Attachment 21 - Applicant's response to Town Council staff report
1
August 9, 2016
Hon. Barbara Spector and Members of the Town Council
Town of Los Gatos
110 E. Main Street
Los Gatos, CA 95030
RE: North Forty Phase 1 (“Project”)
Architecture and Site Application S-13-090
Vesting Tentative Map Application M-13-014
Special Town Council Meeting August 9, 2016
Dear Mayor Spector, Vice Mayor Sayoc and Members of Los Gatos Town Council:
We have reviewed the Staff Report dated August 4, 2016 and wish to respond to certain
statements and analyses contained in that Report and expressed by some members of the public
in letters attached to the Staff Report. Preliminarily, we note that although the official
recommendation on page one of the Staff Report is to deny the Project, the rest of the Staff
Report contains no support for denial. Thus we assume that the official recommendation is in
line with Town practice that the staff recommendation will be to uphold the Planning
Commission’s action, but that this recommendation does not reflect staff’s professional
judgment which in all prior staff reports to has been to approve the Project.
The Staff Report (page 14) suggests that the Council can consider whether the “number and
distribution of units” are consistent with the Specific Plan and possibly suggest changes. A desire
to decrease the number and change the distribution of units is also expressed by some members
of the public in letters attached to the Staff Report. We disagree that this is an option. The
proposed Project is fully consistent with the objective standards of the Specific Plan, as the Staff
Report confirms. There is no other application in front of the Town, so any idea that some units
could be redistributed elsewhere in the North Forty Plan Area is pure speculation at this time.
The density proposed in our application is based on rights afforded to us by state law.
More particularly:
2
1. The Density Bonus Law entitles the Project to 320 units. If there is a development standard
that precludes the Project from achieving the 320 units, it must be waived by the Town pursuant
to the Density Bonus Law.
2. Under the Housing Accountability Act, the Project cannot be denied and the density cannot
be reduced unless the Project does not conform to some objective standard; and/or there is a
“specific health or safety impact.” However, the state Density Bonus Law also provides that the
Town must waive any development standard that precludes 320 units.
These rights provided by state law are in addition to rights afforded to us by Town policy. More
particularly:
1. Under the Town’s Housing Element and the Housing Element statute, the approval is “by
right” and must achieve development at a minimum of 20 units per acre.
2. The Town’s own North Forty EIR stated that the Project has no impact on parks or open space,
and the Town has not adopted a State Quimby Act-compliant subdivision ordinance, so no
additional open space can be required to be dedicated to the Town or for public access.
Nonetheless, the Project exceeds all the standards for private open space in the Specific Plan and
voluntarily offers to allow public access to the vast majority of the open space in the Project.
Town of Los Gatos General Plan
Not only is the right to build at this density (or higher) afforded to us by State and local law but
we believe this density or intensity is what is, in fact, envisioned by Town policy.
The Housing Element of the General Plan was adopted following the certification of the
Environmental Impact Report (EIR) for the North Forty Specific Plan. The Housing Element was
approved by this Town Council on May 5, 2015. At that time, the minimum density of 20 units
per acre to be required on the North Forty was made clear as was the required ‘by-right’ nature
of approvals for housing. ‘By-right’ is defined as “not requiring a conditional use permit or other
discretionary approval; however, design review according to the objective standards contained
in the Specific Plan can occur (see Action HOU- 2.4).” In addition, the Housing Element states
that “it is anticipated that by-right, multiple-family development at a minimum of 20 units to the
acre will occur as a single use development as permitted by the zoning.” The Project is consistent
with this and other applicable policies and actions specified in the General Plan and Housing
Element as shown in attached Tables A and B.
The Specific Plan reference to “lower intensity residential” in the Lark District is a statement that
the planned uses in the Lark District are lower intensity uses than those in the Transition and
3
Northern Districts due to its primarily residential character versus the other districts (which
include higher intensity mixed-use, commercial, hospitality and entertainment uses). Section
2.3.2 of the Specific Plan makes this distinction vis-à-vis the Transition District as it states:
“Located in the central portion of the Specific Plan Area, the Transition District provides a
transition and buffer between the lower intensity, primarily residential, character of the Lark
District and the active retail and entertainment emphasis of the Northern District. The Transition
District will accommodate a range of uses including neighborhood-serving stores, specialty
market and mixed-use housing with residential units above commercial. A hotel or hospitality
use could also be part of the land use mix.”
In alignment with the Town’s Housing Element policies, the North Forty Specific Plan makes it
more difficult for lower density residential to be approved by making multifamily housing its
focus (Section 2.4 page 2-6) and making the non-multifamily residential type, cottage clusters,
only allowable with a Conditional Use Permit (Table 2-1). Thus, the Specific Plan is in
conformance with the General Plan Housing Element Policy HOU 2.4 and the intensity of housing
proposed is in line with these policies.
The Housing Element
Related to this, members of the public have expressed concern that the Town will be required to
find another site to meet its RHNA requirements if the Project is built as proposed. The Project
proposes 50 units of affordable, income-restricted housing and 270 units of market-rate housing
(with a density bonus), all at a density of 20 units per acre. This more than meets the Town's
obligation to allow development of 270 units on the North Forty at 20 units per acre, and no
additional rezoning will be needed to meet the Town's Housing Element obligations. If a Project
application, such as the one before you, is approved at a density of less than 20 units per acre or
denied, additional rezoning would be required to meet the Town’s obligations under state
Housing Element law. Please see attached e-mail correspondence from Glen Campora, Assistant
Deputy Director, Housing Policy Division, California Department of Housing and Community
Development, which is attached as Exhibit A.
Open Space and Quimby Act
Finally, reducing or redistributing units from the area covered by the Project application is being
suggested in order to create more open space. As has been already noted, the Specific Plan
requires 30 percent open space (more than any other Project in Los Gatos that we have observed
in the eight years we have been active on the North Forty), and our application exceeds this
4
requirement by providing 39 percent open space, of which at least 85 percent is open to the
public.
A requirement for provision of public access to open space (including on the 30 percent already
required by the Specific Plan) cannot be justified unless it is needed to mitigate the impacts of
private development. The standard of the Nollan, Dolan, and Ehrlich cases requires that there
be an essential nexus to the impacts of the Project, and that the requirement be roughly
proportional to those impacts.
However, this nexus requirement is not satisfied in the North Forty Specific Plan. There is no
impact on public open space due to the passage of the North Forty Specific Plan or the planned
development of the Plan Area. The EIR for the Specific Plan identifies no such impact, and the
Town has no ordinance consistent with the Quimby Act requiring public open space in new
developments, since there is already abundant public open space in the Town, including open
space close to the Plan Area. The EIR determined based on the buildout of the 2020 General Plan
EIR (which included up to 750 residential units on the North 40) that there is adequate public
open space nearby to serve the Project (p. 3-187).
Despite this finding, we have designed an open space program that is the centerpiece of a model
agrarian neighborhood. The open space program will feature 2.7 acres devoted to agricultural
uses which will produce an estimated 14.5 tons of fruits and vegetables per year. These will be
grown in community gardens, commercial gardens and on producing (not ornamental) orchard
trees. We also feature eight public parks and plazas that are connected by 25’ to 35’ wide
landscaped paseos, shaded sidewalks and a multi-modal pathway system. These parks include a
community park that is comparable in size and scale to Town Plaza Park and two passive use
neighborhood parks that are similar in size and scale to other neighborhood parks in Los Gatos.
Finally, buoyed by the Town’s aspiration for amenities for pedestrians and bicycles and in
addition to the multi-modal pathway system, we are voluntarily proposing to connect the North
Forty to the Los Gatos Creek Trail via dedicated bicycle lanes on both sides of Lark Avenue.
Reduction of Unit Sizes
In addition to the desire to reduce or redistribute units in order to create more open space,
another common complaint is that the units are too large and should be reduced in size. We
would emphasize that there is absolutely no objective standard in the Specific Plan that would
support any such reduction. The only specification of unit sizes contained in the Specific Plan is
on page 6-14, and the sizes listed there are on average considerably larger than those proposed.
In fact, if one takes the maximum residential square footage allowed (700,000 sf) and divides by
5
the 270 baseline (365 density bonus) allowable units, the resulting maximum size per unit is 2,592
square feet (1,917 square feet if density bonus is used) which is approximately 1,199 (524) square
feet larger than proposed.
Any requirement to reduce unit size would in effect be a denial of this Project, since it would
require complete redesign of the buildings and site layout, in violation of the Housing Element
“by right” requirement, the Density Bonus Law, and the Housing Accountability Act. In addition,
it renders the Project infeasible economically.
After the Planning Commission’s request to consider smaller unit sizes, we commissioned John
Burns Real Estate Consultants to determine the feasibility of this from a marketability
perspective. Their consumer analysis summarizes how the reduction of the average market rate
for-sale housing square footage by over 33% (from 1567 to 1000 square feet) is not supported
by the market. Based on their research, the size of units proposed is far smaller than the existing
newer multi-family for-sale housing stock in the Town. The report states: “Of newer townhomes
in Los Gatos, the median unit size is over 1,900 SF, including three bedrooms and 2 ½ bathrooms.
When assessing only townhomes built in the last 10 years, the median unit size is even larger, at
+/- 2,100 SF. At a weighted average size of 1,561 SF, the current product array at the Subject
Property is substantially smaller than the recently constructed housing inventory of Los Gatos.”
This report is attached as Exhibit B to this letter.
Finally, the Staff Report references that the Planning Commission statement that “(t)he project
does not incorporate views adequately in the layouts as called out in Open Space Policy 01 View
Preservation and does not comply with Design Guideline 3.2.1.d Site Planning and Design, and
Section 3.2.6.e.i. Building Elements and Articulation which states “Special care shall be taken to
avoid obstructing views to the surrounding hills.”” However, Section 3.2.6.e.i. more specifically
states in Section e) that “Projects located on corner parcels at signalized intersections along Lark
Avenue and Los Gatos Boulevard should incorporate major design features on the intersection
corner,” and in Section I) that “Buildings located at these corner locations are strongly
encouraged to frame and front onto intersections. Special care shall be taken to avoid to avoid
obstructing views to the surrounding hills.”
This portion of the Specific Plan only relates to the corner buildings at signalized intersections.
For this application, this applies only to Lark and Los Gatos Boulevard and Los Gatos Boulevard
and the new Neighborhood Street. The application does not include the land area located at the
corner of Lark Avenue and Los Gatos Boulevard (gas station location). At Los Gatos Boulevard
and the new Neighborhood Street entrance, the two buildings proposed both frame and front
onto this intersection. The Specific Plan requirement for a 30’ orchard setback along Los Gatos
6
Boulevard and a 25’ height restriction from Los Gatos Boulevard for the first 50’ from the
property line have been also been satisfied. Therefore, the reference to this portion of the
Specific Plan as a broader policy is not appropriate, and the application in fact satisfies the
objective standards for this portion of the site plan.
The above represents our responses to the Staff Report dated August 4, 2016 and expressed by
some members of the public in letters attached to the Staff Report. We appreciate your
consideration of our responses.
Sincerely,
A. Don Capobres Linda Mandolini Wendi Baker
Principal President Vice President of Development
Harmonie Park Development Eden Housing SummerHill Homes
Representing Grosvenor
7
TABLE A: Conformance with General Plan
Policy or Action Project Conformance
Goal LU-4 To provide for well-planned, careful growth that
reflects the Town’s existing character and infrastructure.
Goal LU-11 To Plan for development of a variety of uses in
the North Forty area in a coordinated and comprehensive
way.
Policy LU-11.1 Zoning shall be changed as part of the
development applications to provide consistency with the
Vasona Light Rail Element and other elements of this
General Plan and with any future specific plan prepared for
this area.
On June 17, 2015 the Town Council adopted
Resolutions Nos. 2015-055 and 2015-056
adopting the North Forty Specific Plan and
adopting amendments to the Land Use Element
of the Los Gatos General Plan for the North Forty
Specific Plan area. Those resolutions found that
the Specific Plan was consistent with the General
Plan and amended the Land Use Element to
incorporate the major policies of the Specific
Plan. In particular, the Land Use Element was
modified to incorporate the Vision Statement
contained on page 1-1 of the Specific Plan, the
general guidelines contained on pages 1-6 and 1-
7 of the Specific Plan, and the maximum
development capacity contained in Table 2-2 of
the Specific Plan. The Specific Plan also
determined that its policies, standards, and
guidelines were consistent with the overarching
goals of the General Plan.
Therefore, given that the vision, guidelines, and
development capacity contained in the General
Plan are identical to those in the Specific Plan,
and that the Specific Plan was adopted to
determine those development standards
consistent with the vision, guidelines, and
development capacity contained in both the
General Plan and the Specific Plan, the
determination that the Project is consistent with
the Specific Plan conclusively determines that
the Project is also consistent with those
provisions of the General Plan applicable to the
North Forty.
Policy LU-11.2 The Town shall encourage uses that serve
Town residents. These include, but are not limited to open
space, playfields, office, retail, and other commercial uses.
Residential uses may be permitted as part of mixed-use
development and only with acceptable mitigation of
adverse noise, air quality, and other environmental hazards.
The North Forty Specific Plan requires a
minimum of 30% open space. The Project
application proposes 39% open space. The
Project application also proposes 66,000 square
feet of neighborhood serving commercial space
as part of a mixed-use development that also
8
Policy or Action Project Conformance
includes residential housing that meet the
objective criteria of the North Forty Specific Plan
which were established to respond to unmet
residential needs of the Town of Los Gatos.
Impacts of noise, air quality, and other
environmental hazards were studied in the
Environmental Impact Report (EIR) for the North
Forty Specific Plan. This EIR was certified by the
Town Council on January 20, 2015 by Resolution
No. 2015-002. In evaluating the environmental
impacts of the Specific Plan, the EIR
comprehensively reviewed all of the policies of
the General Plan applicable in any way to the
North Forty and found that the North Forty
Specific Plan was consistent with the applicable
General Plan policies. The conclusions of the EIR
regarding the Project’s conformance with the
General Plan are hereby incorporated by
reference into these findings.
Policy LU-11.3 Provide coordinated infrastructure in the
North Forty area.
The North Forty Specific Plan requires that all
infrastructure necessary to support the
development shall be constructed in capacity
that allows for current and future phases, subject
to approval of the town engineer. All
infrastructures stubbed for future use, including
utilities and roadways, shall be constructed so as
not to appear
unfinished. The Project application complies.
The infrastructure in the Project application is
designed to stand alone and not be dependent
on improvement required in future phases. See
Tentative Map Sheet 1.3
Dimensional Plan, Grading Plans Sheet 1.6-1.14
and Preliminary Utility Plan sheet 1.16 for future
site connection edge conditions.
The infrastructure in the Project application sizes
utilities for future site connection and edge
conditions. See Preliminary Utility Plan sheet
1.16.
Policy LU-11.4 Include a variety of commercial uses
reflective of Town Council’s Vision and Guiding Principles
for the North Forty. Land uses shall follow a logical land use
The North Forty Specific Plan states in Section
2.4 “In general, lower intensity shops, offices,
and residential land uses are envisioned in the
southern portion of the Specific Plan Area.
9
Policy or Action Project Conformance
pattern that takes advantage of the site opportunities while
protecting adjacent uses.
Moving northward, potential land uses transition
to mixed-use residential and potentially
hospitality uses to provide a buffer between the
primarily residential uses in the southern portion
of the Specific Plan Area and the entertainment,
restaurant, and shopping uses envisioned in the
northern portion of the Specific Plan Area.”
The Project application conforms to the Specific
Plan as non-vertical-mixed use residential is
planned in the southern Lark District and retail
and mixed-use residential is proposed in the
Transition District (which is north of the Lark
District). The residential use in the Lark District is
compatible with the Highland Oaks residential
neighborhood which is located directly south of
the Lark District.
Policy LU-11.5 Avoid negative effects on the long-term
development potential of the area surrounding the North
Forty area.
The infrastructure in the Project application is
designed to stand alone and not be dependent
on improvement required in future phases. It
also, however, sizes utilities for future site
connection and edge conditions.
Proposed roadway and traffic improvements for
this Project application are also designed to
mitigate impacts of automobile trips caused by
potential future development in the North Forty
Specific Plan Area that are not a part of the
Project application. Internal roadways are also
designed for future connections and edge
conditions.
Policy LU-11.6 Incorporate multimodal links from the North
Forty area to the Vasona Light Rail station into the North
Forty Specific Plan.
Section 4.9, 4.10, 4.11 and 4.12 outline
multimodal links from the North Forty Specific
Plan Area to other parts of the Town and region.
On bicycle travel, the Project application
complies with the Specific Plan and also
voluntarily proposes to connect its internal multi-
modal path to the Los Gatos Creek Trail system
by providing dedicated bike lands from the
Project area west along Lark Avenue.
As part of the draft Conditions of Approval, The
Applicant shall prepare a Transportation Demand
Management (TDM) Plan for Town of Los Gatos
approval prior to the issuance of a building
10
Policy or Action Project Conformance
permit. The TDM shall include a minimum of
those measures identified in the Specific Plan
such as:
a. Bicycle facility provisions
b. Transit passes and subsidies
c. Carpool incentive
d. Reserved car share parking
e. Electrical car charging stations
f. Coordination with the Santa Clara Valley
Transportation Authority (VTA) to decrease
headway times to connect to regional
destinations, etc. The TDM shall include a TDM
coordinator who will submit a TDM effectiveness
report to the Town annually.
In addition, the applicants have been actively
working with the Valley Transit Authority,
CalTrans, Silicon Valley Bicycle Coalition, Town
Staff, the school districts and Town commissions
including Bicycle and Pedestrian Advisory
Commission on specific congestion management
programs.
Goal VLR-3 To encourage mixed-use developments that
coordinate housing in proximity to either neighborhood
commercial uses or employment centers.
Policy VLR-3.4 Encourage mixed-use development of
commercial, office, and medium-high residential uses in the
North Forty area and along East Los Gatos Boulevard, north
of Lark Avenue.
Section 2.4 of the Specific Plan states that “the
Specific Plan land uses help to create a
pedestrian-oriented and interactive
environment that is compatible with surrounding
neighborhoods as well as
provides for on-site uses that are compatible
with each other. The Specific Plan specifies the
desired mix, as well as the location of land uses.
In general, lower intensity shops, offices, and
residential land uses are envisioned in the
southern portion of the Specific Plan Area.
Moving northward, potential land uses transition
to mixed-use residential and potential hospitality
uses to
provide a buffer between primarily residential
uses in the southern portion of
the Specific Plan Area and the entertainment,
restaurant, and shopping uses”
11
Policy or Action Project Conformance
The Project application proposes residential uses
that are consistent with this General Plan Policy
in addition the Town’s Housing Element.
Goal VLR-9 To reduce traffic impacts of residential
development within the Vasona Light Rail area by taking
advantage of mass transit opportunities.
Policy VLR-9.5 Promote the development of mass transit
links between Los Gatos Boulevard, particularly any
development on the North Forty site, and the planned
Vasona Light Rail station.
As a condition of approval, the applicant is
required to coordinate with the Santa Clara
Valley Transportation Authority (VTA), plan for,
and provide an enhanced bus stop at the
location of the existing stop along southbound
Los Gatos Boulevard between Neighborhood
Street and Bennett Way. The improvements shall
be in compliance with VTA standards and must
be completed and accepted by the Town of Los
Gatos before a Certificate of Occupancy for any
new building can be issued.
Goal CD-1 Preserve and enhance Los Gatos’ character
through exceptional community design.
Policy CD-1.6 Town staff shall review properties next to
community entry points when they are developed or
redeveloped to reflect the gateway concept.
The Project application has been reviewed by
Town Staff and the Town’s consulting architect
and has met the requirements of the Town’s
consulting architect.
12
TABLE B: Conformance with Housing Element
Policy or Action Project Conformance
Action HOU-1.1: Below Market Price (BMP) Program:
Continue to implement the BMP Program in order to
increase the number of affordable units in the community.
The Project provides over 20% very low income
units, exceeding the BMP program requirement
for 20% moderate-income units. See Exhibit 19
of Attachment 1 to staff report.
Action HOU-1.7: North Forty Specific Plan Area Rezoning:
the Town will rezone 13.5 acres within the North Forty
Specific Plan area within three years of Housing Element
adoption at minimum a density of 20 dwelling units per
acre to facilitate affordable housing production. After
rezoning, owner occupied or multiple family development
will be by-right as defined by not requiring a conditional use
permit or other discretionary approval; however, design
review according to the objective standards contained in
the Specific Plan can occur (see Action HOU- 2.4). In
addition, it is anticipated that by-right, multiple-family
development at a minimum of 20 units to the acre will
occur as a single use development as permitted by the
zoning. If housing affordable to very low and low income
households is part of a mixed use development, it will
occupy at least 50 percent of the total floor area of a mixed
use Project.
The Town completed the rezoning of the North
Forty to permit housing at 20 units per acre on a
minimum of 13.5 acres within the North Forty
Specific Plan area. The zoning permits housing by
right as defined in State Law, with design review
permitted based on the objective standards in
the Specific Plan. The senior affordable housing
occupies at least 50 percent of the floor area of
the mixed use building it occupies.
Action HOU-2.4: By Right Findings: For multiple family
residential development within the North Forty and the
Southbay AHOZ site subject to by right development, the
Town will amend the
Town Code to add by right development findings that,
among other items, state that if a Project meets the
objective review criteria contained in the AHOZ Design
Guidelines or North Forty Specific Plan design guidelines
(available on the Town’s website) the deciding body will
approve the affordable housing proposal.
Although the Town has not adopted these
provisions to the Town code, the Town is
reviewing the Project application based on
objective review criteria contained in the North
Forty Specific Plan design guidelines.
Goal HOU-5: Retain and expand affordable housing
opportunities for seniors.
The Project includes 49 units of housing
affordable to very low income seniors.
Exhibit A
Exhibit B
www.realestateconsulting.com
North 40
SummerHill Homes
Consumer Analysis
Los Gatos, California
August, 2016
7840 Madison Ave., Suite 187 | Fair Oaks, CA 95628 | (916) 647-3263
www.realestateconsulting.com
Background and Objective
2
BACKGROUND:
SummerHill Homes (“Client”)has commissioned John Burns Real Estate Consulting (“JBREC”)to perform this consumer and
financial analysis of a market opportunity relating to the development of the North 40 project (“Subject”or “LGN40”)in Los
Gatos,CA.North 40 will consist of 260 market-rate condominiums (253 will be built by SummerHill Homes),in addition to 10
market-rate apartments (built by Grosvenor)and 50 senior affordable apartments (built by Eden Housing).This report will focus
primarily on the SummerHill Homes’market-rate condominium homes.Current plans call for a variety of product types including
attached cluster condominiums,row townhomes,and garden cluster lofts.Planned unit sizes as currently configured range from
approximately 900 –2,000 square feet (SF),averaging 1,567 SF among the for-sale product types (1,393 SF average
community-wide),and feature one to three bedrooms.The Town of Los Gatos Planning Commission has recommended the
Client reconfigure the current plans to a smaller average unit size of 1,000 SF or less.Client has asked JBREC to evaluate the
Town of Los Gatos’request in terms of a market acceptance and consumer preference perspective.
OBJECTIVE:
The objective of this assignment is to provide a brief overview in the potential market acceptance of and consumer preferences
toward the Subject as envisioned by the Town (in terms of a less than 1,000 SF average unit size parameter).
CONTACT INFORMATION:
This analysis was prepared by John Burns Real Estate Consulting.
Dean Wehrli,Senior Vice President,served as Project Manager and Aaron Stubblefield,Consultant,gathered data and provided
analysis.Follow-up questions should be directed to us at:
Dean Wehrli: dean@jbrec.com
www.realestateconsulting.com
SummerHill Product Array
3
This table details the current product mix to be constructed by SummerHill Homes at the Subject. The 253 units will all be
attached, multi-story, for-sale product with an average of 1.94 bedrooms per unit.
Source:SummerHill Homes
www.realestateconsulting.com
Executive Summary and Key Conclusions
4
www.realestateconsulting.com
Executive Summary
5
Executive Summary of Findings
•Our consumer preference survey shows that home shoppers in Santa Clara County and the nation prefer home
sizes significantly larger than the +/-1,000 SF or smaller units as envisioned by the Town.Prospective home buyers
typically are looking for three to four bedrooms and homes ranging from 1,500 to 2,500 SF.Based on this survey,few are
searching for a home under 1,500 SF and virtually no home buyers would be satisfied with a home under 1,000 SF.
Though Santa Clara County home shoppers are slightly more accepting of smaller homes than the national sample,the
trends are very similar and clearly indicate a lack of market acceptance of very small homes in the for-sale market.
•Attached townhomes built over the last 10 and 25 years in Los Gatos and a slightly larger Competitive Market Area
(CMA)of like communities near Los Gatos are universally larger than 1,000 SF.Townhomes –that is,attached multi-
level floorplans like that to be built at the Subject –average about 1,500+SF across the CMA and 1,900 to over 2,000 SF
in Los Gatos.There have been no transactions over the last three years for townhomes under about 1,100 SF.That is,the
shape of the existing market in Los Gatos and the CMA strongly implies there would be limited,if any,market acceptance
of very small townhome units.In truth,plans at about 1,000 SF or smaller are far more suited to the apartment market.
This is a very different user than most for-sale home shoppers,particularly in a highly upscale,older skewing community
like Los Gatos.
•Los Gatos is a very affluent community even by Bay Area standards,with a median household income of over $126,000.
The city’s address cachet allows it to support very strong home pricing with even attached product typically selling for
well over $1 million.There is currently unmet demand for more for-sale,entry-level homes in Los Gatos,which the current
product array of the Subject will help satisfy while remaining appropriate for the market and location.
•Residents of Los Gatos skew older,with a median age of 46,indicative of a large proportion of DINKS (dual-income,no
kids),empty nesters,and some retirees.While these life stages don’t require large homes (as they don’t have to
accommodate children),they typically have the desire and means to live in a more conventional sized residence.
•In sum,from a consumer,market,and demographic perspective,our analysis indicates that very small units are
poorly suited for the Subject,would diminish if not erase its marketability and financing opportunities,and would
limit its value.
www.realestateconsulting.com
Consumer Preference and Market Summary
6
www.realestateconsulting.com
JBREC Product and Consumer Insights Survey
7
John Burns Real Estate Consulting conducts an annual nationwide product and consumer survey among new home shoppers
that have registered interest with new home builders online or in their sales office.The questions are primarily focused on future
home preferences.We have extracted respondents located within Santa Clara County in order to refine the results more closely
to Los Gatos consumer preferences.The table below shows the results of preferred future home sizes at both a National and
Santa Clara County level.There is a clear illustration of preference towards more conventional homes sizes.The
overwhelming majority (83%)of new home buyers in Santa Clara County are seeking a 3 or 4 bedroom home,while less than
0.5%favor a single bedroom.In terms of unit size,Santa Clara County does prefer smaller homes relative to that of the National
Average,however,they primarily prefer homes in the range of 1,500 –2,500 SF.Though 6.7%of buyers in Santa Clara County
are in the market for a home sized 1,000 –1,499 SF,less than 0.5%would be interested in a home of under 1,000 SF.Based
on these results,an alteration of the average unit size at the Subject development to 1,000 SF or less would limit demand to an
extraordinary small niche within this submarket.
National Sample
21,848
Santa Clara County
389
www.realestateconsulting.com
Current Housing Inventory of Los Gatos
8
•Currently,the active new home projects in Los Gatos are targeted toward a very
wealthy niche market buyer.Sorellas (SummerHill Homes)and The Highlands
of Los Gatos (Davidon Homes)both offer luxury single family homes with
substantial lots,often highlighted by spectacular views.Unit sizes at these
projects are very large,typically over 4,000 SF,touting three –seven bedrooms
and prices ranging from $4 million.
•The table below displays median statistics for recent (last three year)townhouse
sale transactions within Los Gatos,as well as the wider CMA defined as the
combined cities of Los Gatos,Saratoga,Cupertino,Los Altos,and Palo Alto.
Whereas product in this market tends to be substantially older,we restricted our
assessment to include only townhomes constructed in 1990 and newer,as well
as 2005 and newer in order to better represent housing inventory competitive
with new homes.
•Of newer townhomes in Los Gatos,the median unit size is over 1,900 SF.
including three bedrooms and 2½bathrooms.When assessing only townhomes
built in the last ten years,the median unit size is even larger at +/-2,100 SF.At
a weighted average size of 1,393 SF,the current product array at the Subject is
substantially smaller than the recently constructed townhome inventory of Los
Gatos,and the wider CMA.In fact,the smallest townhome in the CMA is just
under 1,100 SF.
Source:Multiple Listing Service (MLS)
The Highlands of Los Gatos
Townhome inventory example in Los Gatos
Townhomes 1990+Townhomes 2005+Townhomes 1990+Townhomes 2005+
Unit Size 1,935 2,116 1,589 1,519
Bed Count 3.0 3.0 3.0 3.0
Bath Count 2.5 2.8 2.5 2.5
Year Built 1997 2016 2008 2009
Price $1,290,000 $1,875,000 $1,425,000 $1,450,000
$/SF $823 $887 $878 $889
Days on Market 15 4 10 10
8/1/2013 to 8/1/2016 Townhome Sales
Median Statistics Los Gatos Competitive Market Area
www.realestateconsulting.com
Los Gatos Demographics
9
•Los Gatos is situated along the foothills of the Santa Cruz Mountains,
just southwest of San Jose.The Town offers a historically less dense
residential profile than other core Bay Area cities,while still providing a
quick commute to the vast employment of the Silicon Valley.
•The Town is markedly older than the wider Bay Area region with a
median age of 46 years.This is indicative of more “Move-Up”
households,with approximately 32%of residents aged between 45 –
64 (compared to the nationwide average of 26%).
•Household sizes are slightly smaller than the national average,with a
median of 2.4 residents per household.Though there are families in
Los Gatos,the city has many DINKS (dual-income,no kids),empty
nesters (adult children that have left the household),and retirees.
•Los Gatos is a very affluent town even relative to Bay Area standards.
The city has a median income of $126,000 per household (over twice
the national average),average net worth of $1.7 million (three times the
national average),and a median home value of $1,000,000 (five times
the national average).According to Bloomberg Businessweek,Los
Gatos is the 33rd wealthiest city in the United States.
Population 30,919 Median Household Income $126,008
Households 12,818 Median Home Value $1,000,001
Avg. Household Size 2.39 Average Net Worth $1,708,677
Median Age 46.0 Edu. Attainment (Bachelors or Higher)69%
Los Gatos (2016 Statistics)
Source:ESRI
www.realestateconsulting.com
Limiting Conditions
10
www.realestateconsulting.com
Limiting Conditions
11
The conclusions and recommendations presented in this report are based on our analysis of the information available to us from
our own research and from the client as of the date of this report.We assume that the information is correct and reliable and that
we have been informed about any issues that would affect project marketability or success potential.
Our conclusions and recommendations are based on current and expected performance of the national,and/or local economy
and real estate market.Given that economic conditions can change and real estate markets are cyclical,it is critical to monitor
the economy and real estate market continuously,and to revisit key project assumptions periodically to ensure that they are still
justified.
We have no responsibility to update our product analysis for events and circumstances occurring after the date of our report.
CONSULTING
•Strategic Direction & Planning
•Home Builder Operations Assessment
•Demand Analysis
•Consumer Research & Focus Groups
•Economic Analysis & Forecasting
•Litigation Support & Expert Witness
•Financial Modeling
•Project & Product Positioning
RESEARCH
•Exclusive Access to our Research & Consulting Executives
•Metro Analysis & Forecast
•Regional Analysis & Forecast
•Home Builder Analysis & Forecast
•Apartment Analysis & Forecast
•Exclusive Client Events
•Public Builder Call Summaries
•Weekly Insight
•Presentations & Webinars
•Consumer Research
•Proprietary Surveys
Depth and Breadth of Experience
Established in 2001, JBREC performs 600+ market studies annually.