9 TOTAL/ WTD. AVG. COMMUNITY Avalon San Dimas Walnut Ridge II Eaves Phillips Ranch The Hills of Diamond Bar La Verne Village The Gabriel Diamond Bar Village Monterey Station Emerald Pointe YEAR BUILT 2014 1983 1990 1979 2014 2022 1987 2014 1989 OCCUPANCY %99%98%100%99%98%18%99%94%98% MARKET RATE UNITS Studio 16 79 95 1BR 56 166 63 200 38 53 96 672 1BR+85 26 10 121 2BR 100 282 416 183 100 108 70 207 64 1,530 2BR+2 2 3BR 20 9 4 33 Total 156 464 501 203 172 312 136 349 160 2,453 UNIT MIX Studio 3%23%4% 1BR 36%36%37%64%28%15%60%27% 1BR+17%19%3%5% 2BR 64%61%83%90%58%35%51%59%40%62% 2BR+1%0% 3BR 10%5%1%1% Total 100%100%100%100%100%100%100%100%100%100% AVERAGE SIZE (SF) Studio 550 456 472 1BR 770 590 758 755 735 630 731 701 1BR+925 835 975 910 2BR 1,084 862 1,008 923 1,005 1,120 935 844 1,010 958 2BR+1,140 1,140 3BR 1,020 1,296 1,397 1,141 Total 971 754 994 933 930 890 863 727 843 869 3.1.b Packet Pg. 68 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 37 RENTAL RATES AT COMPARABLE PROPERTIES Source: CoStar; RCLCO MAP KEY 1 2 3 4 5 6 7 8 9 TOTAL/ WTD. AVG. COMMUNITY Avalon San Dimas Walnut Ridge II Eaves Phillips Ranch The Hills of Diamond Bar La Verne Village The Gabriel Diamond Bar Village Monterey Station Emerald Pointe YEAR BUILT 2014 1983 1990 1979 2014 2022 1987 2014 1989 AVERAGE SIZE (SF) Studio 550 456 472 1BR 770 590 758 755 735 630 731 701 1BR+925 835 975 910 2BR 1,084 862 1,008 923 1,005 1,120 935 844 1,010 958 2BR+1,140 1,140 3BR 1,020 1,296 1,397 1,141 Total 971 754 994 933 930 890 863 727 843 869 AVERAGE ASKING RENT Studio $2,038 $1,912 $1,933 1BR $2,493 $2,080 $2,447 $2,595 $2,099 $2,119 $2,611 $2,382 1BR+$2,516 $2,250 $2,425 $2,451 2BR $3,067 $2,695 $2,893 $2,764 $2,841 $3,164 $2,550 $2,423 $2,885 $2,788 2BR+$2,850 $2,850 3BR $2,775 $3,600 $4,028 $3,152 Total $2,861 $2,452 $2,829 $2,765 $2,736 $2,810 $2,371 $2,261 $2,720 $2,632 AVERAGE ASKING $/SF Studio $3.70 $4.19 $4.10 1BR $3.24 $3.52 $3.23 $3.43 $2.86 $3.36 $3.57 $3.40 1BR+$2.72 $2.69 $2.49 $2.69 2BR $2.83 $3.13 $2.87 $2.99 $2.83 $2.82 $2.73 $2.87 $2.86 $2.91 2BR+$2.50 $2.50 3BR $2.72 $2.78 $2.88 $2.76 Total $2.95 $3.25 $2.85 $2.96 $2.94 $3.16 $2.75 $3.11 $3.23 $3.03 3.1.b Packet Pg. 69 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 38 RENTAL APARTMENT PIPELINE Source: CoStar; Axiometrics; City Planning Websites; RCLCO THE SOUTHEAST SAN GABRIEL VALLEY EXPERIENCED NO NEW DEVELOPMENT FOR OVER A DECADE UNTIL PROJECTS DELIVERED EACH YEAR BETWEEN 2019 AND 2021. THE CURRENT PIPELINE IS MIRRORING THIS CHANGING DYNAMIC IN THE REGION. ►The limited supply of new housing,lack of new development and tight vacancy rates,combined with significant rent growth have signify significant pent up demand in the Southeast San Gabriel Valley. ►There are three properties currently under construction,totaling nearly 360 units,more new product than the market has experienced in over a decade. Map of Under Construction and Planned Apartments Southeast San Gabriel Valley, August 2022 MAP KEY PROJECT DEVELOPER EST. OPENING TOTAL UNITS UNDER CONSTRUCTION 1 The Terraces at Walnut Sunjoint Development LLC 2024 270 2 1300 W Mission Blvd Not Available 2022 33 3 West Mission Apartments Not Available 2022 55 358 PLANNED/PROPOSED 4 Lanterman Greystar 2026 100 5 Begonia Heights Begonia Real Estate 2025 200 300 Subject Site 3.1.b Packet Pg. 70 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 39 APARTMENT MARKET TRENDS – SOUTHEAST SAN GABRIEL VALLEY THE SOUTHEAST SAN GABRIEL VALLEY MARKET SAW THE DELIVERY OF NEW PRODUCT FOR THE FIRST TIME IN OVER A DECADE IN 2019, FOLLOWED BY SMALL PROJECTS IN 2020 AND 2021. DESPITE THE INCREASED SUPPLY, THE UNITS WERE RAPIDLY ABSORBED LEADING TO DECREASING VACANCY AND RECORD RENT GROWTH OF 14.2% IN 2021. WITH RECORD DELIVERIES ANTICIPATED BETWEEN 2024 AND 2035, VACANCY IS EXPECTED TO SPIKE INITIALLY, BUT TAPER OFF BEGINNING IN 2028 Source: CoStar; RCLCO Historical and Forecasted Completion, Absorption, Vacancy, and Rent Growth; Apartment Competitive Market Area; Southeast San Gabriel Valley 2007-2035 -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% -100 -50 0 50 100 150 200 250 300 350 400 2007 2009 2011 2013 2015 2017 2019 2021 2023 (f)2025 (f)2027 (f)2029 (f)2031 (f)2033 (f)2035 (f)Vacancy/Rent GrowthUnitsChange in Inventory (Units)Net Absorption (Units)Vacancy (%) Historical Effective Rent Growth (%)RCLCO Rent Growth Forecast 3.1.b Packet Pg. 71 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 40 APARTMENT MARKET TRENDS – SOUTHEAST SAN GABRIEL VALLEY ON AVERAGE, COSTAR, AXIOMETRICS, AND RCLCO PROJECT RENT GROWTH OF 5.1% PER YEAR BETWEEN 2022 AND 2027 ►Axiometrics provides a more aggressive rent growth projection than CoStar and RCLCO,but all projections anticipate significant and continued rent growth in the region tapering towards long-term averages at the end of the projection period. Source: CoStar; Axiometrics; RCLCO Historical and Projected Rent Growth San Gabriel Valley 2008-2032 -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 Historical Axiometrics CoStar RCLCO RENT GROWTH SOURCE 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Axiometrics 15.0%10.0%6.8%5.5%4.4%3.9%N/A N/A N/A N/A N/A CoStar 5.3%5.1%3.7%3.1%2.7%2.3%N/A N/A N/A N/A N/A RCLCO 8.2%4.5%3.7%3.1%2.6%2.6%2.5%2.6%2.6%2.9%2.9% Average 9.5%6.5%4.7%3.9%3.2%2.9%2.5%2.6%2.6%2.9%2.9% 3.1.b Packet Pg. 72 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 41 SUPPORTED SUPPLY ADDITIONS Source: CoStar; RCLCO THE DIAMOND BAR TOWN CENTER IS PROJECTED TO SUPPORT OVER MARKET-RATE 1,200 UNITS DURING THE DEVELOPMENT CYCLE BETWEEN 2025 AND 2034 ►RCLCO recommends a program that includes several rental housing types to facilitate more rapid lease-up and draw from a broader renter pool.This program includes workforce,standard,and premium apartments as well as rental townhomes. ►In addition to the market rate rental housing,RCLCO recommends offering 310 affordable units (representing 20%of the market-rate rental and for-sale housing,excluding workforce housing,at the Diamond Bar Town Center)spread across the four rental types. ►Phasing of the various multifamily housing types should allow for greater absorption,however between 2024 and 2029 vacancies are projected to be heavily impacted by the influx of new product in the market <<<HISTORICAL FORECAST>>> 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 NEW INVENTORY YTD Deliveries 1 0 Under Construction 2 88 0 270 0 0 0 0 0 0 0 0 0 0 Planned & Proposed 3 0 0 60 60 60 60 60 0 0 0 0 0 0 Other Planned & Proposed 4 0 0 0 0 0 0 0 0 0 0 0 0 0 Subject Site 5 0 0 0 65 70 100 110 130 140 155 165 145 140 Total New Inventory 20 88 0 330 125 130 160 170 130 140 155 165 145 140 SUPPLY Beginning Inventory 1 3,056 3,076 3,164 3,164 3,494 3,619 3,749 3,909 4,079 4,209 4,349 4,504 4,669 4,814 Plus: Change in Inventory 20 88 0 330 125 130 160 170 130 140 155 165 145 140 Ending Inventory 3,076 3,164 3,164 3,494 3,619 3,749 3,909 4,079 4,209 4,349 4,504 4,669 4,814 4,954 DEMAND Beginning Occupied Units 1 2,960 3,021 3,064 3,119 3,189 3,286 3,402 3,528 3,671 3,831 4,008 4,202 4,412 4,634 Plus: Net Absorption 4 61 43 55 71 97 115 126 143 160 177 194 211 222 222 Ending Occupied Units 3,021 3,064 3,119 3,189 3,286 3,402 3,528 3,671 3,831 4,008 4,202 4,412 4,634 4,857 SUPPLY-DEMAND BALANCE Ending Occupancy 98.2%96.8%98.6%91.3%90.8%90.7%90.3%90.0%91.0%92.2%93.3%94.5%96.3%98.0% (Over)/Under Supply at 5%104 61 119 -137 -160 -168 -195 -215 -176 -130 -81 -25 64 158 3.1.b Packet Pg. 73 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 42 MULTIFAMILY DEMAND THE DEMAND POOL FOR MULTIFAMILY UNITS IN THE SAN GABRIEL VALLEY IS APPROXIMATELY 52,000 HOUSEHOLDS ANNUALLY, REPRESENTING APPROXIMATELY 9% OF ALL HOUSEHOLDS IN THE SAN GABRIEL VALLEY 576,693 Households in the Primary Market Area 14%37%20%27% 27,891 79,957 6,122 33,293 5,847 21,212 Renters6,198 Renters 20,073 Renters 2,902 Renters 1,854 Renters 52,240 Renters 3,692 2,357 (425)(3,244)3,894 (352)0 (730)0 73%56%41%36%51% 31,231 82,740 2,878 34,919 5,422 Total Renters Total Households Annual Renter Demand Annual Multifamily Demand % Renters Move Each Year Net Tenure Switch New Household Growth TOTAL DEMAND 79,353 576,963156,111215,124 113,914 25-34 35-54 55-64 65+ 57,899 292,793 56,456 120,184 46,688 68%75%57%54%64%63% (1,111) % Rent Multifamily 2% 6,804 1,514 (28) 93% 8,290 UNDER 25 12,461 11,565 3.1.b Packet Pg. 74 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 43 PROGRAM RECOMMENDATIONS Source: RCLCO RCLCO RECOMMENDS A BLEND OF PRODUCT TYPES, INCLUDING WORKFORCE APARTMENTS, STANDARD APARTMENTS, PREMIUM APARTMENTS, AND TOWNHOMES ►Workforce apartments offer a value alternative to the standard apartments as the units have smaller average sizes and the community would offer a greater proportion of studio units. ►The standard apartment program is reflective of current apartment offerings in the Southeast San Gabriel Valley in terms of unit sizes,but provides a greater proportion of studio and one-bedroom units.This program would likely fill a void in the market and could attract demand from the single and couples demographics that are currently underserved. ►The premium apartments have a unit distribution similar to existing communities in the area,though they offer a greater number of three-bedroom units.The unit sizes are larger than most of the competitive properties and are anticipated to be highly amenitized and have superior unit finishes. ►Rental townhomes could potentially capture demand from couples and young families looking for the increased privacy of single-family living,but who are currently priced out of the for-sale market. Rental Community Programs; Diamond Bar Town Center WORKFORCE APARTMENTS STANDARD APARTMENTS PREMIUM APARTMENTS TOWNHOMES TOTAL/AVERAGE MARKET RATE UNITS 360 440 320 125 1,245 AVG. SIZE 710 790 990 1,270 865 AVG. RENT $2,315 $2,820 $3,245 $3,905 $2,890 AVG. $/SF $3.26 $3.57 $3.28 $3.07 $3.34 MONTHLY ABSORPTION PACE 33.8 Units per Month 22.9 Units per Month 18.0 Units per Month 16.4 Units per Month AFFORDABLE UNITS 90 110 80 30 310 AVG. SIZE 640 710 890 1,145 1,005 AVG. RENT $1,160 $1,180 $1,295 $1,380 $1,225 AVG. $/SF $1.81 $1.66 $1.46 $1.21 $1.22 3.1.b Packet Pg. 75 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 44 FOR-SALE RESIDENTIAL ANALYSIS 3.1.b Packet Pg. 76 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 45 FOR-SALE HOUSING TRENDS AFTER A PERIOD OF STAGNATION FOLLOWING THE 2008 HOUSING CRISIS, PRICES HAVE STEADILY INCREASED EACH YEAR BEGINNING IN 2013-2014. THE INCREASE IN HOME DEMAND SPURRED BY THE COVID-19 PANDEMIC, COMBINED WITH LIMITED NEW INVENTORY HAS RAPIDLY ACCELERATED HOME VALUE INCREASES SINCE 2020. ►As of May 2022 the Zillow Home Value Index for Diamond Bar is approximately $954,000,a 37.4%increase from the December 2019 value of roughly $694,000. »This tracks closely to the average for Los Angeles county which increased by 36.7%over the same period. $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 Median Home ValueDiamond Bar Los Angeles Walnut Pomona Comparison of Zillow Home Value Index by Geography 2000–2022 Source: Zillow; RCLCO Note: Zillow Home Value Index is a seasonally adjusted figure that reflects the typical value of homes in the 35th to 65th percentile within a region. 3.1.b Packet Pg. 77 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 46 THE MAJORITY OF HOMES SOLD IN DIAMOND BAR OVER THE PAST 12 MONTHS EXCEEDED $1 MILLION, WITH 98% OF HOMES SELLING FOR GREATER THAN $700K. ►The average sale price for single-family homes in Diamond Bar during the last year was roughly $1.23 million,or $475 per square foot (average size of 2,586 SF). »Condos and townhomes performed similarly well,selling for $568,000 on average,or $458 per square foot (average size of 1,240 SF) ►An indicator of the high incomes and spending power in the market,52%of homes sold in Diamond Bar since June 2021 were priced at over $1 million,with fewer than 2%of homes selling for less than $700k. $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000Sale PriceSquare Footage Single-Family Condo Townhouse FOR-SALE HOUSING TRENDS Comparison of Sale Price by Home Type; Diamond Bar June 2021 –May 2022 Source: Redfin; RCLCO 3.1.b Packet Pg. 78 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 47 FOR-SALE RESIDENCES AT THE DIAMOND BAR TOWN CENTER WILL LIKELY COMPETE MOST DIRECTLY WITH EXISTING TOWNHOME AND CONDO COMMUNITIES IN THE SOUTHEAST SAN GABRIEL VALLEY REGION ►With no actively selling communities in Diamond Bar,RCLCO focused our analysis on the resale market of attached and detached product at townhome and condo communities.The attached properties on the resale market range in size from 976 square feet to 1,700 square feet and range in price from $393,000 to $875,000.Detached product at the two communities surveyed is significantly larger ranging in size from 2,100 to nearly 3,500 square feet and achieves a sizable price premium ranging from $865,000 to $1.8 million. ►Immediately southwest of the Diamond Bar Town Center,Fall Creek Condos is a for-sale community built in 1979 with resales currently priced just below $400,000. ►Given the age of the existing communities,and the projected quality of execution at properties at the Diamond Bar Town Center,RCLCO anticipates for-sale properties will likely compete most directly with the newly built detached communities in the area. FOR-SALE COMPETITIVE SET Map and Summary of Competitive Communities Diamond Bar; August 2022 Source: Redfin; RCLCO MAP KEY COMMUNITY AVG. HOME SIZE TOTAL AVG. PRICE TOTAL AVG. $/SF TOTAL MONTHLY PAYMENT 1 Washington Ave & Cottonwood 1,473 $700,000 $475 $2,674 2 Quarry Ln & Crest Ln 1,115 $661,596 $593 $2,527 3 Presado Dr & Laurelrim Dr 1,067 $592,400 $555 $2,263 4 Canyon Park Dr & Shady Hills Dr 976 $538,750 $552 $2,058 5 Silver Hawk Dr & Shannon Ct 1,732 $875,000 $505 $3,342 6 Paseo De Terrado & Chardonnay Dr 1,223 $726,333 $594 $2,774 7 Cleghorn Dr & Monument Canyon Dr 1,212 $643,250 $531 $2,457 8 Fall Creek Condos 1,005 $393,043 $391 $1,501 9 High Knob Rd & Golden Springs Dr 1,293 $597,499 $462 $2,282 10 Lennar Phillips Ranch 2,123 $865,467 $408 $3,305 11 South Pointe 3,470 $1,836,000 $529 $7,012 TOTAL/AVERAGE 1,461 $714,914 $489 $2,730 Subject SiteMAP KEY Attached Product Detached Product 3.1.b Packet Pg. 79 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 48 FOR SALE POSITIONING Source: New Home Source; Redfin; Zillow; Individual Community Websites; RCLCO THE TOWNHOMES AND STACKED FLATS AT DIAMOND BAR TOWN CENTER ARE POSITIONED ABOVE ALL ATTACHED PRODUCT IN THE SOUTHEAST SAN GABRIEL VALLEY WITH ONLY THE NEWEST CONSTRUCTION OUTCOMPETING PROJECTED PRICING $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 $2,200,000 Total Average PriceSF Diamond Bar Town Center | Torti Gallas | Townhomes Diamond Bar Town Center | Torti Gallas | Stacked Flats Washington Ave & Cottonwood | Diamond Bar | CondoQuarry Ln & Crest Ln | Diamond Bar | Condo/TownhousePresado Dr & Laurelrim Dr | Diamond Bar | Condo Canyon Park Dr & Shady Hills Dr | Diamond Bar | Condo/TownhouseSilver Hawk Dr & Shannon Ct | Diamond Bar | Condo/TownhousePaseo De Terrado & Chardonnay Dr | Diamond Bar | Condo/TownhouseCleghorn Dr & Monument Canyon Dr | Diamond Bar | Condo/TownhouseFall Creek Condos | Diamond Bar | Condo High Knob Rd & Golden Springs Dr | Diamond Bar | Condo/TownhouseLennar Phillips Ranch | Pomona | SFD South Pointe | Diamond Bar | SFD Price to Size Relationship 3.1.b Packet Pg. 80 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 49 FOR-SALE PRICING AND ABSORPTION BASED ON RCLCO’S DEMAND ANALYSIS AND PROJECTED ABSORPTION FOR THE DIAMOND BAR TOWN CENTER, FOR-SALE HOUSING IS PROJECTED TO AVERAGE ABSORPTION OF 7 HOMES PER MONTH RESULTING IN A TOTAL SALES PERIOD OF JUST OVER FIVE YEARS TOWNHOMES ►Pricing and Product Segmentation:RCLCO projects that the Diamond Bar Town Center can likely achieve strong pricing,in line with or above,competitive townhome communities in the submarket (on a per square foot basis),given the community’s anticipated quality of execution,newer vintage,and proximity to retail and dining options.The current pricing will likely appeal to those looking for increased privacy and space over multifamily rental housing,but who may be potentially priced out of the single-family housing market. ►Absorption:At the projected prices,RCLCO anticipates townhomes at the Diamond Bar Town Center could likely absorb four units per month,selling out in just over four years. STACKED FLATS ►Pricing and Product Segmentation:RCLCO projects that the Diamond Bar Town Center can likely achieve strong pricing,above the performance of the townhome product due to a higher level of execution and the absence of this product type in the area market.Despite the anticipated quality of build,this product still represents a discount to some newly constructed single-family homes in Diamond Bar like the South Pointe community (included in the competitive set). ►Absorption:The stacked flats are projected to absorb approximately three units per month,resulting in a sales period of just over three years. HOMES HOME SIZE HOME PRICE PRODUCT LINE #% SALES PACE AVG. AVG. BASE PRICE BASE $/SF (INCENTIVES) NET BASE PRICE NET BASE $/SF OPTIONS PREMIUM S TOTAL AVG. PRICE TOTAL AVG. $/SF Townhomes 200 62.5%4 1,460 $846,000 $580 ($5,000)$841,000 $576 $12,000 2.0%$869,000 $595 Stacked Flats 120 37.5%3 2,090 $1,125,000 $538 ($5,000)$1,120,000 $536 $15,000 2.0%$1,157,000 $554 TOTAL/WTD. AVG.320 100.0%7 1,696 $951,000 $561 ($5,000)$946,000 $558 $13,000 2.0%$977,000 $576 3.1.b Packet Pg. 81 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 50 SENIORS HOUSING ANALYSIS 3.1.b Packet Pg. 82 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 51 SENIOR HOUSING PROGRAM RCLCO’S ANALYSIS SUGGESTS THE DIAMOND BAR TOWN CENTER CAN SUPPORT AN ADDITIONAL 180 RENTAL HOUSING UNITS AS SENIOR HOUSING ►Given the significant aging population of the San Gabriel Valley,senior housing presents an attractive housing opportunity for the Diamond Bar Town Center. ►The sizable,and rapidly growing,elderly population of the San Gabriel Valley represents a large demand pool that is currently underserved with senior housing options. ►With smaller average unit sizes than traditional multifamily units,senior housing would likely achieve average rents of $4,025 per month for an average 720 square foot unit ($5.59 per square foot). ►There are currently 117 senior housing units in the development pipeline and RCLCO recommends 180 senior housing units at the Diamond Bar Town Center.These units are projected to absorb rapidly at nearly 12 units per month,resulting in a lease-up period of just under 15 months to reach stabilization (95%occupancy). SENIOR HOUSING DELIVERY YEAR 2026 MARKET RATE UNITS 180 AVG. SIZE 720 AVG. RENT $4,025 AVG. $/SF $5.59 MONTHLY ABSORPTION PACE 11.5 Units per Month MONTHS TO STABILIZATION (95%)14.9 Months 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 0-4 5-9 10-14 15-19 20-24 25-34 35-44 45-54 55-64 65-74 75-84 85+ 2010 2021 2026 Population Distribution by Age San Gabriel Valley Aging Population 3.1.b Packet Pg. 83 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 52 SENIOR HOUSING DEMOGRAPHICS THE SENIOR POPULATION OF THE SAN GABRIEL VALLEY IS PROJECTED TO EXPERIENCE TREMENDOUS GROWTH THROUGH 2026 The San Gabriel Valley currently has a population of 1.9 million and is projected to grow by only 10,000 people through 2026. ►The senior population (75+)currently make up 6.8%of the population at 129,211. ►The senior population in the San Gabriel Valley is projected to increase by 23,452 over the next five years for an annual population growth of nearly 4,700 people.This is projected to increase the share of senior population to 8.0%of the PMA population due to outsized growth of the senior population and a shrinking of younger demographics. The PMA is currently made up of 576,979 households.By 2026,the PMA is projected grow to a total of 578,785 households. ►Senior households (75+)currently make up 11.7%of the total households in the PMA at 67,679. ►Senior households in the PMA are projected to increase by 9,380 over the next five years for an annual household growth of 1,876 households.This is projected to increase the share of senior households to 13.3%of the total PMA households. The senior population growth projection is substantially higher than the growth that occurred from 2010 to 2021. ►From 2010 to 2021 the age cohort from 75-79 increased by 1,203 seniors annually while it is projected that the same cohort is projected to increase by 2,545 seniors annually from 2021-2026. ►From 2010 to 2021 the age cohort of those over the age of 80 increased by 835 seniors annually while it is projected that the same cohort is projected to increase by nearly triple that amount from 2021-2026 with an annual projected increase of 2,146. ►Overall,the senior population is expected to grow at a much higher rate as the Baby- Boomer generation enters into the senior housing age range. 41,465 54,700 67,424 65,324 74,511 85,239 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 2010 2021 2026 2010 2021 2026 +2,545 seniors per year +835 seniors per year +2,146 seniors per year +1,203 seniors per year 75-79 Years 80 Years + Senior Population Growth by Age Group 2021 2021-2026*2026 POPULATION All 1,902,915 10,634 1,913,549 75+129,211 23,452 152,663 % 75+6.8%220.5%8.0% HOUSEHOLDS All 576,979 1,806 578,785 75+67,679 9,380 77,059 % 75+11.7%519.4%13.3% Senior Demographics; 2021-2026 * %75+ includes growth and people aging in place 3.1.b Packet Pg. 84 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 53 SENIOR HOUSING SUPPLY & DEMAND THERE IS A SIGNIFICANT LACK OF SENIOR HOUSING IN THE SAN GABRIEL VALLEY, THE AREA IS CURRENTLY UNDERSUPPLIED BY OVER 4,000 UNITS As part of our analysis,we studied the current supply demand dynamics of the San Gabriel Valley.A key metric we focus on is the Penetration Rate,defined by the National Investment Center for Seniors Housing and Care’s NIC MAP data service as (Inventory /Number of Households headed by a senior aged 75+).We also look at how demographics and inventory change over time,and how those factors affect the future Penetration Rate. The Penetration Rate of a particular submarket compared to the greater MSA,or national levels,is one indication of whether or not there is room for new supply.Based on NIC MAP,the current national aggregate Penetration Rate for seniors is approximately 10.5%. ►A low Penetration Rate,especially when coupled with high Occupancy Rates of existing facilities,is typically a good indicator of a submarket that has room for new supply. ►A high Penetration Rate coupled with low Occupancy Rates suggests a market with too much supply versus demand. ►One less apparent nuance here is that the quality,age,location,and accessibility of the inventory is likely to also play a role.If a market has a select number of newer facilities with higher occupancy paired with a greater number of older facilities with low occupancy,this oftentimes indicate that consumer preferences are not necessarily being satisfied by the existing inventory. We found that the growth of quality eldercare supply in the PMA has been very low,with approximately 12%of total units added between 2001 and 2011 and no new development since 2011.A demographic trend analysis indicates that the PMA is projected to see an increase in 75+senior population of 23,452 people by 2026,or 4,690 people each year for the next five years.In terms of households,there are currently 67,679 households over the age of 75 in the PMA.By 2026,there is projected to be 77,059 senior households in the PMA representing an increase of 9,380 households or 1,876 new senior households per year. Currently the PMA is undersupplied by 4,050 units due to a current penetration rate of 4.5%.With the delivery of all units in the current pipeline and the Subject Site,by 2026 the PMA is projected to continue to be underserved and is projected to have a lower penetration rate of 4.4%,and is projected to be undersupplied by 4,738 units. 2021 2021-2026 2026 Total 75+ Population1 129,211 23,452 152,663 Total 75+ Households1 67,679 9,380 77,059 Total Units of Senior Housing (Including Subject Property)2 3,056 297 3,353 Penetration Rate 4.5%--4.4% Supported Supply at National Penetration Rate (10.5%)7,106 985 8,091 (Over)/Under Supply 4,050 688 4,738 3.1.b Packet Pg. 85 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 54 RETAIL ANALYSIS 3.1.b Packet Pg. 86 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 55 RETAIL MARKET OVERVIEW RETAIL ESTABLISHMENTS IN DIAMOND BAR ARE GENERALLY LARGER THAN THE SURROUNDING AREA, BUT COMPRISE ONLY 15% OF ALL RETAIL LOCATIONS IN THE SOUTHEAST SAN GABRIEL VALLEY ►While the 96 retail buildings,including multi-tenant buildings,in Diamond Bar account for just 15%of locations in Southeast San Gabriel Valley,the average establishment is nearly 16,000 square feet,compared to just over 9,600 in the broader area. ►Vacancies in the area are roughly similar,but average NNN lease rates in Diamond Bar are 28%higher than Southeast San Gabriel Valley,$25.16 ($2.10 per month) compared to $19.70 ($1.64 per month). ►The number of retail locations in Diamond Bar has remained largely unchanged since 2006,with the delivery of five properties over that time totaling nearly 88,500 square feet (average of 17,693 square feet per new establishment).Over the same period Southeast San Gabriel Valley (excluding Diamond Bar)added 26 locations for a total of approximately 416,800 square feet (average of 16,030 square feet per new establishment) ►There has been substantial absorption of retail space in Diamond Bar over the past decade,with net absorption representing 360%of the 10-year completions (Southeast San Gabriel Valley had a ratio of 108%).This demonstrated demand for new retail space is mirrored in the vacancy rate decreasing from 14.3%in 2015 to 6.7%as of July 2022. Diamond Bar Town Center 1Properties profiled represent all existing retail locations 2Average Lease Rate calculated using Overall NNN Rents on a monthly basis.Source: CoStar; RCLCO Map of Diamond Bar and Southeast San Gabriel Valley and San Gabriel Valley MAP CLUSTER # OF TOTAL AVERAGE AVG LEASE AVG 10-YEAR 10-YEAR KEY NAME BUILDINGS1 SF BUILDING SF RATE2 VACANCY COMPLETIONS SF ABSOPTION SF Diamond Bar Town Center 28 447,567 15,985 $18.80 10.4%0 32,345 1 Diamond Bar 96 1,513,091 15,761 $25.16 6.7%8,552 30,902 2 Southeast San Gabriel Valley 642 6,179,480 9,625 $19.70 6.8%297,908 321,433 3 San Gabriel Valley 8,363 86,068,580 10,292 $26.83 4.9%2,333,403 3,194,366 Diamond Bar Capture and Premium/Discount of SE SGV 15.0%24.5%63.7%27.7%-1.5%2.9%9.6% 3.1.b Packet Pg. 87 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 56 RETAIL MARKET TRENDS –DIAMOND BAR THE DIAMOND BAR AREA EXPERIENCED LIMITED NEW SUPPLY BETWEEN 2011 AND 2021, WITH JUST TWO RETAIL DELIVERIES. OVER THIS PERIOD, VACANCY, EFFECTIVE RENT GROWTH, AND ABSORPTION HAVE FLUCTUATED HEAVILY. HOWEVER, POSITIVE NET ABSORPTION OVER THIS PERIOD HAS CREATED NEAR 10-YEAR LOW VACANCY OF 6.7% AS OF JULY 2022 AND RETAIL ABSORPTION APPEARS TO BE RECOVERING FROM THE EFFECTS OF THE COVID-19 PANDEMIC. Source: CoStar; RCLCO Retail Completion, Absorption, Vacancy, and Rent Growth; Diamond Bar 2007-2021 -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% (150,000) (100,000) (50,000) 0 50,000 100,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD OCCUPANCYSQUARE FEETChange in Inventory Net Absorption Vacancy (Overall)Rent Growth (Overall) 3.1.b Packet Pg. 88 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 57 TAXABLE RETAIL SALES TAXABLE RETAIL SALES IN DIAMOND BAR AVERAGED OVER $432 MILLION P ER YEAR BETWEEN 2017 AND 2021 AND ACCOUNTED FOR ROUGHLY 20% OF RETAIL SALES WITHIN TH E SOUTHEAST SAN GABRIEL VALLEY DURING THAT PERIOD. NEIGHBORING POMONA AVERAGED A NNUAL TAXABLE RETAIL SALES OF ROUGHLY $1.5 BILLION ANNUALLY FOR THE PREVIOUS FIVE YEA RS AND COMPRISES 70% OF SOUTHEAST SAN GABRIEL VALLEY SALES. Source: California Board of Equalization; RCLCO 0% 5% 10% 15% 20% 25% $ $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021In $MillionsDiamond Bar Walnut Pomona Diamond Bar as a % of Southeast San Gabriel Valley Taxable Retail Sales by City 2009-2021 3.1.b Packet Pg. 89 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 58 RETAIL REVENUES BY CATEGORY Source: California Board of Equalization; CoStar; RCLCO FAST FOOD AND GENERAL MERCHANDISE ACCOUNT FOR OVER A THIRD (37%) OF ALL TAXABLE RETAIL REVENUE IN EXISTING RETAIL AT THE DIAMOND BAR TOWN CENTER. LOCAL RESTAURANTS, GROCERY, AND CLOTHING AND ACCESSORY STORES ACCOUNT FOR AN EVEN LARGER COMBINED PORTION OF TAXABLE RETAIL REVENUE (40%). DIAMOND BAR TOWN CENTER # OF RETAIL SPACES RETAIL SALES TAXABLE SALES % TAXABLE SALES $ % OF ALL TAXABLE REVENUE SQUARE FEET RETAIL SALES / SF General Merchandise 3 $26,737,035 100%$26,737,035 31%57,499 $465 Local Restaurant 13 $10,857,000 100%$10,857,000 13%43,428 $250 Service 58 $0 0%$0 0%102,649 $0 Ice Cream 1 $268,710 0%$0 0%1,014 $265 Service w/ Retail Component 3 $2,425,500 5%$121,275 0%13,475 $180 Fast Casual 4 $4,328,250 100%$4,328,250 5%9,950 $435 Pharmacy 2 $5,900,075 24%$1,416,018 2%7,613 $775 Specialty Grocer 2 $26,826,000 25%$6,706,500 8%17,884 $1,500 Grocery 2 $46,738,750 25%$11,684,688 13%67,250 $695 Hospitality 1 $2,965,169 14%$415,124 0%54,473 N/A Auto Parts 1 $1,056,000 100%$1,056,000 1%4,800 $220 Fast Food 3 $5,409,000 100%$5,409,000 6%10,818 $500 Clothing & Accessory Stores 1 $12,340,790 100%$12,340,790 14%32,054 $385 Home Improvement 1 $4,050,000 100%$4,050,000 5%10,000 $405 Gas Station 4 $1,497,600 100%$1,497,600 2%14,976 $100 Vacant 23 $0 N/A $0 0%58,433 N/A TOTAL 122 $151,399,879 57%$86,619,279 100%506,316 $299 Retailers and Taxable Retail Sales; Diamond Bar Town Center 2021 3.1.b Packet Pg. 90 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 59 RETAIL MARKET TRENDS Source: CoStar; RCLCO RETAIL CONSTRUCTION ACTIVITY IN THE SOUTHEAST SAN GABRIEL VALLEY HAS BEEN LIMITED SINCE 2013 ►Lack of new product in the area lead to rapidly declining vacancy rates between 2015 and 2017. ►Vacancy rates rose between 2018 and 2021,likely worsened during the latter two years due to the effects of the Covid-19 pandemic on brick and mortar retail spending, demonstrated through negative net absorption during that period. -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% -150,000 -100,000 -50,000 0 50,000 100,000 150,000 200,000 250,000 2017 2018 2019 2020 2021 2022 YTD Vacancy RateSF Delivered / AbsorbedDeliveries, SF Net Absorption, SF Vacancy Rate Historical Retail Deliveries and Occupancy Rate, 2010-2022 YTD; Southeast San Gabriel Valley 3.1.b Packet Pg. 91 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 60 THE DIAMOND BAR TOWN CENTER IS PROJECTED TO SUPPORT JUST OVER 446,000 SQUARE FEET OF RETAIL SPACE BY 2031 ►RCLCO analyzed existing retail conditions and projected future demand using projected household growth for the Southeast San Gabriel Valley.By 2031,the site is projected to support over 446,000 square feet. ►Despite the site containing 447,000 square feet of occupied space currently,RCLCO has determined the actual demand for retail at the site is just over 308,000 square feet which should increase to 446,000 square feet at the maturation of the site. RCLCO believes this program will likely enable greater retail rents and higher occupancies. ►The RCLCO proposed program supports maintaining a high proportion of grocery and drug as well as restaurants to best occupy this space.The program also proposes to increase entertainment and services,a sector that is underrepresented in the current Diamond Bar Town Center. ►Future retail demand at the Diamond Bar Town Center is comprised predominantly of grocery &drug and soft goods locations,combining for 57%of retail demand by 2031. ►Grocery &drug and restaurants comprise a large proportion of the proposed program at a combined 44%,reflective of the current tenancy of the Diamond Bar Town Center. Distribution of Retail Demand for Diamond Bar Town Center;2031 Grocery & Drug 109,000 SF Restaurants 87,100 SF Soft Goods 82,600 SF Entertainment & Services 75,700 SF Auto & Gas 56,300 SF Hard Goods 35,600 SF RETAIL DEMAND Source: CoStar; Client Materials; RCLCO Summary of Retail Demand at the Diamond Bar Town Center; 2021-2031 STORE TYPE 2021 2026 2031 Grocery & Drug 72,900 89,500 109,000 Restaurants 62,200 73,600 87,100 Hard Goods 24,400 29,500 35,600 Soft Goods 57,700 69,200 82,600 Entertainment & Services 48,100 60,700 75,700 Auto & Gas 42,900 49,100 56,300 TOTAL 308,200 SF 371,600 SF 446,300 SF PARCEL # OF BUS.SF OCC. SF OCC. %PRIMARY TENANT(S) 1 0 0 0 N/A Vacant 2 1 54,473 54,473 100%Best Western Diamond Bar Hotel 3 1 8,483 8,483 100%Aashiana Restaurant 4 1 2,145 2,145 100%Brown Rice Thai 5 1 4,246 4,246 100%Diamond Palace Chinese Seafood 6 1 6,975 6,975 100%Tire Choice 7 1 3,372 3,372 100%Carl's Jr. 8 1 3,746 3,746 100%McDonald's 9 5 100,702 73,084 73%Sprouts Farmers Market / Ross Dress for Less 10 1 2,000 2,000 100%Pump Station 11 1 2,000 2,000 100%76 Gas Station 12 13 46,598 45,302 97%Ace Hardware / AutoZone 13 14 49,326 34,507 70%Local Restaurants and Service Oriented Businesses 14 13 41,281 37,281 90%Local Restaurants and Service Oriented Businesses 15 14 20,134 16,784 83%Medical and Service Oriented Businesses 16 1 6,538 6,538 100%Chevron Gas Station 17 8 20,528 20,528 100%Encore Teppan / Diamond Bar Montessori Academy 18 2 6,538 6,538 100%Shell Gas Station / 7-Eleven 19 3 10,500 10,500 100%Taco Bell / Leslie's Pool Supply / Diamond Bar Beauty 20 1 32,750 32,750 100%Smart & Final Extra! 21 3 62,399 56,399 90%CVS 22 1 2,600 2,600 100%Mobil Gas Station 23 5 7,420 7,420 100%Village Dental 24 7 11,562 10,212 88%Service Oriented Businesses TOTAL 99 506,316 447,883 88% Summary of Existing Retail at the Diamond Bar Town Center; 2022 3.1.b Packet Pg. 92 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 61 RETAIL DEMAND ANALYSIS AN ANALYSIS OF EXISTING RETAIL SUPPLY AND DEMAND SUGGESTS THERE IS AN OVERABUNDANCE OF ELECTRONICS & APPLIANCE STORES AND GASOLINE STATIONS IN THE SOUTHEAST SAN GABRIEL VALLEY. CONVERSELY, THE AREA IS CURRENTLY SIGNIFICANTLY UNDERSUPPLIED BY GENERAL MERCHANDISE $156,068,012 $124,821,101 $74,580,367 $32,673,073 $29,701,051 $29,183,023 $10,343,957 -$3,606,032 -$15,563,522 -$60,793,377 -$123,989,198 -$137,813,232 -$200,000,000 -$100,000,000 $0 $100,000,000 $200,000,000 General Merchandise Stores Motor Vehicle & Parts Dealers Clothing & Clothing Accessories Stores Food & Beverage Stores Health & Personal Care Stores Bldg Materials, Garden Equip. & Supply Stores Food Services & Drinking Places Sporting Goods, Hobby, Book & Music Stores Miscellaneous Store Retailers Furniture & Home Furnishings Stores Gasoline Stations Electronics & Appliance Stores Retail Leakage Analysis; Southeast San Gabriel Valley August 2022 3.1.b Packet Pg. 93 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 62 RETAIL PROGRAMMING THE PROPOSED RETAIL PROGRAM INCLUDES UTILIZING A GREATER AMOUNT OF ENTERTAINMENT AND SERVICES SPACE, IN THE FORM OF A MOVIE THEATER, AS A CENTRAL POINT FOR THE DIAMOND BAR TOWN CENTER ►RCLCO believes that a movie theater provides an aesthetic visual focal point as well as a cultural draw that can drive increased traffic to the Diamond Bar Town Center. ►The city of Diamond Bar does not currently have a movie theater and the two nearest theaters are Harkins Theatres Chino Hills 18,approximately 5.5 miles east in Chino Hills and AMC Puente Hills 20,approximately 8.7 miles west in City of Industry. ►The program proposes increasing restaurants by 7,000 square feet as there is additional unmet demand for food and beverage in the Southeast San Gabriel Valley. The increased space provides an opportunity to bring in several smaller fast-casual restaurants or a few larger full-service restaurants. ►Grocery and drug has approximately 12,000 square feet of unmet demand,which RCLCO believes could be met by the addition of another specialty or boutique grocer at the Diamond Bar Town Center.This type of retail offering would complement existing grocery stores at the Diamond Bar Town Center while providing an increased draw from new consumer segments. 3.1.b Packet Pg. 94 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 63 RETAIL PRICE POSITIONING Source: CoStar; RCLCO EXECUTED LEASES IN THE SOUTHEAST SAN GABRIEL VALLEY AREA OVER THE PAST TWELVE MONTHS RANGE FROM $1.50 TO $3.25 NNN PER SQUARE FOOT PER MONTH. RCLCO RECOMMENDS POSITIONING ASKING RENTS BETWEEN $3.00 AND $4.00 PER SQUARE FOOT. Executed Retail Lease Comps Positioning; August 2022 3.1.b Packet Pg. 95 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 64 RETAIL PRICE POSITIONING Source: CoStar; RCLCO ASKING RETAIL LEASES IN THE SOUTHEAST SAN GABRIEL VALLEY RANGE FROM $1.65 TO $3.30 NNN PER SQUARE FOOT PER MONTH. AT THE RECOMMENDED $3.00 TO $4.00 PER SQUARE FOOT, THE DIAMOND BAR TOWN CENTER WOULD BE ASKING TOP OF MARKET RETAIL RENTS Asking Retail Lease Comps Positioning; August 2022 3.1.b Packet Pg. 96 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 65 HOSPITALITY ANALYSIS 3.1.b Packet Pg. 97 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 66 COMPARABLE HOTEL PROPERTIES Source: CoStar; Hotel Websites; RCLCO Comparable Hotel Properties August 2022THE SOUTHEAST SAN GABRIEL VALLEY LACKS MODERN, AND WELL-AMENITIZED HOTELS ►Within the competitive area (including Diamond Bar,Walnut,and the western portion of Pomona),RCLCO identified 13 comparable hotels.The competitive properties range in scale from independent to upper upscale with average rack rates from $119 to $224 per night and with the exception of the Comfort Inn in Pomona,were constructed prior to 1998. ►Hospitality locations at the Diamond Bar Town Center should compete most directly with the primary competitive set which is comprised of hotels between the midscale and upper upscale class.While RCLCO believes the Best Western could be upgraded to a higher-end offering,it would face further competition as the pipeline begins to deliver.The secondary competitive set demonstrates more budget-friendly alternatives and includes properties in the independent and economy class. ►The majority of comparable hotels within the area are concentrated along major highways and beyond facilitating conferences,provide guests convenient access to the greater San Gabriel Valley and nearby events at places like the Pomona Fairplex and Disneyland in Anaheim. MAP KEY HOTEL CLASS YEAR OPENED ROOMS AVG. RACK RATE PRIMARY COMPETITIVE SET 1 Sheraton Hotel Fairplex & Conference Center Upper Upscale 1992 244 $224 2 Ayres Suites Diamond Bar Upscale 1997 101 $164 3 DoubleTree by Hilton Pomona Upscale 1989 132 $182 4 Comfort Inn Pomona Near Fairplex Upper Midscale 2008 51 $151 5 Holiday Inn Diamond Bar –Pomona Upper Midscale 1990 176 $145 6 La Quinta Inns & Suites Pomona Upper Midscale 1985 161 $136 7 Quality Inn & Suites Walnut Midscale 1990 92 8 Best Western Diamond Bar Hotel & Suites Midscale 1988 97 $119 SECONDARY COMPETITIVE SET 9 Motel 6 Los Angeles –Pomona Economy 1985 121 $89 10 America Inn & Suites Independent 1981 115 11 Lemon Tree Motel Independent 1973 67 $76 12 Kellogg West Conference Center Independent 1971 85 13 Claremont West Suites Independent 1969 60 MAP KEY TOTAL ROOMS Upper Upscale 244 Upscale 233 Upper Midscale 388 Midscale 189 Economy 121 Independent 327 TOTAL EXISTING 1,502 Map of Southeast Diamond Bar Hotel Supply August 2022 PROPERTY NAME ROOMS SCALE YEAR BUILT Holiday Inn Diamond Bar -Pomona 176 Upper Midscale 1990 Best Western Diamond Bar Hotel & Suites 97 Midscale 1988 Ayres Suites Diamond Bar 101 Upscale 1997 Hampton Inn & Suites by Hilton Diamond Bar Lo 124 Upper Midscale 2024 TOTAL/AVG.498 2000 3.1.b Packet Pg. 98 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 67 HOSPITALITY TRENDS AVERAGE DAILY RATES IN THE DIAMOND BAR DECLINED BY 14% IN 2020 AS THE COVID-19 PANDEMIC HEAVILY IMPACTED THE TOURISM INDUSTRY. HOWEVER, THE MARKET DEMONSTRATED STRONG RECOVERY OF 15% IN 2021, REACHING NEAR PRE- PANDEMIC LEVELS. OCCUPANCIES ALSO DIPPED HEAVILY IN 2020 AND HAVE BEEN SLOW TO RECOVER, STILL LAGGING BEHIND PRE-PANDEMIC LEVELS. Comparison of Hotel ADR, RevPAR, and Occupancy; Diamond Bar 2016-2021 Source: CoStar; RCLCO $113 $120 $118 $118 $102 $117 $87 $91 $86 $86 $50 $73 77%75%72%72% 48% 61% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% $0 $20 $40 $60 $80 $100 $120 $140 2016 2017 2018 2019 2020 2021 ADR RevPAR Occupancy PROPERTY NAME ROOMS SCALE YEAR BUILT Holiday Inn Diamond Bar -Pomona 176 Upper Midscale 1990 Best Western Diamond Bar Hotel & Suites 97 Midscale 1988 Ayres Suites Diamond Bar 101 Upscale 1997 Hampton Inn & Suites by Hilton Diamond Bar Lo 124 Upper Midscale 2024 TOTAL/AVG.498 2000 Summary of Diamond Bar Hospitality Properties 3.1.b Packet Pg. 99 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 68 HOTEL PIPELINE Source: CoStar; RCLCO Under Construction and Planned Hotels August 2022 Subject Site MAP KEY HOTEL CLASS YEAR OPENED ROOMS PIPELINE 1 Fairfield Inn & Suites Los Angeles Pomona Upper Midscale 2026 105 2 Hilton Garden Inn Pomona Upscale 2022 148 3 Hampton Inn & Suites by Hilton Diamond Bar Lo Upper Midscale 2024 124 4 Tryp by Wyndham Pomona Upper Midscale 2025 132 5 Hyatt Place Pomona Upscale 2025 115 6 Hyatt House Pomona Upscale 2025 100 MAP KEY TOTAL ROOMS Under Construction 148 Planned / Proposed 576 TOTAL PIPELINE 724 THE PIPELINE IN THE HOTEL COMPETITIVE MARKET AREA IS LARGE RELATIVE TO RECENT YEARS WITH ONLY ONE DELIVERY OVER THE PREVIOUS TWO DECADES 3.1.b Packet Pg. 100 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 69 HOSPITALITY DEMAND ANALYSIS HISTORICAL PROJECTED 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 SUPPLY Beginning Room Nights 501,346 477,999 518,542 526,330 433,336 493,299 602,250 602,250 647,510 764,529 795,189 795,189 795,189 795,189 795,189 Change in Room Nights -23,347 40,543 7,788 -92,994 59,963 108,951 0 45,260 117,019 30,660 0 0 0 0 0 Ending Room Nights 477,999 518,542 526,330 433,336 493,299 602,250 602,250 647,510 764,529 795,189 795,189 795,189 795,189 795,189 795,189 DEMAND Demonstrated Demand Growth Rate -8.3%5.8%1.8%-41.5%41.8%35.3%5.0%5.0%5.0%5.0%5.0%5.0%5.0%5.0%5.0% Beginning Demand Nights 388,282 356,175 376,700 383,597 224,477 318,255 430,619 452,150 474,758 498,495 523,420 549,591 577,071 605,924 636,221 Demonstrated Demand Growth -32,107 20,525 6,897 -159,120 93,778 112,364 21,531 22,608 23,738 24,925 26,171 27,480 28,854 30,296 31,811 Ending Demand Nights 356,175 376,700 383,597 224,477 318,255 430,619 452,150 474,758 498,495 523,420 549,591 577,071 605,924 636,221 668,032 Historical & Projected Occupancies 74.5%72.6%72.9%51.8%64.5%71.5%75.1%73.3%65.2%65.8%69.1%72.6%76.2%80.0%84.0% Target Occupancy 70.0%70.0%70.0%70.0%70.0%70.0%70.0%70.0%70.0%70.0% UNMET DEMAND Demand at Target Occupancy (Nights)421,575 421,575 453,257 535,170 556,632 556,632 556,632 556,632 556,632 556,632 Unmet Demand (Nights)9,044 30,575 21,501 0 0 0 20,439 49,292 79,588 111,399 Unmet Demand (Available Room Nights)12,920 43,679 30,715 0 0 0 29,198 70,417 113,698 159,142 Unmet Demand (Rooms)35 120 84 0 0 0 80 193 312 436 DEMAND FOR HOTEL ROOMS IN THE SOUTHEAST SAN GABRIEL VALLEY IS PROJECTED TO REACH 220 ROOMS BY 2031. GIVEN THE EXISTING BEST WESTERN DIAMOND BAR HOTEL & SUITES AND THE OUTSIZED HOSPITALITY PIPELINE, RCLCO DOES NOT RECOMMEND ADDING ADDITIONAL HOTEL SPACE 3.1.b Packet Pg. 101 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 70 OFFICE ANALYSIS 3.1.b Packet Pg. 102 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 71 OFFICE MARKET OVERVIEW DIAMOND BAR ACCOUNTS FOR 42% OF ALL OFFICE SPACE IN THE SOUTHEAST SAN GABRIEL VALLEY AND COMMANDS A 9% PREMIUM IN FSG RENTS ►Given the current conditions of the office market,RCLCO does not recommend including office space as a component of the Diamond Bar Town Center.Higher vacancies than surrounding areas may indicate the office market in Diamond bar is already saturated. ►Despite accounting for only 28%of office buildings in the area,Diamond Bar provides over 2.35 million square feet of the Southeast San Gabriel Valley’s 5.62 million square feet of office space. ►The office market in Diamond Bar generates average FSG lease rates of $31.24 ($2.60 per month),a 9.2%premium to rents in the Southeast San Gabriel Valley, averaging $28.61 ($2.38 per month). ►Office vacancy in Diamond Bar is 12.2%as of July 2022,exceeding the 10.6% vacancy in the San Gabriel Valley and matching a 20-year record high of from 2010. ►The most recent office delivery in Diamond Bar occurred in 2014,with one new property providing just over 22,000 square feet.In comparison,the Southeast San Gabriel Valley (excluding Diamond Bar)has had seven completions over the same period,totaling roughly 338.000 square feet (an average of 48,322 square feet per office building). ►Between 2012 and 2021,Diamond Bar absorbed nearly 22,000 square feet of office space,an absorption ratio of 98%of new space.Comparatively,the Southeast San Gabriel Valley (excluding Diamond Bar),had an absorption ratio of just 54%of new space during the same period. ► 1Properties profiled represent all existing office buildings over 5k square feet. 2Total average rate calculated using Full-Service Gross (FSG) rent on a monthly basis. Source: CoStar; RCLCO Map of Diamond Bar and Southeast San Gabriel Valley Diamond Bar Town Center MAP CLUSTER # OF TOTAL AVERAGE AVG LEASE AVG 10-YEAR 10-YEAR KEY NAME BUILDINGS1 SF BUILDING SF RATE2 VACANCY COMPLETIONS SF ABSOPTION SF 1 Diamond Bar 70 2,356,311 33,662 $31.24 12.2%22,181 21,761 2 Southeast San Gabriel Valley 252 5,622,682 22,312 $28.61 10.6%360,434 205,972 3 San Gabriel Valley 1,833 50,619,471 27,616 $32.58 9.5%1,407,273 1,291,092 Diamond Bar Capture and Premium/Discount of SE SGV 27.8%41.9%50.9%9.2%15.1%6.2%10.6% 3.1.b Packet Pg. 103 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 72 OFFICE MARKET TRENDS –DIAMOND BAR DIAMOND BAR HAS EXPERIENCED STEADILY INCREASING OFFICE VACANCY SINCE 2018, WITH NEGATIVE NET ABSORPTION EACH YEAR DURING THE SAME PERIOD. FOLLOWING SEVERAL YEARS OF SLIDING RENT GROWTH, DIAMOND BAR OFFICE SPACES GENERATED RENT GROWTH OF 5.7% IN 2021 AND AS OF JULY 2022 HAS HAD RENT GROWTH OF 4.8%. NEGATIVE NET ABSORPTION LEADING TO INCREASING VACANCIES INDICATE THERE IS INSUFFICIENT DEMAND FOR NEW OFFICE SPACE IN DIAMOND BAR. Source: CoStar; RCLCO Completion, Absorption, Vacancy, and Rent Growth; Diamond Bar 2003-2022 YTD -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% (120,000) (100,000) (80,000) (60,000) (40,000) (20,000) 0 20,000 40,000 60,000 80,000 100,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD OCCUPANCYSQUARE FEETChange in Inventory Net Absorption Vacancy (Overall)Rent Growth (Overall) 3.1.b Packet Pg. 104 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 73 OFFICE MARKET TRENDS OFFICE RENTS IN BOTH DIAMOND BAR AND THE SOUTHEAST SAN GABRIEL VALLEY HAVE STEADILY INCREASED SINCE 2014. VACANCY RATES ARE ALSO SIMILAR IN BOTH MARKETS AND HAVE BEEN RISING EACH YEAR SINCE 2018. $1.87 $1.89 $1.85 $2.04 $2.20 $2.44 $2.16 $2.12 $1.99 $2.03 $1.95 $1.99 $2.01 $2.16 $2.20 $2.31 $2.42 $2.42 $2.35 $2.48 $2.60 $1.75 $1.80 $1.59 $1.83 $1.96 $2.38 $2.12 $2.04 $1.87 $1.91 $1.96 $1.93 $1.91 $1.99 $1.92 $2.01 $2.14 $2.26 $2.25 $2.36 $2.38 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 YTD Office VacancyOffice Rent (NNN)Diamond Bar Southeast San Gabriel Valley Diamond Bar Southeast San Gabriel Valley Office Rent (NNN) and Vacancy; Diamond Bar and Southeast San Gabriel Valley 2002-2022 YTD 3.1.b Packet Pg. 105 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 74 DISCLAIMERS 3.1.b Packet Pg. 106 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 75 CRITICAL ASSUMPTIONS Our conclusions are based on our analysis of the information available from our own sources and from the client as of the date of this report.We assume that the information is correct,complete,and reliable. We made certain assumptions about the future performance of the global,national,and local economy and real estate market,and on other factors similarly outside either our control or that of the client.We analyzed trends and the information available to us in drawing these conclusions.However,given the fluid and dynamic nature of the economy and real estate markets,as well as the uncertainty surrounding particularly the near-term future,it is critical to monitor the economy and markets continuously and to revisit the aforementioned conclusions periodically to ensure that they are reflective of changing market conditions. We assume that the economy and real estate markets will experience a period of slower growth in the next 12 to 24 months,and then return to a stable and moderate rate in 2024 and beyond.However,stable and moderate growth patterns are historically not sustainable over extended periods of time,the economy is cyclical,and real estate markets are typically highly sensitive to business cycles.Further,it is very difficult to predict when inflection points in economic and real cycles will occur. With the above in mind,we assume that the long-term average absorption rates and price changes will be as projected,realizing that most of the time performance will be either above or below said average rates. Our analysis does not consider the potential impact of future economic shocks on the national and/or local economy,and does not consider the potential benefits from major "booms”that may occur.Similarly,the analysis does not reflect the residual impact on the real estate market and the competitive environment of such a shock or boom.Also,it is important to note that it is difficult to predict changing consumer and market psychology. As such,we recommend the close monitoring of the economy and the marketplace,and updating this analysis as appropriate. Further,the project and investment economics should be “stress tested”to ensure that potential fluctuations in revenue and cost assumptions resulting from alternative scenarios regarding the economy and real estate market conditions will not cause failure. In addition,we assume that the following will occur in accordance with current expectations: ►Economic,employment,and household growth ►Other forecasts of trends and demographic and economic patterns,including consumer confidence levels ►The cost of development and construction ►Tax laws (i.e.,property and income tax rates,deductibility of mortgage interest,and so forth) ►Availability and cost of capital and mortgage financing for real estate developers,owners and buyers ►Competitive projects will be developed as planned (active and future)and that a reasonable stream of supply offerings will satisfy real estate demand ►Major public works projects occur and are completed as planned Should any of the above change,this analysis should be updated,with the conclusions reviewed accordingly (and possibly revised) 3.1.b Packet Pg. 107 Torti Gallas + Partners | Market Demand and Fiscal Impact Analysis | Diamond Bar Town Center R1-10743.27 | September 6, 2022 | 76 Reasonable efforts have been made to ensure that the data contained in this study reflect accurate and timely information and are believed to be reliable.This study is based on estimates,assumptions,and other information developed by RCLCO from its independent research effort,general knowledge of the industry,and consultations with the client and its representatives.No responsibility is assumed for inaccuracies in reporting by the client,its agent,and representatives or in any other data source used in preparing or presenting this study.This report is based on information that to our knowledge was current as of the date of this report,and RCLCO has not undertaken any update of its research effort since such date. Our report may contain prospective financial information,estimates,or opinions that represent our view of reasonable expectations at a particular time,but such information, estimates,or opinions are not offered as predictions or assurances that a particular level of income or profit will be achieved,that particular events will occur,or that a particular price will be offered or accepted.Actual results achieved during the period covered by our prospective financial analysis may vary from those described in our report,and the variations may be material.Therefore,no warranty or representation is made by RCLCO that any of the projected values or results contained in this study will be achieved. Possession of this study does not carry with it the right of publication thereof or to use the name of "Robert Charles Lesser &Co."or "RCLCO"in any manner without first obtaining the prior written consent of RCLCO.No abstracting,excerpting,or summarization of this study may be made without first obtaining the prior written consent of RCLCO.This report is not to be used in conjunction with any public or private offering of securities or other similar purpose where it may be relied upon to any degree by any person other than the client without first obtaining the prior written consent of RCLCO.This study may not be used for any purpose other than that for which it is prepared or for which prior written consent has first been obtained from RCLCO. GENERAL LIMITING CONDITIONS 3.1.b Packet Pg. 108 AUSTIN 1 0 0 C o n g r e s s A v e n u e , S u i t e 2 0 0 0 A u s t i n , T X 7 8 7 0 1 LOS ANGELES 11 6 0 1 W i l s h i r e B o u l e v a r d , S u i t e 1 6 5 0 L o s A n g e l e s , C A 9 0 0 2 5 ORLANDO 9 6 4 L a k e B a l d w i n L a n e , S u i t e 1 0 0 O r l a n d o , F L 3 2 8 1 4 WASHINGTON, DC 7 2 0 0 W i s c o n s i n A v e n u e , S u i t e 111 0 B e t h e s d a , M D 2 0 8 1 4 3.1.b Packet Pg. 109 October 4, 2022 ©2020 Torti Gallas + Partners | 601 West 5th Street, Suite 600 | Los Angeles, California 90071 | 213.607.0070 1 Properties Contacted DIAMOND BAR TOWN CENTER SPECIFIC PLAN60 Freeway Di am o n d B a r B l v d . Golden Springs Dr. Program Alternative 1 - Minimum Buildout PROGRAM Residential +/- 1,350 units Commercial 403K sf (includes 58.4K sf of Civic Building) Hotel 97 Keys Residential GF Retail and Residential Above Retail/Commercial Civic Hotel Existing Retail 3.1.c Packet Pg. 110 October 4, 2022 ©2020 Torti Gallas + Partners | 601 West 5th Street, Suite 600 | Los Angeles, California 90071 | 213.607.0070 2 Properties Contacted DIAMOND BAR TOWN CENTER SPECIFIC PLAN Program Alternative 2 - Halfway buildout60 Freeway Di am o n d B a r B l v d . Golden Springs Dr. PROGRAM Residential +/- 1,800 units Commercial 402K sf (includes 58.4K sf of Civic Building) Hotel 97 Keys Residential GF Retail and Residential Above Retail/Commercial Civic Hotel Existing Retail 3.1.c Packet Pg. 111 October 4, 2022 ©2020 Torti Gallas + Partners | 601 West 5th Street, Suite 600 | Los Angeles, California 90071 | 213.607.0070 3 Properties Contacted DIAMOND BAR TOWN CENTER SPECIFIC PLAN Program Alternative 3 - Full buildout60 Freeway Di am o n d B a r B l v d . Golden Springs Dr. PROGRAM Residential +/- 2,055 units Commercial 419K sf (includes 58.4K sf of Civic Building) Hotel 97 Keys Residential GF Retail and Residential Above Retail/Commercial Civic Hotel Existing Retail 3.1.c Packet Pg. 112 REVISED JANUARY 2021 Guide to the California Density Bonus Law BY JON GOETZ AND TOM SAKAI 3.1.d Packet Pg. 113 Table of Contents INTRODUCTION AND OVERVIEW........................................................................................................ HOW THE DENSITY BONUS WORKS................................................................................................... DENSITY BONUS CHART........................................................................................................... HOW THE DENSITY BONUS CAN HELP IN A FRIENDLY JURISDICTION....................................... HOW THE DENSITY BONUS CAN HELP IN A HOSTILE JURISDICTION.......................................... CEQA ISSUES IN DENSITY BONUS PROJECTS................................................................................. USING THE DENSITY BONUS TO SATISFY INCLUSIONARY HOUSING REQUIREMENTS............ DENSITY BONUS AND REPLACEMENT HOUSING........................................................................... DENSITY BONUS IN THE COASTAL ZONE........................................................................................ DENSITY BONUS - A FLEXIBLE TOOL............................................................................................... DENSITY BONUS STATUTES.............................................................................................................. MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 1 JON GOETZ E-mail: jgoetz@meyersnave.com Direct: 800.464.3559 Jon Goetz is an attorney at Meyers Nave. He has over 30 years of experience in real estate, land use, environmental, redevelopment, housing and municipal law. Jon represents private and public entities in complex real estate development transactions, land use planning, public-private development, infrastructure financing and affordable housing. He has advised on acquiring, financing, leasing and disposing of all forms of improved and unimproved property. ABOUT THE AUTHORS TOM SAKAI E-mail: tsakai@springbrookadvisors.com Direct: 949.833.2599 Tom Sakai is the Principal of Springbrook Realty Advisors, Inc., a real estate consulting practice located in Newport Beach. His practice specializes in consulting to land developers and homebuilders, focusing on pro formas and feasibilities for master-planned communities, school negotiations, assessment district and Mello-Roos financing, affordable housing issues, and other services to the real estate industry. 2 3 4 10 11 11 11 12 12 12 13 3.1.d Packet Pg. 114 Introduction and Overview Savvy housing developers are taking advantage of California’s Density Bonus Law, a mechanism which allows them to obtain more favorable local development requirements in exchange for offering to build or donate land for affordable or senior units. The Density Bonus Law (found in California Government Code Sections 65915 – 65918) provides developers with powerful tools to encourage the development of affordable and senior housing, including up to a 50% increase in project densities for most projects, depending on the amount of affordable housing provided, and an 80% increase in density for projects which are completely affordable. The Density Bonus Law is about more than the density bonus itself, however. It is actually a larger package of incentives intended to help make the development of affordable and senior housing economically feasible. Other tools include reduced parking requirements, and incentives and concessions such as reduced setback and minimum square footage requirements. Often these other tools are even more helpful to project economics than the density bonus itself, particularly the special parking benefits. Sometimes these incentives are sufficient to make the project pencil out, but for other projects financial assistance is necessary to make the project feasible. In determining whether a development project would benefit from becoming a density bonus project, developers also need to be aware that: • The Density Bonus is a state mandate. A developer who meets the requirements of the state law is entitled to receive the density bonus and other benefits as a matter of right. As with any state mandate, some local governments will resist complying with the state requirement. But many local governments favor the density bonus as a helpful tool to cut through their own land use requirements and local political issues. • Use of a density bonus may be particularly helpful in those jurisdictions that impose inclusionary housing requirements for new developments. • Special development bonuses are available for developers of commercial projects who partner with affordable housing developers to provide onsite or offsite affordable housing. Special bonuses are also available for condominium conversion projects and projects that include childcare facilities. • The Legislature has recently added density bonuses for housing developments for foster youth, disabled veterans, homeless persons and college students. 2 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 3.1.d Packet Pg. 115 How the Density Bonus Works PROJECTS ENTITLED TO A DENSITY BONUS Cities and counties are required to grant a density bonus and other incentives or concessions to housing projects which contain one of the following: • At least 5% of the housing units are restricted to very low income residents. • At least 10% of the housing units are restricted to lower income residents. • At least 10% of the housing units in a for-sale common interest development are restricted to moderate income residents. • 100% of the housing units (other than manager’s units) are restricted to very low, lower and moderate income residents (with a maximum of 20% moderate). • At least 10% of the housing units are for transitional foster youth, disabled veterans or homeless persons, with rents restricted at the very low income level. • At least 20% of the housing units are for low income college students in housing dedicated for full-time students at accredited colleges. • The project donates at least one acre of land to the city or county for very low income units, and the land has the appropriate general plan designation, zoning, permits and approvals, and access to public facilities needed for such housing. • The project is a senior citizen housing development (no affordable units required). • The project is a mobilehome park age-restricted to senior citizens (no affordable units required). DENSITY BONUS AMOUNT The amount of the density bonus is set on a sliding scale, based upon the percentage of affordable units at each income level, as shown in the chart on the following page. (Note that maximum density bonus amounts for very low, lower and moderate income housing were increased by legislation approved in 2020.) MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 3 3.1.d Packet Pg. 116 DENSITY BONUS CHART* *All density bonus calculations resulting in fractions are rounded up to the next whole number. **Affordable unit percentage is calculated excluding units added by a density bonus. ***Moderate income density bonus applies to for sale units, not to rental units. ****No affordable units are required for senior units. ***** Applies when 100% of the total units (other than manager’s units) are restricted to very low, lower and moderate income (maximum 20% moderate). 4 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 5%20%---20%-- 6%22.5%---20% -- 7%25%---20%-- 8%27.5%---20%-- 9%30%---20%-- 10%32.5%20%5%15%20%20%- 11%35%21.5%6%16%20%20%- 12%38.75%23%7%17%20%20%- 13%42.5%24.5%8%18%20%20%- 14%46.25%26%9%19%20%20%- 15%50%27.5%10%20%20%20%- 16%50%29%11%21%20%20%- 17%50%30.5%12%22%20%20%- 18%50%32%13%23%20%20%- 19%50%33.5%14%24%20% 20% - 20%50%35%15%25%20%20%35% 21%50%38.75%16%26%20%20%35% 22%50%42.5%17%27%20%20%35% 23%50%46.25%18%28%20%20%35% 24%50%50%19%29%20%20%35% 25%50%50%20%30%20%20%35% 26%50%50%21%31%20%20%35% 27%50%50%22%32%20%20%35% 28%50%50%23%33%20%20%35% 29%50%50%24%34%20%20%35% 30%50%50%25%35%20%20%35% 31%50%50%26%35%20%20%35% 32%50%50%27%35%20%20%35% 33%50%50%28%35%20%20%35% 34%50%50%29%35%20%20%35% 35%50%50%30%35%20%20%35% 36%50%50%31%35%20%20%35% 37%50%50%32%35%20%20%35% 38%50%50%33%35%20%20%35% 39%50%50%34%35%20%20%35% 40%50%50%35%35%20%20%35% 41%50%50%38.75%35%20%20%35% 42%50%50%42.5%35%20%20%35% 43%50%50%46.25%35%20%20%35% 44%50%50%50%35%20%20%35% 100%*****80%80%80%35%20%20%35% AFFORDABLE UNIT PERCENTAGE** VERY LOW INCOME DENSITY BONUS LOW INCOME DENSITY BONUS MODERATE INCOME DENSITY BONUS*** LAND DONATION DENSITY BONUS SENIOR**** FOSTER YOUTH/ DISABLED VETS/ HOMELESS COLLEGE STUDENTS 3.1.d Packet Pg. 117 REQUIRED INCENTIVES AND CONCESSIONS In addition to the density bonus, the city or county is also required to provide one or more “incentives” or “concessions” to each project which qualifies for a density bonus (except that market rate senior citizen projects with no affordable units, and land donated for very low income housing, do not appear to be entitled to incentives or concessions). A concession or incentive is defined as: • A reduction in site development standards or a modification of zoning code or architectural design requirements, such as a reduction in setback or minimum square footage requirements; or • Approval of mixed use zoning; or • Other regulatory incentives or concessions which actually result in identifiable and actual cost reductions. The number of required incentives or concessions is based on the percentage of affordable units in the project: 1 5%10%10% 2 10%17%20% 3 15%24%30% 4 100% Low/Very Low/Mod (20% Moderate allowed) 100% Low/Very Low/Mod (20% Moderate allowed) 100% Low/Very Low/Mod (20% Moderate allowed) The city or county is required to grant the concession or incentive proposed by the developer unless it finds that the proposed concession or incentive does not result in identifiable and actual cost reductions, would cause a public health or safety problem, would cause an environmental problem, would harm historical property, or would be contrary to law. The Density Bonus Law restricts the types of information and reports that a developer may be required to provide to the local jurisdiction in order to obtain the requested incentive or concession. The local jurisdiction has the burden of proof in the event it declines to grant a requested incentive or concession. Financial incentives, fee waivers and reductions in dedication requirements may be, but are not required to be, provided by the city or county. The developer may be entitled to the incentives and concessions even without a request for a density bonus. OTHER FORMS OF ASSISTANCE A development qualifying for a density bonus also receives two additional forms of assistance which have important benefits for a housing project: • Waiver or Reduction of Development Standards. If any other city or county development standard would physically prevent the project from being built at the permitted density and with the granted concessions/incentives, the developer may propose to have those standards waived or reduced. The city or county is not permitted to apply any development standard which physically precludes the construction of the project at its permitted density and with the granted concessions/incentives. The city or county is not required to waive or reduce development standards that would cause a public health or safety problem, cause an environmental problem, harm historical property, or would be contrary to law. The waiver or reduction of a development standard does not count as an incentive or concession, and there is no limit on the number of development standard waivers that may be requested or granted. Development standards which have been waived or reduced utilizing this section include setback, lot coverage and open space requirements, and should apply to building height limits as well. This ability to force the locality to modify its normal development standards is sometimes the most compelling reason for the developer to structure a project to qualify for the density bonus. NO. OF INCENTIVES/ CONCESSIONS VERY LOW INCOME PERCENTAGE LOWER INCOME PERCENTAGE MODERATE INCOME PERCENTAGE MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 5 3.1.d Packet Pg. 118 • Maximum Parking Requirements. Upon the developer’s request, the city or county may not require more than the following parking ratios for a density bonus project (inclusive of parking for persons with disabilities): Studio 1 space 1 Bedroom 1 space 2 Bedroom 1.5 spaces 3 Bedroom 1.5 spaces 4 Bedroom 2.5 spaces • Special Parking Requirements. Lower parking ratios apply to specified projects (although local jurisdictions can require higher parking ratios if supported by a specified parking study): Rental/for sale projects with at least 11% very low income or 20% lower income units, within 1/2 mile of accessible major transit stop 0.5 spaces per unit Rental projects 100% affordable to lower income, within 1/2 mile of accessible major transit stop 0 spaces per unit Rental senior projects 100% affordable to lower income, either with paratransit service or within 1/2-half mile of accessible bus route (operating at least eight times per day) 0 spaces per unit Rental special needs projects 100% affordable to lower income households, either with paratransit service or within 1/2-half mile of accessible bus route (operating at least eight times per day) 0 spaces per unit Rental supportive housing developments 100% affordable to lower income households 0 spaces per unit Onsite spaces may be provided through tandem or uncovered parking, but not onstreet parking. Requesting these parking standards does not count as an incentive or concession, but the developer may request further parking standard reductions as an incentive or concession. This is one of the most important benefits of the density bonus statute. In many cases, achieving a reduction in parking requirements may be more valuable than the additional permitted units. In higher density developments requiring the use of structured parking, the construction cost of structured parking is very expensive, costing upwards of $20,000 per parking space. While this provision of the density bonus statute can be used to reduce excessive parking requirements, care must be taken not to impact the project’s marketability by reducing parking to minimum requirements which lead to parking shortages. AFFORDABLE HOUSING RESTRICTIONS • Rental Units. Affordable rental units must be restricted by an agreement which sets maximum incomes and rents for those units. As of January 1, 2015, the income and rent restrictions must remain in place for a 55 year term for very low or lower income units (formerly only a 30 year term was required). Rents must be restricted as follows (continue to page 7): 6 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 3.1.d Packet Pg. 119 • For very low income units, rents may not exceed 30% x 50% of the area median income for a household size suitable for the unit. • For lower income units, rents may not exceed 30% x 60% of the area median income for a household size suitable for the unit. • In 100% affordable housing developments, the rent for at least 20% of the units must meet the rent standards of Health and Safety Code Section 50053, and the remaining units may instead meet Low Income Housing Tax Credit rent standards. • Area median income is determined annually by regulation of the California Department of Housing and Community Development, based upon median income regulations adopted by the U.S. Department of Housing and Urban Development. • Rents must include a reasonable utility allowance. • Household size appropriate to the unit means 1 for a studio unit, 2 for a one bedroom unit, 3 for a two bedroom unit, 4 for a three bedroom unit, etc. • For Sale Units. Affordable for sale units must be sold to the initial buyer at an affordable housing cost. Housing related costs include mortgage loan payments, mortgage insurance payments, property taxes and assessments, homeowner association fees, reasonable utilities allowance, insurance premiums, maintenance costs, and space rent. • For very low income units, housing costs may not exceed 30% x 50% of the area median income for a household size suitable for the unit. • For lower income units, housing costs may not exceed 30% x 70% of the area median income for a household size suitable for the unit. • For moderate income units, housing costs may not exceed 35% x 110% of the area median income for a household size suitable for the unit. • Buyers must enter into an equity sharing agreement with the city or county, unless the equity sharing requirements conflict with the requirements of another public funding source or law. The equity sharing agreement does not restrict the resale price, but requires the original owner to pay the city or county a portion of any appreciation received on resale. • The city/county percentage of appreciation is the purchase price discount received by the original buyer, plus any down payment assistance provided by the city/county. (For example, if the original sales price is $300,000, and the original fair market value is $400,000, and there is no city/county down payment assistance, the city/county subsidy is $100,000, and the city/county’s share of appreciation is 25%). MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 7 3.1.d Packet Pg. 120 • The seller is permitted to retain its original down payment, the value of any improvements made to the home, and the remaining share of the appreciation. • The income and affordability requirements are not binding on resale purchasers (but if other public funding sources or programs are used, the requirements may apply to resales for a fixed number of years). LOCAL GOVERNMENT PROCESSING OF DENSITY BONUS APPLICATIONS Under new legislation effective in 2019, local governments are now required to notify developers what information must be submitted for a complete density bonus application. Once a development application is determined to be complete, the local government must notify the developer the level of density bonus and parking ratio the development is eligible to receive. If the developer requests incentives, concessions, waivers or reductions of development standards, the local jurisdiction is required to notify the developer if it has submitted sufficient information necessary for the local government to make a determination on those issues. HOW THE DENSITY BONUS WORKS FOR 100% AFFORDABLE PROJECTS 2019 legislation requires local governments to grant an 80% density bonus to housing projects in which all of the units (other than manager’s units) are restricted to very low, low and moderate income residents, with a maximum of 20% restricted to moderate income units. If a 100% affordable project is located within a half mile of a major transit stop, the local government may not impose any maximum density limits at all, and the project is further entitled to receive a maximum height increase of up to three additional stories or 33 feet. However, if the project receives a waiver from maximum controls on density, it is not eligible for the waiver or reduction of any development standards which would otherwise be available. 100% affordable projects are also entitled to a fourth incentive or concession. HOW THE DENSITY BONUS WORKS FOR SENIOR PROJECTS As shown in the Density Bonus Chart on page 4, a senior citizen housing development of at least 35 units meeting the requirements of Section 51.3 or 51.12 of the Civil Code qualifies for a 20% density bonus. This is a very desirable option for senior housing developments. In jurisdictions where the local ordinances do not reduce the parking requirements for senior housing developments, the reduced parking requirements alone may justify applying for a density bonus. HOW THE DENSITY BONUS WORKS FOR STUDENT HOUSING PROJECTS New legislation taking effect in 2019 requires cities and counties to grant a 35% density bonus for housing developments that will include at least 20% of the units for low income college students. The housing must be used exclusively for full-time students at accredited colleges, and must be subject to an operating agreement or master lease with one or more colleges. Unlike the maximum income requirements for other forms of affordable housing, resident income levels are determined through the student’s eligibility for the state’s Cal Grant financial aid program. Affordable rent levels are also specially tailored for a student population, with maximum rents established per bed for individual residents, rather than for the entire apartment unit. Homeless students receive priority for affordable units. HOW THE DENSITY BONUS WORKS FOR COMMERCIAL PROJECTS The Density Bonus Law requires that cities and counties provide a “development bonus” to commercial developers who partner with affordable housing developers for the construction of affordable housing on the commercial project site, or offsite within the jurisdiction located near schools, employment and a major transit stop. The commercial developer may participate through the donation of land or funds for the 8 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 3.1.d Packet Pg. 121 affordable housing, or direct construction of the housing units. The partnership between the commercial developer and the affordable developer can occur through a newly formed legal entity such as a corporation, LLC or partnership, or can take the shape of a contractual agreement between the parties. To be eligible for the development bonus, at least 30% of the housing units must be restricted to lower income residents or 15% of the housing units must be restricted to very low income residents. Unlike the primary Density Bonus Law, there is no fixed amount of increased density awarded to the developer. Instead, the development bonus can be any mutually agreeable incentive, including up to a 20% increase in development intensity, floor area ratio, or height limits, up to a 20% reduction in parking requirements, use of a limited use elevator, or an exception to a zoning ordinance or land use requirement. Commercial developers who need extra leverage to obtain more favorable development standards for their project may want to consider providing affordable housing in order to take advantage of the benefits of the development bonus. HOW THE DENSITY BONUS WORKS FOR CONDOMINIUM CONVERSION PROJECTS The density bonus statute provides for a density bonus of up to 25% for condominium conversion projects providing at least 33% for the total units to low or moderate income households or 15% of the units to lower income households. Many condominium conversion projects are not designed in a manner that allows them to take advantage of the opportunity to construct additional units, but some projects may find this helpful. HOW THE DENSITY BONUS WORKS FOR CHILDCARE Housing projects that provide childcare are eligible for a separate density bonus equal to the size of the childcare facility. The childcare facility must remain in operation for at least the length of the affordability covenants. A percentage of the childcare spaces must also be made available to low and moderate income families. A separate statute permits cities and counties to grant density bonuses to commercial and industrial projects of at least 50,000 square feet, when the developer sets aside at least 2,000 square feet in the building and 3,000 square feet of outside space for a childcare facility. HOW TO OBTAIN A DENSITY BONUS THROUGH LAND DONATION Many market rate housing developers are uncomfortable with building and marketing affordable units themselves, whether due to their lack of experience with the affordable housing process or because of their desire to concentrate on their core market rate homes. Other developers may have sites that are underutilized in terms of project density. The Density Bonus Law contains a special sliding scale bonus for land donation which allows those developers to turn over the actual development of the affordable units to local agencies or experienced low income developers. The density bonus is available for the donation of at least an acre of fully entitled land, with all needed public facilities and infrastructure, and large enough for the construction of a high density very low income project containing 10% of the total homes in the development. The parcel must be located within the boundary of the proposed development or, subject to the approval of the jurisdiction, within one-fourth mile of the boundary of the proposed development. The more units that can be built on the donated land, the larger the density bonus. Because of the parcel size requirements, this option is only practical for larger developments. The land donation density bonus can be combined with the regular density bonus provided for the development of affordable units, up to a maximum 35% density bonus. A master planned community developer needs to carefully evaluate the land donation option as opposed to engaging an affordable housing developer to fulfill the project’s affordable housing obligations. In many cases the master developer will prefer to control the affordable component of the project through a direct agreement with the affordable housing developer, rather than allowing the local government to control the project. FLOOR AREA RATIO BONUSES Under new legislation effective in 2019, a local jurisdiction is permitted to grant a floor area ratio bonus rather than a traditional density bonus to certain high density affordable housing projects adjacent to public MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 9 3.1.d Packet Pg. 122 transit. Eligible projects are also entitled to special parking ratios of one-tenth of a parking space per affordable unit and one-half space per market rate unit. To be eligible for the floor area ratio bonus, the project must restrict at least 20 percent of the units to very low income tenants, must be located within a transit priority area or near a major transit stop, and must be in compliance with local height limits. How the Density Bonus Can Help in a Friendly Jurisdiction While the Density Bonus Law is often used by developers to obtain more housing than the local jurisdiction would ordinarily permit, it can also be a helpful land use tool in jurisdictions which favor the proposed project and want to provide support. Planners in many cities and counties may be disposed by personal ideology or local policy to encourage the construction of higher density housing and mixed use developments near transit stops and downtown areas, but are hampered by existing general plan standards and zoning from approving these sorts of projects. Elected officials often support these projects too, but may find it politically difficult to oppose neighborhood and environmental groups over the necessary general plan amendments, zoning changes and CEQA approvals. The density bonus can provide a useful mechanism for increasing allowable density without requiring local officials to approve general plan amendments and zoning changes. A project that satisfies the requirements of the Density Bonus Law often can obtain the necessary land use approvals through the award of the density bonus units and requested concessions and incentives, without having to amend the underlying land use requirements. Friendly local officials may encourage the use of the density bonus to “force” the jurisdiction to approve a desired project. 10 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 3.1.d Packet Pg. 123 How the Density Bonus Law Can Help in a Hostile Jurisdiction It is important to know that the density bonus is a state law requirement which is mandatory on cities and counties, even charter cities which are free from many other state requirements. A developer who meets the law’s requirements for affordable or senior units is entitled to the density bonus and other assistance as of right, regardless of the locality’s desires (subject to limited health and safety exceptions). The density bonus statute can be used to achieve reductions in development standards or the granting of concessions or incentives from jurisdictions that otherwise would not be inclined to grant those items. Examples might include a reduction in parking standards if those standards are deemed excessive by the developer, or other reductions in development standards if needed to achieve the total density permitted by the density bonus. Developers who nonetheless encounter hostility from local jurisdictions are provided several tools to ensure that a required density bonus is actually granted. Developers are entitled to an informal meeting with a local jurisdiction which fails to modify a requested development standard. If a developer successfully sues the locality to enforce the density bonus requirements, it is entitled to an award of its attorneys’ fees. The obligation to pay a developer’s attorneys’ fees is a powerful incentive for local jurisdictions to voluntarily comply with the state law density bonus requirements, even when the jurisdiction is not in favor of its effects on the project. CEQA Issues in Density Bonus Projects Although there is no specific density bonus exemption from the California Environmental Quality Act (CEQA), many density bonus projects are likely candidates for urban infill and affordable housing exemptions from CEQA. One commonly invoked exemption is the Class 32 urban infill exemption found in CEQA Guidelines Section 15332. That exemption is available if the project is consistent with applicable general plan designation and zoning, the site is five acres or less and surrounded by urban uses, is not habitat for endangered, rare or threatened species, does not have any significant effects relating to traffic, noise, air quality or water quality, and is adequately served by utilities and public services. Other exemptions are available for high density housing projects near major transit stops (CEQA Guidelines Section 15195) and affordable housing projects of up to 100 units (CEQA Guidelines Section 15194). A 2011 case, Wollmer v. City of Berkeley, clarified the use of the CEQA infill exemption for density bonus projects. In that case, an opponent of a Berkeley density bonus project challenged the City’s use of the urban infill exemption on the grounds that the City’s modifications and waivers of development standards, as required under the Density Bonus Law, meant that the project was not consistent with existing zoning. The court rejected that argument, finding that the modifications required by the Density Bonus Law did not disqualify the project from claiming the exemption. Not all density bonus projects will qualify for one of these CEQA exemptions, however. Sometimes the additional density provided to non-exempt projects may bring the project out of the coverage of an existing CEQA approval for a general plan, specific plan or other larger project. For instance, if a previously approved environmental impact report analyzed a 100 unit project as the largest allowed under existing zoning, but the developer is able to qualify for 120 units with a density bonus, the existing EIR may not cover the larger project. The larger density bonus project may require additional CEQA analysis for approval. Using the Density Bonus to Satisfy Inclusionary Housing Requirements Many of California’s cities and counties have adopted inclusionary housing ordinances, which typically require that a specified percentage of units in a new housing development be restricted as affordable units. The inclusionary requirements significantly reduce income from rental units and sales prices of for-sale homes. In today’s tight housing market, compliance with local inclusionary requirements may make many projects economically infeasible. The density bonus provides one method for developers to improve the economics of their project while still complying with the inclusionary A 2013 case, Latinos Unidos del Valle de MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 11 3.1.d Packet Pg. 124 Napa y Solano v. County of Napa, held that inclusionary units qualify as affordable units for purposes of the Density Bonus Law. The case confirmed that the density bonus is a financial tool available to help developers achieve city and county inclusionary housing requirements. Density Bonus and Replacement Housing Developers obtaining a density bonus are required to replace existing units which were previously occupied by very low or lower income households or subject to rent control, when those units have been demolished or vacated prior to the density bonus application. The housing development must also meet the applicable affordable housing standards, including the replacement units. As a result of uncertainty about how to apply these standards when the income levels of prior residents is unknown. The Density Bonus Law establishes a rebuttable presumption for the income level of the replacement unit when the income level of the actual prior resident is unknown. Density Bonus in the Coastal Zone When affordable housing is proposed in the coastal zone, the Density Bonus Law’s focus on encouraging the development of affordable housing could clash with the California Coastal Act’s focus on environmental protection. Legislation effective in 2019 now requires the density bonus to be administered in the Coastal Zone in a manner that is consistent and harmonized with the California Coastal Act. This legislation overturns a 2016 appellate court ruling, Kalnel Gardens, LLC v. City of Los Angeles, which found that a proposed housing project that violates the Coastal Act as a result of a density bonus could be denied on that basis. The court in Kalnel Gardens held that the Density Bonus Law is subordinate to the Coastal Act, but the new language attempts to strike a balance between the state goals of promoting housing and protecting the coast. Density Bonus – A Flexible Tool The Density Bonus Law can be a powerful tool for different types of development projects, whether they are traditional affordable housing projects, predominantly market rate housing developments, or senior projects. Obtaining greater density can help the developer of any project bring costs and financing sources into line by putting more homes on the land, reducing the per unit land costs. Use of the favorable parking requirements can reduce the amount of costly land needed for parking. The incentives and concessions to be provided by the local government can provide a helpful way to modify development requirements which may stand in the way of a successful project. Of course there is a price to pay for these benefits—the affordable units needed to earn the density bonus. Developers need to make a cost-benefit determination whether the cost of compliance is worth the benefits. But the Density Bonus Law is unquestionably a useful option for housing developers trying to make financial sense of projects in today’s economy. 12 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 3.1.d Packet Pg. 125 Density Bonus Statutes Government Code Sections 65915 – 65918. Effective as of January 1, 2021 65915. (a) (1) When an applicant seeks a density bonus for a housing development within, or for the donation of land for housing within, the jurisdiction of a city, county, or city and county, that local government shall comply with this section. A city, county, or city and county shall adopt an ordinance that specifies how compliance with this section will be implemented. Except as otherwise provided in subdivision (s), failure to adopt an ordinance shall not relieve a city, county, or city and county from complying with this section. (2) A local government shall not condition the submission, review, or approval of an application pursuant to this chapter on the preparation of an additional report or study that is not otherwise required by state law, including this section. This subdivision does not prohibit a local government from requiring an applicant to provide reasonable documentation to establish eligibility for a requested density bonus, incentives or concessions, as described in subdivision (d), waivers or reductions of development standards, as described in subdivision (e), and parking ratios, as described in subdivision (p). (3) In order to provide for the expeditious processing of a density bonus application, the local government shall do all of the following: (A) Adopt procedures and timelines for processing a density bonus application. (B) Provide a list of all documents and information required to be submitted with the density bonus application in order for the density bonus application to be deemed complete. This list shall be consistent with this chapter. (C) Notify the applicant for a density bonus whether the application is complete in a manner consistent with the timelines specified in Section 65943. (D) (i) If the local government notifies the applicant that the application is deemed complete pursuant to subparagraph (C), provide the applicant with a determination as to the following matters: (I) The amount of density bonus, calculated pursuant to subdivision (f), for which the applicant is eligible. (II) If the applicant requests a parking ratio pursuant to subdivision (p), the parking ratio for which the applicant is eligible. (III) If the applicant requests incentives or concessions pursuant to subdivision (d) or waivers or reductions of development standards pursuant to subdivision (e), whether the applicant has provided adequate information for the local government to make a determination as to those incentives, concessions, or waivers or reductions of development standards. (ii) Any determination required by this subparagraph shall be based on the development project at the time the application is deemed complete. The local government shall adjust the amount of density bonus and parking ratios awarded pursuant to this section based on any changes to the project during the course of development. (b) (1) A city, county, or city and county shall grant one density bonus, the amount of which shall be as specified in subdivision (f), and, if requested by the applicant and consistent with the applicable requirements of this section, incentives or concessions, as described in subdivision (d), waivers or reductions of development standards, as described in subdivision (e), and parking ratios, as described in subdivision (p), when an applicant for a housing development seeks and agrees to construct a housing development, excluding any units permitted by the density bonus awarded pursuant to this section, that will contain at least any one of the following: (A) Ten percent of the total units of a housing development for lower income households, as defined in Section 50079.5 of the Health and Safety Code. (B) Five percent of the total units of a housing development for very low income households, as defined in Section 50105 of the Health and Safety Code. (C) A senior citizen housing development, as defined in Sections 51.3 and 51.12 of the Civil Code, or a mobilehome park that limits residency based on age requirements for housing for older persons pursuant to Section 798.76 or 799.5 of the Civil Code. (D) Ten percent of the total dwelling units in a common interest development, as defined in Section 4100 of the Civil Code, for persons and families of moderate income, as defined in Section 50093 of the Health and Safety Code, provided that all units in the development are offered to the public for purchase. (E) Ten percent of the total units of a housing development for transitional foster youth, as defined in Section 66025.9 of the Education Code, disabled veterans, as defined in Section 18541, or homeless persons, as defined in the federal McKinney-Vento Homeless Assistance Act (42 U.S.C. Sec. 11301 et seq.). The units described in this subparagraph shall be subject to a recorded affordability restriction of 55 years and shall be provided at the same affordability level as very low income units. MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 13 3.1.d Packet Pg. 126 14 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 (F) (i) Twenty percent of the total units for lower income students in a student housing development that meets the following requirements: (I) All units in the student housing development will be used exclusively for undergraduate, graduate, or professional students enrolled full time at an institution of higher education accredited by the Western Association of Schools and Colleges or the Accrediting Commission for Community and Junior Colleges. In order to be eligible under this subclause, the developer shall, as a condition of receiving a certificate of occupancy, provide evidence to the city, county, or city and county that the developer has entered into an operating agreement or master lease with one or more institutions of higher education for the institution or institutions to occupy all units of the student housing development with students from that institution or institutions. An operating agreement or master lease entered into pursuant to this subclause is not violated or breached if, in any subsequent year, there are not sufficient students enrolled in an institution of higher education to fill all units in the student housing development. (II) The applicable 20-percent units will be used for lower income students. For purposes of this clause, “lower income students” means students who have a household income and asset level that does not exceed the level for Cal Grant A or Cal Grant B award recipients as set forth in paragraph (1) of subdivision (k) of Section 69432.7 of the Education Code. The eligibility of a student under this clause shall be verified by an affidavit, award letter, or letter of eligibility provided by the institution of higher education that the student is enrolled in, as described in subclause (I), or by the California Student Aid Commission that the student receives or is eligible for financial aid, including an institutional grant or fee waiver, from the college or university, the California Student Aid Commission, or the federal government shall be sufficient to satisfy this subclause. (III) The rent provided in the applicable units of the development for lower income students shall be calculated at 30 percent of 65 percent of the area median income for a single-room occupancy unit type. (IV) The development will provide priority for the applicable affordable units for lower income students experiencing homelessness. A homeless service provider, as defined in paragraph (3) of subdivision (e) of Section 103577 of the Health and Safety Code, or institution of higher education that has knowledge of a person’s homeless status may verify a person’s status as homeless for purposes of this subclause. (ii) For purposes of calculating a density bonus granted pursuant to this subparagraph, the term “unit” as used in this section means one rental bed and its pro rata share of associated common area facilities. The units described in this subparagraph shall be subject to a recorded affordability restriction of 55 years. (G) One hundred percent of all units in the development, including total units and density bonus units, but exclusive of a manager’s unit or units, are for lower income households, as defined by Section 50079.5 of the Health and Safety Code, except that up to 20 percent of the units in the development, including total units and density bonus units, may be for moderate-income households, as defined in Section 50053 of the Health and Safety Code. (2) For purposes of calculating the amount of the density bonus pursuant to subdivision (f), an applicant who requests a density bonus pursuant to this subdivision shall elect whether the bonus shall be awarded on the basis of subparagraph (A), (B), (C), (D), (E), (F), or (G) of paragraph (1). (3) For the purposes of this section, “total units,” “total dwelling units,” or “total rental beds” does not include units added by a density bonus awarded pursuant to this section or any local law granting a greater density bonus. (c) (1) (A) An applicant shall agree to, and the city, county, or city and county shall ensure, the continued affordability of all very low and low-income rental units that qualified the applicant for the award of the density bonus for 55 years or a longer period of time if required by the construction or mortgage financing assistance program, mortgage insurance program, or rental subsidy program. (B) (i) Except as otherwise provided in clause (ii), rents for the lower income density bonus units shall be set at an affordable rent, as defined in Section 50053 of the Health and Safety Code. (ii) For housing developments meeting the criteria of subparagraph (G) of paragraph (1) of subdivision (b), rents for all units in the development, including both base density and density bonus units, shall be as fol- lows: (I) The rent for at least 20 percent of the units in the development shall be set at an affordable rent, as defined in Section 50053 of the Health and Safety Code. (II) The rent for the remaining units in the development shall be set at an amount consistent with the maximum rent levels for a housing development that receives an allocation of state or federal low-income housing tax credits from the California Tax Credit Allocation Committee. (2) An applicant shall agree to, and the city, county, or 3.1.d Packet Pg. 127 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 15 city and county shall ensure that, the initial occupant of all for-sale units that qualified the applicant for the award of the density bonus are persons and families of very low, low, or moderate income, as required, and that the units are offered at an affordable housing cost, as that cost is defined in Section 50052.5 of the Health and Safety Code. The local government shall enforce an equity sharing agreement, unless it is in conflict with the requirements of another public funding source or law. The following apply to the equity sharing agreement: (A) Upon resale, the seller of the unit shall retain the value of any improvements, the downpayment, and the seller’s proportionate share of appreciation. The local government shall recapture any initial subsidy, as defined in subparagraph (B), and its proportionate share of appreciation, as defined in subparagraph (C), which amount shall be used within five years for any of the purposes described in subdivision (e) of Section 33334.2 of the Health and Safety Code that promote home ownership. (B) For purposes of this subdivision, the local government’s initial subsidy shall be equal to the fair market value of the home at the time of initial sale minus the initial sale price to the moderate-income household, plus the amount of any downpayment assistance or mortgage assistance. If upon resale the market value is lower than the initial market value, then the value at the time of the resale shall be used as the initial market value. (C) For purposes of this subdivision, the local government’s proportionate share of appreciation shall be equal to the ratio of the local government’s initial subsidy to the fair market value of the home at the time of initial sale. (3) (A) An applicant shall be ineligible for a density bonus or any other incentives or concessions under this section if the housing development is proposed on any property that includes a parcel or parcels on which rental dwelling units are or, if the dwelling units have been vacated or demolished in the five-year period preceding the application, have been subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of lower or very low income; subject to any other form of rent or price control through a public entity’s valid exercise of its police power; or occupied by lower or very low income households, unless the proposed housing development replaces those units, and either of the following applies: (i) The proposed housing development, inclusive of the units replaced pursuant to this paragraph, contains affordable units at the percentages set forth in subdivision (b). (ii) Each unit in the development, exclusive of a manager’s unit or units, is affordable to, and occupied by, either a lower or very low income household. (B) For the purposes of this paragraph, “replace” shall mean either of the following: (i) If any dwelling units described in subparagraph (A) are occupied on the date of application, the proposed housing development shall provide at least the same number of units of equivalent size to be made available at affordable rent or affordable housing cost to, and occupied by, persons and families in the same or lower income category as those households in occupancy. If the income category of the household in occupancy is not known, it shall be rebuttably presumed that lower income renter households occupied these units in the same proportion of lower income renter households to all renter households within the jurisdiction, as determined by the most recently available data from the United States Department of Housing and Urban Development’s Comprehensive Housing Affordability Strategy database. For unoccupied dwelling units described in subparagraph (A) in a development with occupied units, the proposed housing development shall provide units of equivalent size to be made available at affordable rent or affordable housing cost to, and occupied by, persons and families in the same or lower income category as the last household in occupancy. If the income category of the last household in occupancy is not known, it shall be rebuttably presumed that lower income renter households occupied these units in the same proportion of lower income renter households to all renter households within the jurisdiction, as determined by the most recently available data from the United States Department of Housing and Urban Development’s Comprehensive Housing Affordability Strategy database. All replacement calculations resulting in fractional units shall be rounded up to the next whole number. If the replacement units will be rental dwelling units, these units shall be subject to a recorded affordability restriction for at least 55 years. If the proposed development is for-sale units, the units replaced shall be subject to paragraph (2). (ii) If all dwelling units described in subparagraph (A) have been vacated or demolished within the five-year period preceding the application, the proposed housing development shall provide at least the same number of units of equivalent size as existed at the highpoint of those units in the five-year period preceding the application to be made available at affordable rent or affordable housing cost to, and occupied by, persons and families in the same or lower income category as those persons and families in occupancy at that time, if known. If the incomes of the persons and families in occupancy at the highpoint is not known, it shall be rebuttably presumed that low-income and very low 3.1.d Packet Pg. 128 16 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 income renter households occupied these units in the same proportion of low-income and very low income renter households to all renter households within the jurisdiction, as determined by the most recently available data from the United States Department of Housing and Urban Development’s Comprehensive Housing Affordability Strategy database. All replacement calculations resulting in fractional units shall be rounded up to the next whole number. If the replacement units will be rental dwelling units, these units shall be subject to a recorded affordability restriction for at least 55 years. If the proposed development is for-sale units, the units replaced shall be subject to paragraph (2). (C) Notwithstanding subparagraph (B), for any dwelling unit described in subparagraph (A) that is or was, within the five-year period preceding the application, subject to a form of rent or price control through a local government’s valid exercise of its police power and that is or was occupied by persons or families above lower income, the city, county, or city and county may do either of the following: (i) Require that the replacement units be made available at affordable rent or affordable housing cost to, and occupied by, low-income persons or families. If the replacement units will be rental dwelling units, these units shall be subject to a recorded affordability restriction for at least 55 years. If the proposed development is for-sale units, the units replaced shall be subject to paragraph (2). (ii) Require that the units be replaced in compliance with the jurisdiction’s rent or price control ordinance, provided that each unit described in subparagraph (A) is replaced. Unless otherwise required by the jurisdiction’s rent or price control ordinance, these units shall not be subject to a recorded affordability restriction. (D) For purposes of this paragraph, “equivalent size” means that the replacement units contain at least the same total number of bedrooms as the units being replaced. (E) Subparagraph (A) does not apply to an applicant seeking a density bonus for a proposed housing development if the applicant’s application was submitted to, or processed by, a city, county, or city and county before January 1, 2015. (d) (1) An applicant for a density bonus pursuant to subdivision (b) may submit to a city, county, or city and county a proposal for the specific incentives or concessions that the applicant requests pursuant to this section, and may request a meeting with the city, county, or city and county. The city, county, or city and county shall grant the concession or incentive requested by the applicant unless the city, county, or city and county makes a written finding, based upon substantial evidence, of any of the following: (A) The concession or incentive does not result in identifiable and actual cost reductions, consistent with subdivision (k), to provide for affordable housing costs, as defined in Section 50052.5 of the Health and Safety Code, or for rents for the targeted units to be set as specified in subdivision (c). (B) The concession or incentive would have a specific, adverse impact, as defined in paragraph (2) of subdivision (d) of Section 65589.5, upon public health and safety or the physical environment or on any real property that is listed in the California Register of Historical Resources and for which there is no feasible method to satisfactorily mitigate or avoid the specific, adverse impact without rendering the development unaffordable to low-income and moderate-income households. (C) The concession or incentive would be contrary to state or federal law. (2) The applicant shall receive the following number of incentives or concessions: (A) One incentive or concession for projects that include at least 10 percent of the total units for lower income households, at least 5 percent for very low income households, or at least 10 percent for persons and families of moderate income in a common interest development. (B) Two incentives or concessions for projects that include at least 17 percent of the total units for lower income households, at least 10 percent for very low income households, or at least 20 percent for persons and families of moderate income in a common interest development. (C) Three incentives or concessions for projects that include at least 24 percent of the total units for lower income households, at least 15 percent for very low income households, or at least 30 percent for persons and families of moderate income in a common interest development. (D) Four incentives or concessions for projects meeting the criteria of subparagraph (G) of paragraph (1) of subdivision (b). If the project is located within one-half mile of a major transit stop, the applicant shall also receive a height increase of up to three additional stories, or 33 feet. (3) The applicant may initiate judicial proceedings if the city, county, or city and county refuses to grant a requested density bonus, incentive, or concession. If a court finds that the refusal to grant a requested density bonus, incentive, or concession is in violation of this 3.1.d Packet Pg. 129 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 17 section, the court shall award the plaintiff reasonable attorney’s fees and costs of suit. Nothing in this subdivision shall be interpreted to require a local government to grant an incentive or concession that has a specific, adverse impact, as defined in paragraph (2) of subdivision (d) of Section 65589.5, upon health, safety, or the physical environment, and for which there is no feasible method to satisfactorily mitigate or avoid the specific adverse impact. Nothing in this subdivision shall be interpreted to require a local government to grant an incentive or concession that would have an adverse impact on any real property that is listed in the California Register of Historical Resources. The city, county, or city and county shall establish procedures for carrying out this section that shall include legislative body approval of the means of compliance with this section. (4) The city, county, or city and county shall bear the burden of proof for the denial of a requested concession or incentive. (e) (1) In no case may a city, county, or city and county apply any development standard that will have the effect of physically precluding the construction of a development meeting the criteria of subdivision (b) at the densities or with the concessions or incentives permitted by this section. Subject to paragraph (3), an applicant may submit to a city, county, or city and county a proposal for the waiver or reduction of development standards that will have the effect of physically precluding the construction of a development meeting the criteria of subdivision (b) at the densities or with the concessions or incentives permitted under this section, and may request a meeting with the city, county, or city and county. If a court finds that the refusal to grant a waiver or reduction of development standards is in violation of this section, the court shall award the plaintiff reasonable attorney’s fees and costs of suit. Nothing in this subdivision shall be interpreted to require a local government to waive or reduce development standards if the waiver or reduction would have a specific, adverse impact, as defined in paragraph (2) of subdivision (d) of Section 65589.5, upon health, safety, or the physical environment, and for which there is no feasible method to satisfactorily mitigate or avoid the specific adverse impact. Nothing in this subdivision shall be interpreted to require a local government to waive or reduce development standards that would have an adverse impact on any real property that is listed in the California Register of Historical Resources, or to grant any waiver or reduction that would be contrary to state or federal law. (2) A proposal for the waiver or reduction of development standards pursuant to this subdivision shall neither reduce nor increase the number of incentives or concessions to which the applicant is entitled pursuant to subdivision (d). (3) A housing development that receives a waiver from any maximum controls on density pursuant to clause (ii) of subparagraph (D) of paragraph (3) of subdivision (f) shall only be eligible for a waiver or reduction of development standards as provided in subparagraph (D) of paragraph (2) of subdivision (d) and clause (ii) of subparagraph (D) of paragraph (3) of subdivision (f), unless the city, county, or city and county agrees to additional waivers or reductions of development standards. (f) For the purposes of this chapter, “density bonus” means a density increase over the otherwise maximum allowable gross residential density as of the date of application by the applicant to the city, county, or city and county, or, if elected by the applicant, a lesser percentage of density increase, including, but not limited to, no increase in density. The amount of density increase to which the applicant is entitled shall vary according to the amount by which the percentage of affordable housing units exceeds the percentage established in subdivision (b). (1) For housing developments meeting the criteria of subparagraph (A) of paragraph (1) of subdivision (b), the density bonus shall be calculated as follows: 10 20 11 21.5 12 23 13 24.5 14 26 15 27.5 16 29 17 30.5 18 32 19 33.5 20 35 21 38.75 22 42.5 23 46.25 24 50 (2) For housing developments meeting the criteria of subparagraph (B) of paragraph (1) of subdivision (b), the density bonus shall be calculated as follows: 5 20 6 22.5 PERCENTAGE LOW-INCOME UNITS PERCENTAGE DENSITY BONUS PERCENTAGE VERY LOW-INCOME UNITS PERCENTAGE DENSITY BONUS 3.1.d Packet Pg. 130 18 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 7 25 8 27.5 9 30 10 32.5 11 35 12 38.75 13 42.5 14 46.25 15 50 (3) (A) For housing developments meeting the criteria of subparagraph (C) of paragraph (1) of subdivision (b), the density bonus shall be 20 percent of the number of senior housing units. (B) For housing developments meeting the criteria of subparagraph (E) of paragraph (1) of subdivision (b), the density bonus shall be 20 percent of the number of the type of units giving rise to a density bonus under that subparagraph. (C) For housing developments meeting the criteria of subparagraph (F) of paragraph (1) of subdivision (b), the density bonus shall be 35 percent of the student housing units. (D) For housing developments meeting the criteria of subparagraph (G) of paragraph (1) of subdivision (b), the following shall apply: (i) Except as otherwise provided in clause (ii), the density bonus shall be 80 percent of the number of units for lower income households. (ii) If the housing development is located within one-half mile of a major transit stop, the city, county, or city and county shall not impose any maximum controls on density. (4) For housing developments meeting the criteria of subparagraph (D) of paragraph (1) of subdivision (b), the density bonus shall be calculated as follows: 10 5 11 6 12 7 13 8 14 9 15 10 16 11 17 12 18 13 19 14 20 15 21 16 22 17 23 18 24 19 25 20 26 21 27 22 28 23 29 24 30 25 31 26 32 27 33 28 34 29 35 30 36 31 37 32 38 33 39 34 40 35 41 38.75 42 42.5 43 46.25 44 50 (5) All density calculations resulting in fractional units shall be rounded up to the next whole number. The granting of a density bonus shall not require, or be interpreted, in and of itself, to require a general plan amendment, local coastal plan amendment, zoning change, or other discretionary approval. (g) (1) When an applicant for a tentative subdivision map, parcel map, or other residential development approval donates land to a city, county, or city and county in accordance with this subdivision, the applicant shall be entitled to a 15-percent increase above the otherwise maximum allowable residential density for the entire development, as follows: 10 15 11 16 12 17 13 18 14 19 PERCENTAGE MODERATE-INCOME UNITS PERCENTAGE DENSITY BONUS PERCENTAGE VERY LOW-INCOME PERCENTAGE DENSITY BONUS 3.1.d Packet Pg. 131 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 19 15 20 16 21 17 22 18 23 19 24 20 25 21 26 22 27 23 28 24 29 25 30 26 31 27 32 28 33 29 34 30 35 (2) This increase shall be in addition to any increase in density mandated by subdivision (b), up to a maximum combined mandated density increase of 35 percent if an applicant seeks an increase pursuant to both this subdivision and subdivision (b). All density calculations resulting in fractional units shall be rounded up to the next whole number. Nothing in this subdivision shall be construed to enlarge or diminish the authority of a city, county, or city and county to require a developer to donate land as a condition of development. An applicant shall be eligible for the increased density bonus described in this subdivision if all of the following conditions are met: (A) The applicant donates and transfers the land no later than the date of approval of the final subdivision map, parcel map, or residential development application. (B) The developable acreage and zoning classification of the land being transferred are sufficient to permit construction of units affordable to very low income households in an amount not less than 10 percent of the number of residential units of the proposed development. (C) The transferred land is at least one acre in size or of sufficient size to permit development of at least 40 units, has the appropriate general plan designation, is appropriately zoned with appropriate development standards for development at the density described in paragraph (3) of subdivision (c) of Section 65583.2, and is or will be served by adequate public facilities and infrastructure. (D) The transferred land shall have all of the permits and approvals, other than building permits, necessary for the development of the very low income housing units on the transferred land, not later than the date of approval of the final subdivision map, parcel map, or residential development application, except that the local government may subject the proposed development to subsequent design review to the extent authorized by subdivision (i) of Section 65583.2 if the design is not reviewed by the local government before the time of transfer. (E) The transferred land and the affordable units shall be subject to a deed restriction ensuring continued affordability of the units consistent with paragraphs (1) and (2) of subdivision (c), which shall be recorded on the property at the time of the transfer. (F) The land is transferred to the local agency or to a housing developer approved by the local agency. The local agency may require the applicant to identify and transfer the land to the developer. (G) The transferred land shall be within the boundary of the proposed development or, if the local agency agrees, within one-quarter mile of the boundary of the proposed development. (H) A proposed source of funding for the very low income units shall be identified not later than the date of approval of the final subdivision map, parcel map, or residential development application. (h) (1) When an applicant proposes to construct a housing development that conforms to the requirements of subdivision (b) and includes a childcare facility that will be located on the premises of, as part of, or adjacent to, the project, the city, county, or city and county shall grant either of the following: (A) An additional density bonus that is an amount of square feet of residential space that is equal to or greater than the amount of square feet in the childcare facility. (B) An additional concession or incentive that contributes significantly to the economic feasibility of the construction of the childcare facility. (2) The city, county, or city and county shall require, as a condition of approving the housing development, that the following occur: (A) The childcare facility shall remain in operation for a period of time that is as long as or longer than the period of time during which the density bonus units are required to remain affordable pursuant to subdivision (c). (B) Of the children who attend the childcare facility, the children of very low income households, lower income households, or families of moderate income shall equal a percentage that is equal to or greater than the 3.1.d Packet Pg. 132 20 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 percentage of dwelling units that are required for very low income households, lower income households, or families of moderate income pursuant to subdivision (b). (3) Notwithstanding any requirement of this subdivision, a city, county, or city and county shall not be required to provide a density bonus or concession for a childcare facility if it finds, based upon substantial evidence, that the community has adequate childcare facilities. (4) “Childcare facility,” as used in this section, means a child daycare facility other than a family daycare home, including, but not limited to, infant centers, preschools, extended daycare facilities, and schoolage childcare centers. (i) “Housing development,” as used in this section, means a development project for five or more residential units, including mixed-use developments. For the purposes of this section, “housing development” also includes a subdivision or common interest development, as defined in Section 4100 of the Civil Code, approved by a city, county, or city and county and consists of residential units or unimproved residential lots and either a project to substantially rehabilitate and convert an existing commercial building to residential use or the substantial rehabilitation of an existing multifamily dwelling, as defined in subdivision (d) of Section 65863.4, where the result of the rehabilitation would be a net increase in available residential units. For the purpose of calculating a density bonus, the residential units shall be on contiguous sites that are the subject of one development application, but do not have to be based upon individual subdivision maps or parcels. The density bonus shall be permitted in geographic areas of the housing development other than the areas where the units for the lower income households are located. (j) (1) The granting of a concession or incentive shall not require or be interpreted, in and of itself, to require a general plan amendment, local coastal plan amendment, zoning change, study, or other discretionary approval. For purposes of this subdivision, “study” does not include reasonable documentation to establish eligibility for the concession or incentive or to demonstrate that the incentive or concession meets the definition set forth in subdivision (k). This provision is declaratory of existing law. (2) Except as provided in subdivisions (d) and (e), the granting of a density bonus shall not require or be interpreted to require the waiver of a local ordinance or provisions of a local ordinance unrelated to development standards. (k) For the purposes of this chapter, concession or incentive means any of the following: (1) A reduction in site development standards or a modification of zoning code requirements or architectural design requirements that exceed the minimum building standards approved by the California Building Standards Commission as provided in Part 2.5 (commencing with Section 18901) of Division 13 of the Health and Safety Code, including, but not limited to, a reduction in setback and square footage requirements and in the ratio of vehicular parking spaces that would otherwise be required that results in identifiable and actual cost reductions, to provide for affordable housing costs, as defined in Section 50052.5 of the Health and Safety Code, or for rents for the targeted units to be set as specified in subdivision (c). (2) Approval of mixed-use zoning in conjunction with the housing project if commercial, office, industrial, or other land uses will reduce the cost of the housing development and if the commercial, office, industrial, or other land uses are compatible with the housing project and the existing or planned development in the area where the proposed housing project will be located. (3) Other regulatory incentives or concessions proposed by the developer or the city, county, or city and county that result in identifiable and actual cost reductions to provide for affordable housing costs, as defined in Section 50052.5 of the Health and Safety Code, or for rents for the targeted units to be set as specified in subdivision (c). (l) Subdivision (k) does not limit or require the provision of direct financial incentives for the housing development, including the provision of publicly owned land, by the city, county, or city and county, or the waiver of fees or dedication requirements. (m) This section does not supersede or in any way alter or lessen the effect or application of the California Coastal Act of 1976 (Division 20 (commencing with Section 30000) of the Public Resources Code). Any density bonus, concessions, incentives, waivers or reductions of development standards, and parking ratios to which the applicant is entitled under this section shall be permitted in a manner that is consistent with this section and Division 20 (commencing with Section 30000) of the Public Resources Code. (n) If permitted by local ordinance, nothing in this section shall be construed to prohibit a city, county, or city and county from granting a density bonus greater than what is described in this section for a development that meets the requirements of this section or from granting a proportionately lower density bonus than what is required by this section for developments that do not meet the requirements of this section. 3.1.d Packet Pg. 133 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 21 (o) For purposes of this section, the following definitions shall apply: (1) “Development standard” includes a site or construction condition, including, but not limited to, a height limitation, a setback requirement, a floor area ratio, an onsite open-space requirement, or a parking ratio that applies to a residential development pursuant to any ordinance, general plan element, specific plan, charter, or other local condition, law, policy, resolution, or regulation. (2) “Located within one-half mile of a major transit stop” means that any point on a proposed development, for which an applicant seeks a density bonus, other incentives or concessions, waivers or reductions of development standards, or a vehicular parking ratio pursuant to this section, is within one-half mile of any point on the property on which a major transit stop is located, including any parking lot owned by the transit authority or other local agency operating the major transit stop. (3) “Major transit stop” has the same meaning as defined in subdivision (b) of Section 21155 of the Public Resources Code. (4) “Maximum allowable residential density” means the density allowed under the zoning ordinance and land use element of the general plan, or, if a range of density is permitted, means the maximum allowable density for the specific zoning range and land use element of the general plan applicable to the project. If the density allowed under the zoning ordinance is inconsistent with the density allowed under the land use element of the general plan, the general plan density shall prevail. (p) (1) Except as provided in paragraphs (2), (3), and (4), upon the request of the developer, a city, county, or city and county shall not require a vehicular parking ratio, inclusive of parking for persons with a disability and guests, of a development meeting the criteria of subdivisions (b) and (c), that exceeds the following ratios: (A) Zero to one bedroom: one onsite parking space. (B) Two to three bedrooms: one and one-half onsite parking spaces. (C) Four and more bedrooms: two and one-half parking spaces. (2) (A) Notwithstanding paragraph (1), if a development includes at least 20 percent low-income units for housing developments meeting the criteria of subparagraph (A) of paragraph (1) of subdivision (b) or at least 11 percent very low income units for housing developments meeting the criteria of subparagraph (B) of paragraph (1) of subdivision (b), is located within one-half mile of a major transit stop, and there is unobstructed access to the major transit stop from the development, then, upon the request of the developer, a city, county, or city and county shall not impose a vehicular parking ratio, inclusive of parking for persons with a disability and guests, that exceeds 0.5 spaces per unit. (B) For purposes of this subdivision, a development shall have unobstructed access to a major transit stop if a resident is able to access the major transit stop without encountering natural or constructed impediments. For purposes of this subparagraph, “natural or constructed impediments” includes, but is not limited to, freeways, rivers, mountains, and bodies of water, but does not include residential structures, shopping centers, parking lots, or rails used for transit. (3) Notwithstanding paragraph (1), if a development consists solely of rental units, exclusive of a manager’s unit or units, with an affordable housing cost to lower income families, as provided in Section 50052.5 of the Health and Safety Code, then, upon the request of the developer, a city, county, or city and county shall not impose vehicular parking standards if the development meets either of the following criteria: (A) The development is located within one-half mile of a major transit stop and there is unobstructed access to the major transit stop from the development. (B) The development is a for-rent housing development for individuals who are 62 years of age or older that complies with Sections 51.2 and 51.3 of the Civil Code and the development has either paratransit service or unobstructed access, within one-half mile, to fixed bus route service that operates at least eight times per day. (4) Notwithstanding paragraphs (1) and (8), if a development consists solely of rental units, exclusive of a manager’s unit or units, with an affordable housing cost to lower income families, as provided in Section 50052.5 of the Health and Safety Code, and the development is either a special needs housing development, as defined in Section 51312 of the Health and Safety Code, or a supportive housing development, as defined in Section 50675.14 of the Health and Safety Code, then, upon the request of the developer, a city, county, or city and county shall not impose any minimum vehicular parking requirement. A development that is a special needs housing development shall have either paratransit service or unobstructed access, within one-half mile, to fixed bus route service that operates at least eight times per day. (5) If the total number of parking spaces required for a development is other than a whole number, the number shall be rounded up to the next whole number. For purposes of this subdivision, a development may provide onsite parking through tandem parking or 3.1.d Packet Pg. 134 22 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 uncovered parking, but not through onstreet parking. (6) This subdivision shall apply to a development that meets the requirements of subdivisions (b) and (c), but only at the request of the applicant. An applicant may request parking incentives or concessions beyond those provided in this subdivision pursuant to subdivision (d). (7) This subdivision does not preclude a city, county, or city and county from reducing or eliminating a parking requirement for development projects of any type in any location. (8) Notwithstanding paragraphs (2) and (3), if a city, county, city and county, or an independent consultant has conducted an areawide or jurisdictionwide parking study in the last seven years, then the city, county, or city and county may impose a higher vehicular parking ratio not to exceed the ratio described in paragraph (1), based upon substantial evidence found in the parking study, that includes, but is not limited to, an analysis of parking availability, differing levels of transit access, walkability access to transit services, the potential for shared parking, the effect of parking requirements on the cost of market-rate and subsidized developments, and the lower rates of car ownership for low-income and very low income individuals, including seniors and special needs individuals. The city, county, or city and county shall pay the costs of any new study. The city, county, or city and county shall make findings, based on a parking study completed in conformity with this paragraph, supporting the need for the higher parking ratio. (9) A request pursuant to this subdivision shall neither reduce nor increase the number of incentives or concessions to which the applicant is entitled pursuant to subdivision (d). (q) Each component of any density calculation, including base density and bonus density, resulting in fractional units shall be separately rounded up to the next whole number. The Legislature finds and declares that this provision is declaratory of existing law. (r) This chapter shall be interpreted liberally in favor of producing the maximum number of total housing units. (s) Notwithstanding any other law, if a city, including a charter city, county, or city and county has adopted an ordinance or a housing program, or both an ordinance and a housing program, that incentivizes the development of affordable housing that allows for density bonuses that exceed the density bonuses required by the version of this section effective through December 31, 2020, that city, county, or city and county is not required to amend or otherwise update its ordinance or corresponding affordable housing incentive program to comply with the amendments made to this section by the act adding this subdivision, and is exempt from complying with the incentive and concession calculation amendments made to this section by the act adding this subdivision as set forth in subdivision (d), particularly subparagraphs (C) and (D) of paragraph (2) of that subdivision, and the amendments made to the density tables under subdivision (f). 65915.5. (a) When an applicant for approval to convert apartments to a condominium project agrees to provide at least 33 percent of the total units of the proposed condominium project to persons and families of low or moderate income as defined in Section 50093 of the Health and Safety Code, or 15 percent of the total units of the proposed condominium project to lower income households as defined in Section 50079.5 of the Health and Safety Code, and agrees to pay for the reasonably necessary administrative costs incurred by a city, county, or city and county pursuant to this section, the city, county, or city and county shall either (1) grant a density bonus or (2) provide other incentives of equivalent financial value. A city, county, or city and county may place such reasonable conditions on the granting of a density bonus or other incentives of equivalent financial value as it finds appropriate, including, but not limited to, conditions which assure continued affordability of units to subsequent purchasers who are persons and families of low and moderate income or lower income households. (b) For purposes of this section, “density bonus” means an increase in units of 25 percent over the number of apartments, to be provided within the existing structure or structures proposed for conversion. (c) For purposes of this section, “other incentives of equivalent financial value” shall not be construed to require a city, county, or city and county to provide cash transfer payments or other monetary compensation but may include the reduction or waiver of requirements which the city, county, or city and county might otherwise apply as conditions of conversion approval. (d) An applicant for approval to convert apartments to a condominium project may submit to a city, county, or city and county a preliminary proposal pursuant to this section prior to the submittal of any formal requests for subdivision map approvals. The city, county, or city and county shall, within 90 days of receipt of a written proposal, notify the applicant in writing of the manner in which it will comply with this section. The city, county, or city and county shall establish procedures for carrying out this section, which shall include legislative body approval of the means of compliance with this section. 3.1.d Packet Pg. 135 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 23 (e) Nothing in this section shall be construed to require a city, county, or city and county to approve a proposal to convert apartments to condominiums. (f) An applicant shall be ineligible for a density bonus or other incentives under this section if the apartments proposed for conversion constitute a housing development for which a density bonus or other incentives were provided under Section 65915. (g) An applicant shall be ineligible for a density bonus or any other incentives or concessions under this section if the condominium project is proposed on any property that includes a parcel or parcels on which rental dwelling units are or, if the dwelling units have been vacated or demolished in the five-year period preceding the application, have been subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of lower or very low income; subject to any other form of rent or price control through a public entity’s valid ex- ercise of its police power; or occupied by lower or very low income households, unless the proposed condominium project replaces those units, as defined in subparagraph (B) of paragraph (3) of subdivision (c) of Section 65915, and either of the following applies: (1) The proposed condominium project, inclusive of the units replaced pursuant to subparagraph (B) of paragraph (3) of subdivision (c) of Section 65915, contains affordable units at the percentages set forth in subdivision (a). (2) Each unit in the development, exclusive of a manager’s unit or units, is affordable to, and occupied by, either a lower or very low income household. (h) Subdivision (g) does not apply to an applicant seeking a density bonus for a proposed housing development if their application was submitted to, or processed by, a city, county, or city and county before January 1, 2015. 65915.7. (a) When an applicant for approval of a commercial development has entered into an agreement for partnered housing described in subdivision (c) to contribute affordable housing through a joint project or two separate projects encompassing affordable housing, the city, county, or city and county shall grant to the commercial developer a development bonus as prescribed in subdivision (b).Housing shall be constructed on the site of the commercial development or on a site that is all of the following: (1) Within the boundaries of the local government. (2) In close proximity to public amenities including schools and employment centers. (3) Located within one-half mile of a major transit stop, as defined in subdivision (b) of Section 21155 of the Public Resources Code. (b) The development bonus granted to the commercial developer shall mean incentives, mutually agreed upon by the developer and the jurisdiction, that may include, but are not limited to, any of the following: (1) Up to a 20-percent increase in maximum allowable intensity in the General Plan. (2) Up to a 20-percent increase in maximum allowable floor area ratio. (3) Up to a 20-percent increase in maximum height requirements. (4) Up to a 20-percent reduction in minimum parking requirements. (5) Use of a limited-use/limited-application elevator for upper floor accessibility. (6) An exception to a zoning ordinance or other land use regulation. (c) For the purposes of this section, the agreement for partnered housing shall be between the commercial developer and the housing developer, shall identify how the commercial developer will contribute affordable housing, and shall be approved by the city, county, or city and county. (d) For the purposes of this section, affordable housing may be contributed by the commercial developer in one of the following manners: (1) The commercial developer may directly build the units. (2) The commercial developer may donate a portion of the site or property elsewhere to the affordable housing developer for use as a site for affordable housing. (3) The commercial developer may make a cash payment to the affordable housing developer that shall be used towards the costs of constructing the affordable housing project. (e) For the purposes of this section, subparagraph (A) of paragraph (3) of subdivision (c) of Section 65915 shall apply. (f) Nothing in this section shall preclude any additional allowances or incentives offered to developers by local governments pursuant to law or regulation. (g) If the developer of the affordable units does not 3.1.d Packet Pg. 136 24 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 commence with construction of those units in accordance with timelines ascribed by the agreement described in subdivision (c), the local government may withhold certificates of occupancy for the commercial development under construction until the developer has completed construction of the affordable units. (h) In order to qualify for a development bonus under this section, a commercial developer shall partner with a housing developer that provides at least 30 percent of the total units for low-income households or at least 15 percent of the total units for very low-income households. (i) Nothing in this section shall preclude an affordable housing developer from seeking a density bonus, concessions or incentives, waivers or reductions of development standards, or parking ratios under Section 65915. (j) A development bonus pursuant to this section shall not include a reduction or waiver of the requirements within an ordinance that requires the payment of a fee by a commercial developer for the promotion or provision of affordable housing. (k) A city or county shall submit to the Department of Housing and Community Development, as part of the annual report required by Section 65400, information describing a commercial development bonus approved pursuant to this section, including the terms of the agreements between the commercial developer and the affordable housing developer, and the developers and the local jurisdiction, and the number of affordable units constructed as part of the agreements. (l) For purposes of this section, “partner” shall mean formation of a partnership, limited liability company, corporation, or other entity recognized by the state in which the commercial development applicant and the affordable housing developer are each partners, members, shareholders or other participants, or a contract or agreement between a commercial development applicant and affordable housing developer for the development of both the commercial and the affordable housing properties. (m) This section shall remain in effect only until January 1, 2022, and as of that date is repealed. 65916. Where there is a direct financial contribution to a housing development pursuant to Section 65915 through participation in cost of infrastructure, write-down of land costs, or subsidizing the cost of construction, the city, county, or city and county shall assure continued availability for low- and moderate- income units for 30 years. When appropriate, the agreement provided for in Section 65915 shall specify the mechanisms and procedures necessary to carry out this section. 65917. In enacting this chapter it is the intent of the Legislature that the density bonus or other incentives offered by the city, county, or city and county pursuant to this chapter shall contribute significantly to the economic feasibility of lower income housing in proposed housing developments. In the absence of an agreement by a developer in accordance with Section 65915, a locality shall not offer a density bonus or any other incentive that would undermine the intent of this chapter. 65917.2. (a) As used in this section, the following terms shall have the following meanings: (1) “Eligible housing development” means a development that satisfies all of the following criteria: (A) The development is a multifamily housing development that contains five or more residential units, exclusive of any other floor area ratio bonus or incentive or concession awarded pursuant to this chapter. (B) The development is located within one of the following: (i) An urban infill site that is within a transit priority area. (ii) One-half mile of a major transit stop. (C) The site of the development is zoned to allow residential use or mixed-use with a minimum planned density of at least 20 dwelling units per acre and does not include any land zoned for low density residential use or for exclusive nonresidential use. (D) The applicant and the development satisfy the replacement requirements specified in subdivision (c) of Section 65915. (E) The development includes at least 20 percent of the units, excluding any additional units allowed under a floor area ratio bonus or other incentives or concessions provided pursuant to this chapter, with an affordable housing cost or affordable rent to, and occupied by, persons with a household income equal to or less than 50 percent of the area median income, as determined pursuant to Section 50093 of the Health and Safety Code, and subject to an affordability restriction for a minimum of 55 years. (F) The development complies with the height 3.1.d Packet Pg. 137 requirements applicable to the underlying zone. A development shall not be eligible to use a floor area ratio bonus or other incentives or concessions provided pursuant to this chapter to relieve the development from a maximum height limitation. (2) “Floor area ratio” means the ratio of gross building area of the eligible housing development, excluding structured parking areas, proposed for the project divided by the net lot area. For purposes of this paragraph, “gross building area” means the sum of all finished areas of all floors of a building included within the outside faces of its exterior walls. (3) “Floor area ratio bonus” means an allowance for an eligible housing development to utilize a floor area ratio over the otherwise maximum allowable density permitted under the applicable zoning ordinance and land use elements of the general plan of a city or county, calculated pursuant to paragraph (2) of subdivision (b). (4) “Major transit stop” has the same meaning as defined in Section 21155 of the Public Resources Code. (5) “Transit priority area” has the same meaning as defined in Section 21099 of the Public Resources Code. (b) (1) A city council, including a charter city council or the board of supervisors of a city and county, or county board of supervisors may establish a procedure by ordinance to grant a developer of an eligible housing development, upon the request of the developer, a floor area ratio bonus, calculated as provided in paragraph (2), in lieu of a density bonus awarded on the basis of dwelling units per acre. (2) In calculating the floor area ratio bonus pursuant to this section, the allowable gross residential floor area in square feet shall be the product of all of the following amounts: (A) The allowable residential base density in dwelling units per acre. (B) The site area in square feet, divided by 43,560. (C) 2,250. (c) The city council or county board of supervisors shall not impose any parking requirement on an eligible housing development in excess of 0.1 parking spaces per unit that is affordable to persons and families with a household income equal to or less than 120 percent of the area median income and 0.5 parking spaces per unit that is offered at market rate. (d) A city or county that adopts a floor area ratio bonus ordinance pursuant to this section shall allow an applicant seeking to develop an eligible residential development to calculate impact fees based on square feet, instead of on a per unit basis. (e) In the case of an eligible housing development that is zoned for mixed-use purposes, any floor area ratio requirement under a zoning ordinance or land use element of the general plan of the city or county applicable to the nonresidential portion of the eligible housing development shall continue to apply notwithstanding the award of a floor area ratio bonus in accordance with this section. (f) An applicant for a floor area ratio bonus pursuant to this section may also submit to the city, county, or city and county a proposal for specific incentives or concessions pursuant to subdivision (d) of Section 65915. (g) (1) This section shall not be interpreted to do either of the following: (A) Supersede or preempt any other section within this chapter. (B) Prohibit a city, county, or city and county from providing a floor area ratio bonus under terms that are different from those set forth in this section. (2) The adoption of an ordinance pursuant to this section shall not be interpreted to relieve a city, county, or city and county from complying with Section 65915. 65917.5. (a) As used in this section, the following terms shall have the following meanings: (1) “Child care facility” means a facility installed, operated, and maintained under this section for the nonresidential care of children as defined under applicable state licensing requirements for the facility. (2) “Density bonus” means a floor area ratio bonus over the otherwise maximum allowable density permitted under the applicable zoning ordinance and land use elements of the general plan of a city, including a charter city, city and county, or county of: (A) A maximum of five square feet of floor area for each one square foot of floor area contained in the child care facility for existing structures. (B) A maximum of 10 square feet of floor area for each one square foot of floor area contained in the child care facility for new structures. For purposes of calculating the density bonus under this section, both indoor and outdoor square footage requirements for the child care facility as set forth in applicable state child care licensing requirements shall MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 25 3.1.d Packet Pg. 138 be included in the floor area of the child care facility. (3) “Developer” means the owner or other person, including a lessee, having the right under the applicable zoning ordinance of a city council, including a charter city council, city and county board of supervisors, or county board of supervisors to make an application for development approvals for the development or redevelopment of a commercial or industrial project. (4) “Floor area” means as to a commercial or industrial project, the floor area as calculated under the applicable zoning ordinance of a city council, including a charter city council, city and county board of supervisors, or county board of supervisors and as to a child care facility, the total area contained within the exterior walls of the facility and all outdoor areas devoted to the use of the facility in accordance with applicable state child care licensing requirements. (b) A city council, including a charter city council, city and county board of supervisors, or county board of supervisors may establish a procedure by ordinance to grant a developer of a commercial or industrial project, containing at least 50,000 square feet of floor area, a density bonus when that developer has set aside at least 2,000 square feet of floor area and 3,000 outdoor square feet to be used for a child care facility. The granting of a bonus shall not preclude a city council, including a charter city council, city and county board of supervisors, or county board of supervisors from imposing necessary conditions on the project or on the additional square footage. Projects constructed under this section shall conform to height, setback, lot coverage, architectural review, site plan review, fees, charges, and other health, safety, and zoning requirements generally applicable to construction in the zone in which the property is located. A consortium with more than one developer may be permitted to achieve the threshold amount for the available density bonus with each developer’s density bonus equal to the percentage participation of the developer. This facility may be located on the project site or may be located offsite as agreed upon by the developer and local agency. If the child care facility is not located on the site of the project, the local agency shall determine whether the location of the child care facility is appropriate and whether it conforms with the intent of this section. The child care facility shall be of a size to comply with all state licensing requirements in order to accommodate at least 40 children. (c) The developer may operate the child care facility itself or may contract with a licensed child care provider to operate the facility. In all cases, the developer shall show ongoing coordination with a local child care resource and referral network or local governmental child care coordinator in order to qualify for the density bonus. (d) If the developer uses space allocated for child care facility purposes, in accordance with subdivision (b), for purposes other than for a child care facility, an assessment based on the square footage of the project may be levied and collected by the city council, including a charter city council, city and county board of supervisors, or county board of supervisors. The assessment shall be consistent with the market value of the space. If the developer fails to have the space allocated for the child care facility within three years, from the date upon which the first temporary certificate of occupancy is granted, an assessment based on the square footage of the project may be levied and collected by the city council, including a charter city council, city and county board of supervisors, or county board of supervisors in accordance with procedures to be developed by the legislative body of the city council, including a charter city council, city and county board of supervisors, or county board of supervisors. The assessment shall be consistent with the market value of the space. A penalty levied against a consortium of developers shall be charged to each developer in an amount equal to the developer’s percentage square feet participation. Funds collected pursuant to this subdivision shall be deposited by the city council, including a charter city council, city and county board of supervisors, or county board of supervisors into a special account to be used for child care services or child care facilities. (e) Once the child care facility has been established, prior to the closure, change in use, or reduction in the physical size of, the facility, the city, city council, including a charter city council, city and county board of supervisors, or county board of supervisors shall be required to make a finding that the need for child care is no longer present, or is not present to the same degree as it was at the time the facility was established. (f) The requirements of Chapter 5 (commencing with Section 66000) and of the amendments made to Sections 53077, 54997, and 54998 by Chapter 1002 of the Statutes of 1987 shall not apply to actions taken in accordance with this section. (g) This section shall not apply to a voter-approved ordinance adopted by referendum or initiative. 65918. The provisions of this chapter shall apply to charter cities. 26 MEYERS NAVE A professional law corporation | CALIFORNIA DENSITY BONUS LAW 2021 3.1.d Packet Pg. 139