Building Assets

For the purposes of this analysis, project construction costs are used as a proxy for building asset values. The limitations to this approach are discussed below in a separate section, but it provides a conservative value which is sufficient for this analysis. The assumption here, which are borne out by market demand studies commissioned by UCD, is that construction value is a proxy for the present value of program income or achievable rents associated with each building use (cite) Restated, over time, the rents or program income from the buildings will necessarily equal or exceed their construction value.

There are six building construction types in Aggie Square. There is classroom and lab space, office space, retail space, residential units, a parking garage, and a rehab hospital. Each of these have a different base building and tenant improvement cost, ranging from $140 to $846 per rentable square foot , with a total of building asset value of $825.7 million.

Aggie Square Phase IRentable Square
Base Building Cost
per Square Foot
Tenant Improvements
per Square Foot
Building Value
West Lab Building235,542526350 $        206,334,792
East Lab Building280,898526350 $        246,066,648
Lifelong Learning Building267,811490200 $        184,789,590
Alice Waters Institute35,510449* $          15,943,990
Other Commercial15,790449* $            7,089,710
Residential (190 units)137,720472* $          65,003,840
Kindred Rehab Hospital53,000943* $          49,979,000
Garage (1,200 spaces) (1)360,400140*$          50,546,000
 1,986,671  $        825,663,570
Developer Cost & Profit   $      24,769,907
    $      850,433,477

The cost of a building is a key component to determine the profits of various parties involved in managing planning and development of the overall project (the developer), managing the construction of the project (the general contractor), and arranging the financing of a project (the capital partner). The rent for the buildings is set at a level necessary to cover land and building costs and the direct costs and profit requirements of these three participants. For this exercise, it is presumed that the general contractor profits of 1% ($8.2 million) are already included in the construction costs, and that the other two will add 3%, or $24.8 million to the total project costs – with approximately half of this representing profits. Therefore, the rents will be set to finance a building asset worth $850 million and the land value of $37.3 million.

The direct economic benefits to UCD in terms of a building asset is $850 million. Local governments do exact some fees based on construction or development costs, but these typically are reimbursements for plan reviews and are less than one percent for a project of this magnitude. Based on planning documents obtained through a public records request, UCD spent approximately $2 million advancing the project through community workshops and governing boards. This represents roughly one quarter of one percent of the project asset value of the buildings. To be conservative, I estimate that a reasonable amount to share with the community is half ($1.0 million) of what was spent by UCD to advance the project. It seems appropriate, following the public interest approach used by the California Public Utilities Commission, that this funding be advanced to community groups during the planning process.

What was disclosed in the planning documents?

All construction costs were included in the public documents. However, there were no disclosures on rents, developer profits, capital partner profits, or general contractor profits. Documents obtained through public records request did indicate UCD is lowering the risk of the development by guaranteeing rent for a significant portion of the buildings. The documents also provide a “Developer’s Target Yield” (Predevelopment Agreement) and expected Internal Rates of Returns (IRRs) for investors (Second Market Report), but no details were provided in these documents to fully understand the profits extracted by private parties developing the property, or the risk profile of the project for these parties. A passing mention is made in the City’s assessment of the subsidy request that the developer fee for the project was high.