FL CCIM_Retail Feasibility Analysis.pdf

Retail Property Feasibility Analysis

December 13, 2012

Gary M. Ralston, CCIM, SIOR, CPM, CRE, SCLS Coldwell Banker Commercial Saunders Ralston Dantzler Realty

Lakeland, FL (863) 877-2828

[email protected]

mailto:[email protected]�

SAUNDERS RALSTON DANTZLER

Gary Ralston

net-leased real estate. During that time he guided the company's growth from less than $15 million in real estate assets to over $1.5 billion.

Gary holds the Certified Commercial Investment Member (CCIM), Society of Industrial and Office Realtors (SIOR), Specialist in Real Estate Securities (SRS), Certified Property Manager (CPM), Counselor of Real Estate (CRE) and Senior Certified Leasing Specialist (SCLS) designations and is also a Florida licensed real estate broker and certified building contractor.

Gary is a senior instructor for the CCIM Institute and a member of the board of directors of the CCIM Institute and CCIM Technologies, Inc. He is a Past President of the Florida CCIM Chapter. Gary is a full member of the Urban Land Institute (ULI) and a former Vice Chairman of the Small Scale Development Council. He is a member of the International Council of Shopping Centers (ICSC) and an instructor for the ICSC University of Shopping Centers at Wharton, the ICSC Executive Learning series and RECon Academy.

Gary holds a Masters in Real Estate and Construction Management from the University of Denver and serves on the Burns Counselor Board of the Franklin L. Burns School of Real Estate and Construction Management at the University of Denver. In 2007 was named an adjunct faculty member at the University of Denver and in 2011 he was named an adjunct faculty member at Florida Southern College.

Gary is a past member of the Executive Advisory Board of the Center for Retailing Education and Research at the University of Florida. He was inducted as a Hoyt Fellow (www.hoyt.org) in 2001. In 2011 Gary was appointed to the Board of Directors of the Central Florida Development Council (www.cfdc.org). Gary is a member of the Regional Economic Information Network of the Jacksonville Branch of the Federal Reserve Bank of Atlanta.

Gary M. Ralston, CCIM, SIOR, SRS, CPM, CRE, SCLS, is a managing partner of Coldwell Banker Commercial Saunders Ralston Dantzler Realty, LLC – the premier commercial services provider in Central Florida (Polk County). He is a recognized subject matter expert on retail and commercial properties. His consulting assignments include handling Florida REO properties for one of the nation’s largest special servicers of small commercial loans. He also serves as a principal of a retail build-to-suit development and investment company. From the early 1990s to 2004 Gary was the president and a member of the board of directors of Commercial Net Lease Realty, Inc. (NYSE:NNN) the industry leader in single-tenant corporate

http://www.hoyt.org/�

http://www.cfdc.org/�

CCIM Real Estate Feasibility Model

Financial Analysis

Market (Demand/Supply)

Analysis

Location, Site &

Building Analysis

Political & Legal

Analysis

Strategic Analysis •Goals and Objectives

•Alternatives •Decision Criteria

•“Go/No Go” Decision Points

Retail “Interesting Facts”

• WMT is almost 10% of US non-automotive retail sales (44, 45, less 4411)

• Top 100 retailers – 259,400 stores

– Less than 15% of total number of stores

– Almost 50% of total US non-automotive retail sales

2011 Top 100 US Retailers www.stores.org

Rank Company Headquarters Sales # Stores 2011 Sales/Stores 1 Wal-Mart Bentonville, Ark. 316,083,000,000 4,423 71,463,486

WMT (less Sam's) 264,186,000,000 3,868 68,300,414 2 Kroger Cincinnati 85,491,000,000 3,574 23,920,257 3 Target Minneapolis 68,466,000,000 1,763 38,834,940 4 Walgreen Deerfield, Ill. 66,330,000,000 7,651 8,669,455 5 Costco Issaquah, Wash. 69,400,000,000 433 160,277,136 6 The Home Depot Atlanta 62,075,000,000 1,963 31,622,517 7 CVS Caremark Woonsocket, R.I. 59,688,000,000 7,345 8,126,344

Sam's Club (WMT) 53,795,000,000 611 88,044,190 8 Lowe's Mooresville, N.C. 49,282,000,000 1,712 28,786,215 9 Best Buy Richfield, Minn. 37,551,000,000 1,443 26,022,869

10 Safeway Pleasanton, Calif. 36,923,000,000 1,453 25,411,562 11 McDonald's Oak Brook, Ill. 34,172,000,000 14,087 2,425,783 12 Sears Holdings Hoffman Estates, Ill. 33,837,000,000 3,489 9,698,194 13 SUPERVALU Eden Prairie, Minn. 29,297,000,000 2,466 11,880,373 14 Publix Lakeland, Fla. 26,967,000,000 1,198 22,510,017 15 Amazon.com Seattle 26,397,000,000 16 Macy's Cincinnati 26,344,000,000 840 31,361,905 17 Rite Aid Camp Hill, Pa. 25,256,000,000 4,664 5,415,094 18 Ahold USA / Royal Ahold Washington, D.C. 25,074,000,000 756 33,166,667 19 Delhaize America Salisbury, N.C. 19,230,000,000 1,650 11,654,545 20 Kohl's Menomonee Falls, Wis. 18,804,000,000 1,127 16,685,004 21 Apple Stores / iTunes Cupertino, Calif. 17,825,000,000

Apple Stores 10,608,500,000 245 43,300,000 22 TJX Framingham, Mass. 17,386,000,000 2,212 7,859,855 23 J.C. Penney Plano, Texas 17,146,000,000 1,105 15,516,742

http://www.stores.org/2010/Top-100-Retailers?order=field_rank_value&sort=desc�

http://www.stores.org/2010/Top-100-Retailers?order=field_rank_value&sort=desc�

Rank Company Headquarters Sales # Stores 2011 Sales/Stores 24 True Value Chicago 17,135,000,000 4,650 3,684,946 25 YUM! Brands Louisville, Ky. 17,100,000,000 18,050 947,368 26 H-E-B San Antonio 16,820,000,000 308 54,610,390 27 Meijer Grand Rapids, Mich. 16,603,000,000 197 84,279,188 28 Dollar General Goodlettsville, Tenn. 14,807,000,000 9,937 1,490,088 29 Wakefern / ShopRite Keasbey, N.J. 12,838,000,000 291 44,116,838 30 BJ's Wholesale Club Westborough, Mass. 11,797,000,000 196 60,188,776 31 Gap San Francisco, Calif. 11,443,000,000 2,436 4,697,455 32 Subway Milford, Conn. 11,206,000,000 25,014 447,989 33 Verizon Wireless Basking Ridge, N.J. 10,997,000,000 2,330 4,719,742 34 Nordstrom Seattle 10,497,000,000 225 46,653,333 35 7-Eleven Dallas 10,361,000,000 7,779 1,331,919 36 Staples Framingham, Mass. 10,337,000,000 1,583 6,530,006 37 Whole Foods Market Austin, Texas 9,794,000,000 311 31,491,961 38 Ace Hardware Oak Brook, Ill. 9,491,000,000 4,072 2,330,796 39 Bed Bath & Beyond Union, N.J. 9,402,000,000 1,143 8,225,722 40 Aldi Batavia, Ill. 9,218,000,000 1,195 7,713,808 41 Wendy's Dublin, Ohio 8,931,000,000 5,876 1,519,912 42 Ross Stores Pleasanton, Calif. 8,605,000,000 1,124 7,655,694 43 Limited Brands Columbus, Ohio 8,590,000,000 2,623 3,274,876 44 Family Dollar Matthews, N.C. 8,548,000,000 7,023 1,217,144 45 Burger King Holdings Miami 8,446,000,000 7,218 1,170,130 46 Toys "R" Us Wayne, N.J. 8,281,000,000 871 9,507,463 47 Army Air Force Exchange Dallas 8,228,000,000 181 45,458,564 48 Menard Eau Claire, Wis. 8,067,000,000 262 30,790,076 49 Starbucks Seattle 10,639,900,000 10,787 986,363

Rank Company Headquarters Sales # Stores 2011 Sales/Stores 50 Darden Restaurants Orlando 7,905,000,000 1,936 4,083,161 51 Trader Joe's Monrovia, Calif. 7,307,000,000 376 19,433,511 52 Office Depot Boca Raton, Fla. 7,297,000,000 1,125 6,486,222 53 Barnes & Noble New York 7,157,000,000 1,330 5,381,203 54 Hy-Vee W. Des Moines, Iowa 7,092,000,000 261 27,172,414 55 Winn-Dixie Stores Jacksonville, Fla. 6,986,000,000 484 14,433,884 56 Health Mart Systems Omaha, Neb. 6,943,000,000 2,850 2,436,140 57 A&P Montvale, N.J. 6,791,000,000 310 21,906,452 58 Giant Eagle O'Hara Township, Pa. 6,681,000,000 406 16,455,665 59 GameStop Grapevine, Texas 6,566,000,000 4,455 1,473,850 60 Dollar Tree Chesapeake, Va. 6,531,000,000 4,252 1,535,983 61 AutoZone Memphis 6,523,000,000 4,507 1,447,304 62 AT&T Wireless Dallas 6,486,000,000 2,300 2,820,000 63 Dunkin' Brands Canton, Mass. 6,428,000,000 9,472 678,632 64 DineEquity Glendale, Calif. 6,322,000,000 3,385 1,867,651 65 Wegman's Food Markets Rochester, N.Y. 6,199,000,000 78 79,474,359 66 Dillard's Little Rock, Ark. 6,194,000,000 304 20,375,000 67 Advance Auto Parts Roanoke, Va. 6,119,000,000 3,636 1,682,893 68 O'Reilly Automotive Springfield, Mo. 5,789,000,000 3,740 1,547,861 69 OfficeMax Naperville, Ill. 5,529,000,000 881 6,275,823 70 QVC West Chester, Pa. 5,412,000,000 71 Dick's Sporting Goods Coraopolis, Pa. 5,212,000,000 561 9,290,553 72 PetSmart Phoenix, Ariz. 5,186,000,000 1,159 4,474,547 73 Big Lots Columbus, Ohio 5,093,000,000 1,451 3,509,993 74 Defense Commissary Agcy. Fort Lee, Va. 5,067,000,000 180 28,150,000 75 Save Mart Modesto, Calif. 5,036,000,000 238 21,159,664

Rank Company Headquarters Sales # Stores 2011 Sales/Stores 76 Alimentation Couche-Tard Tempe, Ariz. 4,867,000,000 4,050 1,201,728 77 Dell Round Rock, Texas 4,748,000,000 78 WinCo Foods Boise, Idaho 4,563,000,000 80 57,037,500 79 Sherwin-Williams Cleveland 4,529,000,000 3,326 1,361,696 80 Harris Teeter Supermkts. Charlotte, N.C. 4,286,000,000 204 21,009,804 81 Tractor Supply Co. Brentwood, Tenn. 4,233,000,000 1,085 3,901,382 82 Albertsons Boise, Idaho 4,100,000,000 211 19,431,280 83 Chick-fil-A Atlanta 4,051,000,000 1,615 2,508,359 84 Brinker International Dallas 4,038,000,000 1,335 3,024,719 85 Neiman Marcus Dallas 4,035,000,000 77 52,402,597 86 Foot Locker New York 3,959,000,000 2,476 1,598,950 87 RadioShack Fort Worth, Texas 3,959,000,000 5,480 722,445 88 Burlington Coat Factory Burlington, N.J. 3,837,000,000 477 8,044,025 89 Roundy's Supermarkets Milwaukee, Wis. 3,827,000,000 158 24,221,519 90 Michaels Stores Irving, Texas 3,825,000,000 1,109 3,449,053 91 Belk Charlotte, N.C. 3,700,000,000 303 12,211,221 92 Stater Bros. Holdings San Bernardino, Calif. 3,693,000,000 167 22,113,772 93 Sonic Oklahoma City, Okla. 3,693,000,000 3,561 1,037,068 94 Williams-Sonoma San Francisco 3,682,000,000 561 6,563,280 95 IKEA North America Conshohocken, Pa. 3,632,000,000 38 95,578,947 96 Price Chopper Supermkts. Rotterdam, N.Y. 3,556,000,000 129 27,565,891 97 The Sports Authority Englewood, Colo. 3,471,000,000 460 7,545,652 98 OSI Restaurant Partners Tampa, Fla. 3,461,000,000 1248 2,773,237 99 Ingles Markets Asheville, N.C. 3,429,000,000 203 16,891,626

100 Raley's W. Sacramento, Calif. 3,335,000,000 142 23,485,915

http://www.stores.org/2012/Top-100-Retailers

http://www.stores.org/2012/Top-100-Retailers�

INN

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EXPAN

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DEC

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TIME

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S IN

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Retail Business Life Cycle

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2007 363,340 364,458 367,902 366,466 371,045 367,773 369,539 371,085 374,620 374,485 378,939 376,660

2008 376,031 372,110 372,846 374,810 376,189 377,289 375,214 373,741 366,877 353,187 342,298 333,348

2009 338,246 337,081 331,380 332,258 335,557 339,659 340,600 348,621 339,523 342,223 346,812 348,184

2010 348,585 348,794 355,695 358,023 355,693 354,404 355,436 358,715 361,756 366,507 370,165 372,587

2011 375,739 378,934 382,115 383,810 383,733 387,045 388,064 388,595 392,354 395,995 397,868 398,012

2012 400,550 404,692 406,200 404,112 403,641 400,635 403,176 NA NA NA NA NA

Source: Monthly Retail Trade and Food Services

44X72: Retail Trade and Food Services: U.S. Total

Seasonally Adjusted Sales - Monthly [Millions of Dollars]

Period: 2007 to 2012

Definition: NAICS 44-45, Retail Trade

The Retail Trade sector comprises establishments engaged in retailing merchandise, generally without transformation, and rendering services incidental to the sale of merchandise. The retailing process is the final step in the distribution of merchandise; retailers are, therefore, organized to sell merchandise in small quantities to the general public.

http://www.census.gov/econ/census02/data/us/US000_44.HTM

2007 Economic Census

44-45 & 722 Retail and food services sales, total 4,647,648 Retail sales and food services excl motor vehicle and parts 3,821,349 Retail sales, total 4,154,147 Retail sales, total (excl. motor vehicle and parts dealers) 3,327,848

441 Motor vehicle and parts dealers 826,299 442 Furniture and home furnishings stores 88,821 443 Electronics and appliance stores 99,996 444 Building mat. and garden equip. and supplies dealers 278,902 445 Food and beverage stores 613,908 446 Health and personal care stores 272,286 447 Gasoline stations 526,196 448 Clothing and clothing access. stores 226,748 451 Sporting goods, hobby, book, and music stores 84,671 452 General merchandise stores 629,123 453 Miscellaneous store retailers 113,452 454 Nonstore retailers 393,745 722 Food services and drinking places 493,501

Total Retail Sales 2011

http://www.census.gov/retail/index.html

• Consumer is “trading down” / recession retail • Wal-Mart • Dollar stores • Warehouse clubs

Retail Business Trends

• Consumer is “trading down” / recession retail • Wal-Mart • Dollar stores • Warehouse clubs

• Convenience & Value

• Efficiency – Who took Circuit City’s business?

• The internet??

Retail Business Trends

NAICS code

2009 Value of sales (million dollars)

E-commerce as % of total sales Total E-commerce

Retail trade, total 44-45 3,638,471 145,214 4.0 Motor vehicle and parts dealers 441 676,801 17,201 2.5 Furniture and home furnishings stores 442 86,657 Electronics and appliance stores 443 98,384 1,140 1.2 Building material/garden equipment/supplies stores 444 268,206 477 0.2 Food and beverage stores 445 570,581 883 0.2 Health and personal care stores 446 253,243 177 0.1 Gasoline station 447 388,515 Clothing and clothing accessories stores 448 204,866 2,965 1.4 Sporting goods, hobby, book, and music stores 451 81,373 1,865 2.3 General merchandise stores 452 592,009 220 Miscellaneous store retailers 453 105,366 2,360 2.2 Nonstore retailers 454 312,470 116,543 37.3 ..Electronic shopping and mail-order houses 45411 234,667 112,791 48.1 Source: U.S. Census Bureau, "E-Stats, 2009 E-commerce Multi-sector Report," May 2011.

Retail Trade Sales--Total and E-Commerce

http://www.dollargeneral.com/OurStores/Pages/StoreLocator.aspx�

http://www.dollargeneral.com/OurStores/Pages/StoreLocator.aspx�


Estimated Quarterly U.S. Retail Sales (Adjusted1): Total and E-commerce2

(Estimates are based on data from the Monthly Retail Trader Survey and administrative records.)

Retail Sales E-commerce Percent Change Percent Change (millions of dollars) as a Percent From Prior Quarter From Same Quarter

Quarter of A Year Ago Total E-commerce Total Total E-commerce Total E-commerce 2nd quarter 2012(p) 1,076,934 54,842 5.1 -0.4 3.3 4.3 15.3 1st quarter 2012(r) 1,081,347 53,091 4.9 1.5 2.9 6.4 15.3 4th quarter 2011 1,065,030 51,575 4.8 2.0 6.2 7.5 15.1 3rd quarter 2011 1,044,075 48,564 4.7 1.1 2.1 8.9 12.8 2nd quarter 2011(r) 1,032,271 47,575 4.6 1.5 3.3 8.4 15.7 1st quarter 2011 1,016,544 46,065 4.5 2.6 2.8 8.3 17.2 4th quarter 2010 990,726 44,819 4.5 3.3 4.1 7.2 17.4 3rd quarter 2010 958,694 43,043 4.5 0.7 4.7 4.6 16.1 2nd quarter 2010 952,070 41,112 4.3 1.4 4.6 6.4 16.9 1st quarter 2010 938,772 39,295 4.2 1.6 3.0 5.1 14.9


Estimated Quarterly U.S. Retail Sales (Adjusted1): Total and E-commerce2

(Estimates are based on data from the Monthly Retail Trader Survey and administrative records.)

Retail Sales E-commerce Percent Change Percent Change (millions of dollars) as a Percent From Prior Quarter From Same Quarter

Quarter of A Year Ago Total E-commerce Total Total E-commerce Total E-commerce 2nd quarter 2012(p) 1,076,934 54,842 5.1 -0.4 3.3 4.3 15.3 1st quarter 2012(r) 1,081,347 53,091 4.9 1.5 2.9 6.4 15.3 4th quarter 2011 1,065,030 51,575 4.8 2.0 6.2 7.5 15.1 3rd quarter 2011 1,044,075 48,564 4.7 1.1 2.1 8.9 12.8 2nd quarter 2011(r) 1,032,271 47,575 4.6 1.5 3.3 8.4 15.7 1st quarter 2011 1,016,544 46,065 4.5 2.6 2.8 8.3 17.2 4th quarter 2010 990,726 44,819 4.5 3.3 4.1 7.2 17.4 3rd quarter 2010 958,694 43,043 4.5 0.7 4.7 4.6 16.1 2nd quarter 2010 952,070 41,112 4.3 1.4 4.6 6.4 16.9 1st quarter 2010 938,772 39,295 4.2 1.6 3.0 5.1 14.9

Amazon.com

Amazon 2011 10K

Amazon.com

Amazon 2011 10K

• Internet means an informed consumer – Retail margins are under pressure – equals lower rent

• Technology creates more efficient use of inventory & space – equals more sales in less space – equals smaller stores

• Supermarket business is increasingly focused on dominant players and larger stores

• Retail industry is increasing dominated by stronger, national anchors over their smaller regional/local peers • This is not necessarily the case with in-line space

• Large spaces are hard to re-tenant

Retail Real Estate Trends

• Exclusive use provisions will impact 2nd generation space

• Landlords are making greater use of service tenants to maintain occupancy • One study – service was less than 15% ten

years ago vs. 24% today • “Start ups” companies retail, service, etc. will be

new “mom & pops”

Retail Real Estate Trends

Why More Open Stores • Economies of Scale

– One promotional cost for all stores – Share distribution center – Leverage management and central operations

• Cannibalization

– Open stores as long as profits increase – Cannibalization diminishes returns from

locating too many stores in an area

Factors Affecting Store Location • Strategic fit with target market

– (customers = demand) • Competition (supply) • Cost of operating store

– (financial feasibility for retailer) • Economic conditions

– Retailers expand when they are gaining market share and generating free cash flow

– General demographic trends • Growing population and income = more retail sales

How Do Retailers Evaluate Sites

• Estimates potential sales at location – Minimum population or # of households – Income and lifestyle characteristics

• Site characteristics

– Specifics which many increase or decrease potential sales estimate

– Parking – Visibility – Adjacent tenants

Adjacent Tenants

• Exclusive use restrictions – Creates artificial demand

• Complimentary (traffic generators) • Principle of Cumulative Attractiveness

• Co-Tenancy

Retailers Financial Feasibility • Occupancy cost is a percentage of sales • Occupancy costs includes

– Base rent – CAM – Taxes, insurance, etc.

• Different retail lines of trade have different

gross operating margins and thus rent as a percent of sales can vary – Dollar store vs auto parts vs jewelry store

Retail Gross Margin Cost Kroger AMZN WMT Sears

Sales 87,048,000,000 90,374,000,000 48,077,000,000 418,952,000,000 41,567,000,000

COGS 77,739,000,000 71,494,000,000 37,288,000,000 315,287,000,000 30,836,000,000

Gross Margin 9,309,000,000 18,880,000,000 10,789,000,000 103,665,000,000 10,731,000,000

Gross Margin % 10.7% 20.9% 22.4% 24.7% 25.8%

Publix WAG TGT DG HD

Sales 26,967,389,000 72,184,000,000 65,786,000,000 14,807,188,000 67,997,000,000

COGS 19,520,370,000 51,692,000,000 45,725,000,000 10,109,278,000 44,693,000,000

Gross Margin 7,447,019,000 20,492,000,000 20,061,000,000 4,697,910,000 23,304,000,000

Gross Margin % 27.6% 28.4% 30.5% 31.7% 34.3%

Advance Auto Parts Example

• Search Advance Auto Parts • Investor Relations • Annual Report / 10K • Look for income statement

Sears Holding Corporation

Starbucks (NASDAQ:SBUX) %

FY ending 12/2/2011

Net Sales 9,632,400,000

Cost of sales including occupancy costs 4,949,300,000 51.4%

Gross Margin 4,683,100,000 48.6%

Coffee can pay a lot of rent!

Purchasing Power • Estimating demand

– People / households – Income / disposable income – Lifestyle / tapestry – http://www.esri.com/library/brochures/pdfs/tapestry-segmentation.pdf

• STDB Retail MarketPlace Profile report

– http://www.esri.com/library/whitepapers/pdfs/esri-data-retail-marketplace.pdf

http://www.esri.com/library/brochures/pdfs/tapestry-segmentation.pdf�

http://www.esri.com/library/whitepapers/pdfs/esri-data-retail-marketplace.pdf�

Summary Demographics 2009 Population 309,731,508 2009 Households 116,523,156

2009 Median Disposable Income $43,361 2009 Per Capita Income $27,277

Industry Summary Demand Supply Retail Gap Surplus / Leakage Number of (Retail Potential) (Retail Sales) (Demand - Supply) Factor Businesses

Total Retail Trade and Food & Drink (NAICS 44-45, 722) $3,159,959,994,136 $3,204,182,167,862 -$44,222,173,726 -0.7 2,549,724 Total Retail Trade (NAICS 44-45) $2,696,791,458,246 $2,748,067,968,046 -$51,276,509,800 -0.9 1,864,278 Total Food & Drink (NAICS 722) $463,168,535,890 $456,114,199,816 $7,054,336,074 0.8 685,446

Demand Supply Surplus / Leakage Number of Industry Group (Retail Potential) (Retail Sales) Retail Gap Factor Businesses Motor Vehicle & Parts Dealers (NAICS 441) $670,514,909,767 $687,977,716,392 -$17,462,806,625 -1.3 235,175 Automobile Dealers (NAICS 4411) $578,877,558,045 $593,335,669,404 -$14,458,111,359 -1.2 111,692 Other Motor Vehicle Dealers (NAICS 4412) $50,330,131,040 $52,094,544,181 -$1,764,413,141 -1.7 42,451 Auto Parts, Accessories, and Tire Stores (NAICS 4413) $41,307,220,682 $42,547,502,807 -$1,240,282,125 -1.5 81,032

Furniture & Home Furnishings Stores (NAICS 442) $98,919,930,686 $91,847,106,437 $7,072,824,249 3.7 110,176 Furniture Stores (NAICS 4421) $62,542,941,027 $54,742,430,323 $7,800,510,704 6.7 47,868 Home Furnishings Stores (NAICS 4422) $36,376,989,659 $37,104,676,114 -$727,686,455 -1.0 62,308

Electronics & Appliance Stores (NAICS 443/NAICS 4431) $82,417,769,734 $84,493,504,711 -$2,075,734,977 -1.2 123,325

Bldg Materials, Garden Equip. & Supply Stores (NAICS 444) $116,439,012,859 $116,952,731,058 -$513,718,199 -0.2 166,028 Building Material and Supplies Dealers (NAICS 4441) $106,549,571,943 $106,658,508,886 -$108,936,943 -0.1 129,317 Lawn and Garden Equipment and Supplies Stores (NAICS 4442) $9,889,440,916 $10,294,222,172 -$404,781,256 -2.0 36,711

Food & Beverage Stores (NAICS 445) $512,484,559,459 $518,878,839,136 -$6,394,279,677 -0.6 218,892 Grocery Stores (NAICS 4451) $469,368,667,754 $476,447,171,320 -$7,078,503,566 -0.7 129,623 Specialty Food Stores (NAICS 4452) $18,839,987,869 $16,811,716,877 $2,028,270,992 5.7 51,200 Beer, Wine, and Liquor Stores (NAICS 4453) $24,275,903,836 $25,619,950,939 -$1,344,047,103 -2.7 38,069

Demand Supply Surplus / Leakage Number of

Industry Group (Retail Potential) (Retail Sales) Retail Gap Factor Businesses Health & Personal Care Stores (NAICS 446/NAICS 4461) $104,417,752,601 $113,430,264,401 -$9,012,511,800 -4.1 129,338

Gasoline Stations (NAICS 447/NAICS 4471) $432,703,600,864 $424,337,402,649 $8,366,198,215 1.0 105,225

Clothing and Clothing Accessories Stores (NAICS 448) $120,364,069,285 $128,104,648,006 -$7,740,578,721 -3.1 236,065 Clothing Stores (NAICS 4481) $93,448,677,340 $99,070,632,972 -$5,621,955,632 -2.9 156,523 Shoe Stores (NAICS 4482) $11,788,977,284 $12,755,794,092 -$966,816,808 -3.9 30,754 Jewelry, Luggage, and Leather Goods Stores (NAICS 4483) $15,126,414,661 $16,278,220,942 -$1,151,806,281 -3.7 48,788

Sporting Goods, Hobby, Book, and Music Stores (NAICS 451) $38,531,396,409 $42,190,971,217 -$3,659,574,808 -4.5 131,312 Sporting Goods/Hobby/Musical Instrument Stores (NAICS 4511) $20,217,691,471 $22,438,790,537 -$2,221,099,066 -5.2 102,310

Book, Periodical, and Music Stores (NAICS 4512) $18,313,704,938 $19,752,180,680 -$1,438,475,742 -3.8 29,002

General Merchandise Stores (NAICS 452) $370,767,412,695 $385,040,000,063 -$14,272,587,368 -1.9 76,412 Department Stores Excluding Leased Depts. (NAICS 4521) $180,743,211,742 $182,664,226,029 -$1,921,014,287 -0.5 30,293 Other General Merchandise Stores (NAICS 4529) $190,024,200,953 $202,375,774,034 -$12,351,573,081 -3.1 46,119

Miscellaneous Store Retailers (NAICS 453) $55,167,277,457 $57,875,769,094 -$2,708,491,637 -2.4 303,678 Florists (NAICS 4531) $6,289,266,686 $5,478,872,712 $810,393,974 6.9 41,534 Office Supplies, Stationery, and Gift Stores (NAICS 4532) $18,313,701,964 $19,267,443,167 -$953,741,203 -2.5 83,592 Used Merchandise Stores (NAICS 4533) $4,331,171,072 $4,863,757,757 -$532,586,685 -5.8 59,822 Other Miscellaneous Store Retailers (NAICS 4539) $26,233,137,735 $28,265,695,458 -$2,032,557,723 -3.7 118,730

Nonstore Retailers (NAICS 454) $94,063,766,430 $96,939,014,882 -$2,875,248,452 -1.5 28,652 Electronic Shopping and Mail-Order Houses (NAICS 4541) $49,213,479,731 $54,134,827,567 -$4,921,347,836 -4.8 5,329 Vending Machine Operators (NAICS 4542) $14,368,545,500 $10,946,777,588 $3,421,767,912 13.5 8,277 Direct Selling Establishments (NAICS 4543) $30,481,741,199 $31,857,409,727 -$1,375,668,528 -2.2 15,046

Food Services & Drinking Places (NAICS 722) $463,168,535,890 $456,114,199,816 $7,054,336,074 0.8 685,446 Full-Service Restaurants (NAICS 7221) $196,120,539,286 $200,757,467,451 -$4,636,928,165 -1.2 384,498 Limited-Service Eating Places (NAICS 7222) $203,344,507,091 $191,605,481,221 $11,739,025,870 3.0 210,456 Special Food Services (NAICS 7223) $38,017,365,935 $38,012,352,773 $5,013,162 0.0 34,658 Drinking Places - Alcoholic Beverages (NAICS 7224) $25,686,123,578 $25,738,898,371 -$52,774,793 -0.1 55,834

Retail Geographies • Region

– Typically formal geographies such as MSA or combination of Counties

• Market – Typically formal geographies such as Counties or

divisions of Counties • Submarket

– Group of buildings competitive with each other and distinct boundaries, often zip codes

• Trade Area (Retail Trade Area) – will discuss and demonstrate in Case Study

Trade Area

• A Retail trade area is the geographic area from which the steady, sustaining patronage for a shopping center is obtained.

• Trade area delineation

Rules for defining a Retail Trade Area

• Trade Area defined using Theissen Polygon – ½ distance to next occurrence of competing

supply • Cannibalization • Consistent with Reilly’s Law of Gravitational Analysis

for retail properties • Map competing supply and/or next closest

store of same chain (cannibalization) • Establish preliminary boundary of trade area

based on ½ distance to competing supply in each direction

• Adjust to account for road systems

Ralston’s Rules for retail trade areas

1) Radius – ½ distance to next competing point of supply

2) Drive-time (3, 5 & 10 min) 3) Custom polygon based on physical

boundaries and road network

Subject & DG -> 3 mile radius trade area

Trade Area -> 3 mile radius, plus 3, 5 10 min drive time

Trade Area -> 3 mile radius trade area, plus 3, 5 10 min drive time & custom polygon

Retail (Sales) Gap Model • Retail Sales Gap Model Disaggregated by

Line-of-Trade – Delineate “Trade Area” – ESRI Retail Sales Demand estimates using

modified Retail MarketPlace Profile report – ESRI or CoStar estimate of Supply – report

modified to address NAICS retail line-of-trade – Gap (Leakage) calculation

• Tenants within Lines of Trade with “positive

Gap”

Gap Analysis – Benchmark Geography

• Model for demand parameter:

Total retail SF in “benchmark geography” Divided by: Population or households in benchmark geography = Retail SF per capita or per household in benchmark

geography

1. Select Benchmark Geography

a. Typically MSA or County

2. Calculate Demand parameter

=

÷

Retail square feet per capita or per household in benchmark geography

Total population or number of households in benchmark geography

Total retail square feet in benchmark geography

Model for Demand Parameter

Gap Analysis

3. Estimate the demand for aggregate retail space in the market area If vacancy in the benchmark geography or the Market area is other than “normalized” i.e., long

term stabilized occupancy, then adjust to account for normalized vacancy.

= × Market area population or number of households

Demand parameter

Square feet of demand

Model for Demand

Gap Analysis

=

- Supply

Demand including

Gap including adjustment for acceptable vacancy

Model for Gap

4. Calculate the gap including an acceptable vacancy for aggregate retail space in the market area

Gap Analysis

Gap using Benchmark Geography

• Lake County, FL – Population 305,150 – Households 126,929 – Retail SF 6,046,685

• Trade Area

– Households 11,800 – Retail SF 410,000

• What is the Gap?

Retail SF in Lake 6,046,685 HH in Lake 126,929

SF/HH

47.64

Demand Parameter

47.64 # of HH in Trade Area 11,800

Demand

562,132

Demand

562,132

Supply in Trade Area

410,000

Gap

152,132

Benchmark Geography Example

Some say we have too much space

43.0

44.0

45.0

46.0

47.0

48.0

49.0

50.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

US Retail Space Per Capita has increased but so have sales until 2007

• Retail Activity can occur as either a free standing establishment or as part of a shopping center

• Two principal sources of information are ICSC and ULI

• Dollars and Cents of Shopping Centers

12/13/2012 53

Retail Activity

Retail Space Definitions (ICSC / ULI)

• Freestanding Costar -> General • Shopping Centers

– Open Air Costar -> Shopping Center

• Convenience Strip Centers • Neighborhood Neighborhood • Community Community • Power Center (a/k/a Super Community) • Other Costar -> Specialty

– Lifestyle Theme / Festival – Theme / Festival Outlet

– Enclosed • Regional / Superregional Costar -> Mall • Outlet

• Mixed use

55 12/13/2012

Shopping Center Characteristics

Module 8– Retail Properties

2008 2009 2010 2011

Number of Shopping Centers1 106,617 107,514 107,773 107,823

Minimum Size Shopping Center Included No Minimum Size No Minimum Size No Minimum Size No Minimum Size

Shopping Centers by Type (Number of Centers):1

Super-Regional (800,000+ sq ft) 639 644 646 646

Regional (400,000 - 800,000 sq ft) 779 791 791 791

Community (100,000 - 350,000 sq ft) 9,211 9,293 9,317 9,324

Neighborhood (30,000 - 150,000 sq ft) 31,582 31,804 31,875 31,887

Power Center (250,000 - 600,000 sq ft) 2,027 2,070 2,079 2,083

Lifestyle (150,000 - 500,000 sq ft) 391 412 417 418

Theme/Festival (80,000 - 250,000 sq ft) 247 250 250 250

Outlet (50,000 - 400,000 sq ft) 319 323 325 325

Strip/Convenience (< 30,000 sq ft) 61,355 61,859 62,004 62,030

Airport Retail (75,000 - 250,000 sq ft) 67 68 69 69

Shopping Center GLA1 7,234,299,203 sq ft 7,307,603,702 sq ft 7,325,729,312 sq ft 7,330,063,735 sq ft

Shopping Centers by Type (Share of GLA):1

Super-Regional (800,000+ sq ft) 10.7% 10.7% 10.7% 10.7%

Regional (400,000 - 800,000 sq ft) 6.2% 6.2% 6.2% 6.2%

Community (100,000 - 350,000 sq ft) 24.9% 24.8% 24.8% 24.8%

Neighborhood (30,000 - 150,000 sq ft) 31.8% 31.7% 31.7% 31.7%

Power Center (250,000 - 600,000 sq ft) 11.3% 11.4% 11.4% 11.5%

Lifestyle (150,000 - 500,000 sq ft) 1.8% 1.8% 1.8% 1.8%

Theme/Festival (80,000 - 250,000 sq ft) 0.5% 0.5% 0.5% 0.5%

Outlet (50,000 - 400,000 sq ft) 1.0% 1.0% 1.0% 1.0%

Strip/Convenience (< 30,000 sq ft) 11.6% 11.6% 11.6% 11.6%

Airport Retail (75,000 - 250,000 sq ft) 0.2% 0.2% 0.2% 0.2%

Shopping Center GLA as % of Total Retail Space 45.9% 46.0% 45.9% 45.9%

Total Shopping Center GLA per 100 Inhabitants 2,376 sq ft 2,380 sq ft 2,372 sq ft N/A

Number of Retail Establishments2 N/A N/A N/A N/A

Source: www.costar.com

Sales 2008 2009 2010 2011

Total Retail Sales (in USD)2 US$4.41 tril. US$4.09 tril. US$4.36 tril. N/A

Year-on-Year % Change in Retail Sales -0.9% -7.2% 6.4% N/A

Total Retail Sales per Capita (in USD) US$14,626 US$14,363 US$13,253 N/A

Total Retail Sales % GDP2, 3 31.7% 30.7% 29.0% N/A

Shopping-Center Sales (in USD)2, 4, 5 US$2.27 tril. US$2.22 tril. US$2.29 tril. N/A

Year-on-Year % Change in Shopping-Center Sales 0.7% -2.6% 3.4% N/A

Shopping-Center Sales per Capita (in USD) US$7,423 US$7,408 US$7,176 N/A

Shopping-Center Sales % GDP 16.1% 15.8% 15.7% N/A

Market Cap Using Repeat Sales Price Estimate Methodology for 2009*

Property Type Square Footage Price/SF Market Cap Office 12,058,379,264 $136 $1,639,939,579,842 Industrial 23,851,606,671 $45 $1,073,322,300,185 Flex 2,907,635,121 $91 $264,594,796,011 Retail 17,336,105,191 $172 $2,981,810,092,879 Health Care 2,634,773,693 $490 $1,291,039,109,668 Hospitality 2,556,726,260 $97 $894,854,191,000 Mixed-Use 107,651,632 $95 $10,226,905,040 Multi-Family 22,643,500,000 $62 $1,403,897,000,000 Specialty, Sports & Entertainment $ 1,953,008,671,667 Totals 84,096,377,832 $10,865,840,902,512

This approach uses an arithmetic value weighting for Office, Industrial, Retail and Multifamily prices shaded here in green. This estimate is closer to the end of 2009. The other values remain the same. See: “A Comprehensive Approach to Commercial Real Estate Prices” by Ruijue Peng et al, ARES 2010

Retail Space Per Capita U.S. Avg = 56.4 sq ft per capita

Shopping Center Terms • Types of space

– In-line – End cap – Elbow – Out-parcel – Pad

• Measurement -> GLA • Parking Index / Ratio • Typical lease terms

– 3 to 5 years for locals, 10 to 20 years for anchors – NN, NNN – CAM Charges

Real estate is space for people.

Space for people to: live in work in shop in, and store things in.

Demand for retail real estate is people

and money (household income).

Retail Demand Segmentation • Consumer income

• Population & household numbers

• Consumer expenditure percentages

Retail Demand Estimate • Purchasing Power

– Per Capita Income or – Average Household Income

• Disposable purchasing power estimate

• Allocation of purchasing based on consumer

expenditure patterns.

Summary Demographics 2009 Population 309,731,508 2009 Households 116,523,156

2009 Median Disposable Income $43,361 2009 Per Capita Income $27,277

Industry Summary Demand Supply Retail Gap Surplus / Leakage Number of (Retail Potential) (Retail Sales) (Demand - Supply) Factor Businesses

Total Retail Trade and Food & Drink (NAICS 44-45, 722) $3,159,959,994,136 $3,204,182,167,862 -$44,222,173,726 -0.7 2,549,724 Total Retail Trade (NAICS 44-45) $2,696,791,458,246 $2,748,067,968,046 -$51,276,509,800 -0.9 1,864,278 Total Food & Drink (NAICS 722) $463,168,535,890 $456,114,199,816 $7,054,336,074 0.8 685,446

Demand Supply Surplus / Leakage Number of Industry Group (Retail Potential) (Retail Sales) Retail Gap Factor Businesses Motor Vehicle & Parts Dealers (NAICS 441) $670,514,909,767 $687,977,716,392 -$17,462,806,625 -1.3 235,175 Automobile Dealers (NAICS 4411) $578,877,558,045 $593,335,669,404 -$14,458,111,359 -1.2 111,692 Other Motor Vehicle Dealers (NAICS 4412) $50,330,131,040 $52,094,544,181 -$1,764,413,141 -1.7 42,451 Auto Parts, Accessories, and Tire Stores (NAICS 4413) $41,307,220,682 $42,547,502,807 -$1,240,282,125 -1.5 81,032

Furniture & Home Furnishings Stores (NAICS 442) $98,919,930,686 $91,847,106,437 $7,072,824,249 3.7 110,176 Furniture Stores (NAICS 4421) $62,542,941,027 $54,742,430,323 $7,800,510,704 6.7 47,868 Home Furnishings Stores (NAICS 4422) $36,376,989,659 $37,104,676,114 -$727,686,455 -1.0 62,308

Electronics & Appliance Stores (NAICS 443/NAICS 4431) $82,417,769,734 $84,493,504,711 -$2,075,734,977 -1.2 123,325

Bldg Materials, Garden Equip. & Supply Stores (NAICS 444) $116,439,012,859 $116,952,731,058 -$513,718,199 -0.2 166,028 Building Material and Supplies Dealers (NAICS 4441) $106,549,571,943 $106,658,508,886 -$108,936,943 -0.1 129,317 Lawn and Garden Equipment and Supplies Stores (NAICS 4442) $9,889,440,916 $10,294,222,172 -$404,781,256 -2.0 36,711

Food & Beverage Stores (NAICS 445) $512,484,559,459 $518,878,839,136 -$6,394,279,677 -0.6 218,892 Grocery Stores (NAICS 4451) $469,368,667,754 $476,447,171,320 -$7,078,503,566 -0.7 129,623 Specialty Food Stores (NAICS 4452) $18,839,987,869 $16,811,716,877 $2,028,270,992 5.7 51,200 Beer, Wine, and Liquor Stores (NAICS 4453) $24,275,903,836 $25,619,950,939 -$1,344,047,103 -2.7 38,069

Demand Supply Surplus / Leakage Number of

Industry Group (Retail Potential) (Retail Sales) Retail Gap Factor Businesses Health & Personal Care Stores (NAICS 446/NAICS 4461) $104,417,752,601 $113,430,264,401 -$9,012,511,800 -4.1 129,338

Gasoline Stations (NAICS 447/NAICS 4471) $432,703,600,864 $424,337,402,649 $8,366,198,215 1.0 105,225

Clothing and Clothing Accessories Stores (NAICS 448) $120,364,069,285 $128,104,648,006 -$7,740,578,721 -3.1 236,065 Clothing Stores (NAICS 4481) $93,448,677,340 $99,070,632,972 -$5,621,955,632 -2.9 156,523 Shoe Stores (NAICS 4482) $11,788,977,284 $12,755,794,092 -$966,816,808 -3.9 30,754 Jewelry, Luggage, and Leather Goods Stores (NAICS 4483) $15,126,414,661 $16,278,220,942 -$1,151,806,281 -3.7 48,788

Sporting Goods, Hobby, Book, and Music Stores (NAICS 451) $38,531,396,409 $42,190,971,217 -$3,659,574,808 -4.5 131,312 Sporting Goods/Hobby/Musical Instrument Stores (NAICS 4511) $20,217,691,471 $22,438,790,537 -$2,221,099,066 -5.2 102,310

Book, Periodical, and Music Stores (NAICS 4512) $18,313,704,938 $19,752,180,680 -$1,438,475,742 -3.8 29,002

General Merchandise Stores (NAICS 452) $370,767,412,695 $385,040,000,063 -$14,272,587,368 -1.9 76,412 Department Stores Excluding Leased Depts. (NAICS 4521) $180,743,211,742 $182,664,226,029 -$1,921,014,287 -0.5 30,293 Other General Merchandise Stores (NAICS 4529) $190,024,200,953 $202,375,774,034 -$12,351,573,081 -3.1 46,119

Miscellaneous Store Retailers (NAICS 453) $55,167,277,457 $57,875,769,094 -$2,708,491,637 -2.4 303,678 Florists (NAICS 4531) $6,289,266,686 $5,478,872,712 $810,393,974 6.9 41,534 Office Supplies, Stationery, and Gift Stores (NAICS 4532) $18,313,701,964 $19,267,443,167 -$953,741,203 -2.5 83,592 Used Merchandise Stores (NAICS 4533) $4,331,171,072 $4,863,757,757 -$532,586,685 -5.8 59,822 Other Miscellaneous Store Retailers (NAICS 4539) $26,233,137,735 $28,265,695,458 -$2,032,557,723 -3.7 118,730

Nonstore Retailers (NAICS 454) $94,063,766,430 $96,939,014,882 -$2,875,248,452 -1.5 28,652 Electronic Shopping and Mail-Order Houses (NAICS 4541) $49,213,479,731 $54,134,827,567 -$4,921,347,836 -4.8 5,329 Vending Machine Operators (NAICS 4542) $14,368,545,500 $10,946,777,588 $3,421,767,912 13.5 8,277 Direct Selling Establishments (NAICS 4543) $30,481,741,199 $31,857,409,727 -$1,375,668,528 -2.2 15,046

Food Services & Drinking Places (NAICS 722) $463,168,535,890 $456,114,199,816 $7,054,336,074 0.8 685,446 Full-Service Restaurants (NAICS 7221) $196,120,539,286 $200,757,467,451 -$4,636,928,165 -1.2 384,498 Limited-Service Eating Places (NAICS 7222) $203,344,507,091 $191,605,481,221 $11,739,025,870 3.0 210,456 Special Food Services (NAICS 7223) $38,017,365,935 $38,012,352,773 $5,013,162 0.0 34,658 Drinking Places - Alcoholic Beverages (NAICS 7224) $25,686,123,578 $25,738,898,371 -$52,774,793 -0.1 55,834

Legal Issues • Zoning / land use codes

– WWW.municode.com

• Cross access and easements

• Restrictive covenants

• Exclusive use restrictions • Co-tenancy

http://www.municode.com/�

STDB Example

• 4717 S FLORIDA AVE, Lakeland, FL, 33813 • Saunders Maps

• STDB activity • http://www.stdb.com/ • Create study areas

• 1, 2, 3 mile radius • 3, 5, 10 min drive time

• Run reports • demographic • Retail marketplace profile

http://www.stdb.com/�

• Location Benchmark Comparison • Maps • Demographics & Demand

Gary Ralston, CCIM, SIOR, CRE, CPM, SCLS Coldwell Banker Commercial Saunders Ralston Dantzler Realty

(863) 877-2828 [email protected]

mailto:[email protected]�

5125 S Florida, Lakeland -> 5-10-15 minute drive time

FDOT Traffic Count

35496 Hwy 27, Haines City -> 5-10-15 minute drive time

FDOT Traffic Count

1100 3rd ST SW, Winter Haven -> 5-10-15 minute drive time

FDOT Traffic Count

210 SR 60 W, Lake Wales -> 5-10-15 minute drive time

FDOT Traffic Count

MANNY’S CHOPHOUSE Locations (5, 10 15 min drive time)

Haines City Lake Wales Winter Haven

Lakeland

35496 HWY 27 210 SR 60 W

1100 3rd ST SW

5125 S Florida

Demographic and Restaurant Demand Comparison

5125 S Florida Ave, Lakeland 35496 Hwy 27 Haines City 1100 3rd ST SW, Winter Haven 210 SR 60 W Lake Wales

Drive Time: 10 minutes 15 minutes 10 minutes 15 minutes 10 minutes 15 minutes 10 minutes 15 minutes 2010 Population 83,686 167,743 39,164 60,891 74,238 125,988 21,294 35,874 2010 Households 33,828 65,481 15,059 23,496 29,352 50,417 8,582 14,330 2010 Median Disposable Income $44,501 $38,067 $31,919 $32,086 $36,064 $35,999 $29,375 $31,723 2010 Per Capita Income $28,341 $23,590 $19,371 $19,197 $21,633 $21,721 $19,666 $20,111

Food Services & Drinking Places (NAICS 722) $129,783,049 $213,811,975 $38,931,466 $61,463,497 $87,238,531 $147,096,316 $22,030,744 $38,191,079 Full-Service Restaurants (NAICS 7221) $54,374,016 $89,467,014 $16,210,394 $25,530,227 $36,487,567 $61,407,601 $9,152,547 $15,840,403 Limited-Service Eating Places (NAICS 7222) $68,857,263 $113,356,510 $20,794,135 $32,888,797 $46,312,862 $78,273,063 $11,774,122 $20,455,634 Drinking Places - Alcoholic Beverages (NAICS 7224) $2,162,114 $3,564,362 $602,572 $947,692 $2,958,299 $2,420,088 $352,045 $589,870

1,479,803 2011 reconciled to 2010 Census Drive Time: 10 minutes 15 minutes 10 minutes 15 minutes 10 minutes 15 minutes 10 minutes 15 minutes Population 92,603 176,210 46,425 101,790 75,089 142,680 24,247 72,291 Households 36,865 66,847 17,778 39,870 28,721 55,080 9,541 28,032 Medial HH Income $52,282 $43,464 $36,390 $38,463 $38,266 $38,980 $31,274 $38,217

Traffic Count (FDOT - AADT) 39,500 43,000 26,000 19,600

Summary • The proposed Lakeland location offers:

– Almost twice as many people as Haines City and over 3 times the potential restaurant sales

– Almost 1.25 times as many people as Winter Haven and about 1.5 times the potential restaurant sales

– Almost 4 times as many people as Lake Wales and almost 6 times the potential restaurant sales

• The Lakeland location has the potential to be much better than any of the current locations!

Tenant’s Financially Feasible Rent • Identification of retail-line-of-trade (4 digit NAICS) • Define trade area – delineate geography on map • Allocate disposable household income by NAICS

code (ESRI program/report) • Allocate trade area sales amongst competing

points of supply in trade area using gravity model • Adjust for leakage and displaced sales. • Result is Potential sales for tenant at subject

location • Using gross margin for tenant/retail line-of-trade

derive financially feasible rent

Identification of retail-line-of-trade (4 digit NAICS)

• http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart_code=44&search=2012 NAICS Search

4411 Automobile Dealers 4412 Other Motor Vehicle Dealers 4413 Automotive Parts, Accessories, and Tire Stores 4421 Furniture Stores 4422 Home Furnishings Stores 4431 Electronics and Appliance Stores 4441 Building Material and Supplies Dealers 4442 Lawn and Garden Equipment and Supplies Stores 4451 Grocery Stores 4452 Specialty Food Stores 4453 Beer, Wine, and Liquor Stores 4461 Health and Personal Care Stores 4471 Gasoline Stations 4481 Clothing Stores 4482 Shoe Stores 4483 Jewelry, Luggage, and Leather Goods Stores 4511 Sporting Goods, Hobby, and Musical Instrument Stores 4512 Book Stores and News Dealers 4521 Department Stores 4529 Other General Merchandise Stores 4531 Florists 4532 Office Supplies, Stationery, and Gift Stores 4533 Used Merchandise Stores 4539 Other Miscellaneous Store Retailers 4541 Electronic Shopping and Mail-Order Houses 4542 Vending Machine Operators 4543 Direct Selling Establishments

7223 Special Food Services (Caterers, Mobile Food Services) 7224 Drinking Places (Alcoholic Beverages) 7225 Restaurants and Other Eating Places

Identification of retail-line-of-trade (4 digit NAICS)






Ralston’s Rules for retail trade areas

1) Radius – ½ distance to next competing point of supply

2) Drive-time (3, 5 & 10 min) 3) Custom polygon based on physical

boundaries and road network






Potential Demand within Trade Area • Use ESRI Retail Market Place Profile report to estimate

potential sales within trade area

ESRI Report • Allocate disposable household income by NAICS code

(ESRI program/report – modification/expansion of Retail MarketPlace Profile) – NAICS code for retail (44-45 & 722)

• Adjust current Retail MarketPlace Profile report to include new NAICS list for retail

– NAICS code for certain non-retail neighborhood services (see new NAICS list)

• Perhaps the calculation is allocation of disposable income based on expenditure characteristics under ESRI Tapestry Segmentation of 65 unique market segments






Use Gravity Model to allocate sales amongst competing points of supply

Gravity Model • Retail Gravity Model

A gravity model is used to estimate dollar flows to or the sale/revenue potential of competing retail establishments in a given geographic market.

!(!(

!(

1.0 Miles1.0

Mile

s

2.0 Miles

Neighborhood "X"

Store "A" 14,000 SqFt.

Store "B" 20,000 SqFt.

Store "C" 100,000 SqFt.

Store Size/Distance to Store2

Sum(Store Size/Distance to Store2 )Capture

(or probability of visiting store)=

Store AStore BStore C

14,000 Square Feet / 1.02 Miles to Target Neighborhood 20,000 Square Feet / 1.02 Miles to Target Neighborhood100,000 Square Feet / 2.02 Miles to Target Neighborhood

===

14,00020,00025,00059,000

1. Calculate Sum(Store Size/Distance to Store)

Probability of Visiting Store AProbability of Visiting Store BProbability of Visiting Store C

( 14,000 Square Feet / 1.0 Miles2 to Target Neighborhood) / 59,000( 20,000 Square Feet / 1.0 Miles2 to Target Neighborhood) / 59,000(100,000 Square Feet / 2.0 Miles2 to Target Neighborhood) / 59,000

===

0.23720.33890.4237

===

Conclusions

The probability that consumers will visit store "B" is higher than store "A" even though they are the same distance away because store "B" is larger.

It is more likely that store "C" will be visited even though it is twice as far away becauseit is far bigger than the other two stores.

2. Calculate Probability That Neighborhood Residents Will Visit Each Store

Lake Fairview

Lake Killarney

Lake Bell

L Lake Fairview

Lake Shadow

Block Group X






Adjust for Leakage

$$$$ $$$$

Adjust for Leakage • Leakage

$$$$ $$$$

Adjust for Displaced Sales

$$$$ $$$$

Adjust for Displaced Sales • Displaced Sales

$$$$ $$$$

Displaced Sales Example

http://www.youtube.com/watch?v=0JnJp4t8YxY&feature=plcp

http://www.youtube.com/watch?v=0JnJp4t8YxY&feature=plcp�

Site Plan

Restaurants

Hotels

Subject Property

LEGOLAND FLORIDA Market Area Map

LEGOLAND Vicinity 2010 Traffic Counts (AADT)

http://www2.dot.state.fl.us/FloridaTrafficOnline/viewer.html

26,000

Zoning http://www.mywinterhaven.com/documents/ExistingFLUMap.pdf











Gross Margin Analysis • Potential sales at subject location/site • Apply gross margin % to potential sales • Adjust rental range based on gross margin

factor

Financially Feasible Rent • Consider rent as component of occupancy

cost – Is rent NNN? – Adjust for range of CAM

• High to low

• Conclude financially feasible rent

New Retail Real Estate Valuation Perspective • Traditional valuation approach

– Comparable sales – Replacement cost – Income

• Current practice provides for income approach to be based on current rent and consideration of comparable rent

• New approach – “bottom up” based on tenant’s perspective, i.e., Tenant Financial Feasibility for subject location

• Tenant’s financially feasible rent (“TFF rent”) at subject location based on potential sales (demand)

• TFF rent becomes alternative input to income valuation approach

Documents

FL CCIM_Retail Feasibility Analysis.pdf