NEW ORLEANSCOMMERCIAL REAL ESTATE REPORT

February 2002 Volume 10, Issue 1

SRSA COMMERCIAL REAL ESTATE, INC.Bar ry Sp izer, CCIM Steve Reisig, CCIM Don Schwarcz Cath y Alb a, CCIM Kirsten Early

Mar tin O. Miller I II

SRSA MAKES BIGGEST SALE OF THE YEAR

Steve Reisig, CCIM and Barry Spizer,CCIM combined to broker the largestcommercial real estate sale of 2001 inthe state of Louisiana. It was the saleof the entire Louisiana industrialportfolio of First Industrial PropertyTrust. The sale included 14 officewarehouse buildings containing 549,839sq. ft., 5 bulk industrial buildingscontaining 755,231 sq. ft. and 3 officebuildings containing 120,593 sq. ft.located in New Orleans, Baton Rougeand Shreveport. The 22-buildingportfolio sold to a partnership led by

Sealy & Co. for $63,250,000.

The sales also included 54.96 acres of vacant land in James Business Park. Applyinga value of approximately $3.6 million for the land, the sales price for the buildingsequates to $41.84 per square foot and represents a 9.78% going in cap rate. Thebuildings were 86.6% occupied at the time of sale.

The portfolio included 15 buildings in James Business Park, located just west of theLouis Armstrong New Orleans International Airport. Also included in the portfolio wasthe Jefferson Business Center in the Elmwood Business Park in New Orleans, fivebuildings in the Industriplex in Baton Rouge and the Gatx/Honda warehouse inShreveport. The James Park buildings included Service Center #24 and JamesDistribution Center, the only two new spec multi-tenant Class A industrial buildingsconstructed in the New Orleans area in many years.

IN MEMORIUM

All of the employees of SRSA CommercialReal Estate would like to honor thememory of those who lost their lives in thehorrific terrorist acts of September 11th.Life in America will never be the same.Those events have certainly shaped thecommercial real estate industry, with theloss of the World Trade Center twin towersBeing in the office building business, wetruly understand the brave acts of theproperty managers, tenants, policemen,fireman and rescue workers who saved somany lives. We mourn for the families

who lost loved ones

While it may be tough to believe there is anything positive in all of this, the outcry ofpatriotism and the way it has brought families closer together is certainly good to see.We are proud of how our citizens have responded to this tragedy.It’s nice to see American flags flying from so many homes and businesses. As atourist city, it’s good to see people traveling again and coming to New Orleans. Welook forward to a great 2002, but WE WILL ALWAYS REMEMBER the events ofSeptember 11th.

ST. THOMAS/WAL-MARTASSEMBLAGE BY SRSADue to the hard work of a team of SRSAbrokers, including Kirsten Early, DonSchwarcz and Steve Reisig, HistoricRestoration, Inc. (HRI) was able toassemble 16 p roper t ies a longTchoupitoulas Street near Jackson Avenueto create a site of approximately 15 acres.Subject to City Council approval, SRSA hasarranged for HRI operating as “RiverviewRetail Development,” to sell the site to Wal-Mart, so they can build a new Super Wal-Mart on the site.

HRI was selected by HUD to redevelop theSt. Thomas low-income housing project.Many of the old structures have been torndown and will be replaced with a less denseresidential development. This will includeapartments, condos and townhouses bothsubsidized and in the moderate-incomerange. To make the project work, thedevelopers felt a commercial retail phasewas critical, as it would provide jobs for theresidents as well as tax dollars to assist inthe financing.

While controversy has surrounded theproject due to its proximity to the prominentlower garden district residential area andthe Magazine Street shopping corridor(mostly antique shops and restaurants), itappears the project will get approved. Wal-Mart has agreed to shrink the size of thestore and to design it to blend in with theneighborhood. Additionally they haveagreed to preserve a historic warehousestructure on the site.

The total assembled property acquiredcontains approximately 10 acres and cost$4,355,076 or just over $10 per squarefoot. The highest priced parcel was the39,000 square foot warehouse located at1900-1928 Rousseau Street, which sold for$1,250,000.

SPIZER/REISIG WIN F. POCHE WAGUESPACKAWARD

Barry Spizer, CCIM and Steve Reisig, CCIM were therecipients of the 2000 F. Poche Waguespack Awardgiven by the Commercial Investment Division of theNew Orleans Metropolitan Association of Realtors. Theaward is given to the salesman with the highestvolume of sales and leases in the marketplace for theyear. Spizer and Reisig led the division with volume ofover $47,619,000 each in 2000. They also receivedawards for the largest office building sale, the largestoffice lease and the highest volume of office buildingsales and lease transactions in 2000.

Barry Spizer Steven Reisig

GSCC OVERSEES BOYS TOWN CONSTRUCTION

SRSA’s construction subsidiary, Gulf SouthCommercial Construction handled the constructionmanagement for two projects for Boys Town, one onBehrman Highway on the Westbank and the other onHaynes Boulevard in New Orleans East. TheWestbank home was completed in September as agirl’s shelter. The facility in New Orleans East willinclude five residences, a classroom building and anoffice building. Total cost of the two projects will beapproximately $6 million dollars.

G S C C , headed by Carl Howat,worked closely with the architect,Williams and Associates, and thecontractor, Spartan Building Co., toinsure the project came in on timeand within budget. SRSA’s CathyAlba, CCIM represented Boys Townin the acquisition of both parcels.

SRSA MANAGES OVER 500,000 SQUAREFEET OF SHOPPING CENTERS

SRSA’s property management subsidiary, SRSA GulfSouth Management, has increased its shoppingcenter management portfolio to over 500,000 sq. ft.With the additions of MacArthur Center and MarreroShopping Center, both on the Westbank, we are now

one of the largest shopping center managers in theregion.

Marrero Shopping Center is a 125,000 sq. ft. centeranchored by Winn Dixie and Rite Aid. It is adjacent toWest Jefferson Medical Center. The MacArthur Centeris approximately 120,000 sq. ft. and is anchored byFamily Dollar. It is located at MacArthur Blvd. andGeneral DeGaulle Drive. Mike Hilferty, CPM, headsthis company for SRSA and manages both centers.

Additionally, SRSA manages Independence Mall inMetairie, as well as Northside Plaza, a 145,000 sq. ft.center in Slidell. Northside is currently undergoing amajor renovation which includes construction of an outparcel building for Verizon and the conversion of avacant Winn Dixie into two big box spaces and somesmall shop space.

SPIZER ELECTED NATIONAL CCIM PRESIDENT

Barry Spizer, CCIM was electednational president for the CCIMInstitute of the NationalAssociation of Realtors for2003. In that position, he willlobby congress with MartinEdwards, CCIM, president ofthe National Association ofRealtors and will serve on theRealtors Commercial Alliance with the leaders of SIOR,ULI, IREM, Counselors of Real Estate and heads ofCushman & Wakefield, CB Richard Ellis, Grubb & Ellisand others. Additionally, Spizer will help build localCCIM chapters, oversee the further development ofthe Site To Do Business and continue to see that theCCIM Institute offers the premier commercial realestate education in the industry.

NORTHPARK ON THE GROW

This past year has been an exciting year of growth forNorthPark Business Park in Covington, LA. SRSA

brokered the sale of one of the lots fronting Highway190 to TGI Fridays restaurant, which is now opened.Additionally, the Marriott Courtyard Hotel wasexpanded to 150 rooms plus more meeting space. TheFederal

Express Building was also expanded, with the help ofGSCC, to 20,000 sq. ft. to handle their growth on theNorthshore.

In the office park, the Northpark Corporate II Buildingincreased its occupancy to almost 90%. New tenantsinclude LLOG Exploration, Rehab Dynamics andGSA/Food & Drug Administration.

SALES DROP BACK TO 1999 LEVELS

After solid sales years in 1997, 1998 and 2000, total volumeof commercial real estate sales over $500,000 have fallen off tounder $500 million. The 2001 numbers are almost identical tothose of 1999, which still exceeds all of the years between1990 and 1996. In the year 2001, the New Orleans market had230 transactions totaling $465 million. The largest sale of theyear was the sale of First Industrial’s Louisiana portfolio for$63,250,000 (see page 1 for details).

New Orleans Commercial Real Estate Sales

1997 1998 1999 2000 2001

Office $337.5 $216.3 $51.8 $218.9 $62.9

Retail $89.9 $154.4 $152.2 $106.3 $105.6

Industrial $96.3 $87.4 $75.5 $73.8 $131.8

Apartments $42.0 $68.7 $29.9 $46.1 $70.3

Hotel $279.0 $72.2 $24.3 $49.8 $28.8

Land $43.7 $46.3 $54.7 $89.9 $48.3

Miscellaneous $35.6 $101.9 $38.3 $27.2 $17.7

Total Sales Volume $924.1 $747.2 $426.7 $612.0 $465.3

Number of Sales 201 248 230 231 230

NOTE: All numbers in millions except number of sales. Totals based on sales over

$500,000 in the Greater New Orleans. Source: SRSA Research Department

OFFICE

While it was not a record year in office building sales, therewere still three significant office buildings which traded in2001. The largest sale was the AAA Building on CausewayBlvd. in Metairie. The 124,000 sq. ft. property was sold byWBK Partners (Koll Bren Fund) to a partnership of JefferyFeil and LNR Property Co. (Lennar Partners). The sales priceequates to $72.18/ sq. ft. and a going in cap rate of 10.75%.The building was 95% leased at the time of sale and wasanchored by American Auto Association (AAA).

The Metairie Tower office building on Metairie Road also soldin 2001. B.F.Saul Real Estate Investment Trust sold theproperty to G.L.Metairie Towers, LLC for $7,200,000. The91,000 sq. ft. building sold for $79.12/sq. ft. and a 10.56%cap rate. It was 92% occupied at the time of sale.

Riverside I & II was the other major office sale in 2001.Northwestern Mutual sold the buildings to RiversideInvestors, LLC (Select Properties) for $6,100,000. The 89,834sq. ft. property sold for $67/ sq. ft. and a 13.2% cap rate. Thebuildings were 99% leased at the time of sale.

RETAIL

In the retail area there were also some noteworthysales. The 10.993-acre site at Airline Drive and ClearyAvenue adjacent to the on ramp to the EarhartExpressway was sold by Joseph Canizaro to Sam’sBusiness Trust to build a Sam’s Warehouse store. It

was formerly the site of the Real Superstore. The$6,750,000 price equates to $14.10/ sq. ft. basedsolely on the land, but Sam’s did reuse part of the oldstructure.2001 was the year for controversial uptown NewOrleans real estate deals. In addition to thecontroversial Wal-Mart deal (see page 1), the RegionalTransit Authority agreed to sell its Magazine Street BusBarn property to Arabella Station, LLC (Neil Hixon andChris Sarpy) for $4,500,000. After much debate andprotest from the neighbors, the developers decided toscale back their project to only include a Whole FoodCompany store and a residential use. As a result ofhaving to scale back the project, the price wasreduced to $3,000,000 or $20/sq. ft. for the 150,000sq. ft. site. Don Schwarcz of SRSA Commercial RealEstate represented Whole Food in their lease with thedevelopers.

The other noteworthy retail sale in 2001 was the saleof the Gentilly Wood Shopping Center on ChefMenteur Highway. The center was sold to GreentreeRealty, LLC (Thor Equities) for $5,600,000. The138,000 sq. ft. center sold for $40.58/sq. ft. and wasfully leased at the time of sale.

LAND

One of the largest land sales in 2001 was the sale of19.5 acres located at Dickory and Mounes in Elmwood.East Jefferson Properties sold the site to CottonwoodApartments (Favrot & Shane) for $6,156,820. Thatequates to a value of $7.24/sq. ft. for the land, whichwas zoned GO-1.

Following the St. Thomas assemblage for Wal-Mart(see page 1), the third largest land sale was for thesite adjacent to the Energy Centre office building. Itincluded everything remaining in the square betweenLoyola and Rampart and Poydras and Lafayette. Thesite was sold by Nineland LLC to SIP-NO Ventures(Shorenstein Company) for $3,850,000. Shorenstein isthe owner of Energy Centre and currently have a new450 space-parking garage under construction on thesite.

TOP FIVE SALES FOR 2001

RANK PROPERTY TYPE PRICE

# 1 First Industrial Portfolio Industrial $ $63,250,000# 2 Hidden Lake Apartments Apartment $15,000,000# 3 AAA Building Office $8,950,000# 4 Winn Dixie Airline Retail $7,305,736# 5 Metairie Towers Office $7,200,000

Source: SRSA Research Department

OUTLOOK 2002

2002 is certainly shaping up to be a very interestingyear. Whether or not there will be some hangover fromthe events of September 11th and the nationalrecession is hard to tell. While there are certainly somesigns of life, with good activity early in the year, it is

hard to be overly optimistic. Our forecast for 2002 ismuch like 2001, a good year but not a great year.

In the retail area, we have Target coming into ourmarket with multiple stores. They have secured sites inMetairie (at Clearview Shopping Center), the Westbankon Manhattan Blvd. and in Slidell. Best Buy has also startedopening stores in our market with more to come in 2002.Driven by this retail activity, look for new centers to bedeveloped in Mandeville and Slidell, as well as on theWestbank. Also look for the completion of the redevelopmentof Northside Plaza in Slidell in 2002.

We also have some major fallout in the retail sector. ServiceMerchandise and K-Mart’s problems will create some vacancyin the marketplace. Additionally there are other retailers whoare struggling who could also be closing stores in 2002.

The office market has been most dramatically effected by theeconomic slowdown. Major corporate office space users havebeen in the cutback and layoff mode, creating more officevacancy than we have seen in years. Metairie, a traditionallystrong sub market, has been hit with over 200,000 sq. ft. ofsublease space. With few new tenants moving into the market,that space will be tough to fill. As a result, rates in Metairiehave fallen by $1-2 per square foot, providing space in Class Abuildings for under $20 and in Class B buildings in the $15-17range.

The CBD office market is equally tough with large blocks ofsublease space adding to normal vacancy in the officetowers. Look for 1010 Common to fill up with the addition oftwo large state offices and for Plaza Towers (the building thestate is moving out of) to sell and be converted to a hotel orresidential use. While that trend has been good to the CBD inrecent years, it is slowing down due to the difficulty in gettingfinancing for a hotel conversion project.

1031 TAX FREE EXCHANGE

SRSA has investment specialists who understand 1031 tax-free exchanges. If you have little or no basis in your propertyand cannot sell because you do not want to pay high capitalgains tax, speak to us and let us assist you with a replacementproperty. Cathy Alba, CCIM and Barry Spizer, CCIM bothsuccessfully completed 1031 exchanges for their clients thispast year.

CONCLUSION

While we know our real estate market has changed as aresult of September 11th, we also can see how we havestarted to pick up the pieces. We just witnessed the greatestSuper Bowl ever in New Orleans and are getting ready toembark on a fabulous Mardi Gras season. Tourists andconventions have returned to the city and the hospitalitybusiness is strong again. We are about to elect a new mayor(who is not a career politician) and who is determined to bringbusinesses to New Orleans. And we will soon have an NBAbasketball team to play in our new arena (the CharlotteHornets) and a significant infusion of cash into the NewOrleans Medical Center (Tulane and LSU Medical schools).There are a lot of good positive things happening in our cityand we hope to ride that momentum to a successful 2002 inthe commercial real estate industry.

If you have a property to sell or money to invest, theprofessionals at SRSA are ready to help you. We specializein t he acquisi tion and s ale of c ommerc ia l rea l est at eand c an help you get the job done. With our investmentsales experience (over 75 years), we can analyze investmentopportunities and assist you through the process to asuccessful closing. If you have a property to manage, let theprofessionals at SRSA Gulf South Management assist you inmaximizing the value of your asset through its efficient and topquality management services. We can now also handle yourconstruction needs through Gulf South CommercialConstruction. Please give us a call at (504) 831-2363 and letus put our skills to work for you or check us out on the Webat www.srsa-realestate.com.

For More Information Contact

SRSA Commercial Real Estate, Inc.

3850 N. Causeway Boulevard

Suite1970

Metairie, Louisiana 70002

Phone: (504) 831-2363

Fax: (504) 831-0481