IVEY | 3iaing Richard ivey School of Business ‘The University of Western Ontaio 503 Cricket Road 2011-06-16 frenms oF Use * ‘understand and agree that this document willbe active for viewing ‘and printing for a limited period, and past the expiration dete, | ‘understand | will no longer have access to tha electronic document. ‘ Lundorstand that ! may access this Cocument on upto four different computars within the active period. ‘| agree not to forward this document to anyone else. + L agree to print only one copy ofthis document for my personal use. * Lagree to print multiple copies only if| have already purchased copyright permissions forthe exact number of copies! wish to make, Document i)w HARVARD |BUSINESS|SCHOOL 9-396-001 wauatanej. YooRvU 503 Cricket Road In September 2003, Mason Speed Sexton was evaluating how he should proceed with his property at 503 Cricket Road, Charlottesville, Virginia. He had inherited the stucco house in 1993. It was located on a 14,000-square-foot lot approximately one block from the main campus of the University of Virginia, Four years later, he attended that institution as a first-year student and immediately took lover management of the property. This was his first exposure to real estate management and fo the benefits and problems of rental property. Before Sexton took control of the house in 1997, it had been divided into individual rooms that ‘were rented to students. There were 7 double bedrooms, 6 large single bedrooms, 2 kitchens, a large living room, and 544 bathrooms. He spent two summers with a local handyman cleaning, painting, rofurnishing and generally improving the long-neglected property. After remodeling, he was able tO raise the rents by percentages varying from 25% to 40% and began to operate the praperty at a profit for the first time (see Exhibit 1). His experience taught him the importance of several factors crucial to real estate management. He learned that his property’s location made it possible to demand rents in exoess of those justified by the space and the facilities alone. He also learned that the age of the current structure and the resulling high maintenance costs were consuming the little profit there was. He concluded that as the building continued to age and deteriorate, the situation would only worsen. During the period of his management, he filled the house with his undergraduate friends. As a precaution, he required his tenants to sign a formal lease drawn by his lawyer and to get their parents’ signatures if they were under twenty-one. Among these friends were two architectural students who came to him in the spring of 2000 proposing to build an apartment house at 503 Cricket Road, Their original concept was to design an “architectural commune” under the supervision of one of the professors in their graduate program. In fact, the professor asked if 508 Cricket Road could be used as a studio project for his second-year architecture students. ‘The idea seemed logical to Sexton and a way to get some free help. Planning a New Building After graduating from the University of Virginia in June 2001, Sexton took a fob with a small software company and moved to New York. In mid-2002, Sexton was admitted to Harvard Business: School and planned to enzall in the fall. At that time, he sought the advice of his mother on his idea to tear down the old house and erect an apartment building. In his opinion, her 20 years of real estate Pre Wile ap Donald A. Bown precede ciel et “UP Ray Koad” HS case No, STM IBS ses ae {hvelopd sey the bai eae dasa Cree ninth ere se eaten owes ray dat or ato ‘Shale or inte nagar CCopyght © 296 Pent and Felons Haran Cale To ne copie or svat penne eprodce mall 1600515785 Seo Harssd Basic tel Pubising, ty MA HL, on go 0 py omwwetinpharaedec Wo pa of te pubeaton ray be rodnon sone 4 steel jute vest fn speassne on need in any fom or BY ay noo che ‘Pobonpnng sede, ethos scent he portanon of Haran sins Sa ‘This document is authorized for use by Edward Byers from 6/14/2013 to 2/14/2014, Use outside these parameters is 2 copyright viclation.396-001 505 Cricket Ron experience as a successful broker on Long Island—coupled with her interest in the property—made het a sowice of sound judgment and invaluable advice. After the first sot of plans had been submitted by five different groups of architecture students, he and his mother were able to envision @ feasible design that would fulfill the property’s best use. They had learned that Charlottesville’s ““R3” zoning laws for this location restricted building construction to one housing unit per thousand ‘square feet of available land. This meant that they could build a maximum of 14 units, but these units were unrestricted as to the size or number of rooms in each unit as long as the structure adhered to required setbacks from the property line and the five-story height limitation. Sexton decided that his objective was to maximize the value of the property with any project that might be Dui, since it was his only inheritance, and he wanted to make the most of it both in terms of current. cash flow and cash to be realized at the time of sale. After choosing the design and architect he liked best, Sexton spent many hours with his mother and the architect. He repeatedly revised the sketches and the floor plans until he was satistied that he had mict his maximum-use eriteria and had an aesthetically pleasing and economically feasible set of plans, Among the decisions he made at this time were: (1) to make each unit, on average, 1,000 ‘square feet, and to provide each of the 14 units with its own kitchen and bath; (2) fo use concrete decking planks and brick-bearing walls as the primary means of construction because of their east advantages, long durability, and maintenance-feee characteristics; (3) to build all bedrooms large enough and with enough closet space for atleast two people; (4) to build all bathrooms, kitchens, anc facilities to withstand maximum wear and lear while requiring the least possible amount of maintenance; and (5) within the consiraints above, to attract affluent students by making the apartments as attractive, ary, convenient, and hovurious as possible, The overriding goal of this early planning phase was to decide upon a structure of lasting value that would require a minimum of time and expense to maintain. During the design phase, Sexton became concerned about the properly management. Since his mother was 65, he decided to ask her if she wanted to move to Charlottesville, become a broker there, and take over the management of the building. In order to make this proposal attractive to his mother, who was divoreed, he promised her a “penthouse designed to her specifications.” He dil rot know whether he could afford this offer, or, if he could, whether his mother would be amenable to the idea ‘Concurrently, atthe beginning of the summer of 2002, he surveyed the list of available contractors in Charlottesville who were willing and able to undertake this kind of job. To his great chagrin, he discovered that since his project was to be one of the first mic-rise apartment buildings in several ‘years in Charlottesville, most local contractors were not geared up even to bid on it, He explained his ‘concept fo the one general contractor with the most experience and showed him the plans and sketches. Sexton then asked for an estimate of what the contractor thought it would cost to build. Within a day, the contractor produced a construction cost estimate of $690,000. Sexton estimated his tolal development casts from that base. ‘Market Research Before making any major dollar commitment to the project, Sexton wanted to do @ more in-depth survey of the local rental housing market and, if possible, get « verbal commitment for permanent financing, on the basis of the plans and numbers he had at that time. On an overall basis, he liked. Charlottesville as a macket (ace Appendix A). He spent two full days in July 2002 talking to local real state brokers to determine whut the demand might be for his new luxury apartments and whether he could get rents of around $700 per unit. Reactions were mixed. Most of his contacts agreed that This document is authorized for use by Edward Byers from 6/14/2018 to 2/14/2014. Use outside these parameters is a copyright violation,53 Cricket Road 86-01 such rents were too high for young families, professionals, and nonstudents, and that $700 was atthe high end of the rental range for Charlottesville apartments (see Exhibit 2). A visit fo the Off-Campus Housing Bureau was much more encouraging. ‘There he learned that the off-campus housing situation was critical. Students would pay almost anything for good, clean housing that was within walking distance of the university. The director informed him that in the last two years, available apartments had been given out by lottery. More recently, they had cllminated the lottery system, as it had proved unworkable. The current situation was described as a free-for-all” with local landlords responding by increasing rents sharply. This was a change from the 1990s when rents were flat with some vacancies, ‘During this same trip to Charlottesville, Sexton got a break: in the form of a tip from his contractor that a "Special Report” from the Housing Guidance Council had recently been released and that he might get a copy from one of the largest builder-developers in central Virginia. He called the developer's office and a secretary told him that he could read the report while he was there, but that it couldn't leave the office. He therefore took a small tape recorder into an empty conference room, {and recorded the parts he felt to be important to his project. In general the report indicated that there was a strong market for rental property within walking, distance of the University and that demand would remain strong through 2006, even without further expansion by the University of Virginia. Since he planned to ret to students who were willing and able to ive two to a bedroom, he had to make rent comparisons on a per-student basis, He was able to get information onthe few comparables for rental units in midrise buildings (see Exhibit 2). The large rooms in the existing 108-year-old, deteriorating structure had rented during the last three to five years for $125 per person per month with four or five people sharing the same bathroom and kitchenstte. Occupancy levels had been virtually at the 100% level for the entire period of his ownership with long waiting lists for any available rooms. Many students seemed fo be quite willing to pay this price for conveniently located housing despite its run-down condition and lack of amenities. Bedrooms in the new structure would rent for an average of $350 per month and could ‘easily accammodate two persons, resulting in a per-person cost of $175 per month. Next, based on his knowledge of the local rental market andl some preliminary research he had conducted with the help of the general contractor, he estimated his operating expenses including, vacancy and derived his expected cash flow (See Exhibit 3). On the basis of this rough analysis, he decided that with cash flow of $90,034 and a total cost of $850,009, the project was economically feasible and that he should proceed to the next stage Availability of Credit Armed with his new market data, the “Special Report” excerpts, and his pro forma income and expense statement, Sexton visited the local Crestar Bank After presenting his proposal for an {$850,000 project, he got a verbal commitment for $45,000 per unit or a $630,000 first marigage at an interest rate of 8.5% with an amortization period of 25 years and a mortgage constant of 9.67% based ‘on 300 monthly mortgage payments. This was some $70,000 less than the loan he was hoping for. Tt ‘would require an equity investment of $220,000: $150,000 through contributing the land and $70,000 in cash. He was told that the bank had never lent nore than $40,000 per unit before and that they were stretching themselves to reach this higher level. Other visits to the Shenandoah Life Insurance Company, the local savings bank, and others produced similar results. The general feeling Sexton encountered seemed to be that this project was “too rich for our blood.” In his opinion, this experience underscored the problem of dealing with small-town, local financial institutions. First, This document is authorized for use by Edward Byers from 6/14/2018 to 2/14/2014, Use outside these parameters is a copyright violation.396-001 505 Cricket Road since this was a pioneering effort inthe sense that it was tobe the first mid-rise in several years in the town aimed at students, most lenders approached it cautiously and, in his opinion, with undue conservatism. Secondly, he had received the impression that the sizeof the loan was "too heavy” for several institutions, wino were still recovering from their real estate loan losses a few years earlier. Although Sexion’s available time in Charlottesville was drawing to a close, he still had not received very encouraging results. Looking for additional sources, Sexton sought out the most reputable mortgage broker in town, ‘The gentleman fo whom he was referred turned out to be the ‘executive vice president of the commercial bank where he kept a house account. He was very helpful in suggesting sources of mortgage money and assured Sexton that for 2% of the Ioan he could secure financing of $700,000 with a carrying, cost of $67,690 quickly and easily. As a precondition, however, Sexton would have to get final bids on the project to determine the construction costs more exactly in order to finalize his commitment. This, in turn, required that Sexton procure a complete set of ‘working drawings and specifications by an architect certified in Virginia. Unfortunately, the architect ‘who had done all the work up to this point was with a New York firm and not licensed in Virginia. In addition, a local engineer had to take test borings on the land to determine what kind of foundation would be needed. To proceed further, Sexton had to commit almost $25,000 in architectural and engineering fees. These would have to be paid whether or not the building was built. On the basis of Sexton's mother’s credit, however, Sexton would be able to delay payment of ‘these bills until they got financing or the project was shelved, Problems with the Planning Commission In late August 2002, a disturbing piece of news arrived which caused Sexton added expense and worry through the fall, All plans for mull-family housing, office, and industrial buildings had to be approved by the City Planning Commission. A new planaing director was hired who stated that he vwas very concerned that each project met the highest planning standard. Since Sexton's project was the first to seek approval under the new director it was being treated as somewhat of atest case. The planning director was very “tough” in his meetings with Sexton and insisted that Sexton take pains not to disturb a single tree or bush in putting up the building. If Sexton did not comply with the rules, he would not receive his certificate of occupancy. In addition, Sexton had to present detailed landscaping plans and elevations of the building to get his project approved. He therefore hired a local landscape architect at a cost of $5,000 to do the plans and appear before the commission on his behalf. The outcome of the meeting was that the Planning Commission not only approved Sexton’s plans, but “hailed” them as a model for future development in Charlottesville. New Cost Estimates Once the working drawings were completed, the general contractor sent out invitations to local ‘subcontractors to bid on the property. By March 2003, when the bids were returned, the building market had taken a dramatic turn from its status a year earlier. The real estate downturn a few years carlier had caused the biggest developer in Charlottesville to go bankrupt, leaving, debts of $17 million. Since then, there was litle new construction. Many contractors, architects, and other sub- contractors were out of jobs and hungry for work. However, by the spring of 2003, the economy was heating up anc construction in Charlottesville, especially in single-family homes and townhouses on the ouiskirls of the city, was booming. ‘The University was retrofitfing a number of its existing buildings. These reasons, coupled with the fact that this was Sexton’s first real estate venture, made itdifficult to attract bids on the project. When he got bids, his worst fears were realized. ‘The lowest bid came in at $120,000 over his estimates. ‘This document is authorized for use by Edward Byers from 6/14/2019 to 2/14/2014. Use outside these parameters is a copyright violation.50 Creket Road swea01 ‘The multitude of factors behind this huge difference required a great deal of time and effort to discover and, in some eases, eliminate, A major reason for the high construction costs was the fact that the test borings showed the need for reinforced spread footings that had to go down 4 feet. This foundation work, which included other related expenses, increased! his costs by $50,000. To get around this problem, Sexton attempted to swap his picce of land for a similarly sized, but less: attractively located piece owned by the University. Unfortunately, the Board of Overseers was not interested in his proposal and he was stuck with the extra cost During this period, his general contractor, architects, and his mother were of tremendous help in finding ways to save money and cut costs. Ultimately, the original bids were reduced by $40,000, a development absolutely critical to keeping the project economically viable. For instance, he quickly discovered that he could save $13,000 on the masonry (see Exhibit 4) by changing from the 8'4” ceilings called for in the plans to 8 ft. cellings and by using oversized instead of standard brick. This change also meant that procut, regulation 8 ft. wallboard could now be installed without the extra labor it would require to patch every piece and use extenders. Italso meant saving 10% an the cost of cheaper bricks that requited less mortar and labor. Some other ways in which he cut costs were to: (I) eliminate all the ceramic tile work; 2) take out all dishwashers and garbage disposal units making, them optional on a rental basis; (3) replace the electric switches called for in the specifications with ones costing less and moving the position of the boxes in order to use less electrical cable; (4) make Kitchens smaller by 14 feet and switching to lower-grade cabinets, Unfortunately, he was not the cnily one in Charlottesville facing high building costs, A recent article in the local paper showed that CCharlottesville’s average building cost of $45 per square foot was among the highest in the nation. Despite these high cost levels, Sexton expected a reasonable return on his investment. The total evelopment budget of $940,000, based on a 12-month construction period, is shown in Exhibit 5. Pro Fornta Income Statement A major reservation voiced by potential lenders was centered around Sexton’s pro forma income ‘statements (see Exhibit 3). Specifically, bankers believed that his operating expenses of $21,686 were too low since they totalled only about 19% of the net rent of $117,720. The bankers wanted to see operating expenses, including real estate taxes, in the neighborhood of 25% of net rental income or $29,A00 since their experience had indicated that this would be their probable cost to run the building should there be a default on the mortgage. In particular, the lender felt that real estate taxes would be $2,500 higher and management and administration, repairs and maintenance, and utility charges should all be increased. Making these adjustments, Sexton projected the return on investment of $982,320 on a cost of $940,000 (see Exhibit 6), Requiring a coverage ratio of about 1.2 of eash flow from operations to debt service, Sexton felt that he could still obtain a loan of $700,000 at an 8.5% interest rate (9.67% mortgage constant). This Tefta cash return of $14,680 on an equity investment of $240,000 or 6b (see Exhibit 6). As bad as this seemed, he thought there were some positives: the partial shellering of income and the anticipated increase in value through appreciation. He felt rents would grow and in a few years he could justify a sale at an 825% capitalization rate. Tax Shield and Discounted Cash Flow Analysis of Return Sexton had decided to use the “discounted cash flow analysis of return” format in the pro forma, ‘because he believed it was the only method clearly relating the estimated value of a project with its cash flow over time. He knew that real estate investors establish value and base their investment decisions on four sources of entrepreneurial reward: (1) appreciation, (2) loan amortization, ‘This document is authorized for use by Edward Byers from 6/14/2013 to 2/14/2044, Use outside these parameters is @ copyright violation,396-001 ‘5 Cricket Road @) income tax savings, and (4) cash flow. He believed that the method used in his analysis integrated. all four clements and tolel “Ihe Cricket Road Story” effectively. Sexton felt confident thatthe aftertax projected retum of close to 20% would awaken the interest of most investors (sce Exhibit 7). Current Situation By September 2048, when Sexton returned to the second-year MBA program, the project was in limbo. He had not been able to obtain permanent financing on acceplable terms. Fle had almost completely ceased to deal with his original mortgage broker because the broker had not lived up to hhis promise to secure a take-out loan. At this point, hig architects had become very helpful in arranging meetings with interested lenders and investors. On his own, he had spoken to a number of recently formed public real estate investment trusts (REITs) to which he had sent proposals Although these were stil being evaluated and reviewed, Sexton had received the distinct impression that his project was too small to warrant viable consideration. He had not yet received any favorable responses. Moreover, as time passed, it became less andl less likely that the building, could be completed before the original target date of January 1, 2005. This meant that he would miss the change in semesters at the University when a new influx of students would be looking for housing. Consequently, he would have a difficult ime renting the property until the following September anct ‘would incur large additional carrying costs. He was left wondering about his next steps. ‘This document is authorized for use by Edward Byers from 6/14/2013 to 2/14/2014, Use outside these parameters is a copyright violation,503 Creket Road Exhibit 1 Income and Expense Statement for Present Use Gross rental income (Note 1) $30,000 Allowance for vacancies and bad debts (900) Not rontal income, Operating Expenses: Ral estate taxes ($9,000) Water and sewer (1,000) Heat and electrcty (2,900) Insurance (1.200) sanitor (1,600) Repairs (2.900) Management fee (1,800) Total Operating Expenses Income trom oporatons. $29,100 ($14,100) $15,000 Nole 1: ‘Risteon rooms with 20 stunts paying $125 per room, per person per month, Exhibit2 Charlottesville Apartments 600 Cricket Oxford Woodrow Cambridge Ash Brandon Mein Hill Apartments _“Square_Tree 1-Bedroom Unit 1 person $500 635 540 680 500 675, 2 poopie 500 as 540 690 590 or, 2-Bedroom Unit S poopie 530 685 570 690 620 725, 4 paopie 560 685 800 680 650 75 ‘This document is authorized for use by Edward Byers from 6/14/2013 to 2/14/2014. Use outside these parameters is a copyright violation,296.001 50 Creket Ras Exhibit3 Preliminary Pro Forma Income and Expense Statement Gross renial income (14 units x4 students x$175 x 12 mos) $117,000, Vacancy allowance (5% of gross rent) (6,880) ‘et rental Income siii720 Operating Expenses: Foal estate taxes 7,800 Water and sewer 4,000 Gas 4,000 Insurance 2.200 slanltor 2,000 Reserve for general repairs 4,400 Electicty 1,200 ‘Management fee (5% of net rent) 5.586 otal Operating Expenses $21,688 Income from operations (Noto 1) $90.084 [Note Tota! developient cost eatimated at $880 000) nung land et $280,000, constaction at $630.00, anu soft cost (ey irene, sehitectre, egal et) a $7,000 ‘This document is authorized for use by Edward Byers from 6/14/2018 to 2/14/2014. Use outside these parameters is a copyright violation.513 Cricket Road 596-001 Exhibit 4 Projected Construction Cost, Spring 2002 em March Bid Revised Bid Difference Demolition $ 8.800 $9800 8 0 Reinforcing and stool ° 3,700 3,700 Concrete 43,500 43,000 (500) Masonry 487,900 124,900 (13.000) Structural steel 17,600 47,000 (600) Stoel salts 41,000 411000 ° ough carpentry 21,100 21,100 ° ough hardware 900 ‘900 0 Finish carpentry 16,400 14,400 (2,000) Finish narcware 2,000 2,000 ° Drainage 1.800) 1,900 ° Roofing 12,000 12,000 o Door A. Metal 3,000 3,000 o oor Bi-Foiding 1,800 1,800 o Windows 18,000 16,000 (2,000) Drywall 19,000 17,500 (13500) Tile work 400 0 (400) Resilient tie 8,000 3,000 0 Painting 8.800 7,800 1,000) ‘Special decoration 1,600 41,600 0 Kitchen cabinets 18,500 14.400 (4,100) Appliances 44,100 12,000 (2,100), Blinds & shades 11500 41,500 0 Carpets 13,400 43,400 ° Metal shelving 1.800 4,800 0 Elevators 40,500 37,500 (3,000) Plumbing 158,000 36,000 (2,000) Tube & showers, tollets, basins 6.000 6,000 ° ‘Termite protection 300 300 0 Procast slabs 51,000 51,000 ° Hoating, ventilating, air conditioning 29,000 29,000 0 Eloctrie 139,500 37,000 (2,500) Fireplaces 1,400 1400 o Caulking ‘900 900 o Earth moving | 6,000 6,000 ° Site work 2,600 2,600 0 Walks, ete 10,700 9,600 (1,109) Lawns 4.400 3,000 (1409) Goneral requirements 3,000 0,000 (3.000) Tools —2,000 2.000 eo Total $882,800 $3648, 300 (639,500) Taxes 49,400 18,400 1,000) Overhead & prot 47.800 45.300 (2.500) Total $750,000, $710,000 (40,000) ‘This document is authorized for use by Edward Byers from 6/14/2013 lo 2/14/2014, Use outside these parameters is a copyright violation,396-001 518 Cricket Road Exhibit'5 Total Development Cost Budget Spring 2003 Land at market value {$180,000 Construction costs? 710,000 Architectural and Engineering 20,000 Legal, builder's sk insurance, taxes 20,000 Interest on construction loan 30,000 “Total development costs ‘$040,000 Less assumed loan 00.000 Equity investment requted 240,000 Less land 150.000 Cash required $99,000 haat on pana species inden Propo See “Proj Const Coste" BB for ties kaw Exhibit6 Cash Flow Analysis (using 25% expense ratio) Income and Cash Flow. $117,600 5.080 Not rental income n1,720 Total expenses 29.400 Not cash flow iftrae and clear of debt 182,320 Annual debt service $700,000: 81% interest, 25 years; 9.07% constant 07.690 Net cagh fow attr debt servicing $14,630 navel on monthly morgage payments 0 ‘This document is authorized for use by Edward Byers from 6/14/2013 to 2/14/2014, Use outside these parameters is @ copyright violation.‘uo 1yBukdoo es! siejawesed esa ePISino BSP] “pLOZ/PL/Z 1 ELOZ/PL/9 WON S1OKE Prempa Aq BSN 10} PEzONINe S| UELUNDOP SIAL ‘so0e hg jose wore uonepaidap Suey suse ve PUR yg axe sue ee Trepe CuO pases sf gr ysl 29250 oneal 89 nN fo B00 woop € SUEY INES OO HL se oprpnndin icra we O12 C218 9 ao geo jou saMnun op Burke uo poseg st sd Ses By “sone 20 Kae az eo paw aurouy a4ssed Se sBN A PENSE] 3H Ae [Hopay MASE aM BO HEA HE SIL, ‘spredaud eauoprse ay pou Aianaoa: 90 sea 7 dx PPP HE ORTORCEAA MH POISE 8 SHE TORDONP Eg send sad 92 star asundao Sugesado pue aaiou [as IN 'sNOUWnss¥ 696 NSAUSY JOSLVETWNESINI — OOeSLE feng seney 10 erisis Sib LANA INSSSUA ISN BLS 34gh SOL toz098 u99 Jo aounes zeus s55@ 8 sone, weele § ows woyuseD Ie oe zecs Howey voneoaideg TETZST — ooumjen ofebion esas ops us ueD (ooesis) ye ou9U (ex2598) 8A 1008 12H PeLsis eam FS reurs'ls ped Ses coeses ewes OGSES © NB eES OPES eURS CNHs wEIAS | OSIS. «aves © (OvoHzS) NuPUae LOL veeies Fes wos YsEO LON (ovrore) whi seze owes, we aol ovet ag OTS HSVO XL SELLY se) usd) evs) Ge) zo st 690 @ OMRBAa XE wow sizes ere (v3) ‘uo0% OEE (ers) ered) tere) tex'8e) (ex0) uonepsexdog- rel EL SLL soo 80 zea onezwourye wo | ueueanae we | seohcoH mola useO EL 210199 ex (e019) (a9'19) (6929) (es) 929) (699) Byoubs- ee ze0lk © s's0k GOW orss arcs wvon zeae ime 18819 fue oo ws (oree) eeu) ese) ore) «ize ee) esesuacig fugasadg- Wells 9OSBIS ELSIE aLAMIS TAVIS NSELS SEALS LEALS | LELLIS ae 809) FEU ON a = 7 z 3 3 7 F z T 7 (0008) ss4yeuy mops yseD poruncosic CuO OXF LANAP se 10036696-001 53 Crest Road Appendix A Charlottesville and Albermarle County are situated in central Virginia along the eastem slope of the Blue Ridge Mountains just 30 minutes away from the Skyline Drive. Charlottesville is 67 miles ‘west of Richmond and 115 miles southwest of Washington, D.C. The 2000 census listed Albermarle ‘County's population 28 56,000 and Charlottesville’s population as 40,000. Census projections indicate that the populations will continue to grow at an average rate of 3% per year, and that growth was expected. in spurts rather than as a single smooth trend. The proportion of Charlottesville’s employed population classified as professional is 45%; 52% work in managerial, sales, or clerical positions, Manufacturers in many different industries provide a payroll in excess of $150 million. There are rnine electronics firms in the immediate area including General Electric, Sperry Marine Systems, and Stromberg-Carlson. Morton's Frozen Foods employs 1,500 people in a plant 12 miles to the west of the city. ‘Three printing plants—the Allen Press, the Michie Press and the Lindsey Printing ‘Company—employ over 400 people and are located in Albermarle County. Martin-Marietia operates. ‘2 quarry to the north of the city. Two concrete manufacturers serve the growing needs of the construction industry. Two clothing and textile firms have plants within the county. An office equipment manufacturer, the Acme Visible Record Co, and a tire plant for Uniroyal complete the lst of major industrial installations. Although there are indications that General Electric may locate another plant in the Charlottesville-Albermarle area, the prospect of further industry growth is limited by the diminished pool of available labor ancl the opposition of many local groups to any activity which might damage the local environment. Charlottesville has many government jobs. The city serves as a regional center for the state and as the county seat for Albermarle County. ‘The federal government has a substantial payroll here on the staff of the Army Judge Advocate General’s school and the Army Foreign Service Technological ‘Center. Federal employment in the area is not considered likely to grow. It took substantial pressure from the local congressional delegation to bring in the Army Foreign Service Technological Center and even this did not replace all the jobs lost when HEW vacated the feceral office building several ‘months earlier. Albermarle County remains an active agricultural area. There are extensive apple and peach orchards within the county. Many large firms still specialize in cattle breeding, dairy products or horse raising. ‘The single most important influence upon the future of the county and the city is the University of Virginia. This is a prominent educational institution with graduate schools of law, medicine and bbusiness which zank among the best American professional schools. ‘The University has attracted a ‘well-educated and affluent group of professionals and is also an important source of employment for ‘unskilled workers in the county and city. Additionally, the University serves as the center for much Of the cultural and social life in the area by sponsoring concerls, lectures and exhibits. Increases in enrollment will continue to foster growth in the area The city’s rich historical background, its natural scenic beauty, and the remarkable examples of Jeffersonian architecture have made it into an important tourist center, deawing over 400,000 people a year. 2 This document is authorized for use by Edward Byers from 6/14/2013 to 2/14/2014, Use outside these parameters is a copyright violation.505 Cricket Road 96-001 ‘The city and county are relatively well served in terms of transportation. Interstate 64 runs east- ‘west through the city and connects it with Richmond and Nocfolk to the east, Roanoke andl ultimately St. Louis to the west. Dual-lane Route 29 connects with Washington, D.C. Both the Chesapeake and ‘Ohio and the Southern Railroads serve the city and use Charlottesville as an important switching, point. Charlottesville has a regional airport with daily scheduled flights to points as distant as New York and Atlanta, Charlottesville and its surrounding area represent one of the sinall, sustained growth areas in the South, While many communities are dependent for their growth on a single source like commerce, recreation, politics, professionals, or education, Charlottesville is fortunate enough to have a strong base in many of these areas. Its numerous advantages virtually guarantee a stable and prosperous ‘economy. cy ‘This document is authorized for use by Eduard Byers from 6/14/2013 lo 2/14/2014, Use outside these parameters is a copyright violation.