Wheaton development project final prsentation

Pinnacle Developers

Rich Weidel

Yeo-Jin Lee

Lin Xue

Todd Robinson

Duke Fairchild

Ankoor Jivan

VISION

VISION MARKET SITE DESIGN PROGRAM SCHEDULE FINANCIALS BRANDING CONCLUSION

Program Rationale Wheaton has the right Location

But why go to Wheaton?

25 minute commute from Metro Center!


Program Rationale The Taste of Wheaton and Chuck Levin’s are BIG successes…


Program Rationale But on the other 364 days a year?

How do we attract people to Wheaton EVERYDAY?


Wheaton Epicenter: Live Tastefully Wheaton Epicenter is a transit-oriented development program that will attract people to Wheaton 365 days a year.


Massing


Wheaton Epicenter: Live Tastefully

Create a vibrant, safe and viable transit oriented development that will foster Wheaton’s current cultural characteristics by creating a live-work-play town center that sparks the revitalization of Wheaton’s CBD.


Wheaton Epicenter: Live Tastefully Seven Building TOD Comprised of 1M+ SF (5+ FAR)

Three phase, Five Year Development Total Cost: $315m Stabilized Value: $372m

Base Case Returns - Unlevered IRR: 8.5% - Levered IRR: 11% -Cash-On-Cash: 4.2% - 11%

Branding: Live Tastefully -Embrace Wheaton’s strengths in food and music

Destination Point: The Heart of Wheaton!

MARKET


Optimistic MSA DC Market Ahead


Understanding the Market

WHO?

WORK

LIVE

SHOP EAT &

PLAY

TRAVEL


Demographic

43% Brite Lites, Li'l City – Upscale, Age 25-44 w/o Kids Median HHI: $75,255 College Educated; Mostly own Homes

26% Second City Elite – Upscale, Older w/o Kids Median HHI: $80,634 Graduate Plus degrees; Mostly own Homes

17% Up-and-Comers – Upper-Mid, Age 25-44 w/o Kids Median HHI: $52,258 College Educated; Mix of Owners and Renters

Upscale young professional / Single or Married but w/o Kids / College Educated . . .

• Population – DC MSA

• Population growth rate: 12% (2010-2020)

– Montgomery


– Wheaton


• Target Demographic


Office – Demand Analysis

• Employment – DC MSA

• 4th largest labor market (> 4mn employed)

• Unemployment rate: 6% ( 9.4%)

– Wheaton1)

• 84,000 job creation expected by 2020 => 1.1% capture rate = 924 jobs

• 924 jobs x 200SF/job = 185K+ SF

• Class A Net Absorption in 20102)

– Suburban Maryland: + 381K SF

– Wheaton: - 11K SF

• Class A /B/C Rent 3) – Kensington/Wheaton:

$29/22.30/21.45/SF

– Wheaton: $29/21.68/21.32/SF

– GSA Rent: $34 full service in MD

1) Maryland Department of Transportation: Wheaton Urban District Market Analysis – Jan 2010

2) Co-Star 3) Co-Star Office Report: Washington DC, Yr End 2010


• Future Supply – Silver Spring Joint Development: 200K SF of office space

• 2.1 mil SF – Inventory • 2003 – Last delivery in Kensington/Wheaton • 9.75% - Vacancy Rate • 0 SF – Under construction

• 556,405 SF – Inventory, 15 buildings in Wheaton • 0 – Deliveries in the last decade • 18.7% - Vacancy Rate, 100,000sf

Office – Supply Analysis

(Source) Co-Star (Source) Co-Star

• Existing Supply & Vacancy – Kensington/Wheaton - Wheaton


Office – Opportunity

• Weak fundamentals for Wheaton office space in short to mid-term

• Lack of any relevant Class A or LEED certified office product

• Lack of clustering

• Need to capture demand driven by TOD, mixed use synergy, and right tenant mix

• Target tenant: public sector (GSA, non-profit organization, Montgomery County) & private sector


Residential – Demand & Supply Analysis

• Household Income – MSA DC: $86K – Montgomery: $85.7K – Wheaton: $78.7K

• Working Population

– Wheaton: 56% (25-54)

• Future Supply

Washington Properties: 222 units Safeway (after 2013): 496 units Avalon Bay: 320 units

Washington Properties

Safeway

Avalon Bay


– The Cameron (Silver Spring):

$2.14/SF

– 1200 East West (Silver Spring): $2.04/SF

Residential – Comparable Analysis

• Comparables – Metro Point (Wheaton’08):

$1.68/SF (173 units)

– Archstone Station (Wheaton ‘05):

$1.68/SF (243 units)

The Cameron (325 Units - 15 Floors) The Crest at Congressional Plaza (146 Units - 4 Floors) The Georgian (890 Units - 18 Floors)

8710 Cameron Street Silver Spring, MD 20910 1620 East Jefferson Street Rockville, MD 20852 8750 Georgia Ave. Silver Spring, MD 20910

Unit Type Price SF $/SF Unit Type Price SF $/SF Unit Type Price SF $/SF

Studio $1,450 475 $3.05 1BR/1BA $1,733 728 $2.38 Studio $1,485 483 $3.08

1BR/1BA $1,920 720 $2.67 1BR/2BA $2,155 978 $2.20 1BR/1BA $2,021 925 $2.18

1BR/1BA + Den $2,153 924 $2.33 2BR/2BA $2,477 1,256 $1.97 2BR/2BA $2,535 1,235 $2.05

2BR/2BA $2,409 1,108 $2.17 Wtd. Avg. $2,188 987 $2.15 Wtd. Avg. $2,163 881 $2.29

2BR/2BA + Den $2,412 1,218 $1.98

Wtd. Avg. $2,175 889 $2.33

Amenities: On-Site Laundry, Parking, Fitness Center Amenities: Clubhouse, On-Site Laundry, Fitness Center Amenities: Fitness Center, Pool, Business Center,

Pool, Sundeck, Concierge Business Center, Pool, Pet Care Service Sundeck, Concierge, Residence Lounge, Parking,

Theatre Room, Party Room,

Archstone Wheaton Station (243 Units - 6 Floors) MetroPointe (173 Units - 7 Floors) Avalon at Rock Springs (386 Units - 3 Floors)

11101 Georgia Ave. Wheaton, MD 20902 11175 Georgia Ave. Wheaton, MD 20902 6425 Rock Forest Drive Bethesda, MD 20817


1BR/1BA $1,578 819 $1.93 Studio $1,380 573 $2.41 1BR/1BA $1,663 851 $1.95

1BR/1BA Loft $1,578 803 $1.97 1BR/1BA $1,803 913 $1.97 2BR/2BA $2,053 1,244 $1.65

1BR/1BA Den $1,822 873 $2.09 2BR/2BA $2,075 1,023 $2.03 3BR/2BA $2,460 1,334 $1.84

2BR/1BA $1,612 911 $1.77 3BR/2BA $2,585 1,411 $1.83 Wtd. Avg. $2,114 1,143 $1.80

2BR/2BA $1,950 1,247 $1.56 Wtd. Avg. $2,094 980 $2.00

Wtd. Avg. $1,730 930 $1.84

Amenities: Parking, Pool, Business Center, Sundeck, Amenities: Clubhouse, Parking, Business Center, Amenities: Pool, Business Center, Fitness Center,

Residents Lounge., Fitness Center, Parking One-Site Laundry, House Sitting Playground, Residence Lounge, Parking

Archstone Wheaton Station (243 Units - 6 Floors) MetroPointe (173 Units - 7 Floors) Avalon at Rock Springs (386 Units - 3 Floors)

11101 Georgia Ave. Wheaton, MD 20902 11175 Georgia Ave. Wheaton, MD 20902 6425 Rock Forest Drive Bethesda, MD 20817


1BR/1BA $1,578 819 $1.93 Studio $1,380 573 $2.41 1BR/1BA $1,663 851 $1.95

1BR/1BA Loft $1,578 803 $1.97 1BR/1BA $1,803 913 $1.97 2BR/2BA $2,053 1,244 $1.65

1BR/1BA Den $1,822 873 $2.09 2BR/2BA $2,075 1,023 $2.03 3BR/2BA $2,460 1,334 $1.84

2BR/1BA $1,612 911 $1.77 3BR/2BA $2,585 1,411 $1.83 Wtd. Avg. $2,114 1,143 $1.80

2BR/2BA $1,950 1,247 $1.56 Wtd. Avg. $2,094 980 $2.00

Wtd. Avg. $1,730 930 $1.84

Amenities: Parking, Pool, Business Center, Sundeck, Amenities: Clubhouse, Parking, Business Center, Amenities: Pool, Business Center, Fitness Center,

Residents Lounge., Fitness Center, Parking One-Site Laundry, House Sitting Playground, Residence Lounge, Parking


Retail – Demand Analysis

• Strong buying power

– Effective HHI $76.8K (1m)/$84.9K(3m, DC MSA)

• Decrease in population growth but still positive

– Potential shift to less dense area like Wheaton

• Transportation /Access Profile:

– 46K+ vehicle , 900+ bus trips /day1)

– On average, 9,300 metro passengers /day2)

• Employment growth will support retail.

1), 2) WMATA Faregate Data


Retail – Supply Analysis

• Existing

– Westfield Mall: 665K SF

• Tenant: Macy’s/Target/JCPenny/Giant Food/Royal Theatre

– Ethnic-themed restaurants/ mid-priced specialty stores

• Future Supply

– Costco (late 2011/early 2012): 228K SF

– Safeway (mid 2012): 59K SF

• Current Rent: $18-22/SF (15% drop due to economic crisis)

• Current Vacancy: 3.8% (from 1.3% in 2008)


Retail – Opportunity

• Local-Oriented vs. Regional Competition

• Create synergy with new TOD development – Metro rider

– New residents

– Office employees

• Find the niche to complement Westfield Mall / Costco

• Achievable bump up on rent – Wheaton’s specialty store = $23/SF (2010)

• Recovering business cycle with relatively low vacancy of 4%


Food & Entertainment – Demand Analysis

• Wheaton residents eat out;

• Commuters tend to avoid traffic hours;

• Synergy of Mixed-Use;

• Prominent PRIZM segments have a propensity to spend on restaurants and entertainment venues.


Food & Entertainment – Supply Analysis

• 118 restaurants, mainly consisting of local full service, ethnic restaurants

• Tired of existing supply

• High visibility and accessibility

• Farmers market, “Taste of Wheaton,”

Number of Entertainments Venues in Town per 10,000 people (Source: www.visitmontgomery.com)


Hotel – Demand Analysis

• Daily Commuting Travel Pattern

• Relatively Far Proximity to Airports

– Reagan: 15 mile

– BWI: 25mile

– Dulles: 30 mile

• No Tourism and Attraction (Taste of Wheaton)

• No Convention and Meeting


Hotel – Supply Analysis

• No hotel within 3 mile radius / pipeline = 0

• No origination of business

Hotels within 5 mile radius

SITE


Regional Context

• 5 Districts in Wheaton CBD.

– “Core”: civic presence and new offices

• 4 CBDs in Montgomery County.


Opportunities

• Regional Retail Draws • Strong Niche Market • Public/Private Revitalization Potential

• 11 acres of publicly owned properties • Transportation Capacity


Challenges • 20 ft grade raise from Veirs Mill Rd to Georgia Ave.

• 14-bus-line bus bay

• Existing Permeable Surface Lot Metro 0.90 acres, 18.2% Lot # 13 0.33 acres, 18.7%


Connectivity • Red Metro Line

– 20 minutes ride to D.C. downtown

• 19 buses, 14 stops at the bus bay

• 38 percent passengers walks to the metro station


Concept

• Walkable Community • Key Locations • Trophy Building • Intersection nodes • Secondary Entrance

• Civic Spaces • Plaza on podium • Town center • Pedestrian street

• Main Connections • N-S Axis • Mall – Price District • Metro - Garage


Site Layout

• Key Locations • Office Towers • Anchor Retails • Hotel

• Civic Spaces • Metro Plaza • Epicenter Circle • Triangle Ln

• Main Connections • N-S Axis • Mall – Price District • Metro - Garage

• Walkable Community


Open Spaces


View Analysis


Vehicular Circulation


Pedestrian Circulation


Land Use (brown) Three office towers anchor the north, central and the point. (yellow) Three residential buildings; each has a rooftop garden and balconies looking into the plaza. (purple) 150-room hotel.

(charcoal) Three parking garages (red) First floor retail and the movie theatre.

DESIGN


Master Plan


Longitudinal Section


Lot Metro


Lot Metro: Vertical Connection

• Spiral Stair vertically connects the Metro Plaza with the Bus bay underneath it. • Opening on the podium allows natural light. • Glass Sculpture gives visual cue.


E-W Section Looking South


Pet Park and Green Terraces


Metro Plaza


Lot #13


Lot 13: Mezzanine Entertainment • Cinema creates the north end destination. • Public activities take place on both ground and mezzanine level.


View from Veirs Mill Rd

• Neighborhood signage at major entry.

• Immediate access to Epicenter Circle and Plaza Space.

• Pleasant welcome to Wheaton


Epicenter Circle & New Triangle Lane

• Major site connection created

• Pedestrian access maximized

• Outdoor area for unlimited neighborhood activities.

• Parking moved to garage

• Pedestrian walkway created made of grass and brick walkway, with trees to provide shade and fall color.

• Permanent home for the Taste of Wheaton


Architecture Residential

• Materiality predominantly brick and mortar

• Balconies for each apartment

Office

• Material predominantly glass and steel

• 365-degree views

• Outdoor space

Landscape Architecture:

• Hardscape cobble, bluestone, and concrete

• Corten steel Wheaton sign

• Glass plaza entrance

• Birch, Locust, and Cherry

PROGRAM


Total Development Program

Phase I

Bus Bay

Phase II

Lot 13

Phase III

HotelTotal

Office 385,000 95,000 0 480,000

Multifamily 237,150 133,920 0 371,070

Retail Cinema 0 60,000 0 60,000

Trader Joes 15,000 0 0 15,000

Jazz Bar 10,000 0 0 10,000

Restaurants 0 25,000 0 25,000

Other Retail 15,000 15,000 0 30,000

Retail Totals 40,000 100,000 0 140,000

Hotel 0 0 80,000 80,000

Total 662,150 328,920 80,000 1,071,070

Parking Spots 913 487 45 1,445


Phase I

Office Point 200,000 sqft

Office Metro 185,000 sqft

Total Office 385,000 sqft

Multifamily Point 144,150 sqft

Multifamily Metro 93,000 sqft

Total Multifamily 237,150 sqft

Trader Joes 15,000 sqft

Jazz Bar 10,000 sqft

Other Retail 15,000 sqft

Total Retail 40,000 sqft

Total Phase I 662,150 sqft

Office

Multifamily

Retail


Phase I – Bus Facility on Lot 13


Phase I – Develop Platform

• All buildings in Phase I will be built on platform

• Construction benefits to the platform


Phase II

Cinema 60,000 sqft

Restaurants 25,000 sqft

Other Retail 15,000 sqft

Total Retail 100,000 sqft

Office North 95,000 sqft

Multifamily North 133,920 sqft

Total 328,920 sqft

Phase II


Phase III

85,000 sqft

150 Keys

Hotel

SCHEDULE


Schedule

Phase III

2016 2017

Zoning and Permiting

Phase I

Phase II

2011 2012 2013 2014 2015

FINANCIALS


Base Case Financial Snapshot


Development Costs

Total Development Cost = $315 million

22%

33%

8%

6%

10%

8%

13% Multifamily: $70M

Office: $103M

Retail: $25M

Hotel: $19M

Parking: $31M

Infrastructure: $26M

Soft Costs: $42M


Project Value

$99,364,437 $123,094,031

$153,847,745

$142,807,687

$156,301,966

$194,415,317 $37,660,857

$58,454,016

$72,094,541

$25,472,935

$29,688,554

$38,244,163

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

Construction Cost (Today) Stabilized Value (Year 8) Sale Price (Year 15)

Multifamily Office Retail Hotel


NOI’s, Rents & Expenses

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

Net Operating Income

Multifamily Office Retail Hotel

Stabilization

Post Stabilization NOI Growth = 3.2%


Financing

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

Construction Loan Permanent Loan Loan Proceeds

Max. Construction Loan $224,253,434

Max. Permanent Loan $240,628,339

Total Loan Proceeds $17,305,793


Construction Loan & Developer Equity

($20,000,000)

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

2012 2013 2014 2015 2016 2017 2018

Effect of Construction Loan on Developer Equity

Total Development Costs Developer's Equity Construction Loan

Developer Equity Required $107,634,497


Effect of Leverage on Cash Flows

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Unlevered BTCF Debt Service Payment Levered BTCF

Debt Service Payment: $18,751,949 (Upon Stabilization)


Sensitivity Analysis


Best Case

• Lower Tenant Improvement Costs – Current TI’s for office and retail high for new construction – $10 reduction in each to $40 and $55, respectively

• Increase in Revenue Growth – Development of Wheaton Epicenter will drive future rent growth – Increase from 3% to 4%

• Public Partner Assistance – WMATA & Montgomery Co. will benefit from development – Provide equity infusion of $38M to cover the costs for:

• Bus Transfer Facility Improvement • Podium Structure and Sitework • WMATA Garage Addition • Streetscapes and Road Repairs


Comparison Base v. Best Case

BRANDING


Brand Theme and Image

Wheaton Epicenter Culture/Location/Community

Live Tastefully Current: Taste of Wheaton Food and Music Strengths Coming Soon: Contemporary Architecture Pleasant Open Space Additional Entertainment Locations Figuratively and literally, when you’re in Wheaton, you will live tastefully.


Target Market

Young professionals (25-39) Metro provides access to all of DC.

Close proximity to nightlife, and shopping.

Small-Sized Families (25 – 44) Travel savings with TOD location.

Plenty of outdoor areas for recreation.

Retired seniors (65+) Low travel requirement with immediate access to amenities.

Metro provides easy access to family/travel.


Retail Components

Retail Selection: • Brands with higher-end

perceptions yet locally grown, built from the ground up qualities

• Popular, sought after brands • Wide variety • Not common in the area currently .


Retail Components

Entertainment: • State-of-the-art theater with standard

format, IMAX and 3D Theaters • Large scale, live music venue with jazz

appeal, yet open to all types of live entertainment

• A large billiards hall for the terrace of lot 13 overlooking the site creating late night activity


Retail Components

Dining: • Locally owned chains • National chains that fit the area’s

diversity • Family friendly environments


Retail Components

Shopping & Services:

• Popular, affordable, and expanding boutique stores

• Athletic specialty stores

• A bank and pharmacy for convenience


Retail Components

Hotel: Element • Up and coming Westin brand

• Simple, elegant hotel for the traveling executive

• Lead Certified


Advertising Strategy

Logo:

Brand Message: Wheaton Epicenter is a destination that has everything you need, and the means to get anywhere you want. It’s not just a neighborhood, it’s a home.


Advertising Teaser Campaign

I am 400 brand-new apartments, I am 35 stories of office space, I am the Taste of Wheaton, I am an IMAX theater, I am a live jazz club, and I am the Metro. I have the food to feed your appetite, and the entertainment to feed your soul. I am the Wheaton Epicenter And in 2016, I am all yours.

www.wheatonepicenter.com


Advertising Teaser Campaign


Media Plan

Message: Teaser, Site Amenities, Location

“…in 2016, I’m all yours…”

Print


Media Plan

Message: Site Amenities, Location, Leasing Opportunities

“…Wheaton Epicenter breaks ground today…”

“…Leasing opportunities starting today…”

Radio


Media Plan

Message: Convenience of Location on Metro Stop Metro Advertising: Station & Interior Car Advertising

Beltway: Bill Boards

“…If you lived at the Wheaton Epicenter, you’d be heading home on the metro right now…”

“…If you lived at the Wheaton Epicenter, you wouldn’t be stuck in this mess…”

Outdoor


Media Plan

Message: Leasing opportunities, status updates

Social marketing sites with a focus on real estate blogs and popular social media sites.

“…friend the Wheaton Epicenter and get updates on opening day…”

“…reserve an apartment viewing online…”

Online

CONCLUSION


SWOT

STRENGTHS

- Prime location, attract from surrounding residential buildings

- First mover advantage

- One stop shop, new construction

- All the best of urban living

- Design maximizes user experience

WEAKNESSES

- Site requirements are costly

- Parking is challenging

- Public financing needed

- Wheaton is still up and coming, trends could change

OPPORTUNITIES

-Improving market conditions

- Urban sprawl

- Safeway apartments bring demand for entertainment and retail

THREATS

-Safeway apartments

-Wheaton doesn’t catch on

-Changes in zoning in other locales

-USA defaults on debt, federal Gov’t shrinks


Live. Work. Play. Tastefully Wheaton Metro Center Heart of Wheaton

Benefits to the Public: - Increases Metro

Use - Increased Tax

Revenues - Revitalization of

Town Center

Documents

Wheaton development project final prsentation