October 21, 2010UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGNCollege of BusinessDEPARTMENT OF FINANCEFIN490
Market/Feasibility Analysis & Appraisals
6008001,000
24.0%
32.0%
s and
e in
Presented by:
Thomas Amato CRE ‐600‐400‐2000200400600
‐16.0%
‐8.0%
0.0%
8.0%
16.0%
Squ
are Feet (D
eliveries
Absorption)
acancy Rate and Ch
ange
ffectiv
e Net Ren
t)
Thomas Amato, CRE, Partner, Real Estate Counselors InternationalChicago, IL
‐1,000‐800600
‐32.0%
‐24.0%
1995 1999 2003 2007 2011 Thou
sand
s of
Percen
t (Va Ef
Net Absorption Vacancy Rate % Change in Effective Rent
THE CONTEXT
2
The Eight-Stage Model of Real Estate Developmentp
One: Inception of an Idea Not feasible
Five: Formal CommitmentNot feasibleFeasible
Two: Refinement of the IdeaN f bl
Six: Construction
Seven: Completion and Formal Not feasibleFeasible
Three: Feasibility
pOpening
Eight: Property, Asset and Portfolio ManagementThree: Feasibility
Not feasibleFeasible
Portfolio Management
Four: Contract NegotiationCannot reach binding contractsCan reach binding contracts
3 Source: Real Estate Development: Principles and Process
FEASIBILITY ANALYSISFEASIBILITY ANALYSIS
A real estate project is 'feasible' when the real estate analyst determines that there is a reasonable likelihood of satisfying explicit objectives when a selected course of satisfying explicit objectives when a selected course of action is tested for fit to a context of specific constraints and limited resources.
James A. Graaskamp , "A Rational Approach to Feasibility Analysis,“ October 1972, p. 515
4
APPLICATION OF MARKET ANALYSIS
Determine a Project’s Feasibility for Development (Developer, Lender).
Determine Size or Unit/Space Mix For a Specified Site (Developer) Determine Size or Unit/Space Mix For a Specified Site (Developer) .
Understand a Property’s Position in the Market and Long-Term Performance during Acquisition Due Diligence (Investor).during Acquisition Due Diligence (Investor).
Understand Opportunities and Constraints upon the Potential Re-positioning of an Existing Asset (Owner).g ( )
Develop Reasonable Financial/Market Assumptions for Financial Feasibility Analysis (Developer).
Develop Reasonable Financial/Market Assumptions for Appraisal (Lender).
5
KEY ASSUMPTIONS DRIVEN BY MARKET ANALYSIS CONCLUSIONS
Establish Size, Unit/Space Mix.
ANALYSIS CONCLUSIONS
Forecast Subject Property Lease-up.
Establish Rent Structure.
Establish Reasonable Rent Growth Assumptions.p
Determine Lease Structure/Terms – lease length, renew/release assumptions tenant improvement allowance leasing commissionsassumptions, tenant improvement allowance, leasing commissions.
Establish Capitalization Rate assumptions (for valuation analysis).
6
REAL ESTATE APRAISAL: THE BASICS USPAP (Uniform Standards Of Professional Appraisal Practice) – Establishes requirements
for appraisers with regard to Definitions, Ethics, Competency, Scope of Work and Jurisdictional Exceptions. p
Scope of Work – intended users rely on this disclosure to understand the research and analyses performed in the assignment.
Value as Highest & Best Use: that use of the land that may reasonably be expected to produce the greatest net return to the land over a given period of time - legally permissible, physically possible, financially feasible, and maximally productive.
Interest to be Valued:
Fee Simple - "...an absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers .”
Leased Fee – “an ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others.”
Leasehold - “the use and occupancy of the real estate, the value of which arises from the margin of th i d ti it f th t bj t t ti th t d i i f th l ”
7
the economic productivity of the property, subject to meeting the terms and provision of the lease.”
RECONCILIATION OF VALUE CONCLUSION: COMMON PROBLEMS FOUND BY REVIEW APPRAISERSPROBLEMS FOUND BY REVIEW APPRAISERS
Failure to cross-check a value indication obtained through computer Failure to cross check a value indication obtained through computer modeled income approach (e.g. , Argus) with an indication obtained directly from the cost or sales comparison approach.
Inconsistencies in the reported data and between the analyses and conclusions.
Failure to report or cite current market conditions, transaction data, and market behavior.
8 Source: Richard C. Sorrenson, Appraising the Appraisal, 2010, p. 81.
DEFINITIONS
9
BASIC RE DEMAND/SUPPLY DEFINITIONS:
Inventory = Total Amount of Space, Measured in Square Feet or Units
Deliveries = Increase in Inventory from Period to Period (SUPPLY)
Absorption = Net Change In Occupied Space from Period to Period p g p p(DEMAND)
Vacancy Rate = Vacant Space as a % of Inventory
Equilibrium Vacancy Rate = the Vacancy Rate at which Rents neither Rise nor Fall.
Effective Rent - Face rent (aka, asking or street rent), net of concessions (i.e., net of rent abatements and above-standard tenant improvement allowance).
10
GEOGRAPHIC CONSIDERATIONS:
Metro Area Market - usually the Metropolitan Statistical Area; sometimes the Metropolitan Division (i.e., the geographic components of larger MSAs). the Metropolitan Division (i.e., the geographic components of larger MSAs).
Submarket – sometimes a constituent county, but usually a sub county area that is established by patterns of development, accessibility, other physical y p p y p yand perceptional barriers.
Primary, Secondary and Tertiary Markets (retail) – similar to general nature of “submarket” but greater emphasis on capture of demand and linkage to consumers.
C titi S t/P G S t f i di id l ti th t t Competitive Set/Peer Group – Set of individual properties that represent highest level of comparability to subject property.
11
REAL ESTATE CYCLES
12
REAL ESTATE CYCLE POSITIONS:REAL ESTATE CYCLE POSITIONS:I. Recovery Phase - weak to moderate demand, but increasing (Market
moving toward Equilibrium)moving toward Equilibrium)
II. Expansion Phase - strong and increasing demand (Market moving toward Equilibrium)q )
III. Equilibrium - demand strong enough to sustain healthy rates of new construction and rent growth
IV. Correction/Contraction Phase - disequilibrium - weak/weakening demand or new supply exceeding demand (Market moving toward or in Di ilib i )Disequilibrium)
13
REAL ESTATE CYCLE POSITIONS: NORTHWEST SUBURBAN CHICAGO RETAIL SUBMARKET
14 Sources: Reis, Inc., Moody's Economy.com and Real Estate Counselors International, Inc.
DEMAND FUNDAMENTALS/DRIVERS
15
VALIDATING DEMAND/SUPPLY STATISTICS
%
SUBURBAN – WEST OFFICE MARKET (METRO CHICAGO,IL)
Year Deliveries Net AbsorptionVacancy
Rate
% Change
in Effective
Rent1995 121,000 951,000 11.8% 1.5%1996 324,000 713,000 10.4% 4.5%1997 459,000 846,000 9.0% 4.2%1998 1,519,000 1,610,000 8.3% 6.5%1999 1,365,000 845,000 9.5% 2.7%2000 1,760,000 665,000 12.1% -0.5%2001 1,256,000 -1,076,000 19.5% -2.6%2002 695,000 -706,000 22.3% 0.8%2003 322,000 250,000 22.3% -4.2%2004 249,000 306,000 21.1% -2.7%2005 188,000 437,000 20.3% 0.6%2006 439,000 39,000 21.1% 2.1%2007 425000 845,000 19.5% 2.7%2008 395000 56,000 19.9% 3.4%2009 29000 -360,000 20.6% -2.0%
2010 Forecast 183000 143,000 20.3% -1.6%
16 Sources: Reis, Inc., and Real Estate Counselors International, Inc.
VALIDATING DEMAND/SUPPLY STATISTICS
Requires Detailed Analysis of Demand Fundamentals
Quantify Absorption During Periods of Strong Demand and Weak Demand.
Quantify Changes in Rent During Periods of Strong Demand and Weak DemandWeak Demand.
Exercise Caution when Extrapolating Absorption; underlying Demand Fundamentals May be Changing.
Correlate Absorption with Most Relevant Demand Driver.
17
p
DEMAND DRIVERS:Employment (by place of work - estimated
monthly/updated annually)y p y)
Population (estimated annually/updated in decennial )census)
Income (estimated annually/updated in decennial Income (estimated annually/updated in decennial census)
Geodemographics/Psychographics (specialized databases such as PRIZM) - incorporate lifestyle and
18
spending patterns with demographics
CHANGE IN CHICAGO MSA OFFICE USING SECTOR JOBS: LAST TWO RECESSIONS
107.0
109.0
101.0
103.0
105.0
99 =
100
.0) 2001 Recession 2008 -2009 Recession
95.0
97.0
99.0
th In
dex
(19
89.0
91.0
93.0
Job
Gro
wt
85.0
87.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Fi i l A i i i P f i l d B i S iFinancial Activities Professional and Business Services
19 Sources: U.S. Bureau of Labor Statistics; Moody's Economy.com and Real Estate Counselors International, Inc.
EMPLOYMENT AND POPULATION GROWTH FOR LAKE COUNTY, IL GROWTH FOR LAKE COUNTY, IL
295
00)
245
270
ices
(19
70 =
10
170
195
220
ob G
row
th In
di
120
145
170
pula
tion
and
Jo
95
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Pop
P l i N A E l
20
Population Non-Ag Employment
Sources: U.S. Department of Labor; Moody's Economy.com and Real Estate Counselors International, Inc.
POPULATION AND INCOME STATISTICS/ TRENDS
Demographic Variable 1990 2000 2009 2014
% CAAC 1990 to 2000
% CAAC 2000 to 2009
% CAAC 2009 to 2014
POPULATION
Village of 68 706 7 386 74 680 74 09 0 93% 0 10% 0 0 %
Village of Schaumburg
68,706 75,386 74,680 74,509 0.93% -0.10% -0.05%
Primary Market 439,880 494,796 516,338 530,077 1.18% 0.47% 0.53%
Cook County, IL 5,105,067 5,376,741 5,268,639 5,226,654 0.52% -0.23% -0.16%
Chicago-Naperville-J li IL IN WI Joliet, IL-IN-WI
Metropolitan Statistical Area
8,182,076 9,098,316 9,602,177 9,895,500 1.07% 0.60% 0.60%
State of Illinois 11,430,602 12,419,293 12,937,547 13,251,348 0.83% 0.46% 0.48%
United States 248,709,873 281,421,906 306,624,699 322,320,436 1.24% 0.96% 1.00%
PER CAPITA INCOMEPER CAPITA INCOMEVillage of
Schaumburg------- $30,232 $35,714 $38,572 ------- 1.87% 1.55%
Primary Market ------- $29,337 $33,834 $36,319 ------- 1.60% 1.43%Cook County, IL ------- $23,227 $27,135 $29,371 ------- 1.74% 1.60%
Chicago-Naperville-Chicago NapervilleJoliet, IL-IN-WI
Metropolitan Statistical Area
------- $24,614 $28,691 $30,981 ------- 1.72% 1.55%
State of Illinois ------- $23,104 $27,234 $29,534 ------- 1.84% 1.63%
United States ------- $21,587 $26,410 $29,106 ------- 2.27% 1.96%
21 Sources: U.S. Census, Claritas, Inc. and Real Estate Counselors International, Inc.
PRIZM (TOP 10 OF 66 SEGMENTS)Socioeconomic
RankPRIZM NE Segment
NicknamePredominant
Income Age RangePredominant HH
CompositionPredominant Education
ClassPredominant Employment
1 Upper Crust Wealthy 45+ Married Couples College Graduate +Executive, Professional, White Collar1 Upper Crust Wealthy 45 Married Couples College Graduate White Collar
2 Blue Blood Estates Wealthy 35-64 Families with Kids College Graduate +Executive, Professional, White Collar
3 Movers & Shakers Wealthy 35-64 Married Couples College Graduate +Executive, Professional, White Collar3 o e s & S a e s ea y 35 6 a ed Coup es Co ege G adua e White Collar
5 Country Squires Wealthy 35-64 Families with Kids College Graduate +Executive, Professional, White Collar
6 Winners Circle Wealthy 25-54 Families with Kids College Graduate +Executive, Professional, White Collary g C
4 Young Digerati Upscale 25-44 Singles/Couples College Graduate +Executive, Professional, White Collar
7 Money & Brains Upscale 45+ Married Couples College Graduate +Executive, Professional, White Collary p p g
8 Executive Suites Upscale 25-44 Singles/Couples College Graduate +Executive, Professional, White Collar
9 Big Fish, Small Pond Upscale 45+ Married Couples College Graduate +
Executive, Professional, White Collar
22
g , p p g
10 Second City Elite Upscale 45+ Married Couples College Graduate +Professional, White Collar
Sources: Claritas, Inc. and Real Estate Counselors International, Inc.
SAMPLE PRIZM SEGMENT
#09 Big Fish, Small Pond
Up l Old (A 45 64) i h KidUpscale Older (Age 45-64) without Kids
Older, upper-class, college-educated professionals, the members of big fish, small pond are , pp , g p f , f g f , poften among the leading citizens of their small-town communities. These upscale, empty nesting couples enjoy the trappings of success, belonging to country clubs, maintaining large investment portfolios and spending freely on computer technology.
23 Sources: Claritas, Inc. and Real Estate Counselors International, Inc.
SIX PRIZM SEGMENTS ACCOUNT FOR 74% -85% OF RESIDENTS OF THESE COMMUNITIES 85% OF RESIDENTS OF THESE COMMUNITIES
#1 - 09 Big Fish, Small Pond
#2 - 11 God's Country
#3 - 23 Greenbelt Sports
#4 - 28 Traditional Times
#5 - 33 Big Sky Families
# 6 - 38 Simple Pleasures85% 85%
82%82%
84%
86%
x
77%
74%72%
74%
76%
78%
80%
rcen
tage
(Si
xm
ents
)
66%
68%
70%
Sun City Georgetown, TX
Sun City - Huntley, IL Hilton Head - Blufton, SC Sun City - Palm Desert, CA
Falls Run, Fredericksburg, VASu
btot
al P
erSe
gm
24 Sources: Claritas, Inc. and Real Estate Counselors International, Inc.
GEOGRAPHIC DISTRIBUTION OF DOMINANT PRIZM SEGMENTDOMINANT PRIZM SEGMENT
25 Sources: Claritas, Inc. and Real Estate Counselors International, Inc.
REAL ESTATE DEMAND DRIVERS
26
Primary Drivers of Real Estate Demand:Growth in Total Employment
G th i T t d E l t S t d fi d b i d t Growth in Targeted Employment Sectors – defined by industry (NAICS code) or occupation
Growth in Total Population
Growth in Population of Targeted Age-Cohorts
Growth in Income of Total Population
Growth in Income of Targeted Age-Cohorts
Geodemographics/Psychographics
27
Geodemographics/Psychographics
Demand Drivers by Asset Class:
Retail - Population and Population Growth, Income and Income Growth, Expenditure %
Offi Offi U i E l t G th ( B i & P f i l S i d Office - Office-Using Employment Growth (e.g., Business & Professional Services and Financial Activities)
Medical Office Buildings (MOBs) - Growth in Hospital Employment, Growth in Ambulatory Healthcare Services Employment
Apartments – Total Employment Growth, Population Growth (Age 18-34), Income Growth
Industrial - Total Employment Growth, GDP (National) and GRP (Regional)
Senior Housing - Growth in Resident Age Population (Age 75+), Growth in Adult Senior Housing Growth in Resident Age Population (Age 75 ), Growth in Adult Children Population (Age 50+), Single Family Home Price Changes
Student Housing - Growth in Resident Age Population (Age 18-25), University Enrollment Growth Total Employment Growth
28
Enrollment Growth, Total Employment Growth
Demand Drivers by Asset Class:
Active Adult (55+) Housing - Growth in Resident Age Population (Age 50-70), Total Employment Growth, In-Migration Rates, Single Family Home Price Changes
Manufactured Housing - Employment, Population Growth, Income and Income Growth, Home Prices and Home Price Increases
Self-Storage Units - Employment, Population Growth, Income and Income Growth, Home Prices and Home Price Increases
29
EQUIBRIUM VACANCY RATE
30
EQUILIBRIUM VACANCY RATE EQUILIBRIUM VACANCY RATE
The equilibrium vacancy rate is defined as:
the vacancy level where rents are in equilibrium(rate at which rents neither rise nor fall, in inflation-adjusted terms).adjusted terms).
If vacancy rates are above this equilibriumlevel, then we would expect rents to startpto fall.
If rents are below this level, we would expectrents to rise.
31
VACANCY RATE AND RENT GROWTH FOR SILICON VALLEY OFFICE MARKET: 1980 TO 1998
24.0%26.0%28.0%
35.0%
40.0%Vacancy Rate at Equilibrium Rate and Real Rent Growth Near 0%
15.0% 14.0%16.0%18.0%20.0%22.0%
20.0%
25.0%
30.0%
Ren
t
ate
7.4% 7.7%
4.0%6.0%8.0%10.0%12.0%
5.0%
10.0%
15.0%
Cha
nge
in
Vac
ancy
Ra
-3.0%
1.2%
-4.9%
-3.1%-3.2%
2.4%
-6.0%-4.0%-2.0%0.0%2.0%.0%
10 0%
-5.0%
0.0%
5.0%
% CV
-8.4%-10.0%-8.0%6.0%
-15.0%
-10.0%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998
32
Vacancy Rate Vacancy Rate, Less Equil. Vacancy Rate % Change in Real Effective Rent
Sources: Reis, Inc., United States Bureau of Labor Statistics, Moody’s Economy.com, and Real Estate Counselors International, Inc.
OFFICE SPACE EQUILIBRIUM VACANCY RATES FOR U.S. OFFICE MARKETS: 1999
11 7%11.6%11.5%
W hi t D C San Francisco
Chicago
12 8%12.4%
12.0%11.8%11.7%
MemphisJacksonville
BostonNew York
Washington, D.C.
14.2%14.0%
13.8%13.0%
12.8%
Los AngelesRichmond
NorfolkPhiladelphia
Memphis
16 0%15.5%15.4%
14.8%14.8%
Fort WorthAtlanta
Fort LauderdaleNashvilleOrlando
18.4%17.2%
17.0%16.4%
16.0%
RiversidePalm Beach
DallasHouston
Fort Worth
33
18.4%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%Source: Reis, Inc.
NET ABSORPTION
34
Space Absorption:p p
Net Absorption (i e net leasing activity)Net Absorption (i.e., net leasing activity)
Absorption is cyclical and correlated with demand p ydrivers (primarily employment)
Often Absorption is induced by deliveries (New Supply)
35
OFFICE DEMAND DRIVER – FINANCIAL ACTIVITIES AND PROFESSIONAL & BUSINESS SERVICES EMPLOYMENT
107 0
109.0
101.0
103.0
105.0
107.0
99 =
100
.0)
95.0
97.0
99.0
th In
dex
(199
89.0
91.0
93.0
Job
Gro
wt
85.0
87.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
T l P ll E l Fi i l A i i i P f i l d B i S iTotal Payroll Employment Financial Activities Professional and Business Services
36 Sources: U.S. Bureau of Labor Statistics; Moody's Economy.com and Real Estate Counselors International, Inc.
OFFICE SQUARE FEET ABSORBED FOR EVERY JOB CREATED: 1981 TO 1998 EVERY JOB CREATED: 1981 TO 1998
172214
280
W hi t D CLos Angeles
San Francisco
96113
121152
172
ChicagoHouston
PhiladelphiaNew York
Washington, D.C.
5568
7884
92
JacksonvilleAtlanta
RichmondDallas
Boston
404243495155
NorfolkNashvilleMemphis
Fort LauderdalePalm BeachJacksonville
19323440
RiversideOrlando
Fort WorthNorfolk
37
0 50 100 150 200 250 300
Sources: Reis, Inc. Moody's Economy.com and Real Estate Counselors International, Inc.
CHANGE IN EMPLOYMENT AND NET OFFICE ABSORPTION: CHICAGO’S EAST/WEST CORRIDOR OFFICE MARKET
715 935835,468
20,000
800 000
1,000,000
OFFICE MARKET
715,935
320,000
632,000
459,000
156 000
10,000
15,000
400,000
600,000
800,000
163,664 141,000156,000
0
5,000
200 000
0
200,000
nge
in Jo
bs
bsor
ptio
n
-440,000-371,000
-415,000 -10,000
-5,000
-600,000
-400,000
-200,000
ChaA
b
-812,000-20,000
-15,000
-1,000,000
-800,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009YYear
Absorption Change in Jobs
38 Sources: CoStar, Illinois Department of Employment Security and Real Estate Counselors International, Inc.
NEW YORK CITY MULTIFAMILY (CONDO) DEMAND/SUPPLY DEMAND/SUPPLY
35,0004550
Periods of Excess Supply
25,000
30,000
2530354045
Perm
its
uppl
y
15,000
20,000
5101520
ly H
ousi
ng P
of E
xces
s Su
5,000
10,000
20-15-10-50
Mul
ti F
ami
Mon
ths
0-25-20
1983Q1 1986Q1 1989Q1 1992Q1 1995Q1 1998Q1 2001Q1 2004Q1Year/Quarter
39
Multifamily Residential Oversupply Measure (Left Scale) Multifamily Unit Permits (Right Scale)
Sources: U.S. Bureau of Census, Moody's Economy.com and Real Estate Counselors International, Inc.
MARKET ANALYSIS: URBAN GROCERY STORE
40
DEFINITIONS:Primary Trade Area – accounts for 60-70% of resident-based retail sales demand.
GAFO – General Merchandise, Apparel & Accessories, Furniture & Appliances, and Other retail t i ( l k Sh pp ’ G d C p i G d DSTM) categories (also known as Shoppers’ Goods, Comparison Goods or DSTM)
Per Capita Expenditure Share – Per Capita Expenditure as a % of Per Capita Income (derived the Census of Retail Trade statistics)
Per Capita Expenditure –Per capita estimate of retail sales for specific retail category for defined trade area (Other retail categories might include grocery stores, drug stores, eating and drinking establishments.)
Sales Potential – Retail Demand, calculated as product of Population and Per Capita Expenditure
Retained Sales Potential – Retail Demand retained within the trade area (i.e., not exported outside of the trade area).
Capture Rate – Share of Retained Sales Potential that can be captured by the Subject Property
Daytime Population – workers, students and area visitors
41
LOCATION OF NEARBY UPSCALE RESIDENT POPULATION
42 Source: and Real Estate Counselors International, Inc.
DEMAND/SUPPLY METHODOLOGY
Identify sources of demand – resident population, core downtown/midtown workers, tourists and other downtown/midtown workers.
Delineate trade area – assess accessibility, distance and drive times, competition, etc.
Quantify resident and worker/tourist population and per capita income levels.
Estimate per capita expenditures for grocery store merchandise among the two above-referenced segments.
Forecast “Sales Potential” or retail demand (product of per capita expenditure and population) originating from these two segments.
F l f h l d f l Forecast sales opportunity for the planned grocery store after applying capture rates – first, with respect to the level of sales potential retained within the trade area; and then with respect to sales potential forecast to be captured by the planned grocery store.
43
g oce y sto e.
LOCATION OF MAJOR EMPLOYERS
44 Source: Real Estate Counselors International, Inc.
LOCATION OF OFFICE EMPLOYMENT
45 Source: Real Estate Counselors International, Inc.
LOCATION OF COMPETITION
46 Sources: Real Estate Counselors International, Inc. Field Survey
TRADE AREA DELINEATIONTRADE AREA DELINEATION
47 Sources: Real Estate Counselors International, Inc.
RESIDENT POPULATION SALES OPPORTUNITY
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
T d A Trade
A P % Per Capita E dit
Per Capita E dit G
CAAC % G th i R t i d
Trade Area R t i d
Subject Grocery
St Grocery
St T t l Trade Area Resident
Population
Area Per Capita Income
Expenditure for Grocery Store Items
Expenditure for Grocery Store Items
Grocery Store Sales Potential
Growth in Sales
Potential
Retained Sales
Potential %
Retained Sales
Potential
Store Capture
Rate
Store Total Sales
Opportunity2007
Primary 7,400 $17,605 6.30% $1,109 $8,207,451 --------- --------- --------- --------- ---------
S d 14 300 $14 607 6 30% $920 $13 159 446Secondary 14,300 $14,607 6.30% $920 $13,159,446 --------- --------- --------- --------- ---------Total 21,700 $15,629 6.30% $985 $21,366,897 --------- --------- --------- --------- ---------
2013Primary 8,000 $17,605 6.30% $1,109 $8,872,920 0.6% 30% $2,661,876 90.0% $2,395,688
Secondary 14,800 $14,607 6.30% $920 $13,619,567 1.0% 15% $2,042,935 85.0% $1,736,495
Total 22,800 $15,659 6.30% $987 $22,492,487 0.9% 20.9% $4,704,811 88% $4,132,183
DEMAND SEGMENT# 1: Resident Population DEMAND SEGMENT# 1: Resident Population
48 Sources: U.S. Census of Retail Trade, Claritas, Inc. and Real Estate Counselors International, Inc.
TOTAL SALES OPPORTUNITY
(11) (12) (13) (14) (15) (16) (17) (18) (19) (20)
% P C i
Per Capita
Expend. f
Retained (in the
P i Primary
T d A S bj G Midtown
Office Workers
MSA Per Capita Income
% Per Capita Expenditure for Grocery Store Items
for Grocery
Store Items
Grocery Store Sales Potential
Primary Trade
Area) Sales Potential %
Trade Area Retained
Sales Potential
Subject Grocery
Store Capture Rate
Grocery Store Total
Sales Opportunity
Estimated Sales Per
Square Foot
2013Core Midtown
Offi W k i Office Workers in the Primary Trade
Area 14,200 $26,544 4.90% $1,301 $18,469,315 22.5% $4,155,596 90.0% $3,740,036Trade Area Resident Population and Core
Midtown Office Workers in Primary
Trade Area --------- --------- --------- --------- --------- --------- --------- --------- $7 872 219 (Subtotal)Trade Area --------- --------- --------- --------- --------- --------- --------- --------- $7,872,219 (Subtotal)Tourists, Downtown and Other Midtown
Office Workers --------- --------- --------- --------- --------- --------- --------- --------- $1,124,603Total Sales
Opportunity --------- --------- --------- --------- --------- --------- --------- --------- $8,996,822 $635.01
DEMAND SEGMENT# 2 : Core Midtown Office Workers DEMAND SEGMENT# 2 : Core Midtown Office Workers
DEMAND SEGMENT# 3: Visitors (average per person spending per day)
TOTAL SALES OPPORTUNITY
49 Sources: U.S. Bureau of Labor Statistics; Moody's Economy.com and Real Estate Counselors International, Inc.
SALES PRODUCTIVITY
MARKET ANALYSIS: UPSCALE APARTMENTS
50
APARTMENT RESIDENTS: DISTANCE TO PLACE OF WORKPLACE OF WORK
8New York City, NY - 295 …CBD or Near CBD
15
15
15
12
Miami, FL - 252 units
Los Angeles, CA -160 units
Seattle, WA - 135 units
Boston, MA - 335 units CBD or Near CBD Locations
20
20
18
16
Los Angeles, CA - 300 units
Miami, FL - 296 units
Seattle, WA - 344 units
San Diego, CA - 192 units
25
22
22
20
Chicago, IL - 400 units
Chicago, IL--600 units
Ann Arbor, MI - 582 units
Los Angeles, CA - 310 unitsExurban Locations
35
30
0 5 10 15 20 25 30 35 40
San Diego, CA - 282 units
San Francisco, CA -260 units
Distance To Place of Work, In Miles
51
Distance To Place of Work, In Miles
Sources: Real Estate Counselors International, Inc.
APARTMENT RESIDENTS: DRIVE TIME TO PLACE OF WORK
25Boston, MA - 335 unitsCBD or Near CBD
PLACE OF WORK
35
35
30
25
San Diego, CA - 192 units
Miami, FL - 252 units
Los Angeles, CA -160 units
Seattle, WA - 135 unitsCBD or Near CBD Locations
40
35
35
35
Miami FL 296 units
Los Angeles, CA - 310 units
Los Angeles, CA - 300 units
Seattle, WA - 344 units
g
50
40
40
40
Chicago, IL - 400 units
Chicago, IL--600 units
Ann Arbor, MI - 582 units
Miami, FL - 296 units
Exurban Locations
60
55
0 10 20 30 40 50 60 70
San Francisco, CA -260 units
San Diego, CA - 282 units
D i Ti T Pl f W k I Mi
52
Drive Time To Place of Work, In Minutes
Sources: Real Estate Counselors International, Inc.
LOCATION OF COMPETITIVE PROPERTIES LOCATION OF COMPETITIVE PROPERTIES
53 Sources: Appraisal Research Corporation and Real Estate Counselors International, Inc.
LOCATION OF OFFICE EMPLOYMENT AND TOTAL JOBS
Lake County Portion of Market Area – 223,000 Jobs
TOTAL JOBS
Market Area 223,000 Jobs
Cook County Portion of yMarket Area – 359,000 Jobs
54 Sources: CoStar, Illinois Department of Employment Security and Real Estate Counselors International, Inc.
COMPARISON OF GROWTH RATES
132 0134.0136.0138.0
00.0
)
Lake County
120 0122.0124.0126.0128.0130.0132.0
ex (
1997
= 1
0
108 0110.0112.0114.0116.0118.0120.0
Gro
wth
Inde Cook County
96 098.0
100.0102.0104.0106.0108.0
mpl
oym
ent
G
96.01997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008p
Em
Lake County Component Cook County ComponentTotal Market Metro Area
55
Total Market Metro Area
Sources: Illinois Department of Employment Security and Real Estate Counselors International, Inc.
LOCATION OF COMPETITIVE SET
56 Sources: Real Estate Counselors International, Inc.
CALCULATING THE CAPTURE RATE FOR AN EXISTING DEVELOPMENT: LAKE COUNTY, IL
Market Area Renter Household Formations by Age Cohort: 2008 to 2013
HI of $60,000 + and Age 15-24 1,284
EXISTING DEVELOPMENT: LAKE COUNTY, IL
g
HI of $60,000 + and Age 25-34 601
HI of $60,000 + and Age 35-44 -934
HI f $60 000 + d A 45 54 2 159HI of $60,000 + and Age 45-54 2,159
HI of $60,000 + and Age 55-64 1,925
HI of $60,000 + and Age 65-74 577
Total Household Growth in Market Area 5,612
Annual Average Increase in Households 702
Average annual # of Apartment Units Absorbed 204g p
Average # of Units Absorbed Per Month 17
Estimated Capture Rate 29.1%
57 Sources: U.S. Census, Claritas, Inc., historical data for competitive property and Real Estate Counselors International, Inc.
FORECASTING ABSORPTION FOR PLANNED DEVELOPMENTDEVELOPMENT
Market Area Renter Household Formations by Age Cohort: 2008 to 2013
HI of $60,000 + and Age 15-24 870
HI of $60,000 + and Age 25-34 1,176
HI of $60,000 + and Age 35-44 -1,055
HI of $60 000 + and Age 45 54 378HI of $60,000 + and Age 45-54 378
HI of $60,000 + and Age 55-64 1,397
HI of $60,000 + and Age 65-74 769
Total Household Growth in Market Area 3,535
Total Household Growth, including 5% from Outside Market Area
3,721
Annual Average Increase in Households 744Annual Average Increase in Households 744
Capture Rate Range 20% to 30%
Average annual # of Apartment Units Absorbed 149 to 223
58
Forecast of Units Absorbed Per Month 12 to 19
Sources: U.S. Census, Claritas, Inc., historical data for competitive property and Real Estate Counselors International, Inc.
MARKET ANALYSIS: MEDICAL OFFICE
59
THE NATURE OF HEALTHCARE EMPLOYMENT: CHICAGO MSA EMPLOYMENT: CHICAGO MSA
145.0
150.02001 Recession 2008 -2009 Recession
125.0
130.0
135.0
140.0
100
.0)
105 0
110.0
115.0
120.0
ex (
1999
Q4
=
90.0
95.0
100.0
105.0
b G
row
th In
de
85.01999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Job
Total Payroll Employment MOB Employment Hospital Employment
60 Sources: U.S. Bureau of Labor Statistics, Moody’s Economy.com and Real Estate Counselors International, Inc.
MOB EMPLOYMENT:CHICAGO MSA AND KANE COUNTY, IL
690.0
KANE COUNTY, IL
490.0540.0590.0640.0
70 =
100
.0)
290.0340.0390.0440.0
ent
Inde
x (1
97
90.0140.0190.0240.0
Empl
oym
e
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010Year/Quarter
Kane County Chicago MSA
61 Sources: U.S. Bureau of Labor Statistics, Moody’s Economy.com, and Real Estate Counselors International, Inc.
MOB SPACE DELIVERED BY DECADE: E.KANE COUNTY, IL/W. DUPAGE COUNTY, IL
519,750
500,000
550,000
COUNTY, IL/W. DUPAGE COUNTY, IL
400,000
450,000
500,000
22 894250 000
300,000
350,000
quar
e Fe
et
151,621
221,894
150,000
200,000
250,000
Tota
l Sq
34,434
0
50,000
100,000
62
0
1970s 1980s 1990s 2000s
Sources: CoStar and Real Estate Counselors International, Inc.
MEDICAL OFFICE SPACE DEMAND MODELMETHOD 1: Employment Model
A B C D E F G H I JA B C D E F G H I JEmployment for Kane County, Illinois
MOB Average Square Feet
Per Employee (4)
MOB Space Demand, in
Square Feet of NRA (5)
MOB Space Demand, in
Square Feet of NRA,
ROUNDED Offices of
Physicians (1)
Outpatient Care Centers
(1)
Offices of Other Health Practitioners
(1)
Medical and Diagnostic
Laboratories (1)
Other Ambulatory Health Care Services(1)
5% of Hospital Employment
(2)
Total MOB -Related
Employment (3)
2007 4,828 566 905 112 432 391 7,234 299 2,163,063 2,200,0002011 5,732 692 1,080 134 510 447 8,595 299 2,569,920 2,600,000
METHOD 2: Employment/Population Ratio Employment ModelA B C D E F G H I
Offices & Clinics
E l
Medical & Dental Labs E l
5% of Hospital E l
Total MOB -Related
E l T l MOB MOB A MOB S MOB Space D d i
Market Area (1) (2)
Population
Employment for every
100,000 people (3)
Employment for every
100,000 people (3)
Employment for every
100,000 people (4)
Employment for every 100,000 of
Population (5)
Total MOB -Related
Employment (6)
MOB Average Square Feet
Per Employee (7)
MOB Space Demand, in
Square Feet of NRA (8)
Demand, in Square Feet of
NRA, ROUNDED
2007 566,961 1,002 56 100 1,158 6,568 299 1,963,819 2,000,0002011 624,234 1,002 56 100 1,158 7,231 299 2,162,200 2,100,000
METHOD 3 Ph i i /P l i R i E l M d lMETHOD 3: Physician/Population Ratio Employment ModelA B C D E F
Market Area (1) (2)
Population
Patient Care Physicians for every 100,000 of Population
(3)
Estimated Number of
Physicians (4)
MOB Average Square Feet
Per Physician (5)
MOB Space Demand, in
Square Feet of NRA (6)
MOB Space Demand, in
Square Feet of NRA,
ROUNDED Population (3) Physicians (4) (5) NRA (6) ROUNDED
2007 566,961 252 1,429 1,350 1,928,801 1,900,000
2011 624,234 252 1,573 1,350 2,123,644 2,100,000
CONCLUDED DEMAND2007 2,000,000
63
, ,
2011 2,400,000
Sources: U.S. Bureau of Labor Statistics, Moody’s Economy.com, Claritas, Inc., American Medical Association and Real Estate Counselors International, Inc.
MARKET ANALYSIS: SENIOR HOUSING
64
INDEPENDENT/ASSISTING LIVING MOVE-IN RATES AND HOME SALES: CHICAGO MSARATES AND HOME SALES: CHICAGO MSA
17,441 11.0
12.0
18 000
20,000
,
14,27113,378 13,722 13,346
8.0
9.0
10.0
14,000
16,000
18,000
Mon
th
mes
Sol
d
10,647
5.0
6.0
7.0
8,000
10,000
12,000
Mov
e-in
s p
er M
gle
Fam
ily H
om
1 0
2.0
3.0
4.0
2,000
4,000
6,000
Net
M
Sing
0.0
1.0
0
Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008
Quarter/Year
65
Single Family Home Sales AL Net Monthly Move-in Rate IL Net Monthly Move-in Rate
Sources: National Investment Center, Illinois Association of Realtors and Real Estate Counselors International, Inc.
INDEPENDENT LIVING DEMAND/SUPPLY MODEL: ASSUMPTIONSMODEL: ASSUMPTIONS
ASSUMPTIONS USED IN DEMAND/SUPPLY ANALYSIS: INDEPENDENT LIVINGINDEPENDENT LIVING
2010 2012 Notes
Age 75+ Age 75+Income $35,000+ Income $35,000+
Market Area20 Mile
Market Area 20 Mile RadiusMarket AreaRadius
Market Area 20 Mile Radius
Competitive Units Competitive Units
A Total Competitive Units in Market Area
11,196Total Competitive Units in Market Area
11,196 (1)
Unoccupied Units in Market B Unoccupied Units in Market Area
1,232 Unoccupied Units in Market Area 1,232 (2)
C Occupied Units in Market Area 9,964 Occupied Units in Market Area 9,964 (3)
D Competitive Units Planned in Market Area
1,103Competitive Units Planned in Market Area
1,103 (4)
E Project Units 175 Project Units 175 (5)
66 Sources: National Investment Center, Claritas, Inc. and Real Estate Counselors International, Inc.
INDEPENDENT LIVING DEMAND/SUPPLY MODEL: CALCULATIONS
DEMAND/SUPPLY ANALYSIS CALCULATIONS: INDEPENDENT LIVING2010 2012 Notes
Total Age - and Income - Qualified Total Age - and Income -
MODEL: CALCULATIONS
G Total Age - and Income - Qualified Households
58,063Total Age - and Income -Qualified Households
60,232 (7)
Turnover of Existing Units Turnover of Existing UnitsH Units Turned Over per Year 1,893 Units Turned Over per Year 1,893 (8)I From Market Area 1,515 From Market Area 1,515 (9), , ( )J Turnover Penetration Rate 2.6% Turnover Penetration Rate 2.5% (10)
Fill-Up of New Units (Includes Vacant Existing Units)
Fill-Up of New Units (Includes Vacant Existing Units)
K Available New Units 1,278 Available New Units 1,278 (11)L Available (Vacant) Existing Units 1 232 Available (Vacant) Existing Units 1 232 (12)L Available (Vacant) Existing Units 1,232 Available (Vacant) Existing Units 1,232 (12)M Stabilized Occupancy of 95% 2,384 Stabilized Occupancy of 95% 2,384 (13)
N Net Residents to Be Captured from Market Area
1,907Net Residents to Be Captured from Market Area
1,907 (14)
O New Unit Penetration Rate 3.3% New Unit Penetration Rate 3.2%Saturation Rate Saturation Rate
P Total Units in Market Area 12,474 Total Units in Market Area 12,474 (15)Q Stabilized Occupancy of 95% 11,850 Stabilized Occupancy of 95% 11,850 (16)R From Market Area 9,480 From Market Area 9,480 (17)S S i R 16 3% S i R 15 7% (18)
67
S Saturation Rate 16.3% Saturation Rate 15.7% (18)
Sources: National Investment Center, Claritas, Inc. and Real Estate Counselors International, Inc.
For More Information, contact:
Th J A t CRE Li d H M hThomas J. Amato, CREDirector of Due DiligenceReal Estate Counselors International, Inc.Suite 132653 W t J k B l d
Linda H. MehrSenior AssociateReal Estate Counselors International, Inc.Suite 132653 W t J k B l d53 West Jackson Boulevard
Chicago, IL 60604Office Phone: 312.332.4000 X101Cell Phone: 847.217.0198E il t t @ i bi
53 West Jackson BoulevardChicago, IL 60604Office Phone: 312.332.4000 X111Email: [email protected]
Email: [email protected] Web Site: www.reci.biz
68
ADDENDA
69
TRAFFIC COUNT MAPTRAFFIC COUNT MAP
70
TRAFFIC VOLUME COUNTSTRAFFIC VOLUME COUNTS
45 00042,500
39,300
33,60032,700 32,500
30 800
35,000
40,000
45,000
30,800
24,700
21,80020,100 19,800
20,000
25,000
30,000
e daily Traffic Volum
e
10,000
15,000Average
0
5,000
Lake Zurich Schaumburg Mundelein Gurnee Libertyville Palatine McHenry Island Lake Buffalo Grove
Grayslake
71
MARKET SEPARATIONMARKET SEPARATION
72
LOCATION QUOTIENTLOCATION QUOTIENT
0.50
0.31
UTILITIES (22)
TRANSPORTATION & WAREHOUSING (48‐49)
0.80
0.76
0.69
0.68
0.61
HEALTH CARE & SOCIAL ASSISTANCE (62)
OTHER SERVICES (except PUBLIC ADMIN.) (81)
EDUCATIONAL SERVICES (61)
REAL ESTATE & RENTAL & LEASING (53)
INFORMATION (51)
0.90
0.89
0.87
0.80
0.80
FINANCE & INSURANCE (52)
ACCOMMODATIONS & FOOD SERVICES (72)
ADMIN. & SUP. & WASTE MGMT. & REMED. …
PROFESSIONAL, SCIENTIFIC & TECH. SVCS. (54)
UNCLASSIFIED (99)
1.30
1.29
1.28
1.15
1.11
RETAIL TRADE (44‐45)
WHOLESALE TRADE (42)
ARTS, ENTERTAINMENT & RECREATION (71)
CONSTRUCTION (23)
MINING, QUARRYING, & OIL AND GAS …
2.07
1.51
1.40
0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 2.50
AGRICULTURE, FORESTRY, FISHING, & …
MANUFACTURING (31‐33)
MNGMT. OF COMPANIES & ENTERPRISES (55)
Location Quotient
73