Ponte Vistahas reduced the plan from 2200 units to 1900.  The Community Advisory group put together has recommended the current zoning of R-1 be upheld.  The City Council person has said, she will follow the recommendation of the CAC and ask that the zoning be upheld.

Many people (including myself) have suggested that Bisno Development build larger SFRs and sell them for more and that surely they will profit.  I've done some research unfortunately it's not true.

I've put together some facts and figures and have estimated and rounded numbers, but you'll get the basic idea:

$125 Million dollars was paid to purchase 61 acres in North San Pedro

There are existing just under 500 SFR on the site.

R-1 zoning would mean $250,000 was paid per parcel (at the 500 number) and each parcel would be 5227sf, smaller than the majority of SFR parcels in the area (standard is 6000.)

Current construction costs are about $200 per sf.

On a lot size of 5227sf, a 2500sf new home (which would be about the size now allowed by the new "non mansion" change) could probably be sold for $1M. Costing $500,000 to build.

So now each home has a total cost of $750,000 and the profit for each home is $250,000. 

$250,000 X 500SFRs = $125,000,000 just what was paid for the land.

The cost of construction may be a bit lower for a development this size but there are additional costs as well,  cost of the loan, Broker fees in selling the units, infrastructure, taxes and let's not forget the city is taking some of the land for the high school that is to be built there.

So what's a developer to do when faced with land already bought and a community that isn't supporting a high density development? The developer has stated he will continue the process to attempt to have the zoning changed, if he is unsuccessful there are a few choices for him:

Sell the land at a loss to someone who wants to build within R-1 zoning, Sell the land to someone who wants to start from square one and thinks they will be able to get a zoning change, default on the loan and let the land go back to the bank and let the bank try to sell it again.

So while there is a higher demand for SFRs than for condos in this area, in this market and they would definitely sell, the profit would be non existant which would not be acceptable for a $125M investment.

Let's look at the other side of the coin:

1900 units at an average square footage of 1000 on 1344sf per unit

Construction cost $150 per sf (multi unit building is less expensive than SFR)

Cost of land $ 125,000,000

Cost of construction of 1900 units $285,000,000

Average sale price $750,000

$1.425 Billion dollars generated from sale of units subtract cost of land and construction = 1.015 Billion Profit give or take a few million.

Maybe this helps us better understand why it's so important to the Developer to have the zoning changed.