Final Ubc Naiop Report 2012

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TABLE&OF&CONTENTS&

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1.0&EXECUTIVE&SUMMARY........................................................................................................................................................................4& 2.0&PROJECT&OVERVIEW...........................................................................................................................................................................8& 2.1&Regional&Competitive&Advantages..........................................................................................................................................8& 2.2&Subject&site.............................................................................................................................................................................9& 2.3&Site&Development&Constraints..............................................................................................................................................14& 3.0&MARKET&ANALYSIS…………………………………….……………………………………………………………………………………………………………………………….16& 3.1&Macroeconomic&Trends...........................................................................................................………………………………………....16& 3.2&Use&Analysis..................................................................................................…………………………………………………………………....17& 4.0&TARGET&MARKET……………………………………………………………………………………………………………………………………………………………………..…20& 4.1&Residential............................................&.............…………………………………………………………………………......................................20& 4.2&Retail&.........................……………………………………………………………………………….........................................................................21& 5.0&DEVELOPMENT&PROPOSAL……………………………………………………………………………………………………………………………………………………..….23& 5.1&Vision...............................................................................................................…………………………………………………………...……24& 5.2&Retail&Core..................................................................................................………………………………………………………………………24& 5.3&Public&Spaces.............................................................................................…………………………………………………………………….…29& 5.4&Housing&Options.....................................................................................………………………………………………………………………..…29& 5.5&Development&Layout.....................................................................................……………………………………………………………………30& 5.6&Phasing&Strategy..............................................................................................………………………………………………………………….32& 6.0&STRATEGY………………………………………………………………………………………………………………………………………………………………………………..…34& 6.1&Option&1:&Project&Shut]Down........................................................……………………………………………………………………………………35& 6.2&Option&2:&The&Village...............................…………………………………………………………………………………………………………………….….37& 6.3&Option&3:&Gradual&Exit.......................................................................………………………………………………………………..................40& 7.0&RECOMMENDATION...........................................................................................………………………………………………………………………….42& &8.0&APPENDICES...............................................………………………………………………………………....................................................................A1& 9.0&ACKNOWLEDGMENTS&.........................................................................................................................................................................&

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1.0*EXECUTIVE*SUMMARY* & Site*Details& The& Village& at& Point& Defiance& is& one& of& the& last& remaining& undeveloped&waterfront&parcels&south&of&Seattle.&With&one&mile& of&waterfront,&this&97&acre&site&is&situated&in&the&Town&of&Ruston& and&City&of&Tacoma.&& & The&Village&is&located&adjacent&to&Point&Defiance&Park,&with&direct& access&from&downtown&Tacoma&along&Ruston&Way.&&This&702]acre& park& features& a& zoo,& aquarium,& and& Owen& Beach,& and& has& over& two& million& visitors& per& year.& Ruston& Way,& just& south& of& The& Village,& is& a& 2.2]mile& long& waterfront& drive.& & Ruston& Way& also& serves& as& a& recreational& destination& for& many& locals& and& is& well& known& for& its& waterfront& “Restaurant& Row”& featuring& seven& popular& local& restaurants.& & In& short,& this& site& is& in& an& attractive& area&due&to&its&diverse&amenities.&& & This& site& was& formerly& home& to& the& ASARCO& smelter,& but& was& forced&to&close&by&the&EPA&due&to&environmental&contamination.& Since& then,& $100& million& has& been& spent& on& clean& up& and& remediation& on& the& site.& According& to& the& developer’s& environmental& assessment& reports,& the& site& is& now& fit& for& development.&& & * * * * * *

Site*Strengths* • Attractive)location:&Near&Point&Defiance&Park,&Point& Defiance&Triangle,&and&Restaurant&Row& • Public)stakeholders:&City&of&Tacoma&is&building&a&1.1]mile& long&public&promenade&on&the&property& • Large)size:&Undeveloped&land&of&this&size&is&rare&in&this& area& • Unique)Space:&No&other&flat&developable&waterfront& property&available&between&Tacoma&and&Sea]Tac& & &Figure&1.&View&of&Mount&Rainier&

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! Site*Challenges* • Negative)History:&Previous&industrial&use&caused& significant&environmental&damage& • Development)Constraints:&Height&restrictions,&view& corridors,&open&space,&parking,&and&capping&requirements& • Two)Municipalities:&Site&use&must&adhere&to&both&Tacoma& and&Ruston&regulations& & Target*Market** The&target&market&can&be&broken&into&two&main&categories:&& Residential*Uses:*& • Downsizers& • Young&Professionals& • Active&Military&Personnel& • & & &

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Retail*Uses:* • Point&Defiance&Park&&&Ruston&Way&Traffic& • Art&&&Culture&Lovers& • Visitors&from&Pierce,&Thurston&and&South&King&counties& &

Project*Summary*

Development*Proposal* Our& recommendation& is& to& pursue& the& following& strategy,& developing&The&Village&at&Point&Defiance.&&However,&this&strategy& involves& additional& equity& and& exposes& Point& Ruston& Group& to& both&market&risk&and&risk&tied&to&the&destination&retail&core&of&the& village.& & We& include& in& the& report& two& additional& options& that& differ& in& their& exposure& to& risk,& demands& for& additional& equity,& and&financial&performance.& & * * * * * * * & & & & & & & & &

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! The& ultimate& objective& for& the& subject& site& is& to& create& a& legacy& for& the& region& while& profiting& from& this& development& opportunity.& & This& will& be& done& by& creating& a& destination& retail& center& that& combines& shopping,& dining,& art,& and& culture.& The& retail& core& will& be& surrounded& by& its& own& unique& and& active& residential&neighborhoods.&&The&Village&will&create&a&community& environment& while& providing& a& waterfront& high& street& neighborhood& and& the& best& mountain& and& water& views& in& Tacoma.&In&order&to&fulfill&this&vision,&the&development&has&been& designed&with&five&key&goals&in&mind:& & 1. Maximize&water&views& 2. Create&a&lively&waterfront& 3. Ensure&pedestrian&accessibility& 4. Establish&a&cultural&and&artistic&hub& 5. Meet&financial&hurdles&and&achieve&a&10%&cash&on& cash&return&if&possible& & Development*Mix* We& believe& a& mix& of& retail,& townhomes,& apartments,& and& condominiums& optimize& the& site’s& competitive& advantages& making&it&the&highest&and&best&use.&&The&Village&at&Point&Defiance& is&a&mixed]use&development&comprised&of&the&following&mix:& & & Apartment& (units)& 353& & & &

Condos& (units)& 1338&

Town] homes&& 160&

Total& (Units)& 1851&

&Retail& (SF)& 148,800&

Parking& Stalls& 3,650&

Strategy* Clearwater’s& strategy& for& The& Village& is& to& build& a& mixed]use& development& community& with& a& destination& retail& core.& & Due& to& the&magnitude&of&this&project,&there&is&a&large&risk&potential.&&To& help&mitigate&this&risk,&Clearwater&has&implemented&a&strategy&to& return&equity&as&soon&as&possible&to&the&Point&Ruston&Group&in&a& manner& that& sustains& the& vision& of& the& development.& & This& has& been& achieved& through& solely& developing& the& retail& core& and& three&apartment&buildings,&with&the&remaining&land&to&be&sold&to& builders.&&In&this&report&we&present&massing&and&design&diagrams& of& the& buildings& in& the& lots& that& will& be& sold,& but& ultimately& the& building& appearances& and& uses& will& be& at& the& discretion& of& the& builders.& & By& selling& land& instead& of& building& in& later& phases,& we& are& able& to& minimize& the& roll]over& equity& required,& which& allows& for& a& quicker& return& of& equity.& & It& is& clear& from& the& financial& milestones& that& PR& Group& wanted& to& realize& returns& throughout& the& project,& with& a& large& portion& early& on.& & Therefore,& even& though& not& all& financial& milestones& were& met,& Clearwater& prioritized& by& returning& equity& as& early& as& possible& in& the& development&process&to&PR&Group.&&& & Project*Risks* PR& Group& has& invested& $35M& of& equity& in& this& project& to& date.&& The&current&strategy&not&only&has&a&high&degree&of&risk&due&to&its& 16]year& project& length,& but& it& also& relies& on& the& success& of& the& retail& core& as& a& destination& site.& Relying& on& roll]over& equity& creates&addition&risk&if&there&isn’t&enough&money&in&the&previous& year&to&sustain&a&future&year’s&costs.&&The&destination&retail&center& is&expected&to&sustain&itself&due&to&its&desirability&to&residents&in& the&surrounding&areas&as&well&as&the&initial&residents&living&at&The& Village.&&This&desirability&of&the&retail&center&will&allow&a&premium& to&be&charged&when&selling&land.&&&&&

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Figure!2.!Museum! !

Financial*Summary** ** ** ** ** Additional&Equity&Required& $25,261,000* Additional&Bank&Loan&Required& $73,375,000* Revenue&from&Buildings&and&Land&Sales& $232,164,000* Construction&&&Site&Improvements& $72,271,000** Debt&Repayment&&&Interest& $87,420,000** Operating&Cost&(Overhead&and&Property)& $3,757,000** LID&&&Environmental& $13,376,000** && ** && ** NPV&for&The&Village&@&10%&Discount&Rate& *$***(9,751,000)* Levered&IRR&for&The&Village/Copperline/Stk&Hill& 8.27%* & & Financial*Return* The&project&provides&a&levered&IRR&of&8.27%,&from&the&years&2006& to&2028.&&Including&Copperline&and&Stack&Hill&cash&flows,&the&net& present&value&for&The&Village&is&$&(9,751,000).& & * * &

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2.0*PROJECT*OVERVIEW*

Pierce& County& is& situated& between& Puget& Sound& and& the& Cascade& Mountains.& The& county& is& home& to& one& of& the& 30& largest&ports&in&the&United&States&as&well&as&Joint&Base&Lewis]& McChord&]&one&of&the&largest&military&bases&in&the&nation.&

Figure&3.&Regional&Context&Map&

& Figure&4.&Downtown&Tacoma&

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&&&&&&&Figure&5:&Glass&Artwork&

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2.1&REGIONAL&COMPETITIVE&ADVANTAGES& & Regional*Context* The& subject& site& is& located& within& Pierce& County,& Washington,& with& portions& of& the& site& lying& in& both& the& Town& of& Ruston& and& City&of&Tacoma.&

The& City& of& Tacoma’s& heritage& is& a& working& city:& a& port,& mill,& and& industrial& city.& Many& of& these& industries& have& been& in& decline,& but& the& city& has& recently& undergone& revitalization.& Over& the& past& two& decades,& developments& in& the& downtown& core& have& included& the& state’s& first& modern& electric& light& rail& service& and& the& University& of& Washington& Tacoma& Campus.& Further,& downtown& Tacoma& is& known& for& its& thriving& arts& and& culture;& it& is& home& to& numerous& performance&centers&and&museums&such&as&the&Museum&of& Glass&and&the&Tacoma&Arts&Museum.& &

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! Figure&6:&Tacoma&Museum&of&Glass&

Figure&8.&Pierce&County&Population&Growth&Rate&

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Source:&U.S.&Bureau&of&Economic&Analysis& &

Local*Economy& Pierce& County& has& been& relatively& insulated& from& the& turmoil& experienced& by& other& major& metropolitan& regions.& Economic& growth&in&2012&is&forecast&to&be&2.7%,&and&is&expected&to&increase& further& in& 2013& and& beyond.& Pierce& County& has& a& population& of& approximately& 800,000& and& over& the& past& two& decades,& the& population&grew&at&a&faster&pace&than&that&of&King&County,&as&well& as& the& entire& nation.& For& the& next& three& years,& population& is& expected& to& increase& at& a& rate& of& 1.4%& per& year,& which& is& substantially& higher& than& the& annual& growth& rate& of& 0.3%& from& 2008]2011.& Employment& is& expected& to& grow& by& 1.5%& annually& over&the&next&five&years,&primarily&in&Tacoma’s&transportation&and& warehousing&sector.& &

2.2&SUBJECT&SITE&

Figure&9.&Subject&Site&Aerial&View&

Figure&7.&Seattle]Tacoma]Bellevue&MSA&Annual&GDP&Growth&Rate&

10%& 0%& 2002&

2004&

2006&

]10%& & Source:&U.S.&Bureau&of&Economic&Analysis&&

2008&

2010& &

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! & 97& acres& of& waterfront& property,& a& prime& location,& and& stunning& views&are&the&key&features&that&define&this&unique&site.&Located&at& the&intersection&of&Ruston&Way&and&North&51st&Street&in&Tacoma’s& North&End,&the&property&borders&the&municipal&line&between&the& Town& of& Ruston& and& City& of& Tacoma.& Situated& along& a& mile& of& Puget& Sound& shoreline,& the& site& is& only& minutes& away& from& downtown&Tacoma.& & Figure&10.&Views&of&Commencement&Bay& * * * * * * * * * * * * * Static*Attributes* The& site& is& 97& acres.& A& gradual& slope& creates& a& grade& change& of& 137&feet&between&the&highest&point&on&Stack&Hill&and&the&lowest& point&on&the&Waterwalk.& & Location*&*Accessibility* &

The&site&is&approximately&40&miles&south&of&Seattle&and&6.5&miles& northwest&of&Tacoma.&

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Figure&11.&Site&Access&Points&

* * Access& to& the& subject& site& is& by& two& local& arterials:& North& Pearl& Street& and& Ruston& Way.& North& Pearl& Street& has& four& lanes& and& connects& to& Hwy& 16,& while& Ruston& Way& is& a& two]lane& highway& along& Commencement& Bay& to& downtown& Tacoma.& It& also& connects&to&the&Interstate&5&(I]5).&

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! & The& site& is& currently& underserved& by& public& transportation.& The& City& of& Tacoma& has& plans& to& improve& coverage& in& the& area& by& placing&a&bus&stop&at&the&entrance&of&the&site.& & Pedestrian& connectivity& will& be& excellent.& The& City& of& Tacoma& is& constructing&a&pedestrian&path,&known&as&the&Waterwalk,&on&the& property& along& the& bay& that& will& connect& Ruston& Way& and& Point& Defiance&Park.&This&will&be&completed&in&Fall&2012.& * Background* Figure&12.&ASARCO&Smelter* &* & & & & & & & & & & & & & & * * * & &

& The& subject& site& was& formerly& the& home& of& a& copper& smelter& operated& by& ASARCO.& ASARCO’s& smelter& processed& copper& and& heavy&metals&for&nearly&a&century.&For&many&years,&ASARCO&was& one& of& the& largest& employers& in& the& county,& with& over& 1,300& employees.& & & There& were& major& complaints& and& concerns& regarding& pollution& from& the& smelter& asserted& by& the& surrounding& neighborhood.& Although&ASARCO&attempted&to&mitigate&its&pollution&production,& constant& pressure& from& both& the& community& and& various& government&agencies&continued.&Eventually&in&the&mid&1980s,&the& United& States& EPA& ordered& the& plant& to& close.& Over& the& past& 25& years,& $100& million& has& been& invested& in& the& cleanup& and& remediation&of&the&site.& & Current&Developments:& 1. Copperline:& 173& apartment& units& and& 44& condominium& units& 2. Stack&Hill:&12&&acres&consisting&of&36&custom&homes& 3. Hotel:& Tract& 6& on& subject& site& has& been& sold& to& a& private& hotel&operator&(Silver&Cloud&Inns&&&Hotels)& 4. Waterwalk:& The& City& of& Tacoma& is& building& a& 1.1]mile& “Waterwalk”& on& the& shoreline& of& the& property& linking& Point&Defiance&Park&with&Ruston&Way& & & & &

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Figure&13.&Surrounding&Attractions&

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Immediately& west& of& the& site& is& one& of& South& Puget& Sound’s& greatest&attractions,&the&702]acre&Point&Defiance&Park.&It&features& Point& Defiance& Zoo& && Aquarium,& Owen& Beach,& and& attracts& approximately&two&million&visitors&annually.&As&one&of&the&largest&&

& & & & & & & & & & & & & & & & & & & & & & & & & & Urban& parks& in& the& United& States,& Point& Defiance& Park& not& only& appeal& to& locals,& but& also& to& visitors& from& other& parts& of& Pierce,& Thurston,& southern& King& counties.& & There& is& currently& a& coordinated& effort& led& by& Metro& Parks& Tacoma& to& develop& a& section& of& Point& Defiance& Park.& Known& as& the& Point& Defiance& Triangle,&this&development&will&be&completed&in&Spring&2013&and&

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! will& link& the& park& to& the& subject& site& and& Ruston& Way.& Both& the& Town& of& Ruston& and& City& of& Tacoma& intend& to& transform& this& region& into& one& of& the& most& attractive& places& in& all& of& Pierce& County.& Currently& the& Point& Defiance& Triangle& area& is& under] developed,& but& with& improvements& it& will& attract& more& visitors& from& across& the& state.& Improvements& include& academic,& parks& && recreation,& professional,& and& retail& activities.& Additionally,& Tacoma& Yacht& Club,& which& attracts& boat& owners& from& all& across& the&Pacific&Northwest,&is&set&for&a&complete&renovation&beginning& in&Fall&2012.&This&revitalization&will&further&enhance&the&amenities& surrounding&the&site.&& & Figure&14.&Point&Defiance&Zoo&&&Aquarium&&

Tacoma&region.&& & Ruston&Way&is&also&home&to&many&of&Tacoma’s&most&popular& restaurants,& and& is& colloquially& referred& to& as& “Restaurant& Row”.& Figure&15.&Ruston&Way&Walkway&

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Figure&16.&Ruston&Way&Restaurant&

& & East& of& the& property& is& Ruston& Way,& a& 2.2]mile& road& connecting& Point& Defiance& with& downtown& Tacoma.& Activities& along& the& waterfront& include& walking,& fishing,& and& picnicking.& With& daily& traffic&counts&ranging&between&7,000&and&10,000&vehicles,&Ruston& Way& is& one& of& the& more& prominent& gateways& of& the& greater&

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! & The&site’s&surrounding&attractions&are&some&of&the&most&popular&in& Pierce&County.&&Thus&making&the&site’s&location&one&of&its&strongest& attributes.&&

& 2.3&SITE&DEVELOPMENT&& CONSTRAINTS&

* Zoning* The& property& is& fully& entitled.& The& site& was& platted& using& a& boundary&line&adjustment&in&2008,&which&resulted&in&developable& tracts& and& parcels& in& both& municipalities.& Under& the& Tacoma& Municipal& Code,& the& site& is& designated& as& the& S]6& Ruston& Way& Shoreline&District,&and&under&the&Town&of&Ruston,&it&is&part&of&the& City’s&Master&Development&Plan&(MDP)&Zone.&The&entire&property& is& fully& vested& and& entitled& to& allow& for& a& mix& of& commercial& and& residential&uses.& & * * * * * * * * * * * * *

* View*Corridors* According& to& both& municipalities’& codes,& views& for& residents& south&of&the&site&must&not&be&hindered.&In&order&to&protect&their& view&corridors&across&the&site&have&been&strategically&placed.& * Open*Space* 50%&of&the&site&must&remain&as&open&space.&Open&space&include& parks,& undeveloped& areas,& water& parcels,& and& access& ways& for& automobiles,& pedestrian& walkways,& plazas,& shorelines,& setbacks,& and&view&corridors.& & Building*Restrictions* The& property& is& not& subject& to& FAR& restrictions;& however,& there& are&numerous&height&and&setback&constraints&that&vary&across&the& 97& acres.& In& addition,& no& structure& can& be& built& on& the& Ruston] Tacoma&border.&See*Appendix*A* * Parking*Requirements* Parking& on& the& site& must& be& built& above& grade& because& of& geophysical&constraints.&Parking&requirements&on&the&entire&site& follow&the&Ruston&MDP’s&parking&space&standards.&& See*Appendix*B* & * * * * * * *

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! Environmental* Soil& on& the& site& contains& arsenic& due& to& contamination& by& the& ASARCO& smelter.& In& conjunction& with& the& EPA’s& remediation& process&for&the&property,&all&softscape&areas&must&be&capped&with& an& impermeable& liner.& Hardscape& and& building& foundations& will& serve& as& the& cap& for& the& rest& of& the& site.& This& process& may& be& problematic& for& the& site’s& rainwater& drainage& as& lining& and& capping&the&ground&may&cause&water&to&pool&instead&of&drain.& & Figure&17.&Site&Constraints&&

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& After& confirmation& by& the& client& and& further& research& with& cleanup&and&remediation&engineers,&Point&Ruston&LLC&reports&to& us&that&the&site&is&safe&for&residential&and&commercial&uses.&& & & & & & & & &

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! Figure&20.&Cumulative&Household&Growth&(#&of&units)&

3.0*MARKET*ANALYSIS*

& 3.1&MACROECONOMIC&TRENDS&

50,000& 40,000&

&

Figure&18.&Population&Growth&by&Age&–&Indexed&(Year&2000&=&100)&

30,000&

260& 0]19& 20]29& 240& 30]39& 40]49& 220& 50]69& 60+& 200& 180& 160& 140& 120& 100& 80& 2000& 2005& 2010& 2015& 2020& Source:&Washington&Office&of&Financial&Management& &

20,000& 10,000& 0& 2012& 2014& 2016& 2018& 2020& Source:&Census&1990&–&2010&&

2025&

2030& &

In& comparison& to& other& major& cities& and& regions& of& Washington,& Pierce&County&has&significantly&larger&households&and&family&sizes.& The& region& also& has& a& greater& percentage& of& seniors& and& adolescents.& The& former& will& increase& the& most& in& the& coming& decades,& relative& to& other& age& categories,& as& the& baby]boomers& age.& Figure&19.&Household&&&Average&Family&Size&&

&& Persons******** Per*Household* Average*Family*Size** Source:&Census&2010& &

Pierce* County*

King* County*

Washingto n*

2.56& 3.1&

2.38& 3.03&

2.52& 3.07&

Household& growth& over& the& past& two& decades& in& Pierce& County& has& been& consistently& positive.& While& it& has& varied& especially& during& recessions,& the& growth& rate&has&remained&& between&1&and&2%.& &

& Among& these& households,& tenure& has& shifted& to& rental,& as& the& percentage&of&renter&occupied&households&has&increased&over&the& past&decade&in&all&age&cohorts.& & Figure&21.&2010&Pierce&County&Tenure&(%)&

&& #*of*HH* %*of*Total*HH*

Rent* 110,838&& 37%&

Own* 189,080&& 63%&

Total* 299,918&& 100%&

Source:&Census&2010& & Figure&22.&Percentage&renter&tenure&by&age&

80%&

2005& 2010& 2015&

60%& 40%& 20%& 0%& Less&than& 35&to&44& 35&years& years& Source:&Census&2010&

45&to&54& years&

55&to&64& 65&years&or& years& over&

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3.2&USE&ANALYSIS& & In&this&section&Clearwater&analyzes&different&land&uses&to&identify& the& use& that& would& best& match& the& subject& site’s& development& potential& and& identify& development& timing& given& current& market& conditions&and&expected&future&growth.& & Apartments* * Figure&23.&Multifamily&Residential&Apartments&(Rental&#&of&units)* &2,000&&

9%&

New& Supply&

&1,500&&

8%& 7%&

&1,000&&

6%&

apartment& conversions.& Vacancy& rates& are& expected& to& then& decrease& to& 6.2%,& 4.5%& and& 2.6%& in& 2013,& 2014,& and& 2015& respectively.& & Absorption& rates& in& Pierce& County& and& South& King& County& combined& are& expected& to& range& between& 900& and& 1,300& units& annually& for& the& next& three& years& ]& a& significant& improvement& compared&to&the&past&decade.&However,&as&households&age&they& move& into& age& cohorts& with& higher& rates& of& homeownership.& Consequently,&rental&unit&absorption&will&decrease&after&2020.&& & Figure&24.&Apartment&Absorption&&&Average&New&Construction&& & & & New&Construction&based&on&20&years&long&run&average&

&900&& &800&&

5%&

&600&&

&]&&&&

4%&

&500&&

1995&

1999&

2003&

2007&

&(500)&

3%& 2%&

&(1,000)& &(1,500)& Source:&Kidder&Matthews&2011&Q4&Apartment&Regional&Data&

&400&& &300&& &200&&

1%&

&100&&

0%&*

&]&&&&

* A& lack& of& new& construction,& strong& absorption& rates,& and& low& vacancy&is&forecast&to&increase&demand&for&apartments&in&coming& years.&Pierce&County’s&apartment&vacancy&rate&is&currently&7.1%.& This& high& vacancy& rate& should& not& be& attributed& to& a& lack& of& demand,& but& rather& a& shock& in& supply& due& to& condominium& to&

New&Constructon&

&700&&

&500&&

1991&

Absorpton&

2012& 2014& 2016& 2018& Source:&Kidder&Matthews&2011&Q4&Apartment&Regional&Data&

2020& &

& During&the&past&three&years&in&Pierce&County,&the&average&rental& rate& has& only& increased& by& 3%.& Rental& rates& are& expected& to& increase&by&6%&over&the&next&three&years.&Historically,&rents&have& grown&slight&more&than&the&rate&of&inflation.&& &

!

17!

!

!

&

Figure& 25.& New& && Old& Apartment& Building&Cap&Rates&&

10.0%& 9.0%& 8.0%& 7.0%& 6.0%& 5.0%& 2000&2002&2004&2006&2008&2010&

For& the& subject& site,& apartments& are& suitable& for& development& as& demand& is& expected& to& remain& strong& in&the&near&future.& &

& Source:&Kidder&Matthews&2011&Q4&Apartment&Regional&Data*

* Condominiums* *

Figure&26.&Pierce&County&MLS&Condominium&Listing&Data& 8,000& Listngs& Sales:Listng&Rato& 7,000&

6,000& 5,000& 4,000& 3,000&

Figure&27.&Pierce&County&Average&Condominium&Sales&Volume&&&Price&

1400&

$300,000&

1200&

Avg&Price&

1000&

Condo&Sales&

$250,000& $200,000&

800&

$150,000&

600&

$100,000&

400&

$50,000&

200& 0& 1999& 2002& 2005& 2008& Source:&Northwest&Multiple&Listing&Service&–&December&2011&

70%& 60%& 50%& 40%& 30%&

2,000&

20%&

1,000&

10%&

0& q1&2008& q1&2009& q1&2010& q1&2011& Source:&Northwest&Multiple&Listing&Service&–&December&2011&

crisis&in&2008.&While&current&market&conditions&are&weak,&future& demand&will&be&driven&by&growth&in&employment,&population,&and& overall&economic&activity.& &

Annual*Unit*Sales*

On&the&investment&side,&the&apartment&market&is&showing&signs&of& recovery.& Cap& rates& are& trending& downwards& towards& pre] recession&levels.&

0%&

*

& Pierce& County’s& condominium& market& has& been& in& a& depressed& state& since& the& onset& of& the& economic& downturn& and& housing&

$0& 2011&

&

& Condominiums& have& faced& difficult& market& conditions& in& recent& years.&Many&completed&projects&have&had&difficulty&selling&units,& resulting& in& vacancies& of& up& to& 50%& and& some& developers& have& declared& bankruptcy.& A& lack& of& new& construction,& an& increasing& trend& to& convert& to& apartments,& and& hesitation& from& buyers& to& commit&to&purchases&is&further&support&of&a&slow&market.& & Historic& absorption& rates& and& current& conditions& suggest& the& monthly&absorption&for&the&next&three&years&in&Pierce&County&will& be& approximately& 55& units.& Compared& to& recent& years& this& is& a& substantial& improvement.& In& 2011,& there& were& roughly& 1,100&

!

18!

!

! condominium&units&available&for&sale.&At&this&absorption&rate,&this& equates&to&20&months&of&stock.& & As&the&market&gains&momentum,&absorption&should&rise&to&50&to& 60&units&per&month.&If&the&proposed&development&captures&7&to& 10%&of&the&absorption,&this&will&support&development&of&50&to&70& units& per& year.& These& figures& are& based& on& cumulative& absorptions& and& housing& permits& between& both& Pierce& County& and&South&King&County.&& & Townhomes* Townhome& supply& in& Pierce& County& is& outdated& yet& demand& is& expected&to&increase.& & Based& on& research& of& current& listings,& recent& transactions,& and& conversations& with& local& brokers,& Clearwater& has& determined& that&the&current&stock&of&townhomes&primarily&consists&of&older& and& outdated& structures& located& in& less& desirable& locations.& For& the& subject& site,& the& development& of& townhomes& represents& a& viable,&low]risk&option&especially&in&the&earlier&years&of&the&build& out.&There&are&no&significant&limitations&on&the&minimum&number& of& townhomes& that& can& be& built& in& a& phase& (unlike& condominiums,& where& a& full& building& must& be& built& at& once).& Additionally,& since& townhomes& are& typically& of& wood]frame& construction&(versus&concrete),&this&translates&into&lower&building& costs& and& shorter& construction& times.& This& should& result& in& a& lower&initial&capital&investment&and&a&short&turnover&for&units.&In& short,& there& is& a& significant& competitive& advantage& associated& with&building&new&townhomes&since&townhomes&in&Pierce&County& are&currently&outdated.& & &

Retail* Pierce& County’s& retail& market& is& currently& over& served& in& many& aspects&and&is&still&recovering&from&the&2008&recession.& & In& 2011,& absorption& was& positive& for& the& first& time& since& the& economic& crisis.& Although& the& retail& market& has& not& fully& recovered,& employment& and& population& projections& are& positive,& retail& sales& are& expected& to& increase& by& 3.3%& in& 2012,& and& per& capita&personal&incomes&are&on&the&rise.&These&signs&point&towards& an&increase&in&retail&potential.& &

Figure&28.&Retail&Trade&Area&&

Primary&Trade&Area&=&& Red&Zone& Secondary&Trade&Area&=& Green&Zone&

&

With&approximately&26,000&people&living&within&a&5]minute&drive& of& the& site,& population& density& of& the& surrounding& area& is& not& particularly& high.& Analysis& of& the& secondary& trade& area& suggests&

!

19!

!

! that& the& retail& market& is& over]saturated.& Furthermore,& Tacoma& Mall,&the&largest&and&most&significant&retail&destination&in&Pierce& County,&is&only&15&minutes&south&of&the&subject&site.&& & There& is& potential& for& a& neighborhood& use& serving& those& people& within& a& five]minute& drive& time& who& are& closer& to& the& site& than& other& retail& options.& With& an& estimated& 12,000& people& close& to& the&subject&site&and&another&potential&4,000&people&on&site,&there& is&sufficient&demand&for&an&up&to&40,000&SF&neighborhood&center.& Beyond& this,& the& only& alternative& would& be& a& destination& retail& experience.& There& is& no& destination& retail& south& of& Seattle& and& the&property’s&close&proximity&to&Point&Defiance&Park&makes&this& an&attractive&option.& &

4.0*TARGET*MARKET*

& Clearwater& intends& to& develop& a& destination& atmosphere& at& the& subject&site&that&is&attractive&to&a&variety&of&demographic&groups.&& &

4.1&RESIDENTIAL&

& Downsizers* A& fraction& of& older& adults,& whose& children& have& “left& the& nest”,& are& looking& to& downsize& from& large& single]family& dwellings& to& smaller& units.& This& cohort& represents& approximately& 10%& of& Pierce&County’s&population&and&is&the&fastest&growing&cohort&over& the& coming& 20& years.& The& general& characteristics& include& higher& than&average&household&incomes&and&preference&for&ownership.& Often,& the& decision& to& downsize& is& not& motivated& by& financial& matters,& but& rather& a& transition& in& lifestyle.& This& group& seeks&

secure& and& safe& living& environments& that& offer& recreational& and& cultural&activities.& & Figure&29.&Downsizers&

& & Young*Professionals* In& Pierce& County,& there& is& a& growing& population& of& young& professionals.& Attainment& of& high& school& diplomas& and& undergraduate& degrees& are& both& rising& in& Pierce& County.& This& group&will&benefit&the&most&from&future&economic&growth&in&the& region& and& thus& their& incomes& are& expected& to& rise.& Young& professionals& often& prefer& renting,& as& they& do& not& have& the& necessary& capital& to& invest& in& ownership,& especially& since& the& housing&crisis&has&soured&many&young&households&on&the&need&to& accelerate& a& decision& to& enter& homeownership.& In& addition,& this& group&tends&to&move&more&than&others&and&is&always&seeking&to& raise& their& standard& of& living.& Further,& many& of& these& individuals& enjoy& athletic& activities& and& desire& to& live& near& downtown& Tacoma.& & & & &

!

20!

!

! Figure&30.&Young&Professionals&

4.2&RETAIL&MARKET& * Currently&in&Pierce&and&Thurston&Counties,&there&is&no&destination& retail& experience.& The& closest& comparable& retail& experience& is& downtown&Seattle’s&Pike&Place&Market.&& & Nature*&*Outdoor*Enthusiasts* &Figure&31.&Outdoor&Enthusiasts& &

* * Military*Personnel* Joint& Base& Fort& Lewis]McChord& is& only& a& 25]minute& commute& from& Tacoma.& Compared& to& the& last& decade,& there& are& currently& 15,000& more& service& members& stationed& at& the& base.& This& is& primarily& due& to& deployment& cycles& and& the& consolidation& of& smaller&military&bases&across&the&nation.&Despite&expectations&of& soldiers& returning& from& deployment& over& the& next& few& years,& Lewis]McChord& is& expected& to& remain& the& same& size& if& not& expand.& A& significant& number& of& military& personnel& live& in& apartments& and& condominiums& in& the& downtown& core& and& according&to&local&brokers,&lower&ranked&staff&tends&to&rent&while& higher&ranked&officers&tend&to&buy.& &

& & & &

The& Pacific& Northwest& is& home&to&people&who&enjoy& nature&and&the&outdoors&in& all& four& seasons.& Active& living& and& community& wellness& is& a& growing& trend& in& the& region,& with& increasing& numbers& of& individuals& taking& up& outdoor& leisurely& activities.& In& addition,& public& park& space& and& green& space& are& also& in& demand& in& the& region,& especially& in& and& around& Tacoma.& & & & & & &

*

!

21!

!

! * Art*&*Culture*Lovers* Natives& of& South& Puget& Sound& have& consumer& preferences& that& revolve& heavily& around& arts& and& culture.& Many& residents& of& the& region& take& full& advantage& of& the& museums& and& performance& centers& and& have& a& high& appreciation& for& special& events& and& festivals.& These& individuals& are& actively& seeking& new& and& unique& experiences&and&attractions&that&resonate&with&their&interests.&& & These& two& latter& groups& present& unique& opportunities& in& the& sense&that&they&are&large&markets&that&are&currently&underserved.& With& the& optimum& mix& of& arts& and& nature,& an& unprecedented& destination& retail& experience& could& satisfy& the& needs& of& these& consumers& and& further& attract& visitors& from& all& neighboring& counties.& & ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !

! &

Figure&32.&Downtown&Tacoma&with&Views&of&Mt.&Rainier&

* * *

*

!

22!

!

!

* 5.0*DEVELOPMENT*PROPOSAL* & & & & & & & & & & & & & & & & & & & & & & & & & & & & &

& & & & & & & & &

& & & & & & & & & & & & & & & & & & &

!

23!

!

!

& 5.1&VISION& & The& ultimate& objective& for& the& subject& site& is& to& create& a& destination&retail&center&that&combines&shopping,&dining,&art,&and& natural& beauty& to& create& an& experience& like& none& other& in& the& region.&A&unique,&walkable&residential&community&surrounds&the& center,& complete& with& pedestrian& and& bicycle& trails& and& unmatched& water& views.& In& order& to& fulfill& this& vision,& the& development&has&been&designed&with&four&key&goals&in&mind:& & 1. Maximize&water&views& 2. Create&a&lively&waterfront& 3. Ensure&pedestrian&accessibility& 4. Establish&a&cultural&and&artistic&hub& & Figure&33.&Arts&Theatre&

!

& & &

& & & & & & & & & & &

Figure&34.&Public&Market& !

5.2&RETAIL&CORE! & ! ! Close&to&the&waterfront&is&“Artists’&Row”,&the&cultural& hub&of&the&development.&This&500]foot&long&walkway& features&a&performing&arts&theatre,&museum,&and&local& art&gallery.&Also&included&are&work/live&spaces&that&are& to&be&awarded&to&local&artists.&These&two]story&spaces& have& street& level& studios& where& artists& can& display& their& works& for& the& public& to& enjoy.& Additionally,& a& number& of& unique& international& food& stands& face& the& artists’& studios& where& patrons& can& sit& outdoors& and& watch& the& artists& at& work& or& watch& pedestrians& strolling&by.&&See*Appendix*F& & & &

!

24!

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! Figure&35.&Site&Map&with&Building&Uses&& & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & &

& & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & &

!

25!

!

! Figure&36.&Retail&Core&

&

&

&

While& cars& are& welcomed& in& The& Village,& we& have& designed& the& center& to& be& pedestrian& friendly& with& wide& sidewalks& and& pedestrian&only&corridors&such&as&Artist’s&Row.&The&retail&village&is& a& one]park& destination& where& people& can& park& once& and& easily& access&any&of&the&amenities&offered.&All&of&the&streets&surrounding& the&retail&core&are&slow&moving,&with&raised&pedestrian&crosswalks& and& low& speed& limits.& Most& streets& also& have& parallel& parking& spots,& creating& a& buffer& between& pedestrians& and& the& road.& Allowing& slow& moving& vehicles& in& the& retail& core& creates& greater& accessibility& and& more& liveliness& than& pedestrian]only& access& could& alone.& In& addition,& the& street& parking& provided& allows& visitors& easy& access& to& the& waterfront& without& hindering& the& walkability&of&the&retail&core&and&waterfront.& & && & &

!

26!

!

! Figure&37.&Open&space&

Figure&39.&Public&Market&

Linking& the& retail& core& with& the& Waterwalk& is& a& 15,000& SF& public& market& located& in& the& center& of& Grand& Plaza.& It& features& a& fascinating& assortment& of& colorful&stalls,&showcasing& homemade& products& and& the& very& finest& in& gastronomic&delights.&This& space& will& be& a& premier& destination& for& weekly& farmer’s& markets,& annual& festivals,& and& arts& && crafts& fairs.& The& public& market& is& a& permanent& structure& with& garage]style& doors& that& can& be& opened& in& the& summer& but& closed& in& the& winter,& allowing& for& a& year]round& market& experience.& & The& Village’s& public& market& is& unique& to& the& region& and&is&expected&to&attract&visitors&from&Pierce,&King,&and&Thurston& County.&& & Figure&38.&&Inside&the&Public&Market&

&

!!

& & & & & & & & & & & & & & & &

&

&

!

27!

!

! & Figure&40.&Sketch&of&Public&Market&

&

&

&

& & & & & The& 1.1& mile& long& Waterwalk& will& draw& locals& and& visitors& as& it& showcases& the& strongest& attributes& of& the&property,&the&water,&and&views.&With&an&average& width& of& 100& feet,& this& public& promenade& will& link& pedestrians&from&Ruston&Way&to&Point&Defiance&Park& and&serve&The&Village&as&both&a&pedestrian&corridor& and&an&exciting&waterfront&experience.&& & & & & & & & & & & & & & & & & & &

!

28!

!

! The&Waterwalk&features&a&sit]down&restaurant&and&brewery&with& both& water& and& public& market& views.& This& large& lively& restaurant& will&draw&people&into&the&site&from&the&promenade&and&serve&as&a& central&meeting&place.&In&addition,&there&are&a&number&of&small] scale& retail& units& located& close& to& the& restaurant,& along& the& Waterwalk,&with&retail&to&complement&the&park&and&promenade.&& In& the& summer& months,& the& Waterwalk& will& attract& numerous& food&stands&and&retail&kiosks,&and&act&as&the&“Final&Mile”&for&the& Tacoma&Earth&Day&5k&run&and&other&races&in&the&area.&& & Figure&41.&Waterfront&Promenade&

Waterwalk&will&be&busy&with&joggers,&bicyclists&and&families&with& kids&in&town.&The&public&market&will&be&bustling&as&locals&pick&out& fresh& fruit& and& visitors& taste& homemade& pastries& and& cured& meats.& People& will& be& slowly& strolling& down& Artists’& Row,& taking& the&time&to&enjoy&the&museum,&take&in&a&performance&and&admire& local&artist’s&work.&& &

5.3&PUBLIC&SPACES&

& Another& important& design& principle& is& usable& open& space,& more& than& 70%& of& the& property& consists& of& open& space& in& the& form& of& roads,&parks,&courtyards&and&walking&paths.&Further,&a&15,000&SF& community&center&featuring&fitness&facilities&and&public&flex&space& is&there&for&residents&and&visitors&to&enjoy.&This&center&is&expected& to&serve&the&entire&neighborhood,&as&current&stock&in&the&region&is& outdated.& Furthermore,& Promontory& Hill& is& completely& landscaped&and&dedicated&as&a&park&for&all&to&enjoy.& & In&short,&The&Village&is&an&energetic&and&dynamic&community&–&a& place&where&residents&and&visitors&can&interact&with&one&another& and&enjoy&all&that&the&waterfront&community&has&to&offer.& &

5.4&HOUSING&OPTIONS&

& This& clustering& of& art& and& cultural& amenities,& and& the& beautiful& waterfront& walk& will& draw& people& from& surrounding& regions& to& make&The&Village&a&true&destination.&On&a&sunny&summer&day&the&

&

The& Village& is& divided& into& a& number& of& distinct& neighborhoods& that&offer&a&range&of&housing&options.&The&residential&mix&includes& townhomes,& apartments,& and& condominiums.& All& buildings& are& specifically& designed& to& maximize& the& property’s& majestic& water& and& mountain& views.& In& addition,& buildings& have& flat& roofs& to& accommodate& solar& panels& when& they& are& economically& demanded.&See*Appendix*G*&*H&& &

!

29!

!

!

5.5&DEVELOPMENT&LAYOUT& & & Figure&42&Site&Map&with&Neighborhoods&and&Features&

& & & & & & & & & & & & & & & & & & & & & & & & & & &

& & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & &

!

30!

!

! While& we& plan& to& only& develop& the& retail& core,& the& following& district& characteristics& are& what& we& believe& will& be& developed& over&time&on&the&site&through&the&sale&of&parcels.&& & The& character& of& The& Village& comes& from& the& seven& neighborhoods& located& across& the& site.& Created& by& natural& area& breaks,&these&neighborhoods&have&a&variety&of&building&types&and& amenities&for&residents&to&enjoy.& & Marina*District* Marina& District& sits& at& the& Northern& end& of& the& site& with& magnificent& views& of& both& Point& Defiance& Park& and& the& Tacoma& Yacht& Club.& &This& neighborhood& has& four& parcels,& each& with& two& condominium& buildings—& two& parcels& have& 81& units,& while& the& remaining& two& have& 100& units.& Parking& for& residents& is& located& within&the&first&two&floors&of&the&condominium&buildings.& & Promontory*Row* Located&on&the&south&side&of&Yacht&Club&Road&is&Promontory&Row,& a& small& townhome& community.& It& has& 53& townhomes,& each& with& its& own& garage,& patio,& and& private& backyard& backing& onto& Promontory&Hill.&& & The*Village* The&retail&core&at&the&center&of&the&site&is&called&The&Village&and& holds&the&majority&of&the&site’s&amenities.&&Along&with&a&variety&of& retail& already& described,& The& Village& also& has& residential& apartment&buildings.& & Two& of& three& apartment& buildings& located& are& placed& at& the& intersection& of& Cascade& Avenue& and& Ruston& Way—each& containing& 60& units.& &These& apartments& have& a& large& parking&

garage&on&the&first&two&levels&of&the&building,&servicing&both&the& apartments&and&overflow&parking&from&the&retail&core.&&The&third& apartment&building&is&located&behind&the&hotel&and&has&60&units.&&& * Baltimore*Lane* Baltimore& Lane,& another& townhome& community,& is& planned& just& behind& The& Village& on& the& north& side& of& Ruston& Way.& &This& community&has&55&townhomes&and&sits&within&a&short&walk&to&all& the&amenities&in&the&retail&core.&& & Copper*Landing* South& of& The& Village& on& Main& Street,& Copper& Landing& has& a& combination&of&condos,&apartments,&and&townhomes,&in&addition& to& 7,500& SF& of& retail& space.& &With& 214& condo& units,& these& waterfront&buildings&are&strategically&placed&perpendicular&to&the& shoreline& in& order& to& maximize& water& views& for& all& units.& Copperline& Condominiums& and& Apartments& are& also& located& in& this&neighborhood.& & Bayview*Plaza* Bayview&Plaza&is&situated&south&of&Copper&Landing&on&Main&Street& and&offers&residential&units.&&Along&with&the&Waterwalk&there&are& 26& townhomes& with& premium& waterfront& views.& Behind& the& townhomes& are& three& 80]foot,& multi]story& condominium& buildings&that&maximize&water&views&and&contain&living&spaces&for& 463&units.& * Rainier*Place* Rainier&Place&is&located&at&the&far&east&side&of&the&property.&This& neighborhood&has&four&condominiums&buildings&each&with&35,&52,& 70&and&70&units&respectively,&with&the&first&two&floors&designed&as& parking&areas.&6,400&SF&of&retail&space&will&also&be&located&along&

!

31!

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!

& & & & & & & & & & & & & 5.6&PHASING&STRATEGY&

the&Waterwalk.&A&great&design&feature&of&this&neighborhood&is&the& raised&courtyard&between&the&four&condominium&buildings.&It&has& a&dual&purpose&of&creating&garden&views&for&the&residents&as&well& as& incorporating& additional& parking& space& underneath& for& the& residents.& & Figure&43.&Waterfront&Retail&&&Residential&Building&Example&

&

&

&

* Phase*1& The&Village&will&begin&development&with&the&neighborhood&retail& center&and&two&apartment&buildings.&The&first&phase&of&the&retail& center&will&include&an&organic&grocer,&a&drug&store,&a&restaurant,&a& café,& a& bank,& two& local& serving& offices,& and& three& local& serving& CRUs.& The& retail& will& be& placed& along& Ruston& Way,& which& has& a& daily&traffic&count&ranging&between&7,000&and&10,000.& & In& 2014,& Parcel& 11& will& be& sold& to& an& external& developer& for& designated&townhome&use.&&This&small&community&located&behind& the& Copperline& buildings& and& to& the& south& of& the& retail& core& will& help&centralize&the&site.& & *

!

32!

!

! Phase*2& In&2015,&construction&will&begin&on&the&rest&of&the&retail&core.&The& museum,& performing& arts& theatre,& public& market,& international& food&plaza,&artist&work/live&spaces,&several&other&boutique&shops,& and&local&serving&offices&will&be&completed&in&this&phase.&This&will& make& The& Village& a& hub& of& art& and& culture& where& people& from& surrounding& regions& will& want& to& live& and& visit.& There& will& be& an& additional&apartment&building&built&in&this&phase.&Residents&of&this& building& will& help& support& the& retail& as& well& as& liven& up& the& development.& * * * * Figure&44.&Selling&Land&

* * * * * * * * * * * * * * * * *

Future*Land*Sales* Past& phase& 2,& Clearwater& recommends& the& client& sell& the& remaining& parcels& for& development.& In& order& to& maximize& profitability,&selling&according&to&the&Gantt&chart&is&& Recommended.&See*Appendix*K.& & Absorption& rates& have& determined& the& sales& sequence& of& land.& The& goal& is& to& match& absorption& rates& in& order& to& minimize& vacancies& throughout& the& development.& This& is& accomplished& through& staggered& sales& of& parcels& designated& for& townhomes,& apartments,& and& condominiums.& Certain& parcels& have& been& identified& as& prime& waterfront& properties& and& thus& will& be& held& until& later.& These& parcels& (#& 1,& 2,& 14,& 15)& will& be& sold& last& whilst& commanding&the&highest&premiums.& & & & & & ! & ! ! ! ! ! ! ! ! ! !

!

33!

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6.0*Financial*Strategy& Clearwater&has&laid&out&three&possible&strategies&for&the&property& going& forward,& each& providing& a& different& degree& of& risk& and& return.& The& choice& of& which& option& to& pursue& depends& on& the& ability& of& the& partners& in& the& Point& Ruston& Group& to& renegotiate& the&timing&of&the&scheduled&partner&payouts&among&themselves.&& In& particular,& as& it& relates& to& the& financial& milestones& laid& out& in& the& RFP.& It& will& also& depend& on& whether& additional& equity& is& available&from&PR&Group,&or&if&not,&from&new&equity&investors.&The& terms&of&the&new&equity&deal(s)&will&be&an&important&determinant& for&the&feasibility&of&each&option.&Even&the&length&of&time&that&PR& Group&is&willing&to&wait&for&the&return&of&their&equity&invested&to& date&will&determine&which&option&is&chosen.& & The& three& strategies& were& analyzed& using& a& Net& Present& Value& (NPV)& analysis& as& of& 2012.& Cash& flows& in& the& future& were& discounted&back&to&present&day&using&a&10%&discount&rate,&which& is& equivalent& to& the& cash]on]cash& financial& target& of& the& client.& Cash&flows&in&the&past&were&brought&forward&to&present&day,&once& again& using& the& 10%& discount& rate.& This& allowed& for& multiple& options& to& be& valued& and& compared& with& one& another& using& the& same&methodology.&& & A& set& of& assumptions& was& provided& by& the& client& regarding& the& sources& and& uses& of& funds& from& 2006& to& 2013,& including& sales& figures& for& the& Copperline& apartments& and& condominiums.& We& have& taken& these& figures& as& given& and& the& project& recommendations&depend&on&them.&If&the&numbers&turn&out&not& to& be& as& given,& then& a& different& outcome& may& occur& and& recommendations& for& future& phases& may& also& change.& Please&

note& that& we& also& noticed& a& discrepancy& in& the& information& provided& by& the& client,& where& both& a& bank& loan& and& private& financing&were&not&being&fully&paid&off&by&2013.&We&have&adjusted& our& cash& flows& accordingly& to& ensure& that& this& debt& will& be& paid& off.&& & For& our& assumptions& on& various& metrics& such& as& sale& prices,& financing&rates,&growth&rates,&or&cost&assumptions,&please&consult& the&Appendices.& & * * * * * * * * * * * * * * * * * * * * *

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6.1*Option*1:*Project*ShuthDown One&option&that&needs&to&be&considered&is&leaving&the&project&in& its& current& state& and& “walking& away”& as& soon& as& the& Copperline& buildings&are&sold.&Depending&on&whether&or&not&equity&partners& would&prefer&to&realize&their&losses&and&receive&as&much&of&their& equity& back& as& soon& as& possible,& this& may& be& the& preferred& solution.&& & To&mitigate&the&potential&criminal&and&legal&liabilities&that&would& result& from& abandoning& an& environmentally& contaminated& site& that&already&contains&residential&units,&an&impervious&cap&should& be& installed& on& all& areas& of& the& site.& This& includes& areas& that& do& not& yet& have& hardscape,& buildings,& or& an& existing& cap.&& & By& 2014,& as& per& information& provided& by& the& client,& we& assume& that& the& Copperline& Apartments& and& the& majority& of& the& condominiums& are& sold& (at& more& reasonable& prices& than& when& originally& listed).& In& this& case,& there& will& be& sufficient& funds& to& repay& both& bank& and& private& financing.& & The& remainder& of& the& condominiums&will&be&sold&in&2015,&which&is&when&capping&of&the& site& will& be& completed.& &Choosing& this& option& would& result& in& positive& cash& flows& for& PR& Group& in& 2013,& 2014,& and& 2015.& &The& final& exit& would& be& in& 2015.& The& LID,& which& will& go& unpaid& after& 2015,& is& assumed& to& have& a& claim& on& the& remainder& of& the& land.&& & & & & & &

Summary:* * Additional&Equity:&&No&additional&equity&requirements&

*

Risks:&& NPV:&& & & & & & & & & & & & & & & & & & &

Legal&issues&with&environmentally&sensitive&site& Damage&to&reputation&due&to&abandoning&project& & Loss&of&$36,550,000&&

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6.2*Option*2:*The*Village** * Building&The&Village,&a&mixed&use&development&with&a&destination& retail& core,& surrounded& by& residential& units,& represents& the& highest& and& best& use& of& the& Subject& Site.& This& option& requires& additional& equity& at& the& start& of& the& project,& as& well& as& a& postponement&of&the&both&the&$5MM&financial&milestone&in&2013& and&the&$10MM&milestone&in&2016.&This&option&faces&all&the&risks& associated&with&a&development&project.&&In&addition,&it&hinges&on& the& success& of& the& destination& retail& center& both& for& retail& cash& flow& and& to& justify& price& premiums& for& the& residential& developments,&and&thus&land&residuals.&& & The& equity& contribution,& combined& with& rolled& over& equity& from& the& sale& of& the& Copperline& apartments& in& 2013,& will& be& used& to& begin& construction& of& a& retail& core& along& with& apartment& buildings.& This& combination& of& retail& and& rental& apartment& units& will&initially&be&offered&at&below]market&rents&and&will&begin&the& process&of&achieving&a&critical&mass&of&residents&and&visitors.&The& idea&is&to&undertake&a&strategy&which&is&essentially&the&opposite&of& that&taken&with&the&Copperline&buildings:&Instead&of&building&high] end&residences&before&any&amenities,&loss&leading&retail&units&will& be& built& first& to& create& the& reason& for& people& to& go& to& an& area.&& This&way,&premium&prices&can&be&justified&in&the&future.&& & It&is&absolutely&essential&that&a&destination&and&a&sense&of&place&is& created,&even&if&initially&at&a&loss.&The&added&value&to&the&rest&of& the&development&more&than&outweighs&the&costs&faced&in&building& the& retail& core& ]& this& is& shown& clearly& when& we& compare& The& Village&with&an&alternative&strategic&approach&below.&With&a&great& waterfront&location&and&a&unique&retail&mix,&The&Village&at&Point&

Defiance&will&be&able&to&pull&visitors&and&potential&residents&from& Pierce& County,& South& King& County,& as& well& as& Thurston& County.& This& combination& of& waterfront& views& and& destination& retail& will& allow&for&much&higher&prices&when&selling&land&when&the&critical& mass&of&activity&and&excitement&is&achieved.& & Clearwater’s&recommendations&are&under&the&assumption&that&PR& Group& will& be& able& to& provide& the& additional& equity& required& in& 2013.&If&an&additional&equity&partner&was&involved&apart&from&PR& Group,& this& would& lower& the& project& return& to& the& PR& Group.& If& this& strategy& is& successful,& The& Village& at& Point& Defiance& will& be& marveled& for& years& to& come,& showing& what& a& developer’s& creativity&and&determination&can&do,&even&in&a&depressed&market& with&a&tainted&brownfield&site.& & In& order& to& ease& future& equity& requirements,& the& equity& generated&by&Copperline&Apartment&and&Condominium&sales&will& need&to&be&rolled&over,&so&that&profits&generated&from&this&project& are& used& for& the& equity& element& of& the& next& phase.& By& consistently& rolling& over& equity& throughout& the& development& timeline&and&using&leverage&from&construction&loans,&new&equity& requirements& are& minimized.& Rollover]equity& is& our& main& source& of&funds,&so&inherently,&the&ability&to&fund&later&years&depends&on& the&cash&flows&from&previous&years.&&In&some&ways,&this&limits&PR& Group’s& ability& to& remove& equity& until& the& later& years& of& the& project.& & It& also& exposes& the& project& to& cascading& risks& if& early& phases&are&delayed&or&perform&poorly.& & The&Village&commences&with&a&neighborhood&center&anchored&by& a& grocer& and& a& junior& anchor,& at& 69,000& SF& of& total& retail& space.& Once&it&is&built&and&rents&have&stabilized,&the&center&will&be&sold&to& allow&for&more&equity&in&future&phases.&The&neighborhood&center&

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! will& initially& rely& on& residents& from& the& surrounding& community& within& a& five& minute& drive& time& radius.& In& later& years,& it& will& also& serve& the& numerous& future& residents& of& The& Village& at& Point& Defiance.&&Simultaneous&to&the&construction&of&the&neighborhood& center,& apartments& will& be& constructed.& Although& these& apartments&will&be&rented&out&at&below]market&rents&($1.50&PSF& based&on&2012)&and&will&not&be&immediately&profitable&as&a&new& development,& it& will& bring& life& to& the& retail& core& and& entice& hesitant&renters&to&the&area.&&Our&plan&calls&for&a&destination&retail& centre,& and& this& necessitates& active& life& on& the& site.& & The& apartments& help& us& to& achieve& this& goal& early& in& the& project& before&the&site&is&fully&populated.& & The&strategy&is&to&increase&apartment&rental&rates&once&sufficient& condominiums& have& been& built,& so& that& we& no& longer& need& to& subsidize&space&to&attract&the&population&that&enlivens&the&retail& element.& As& condominiums& become& occupied,& apartment& rental& rates&will&be&increased&until&they&are&at&“above&market”&rates&to& adequately& charge& for& the& excellent& location& and& amenities& provided&by&The&Village.&Keeping&forecasted&absorption&in&mind,& 180& rental& apartment& units& will& be& built& in& total:& 120& units& with& the& initial& neighborhood& retail& center& and& then& an& additional& 60& units& in& the& retail& core.& The& retail& core& will& have& a& museum& and& performing& arts& center,& a& public& market,& an& artists’& row,& five& restaurants,& as& well& as& local& serving& office& space.& Like& the& apartments,& the& retail& core& will& be& a& loss& leader,& where& initial& tenants& are& subsidized& with& lower& rents& so& that& the& draw& and& attractiveness&of&the&development&can&be&built&up&over&time.&& The&presence&of&the&retail&core&and&other&residents&on&the&site& will&increase&future&absorption&rates&for&residential&uses.&This& allows&for&more&units&to&be&sold&per&year,&and&correspondingly,& higher&revenues&from&land&sales&and&a&shorter&overall&project&

length.&The&Artists’&Row&live]work&space&will&be&subsidized&to&half] market&rents&under&the&condition&that&the&artists&showcase&their& work&space&to&the&public.&We&expect&that&the&artists’&presence& will&have&positive&spin]offs&in&developing&a&community& environment&and&creating&a&destination&area.&To&maintain&control& of&the&tenant&mix&of&this&integral&part&of&the&site,&the&retail&core& will&not&be&sold&off&until&all&other&undeveloped&land&parcels&have& been&sold.&& & When&the&retail&core&and&apartment&buildings&have&been& completed,&land&sales&will&be&timed&to&match&absorption,&with& zoning&mostly&for&condominium&and&townhome&units&(See& Appendices&for&detailed&land&sales&in&Option&2).&There&will&be&a& strong&reliance&on&condominium&land&sales&because&they&are&able& to&generate&high&land&residual&values,&especially&when&factoring&in& the&premium&charged&in&later&phases.&Fundamentally,&the&plan&is& to&sell&land&to&builders&willing&to&pay&the&highest&price.&Although&a& breakdown&of&expected&property&types&has&been&laid&out,&it&is&up& to&each&builder’s&discretion&to&decide&what&is&the&most&profitable.&&

* Summary:* *

Additional&Equity:&&$25,261,000&required&over&the&course&of&the& build&out.&& Risks:&Cascading&risks&if&early&phases&perform&poorly&significant& capital&requirements&up&front&&&long&duration&for&project&& NPV:&&Loss&of&$9,751,000& & Although&relative&to&the&other&strategies,&Option&2&provides&the& strongest&return,&the&long&build&out&period&necessitates&a&re] evaluation&of&goals&and&expectations&on&a&regular&basis.&

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! & & & & & * * * * * * * * * * * * * * * * * * * * * * * * * * *

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

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6.3*Option*3:*Gradual*Exit& & The& third& option& operates& under& the& assumption& that& PR& Group& investors&are&essentially&“tapped&out,”&and&are&unable&to&provide& any& additional& equity,& and& want& to& extract& capital& as& soon& as& possible.&The&basic&strategy&here&is&to&sell&land&for&residential&uses& as&quickly&as&the&market&allows.&& & This& option& would& still& involve& a& renegotiation& of& the& required& 10%&cash]on]cash&returns&and&financial&milestones.&It&will&not&be& possible& to& meet& the& first& $5MM& financial& milestone& in& 2013.& However,& both& the& $10MM& milestone& in& 2016& and& the& $10MM& milestone&in&2023&can&be&met&without&severely&compromising&the& values&of&land&parcels.&& & PR&Group&will&continue&their&involvement&in&the&project&and&land& will&be&sold&beginning&in&2014&with&mostly&residential&zoning,&with& sales& timed& to& match& forecasted& absorption& rates.& Land& residual& values& were& based& on& a& mix& of& mostly& townhomes& and& condominiums,&though&the&actual&use&choice&will&be&determined& by&the&purchasers.& & Land& sales& for& condominiums& will& commence& only& after& several& plots& have& already& been& built& out,& allowing& for& a& waterfront& premium& to& be& capitalized& on& with& the& higher& density.& In& a& later& phase,&local&residential&density&would&give&rise&to&potential&for&a& small,& local& serving& retail& component& to& complement& the& residential&community.&& & Although&one&of&the&three&financial&milestones&as&laid&out&in&the& RFP&will&not&be&met,&this&project&strategy&has&been&modeled&with&

reasonable& residential& unit& prices,& absorption& and& capture& rates& in& mind& due& to& a& lack& of& a& “sense& of& place.”& This& results& in& a& relatively& long& project& timeline,& but& also& a& project& that& will& provide& relatively& stable& returns& and& sufficient& funds& from& roll] over& equity& and& land& sales& to& cover& LID& payments& and& overhead& costs.&Compared&to&Option&2:&The&Village,&here,&PR&Group&is&able& to&extract&equity&earlier.& * Summary:* Additional& Equity:& $1,207,000& required& over& the& course& of& the& build&out.&& Risks:&&&Absorption&slower&than&expected.&& Less& interest& from& developers& than& expected& due& to& lack& of&amenities& Prices&don’t&grow&as&quickly&as&expected& NPV:&&Loss&of&$20,608,000&& & The&last&parcel&of&land&will&be&sold&in&2028.&The&NPV&of&this&option& at& a& 10%& discount& rate& results& in& a& loss& of& $20,608,000& and& the& project&IRR&has&been&calculated&at&3.15%&over&the&time&frame&of& 2006&–&2028.&This&takes&into&account&all&equity&investments&by&PR& Group& as& well& as& the& sales& of& the& Copperline& and& Stack& Hill& buildings.& & This&strategy&is&one&of&moderate&risk&]&the&returns&modeled&are&in& no& way& guaranteed& and& are& expected& over& a& very& long& time& frame.& If& economic& conditions& were& to& turn& more& favorable,& it& may& be& worth& pursuing& a& strategy& with& additional& risk& and& corresponding& reward.& Option& 3& can& be& considered& the& loss& minimizing&strategy;&it&provides&a&stronger&return&for&the&overall& project& than& simply& “walking& away,”& but& does& not& require& additional&equity&investment.&&

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Scenario*Analysis* *See*Appendix*N*&*O*

Rather& than& evaluate& the& countless& possibilities& for& potential& market& conditions& over& a& 20]year& build& out& period,& we& will& instead& focus& on& the& main& drivers& that& would& greatly& influence& returns& and& their& present& values.& & While& Option& 2& does& provide& the& highest& return,& there& is& an& inherent& risk& involved.& Option& 2& relies& on& the& success& of& the& retail& core& to& justify& a& premium& for& land& sales.& & Should& the& retail& core& have& high& vacancies& and& thus& lower&rents,&The&Village&would&not&be&as&attractive.&A&premium&in& land& sales& values& could& not& be& justified& in& this& case.& Taking& into& account&this&situation,&developers&would&be&unwilling&to&purchase& land& with& a& 15%& profit& on& cost,& likely& requiring& at& least& a& 20%& return&due&to&the&increased&risk.&If,&despite&rent&subsidies,&there& turns&out&to&be&less&of&an&appetite&than&expected&for&space&in&the& retail& core,& it& could& be& that& rents& have& to& be& discounted& around& 25%,& and& in& a& very& negative& scenario,& the& vacancy& rate& in& the& center&could&be&up&to&50%.&& & Under&a&downside&scenario&where:& & Townhome&Non]Luxury&Sale&Prices&in&2012&decrease&by&$15&PSF& (From&$200&to&$185&PSF)& Condominium&Non]Luxury&Sale&Prices&in&2012&decrease&by&$20& PSF&(From&$340&to&$320&PSF)& Retail&Rents&have&a&25%&discount&& Retail&Vacancy&allowance&of&50%& Profit&on&Cost&for&land&sales&is&constant&at&20%& & Project*NPV:& & Loss&of&$47,349,000& &

As&a&simple&upside&scenario:& & Townhome&Luxury&Sale&Prices&in&2012&increase&by&10%&(From& $250&to&$275&PSF)& Condominium&Non]Luxury&Sale&Prices&in&2012&increase&by&10%& (From&$340&to&$374&PSF)& Condominium&Luxury&Sale&Prices&in&2012&increase&by&10%&(From& $400&to&$440&PSF)&&& & Project*NPV:& & Gain&of&$9,195,565&& &

7.0*Recommendations* *

As&a&key&consideration&in&our&recommendations&to&the&client,&it&is& important& to& recognize& that& the& chosen& strategy& going& forward& will& not& be& able& to& provide& the& same& returns& as& a& project& that& a& brand& new& investor& would& decide& to& invest& in& today.& Due& to& several& constraints& and& limiting& factors& that& began& in& 2006,& the& strategy& chosen& should& be& one& that& minimizes& losses& while& still& providing&some&form&of&upside&potential.&& & In&addition&to&having&the&highest&returns&of&the&three&options&that& were& described,& Option& 2:& The& Village,& provides& the& client& the& opportunity&to&build&a&legacy&and&a&development&that&showcases& the& best& of& the& Pacific& Northwest& on& one& of& the& few& remaining& developable&waterfront&sites&in&the&Puget&Sound.&& *

* *

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Appendix(A:(Building(Height(Restrictions For$tracts$located$in$Tacoma,$height$restrictions$depend$on$the$distance$of$the$building$from$the$Ordinary$High$Water$Mark$ (OHWM),$as$set$out$in$the$Tacoma$Zoning$Code: 1.''Between'50ft'and'100ft'of'the'OHWM:''''''''''''35ft'height'restriction 2.''Between'100ft'and'200ft'of'the'OHWM:''''''''''50ft'height'restriction 3.''From'200ft'from'the'OHWM'any'beyond:''''''''80ft'height'restriction For$parcels$located$in$Ruston,$height$restrictions$depend$on$“districts”$as$set$out$in$the$Ruston$MDP: 1.''“Marina'District”:''''''''''''''''''''''''''''''''''''''''''''''''''60ft'height'restriction 2.''“Promenade'District”:''''''''''''''''''''''''''''''''''''''''''60ft'height'restriction 3.''“Baltimore'District”:'''''''''''''''''''''''''''''''''''''''''''''35ft'height'restriction

Appendix(B:(Parking(Requirements Residential$ Studio'''''''''''''''''''1'stall'per'unit One'Bed'''''''''''''''1.5'stalls'per'unit Two'Bed'''''''''''''''2'stalls'per'unit Commercial 4'stalls'per'''''''''''1,000SF Office 5'stalls'per'''''''''''1,000'SF

A1

Appendix(C:(Apartment(Comparables Location Thea's(Landing( Waterfront' Property

Bella(on(Broadway City'Property

Unit(Type

Size((SF)

Direction

Rent

Rent/SF

Vacancy

1'Bd'1'Ba 1'Bd'1'Ba 2'Bd'2'Ba 2'Bd'2'Ba 1'Bd'1'Ba 1'Bd'1'Ba

712 840 1003 1054 614 1234

City City City City Water Water

$'''''''''''''''''''935 $''''''''''''''''1,200 $''''''''''''''''1,300 $''''''''''''''''1,500 $''''''''''''''''1,050 $''''''''''''''''2,000

$''''''''''''''''''1.31 $''''''''''''''''''1.43 $''''''''''''''''''1.30 $''''''''''''''''''1.42 $''''''''''''''''''1.71 $''''''''''''''''''1.62

2% 2% 2% 2% 2% 2%

Studio Studio 1'Bd'1'Ba 1'Bd'1'Ba 2'Bd'1'Ba 2'Bd'2'Ba

450 499 694 715 938 926

Courtyard Back'Alley Water Water Water City

$'''''''''''''''''''780 $'''''''''''''''''''830 $'''''''''''''''''''940 $''''''''''''''''1,120 $''''''''''''''''1,345 $''''''''''''''''1,330

$''''''''''''''''''1.73 $''''''''''''''''''1.66 $''''''''''''''''''1.35 $''''''''''''''''''1.57 $''''''''''''''''''1.43 $''''''''''''''''''1.44

2% 2% 2% 2% 2% 2%

Studio Studio 1'Bd'1'Ba 1'Bd'1'Ba 2'Bd'2'Ba 2'Bd'2'Ba

517 526 596 650 941 1016

Street Street City City City City

$'''''''''''''''''''860 $'''''''''''''''''''885 $''''''''''''''''1,000 $''''''''''''''''1,120 $''''''''''''''''1,375 $''''''''''''''''1,595

$''''''''''''''''''1.66 $''''''''''''''''''1.68 $''''''''''''''''''1.68 $''''''''''''''''''1.72 $''''''''''''''''''1.46 $''''''''''''''''''1.57

12% 12% 12% 12% 12% 12%

1'Bd'1'Ba 2'Bd'2'Ba 3'bd'2'Ba

838 1006 1368

Water $''''''''''''''''1,294 Water $''''''''''''''''1,666 Water $''''''''''''''''2,138 Average(Studio(Rent/SF Average(1(Bd(Rent/SF Average(2(Bd(Rent/SF Total(Average(Rent/SF

Courtyard(17(

Copperline $''''''''''''''''''1.54 $''''''''''''''''''1.66 $''''''''''''''''''1.56 $''''''''''''''''''1.68 $''''''''''''''''''1.53 $''''''''''''''''''1.47 $''''''''''''''''''1.55

A2

Appendix(D:(Condominium(Comparables Location The(Esplanade Waterfront

Stadium(302( Waterfront The(Roberson(

505(Broadway City'Property

Copperline Waterfront

Price/SF(Averages

Unit(Type

Size

Direction

Price

Price/(SF

1'Bd'1'Ba'Den 2'Bd'1.5'Ba 2'Bd'1.5'Ba'Den 1'Bd'1'Ba 1'Bd'1'Ba 2'BD'2.5'Ba'Den

1068 1375 1611 965 729 1858

Water Water Water City City Water

$''''''''''''299,900 $''''''''''''419,900 $''''''''''''454,900 $''''''''''''217,900 $''''''''''''189,900 $''''''''''''599,900

$'''''''''''''''''''281 $'''''''''''''''''''305 $'''''''''''''''''''282 $'''''''''''''''''''226 $'''''''''''''''''''260 $'''''''''''''''''''323

2'Bd'2.5'Bd'

1600

Water

$''''''''''''946,000

$'''''''''''''''''''591

Live/Work 2'Bd'2'Ba 2'Bd'2'Ba 2'Bd'2'Ba 2'Bd'2'Ba 2'Bd'2'Ba

1993 975 1221 860 1164 860

City Water Water City Water Water

$''''''''''''679,000 $''''''''''''400,000 $''''''''''''506,000 $''''''''''''325,000 $''''''''''''470,000 $''''''''''''327,000

$'''''''''''''''''''341 $'''''''''''''''''''410 $'''''''''''''''''''414 $'''''''''''''''''''378 $'''''''''''''''''''404 $'''''''''''''''''''380

Water(Facing

1'Bd'1'Ba 2'Bd'2'Ba 2'Bd'2'Ba 2'Bd'2'Ba 2'Bd'2'Ba 3'Bd'2'Ba

1289 1336 1329 1633 1295 1725

City Water Water City Water Water

$''''''''''''299,000 $''''''''''''440,000 $''''''''''''425,000 $''''''''''''357,410 $''''''''''''370,000 $''''''''''''442,000

$'''''''''''''''''''232 $'''''''''''''''''''329 $'''''''''''''''''''320 $'''''''''''''''''''219 $'''''''''''''''''''286 $'''''''''''''''''''256

Water(Facing

2'Bd'2'Ba'Den 3'Bd'2'Ba'Den 3'Bd'2.5'Ba 3'Bd'2.5'Ba 3'Bd'2'Ba 2'Bd'2.5'Ba

1360 1582 1617 1634 2188 2168

Water Water Water Water Water Water

$''''''''''''592,000 $''''''''''''709,000 $''''''''''''670,000 $''''''''''''672,000 $''''''''''''682,000 $''''''''1,029,000

$'''''''''''''''''''435 Water(Facing $'''''''''''''''''''448 City(Facing $'''''''''''''''''''414 $'''''''''''''''''''411 All $'''''''''''''''''''312 $'''''''''''''''''''475 Total(Average(Water(Facing(PSF Total(Average(City(Facing(PSF Total(Average(PSF

Water(Facing City(Facing All

City(Facing All

City(Facing All

$'''''''''''''''''''307 $'''''''''''''''''''243 $'''''''''''''''''''280

'$'''''''''''''''''''377' '$'''''''''''''''''''404' '$'''''''''''''''''''388'

'$'''''''''''''''''''280' '$'''''''''''''''''''255' '$'''''''''''''''''''274'

'$'''''''''''''''''''250' '$'''''''''''''''''''455' '$'''''''''''''''''''416' $'''''''''''''''''''373 $'''''''''''''''''''291 $'''''''''''''''''''349

A3

Appendix(E:(Townhome(Comparables Location Spanaway Lakewood Lakewood Lakewood Tacoma

Unit(Type 2'Bd'1.5'Ba 3'Bd'2.75'Ba 3'Bd'2.5'Ba 3'Bd'2.5'Ba 3'Bd'3.5'Ba

Size((SF) 1,111 2,200 2,694 4,114 3,103

Price $''''''''''''135,000 $''''''''''''240,000 $''''''''''''495,000 $''''''''''''585,000 $''''''''''''635,000 Total(Average(PSF

PSF $'''''''''''''''''''122 $'''''''''''''''''''109 $'''''''''''''''''''184 $'''''''''''''''''''142 $'''''''''''''''''''205 $'''''''''''''''''''152

Units 1 1 1 1 1 1

SF/Unit ''''''''''''''''30,000 ''''''''''''''''20,000 ''''''''''''''''10,000 ''''''''''''''''''3,750 ''''''''''''''''''3,750 ''''''''''''''''15,000 1000W1500 2000W3000 ''''''''''''''''''''''300 ''''''''''''''''''1,500 ''''''''''''''''''5,000 ''''''''''''''''''3,000 1200W1500 Total(Retail(SF

SF ''''''''''''''''30,000 ''''''''''''''''20,000 ''''''''''''''''10,000 ''''''''''''''''''3,750 ''''''''''''''''''3,750 ''''''''''''''''15,000 ''''''''''''''''10,500 ''''''''''''''''''7,500 ''''''''''''''''''2,400 ''''''''''''''''''3,000 ''''''''''''''''''5,000 ''''''''''''''''''3,000 ''''''''''''''''''7,500 ((((((((((((((121,400

Year 1971 1990 2000 1981 1997

Appendix(F:(Retail(Mix Retail(Type Grocer Jr.(Anchor Brewery(+(Restaurant Museum/Art(Gallery Performance(Art(Theatre Public(Market Local(Serving(CRU's Local(Serving(Office Artisans Cafes Restaurants Banks Cultural(Foods

8 2 1 1

*'Clearwater'has'chosen'to'not'include'a'movie'theatre'in'The'Village'development.'Instead,'a'museum,'art'gallery,'and' performing'arts'theatre'will'be'developed.'These'uses'better'meet'current'demands'of'the'market'and,'more'importantly,' of'the'developments'target'customers.'

A4

Appendix(G:(Residential(Mix Parcel 1 2 3 4 5 6 7 8 9 9 10 10 11 12 12 13 14 14 15

Neighborhood Marina'District Marina'District Marina'District Marina'District Promontory'Row Promontory'Row The'Village Baltimore'Lane Copper'Landing Copper'Landing Copper'Landing Copper'Landing Copper'Landing Bayview'Plaza Bayview'Plaza Bayview'Plaza Bayview'Plaza Bayview'Plaza Rainier'Place Mountview'Vista

Building(Type Condominium Condominium Condominium Condominium Townhome Townhome Apartment Townhome Condominium Townhome Copperline'Condominium Copperline'Apartment Townhome Condominium Townhome Condominium Condominium Townhome Condominium

#(of(Bldg. 2 2 2 2 6 2 3 10 4 1 1 1 8 3 4 2 2 2 4

#(units 81 81 100 100 36 17 180 38 214 10 44 173 33 176 18 147 140 8 255

Building(Type Townhome Condominium Apartment Total

#(units 160 1,338 353 1,851

A5

Appendix(H:(Building(Views

A6

Appendix(I:(Development(Parking(Statistics Phase 1 2

Type Apartment Retail Apartment Retail Total

Stalls(Required 192 276 96 210 774

Phase 1 2

Type Parking0Garage Surface Under0Apart. Surface Total

Stalls(Provided 496 100 93 92 781

Appendix(J:(Site(Map(with(Parcels

A7

APPENDIX(K:(CONSTRUCTION(GANTT(CHART Year(Started Parcel 10

7

Building(Type

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Copperline) Apartments Copperline) Condos

2026

2027

2028

2029

2028

2029

LEGEND

Retail

Point(Ruston(LLC

Apartment

11

Townhome

7

Retail

7

Apartment

8

Townhome

Sellable(Parcels

Townhome 9

Condominium Retail

13 12

Condominium Townhome Condominium

5

Townhome

6

Townhome

4

Condominium

3

Condominium

14

15

Townhome Condominium Retail Condominium

2

Condominium

1

Condominium

Gantt(Chart(by(Building(Type Year(Started Building(Type

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

Apartment Condominium Townhome Retail

A8

Appendix(L:(Pro(Forma(Assumptions GROWTH(RATES Annual(Sales(Price(Growth(Rates Years Condo Townhome Annual(Rent(Growth(Rates Years Apartment Annual(Cost(Growth

2012d20161 3.35% 3.35%

Greater(than(2016(2 2.85% 2.85%

3 (4 2012d2017 ((((((((((((((((((((((((((((((((((((2018d2022 6.00% 3.05%

Greater(than(2022(5 3.05%

All(years Residential'Cost'Inflation NonWResidential'Cost'Inflation LEED'Gold'Premium 1'

3.05%'6 3.15%'7 2.00%'8

Res'Construction'Inflation'+'30'bps'based'on'historical'spreads Inflation'+'10'bps

2 ' 3,'5'

Historical'Rent'Inflation Rent'boost'rate'to'reflect'full'build'out'and'to'eliminate'initial'discount'rate'on'apartments 6' Inflation'+'40'bpsbased'on'historical'spreads 7 '15'yr'average'1987W2002'BLS'New'Construction'Cost'Index 8 'Inflation'+'30bps'based'on'historical'spreads 7 '15'yr'average'1987W2002'BLS'New'Construction'Cost'Index 8 'Inflation'+'30bps'based'on'historical'spreads 4'

A9

RENT(&(SALE(PRICES(PSF

OTHER

Year(2012*

Inflation Developer's(Fee Construction(Contingency Property(Tax(Rate Beginning(Overhead( Environmental(Cap((PSF) Paving/Roads Landscaping((Incl.(Cap)(PSF LEED(Gold(Premium Excise(Tax Sales(Commissions Soft(Costs((%(of(Hard(Costs)

Apartment Condo((Non(Luxury) Condo((Luxury) Townhome((Non(Luxury) Townhome((Luxury) Townhome(Rental Retail(CRU Retail(Anchor Retail(Food(&(Beverage Retail(Average Retail((Subsidized)

$''''''''''''''''''''''18 $'''''''''''''''''''340 $'''''''''''''''''''400 $'''''''''''''''''''200 $'''''''''''''''''''250 $''''''''''''''''''''''19 $''''''''''''''''''''''20 $''''''''''''''''''''''18 $''''''''''''''''''''''30 $''''''''''''''''''''''23 $''''''''''''''''''''''12

2.75% 2.00% 3.00% 1.58% '$'''''''''''500,000' '$''''''''''''''''''1.50' '$''''''''''''''''''3.25' '$''''''''''''''''''4.00' 2% 1.28% 3.00% 21.00%

*$Subsequent$years$increase$by$growth$rate

HARD(COST(PSF

TERMINAL(CAP(RATES

Year(2012*

Year(2012*

Apartment Condo((Non(Luxury) Condo((Luxury) Townhome((Non(Luxury) Townhome((Luxury) Retail

$'''''''''''''''''''120 $'''''''''''''''''''160 $'''''''''''''''''''185 $'''''''''''''''''''110 $'''''''''''''''''''130 $'''''''''''''''''''140

*$Subsequent$years$increase$by$growth$rate

Apartment Townhome Retail Starting$10$year$Treasury Townhome$Spread Apartment$Spread Retail$Spread

6.00% 7.50% 7.50% 2.12% 5.38% 3.88% 5.38%

*$Subsequent$year$terminal$cap$rates$based$on$a$ constant$spread$over$US$treasury$strip$rate

A10

APARTMENTS

RETAIL

Average0Size0(SF) Efficiency Operating0Expenses0(%0of0Rev) Vacancy0&0Bad0Debt0Allowance Structural0Reserve

1000 89% 30% 5% 0.5%

Efficiency Operating0Expenses0(PSF) Vacancy0&0Bad0Debt0Allow. Leasing0Fee Weighted0Average0TI's0(PSF) Structural0Reserve

CONDOMINIUMS

100% $((((((((((((((((((((((((5 6% 6% $((((((((((((((((((((((20 0.5%

PARKING

Average0Size0(SF) Efficiency PreRSales0%

1000 89% 50%

Cost0per0stall0(Above0Grade) Cost0per0stall0(Surface) Cost0per0stall0(Standalone) Revenue0per0stall0(Annual) Retail0Park0Ratio0(per01000SF) Multifamily0Parking0Ratio Townhome0Parking0Ratio Parking0Eff.0(Surface)0(SF) Parking0Eff.0(Above0Grd.)0(SF) Parking0Eff.0(Standalone)0(SF)

TOWNHOMES Average0Size0(SF) Efficiency PreRSales0%

1650 100% 50%

$((((((((((((((20,000 $((((((((((((((((4,000 $((((((((((((((15,000 $(((((((((((((((((((960 3.5 1.6 1 250 350 225

AVERAGE0UNIT0SIZE0(SF) Building

Condo

Townhome

Apartment

Parking0(Above)

Unit0Size

1000

1650

1000

350

Parking0 (Surface) 250

Townhome0 (units) (7((( (7((( 160

Apartment0 (units) 120 60 (7(((

Parking0 (Standalone) 225

PHASING Building0Type Phase(1((year(2013(7(2023) Phase(2((year(2015(7(2028) Land(Sold((year(2014(7(2028)

Condo0(units) (7((( (7((( 1295

Retail0(SF) 69,000 52,400 13,900

A11

OPTION(2(d(ABSORPTION((Units) 1

Apartment( Condo(2 Townhome

2012

2013

2014

2015

2016

2017

2018

45 51 37

67 48 35

111 53 34

141 67 33

124 81 30

121 85 32

100 85 32

2019

2020

2021

2022

2023

2024

2025

100 91 31

99 97 31

63 110 34

60 106 32

60 105 32

59 105 32

59 105 32

2026

2027

2028

2029

2030

45 105 32

44 103 31

44 104 32

44 103 31

44 102 31

OPTION(2(d(ABSORPTION((Units) Apartment( Condo( Townhome

OPTION(2(d(ABSORPTION((Units) Apartment( Condo( Townhome 1

'Apartment'absorption'increases'due'to'low'new'construction'and'low' 'Condo'absorption'increases'after'2014'due'to'housing'market'recovery'and'decreased'unemployment.'It'then'stabilizes'in'2021

2

CONSTRUCTION(LOAN: LTC Financing'Fee Prime'Rate Spread'over'Prime'Rate Loan'RateW'Nominal Compounding'Periods'per'year Effective'Interest'Rate Term'(years)

PERMANENT(FINANCING: 65% 0.75% 3.25% 1.00% 4.25% 12 4.33% 3

LTV DCR Interest'Rate Effective'Rate Amortization'(Years)

70% 1.5 4.25% 4.33% 25

LID(FINANCING Total'Amount'(W'Waterwalk) Amortization'(years) Interest'Rate Annual'Payments

$22,500,000 20 4.50% $1,729,713 A12

Appendix(M:(Land(Sales Land(Sale(#1

Land(Sale(#2

Use: Townhome Year'of'Land'Sale 2014 Size'of'Parcel'Sold 68,796'SF Gross'Buildable'(w/o'Parking) 54,450'SF Total'Hard'&'Soft'Costs,'Interest'&' $''''''''7,950,436 Financing Disposition'Revenue $''''''11,631,851 Sales'Commission'&'Excise $''''''''''''348,956 Profit'on'Cost'% 20% LID'Time'Remaining 19 Discount'for'LID'Payments $''''''''''''425,900 Discount'for'Enviro'Cap'&'Addit.' $''''''''''''126,994 Roads

Use: Townhome Year'of'Land'Sale 2015 Size'of'Parcel'Sold 101,340'SF Gross'Buildable'(w/o'Parking) 62,700'SF Total'Hard'&'Soft'Costs,'Interest'&' $9,434,277 Financing Disposition'Revenue $13,842,960 Sales'Commission'&'Excise $415,289 Profit'on'Cost'% 20% LID'Time'Remaining 18 Discount'for'LID'Payments $623,318 Discount'for'Enviro'Cap'&'Addit.' $161,285 Roads

Land(Sales(Value

Land(Sales(Value

$(((((((((((899,083

$(((((((((((970,847

Land(Sale(#3 Use: Condominium Year'of'Land'Sale 2016 Size'of'Parcel'Sold 104,100'SF Gross'Buildable'(w/o'Parking) 239,400'SF Total'Hard'&'Soft'Costs,'Interest'&' $''''''72,580,838 Financing Disposition'Revenue $''''''97,233,533 Sales'Commission'&'Excise $''''''''2,917,006 Profit'on'Cost'% 20% LID'Time'Remaining 17 Discount'for'LID'Payments $635,296 Discount'for'Enviro'Cap'&'Addit.' $88,650 Roads Land(Sales(Value

$((((((10,285,322

Retail

Townhome

2016 2015 '''''''''''''''''''''''W '''''''''''''''''''''''W 7,500'SF 16,500'SF $''''''''1,485,835

$''''''''2,482,704

$''''''''2,213,971 $''''''''3,642,884 $''''''''''''''94,758 $''''''''''''109,287 20% 20% 17 18 $0 $0 $0

$19,500

$(((((((((((280,176

$(((((((((((442,460

A13

Land(Sale(#4(((((*Priced(as(NondLuxury

Land(Sale(#5

Use: Condominium Year'of'Land'Sale 2018 Size'of'Parcel'Sold 53,870'SF Gross'Buildable'(w/o'Parking) 165,200'SF Total'Hard'&'Soft'Costs,'Interest'&' $''''''48,267,454 Financing Disposition'Revenue $''''''60,329,466 Sales'Commission'&'Excise $''''''''1,809,884 Profit'on'Cost'% 20% LID'Time'Remaining 15 Discount'for'LID'Payments $''''''''''''321,927

Use: Condominium Year'of'Land'Sale 2020 Size'of'Parcel'Sold 130,330'SF Gross'Buildable'(w/o'Parking) 198,000'SF Total'Hard'&'Soft'Costs,'Interest'&' $''''''68,676,967 Financing Disposition'Revenue $''''''89,985,865 Sales'Commission'&'Excise $''''''''2,699,576 Profit'on'Cost'% 15% LID'Time'Remaining 13 Discount'for'LID'Payments $''''''''''''930,056 Discount'for'Enviro'Cap'&'Addit.' $''''''''''''126,645 Roads

Discount'for'Enviro'Cap'&'Addit.' Roads

$''''''''''''''35,805

Land(Sales(Value

$((((((((4,421,132

Land(Sales(Value

$((((((11,307,454

Townhome 2020 '''''''''''''''''''''''W 29,700'SF $''''''''6,137,453 $''''''''9,478,848 $''''''''''''284,365 15% 13 $''''''''''''''''''''W $''''''''''''''51,188 $((((((((1,806,562

Land(Sale(#6 Use: Condominium Year'of'Land'Sale 2021 Size'of'Parcel'Sold 48,900'SF Gross'Buildable'(w/o'Parking) 112,400'SF Total'Hard'&'Soft'Costs,'Interest'&' $''''''44,512,183 Financing Disposition'Revenue $''''''52,538,747 Sales'Commission'&'Excise $''''''''1,576,162 Profit'on'Cost'% 15% LID'Time'Remaining 12 Discount'for'LID'Payments $''''''''''''338,800 Discount'for'Enviro'Cap'&'Addit.' Roads Land(Sales(Value

Townhome 2021 73,150'SF 26,400'SF $''''''''4,902,087 $''''''''7,130,199 $''''''''''''213,906 15% 11 $''''''''''''489,339

$''''''''''''''31,275 $''''''''''''133,088 $4,573,033

$381,163 A14

Land(Sale(#7 Use: Condominium Year'of'Land'Sale 2021 Size'of'Parcel'Sold 48,900'SF Gross'Buildable'(w/o'Parking) 112,400'SF Total'Hard'&'Soft'Costs,'Interest'&' $''''''40,568,077 Financing Disposition'Revenue $''''''52,538,747 Sales'Commission'&'Excise $''''''''1,576,162 Profit'on'Cost'% 15% LID'Time'Remaining 12 Discount'for'LID'Payments $''''''''''''338,800 Discount'for'Enviro'Cap'&'Addit.' $''''''''''''''31,275 Roads Land(Sales(Value

Land(Sale(#8

$((((((((6,577,139

2021 69,350'SF 61,050'SF $''''''11,000,558 $''''''16,031,681 $''''''''''''480,950 15% 12 $''''''''''''480,486 $''''''''''''''73,500 $((((((((1,967,830

*Luxury(Townhomes

Use: Condominium Year'of'Land'Sale 2023 Size'of'Parcel'Sold 77,760'SF Gross'Buildable'(w/o'Parking) 157,300'SF Total'Hard'&'Soft'Costs,'Interest'&' $''''''58,763,587 Financing Disposition'Revenue $''''''77,776,916 Sales'Commission'&'Excise $''''''''2,333,307 Profit'on'Cost'% 15% LID'Time'Remaining 10 Discount'for'LID'Payments $''''''''''''498,814 Discount'for'Enviro'Cap'&'Addit.' $''''''''''''''70,665 Roads Land(Sales(Value

Townhome

$10,275,071

Townhome 2025 0 13,200'SF $''''''''3,169,901 $''''''''4,848,356 $''''''''''''145,451 15% 8 $''''''''''''''''''''W $''''''''''''''40,625 $878,958 A15

Land(Sale(#9

Land(Sale(#10

Use: Condominium Year'of'Land'Sale 2025 Size'of'Parcel'Sold 83,250'SF Gross'Buildable'(w/o'Parking) 286,500'SF Total'Hard'&'Soft'Costs,'Interest'&' $''''113,065,819 Financing Disposition'Revenue $''''149,849,470 Sales'Commission'&'Excise $''''''''4,495,484 Profit'on'Cost'% 15% LID'Time'Remaining 8 Discount'for'LID'Payments $''''''''''''477,482 Discount'for'Enviro'Cap'&'Addit.' $''''''''''''''46,875 Roads Land(Sales(Value

$((((((20,259,594

Retail 2025 0 6,400'SF $''''''''1,267,913 $''''''''1,889,256 $''''''''''''''80,860 15% 17 $''''''''''''''''''''W $''''''''''''''''''''W $(((((((((((304,605

Use: Condominium Year'of'Land'Sale 2027 Size'of'Parcel'Sold 48,900'SF Gross'Buildable'(w/o'Parking) 91,000'SF Total'Hard'&'Soft'Costs,'Interest'&' $''''''38,269,847 Financing Disposition'Revenue $''''''50,347,808 Sales'Commission'&'Excise $''''''''1,510,434 Profit'on'Cost'% 15% LID'Time'Remaining 6 Discount'for'LID'Payments $''''''''''''236,538 Discount'for'Enviro'Cap'&'Addit.' $''''''''''''''39,375 Roads Land(Sales(Value

$((((((((6,501,521

Land(Sale(#11 Use: Condominium Year'of'Land'Sale 2028 Size'of'Parcel'Sold 48,900'SF Gross'Buildable'(w/o'Parking) 91,000'SF 'Total'Hard'&'Soft'Costs,'Interest' $''''''39,277,098 &'Financing' Disposition'Revenue $''''''51,782,721 Sales'Commission'&'Excise $''''''''1,553,482 Profit'on'Cost'% 15% LID'Time'Remaining 5 Discount'for'LID'Payments $''''''''''''209,517 'Discount'for'Enviro'Cap'&'Addit.' $''''''''''''''39,375 Roads' Land(Sales(Value

$((((((((6,731,610

A16

Appendix(N:(Scenario(Analysis(3(Option(2((Upside(Scenario) Source(&(Uses(3(Option(#2:(The(Village((UPSIDE(SCENARIO(3(Unexpected(Growth) SOURCES(of(Funds Financing Bank/&Private&Financing/&LID PR&Group&Equity

200632011

201232017

201832023

202432028

Total

$34,400,000 $116,276,000 $24,000,000 $36,260,000

$0 $0

$0 $0

$150,676,000 $60,260,000

$0 $65,150,000 $0 $0 $25,415,000 $60,087,000 $4,400,000 $9,308,000 $0 $4,500,000 $12,878,000 $80,214,000 $0 $6,000,000 $0 $67,300,000 $271,287,000 $140,301,000

$0 $49,927,000 $0 $50,742,000 $0 $100,669,000

$65,150,000 $135,429,000 $13,708,000 $148,334,000 $6,000,000 $579,557,000

$0 $0 $6,046,000 $0 $1,424,000 $2,210,000 $412,000 $10,092,000

$58,945,000 $129,944,000 $125,272,000 $15,100,000 $20,727,000 $11,720,000 $13,391,000 $375,099,000

Revenue Condo/Apt/Retail&H&Copperline Condo/Apt/Retail&H&The&Village Single&Family&H&Stack&Hill Parcel/Tract&Sales Waterwalk&Sale Total(Sources(of(Funds

USES(of(Funds Property&&&Site&Improvements Hard&&&soft&construction&costs Bank&Loan&Repayment Private&Financing&Repayment LID&Special&assessments Property&Taxes& Operating&costs,&Leasing&Fees&&&Tis&&&Developer&mgmt&fee Total(Uses(of(Funds

$38,800,000 $20,145,000 $21,600,000 $108,344,000 $3,900,000 $77,178,000 $0 $15,100,000 $0 $13,508,000 $350,000 $4,660,000 $2,650,000 $8,654,000 $67,300,000 $247,589,000

$0 $0 $38,148,000 $0 $5,795,000 $4,500,000 $1,675,000 $50,118,000

PR(Group(Cash(Flow*

$&&&(24,000,000) $&(12,562,000) $90,183,000

PV(of(Equity(Invested(200632011((FV(using(10%)** PV(of(201232028(CFs(@(10%**

$((((32,356,435) $41,552,000

Project(NPV(in(2012 $9,195,565 Project(IRR(200632028*** 11.41% *PR&Group&CF&=&(HPR&Group&Equity)&+&Total&Sources&H&Total&Uses **10%&based&on&PR&Group&Return&Hurdle&of&10% ***IRR&includes&all&Copperline&buildings&and&Stack&Hill

$90,577,000

$144,198,000

A17

Appendix(O:(Scenario(Analysis(3(Option(2((Downside(Scenario) Source(&(Uses(3(Option(#2:(The(Village((DOWNSIDE(SCENARIO(3(Retail(Core(Fails) SOURCES(of(Funds Financing Bank/&Private&Financing/&LID PR&Group&Equity Revenue Condo/Apt/Retail&<&Copperline Condo/Apt/Retail&<&The&Village Single&Family&<&Stack&Hill Parcel/Tract&Sales Waterwalk&Sale Total(Sources(of(Funds

200632011

201232017

201832023

202432028

Total

$&&&&34,400,000 $&&&&136,502,000 $&&&&&&&&&&&&&&&&&&&&< $&&&&24,000,000 $&&&&&&36,685,000 $&&&&&&&&&&&&&&&&&&&&<

$&&&&&&&&&&&&&&&&&< $&&&&&&&&&&&&&&&&&<

$(((((170,902,000 $(((((((60,685,000

$&&&&&&&&&&&&&&&&&&< $&&&&&&&&&&&&&&&&&&< $&&&&&&4,400,000 $&&&&&&4,500,000 $&&&&&&&&&&&&&&&&&&< $((((67,300,000

$&&&&&&65,150,000 $&&&&&&10,283,000 $&&&&&&&&&9,308,000 $&&&&&&&&&3,566,000 $&&&&&&&&&6,000,000 $((((267,494,000

$&&&&&&&&&&&&&&&&&&&&< $&&&&&55,432,000 $&&&&&&&&&&&&&&&&&&&&< $&&&&&&&&8,538,000 $&&&&&&&&&&&&&&&&&&&&< $(((((63,970,000

$&&&&&&&&&&&&&&&&&< $&&&&&7,313,000 $&&&&&&&&&&&&&&&&&< $&&&&&5,152,000 $&&&&&&&&&&&&&&&&&< $(((12,465,000

$(((((((65,150,000 $(((((((73,028,000 $(((((((13,708,000 $(((((((21,756,000 $((((((((((6,000,000 $(((((411,229,000

Property&&&Site&Improvements Hard&&&soft&construction&costs Bank&Loan&Repayment Private&Financing&Repayment LID&Special&assessments Property&Taxes& Operating&costs,&Leasing&Fees&&&Tis&&&Developer&mgmt&fee Total(Uses(of(Funds

$&&&&38,800,000 $&&&&21,600,000 $&&&&&&3,900,000 $&&&&&&&&&&&&&&&&&&< $&&&&&&&&&&&&&&&&&&< $&&&&&&&&&&350,000 $&&&&&&2,650,000 $((((67,300,000

$&&&&&&20,145,000 $&&&&108,344,000 $&&&&&&87,186,000 $&&&&&&15,100,000 $&&&&&&13,508,000 $&&&&&&&&&4,660,000 $&&&&&&&&&8,312,000 $((((257,255,000

$&&&&&&&&&&&&&&&&&&&&< $&&&&&&&&&&&&&&&&&&&&< $&&&&&44,307,000 $&&&&&&&&&&&&&&&&&&&&< $&&&&&&&&5,795,000 $&&&&&&&&4,500,000 $&&&&&&&&1,675,000 $(((((56,277,000

$&&&&&&&&&&&&&&&&&< $&&&&&&&&&&&&&&&&&< $&&&&&3,920,000 $&&&&&&&&&&&&&&&&&< $&&&&&1,424,000 $&&&&&1,768,000 $&&&&&&&&412,000 $(((((7,524,000

$(((((((58,945,000 $(((((129,944,000 $(((((139,313,000 $(((((((15,100,000 $(((((((20,727,000 $(((((((11,278,000 $(((((((13,049,000 $(((((388,356,000

PR(Group(Cash(Flow*

$&&&(24,000,000) $&&&&&(26,446,000)

$7,693,000

PV(of(Equity(Invested(200632011((FV(using(10%)** PV(of(201232028(CFs(@(10%**

$((((32,356,435) $((((18,488,000)

USES(of(Funds

Project(NPV(in(2012 $((((50,844,435) Project(IRR(200632028*** N/A *PR&Group&CF&=&(<PR&Group&Equity)&+&Total&Sources&<&Total&Uses **10%&based&on&PR&Group&Return&Hurdle&of&10% ***IRR&includes&all&Copperline&buildings&and&Stack&Hill

$4,941,000 $(((((((37,812,000)

A18

Appendix(P:(Financial(Summary(&(Pro(Forma(Summary Financial(Summary( Input

Output

Equity'Investment'to'Date Additional'Equity'Required

$35,000,000 $25,261,000 Total(Equity( $60,261,000

Bank'Loan'to'Date Private'Financing'to'Date Additional'Bank'Loan LID'Financing

$35,800,000 $13,000,000 $73,375,000 $28,500,000 Total(Debt $150,675,000

Apartment'NOI+Disposition'Revenue Retail'NOI+Disposition'Revenue Subsidized'Space'NOI+Disposition'Revenue Land'Sale'Revenue

$94,956,000 $43,621,000 $4,723,000 $88,864,000 Total(Revenue(From(The(Village $232,164,000

Stack'Hill'Sale'Revenue Copperline'Condo'Sale'Revenue Copperline'Apartment'NOI+Disposition'Revenue

$14,515,000 $30,000,000 $32,365,000

Copperline'Retail'NOI+Disposition'Revenue

$2,785,000 Total(Revenue(From(Copperline(&(Stack(Hill $79,665,000

For(The(Village Debt'Repayment'&'Interest Construction'Cost'(Hard'&'Soft) Property'&'Site'Improvement' Environmental'Cap Operating*Cost*(Overhead*and*Property) LID'Payments Property'Tax Developer's'Fee

$87,420,000 $67,003,000 $5,268,000 $377,000 $3,757,000 $12,999,000 $10,370,000 $1,340,000

For(Copperline(&(Stack(Hill Debt'Repayment'&'Interest Construction'Cost'(Hard'&'Soft) Site'Improvement'&'Environment'Cap Operating'Cost'(Overhead'and'Property) LID'Payments Property'Tax Developer's'Fee

$59,573,000 $60,400,000 $53,300,000 $2,450,000 $7,730,000 $1,350,000 $2,300,000

Return NPV'for'The'Village'@'10%'Discount'Rate $((((((((9,751,000) Levered'IRR'for'The'Village,'Copperline,'&'Stk.'Hill 8.27%

Tract'6'(Hotel)'+'WaterWalk'Sale

$10,500,000 Total(Site(Revenue $322,329,000

A19

A20

A21

A22

Appendix(Q:(Alternative(Use(Analysis Office% The%subject%site%is%not%suitable%for%office%use%due%to%two%main%reasons:% 1.%Current%vacancy%rate%for%offices%is%16.8%%(As%of%Q4%2011).%With%current%supply%in%the%market%of%approximately%1.4%million%SF,%it%would% take%over%six%years%to%absorb%all%the%available%space.%This%is%based%on%historic,%normalized%absorpOon%rates%of%200,000%SF%per%year.% 2.%Typically,%properOes%with%a%major%office%component%are%either%located%in%a%central%business%district,%or%as%a%suburban%office,%near%a% major%highway%or%arterial%route.%The%subject%site%does%not%meet%either%of%these%requirements.% % Industrial% Development%of%industrial%use%on%the%subject%site%is%not%feasible%due%to%three%reasons:% 1.%Industrial%use%is%not%permiTed%according%to%the%Tacoma%Municipal%Code% 2.%Accessibility%and%grade%of%the%site%do%not%meet%the%standards%of%typical%industrial%faciliOes% 3.%An%industrial%development%may%only%promote%the%negaOve%sOgma%associated%with%the%smelOng%plant%and%its%polluOon%of%the%area.% % Single%Family%Dwellings% Point%Ruston%LLC.’s%ulOmate%goal%for%the%subject%site%is%to%build%a%high[density%mixed%use%community.%Developing%single[family%dwellings% on%the%property%will%not%align%with%these%goals.% % Hotel% Development%of%a%hotel%on%the%subject%site%was%not%considered%since%Tract%6%of%the%property%has%already%been%sold%to%Silver%Cloud%Inns% and%Hotels.%They%intend%to%develop%and%operate%a%175[room%hotel.%Due%to%a%non[compeOOon%clause%in%Silver%Cloud’s%sales%agreement,%no% other%hotel%can%be%placed%on%the%property.% % Casino% Development%of%a%casino%on%the%subject%site%is%not%feasible%due%to%two%reasons:% 1.%Casino’s%are%prohibited%as%defined%in%the%Ruston%Municipal%Code% 2.%Emerald%Queen%Casino,%a%well[established%casino,%is%located%just%southeast%of%downtown%Tacoma% % Senior%Housing% Typical%Assisted%or%Independent%Living%properOes%require%large%areas%of%open%space%and%this%results%in%low%building%efficiency,%with% rentable%area%ranging%between%40[65%.%Despite%there%being%a%significant%amount%of%expected%future%demand,%there%are%a%number%of% exisOng%assisted%and%independent%living%centers%in%the%vicinity%of%the%subject%site,%and%at%current%market%rates,%typical%room%sizes,% efficiency,%capitalizaOon%rates,%and%operaOng%expense%raOos%around%70%,%it%is%currently%not%profitable%to%explore%a%typical%independent%or% assisted%living%facility.% % % A23

!

9.0*Acknowledgements* A& very& special& thanks& to& our& UBC& advisors,& Prof.& Mark& Monroe& and& Tsur& Somerville,& as& well& as& our& local& mentors& Janet& Corne,& Chris& Kay,& Michael& Katz,& Michael& Mortenson,& Peter& Russell,& and& Hugo&Vasquez.&& & Thank&you&to&all&our&Seattle&mentors:& & Construction& Shawn&Coffik&–&Ledcor&Estimating& Marc&Everson&–&Walsh&Construction& Nathan&Gordon&–Ledcor&Estimating& Mike&Kelly&–&Anderson&Construction& Jim&Karambelas&–&NAIOP&Mentor,&GLY&Construction& Matt&Parent&–&Venture&Seattle& Bryce&Taylor&–&NAIOP&Mentor,&GLY&Construction& & Market& Dominic&Accetturo&&&Gary&Klockenteger&&&Jeremy&Streufert&&–& Kidder&Matthews&& Scott&Biethan&–&NAIOP&Mentor,&CBRE& CJ&Bowles&–&NAIOP&Mentor,&CBRE& Richard&Briscoe&–&NAIOP&Mentor,&Kidder&Matthews& Alyicia&Chung&&&Michelle&Hamlym&&&Anna&Warshawski&–&ParkLane& Homes& Steve&Crantz&–&NAIOP&Mentor,&Jones&Lang&LaSalle&& Chris&Fox&–&Colliers&International& John&D.&Gordon&–NAIOP&Mentor,&Kidder&Matthews& Yee]Hee&Hahn&&&Brody&O’Keefe&]&CBRE& Yosh&Kasahara&–&ParkLane&Homes& Cam&McGregor&&&Leslie&Marta&–&Concert&Properties&

Andrew&Miller&–&Jones&Lang&LaSalle&& TJ&Rak&–&Artona&Group& Matt&Roewe&–&VIA&Architecture&& Azim&Wazeer&]&Alumni& Alvin&Zhu&–&Omicron& & Finance& Lee&Graeve&–&NAIOP&Mentor,&Intervest&Mortgage&& Brian&Rockey&–&NAIOP&Mentor,&Peoples&Bank&& & Engineers& Lane&Alfonso&–&NAIOP&Mentor,&Geo]Engineers& Barry&Chin&–&NAIOP&Mentor,&Hart&Crowser& Mike&Warfel&–&NAIOP&Mentor,&Shannon&&&Wilson&Inc&& & Developers&& Brett&Allen&–&Triad&Development& Scott&Baldwin&–&Polygon&Homes& Sharon&Coleman&–&NAIOP&Mentor,&Vulcan& Marty&Goodman&&]&NAIOP&Mentor,&Justen&Company& Dennis&Rattie&–&Tarragon&& Norm&Shearing&–&ParkLane&Homes& Sean&Skyes&–&NAIOP&Mentor,&Harbour&Properties& & Law& Don&Marcy&–&NAIOP&Mentor,&Cairncross&&&Hempleman& & Environmental& Brent&Isfeld&–&Birco&Environmental&Services&& & Other& Allen&Lai&–&Henderson&Development&

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43!

!

!

University*of*British*Columbia* * *

*

Bagheri,*Maryam* B.Comm&Candidate& Finance&&&Real&Estate& Grad&2012& * * * * Cheng,*Nik* B.Comm&Candidate& Real&Estate& Grad&2012& * * * * Dibadj,*Daniel* B.Comm&Candidate& Accounting&&&Real&Estate& Grad&2012& *

Kaplun,*Emily* B.Comm&Candidate& International&Business&&& Real&Estate& Grad&2012& * * * Kassam,*Izaam** B.Comm&Candidate& Finance&&&Real&Estate& Grad&2012& * * ** * Lasocha,*Allison* B.Comm&Candidate& Marketing&&&Real&Estate& Grad&2012& *

!

!

** Ma,*Nathan* B.Comm&Candidate& Real&Estate& Grad&2012& * *

* ** *

Pat,*Roy* B.Comm&Candidate& Finance& Grad&2012&

** * * * *

* Wong,*Bryan* B.Comm&Candidate& Finance&&&Real&Estate& Grad&2012& * *

* ** *

* * ** * * *

Yang*Yang,*Zoe* B.Comm&Candidate& Finance&&&Real&Estate& Grad&2012 Payne*Amanda* B.Comm&Candidate& Real&Estate& Grad&2012&

*

!

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