HAYWARD - Bayview Village

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BAYVIEW VILLAGE - HAYWARDEXECUTIVE SUMMARY MARKET STUDYPRESENTED TO: HAPAPRESENTED BY: S L STATE & ASSOCIATESJULY 2011

STATEMENT OF PURPOSEIn May of 2011, HAPA hired S L State & Associates to provide an Executive Summary Market Study for the site known as BayviewVillage located in Hayward, CA. The site will accommodate up to 1,030 homes, and include both condominium and townhomeconfigurations.Bayview Village will offer renters and buyers an opportunity to live a lifestyle that is leading edge. Bayview Village is proposed tomeet five major goals: affordability, green building, energy sustainability, mobility, and community. It is a master plan unlikeanything currently being offered in the past or present in Hayward, and requires a core belief that there are societal changes thatwill bring forth a buyer/renter profile who will be attracted by this leading-edge lifestyle-oriented community. Although thismarket study is a dramatic departure from the typical study we conduct, we acknowledge the steadfast commitment of thedeveloper to design a community that is forward-thinking in its approach. This report will focus on the opportunities andchallenges of the master plan, as designed.The Report will provide:Recommended base prices (for rent and for sale) for the various floor plans as currently designed for the site.Project a rate of absorption and appreciation.Provide critical information regarding the marketing and merchandising that will be necessary to attract buyers to this vibrantcommunity.Define the buyer/renter profile.Provide the necessary competitive analysis that interprets the market both quantitatively and qualitatively.This report is organized into the following sections:I.II.III.IV.V.VI.VII.CMA Overview – Site OverviewLocal EconomyBayview Village Buyer/Renter ProfileSummary of Amenities – Timing of AmenitiesProduct RecommendationsMarketing MessageCompetitive ConclusionsS. L. State & Associates, LLC(925) 735-1000 – info@slstate.com2

I. CMA OVERVIEWRegional PerspectiveCity AttributesSANTA CLARA Hayward refers to itself as “The Heart of the Bay”.Because of the major freeways connecting it to SanFrancisco, the San Mateo Peninsula, and to silicon Valley,the location enjoys easy access to all of the majoremployment centers of the Bay Area.The most vibrant employment right now is taking place inSilicon Valley, which is in the southern part of the SanFrancisco Bay Area. The region is home to many of theworld's largest technology companies including Apple,Google, Facebook, HP, Intel, Cisco, eBay, Adobe, Agilent,Oracle, Yahoo, Netflix, and EA. The term originallyreferred to the region's large number of silicon chipinnovators and manufacturers, but eventually came torefer to all the high-tech businesses in the area; it is nowgenerally used as a metonym for the American high-techsector. Despite the development of other high-techeconomic centers throughout the United States and theWorld, Silicon Valley continues to be the leading hub forhigh-tech innovation and development, accounting for 1/3of all of the venture capital investment in the UnitedStates. Geographically, the Silicon Valley encompasses allof the Santa Clara Valley including the city of San Jose(and adjacent communities), the southern Peninsula, andthe southern East Bay.With a population of over 140,000, Hayward is the sixthlargest city in the San Francisco Bay Area, the third largestin Alameda County, and is located on the Bay's easternshore, primarily between Castro Valley and Union City, atthe eastern terminus of the San Mateo-Hayward Bridge.S. L. State & Associates, LLC(925) 735-1000 – info@slstate.com3

THE SITE - CONCEPT Bayview Village would be built in the hills near California State University EastBay (CSUEB) in the city of Hayward north of Carlos Bee Blvd. and east ofOverlook Ave. The map on the right highlights the bus route from Hayward BART,via Bayview Village, to the Cal State campus.Bayview Village was conceived to provide: affordability, green building,sustainable energy use, walking-orientation, and community involvement, and itwill likely be one of the most ambitious communities of its kind in the SanFrancisco Bay Area. It is not an entirely new concept, and one that we believe willbe growing, particularly in the Bay Area.BAYVIEWVILLAGECar-dependency will be less at Bayview Village by creating a walking-orientedmaster plan, where personal vehicles are restricted or excluded. The heart of thismaster plan will include some commerce and transit will be available to residentsconnecting them to nearby city centers. This compact, mixed-use developmentpattern allows easy personal mobility within the pedestrian zone, and is supportedby walking or biking. Parking will be at the edge of the walkable area, which willallow some degree of flexibility with the logical choice for certain trips that takeplace outside of the community. Walking-oriented developments such as BayviewVillage are ideally suited to car-sharing, which further decreases the number ofvehicles and parking spaces needed.Europe has many areas that were built hundreds of years ago and still work withlimited or nor personal vehicles. The largest car free areas are Zermatt,Switzerland and Venice, Italy. Car free, reduced car, and pedestrian areas havealso been built recently in the United Kingdom, Denmark, Scotland, Austria andGermany. The US is beginning to acknowledge the opportunity for an alternativeenvironment like this, and viability of programs that embrace this lifestyle arepiquing the interest of innovative groups.S. L. State & Associates, LLC(925) 735-1000 – info@slstate.com4

The following two pages represent projects or locations throughout that orient themselves as a walkingoriented community.CAR-FREE AREAS IN THE UNITED STATESWith a few notable exceptions, most US cities have only relatively small car free rthLittle RockCatalina IslandAreaPopulation17-mile (27 km) Arkansas River Trailmost of Island272,000 ceFort CollinsFort CollinsMetro AtlantaVenice Canals7 acres (28,000 m²), 4 streetsColorado State University, 4 long streetsEast Lake Commons, 67 dwellings planned30,000 (pop. of Venice)City population 115,00025,000 studentsProbably 200Character17-mile (27 km) pedestrian use only loop that runs parallel to both sides of the Arkansas River. It cuts through theLittle Rock and North Little Rock downtown areas and crosses over the United States longest pedestrian-only bridge,the Big Dam Bridge. There are businesses and residences that connect to the loop on both sides of the river.car free except for gasoline-powered golf carts in the town of AvalonA small portion of a large canal system created by Abbot Kinney to be the 'Venice of America' still exists. A majorityof the canals were filled in 1929 to make way for the automobile. A square roughly 300 meters on a side.Old Town, commercial district, no traffic except for maintenance crews; area includes 60 apartments for the elderlycar free area of university campus, to be expandedParking will be located on the perimeter of the village. Access within the village core will be by walking, carts, andMichiganMichiganMinnesotaNew YorkMackinac IslandRussell IslandMinneapolisIthacaentire Islandentire Islandskyway 5 miles (8 km) of enclosed overheadIthaca Commons (pedestrian mall)600 permanent residents150 cottages1,500 residences; 4,000 hotel rooms30,000 (entire city of Ithaca)Resort island; horse-and-buggy transportCar free resort community accessible only by boat; only bikes and golf carts are allowed on the islandCommercial/retail heart of the city. 200 million square feet (19 km²) of office space, and 2.5 million square feetDowntown car free area of 1 street, 2 blocks longRoosevelt IslandNew York(New York City) most of Island9,500NevadaLas VegasFremont Street Experience6,489 hotel roomsPortlandPortland Center, two pedestrian streets run parallelthrough the development, which includes twoparks (car free streets total about 1 mile (1.6 km)length)1200OregonPortlandRiverPlace, pedestrian promenade about 1/2 mile(800 m) long (the only large car free area);pedestrian alleys connect other buildings to thepromenade; the site is 73 acres (300,000 m²)South CarolinaBicycle CityEntire TownSouth CarolinaTennesseeDaufuskie Island part of Island & Haig PointMemphisMain Street Mall, 3/4 of a mile (1200 m)4295000TexasSan AntonioRiver WalkVermontVirginiaBurlingtonTangier IslandChurch Street Marketplaceentire Island1,296,68238,889 Burlington proper (2000Census)604WisconsinMadisonState Street200,000 (approx)OregonS. L. State & Associates, LLC(925) 735-1000 – info@slstate.com1,200Cars are allowed on one bridge and on spine road, but long-term parking is only available at one central parkinggarage. Access is via subway, tram, or riverfront footpaths.Car free 5 block pedestrian mall with 60 restaurants, 10 casinos, 2 stages, overhead light show and a brewery.Pedestrian 'friendly' 3 block extension with extra wide sidewalks and lots of small clubs. The main casino strip alsohas pedestrian bridges over the streets. Room numbers for FSE only.Mixed-use development with apartments, retail, and officesMixed-use development along the riverfront including apartments, retail, restaurants, a small market, and a waterfrontpedestrian promenadeThis 160-acre car-free community within the Columbia metro area began development in 2009. All parking will beon the perimeter of the community nearest people’s homes. Specialized bike and walking trails are being constructedand the first phase of homes are planned for 2011.Car free resort development of the 1980s, only accessible by ferry. Private residential golf development on an islandadjacent to Hilton Head Island, South Carolina. Golf carts allowed. Other areas of the island have limited cars.Car free mixed-use district in the heart of the cityMixed-use development along the riverfront including apartments, retail, restaurants, a small market, and a waterfrontpedestrian promenade; Entertainment and shopping district (similar to Venice, Italy-most people travel on the RiverPedestrianized main downtown shopping street, 4 car free blocks. Bicycles must be walked.car free fishing & tourism community6 block car free retail street connecting the university and the capitol. Traditional street & sidewalk layout; the street isused by buses, bicycles, police cars, taxicabs, and numerous delivery (motor) vehicles; pedestrians and the occasional5

The site is located on a hill, so walking up to theUniversity is not likely to be an option. Walkingdown Carlos Bee Boulevard does not yield much inthe way of goods and services, therefore thecommunity will be dependent upon a very efficientbus system to get people to and from retaillocations.The study findings recommend that approximately80% rental and 20% for-sale units be built, unlessdemand shifts at some point and dictates that themarket has a deeper appetite for the for-sale portionof the site. Because the product does not changeeither way in size or construction, this adaptabilitywill be easy to accommodate.S. L. State & Associates, LLC(925) 735-1000 – info@slstate.com6

BAYVIEW VILLAGE – STRENGTH & WEAKNESSES STRENGTHSStunning ViewsLarge Enough to Create Strong CommunityClose to UniversityAffordabilityGreen ConstructionEnergy SustainabilityFast, frequent, free community-managed bus service to BART, the University and Downtown Hayward.The community will appeal to younger buyers who have been saving for their first home. Empty nesters, seeking to downsize andstay in the area will be intrigued by the lifestyle at Bayview. CSUEB Hayward employees and BART commuters will be attracted tothe site. Bayview Village also appeals to work-at-home and home office workers. Above all, this community will appeal to residentswith a strong commitment to the environment, personal healthy, and a more inter-active community.WEAKNESSESProject absorption may be hindered by the project concept of limited array of dwelling unit types: townhomes, flats, and hall-servedcondos.The project is selling bus service and a store as part of the package, and, if not available early-on, some potential sales may be lost.Slow sales may generate doubts that all amenities will be provided, losing more sales.For profitability, a grocery store to serve this development’s population would be on the small end of the spectrum of store sizes, andmay nonetheless require a subsidy from the HOA to be financially solvent.The floor plans emphasize affordability and efficiency over architectural flair, in contrast to larger new housing opportunities, makingthem somewhat inconsistent with upper-end, for-sale expectations.The Village is a Walking-Oriented Development with travel purpose-to-duration characteristics the same as suburbia. Marketing Bayview requires educating the market about how trips work, since anything comparable exists only in a few dense old central cityneighborhoods, and then with cars and traffic. Few people have studied how to make a walking system work. The development teamat Bayview Village has spent a great deal of time to study how trip generation can be met at the site. Educating the public by layingout the specifics of how that program works will be critical.Families with school age children may be put off by the low quality of Hayward schools and perceived difficulty of traveling withchildren without a car. At Bayview Village, school age children will attend the new Stonebrae Elementary, in the Hayward Hills,ranks a 5 out of 10, while the majority of elementary schools in Hayward rank from 1 to 4. This gives Bayview Village a competitiveadvantage.S. L. State & Associates, LLC(925) 735-1000 – info@slstate.com7

ABSORPTION PROJECTIONBased upon our findings, the following represents our recommendations for pricing of both the rental and the for sale programs at Bay View.The for-sale program is expected to absorb at a rate of 3.0 homes per month (anticipating a 2015 market entry) due to the affordability factor,which is two to three times faster than either projects at The Cannery is currently selling at. Eventually, we would expect to see absorption(once the market is heated) of 4-6 units per month (2016 and after), but given that essentially there is only one program, this absorption ratewill result in a very slow completion of the project. We expect the rental units to rent up at 6-8 per month in the beginning, and once many ofthe amenities are in, at a rate of 8-10 per month.CONSERVATIVE ABSORPTION RATESRental Program: 3 to 4 units per month (2015), and 4 to 6 per month in 2016, moving forward.For-Sale Program: 6 to 8 per month (2015) and 8 to 10 per month in 2016, moving forward.The above results assume that the project will perform similar to other for-sale or for-rent projects in the area. This community will introduce alevel of sustainable living unlike anything in the CMA, resulting in potential upside for absorption among residents seeking this lifestyle. Thereis considerable support on the part of the development team which suggests that the community outreach program has the potential to bemarketed to an untapped audience, and may well have a level of “celebrity” endorsements unlike any conventional new-homecommunity. These endorsements could include people and entities tied to sustainable living, green living, co-housing, and othercontemporary thinking individuals which could result in a tremendous amount of public relations articles reaching a broad range of potentialbuyers/renters. News articles written and endorsed by celebrities all across the nation could result in an absorption rate that far exceeds atypical subdivision.For this reason, we are projecting a potential for absorption rates that could be double (or more) that of a typical community. The moreoptimistic absorption rate, based on extraordinary efforts on the part of the development team could yield the following results:POTENTIAL ABSORPTION RATESRental Program: 10 to 12 units per month (2015), and 18 to 25 per month in 2016, moving forward.For-Sale Program: 10 per month (2015) and 12 to 15 per month in 2016, moving forward.S. L. State & Associates, LLC(925) 735-1000 – info@slstate.com8

Bayview Village is projected to achieve the following prices for the programs:BAYVIEW VILLAGE PRICING RECOMMENDATIONSRENTAL DWELLING UNITSProgramRENTAL APARTMENTRENTAL APARTMENTRENTAL FLATRENTAL FLATRENTAL TOWNOUSERENTAL TOWNOUSERENTAL TOWNOUSEFOR-SALE CONDOMINIUMFOR-SALE CONDOMINIUMFOR-SALE FLATFOR-SALE FLATFOR-SALE TOWNHOUSEFOR-SALE TOWNHOUSEFOR-SALE TOWNHOUSES. L. State & Associates, LLC(925) 735-1000 – info@slstate.comApproximate % ofCommunity Mix65% to 75%Sq. Ft.4115307958551,5111,7152,131FOR-SALE DWELLING UNITS25% to 35%4115307958551,5111,7152,200Base Price 900 1,000 1,195 1,250 1,800 1,950 2,200 /SF 2.19 1.89 1.50 1.46 1.19 1.14 1.03 183,000 195,000 222,000 228,000 294,000 315,000 364,000 445 368 279 267 195 184 1659

II. LOCAL ECONOMY – REGIONAL OVERVIEWThe main long-term foundational driver in terms of housing sales volume and price support is a given region’s employment base. Thefollowing table presents historical trends and a five year forecast of employment and unemployment levels for the Oakland-FremontHayward, CA MSA:TOTAL NONFARM JOBSOAKLAND-FREMONT-HAYWARD, CA MSAFEBRUARY 2011OAKLAND-FREMONT-HAYWARD, CA MSATotal Non-Farm 12-Month Change60,0005-Year 3601,299,647Civilian EmploymentCivilianTotal Non-FarmTotal Jobs 12 Month Change Jobless Rate Total Jobs 12 Month rj2012prj2013prj2014prj2015prjCivilian Labor ForceTotal12 Month s shown, this region lost an estimated 63,950 non-farm jobs during Year 2009 – a 6.2% loss of the total non-farm job base for thebiggest loss in decades. During Year 2010, an additional loss of 29,233 jobs occurred. Unfortunately, job losses will continue throughmuch of Year 2011.S. L. State & Associates, LLC(925) 735-1000 – info@slstate.com10

As shown, overall non-farm job growth has not yet become evident in this region – but is forecast to turn positive by theend of 2011. Recent job growth is barely measurable growth in the Other Services, Education/Health Services, andLeisure/Hospitality categories. As shown below, all other categories continue to hemorrhage jobs:Oakland-Fremont-Hayward, CAMSA 12-Month Employment Change by Super SectorDecember 2010-2,600Government700200400Other ServicesLeisure and HospitalityEducational and Health al and Business ServicesFinancial ActivitiesInformationTrade, Transportation, and UtilitiesManufacturingConstruction0Natural Resources and 0015,000 Copyright 2003-2011 Real Estate EconomicsSource: Bureau of Labor Statistics; Real Estate Economicswww.realestateeconomics.com Of the 11 major job industries, eight of them showed continuing job losses, indicating a delay in the stability neededto allow economic growth to emerge in this MSA.After reaching a historically high average of unemployment estimated at 11.5% in 2010, unemployment is forecast topeak at 12.0% in 2011, before gradually receding toward more normal levels thereafter.State and local budget woes have intensified high unemployment levels in this market with further layoffs in the manymunicipalities, special districts and related entities considered a virtual certainty. Employment will not return to pre2007 levels during the forecast period and years of sustained employment growth are needed to reach past peaks.S. L. State & Associates, LLC(925) 735-1000 – info@slstate.com11

There are over 110,857 jobs within a 5-mile radius of the site. If we expand out to a 15-mile reach, that number goes up to675,079. Within a 30-mile radius of the site, there are 2,624,814 jobs. This is a huge number of potential jobs within a 30-mileradius, but the number diminishes without the use of an automobile. That said, nearly 5,000 riders use the Hayward BARTstation each day. According to the latest (April 2011) statistics, approximately 1,300 people exit in San Francisco each day, 1,500in Oakland, another 700 to Fremont/Union City, 300 to San Leandro/South Hayward, and 150 to Berkeley. For those residentswho are employed living at the site, we would expect most of them will take BART to either San Francisco or Oakland each dayto work.BAY VIEW SITE25024 Carlos Bee Blvd, Hayward, CA 94542-1512Ring: 5, 15, 30 MilesTotal Businesses:Total Employees:Total Residential Population:Employee/Residential Population Ratio:BUSINESSESNumberPercentAgriculture & nicationUtilityWholesale TradeLatitudeLongitude:Ring: 30 miles radius236,3272,624,8145,675,9410.46Ring: 15 miles radius59,854675,0791,575,0250.43Ring: 5 miles ntBUSINESSESNumberPercentJOBS WITHIN 5,15, 30-MILERADIUS OF THE 3Retail Trade SummaryHome ImprovementGeneral Merchandise StoresFood StoresAuto Dealers, Gas Stations, Auto AftermarketApparel & Accessory StoresFurniture & Home FurnishingsEating & Drinking PlacesMiscellaneous 478,851Finance, Insurance, Real Estate SummaryBanks, Savings & Lending InstitutionsSecurities BrokersInsurance Carriers & AgentsReal Estate, Holding, Other Investment 089,637Services SummaryHotels & LodgingAutomotive ServicesMotion Pictures & AmusementsHealth ServicesLegal ServicesEducation Institutions & LibrariesOther 4Source: ESRI forecasts for 2010. Business data provided by Infogroup, Omaha NE Copyright 2010, all rights reserved.S. L. State & Associates, LLC(925) 735-1000 – info@slstate.com12

MAJOR EMPLOYERS – HAYWARD Southland Mall is the largest shopping center inHayward. It houses the department stores Sears andMacy's, and other retailers. In addition to a Target storeat the Skywest Commons mall, the city's major retailersinclude Home Depot and Office Depot. Hayward has alarge number of manufacturing businesses. Kobe Steeloperates Kobe Precision. PepsiCo operates a BottlingGroup facility. The headquarters of the Shasta soft drinkcompany is located in Hayward, as is the headquartersof school bus manufacturer the Gillig Corporation. TheUS branch of Bianchi Bicycles, Bianchi USA, operatesout of Hayward. A Costco Business Center is locatedthere. Nakagawa Manufacturing USA, a division of ,Saitama, Japan, operates a facility in Hayward.Manheim San Francisco Bay, a division of ManheimAuctions, operates in Hayward. Role-playing gamepublisher Chaosium is based there. Azuma FoodsInternational, a division of , Mie, Japan, has its factoryin Hayward. Simms' Custom Cycles, founded bylegendary custom motorcycle builder, is located inHayward. Dust Networks is headquartered in Hayward.The US headquarters for Japan based Andersen Bakeryis located in Hayward. Etec Systems, Inc. operated inHayward from 1970 until 2005, when it was closed byits parent company. AirLink Communications, awireless service provider, operated in Hayward until its2007 acquisition by Sierra Wireless.S. L. State & Associates, LLC(925) 735-1000 – info@slstate.comAccording to the city's 2010 Comprehensive Annual Financial Report, the topemployers in the city, representing 7% of total city employment, are:#12345678910111213EmployerHayward Unified School District†California State University, East Bay†Kaiser PermanenteCity of Hayward†St. Rose Hospital†Gillig†Chabot College†Marelich MechanicalBay Cities Auto Auction[12]Kobe PrecisionInjex Industries†[13]Pepsi Beverages Company/Bottling Group[14]Alameda Newspaper Group# 40030013

Restrained growth in this region’s housing stock is projecteddue to limited developable land, the impact of the credit crisison bank capital adequacy and the lack of constructionfinancing. The feasibility of new home development withprevailing local costs and development fee structures ispresently marginal for many municipalities.Housing ConstructionTrends and ForecastsIncremental increases in housing stock will be small; far lowerthan historical patterns:ANNUAL RESIDENTIAL PERMIT ACTIVITY12-MONTH CHANGE IN TOTAL HOUSING SUPPLYOAKLAND-FREMONT-HAYWARD, CA MSAFEBRUARY 2011OAKLAND-FREMONT-HAYWARD, CA MSAFEBRUARY 201114,00012,0005-Year Forecast5-Year 2013prj2014prj2015prjS. L. State & Associates, LLC(925) 735-1000 – info@slstate.com1996 1995 1994Levels of housing construction in the OaklandFremont-Hayward, CA MSA closely correlate withresidential permit activity. Builders sharply reducedconstruction after the housing bubble burst, causingthe severe decline in permit activity in 2008.Residential permit activity dropped to historic lows in2009 and will remain low through 2011, as shown inthe following 1prj2010e20092008Multi-Family20072006200520042003 90Single Family019912,00008,5032,000Permit activity is expected to be at extremelydepressed levels for at least the next two years beforegradually increasing to improved (but still low) levelsby 2013. Despite the urbanized nature of Oaklandand those areas surrounding the East Bay, much ofthis MSA is inland and suburban in nature. Detachedhousing remains a preference of most buyers in thisMSA.These limited increases in the housing stock are fartoo small to support and maintain a vibrant housingbase. Larger household sizes and increasingapartment occupancy rates will emerge over thenext few years.14

HOUSING VALUATION PATTERNSNOW IS THE TIMEHOUSING DEMAND/SUPPLYPATTERNSOAKLAND-FREMONT-HAYWARD, CA MSAFEBRUARY 2011 Real Estate Economics housing model generates the followinghousing supply/demand estimates and forecasts:In general, the patterns of housing over supply and undersupply are based on a comparison between a given year’s ratiobetween jobs and housing relative to the long-term trend. Asshown, the table presents patterns in housing over-supply andunder-supply in this region since 1990, with a forecast to 2015.Emp

With a population of over 140,000, Hayward is the sixth largest city in the San Francisco Bay Area, the third largest in Alameda County, and is located on the Bay's eastern shore, primarily between Castro Valley and Union City, at the eastern terminus of the San Mateo-Hayward Bridge

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