Newport Beach, CA
Land
The Ask
The client, a legacy restaurant-operator, wanted a comprehensive investment and
development plan targeting an 18-20% IRR on a family-owned parcel of mostly vacant land.
Overview
The subject site was owned by a group of family members in trust. The family members had been in the restaurant business for 50 years, and operated a legacy restaurant on a separate site. The subject site, on the other hand, was being operated as an offsite parking lot that was not bringing much value to the owners. As a result, the owners wanted to demolish the parking lot and redevelop the site, while targeting an 18-20% IRR and low-to-modest leverage. However, redevelopment of the site posed certain challenges. Zoning regulations imposed minimum parking requirements that considerably lowered building cover, and height restrictions limited upward expansion. The site was also subject to the California Coastal Act, which added an additional layer of land use complexity. The uneven terrain and other site schematics also required extensive and careful site planning. The family members were ultimately looking for the perfect plan that would align with their legacy, vision, and the site logistics. Quasar stepped up to the challenge.
Our Solution
The Quasar team executed a detailed highest and best use analysis for the site. We
produced an array of possible development paths, while generating robust feasibility studies for every single pathway. We ultimately crafted a development proposal with investment recommendations that would see true to the client’s legacy and vision, and successfully tackled the challenges presented.
The Breakdown:
Legal Feasibility
Developed list of permitted and non-permitted uses (site zoned
Commercial Corridor), as impacted by local and state restrictions and requirements.
Market Analysis
Collected and analyzed data on micro- and macro-drivers (demographics, income, employment, supply & demand, consumer trends &
preferences).
Community Outreach
Surveyed stakeholders; Eliminated uses opposed by the community (such as 24/7 convenience store).
Site Concepts and Planning
Proposed underground parking to meet requirements
and developed value-maximizing uses (Retail Store; Luxury Food and Beverage, Mixed-used, Multifamily and Compact Retail).
Site plan and project delivery
Proposed and assisted in the development of a bi-phasal project delivery and initial site design that replaced existing uses while adapting to other schematics.
Financial Analysis
Ran financials on all possible development pathways and site
uses; conducted base-best-worst case scenario analyses
Business Planning
Proposed highest and best use, and planned for sustained viability
of the venture through SWOT analysis and risk management.
Deal Structuring and Underwriting
Injected market-tested assumptions into underwriting to ensure success of the deal and continuing legacy for client.
Final Recommendation
Based on a thorough and conservative review of construction
cost/financials, completion timeline, cap rates, vacancies, and interest rates, economic drivers, and community sentiments, we proposed the development of a Luxury-Experience Restaurant. Such a proposal not only took advantage of the prime location of the site and the prevailing trend towards experiential spending, and boasted an unlevered IRR of 20%, but most importantly, would uphold the client’s legacy with dignity, for generations.