November 18, 2015 To: Related Commercial Portfolio Ltd. RE

Transcription

Robert S. Nardella, MAI, MRICS
Executive Managing Director
V&A Regional Manager
1290 Avenue of the Americas
New York, NY 10104
Direct +1 212 841 5048
Fax
+1 212 479 1878
robert.nardella@cushwake.com
cushmanwakefield.com
November 18, 2015
To: Related Commercial Portfolio Ltd.
RE: Value Appraisals – Consent to include within Financial Statements
We hereby give our full consent to Related Commercial Portfolio Ltd. (the "Company") to the
inclusion of our Appraisal Report dated June 29, 2015 (Effective date – June 10, 2015) regarding
Gateway Center at Bronx Terminal, 658 River Avenue, Bronx, New York in its entirety, within the
Company's Financial Statements for September 30, 2015, to be published by the Company no later
than November 30, 2015, and any ensuing financial statements, and within any other filing to be filed
and/or disclosed by the Company to the Israel Securities Authority and/or to be published by the
Company.
In addition, we hereby give our full consent to the inclusion of a copy of this letter within the
Company's Financial Statements and other filings as aforesaid.
Yours sincerely,
Cushman & Wakefield, Inc.
RSN:pl
No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein, and same is submitted subject to errors,
omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions, imposed by our principals.
APPRAISAL OF REAL PROPERTY
Gateway Center at Bronx Terminal Market
4-Story Retail Power Center
658 River Avenue
The Bronx, Bronx County, NY 10451
IN AN APPRAISAL REPORT
As of June 10, 2015
Prepared For:
Related Commercial Portfolio, Ltd. c/o Related
Companies
60 Columbus Circle
New York, NY 10005
Prepared By:
Valuation & Advisory
1290 Avenue of the Americas, 9th Floor
New York, NY 10104-6178
C&W File ID: 15-12002-901504
CUSHMAN & WAKEFIELD, INC.
1290 AVENUE OF THE AMERICAS, 9TH FLOOR
NEW YORK, NY 10104-6178
658 River Avenue
NEW YORK, NEW YORK 10019
June 29, 2015
Mr. David Zussman
Related Commercial Portfolio, Ltd. c/o Related Companies
60 Columbus Circle
New York, NY 10023
Re:
Appraisal of Real Property
In an Appraisal Report
658 River Avenue
C&W File ID:
15-12002-901504
Dear Mr. Zussman:
In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our appraisal
of the above property in an appraisal report dated June 29, 2015. The effective date of value is June 10, 2015.
Gateway Center at Bronx Terminal Market is a 4-story retail power center that contains a total of 912,333 square
feet of gross leasable area (GLA) retail space and a 6-level parking garage with 2,575 spaces. The subject
property also includes two 1-story retail/commercial buildings. The subject improvements are situated on a 16.8acre site. The subject retail center is anchored by Target, BJ’s Wholesale Club, and Home Depot, which have
leased 443,500 square feet or 48.6 percent of the property on a long-term basis.
The subject property has been ground leased on a net basis for a base term of 49 years through September 13,
2055. In addition, the ground lease can be extended for five additional ten years renewal terms extending the
lease through September 13, 2105.
This report was prepared for Related Commercial Portfolio, LTD. c/o Related Companies and/or affiliates and is
intended only for their specified use. It may not be distributed to or relied upon by any other persons or entities
without the written permission of Cushman & Wakefield, Inc.
This appraisal report has been prepared in accordance with the Uniform Standards of Professional Appraisal
Practice (USPAP), including the Competency Provision.
MR. DAVID ZUSSMAN
RELATED COMMERCIAL PORTFOLIO, LTD. C/O RELATED COMPANIES
JUNE 29, 2015
PAGE 3
MARKET VALUE AS IS
Based on the agreed to Scope of Work, and as outlined in the report, we developed an opinion that the Market
Value of the Leasehold estate of the above property, after adjusting for the Transaction Payment via Net
Sale Proceeds to be paid by the landlord as per the ground lease, subject to the assumptions and limiting
conditions, certifications, extraordinary assumptions and hypothetical conditions, if any, and definitions, “As-Is” on
June 10, 2015, was:
SIX HUNDRED THIRTEEN MILLION DOLLARS
$613,000,000
The value opinion reported above assumes a sale of the subject property as of the date of value. The
value considers the 7.5 percent Transaction Cost deduction based on the Net Sales Proceeds.
EXTRAORDINARY ASSUMPTIONS
For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions.
This appraisal employs the following extraordinary assumptions: 1) The subject site is ground leased until
September 13, 2055, with 5 consecutive 10 year renewal options by BTM Development Partners LLC (c/o
Related Companies) from the City of New York. As per Section 12.1 of the ground lease, the tenant is responsible
for transaction payments in the event of a sale or financing. Since our market value estimate assumes a sale of
the property as of the date of value, we have adjusted our market value estimate by the defined 7.5 percent of net
sale proceeds obligated to be distributed to the landlord (New York City). We have been provided with the
information which details the anticipated transactions costs related to a potential sale of the subject property.
Some of the deductions defined in the ground lease in calculating the transaction payment apply to both
refinancing or a sale. Therefore, we have utilized the applicable deductions which were made available by the
ownership in calculating the Net Sale Proceeds and the Transaction Payment. We have assumed that the
information provided by the owner regarding the allowable deductions is accurate. If the provided information is
not accurate, we reserve the right to amend our value conclusion. Please refer to the complete list of assumptions
and limiting conditions included in the Income Approach of this report
HYPOTHETICAL CONDITIONS
For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions.
This appraisal does not employ any hypothetical condition.
MR. DAVID ZUSSMAN
RELATED COMMERCIAL PORTFOLIO, LTD. C/O RELATED COMPANIES
JUNE 29, 2015
PAGE 4
This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and
Addenda.
Respectfully submitted,
John A. Katinos, MAI
Senior Director
NY Certified General Appraiser
License No. 46000028780
john.katinos@cushwake.com
(212) 841-5061 Office Direct
(212) 479-1820 Fax
James P. Stuckey, Jr.
Associate Director
NY State Certified Appraiser Assistant
License No. 48000049048
james.stuckey@cushwake.com
(212) 479-1687 Fax
GATEWAY CENTER AT BRONX TERMINAL MARKET
Location:
EXECUTIVE SUMMARY
V
EXECUTIVE SUMMARY
658 River Avenue
The subject site is generally bounded by 149th Street to the south,
the Metro-North Rail Road tracks to the north, River Avenue to the
west, and Exterior Street to the east, across the Harlem River and
adjacent to the Major Deegan Expressway (I-87).
Property Description:
Gateway Center at Bronx Terminal Market is a 4-story retail power
center that contains a total of 912,333 square feet of gross leasable
area (GLA) retail space and a 6-level parking garage with 2,575
spaces in the Bronx, adjacent to Yankee Stadium. The subject
property also includes two 1-story commercial buildings. The subject
site comprises, a total of 16.80 acres or, 731,769 square feet of land
area.
The subject property is anchored by Target, BJ’s Wholesale Club,
and Home Depot, which lease a total of 443,500 square feet or 48.6
percent of the property. It should be noted that the majority of the
subject property is net leased long term at below current market rent
levels. Moreover, 53.1 percent of the subject retail space (484,324
SF) is net leased to credit tenants.
The subject property is ground leased for an initial 49 year base term
through September 13, 2055. Thereafter, the tenant possesses five
consecutive 10-year renewal options, which could extend the lease
through September 13, 2105.
Assessor's Parcel Number:
Block 2356; Lots 20 and 25 & Block 2357; Lots 35, 40, 42, and 45
Interest Appraised:
Leasehold Interest
Date of Value:
June 10, 2015
Date of Inspection:
June 10, 2015
Ownership:
Fee:
City of New York
Leaseholder:
BTM Development Partners LLC in care of Related Companies
EXECUTIVE SUMMARY
VI
Highest and Best Use
If Vacant:
A multi-level retail power center with a parking garage developed to
the highest density feasible.
As Improved:
As currently improved.
Site & Improvements
Land Area:
16.80 acres; 731,769 square feet
Zoning:
C4-4; General Central Commercial District
Number of Stories:
4-level retail power center building and 6-level parking garage.
Year Built:
2009
Gross Building Area (GBA):
Retail Building:
969,019 square feet
Parking Garage:
945,048 square feet
Total GBA:
1,914,067 square feet (Per Tax Assessor)
Gross Leasable Area (GLA):
RETAIL GLA SUMMARY
Component
Target
BJ's Wholesale Club
Home Depot
Total Anchor GLA
Junior Anchor
Retail B/D
Retail C
Retail E
Retail F
Prow Building
Total Non-Anchor GLA
Total Center GLA
Parking Type:
6-Level parking garage
Number of Parking spaces:
2,575 total parking spaces
Area
Total
188,446 SF 20.7%
130,099 SF 14.3%
124,955 SF 13.7%
443,500 SF 48.6%
379,956 SF 41.6%
10,634 SF
1.2%
21,817 SF
2.4%
10,131 SF
1.1%
25,944 SF
2.8%
20,351 SF
2.2%
468,833 SF 51.4%
912,333 SF 100.0%
EXECUTIVE SUMMARY
VALUE INDICATORS
LAND VALUE:
Indicated Land Value:
$73,000,000
Per Square Foot of Land Area:
$99.76
SALES COMPARISON APPROACH:
Indicated Value, Rounded:
$605,000,000 Adjusted for Net Sale Proceeds
Per Square Foot (GLA):
$663.14
INCOME CAPITALIZATION APPROACH
DISCOUNTED CASH FLOW
Projection Period:
12 years
Holding Period:
11 years
Terminal Capitalization Rate:
5.25%
Internal Rate of Return:
6.25%
Indicated Value:
$625,000,000
Per Square Foot of GLA:
$685.06
D IR ECT CA PITA L IZAT ION METHOD
Net Operating Income:
$31,340,953
Capitalization Rate:
5.00%
Indicated Value, rounded
$625,000,000
Per Square Foot (NRA):
$685.06
I N C O M E CA PITA L IZAT ION APPROACH CONC LU SION
Indicated As Is Value:
FINAL VALUE CONCLUSION
Market Value As-Is Leasehold:
$671.90
$671.90
Implied Capitalization Rate
5.11%
Exposure Time:
9 months
Marketing Time:
9 months
VII
EXECUTIVE SUMMARY
VIII
SUBJECT PHOTOGRAPHS
VIEW OF THE SUBJECT ALONG RIVER AVENUE.
ALTERNATE VIEW OF THE SUBJECT ACROSS RIVER AVENUE.
IX
VIEW OF BEST BUY RETAIL SPACE.
V I E W O F C O S T C O R ET A I L S PA C E .
SUBJECT PHOTOGRAPHS
X
SUBJECT PHOTOGRAPHS
VIEW OF CHUCK E CH EESE’S R ETA IL SPAC E.
VIEW OF BURLIN GTON COA T FACTOR Y RETA IL SPAC E.
XI
SUBJECT PHOTOGRAPHS
VIEW OF THE T-MOBILE RETAIL SPACE.
VIEW OF THE TARGET RETAIL SPACE.
XII
SUBJECT PHOTOGRAPHS
A VIEW OF THE ENTRANCE TO THE SUBJECT PARKING AREA.
VIEW OF TH E PARK ING GARAGE W ITH IN TH E SUBJEC T.
XIII
SUBJECT PHOTOGRAPHS
V I E W LO OK ING N ORTH A LON G R I V ER S TR E ET .
V I E W LO OK ING N ORTH A LON G E X T ER IOR STR E ET .
XIV
TABLE OF CONTENTS
TABLE OF CONTENTS
INTRODUCTION -------------------------------------------------------------------------------------------------------------------------------------- 1 NEW YORK CITY REGIONAL ANALYSIS ---------------------------------------------------------------------------------------------------- 5 LOCAL AREA ANALYSIS ------------------------------------------------------------------------------------------------------------------------- 20 NATIONAL RETAIL MARKET ANALYSIS---------------------------------------------------------------------------------------------------- 23 RETAIL MARKET AND TRADE AREA OVERVIEW --------------------------------------------------------------------------------------- 34 TENANT PROFILES -------------------------------------------------------------------------------------------------------------------------------- 39 SITE DESCRIPTION -------------------------------------------------------------------------------------------------------------------------------- 61 IMPROVEMENTS DESCRIPTION --------------------------------------------------------------------------------------------------------------- 63 REAL PROPERTY TAXES AND ASSESSMENTS ----------------------------------------------------------------------------------------- 72 ZONING ------------------------------------------------------------------------------------------------------------------------------------------------- 76 HIGHEST AND BEST USE ------------------------------------------------------------------------------------------------------------------------ 79 VALUATION PROCESS --------------------------------------------------------------------------------------------------------------------------- 81 GROUND LEASE ANALYSIS AND LAND VALUATION --------------------------------------------------------------------------------- 83 SALES COMPARISON APPROACH ----------------------------------------------------------------------------------------------------------- 96 INCOME CAPITALIZATION APPROACH--------------------------------------------------------------------------------------------------- 107 RECONCILIATION AND FINAL VALUE OPINION --------------------------------------------------------------------------------------- 148 ASSUMPTIONS AND LIMITING CONDITIONS ------------------------------------------------------------------------------------------- 149 CERTIFICATION OF APPRAISAL ------------------------------------------------------------------------------------------------------------ 151 GLOSSARY OF TERMS & DEFINITIONS -------------------------------------------------------------------------------------------------- 152 ADDENDA CONTENTS -------------------------------------------------------------------------------------------------------------------------- 158 GATEWAY CENTER AT BRONX TERMINAL MARKET
INTRODUCTION
1
INTRODUCTION
SCOPE OF WORK
This appraisal report is intended to comply with the reporting requirements outlined under the USPAP for an
appraisal report. The report was also prepared to comply with the requirements of the Code of Professional Ethics
of the Appraisal Institute and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA),
Title XI Regulations.
Cushman & Wakefield, Inc. has an internal Quality Control Oversight Program. This Program mandates a
“second read” of all appraisals. Assignments prepared and signed solely by designated members (MAIs) are read
by another MAI who is not participating in the assignment. Assignments prepared, in whole or in part, by nondesignated appraisers require MAI participation, Quality Control Oversight, and signature.
In the process of preparing this appraisal, we:

Inspected the subject property and site improvements.

Reviewed leasing policy, concessions, tenant build-out allowances, and history of recent rental rates and
occupancy with several leasing and investment sales brokers, and market research analysts.

Conducted market research of occupancies, asking rents, concessions and operating expenses at
competing buildings, which involved interviews with on-site managers and a review of our own data base
from previous appraisal files.

Prepared an opinion of stabilized income and expense (for capitalization purposes).

Conducted market inquiries into recent sales of similar land parcels to ascertain sales price per square foot
of land area. This process involved primary research, telephone interviews with sellers, buyers and/or
participating brokers.

Conducted market inquiries into recent sales of similar retail centers to ascertain sales price per square
foot, effective gross income multipliers and capitalization rates. This process involved telephone interviews
with sellers, buyers and/or participating brokers.

This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based
on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion
that the Sales Comparison Approach and the Income Capitalization Approach would be considered
meaningful and applicable in developing a credible value conclusion. Investors do not typically rely on the
Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not relied
upon the Cost Approach to develop an opinion of market value.

The scope of this analysis, and the analysis contained herein, is reflective of “the type and extent of
research and analyses in an assignment” (2014-15 USPAP).
INTRODUCTION
2
REPORT OPTION DESCRIPTION
USPAP identifies two written report options: Appraisal Report and Restricted Appraisal Report. This document is
prepared as an Appraisal Report in accordance with USPAP guidelines. The terms “describe,” summarize,” and
“state” connote different levels of detail, with “describe” as the most comprehensive approach and “state” as the
least detailed. As such, the following provides specific descriptions about the level of detail and explanation
included within the report:

Describes the real estate and/or personal property that is the subject of the appraisal, including physical,
economic, and other characteristics that are relevant

States the type and definition of value and its source

Describes the Scope of Work used to develop the appraisal

Describes the information analyzed, the appraisal methods used, and the reasoning supporting the analyses
and opinions; explains the exclusion of any valuation approaches

States the use of the property as of the valuation date

Describes the rationale for the Highest and Best Use opinion
IDENTIFICATION OF PROPERTY
Common Property Name: Gateway Center at Bronx Terminal Market
Location:
658 River Avenue
The subject site is generally bounded by 149th Street to the south, the Metro-North
Rail Road tracks to the north, River Avenue to the west, and Exterior Street to the
east, across the Harlem River and adjacent to the Major Deegan Expressway (I-87)..
Gateway Center at Bronx Terminal Market is a 4-story retail power center that
contains a total of 912,333 square feet of gross leasable area (GLA) retail space and
a 6-level parking garage with 2,575 spaces in the Bronx, adjacent to Yankee Stadium.
The subject property also includes two 1-story commercial buildings. The subject site
comprises, a total of 16.80 -acres or, 731,769 square feet of land area.
The subject property is anchored by Target, BJ’s Wholesale Club, and Home Depot,
which lease a total of 443,500 square feet or 48.6 percent of the property. It should be
noted that the majority of the subject property is net leased long term at below current
market rent levels. Moreover, 53.1 percent of the subject retail space (484,324 SF) is
net leased to credit tenants.
The subject property is ground leased for an initial 49 year base term through
September 13, 2055. Thereafter, the tenant possesses five consecutive 10-year
renewal options, which could extend the lease through September 13, 2105.
Assessor's Parcel
Number:
Block 2356; Lots 20 and 25 & Block 2357; Lots 35, 40, 42, and 45
INTRODUCTION
3
PROPERTY OWNERSHIP AND RECENT HISTORY
Current Ownership:
The fee interest in the subject site is owned by the City of New York. The subject site
is ground leased to BTM Development Partners LLC in care of the Related
Companies by the City of New York. The 49-year ground lease expires on September
13, 2055, with five consecutive 10-year renewal options which could extend the
ground lease to September 13, 2105.
Sale History:
To the best of our knowledge, the property has not transferred within the past three
years.
Current Disposition:
To the best of our knowledge, the property is not under contract of sale nor is it being
marketed for sale.
DATES OF INSPECTION AND VALUATION
Date of Valuation:
June 10, 2015
Date of Inspection:
June 10, 2015
Property inspection was
performed by:
John A. Katinos, MAI, James P. Stuckey Jr. and Charles R. Looney
CLIENT, INTENDED USE AND USERS OF THE APPRAISAL
Client:
Related Commercial Portfolio, Ltd. c/o Related Companies
Intended Use:
This appraisal is intended to provide an opinion of the Market Value of the Leasehold
interest in the property for internal business decisions by the client. All other uses are
unintended, unless specifically stated in the letter of transmittal. All other uses and
users are unintended.
Intended User:
This appraisal report was prepared for the exclusive use of Related Commercial
Portfolio, Ltd. c/o Related Companies and/or its affiliates. All other uses and users are
unintended.
INTRODUCTION
4
NEW YORK CITY REGIONAL ANALYSIS
R EG IONA L MA P
5
6
INTRODUCTION
MARKET DEFINITION
New York City consists of five counties at the mouth of the Hudson River in the southeast area of New York
State. The borough of Manhattan, also referred to as New York County, forms the political, financial and cultural
core of the city. It is the economic growth engine of the Greater New York Region. The city’s other boroughs are
Brooklyn, Queens, Staten Island, and the Bronx, otherwise known as Kings, Queens, Richmond, and Bronx
counties, respectively. The area’s vast mass transit infrastructure connects the five boroughs as well as the
surrounding suburban areas, forming the Greater New York Region. This region covers 21 counties in the
southeastern section of New York State, southwestern corner of Connecticut, and Central and Northern New
Jersey.
The following are notable points about New York City:

The city is home to the two largest stock exchanges in the world, the New York Stock Exchange and the
NASDAQ.

New York houses many large financial institutions, including Citigroup, JP Morgan Chase, Goldman Sachs,
Barclay’s and Bank of America.

New York City is home to the headquarters of 48 companies on the 2014 Fortune 500 list.
The following map highlights the Metropolitan Statistical Area (MSA) of New York, NY:
NEW YORK CITY COUNTIES
Source: Claritas, Inc., Cushman & Wakefield Valuation & Advisory
CURRENT TRENDS
New York City’s economy is growing modestly on the strength of steady employment gains over the past few
years. The city has recovered all of the jobs lost during the great recession, well ahead of most cities in the
nation, and total employment recently reached an all-time high. The recent job gains have come in many sectors,
and the city’s employment diversity has helped weather the finance industry’s struggles. A major source of recent
7
economic growth has been the city’s tourism industry. NYC & Company, the city’s tourism bureau, estimates that
New York City had a record 56.4 million visitors in 2014, up from 54.3 million in 2013. They created $61.3 billion
in economic impact and sustained 359,000 tourism-related jobs paying $21.0 billion in wages. This boom in the
industry explains the city’s expansion in related employment sectors, and will continue to help the local economy.
A huge boom in tourism has subsequently enabled hotel occupancy rates to keep up with room boom beyond
Manhattan. A growing number of independent and brand-name hotels have been lining the city’s outer boroughs.
In fact, between January and November 2014, outer-borough occupancy rates ran as high as 81.0 percent,
according to STR, a hospitality-industry research firm. Most hotel markets operate at 65.0 occupancy, while
Manhattan is pushing 83.0 percent. Many hoteliers have turned to the outer boroughs to accommodate tourists
who cannot get a reservation in Manhattan’s tight hotel market or think it is too pricey. More than 100 hotels are
scheduled to open across Brooklyn, Queens, Staten Island and the Bronx over the next 36 months. Queens is on
pace to add nearly 50 properties in the next four years, 23 of which will be in Long Island City. Meanwhile,
Brooklyn added two new hotels last year, bringing its total to 50, and occupancy to 81.1 percent. STR projected
that by the end of 2017, Brooklyn will have a total of 70 hotels, a 150.0 percent increase from the 28 properties
the borough had in 2008.
Another source of New York City’s economic prosperity comes from the construction of cultural institutions. A new
study from the New York Building Congress found that cultural institutions accounted for $1.3 billion in new
construction spending for the five years ended in 2014. Notable projects such as the $422.0 million Whitney
Museum, the $65.0 million renovation of the Met Museum’s fountains, the $81.3 million renovation of the Cooper
Hewitt Smithsonian Design Museum, and the expansion of the Queens Museum created 10,000 jobs during the
five-year period. While the cultural projects represent only a tiny portion of the $32.0 billion in annual construction
spending (industries like health care and education outrank cultural construction spending), the sector is vital to
the city’s economy as it attracts tourists from around the world.
Last year, the Independent Budget Office (IBO) released its annual assessment of the city’s economy. The IBO
predicts that the city will show a gain of 413,000 jobs in the current expansion, which is the largest for any
comparable period since the record-keeping started in 1950. Employment increases will continue for the next two
years, and more importantly, the IBO forecasts that wages will finally rise for most workers, not just the wealthy.
While in 2013 household income stagnated in places throughout the U.S., it rose more than 3.0 percent in New
York City. These gains are expected to broaden out when the latest numbers come in. Further, the IBO estimates
the city will generate $6.0 billion more in revenue than the forecast made by the de Blasio administration over the
next four years.
New York City has created more jobs over the past five years than during any five-year period in the last half
century. This spurt of employment growth did not come from Wall Street, however. The big investment banks and
brokerage firms used to form the powerful engine that pulled New York’s economy out of recessions. During the
boom years of the 1990’s, the high-paying securities industry accounted for more than 10.0 percent of all the jobs
added in the city’s private sector. This time around, it has contributed less than 1.0 percent. This proves that New
York City can grow at a rapid pace without leaning on Wall Street. About 425,000 jobs were added since the end
of 2009, bringing total employment to 4.1 million jobs. Although many of these jobs are in lower-paying
businesses, such as hotels and restaurants, fast-growing and well-paying tech companies like Google, Facebook
and BuzzFeed are adding jobs at a fast pace. These major companies have been joined by small startups
throughout the city in creating a thriving tech ecosystem. According to a 2013 study presented at the Bloomberg
Technology Summit, the city’s tech boom has been responsible for roughly one-third of its private sector job
creation since 2007. New York City’s government is helping to nurture the growth with economic development
8
and education initiatives. As a result, Cornell, NYU, Columbia, and Carnegie Mellon are all opening or expanding
tech-oriented campuses in the city, in an effort to meet the need for highly educated workers.
Another 2015 report, issued by the Center for an Urban Future, found that nearly 88.0 percent of all the state’s job
growth was in New York City. Between 2004 and 2014, the city added almost 530,000 jobs, while the rest of the
state gained about 70,000. Over the same time period, private sector jobs in the city jumped 17.3 percent,
whereas they only grew 3.5 percent statewide. The city’s gain was powered by the retail, health care, technology
and creative services sectors. In 2014 alone, health care added 20,900 jobs, retail added 9,700 jobs, and the
creative industry added 7,000 jobs.
Further considerations are as follows:

A report from 2014, which was commissioned by the Association for a Better New York, found that New
York’s growing technology industry generates more than a half-million jobs, almost $125.0 billion in annual
output, and $5.6 billion in tax revenues.

Media giant Viacom is laying off 264 employees in New York City to save $250.0 million. The company is in
the midst of a corporate restructuring that will combine its Comedy Central and Spike channels with MTV and
VH1.

MetLife is quadrupling its space at 200 Park Avenue, and will consolidate all of its New York City employees
to its namesake tower in Midtown. The new lease covers about 550,000 square feet, which is approximately
430,000 square feet more than its current lease. The company expects to complete all the moves by the first
half of 2017.

Domestic merchandise and home furnishings retailer Bed Bath & Beyond signed a lease in January to take
more than 100,000 square feet of space at Liberty View Industrial Plaza in Sunset Park, Brooklyn. The deal
happened as Brooklyn continues to gain popularity as a place to live and work among tech tenants.

A 2014 CPEX retail report identified 43 additional retail corridors in Brooklyn, bringing the total number to 88.
Of those 88 retail districts, 10 corridors had retail rents over $100.0 per square foot compared with just two
corridors five years ago.

California-based real estate brokerage Marcus & Millichap aims to double its New York footprint by looking to
take 40,000 square feet of office space. The company, whose current office is located at 270 Madison
Avenue, said that the new office could accommodate up to 250 staffers.

Facebook continues to expand its footprint at 770 Broadway in Midtown South. The social media giant will
add 80,000 square feet of space, bringing its total to 270,000 square feet. The additional space will have
nearly tripled its size at the property since it first occupied the building two years ago. Rents are believed to
be more than $100.0 per square foot for the new space occupying the entire 15th floor.

Test-prep company Kaplan is subleasing 80,000 square feet of space from Condé Nast at 750 Third Avenue
in Midtown. Kaplan will dispose of its current space of roughly 140,000 square feet at 395 Hudson Street by
subleasing it to WebMD.

Media conglomerate Bloomberg LP is expanding its footprint onto Third Avenue, taking roughly 150,000
square feet at 919 Third Avenue. The company becomes one of the latest in a growing line of companies to
lease big blocks of space on Third Avenue, which is considered midtown’s street of bargains.

Furniture and home-décor retailer Design Within Reach signed a lease for 40,000 square feet at Industry City
industrial complex in Sunset Park. It will also include a repair facility, a design studio and showroom. It is
expected to be operational in late spring and will bring 25 jobs to the site.
9

Office-suite provider Regus signed a deal to take about 34,000 square feet at the Falchi Building in Long
Island City, Queens. Regus and its rival, WeWork, have rapidly expanded across the city to meet an uptick in
demand for office suites.

York Studios is set to bring Film & Television back to the Bronx with the construction of 3 buildings totaling
about 300,000 square feet. The company currently operates out of a 40,000 square foot facility in Queens.
Construction is scheduled to begin this summer and be completed by summer 2016.

Simone Development Companies is in a process of completing a $16.0 million deal that would allow
construction of a 1.9 million square foot mixed-use office, academic and medical complex on a 33-acre site at
1500 Waters Place in the east Bronx. Simone plans to construct two one-story retail buildings, totaling 40,000
square feet; and four 10-story buildings of 250,000 square feet each. Plans will also include a hotel and
100,000 square feet of space for high education. Several thousand permanent jobs are expected to be
created through the development.

Los Angeles-based Estate Four plans to build a 1.2 million square foot project that will include a mixed-use of
offices, shops, performance spaces and a promenade in the Red Hook industrial neighborhood of Brooklyn.
The new development, called the Red Hook Innovation District, would be built over five years at a cost of
$400.0 million.

In March 2015, a partnership of developers between Jamestown, Belvedere Capital and Angelo Gordon
unveiled a massive redevelopment plan for Brooklyn’s Industry City. The plan calls for a $1.0 billion
investment over the next 12 years and 13,300 jobs at Industry City, including the ones currently there. The
developers estimate that another 5,800 jobs would be created throughout the city as a result of the project.
The planned expansion, however, cannot go forward without Mayor de Blasio’s administration’s approval for
the creation of a “special innovation zoning district.”

Jones New York, the women’s clothing brand owned by Sycamore Partners, will close all of its 127 outlet
stores throughout 2015. The company will also discontinue its wholesale business as it seeks strategic
alternatives. The Jones New York brand, which is sold in mid-priced department stores like Macy’s, has
struggled in recent years as retailers ramped up their exclusive-label goods to draw shoppers.

Cornell University broke ground on its Roosevelt Island tech campus in January 2014. The $2.0 billion
project, which won the city’s “Applied Sciences NYC” competition, will add some 2.0 million square feet of
academic, residential, and commercial space over the next two decades. Slated to open in 2017, the new
campus will house approximately 2,000 students and 280 faculty members, and create 8,000 permanent jobs
by 2037. The project more recently received $50.0 million from Verizon to develop an executive education
center.

An October 2014 report from the New York Building Congress forecasts overall construction spending in 2014
to be $32.9 billion, an increase of 17.0 percent from the previous year. A majority of the non-infrastructure
construction spending will be from new residential projects. Despite the optimistic forecast, the New York
Building Congress reported in January 2015 that construction costs increased by 5.0 percent in 2014 after a
nearly 5.0 percent increase in previous year.

Mayor Bill de Blasio and his administration are in the early stage of formulating a rezoning plan for a 57-blocklong corridor along Jerome Avenue that would bring more housing and new businesses to the South Bronx
area. The first step is completion of the Cromwell-Jerome Neighborhood Study, which is expected to be ready
by the end of the year.

Square, a San Francisco based mobile payment devices and software maker, expanded its size by moving
into its brand new 40,000 square foot SoHo office space in October 2014. The company plans to increase its
New York based staff to 385 employees. As of October 2014, the company employed a total of 75
employees.
10

Amazon received $5.0 million in tax credits from New York state at the end of 2014. The company expects to
use the money to bring 500 jobs to New York City at a property in Herald Square shopping district.

Samsung Electronics is looking to purchase as much as 1.0 million square feet of new or existing office space
in Manhattan. According to the Wall Street Journal, offices of that size generally could hold between 5,000
and 7,000 employees. The purchase (if the deal is reached) would be one of largest corporate expansions in
the city in years.

General Motors is reorganizing its Cadillac brand into a separate business unit and relocating the new
company’s headquarters to New York City at the beginning of June 2015. Cadillac expects about 130 to 140
people to be working for Cadillac in New York by the end of the year; many will be new hires. It also expects
that number to double to about 300 in the next three years.

The New York Times began its layoff process in December 2014 as the newspaper company did not receive
enough voluntary buyouts to cover newsroom budget cuts. The company expects to cut more than 100
newsroom jobs.

The State University of New York reached an agreement with the Fortis Property Group to build out NYU
Langone Medical Center at a former site of Long Island College Hospital in Cobble Hill, Brooklyn. Expected to
be completed by 2018, the 125,000 square foot complex, will have 70 doctors and a total staff of 400. NYU
Langone planned to invest $175.0 million to build out the facility.

Rockefeller University is planning a two acre campus extension over the FDR Drive. The project will involve
building a platform over the highway to support four new buildings, and is estimated to cost between $425.0
million and $450.0 million. It is expected to break ground in the second half of 2015, and construction is
expected to be finished in four years.

Online grocer FreshDirect broke ground in December 2014 on its 500,000 square foot corporate
headquarters in Mott Haven, South Bronx. The company reached a deal with the city in 2012 to relocate to
the Bronx (as opposed to New Jersey), keeping its 3,000 jobs in the city. In addition, the relocation is
expected to create 1,000 new jobs for Bronx residents.

New York City is investing $140.0 million to expand manufacturing and create 3,000 jobs at the Brooklyn
Navy Yard. The project, which was announced by Mayor Bill de Blasio in November 2014, will build on earlier
city plans for what is known as Building 77. The building is scheduled to open by mid to late 2016. In addition
to Building 77, The New Lab, a high-tech manufacturing consortium, is expected to expand to 84,000 square
feet, from its current 8,000 square foot space, when it moves into the new Green Manufacturing Center, a
250,000 square foot facility under construction at the Navy Yard.

Numerous high-profile redevelopment projects in various stages of the development pipeline will contribute to
New York City construction spending well into the future. Notable among these include Hudson Yards, Pacific
Park (formerly known as Atlantic Yards), the World Trade Center site, Flushing Commons, Greenpoint
Landing, Domino Sugar Factory, the Staten Island ferris wheel and outlet mall, Willets Point, City Point,
Hallets Point, and Seward Park.

Broadway Stages, a Brooklyn-based studio, has plans to build a $20.0 million film production complex on
Staten Island. The plan will generate 800 jobs over the next two years and as many as 1,500 jobs over the
next five years.

IBM announced that it will be investing $1.0 billion in its new Watson supercomputer division, which will be
headquartered in 51 Astor Place in Manhattan. The money will be partially invested in startup companies and
the hiring of several hundred employees at the new headquarters location.
11
DEMOGRAPHIC TRENDS
DEMOGRAPHIC CHARACTERISTICS
New York City exceeds the national average in household income at both the top and bottom of the spectrum. As
a result, the city’s middle income brackets are relatively small. The high cost of living in New York City pushes out
many of those who are not poor enough to qualify for subsidized rents or wealthy enough to afford market-rate
housing. A 2012 study from the Center for Housing Policy found that for the decade ended in 2010, housing and
transportation costs in New York City rose 55.0 percent. Over the same time period, income in the area only grew
by 31.0 percent.
The city also has a gap in educational attainment. A higher percentage of New York City residents are without a
high school diploma than the national population, and likewise for residents with at least a bachelor’s degree.

The median person in New York City is 36 years old, one year younger than the national median.

New York City’s average household income ($78,499) is significantly higher than the country’s ($71,318).
When looking at median household income, however, the roles are reversed. Median income in New York is
$50,493, while the country’s median household income is $51,352. Medians are typically a better measure of
central tendency, as means are more easily influenced by outliers. As discussed above, New York is full of
outliers at the upper and lower ends of the income scale.

A survey set released by the U.S. Census in September 2013 revealed that in 2011, 21.2 percent of New
York City residents were under the poverty line, compared to only 15.9 percent for the nation as a whole. This
marked the fourth straight year that the percentage increased. The stat seems to suggest that much of the
region’s recent job growth has been in industries with low wages.

New York City bests the national average in residents with at least a bachelor’s degree by 5.5 percentage
points. The city boasts a large number of institutions of higher learning, along with industries that require such
education. The educated labor pool makes New York City an attractive destination for many businesses.
The following table compares the demographic characteristics of New York City with those of the United States:
12
Demographic Characteristics
New York City vs. United States
2014 Estim ates
Characteristic
Median Age (years)
New York
City
United
States
36.0
37.0
Average Annual Household Income
$78,499
$71,318
Median Annual Household Income
$50,493
$51,352
Households by Annual Income Level:
<$25,000
28.3%
24.4%
$25,000 to $49,999
21.3%
24.4%
$50,000 to $74,999
15.7%
17.9%
$75,000 to $99,999
10.6%
11.9%
$100,000 plus
24.1%
21.3%
< High School
20.3%
14.3%
High School Graduate
25.0%
28.4%
College < Bachelor Degree
20.8%
29.0%
Education Breakdown:
Bachelor Degree
20.0%
17.8%
Advanced Degree
13.9%
10.6%
POPULATION
According to Moody’s Analytics, the current population of New York City is estimated at over 8.4 million. Rapid
population growth is and always will be a challenge for New York City, as the densely populated metro area has
little room for growth. The recent trend of redeveloping former industrial and office buildings into residential
buildings could help, but the city will likely never grow as quickly as the rest of the country. Of all the boroughs,
Brooklyn is expected to grow the most quickly in the near future, as its current renaissance continues. According
to Moody’s Analytics, the borough is forecast to grow by an average annual rate of 0.7 percent through 2019.

From 2004 through 2014, New York City had average annual population growth of 0.5 percent. Over the
same time frame, however, the nation grew at an average annual rate of 0.9 percent.

Population growth for the next five years will continue to be relatively low in New York. The average annual
rate is forecast at 0.5 percent, lower than the nation’s forecast annual growth of 0.8 percent.

People typically follow jobs, so the recent trend of private sector job growth is a likely driver behind New
York’s population growth since the recession. The city’s annual growth rate peaked at roughly 1.1 percent in
2011.
The following chart compares historical and projected population growth between New York City and the United
States as a whole:
13
POPULATION GROWTH BY YEAR
New York City vs. United States, 2004-2019
Annual Percent Change
1.3%
United States
New York City
Forecast
1.0%
0.7%
0.4%
0.1%
-0.2%
-0.5%
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory
Note: Shaded bars indicate periods of recession
The following table shows New York City’s annualized population growth by county:
Annualized Population Growth by County
New York City
2004-2019
Population (000’s)
United States
2004
2014
Com pound
Annual
Forecast Forecast Grow th Rate
2015
2019
04-14
292,805.3 318,857.1 321,304.5 332,313.4
0.9%
Com pound
Annual
Grow th Rate
15-19
0.8%
New York City
8,043.4
8,469.4
8,523.9
8,698.1
0.5%
0.5%
Bronx County
1,359.0
1,429.6
1,438.6
1,466.1
0.5%
0.5%
0.7%
Kings County
2,459.1
2,615.9
2,637.5
2,710.9
0.6%
Queens County
2,198.5
2,314.9
2,331.7
2,385.1
0.5%
0.6%
Richmond County
456.8
475.0
476.7
478.4
0.4%
0.1%
New York County
1,569.9
1,633.9
1,639.4
1,657.6
0.4%
0.3%
Source: Data Courtesy of Moody's Analytics, Cushman & Wakefield Valuation & Advisory
HOUSEHOLDS
Much like population growth, New York City continually lags the country in household formation. This is largely
due to issues endemic to New York City. For example, the extremely high cost of living discourages household
formation, especially as young residents group together in apartments to live more affordably. It is not uncommon
for living rooms to be converted into extra bedrooms. Indeed, recent census data show that New York City leads
the nation in nonfamily households, with almost two-thirds of households having members with no familial
relationship.

From 2004 to 2014, the number of households in the city grew at an average annual rate of 0.3 percent, lower
than the national rate of 0.9 percent per year.

Over the next five years, the city’s average growth rate is expected to be 1.0 percent per year, while the rest
of the nation is forecast to have an average growth rate of 1.4 percent.
The chart below compares historical and projected household formation growth between New York City and the
United States as a whole:
14
HOUSEHOLD FORMATION BY YEAR
2.0%
United States
New York City
Forecast
1.5%
1.0%
0.5%
0.0%
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
ECONOMIC TRENDS
GROSS METRO PRODUCT
As discussed earlier, one of the city’s biggest new growth drivers since the recession has been the tech industry.
Giants like Microsoft, eBay, Yahoo!, Google, Facebook, Twitter, and LinkedIn have been expanding, while smaller
tech firms and startups are popping up in “Silicon Alley” and other areas of the city. Notable among these are
Etsy, Shutterstock, Kickstarter, MongoDB, Gilt Groupe, and Tumblr. The industry has also been one of the
biggest consumers of office space in the city in recent quarters. Expansion is expected to continue as Cornell
University’s proposed $2.0 billion high-tech graduate school on Roosevelt Island begins to come to fruition. It may
take some time before new jobs and businesses arise from the initiative, but the industry will continue to own a
growing share of the city’s economic output.
According to Moody’s Analytics, the city’s economy grew by 1.4 percent by in 2014, lower than the nation’s
growth of 2.4 percent. The city’s growth is expected accelerate this year and will surpass the nation’s growth. The
city’s economy is well diversified now, and growth will further intensify when financial companies return to
expansion.

For the purpose of comparing the economies of New York City and the United States, we use Gross Metro
Product (GMP) and Gross Domestic Product (GDP), respectively. The measures are analogous in what they
attempt to capture, but GDP is on a much larger scale than GMP.

From 2004 through 2014, New York City averaged 2.2 percent annual GMP growth, moderately better than
the nation’s annual GDP growth of 1.6 percent over the same time period.

The city’s GMP growth is expected to very slightly lag the nation’s GDP growth over the next five years,
growing by an annual average rate of 2.6 percent. The nation’s GDP is forecast to have 2.7 percent annual
growth.
The following chart compares historical and projected GMP growth by year for New York City and GDP growth for
the United States:
15
REAL GROSS PRODUCT GROWTH BY YEAR
8.0%
United States
Forecast
New York City
5.0%
2.0%
-1.0%
-4.0%
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
EMPLOYMENT DISTRIBUTION
New York City is heavily weighted in office-using employment sectors, which comprise 31.6 percent of jobs
compared to 24.4 percent for the nation. This helps to explain the high wages and job growth found in the metro
area. Furthermore, the city’s abundance of service jobs has shielded it from the gradual decay in manufacturing
employment across the nation.

More New York City workers are employed in education/health services than in any other sector, comprising
20.5 percent of the workforce. The national representation for this sector is currently at 15.5 percent.

The sector with the lowest employment representation in the city is manufacturing, which accounts for only
1.8 percent of the workforce. By contrast, the sector accounts for 8.7 percent of national employment. This is
a reflection of the service-heavy orientation of New York City, the high cost of land, and the lack of space for
large manufacturing facilities.

The percentage of New York City jobs in the financial activities sector is nearly double that of the national
proportion, with 10.7 percent of total employment. This is not surprising, as New York City is the financial
capital of the United States and home to Wall Street.

The area also has more than two times the information sector representation than the rest of the country.
Recent growth in this sector is a result of the tech boom.
The following chart compares non-farm employment sectors for New York City and the United States as a whole:
16
EMPLOYMENT BY SECTOR
2015 Estimates
Construction
Manufacturing
Trade, Transportation & Utilities
Information
United States
Financial Activities
New York City
Professional & Business Services
Education & Health Services
Leisure & Hospitality
Other Services (except Govt.)
Government
0%
4%
8%
12%
16%
20%
24%
MAJOR EMPLOYERS
New York City’s major employers are a good reflection of the city’s employment distribution. Just as many New
York City jobs are in education/health services and financial activities, many of the largest employers are found in
those sectors. Of the ten largest private employers in the city, five work in healthcare, three are banks, one is in
communications, and one is a major retailer.

JP Morgan Chase & Co., Citibank NA, and Bank of America are the three largest banks in the city, employing
more than 81,000 people combined. Their appearance on this list is not surprising, given New York’s status in
the financial world.

As previously stated, the education/health services sector is the largest in the city, and the rest of the list
reflects this. The five largest hospital systems (North Shore-Long Island Jewish Health System, Mount Sinai
Health System, New York-Presbyterian, Continuum Health Partners, and Montefiore Medical Center) employ
nearly 140,000 New Yorkers.
The following table lists New York City’s largest private employers:
17
Largest Private Employers
New York City, NY
Com pany
No. of
Em ployees
Business
Type
North-Shore Long Island Jew ish Health System
48,650
Healthcare
JPMorgan Chase & Co.
37,363
Financial Services
Mount Sinai Medical Center
32,056
Healthcare
Macy's Inc.
31,200
Retailer
Citibank NA
24,991
Financial Services
New York-Presbyterian Healthcare System
21,802
Healthcare
Bank of America
19,500
Financial Services
Continuum Health Partners Inc.
18,974
Healthcare
Verizon Communications
18,650
Communications
Montefiore Medical Center
18,030
Healthcare
Source: Crain's New York Business & Cushman & Wakefield Valuation & Advisory
EMPLOYMENT GROWTH
Employment growth in New York City remains steady, and has now outpaced the nation’s job growth over much
of the past decade. New York City has long since recovered all of the jobs lost during the great recession and is
now in a period of sustained expansion.
According to the New York State Department of Labor, total employment in the city grew by 2.9 percent during
the 12 month period ending in January 2015, adding 115,600 jobs. Private sector job growth in New York City
was even more pronounced, increasing by 3.3 percent from the same time last year, which outpaced both the
state’s growth rate (2.0 percent) and the nation’s growth rate (2.8 percent).
Job growth continues to be broad-based, with almost all major private sectors posting year-over-year gains. The
city’s employment growth over the past year has been led by the following sectors: education/health services
(which grew by 40,800 jobs, representing the fastest growth rate at 4.9 percent growth rate),
professional/business services (which added 24,800 jobs, a 3.8 percent growth rate), leisure/hospitality (which
added 14,400 additional jobs, representing growth rate of 3.8 percent). trade/transportation/utilities (adding
13,700 positions, a 2.2 percent increase), financial activities (which added 8,300 jobs, a 1.9 percent growth rate),
and information (which added 2,900 jobs, a 1.6 percent growth rate).
Every sector except manufacturing (which contracted by 1,600 jobs) added jobs for the 12-month period ending
January 2015. Government employment, which has seen constant contraction in recent months, rose by 3,300
jobs (a 0.6 percent increase) over the past year. The city’s important securities industry has begun to pick up the
pace and will continue to steady after a double-dip contraction, but growth will remain modest. While the industry
payrolls have rebounded to their highest level in more than two years, some concerns still remain. For instance,
Citigroup’s fourth quarter profits were nearly offset by its $3.5 billion legal expenses, while legal costs and
disappointing trading revenue hurt JPMorgan Chase and Bank of America. This wave of bad news will likely have
a consequential impact on future hiring and, combined with ongoing efforts to adapt to tight regulation, keep
financial services in check.
Additional considerations for employment growth are as follows:

Between 2004 and 2014, New York City’s total non-farm employment grew by an annual average of 1.3
percent. This was much better than the nation’s 0.5 percent annual average job growth over the same time
period.

18
Over the next five years, the city’s total non-farm employment is forecast to grow by an annual average of 1.1
percent, slightly below the nation’s 1.3 percent annual growth.
The following chart illustrates total non-farm employment growth per year for New York City and the United
States:
TOTAL EMPLOYMENT GROWTH BY YEAR
4.0%
United States
Forecast
New York City
2.0%
0.0%
-2.0%
-4.0%
-6.0%
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
UNEMPLOYMENT
According to the New York State Department of Labor, New York City’s seasonally adjusted unemployment rate
in January 2015 was 6.5 percent, reaching its lowest level since October 2008. Year over year, the current
unemployment rate represents a 1.5 percentage point improvement from January 2014. The rate remains above
the state (5.8 percent) and national (5.7 percent) rates, however. This paradox of a high unemployment rate
combined with steady job growth is partly a result of discouraged workers returning to the city’s labor force as job
prospects improve.

New York City’s unemployment rate averaged 6.8 percent between 2004 and 2014, falling in line with the
nation’s average rate, but slightly higher than the state’s average rate of 6.7 percent. During the early 2000s
the city had a much higher unemployment rate than the nation, a trend which returned in 2012.

Over the next five years, Moody’s Analytics forecasts that New York City’s unemployment rate will average
4.5 percent, lower than the nation’s 5.1 percent average rate. The city’s unemployment rate will dip below 5.0
percent in 2016.
The following graph compares historical and projected unemployment rates for New York City, the state of New
York, and the United States as a whole:
19
UNEMPLOYMENT RATE BY YEAR
New York City vs. New York vs. United States, 2004-2019
11%
United States
New York
New York City
Forecast
9%
7%
5%
3%
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
CONCLUSION
New York City has fared well in the past few years and expansion is firmly in place. The city has experienced
moderate economic growth and employment gains that have outpaced the nation’s. Economic expansion is
expected to accelerate in 2015 as the tech industry drives employment and financial services begins to recover.
Additional items to consider for New York City:

New York City has had steady private sector job growth since 2011, record tourism numbers, and features a
well-diversified economy that is no longer dependent on Wall Street. As the tech and tourism industries grow
further, New York City will continue to see economic growth in line with the rest of the country.

New York City’s unemployment rate has been trending downward and will experience steady improvement
over the next several years.

Affordability will continue to be a problem in the near term for New York City’s middle class, sustaining the
trend of “a city of extremes”. The shifting employment composition could exacerbate this problem.
LOCAL AREA ANALYSIS
LOCAL AREA MAP
20
LOCAL AREA ANALYSIS
21
LOCATION
The subject site is bounded by 149th street to the south, the Metro-North Rail Road tracks to the north, River
Avenue to the east, and Exterior Street to the west in the Bronxchester neighborhood of the Bronx. The subject is
also located across from the Harlem River, and adjacent to the Major Deegan Expressway (Interstate 87). Local
area accessibility is good, relying on St. Ann’s Avenue to east, Willis Avenue and Melrose Avenue to the west,
East 149th street to the south and East 161st to the north. Bronxchester is generally bound by Melrose to the
east, Highbridge to north, the Harlem River to the East and Manhattan to the south.
NEARBY AND ADJACENT USES
Bronxchester has experienced a growing change as there has been significant development activity in the area.
The subject property is located in an area once renowned as a major retail district but due to persistent neglect
has, until recently, fallen to blight. The City of New York has undertaken multiple initiatives to revitalize the area.
The subject is immediately surrounded by retail/commercial uses, residential uses to the west, and various
recreational and community facility facilities. The new Yankee Stadium was completed in 2009 along with four
new public ball fields, 8,000 new trees, a skating park, 18 new tennis courts and a new esplanade providing
access from the new Yankee Stadium to the Gateway Center. Immediately to the east of the subject property’s is
the 2-acre public park on the Harlem River waterfront owned and operated by the City of New York as open
space for the public’s enjoyment. The park connects to adjacent waterfront recreational facilities and additional
open space yet to be developed. Several parks surround the subject’s immediate area including Heritage Field,
Macomb’s Dam Park, Franz Sigel Park, Joyce Kimer Park and Mullaly Park. The immediate area is also
comprised of the Bronx County Courthouses and Lincoln Hospital
In addition to the subject, the Hub and Concourse Plaza are two shopping centers located within close proximity
at the intersections of 149th Street and Third Avenue and 161st Street and Morris Avenue, respectively. There
are also several local and regional retailers that operate along Third Avenue, River Avenue, 149th Street and
161st Street. Other uses in the area include commercial buildings, office buildings, bank branches, service
stations, and fast food and sit-down restaurants. The influx of new residential buildings north of the subject has
increased over the last few years. The recently completed Via Verde (Green Way), a $99 million mixed-income
rental and home ownership building in the Bronxchester neighborhood of the Bronx, is now 100 percent sold. The
award winning designed building comprises townhouses and a 20-story building and includes 150 low-income
rental units, 71 affordable cooperative residential units, along designated areas for community and recreational
activity. Finally, the proposed renovation of the former Bronx Detention Center into the Bronx Children’s Museum
represents a New York City’s commitment to revitalizing the subject’s surrounding area.
LOCAL AREA CHARACTERISTICS
The subject is located just south of Yankee Stadium underneath the Major Deegan Expressway. Like many
neighborhoods throughout New York City Bronxchester is a self-contained community. The side avenues and
streets are generally one-way with the main and commercial roads being bi-directed. The streets are improved
with mainly lower to middle income residential housing types, including multi-tenant rentals, cooperative
apartment and condominium buildings. Retail and commercial districts are located on River Avenue, 149th Street,
Grand Concourse Boulevard and Third Avenue. These major retail corridors primarily serve the local and
surrounding neighborhoods and have always been considered strong retail districts.
LOCAL AREA ANALYSIS
22
ACCESS
Local area accessibility is good, relying on St. Ann’s Avenue to east, Willis Avenue and Melrose Avenue to the
west, East 149th street to the south and East 161st to the north. The area is also served by the 2, 4 and 5 subway
lines at the Grand Concourse station three blocks to the east of the subject and the 4, B and D lines at the 161st
Street-Yankee Stadium station 8 blocks to the north of the subject. The area is also served by 12 bus routes and
the new Metro North station just north of the subject at 161st Street. Regional access is available via the Cross
Bronx Expressway, Sheridan Parkway, Bruckner Expressway, and Major Deegan Expressway. The subject is
directly accessible via exits 4 and 6 from the Major Deegan Expressway. Based on the City of New York EDC
information the pedestrian traffic exceeds 250,000 people per day and more than 36,000 vehicles drive in and out
of The Hub each day.
SPECIAL HAZARDS OR ADVERSE INFLUENCES
We observed no detrimental influences in the local market area, such as landfills, flood areas, noisy or air
polluting industrial plants, or chemical factories.
CONCLUSION
Bronxchester is established neighborhood that is densely populated and concentrated with residential and
retail/commercial development in the area. The development and growth of the neighborhood over the past few
years has enhanced the desirability of the subject area. Overall, we anticipate overall growth over the long-term
given the demand drivers in the local area.
NATIONAL RETAIL MARKET ANALYSIS
23
INTRODUCTION
The year 2015 is expected to be the strongest year for the U.S. economy since at least 2005. Real gross
domestic product (GDP) is forecast to increase at a 3.3 percent rate, roughly 50 percent faster than the 2.2
percent average since the recovery began in mid-2009. The drivers of growth are consumer spending, business
investment and, to a lesser extent, housing. Additionally, declining oil prices are a net positive for the economy,
boosting the income available for discretionary purchases and reducing costs in a wide range of industries. This
anticipated acceleration will have a strong positive impact on the U.S. commercial real estate sector, leading to
higher demand in all major sectors: office, industrial, retail, multifamily and hospitality.
The strength of the economy at the end of the year was evident in a wide range of indicators, from employment to
manufacturing to consumer spending. Virtually every measure of the health of the labor market improved
substantially during 2014. Perhaps the most important shift of the past year has been in hiring. Businesses are
now looking for more people and creating more jobs than at any time since the 1990s. There were 2.95 million
more jobs in the U.S. than at the end of 2013. That’s more job growth in 12 months than in any full year since
1999. The pace of job growth accelerated notably in 2014. In addition, the number of job openings in the U.S. is
at the highest level since 2001, indicating that job growth is likely to remain strong in the next several quarters.
As job growth has accelerated and income has increased, households have begun to spend more on durable
goods, making purchases they have put off for the past several years. The best example of this is motor vehicle
purchases. In 2014, U.S. motor vehicle sales totaled 16.4 million units, the highest volume since 2006. Sales of
autos are one of the best indicators of the health of consumers. When auto sales are strong, households are
confident about the future and their financial situation, and U.S. motor vehicle sales are expected to remain strong
throughout 2015. In addition, the expectation is that spending on other consumer durable goods, like furniture and
appliances, are expected to increase in the coming year as more households look to replace worn-out goods.
Another important and positive development that bodes well is the steady improvement in the housing sector. The
housing sector is continuing to grow at a moderate pace. New construction and sales of houses are not booming,
but, on balance they are increasing. In the six months to November, new home construction has run at an annual
rate of 1.01 million units, the strongest level of activity since mid-2008. With the latest increase, home prices are
now up over 4.0 percent over the past year. This slow but steady growth will continue to generate greater
employment in the construction sector, as well as to increase consumer spending on everything from furniture
and appliances to utilities and financial services.
For the retail sector, the combination of solid income and employment growth and a return to more seasonal
weather boosted retail sales. Adjusted for inflation, retail sales grew at a 3.3 percent annual rate in January 2015.
The gains were widespread, with auto sales up at a 10.7 percent annual rate, and GAFO sales up at an estimated
2.9 percent annual pace. Over the last couple years, retail industry sales have grown at a rate faster than many
other industries. Through December 2014, preliminary estimates from the U.S. Census Bureau indicate retail
sales totaled over $5.3 trillion, a 4.0 percent increase over the same time-period in 2013. This proliferation marks
47 consecutive quarters of growth. Given the improving market, increased wages, and strong job growth, we
remain confident that consumers will continue to increase spending at a healthy clip, which will boost the need for
both retail and industrial space in the coming year.
24
NATIONAL RETAIL INVESTMENT SALES MARKET
R E T AI L T R AN S AC T I O N A C T I V I T Y
As the economy continues to improve, retail transaction volumes are beginning to rebound. Real Capital Analytics
reported that year-end 2013 retail transaction volumes reached $60.8 billion, surpassing the 12-month totals for
the previous consecutive five years. Still, the 2013 totals remain 24.0 percent below peak levels of the $80.2
billion recorded in 2007. These increased volumes are, nevertheless, a strong indication that investors feel there
is growth potential in the retail market.
Through year-end 2014, pricing metrics have strengthened for retail properties with per-square-foot prices rising,
average cap rates for primary assets falling and the Commercial Property Price Index reaching its highest post
recession level. Year-end 2014 data available from Real Capital Analytics indicates that retail transactions have
totaled over $83.6 billion, already a 32.9 percent increase over the $62.9 billion in transactions recorded in the
previous year.
$44.6
$62.9
$22.1
$16.3
$25.5
$57.1
$81.6
$63.9
$58.0
$61.1
$36.2
$28.6
$14.0
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
$83.6
The following graph displays annual retail transaction volume since 2001:
R E T AI L C AP I T AL I Z AT I O N R AT E S
As the credit markets continue to loosen, transaction activity is on the rise. Investors have increasingly focused on
real assets, such as commercial real estate, as a hedge against inflation in the wake of previous economic
uncertainty. Capitalization rates (OARs) are compressing as demand increases. The PwC Real Estate Investor
Survey reports that national power center and strip shopping center OARs at their lowest levels bottomed in the
third quarter of 2007 at an average of 7.0 percent and 7.2 percent, respectively, while regional mall cap rates
reached a low of 6.7 percent in the first quarter of 2008. Average rates for all three property types peaked in the
first quarter of 2010 at nearly 8.5 percent.
Through year-end 2014, capitalization rates continue to strengthen. Power center OARs averaged 6.6 percent,
while regional mall and strip shopping center OARs averaged 6.2 and 7.1 percent, respectively. In the current
market, investors are viewing higher-quality assets in primary urban and first-tier suburban markets most
favorably. However, with significant investor interest in the most dominate markets, capitalization rates have
compressed notably among much of the most desirable product. As such, secondary markets are beginning to
gather more attention as sources of opportunity. It should also be noted that the combination of relatively low
25
interest rates and increasing loan-to-value ratios are driving many investors to turn to real estate as an alternative
investment vehicle. The added demand should continue to lead to an increase in real estate values and the
subsequent compression of cap rates.
The following graph depicts quarterly national retail capitalization rates by property type since 2008:
National Retail Cap
9.0%
8.5%
8.0%
7.5%
7.0%
6.5%
6.0%
National Power Center
National Regional Mall
National Strip Shopping Center
Source: PwC Real Estate Investor Survey
CMBS M AR K E T
The availability of debt including the gradual resurgence of Commercial Mortgage Backed Securities (CMBS) has
contributed to the increase in transaction activity. At its peak in 2007, CMBS issuance totaled nearly $230.0 billion
in the United States, and retail assets accounted for approximately one-third of total CMBS volume. During the
financial crisis that began in late 2008, funding dramatically plunged. Total CMBS issuance in 2008 dropped to
just $12.0 billion, followed by a nearly non-existent $2.7 billion in 2009. Issuance rebounded in 2010, reaching
$11.7 billion as investors began returning to the market, but the European debt crisis, coupled with the slow U.S.
economic recovery and admissions from Standard & Poor’s that it had “potentially conflicting methods” in how it
was rating securitizations, caused bond buyers to become very conservative in their underwriting and pricing. To
that end, many “balance sheet lenders,” such as local savings and loan banks and life insurance companies, saw
notable increases in lending activity. According to Commercial Mortgage Alert, CMBS issuance still managed to
total nearly $33.0 billion and $48.2 billion, respectively, in 2011 and 2012. Demand doubled in 2013, due in part to
low rates, improving economic conditions and an increased appetite from bond buyers. As such, in 2013 CMBS
issuance totaled $86.1 billion.
According to Trepp LLC, after falling below 6.0 percent and hitting its lowest level in five years in November, the
delinquency rate fell five basis points in December 2014. The delinquency rate for US commercial real estate
loans in CMBS is now 5.75 percent, down 168 basis points from 7.43 percent in December 2013. The CMBS
market heads into the new year with a lot of momentum. For most of 2014, issuance levels lagged behind most
experts’ opinions. A surge in the second half of the year helped the market reach almost $100.0 billion in deals,
leading many lenders to predict that issuance will exceed that barrier in 2015.
26
The following table compares annual CMBS volume over the last eight years:
U.S. CMBS ISSUANCE (IN BILLIONS)
2007
TOTALS $228.6
2008
2009
2010
2011
2012
2013
2014
$12.1
$2.7
$11.6
$32.7
$48.2
$86.1
$94.1
Source: Commercial Mortgage Alert
Five years after the financial crisis that caused $72.1 billion loans to default in the retail sector, a third of that total
remains outstanding. However, lenders are making steady progress reducing distress levels, and while distressed
sales will continue for some time, distress is no longer a significant factor weighing on the marketplace.
The following graphic shows recorded and estimated commercial real estate loan maturities by investor type
through 2020:
27
C O M M E R C I AL P R O P E R T Y P R I C E I N D E X
The Moody’s/RCA Commercial Property Price Index (CPPI) is a periodic same price change index of U.S.
commercial investment properties. The Moody’s/RCA CPPI uses advanced repeat-sale regression analytics to
measure price changes in U.S. commercial real estate.
As of October 2014, the most recent figures published, Moody’s/RCA CPPI for all properties measured an
increase of 14.2 percent year-over-year. Currently at 185.2, the index is now near its peak of 186.06 measured in
the December 2007. For retail properties, CPPI figures reported by Moody’s/RCA have indicated growth at 4.8
percent during the year-ending December 2014. The current Moody’s/RCA CPPI figure for retail properties is
160.56, or 16.9 percent off the index peak of 190.8 witnessed in September 2007.
The following graph displays the CPPI Index between January 2001 and December 2014:
Commercial Property Price Index Comparison
200
460
180
410
160
360
140
310
120
260
100
80
210
2001
2002
2003
2004
2005
2006
Moody's National - All Property (left axis)
2007
2008
2009
2010
Moody's National Retail (left axis)
2011
2012
2013
2014
NCREIF National Aggregate (right axis)
Similarly, the National Council of Real Estate Investment Fiduciaries (NCREIF) also compiles a property price
index based on a large pool of individual commercial real estate properties. The NCREIF Property Price Index is
a quarterly time series composite total rate of return measure of investment performance of said commercial real
estate properties acquired in the private market for investment purposes only. Based on data from NCREIF, the
property price index peaked in the first quarter of 2008 at 419.88 before falling 29.3 percent to 296.81 in the first
quarter of 2010. Since bottoming, the NCREIF Property Price Index has climbed to near its pre-recession levels,
standing at 428.43 as of third quarter 2014 (most recent data available), reflecting the increase in commercial real
estate values over recent quarters.
28
RETAIL MARKET CONDITIONS
R E T AI L C O N S T R U C T I O N A C T I V I T Y
Despite improving fundamentals in the retail real estate market, developers are still concerned about investing in
new construction projects. The exception being outlet center development and projects located in the highestperforming markets with strong tenant mixes possibly including grocery retailers, drug stores or similar net leased
properties that have shown notable strength in the current market. According to data from the CoStar Group,
retail construction starts peaked at 66.0 million square feet in the second quarter of 2006. Given the collapse of
credit markets and consumer demand during the recent recession, construction starts have fallen significantly
over the last few years. Recently, retail construction starts totaled just 5.9 million square feet in the fourth quarter
of 2014.
The following graph shows retail construction starts from the second quarter of 2006 through the fourth quarter of
2014:
Retail Construction Starts (SF in Millions)
Retail Construction Starts Peaked at66.0 Million Square Feet in Q2 2006
60.0
50.0
40.0
30.0
5.9
8.5
11.2
11.1
10.0
15.8
15.2
11.6
18.8
11.6
13.5
14.0
9.2
10.9
13.1
9.3
10.6
8.9
10.3
9.7
12.8
13.4
15.4
18.9
26.2
33.2
40.4
28.6
55.1
52.2
54.0
36.2
64.2
10.0
7.0
Just 5.9 Million Square Feet Commenced in Q4 2014
20.0
66.0
SQUARE FEET IN MILLIONS
70.0
0.0
Source: CoStar Group
Looking forward, new construction activity is expected to remain tepid until the industry works through the large
amounts of debt maturities scheduled to come due between now and 2017. At the moment there continues to be
a significant amounts of available space for retailers to choose from. We expect retail construction starts to
remain tepid moderate through 2015.
R E T AI L P R I C E P E R S Q U AR E F O O T
Following the decline in sales volume, pricing levels achieved by shopping centers and other retail properties
trended downward rapidly before rising in recent quarters. Between 2003 and 2008, a time from when the market
had picked up after the last recession, up until the most recent market fall-out, the average price per square foot
for retail assets increased by 50.8 percent to a peak of $187 per square foot in 2008. However, in 2010, the
average price per square foot for all retail property would sharply decline to a low of $142 per square foot. Not
29
until late 2010/early 2011 did the price per square foot begin to recover, and in 2012 it jumped to $182 per square
foot, a 28.1 percent increase over 2010.
Year-to-date, or fourth quarter data, continued to indicate strength. Total retail property sales are averaging $203
per square foot. The 2014 average has surpassed the recent the 2008 peak, and baring some shift in
fundamentals should continue to set new highs for the foreseeable future. We would note that RCA reports that
there is a widening gap between unit prices paid in primary markets vs. secondary and tertiary markets. A flight to
quality is prevalent in all of the major CRE market groups, including retail.
$297
The following graph depicts the historical average price per square foot for retail assets as surveyed by RCA
through fourth quarter 2014:
$153
$203
$325
$300
$275
$250
$225
$200
$175
$150
$125
$100
$75
Mall & Other
Strip
Total Retail
V AC AN C Y A N D R E N T AL R AT E S
The graph below shows the severity of the last recession in terms of declining absorption and rising vacancy
rates. In 2008, retail absorption was negative for the first time since Reis began collecting data in 1986. Mirroring
the rebound in other commercial property sectors, leasing and occupancy of U.S. malls and shopping centers
saw improved fundamentals through 2014. According to Reis, the low amount of new supply of retail space
should reflect as a decline in retail vacancy rates through 2019. Between 2015 and 2019, Reis data forecasts
absorption in the retail market to average approximately 21.2 million square feet per year while construction
completions average approximately 15.1 million square feet per year. Given this forecast, overall vacancy rates in
the national retail market are projected to fall approximately 180 basis points to 8.4 percent from their current
reading near 10.2 percent.
30
The subsequent graph depicts annual market conditions within retail markets across the U.S.:
RENT GROWTH PERCENTAGE
Annual Retail Market Conditions
50
12%
40
10%
30
8%
20
10
6%
0
4%
-10
FORECAST
-20
2%
0%
-30
COMPLETIONS
NET ABSORPTION
VACANCY RATE
Source: Reis, Inc.
During 2014, falling vacancy rates and rising demand in the retail market has brought the start of meaningful rent
growth for landlords in major U.S. retail markets. According to Reis data, prior to the latest economic recession,
annual effective retail rental rates grew at an average rate of 2.4 percent. Following nearly four years of negative
rent growth during the economic fallout from 2008 to 2011, effective retail rental rate growth figures are now
averaging about 1.0 percent.
The following graph shows a composite of asking and effective annual rent growth within retail markets across the
U.S.:
31
Annual Retail Rent Growth
Rent Growth Percentage
5%
4%
3%
2%
1%
0%
-1%
FORECAST
-2%
-3%
-4%
ASKING RENT % CHANGE
EFFECTIVE RENT % CHANGE
Source: Reis, Inc.
STORE CLOSINGS
According to the most recent annual data collected by the International Council of Shopping Centers (ICSC),
retailers and restaurateurs announced that nearly 5,500 establishments closed in 2014. The annual closing totals
are more than double the previous years. The majority of retailers announcing store closings are mall-based
tenants which has proven very problematic for mall owners with class-B and class–C properties.
The following is a list of space closed by segment:
ANNUAL STORE CLOSINGS
1ST HALF-YEAR
2014
2ND HALF-YEAR
4,403
2013
1,310
1,080
1,282
2012
3,511
2011
953
2,329
1,743
2010
4,396
2009
1,176
2,917
2008
1,894
3,272
2007
3,641
3,081
2006
1,522
2,749
2005
1,981
1,897
2,372
2004
3,750
2003
2,553
2,972
2002
2,001
3,227
2001
2,723
4,149
0
Source: ICSC
1,000
2,000
2,892
3,000
4,000
5,000
6,000
7,000
8,000
32
Discount department store retailers announced that they will close over 2.6 million square feet. In addition,
traditional department stores, such as Sears and Saks Fifth Avenue announced their plans to reduce space by
2.3 million square feet over the coming years. Additionally, retailers Staples and Radio Shack recently announced
the closing of 225 and 1,100 stores, respectively. For Staples and Radio Shack, the closures reflect both
struggling sales totals, as well as a shift away from brick-and-mortar business to online retail.
While declining sales have forced many retailer chains to pare down their number of outlets, other retailers are
closing due to shifts in the marketplace. As such, many struggling retailers have been forced to reinvent how they
reach customers.
E-C O M M E R C E
In the age of Amazon.com, stores are trying to reinvent themselves, generally using one of two strategies: deliver
products more quickly than and nearly as inexpensively as online sellers, or offer shopping experiences that
entice people to visit their establishment and buy something. With the rise of online purchasing and increased
price-sensitivity from consumers, retailers without a notable e-commerce platform will suffer while online-sales
and sales from smartphones continue to grow at a quicker pace than brick-and-mortar sales.
Forrester Research estimates that by 2017, 60.0 percent of all U.S. retail sales will involve the internet in some
way, either as a direct e-commerce transaction or as part of a shopper’s research on a laptop or mobile device.
Additionally, Forrester Research forecasts that approximately 11.0 percent of total retail sales in the U.S. in 2018
will be online purchases. In contrast, e-commerce sales were 5.2 percent of retail sales in 2013.
The following chart tracks e-commerce sales in 2012 and 2013 as well as sales from 2014 thru 2018, as
forecasted by InternetRetailer.com:
E-Commerce Sales: 2012 - 2018
$480
$430
$380
$330
$304
$347
$338
$440
$492
$230
$263
$280
$225
E-COMMERCE SALES (IN BILLIONS)
$530
2012
2013
2014
2015
2016
2017
2018
$180
Source: InternetRetailer.com, Forrester Inc.
Additionally, many retailers are beginning to realize that rather than close stores, they can sustain them by giving
them a much-needed facelift. Reinventing the store involves a thorough rework that often includes creating a
"brand story" to engage and involve a consumer in the shopping experience.
NATIONAL RETAIL MARKET SUMMARY
Market conditions for the retail sector are improved and continue to be very optimistic. Retail sales have
increased, tenant rent concessions have abated, and leasing velocity is on the rise. Furthermore, while many
33
traditional mall tenants are not currently in growth mode, malls continue to outperform all shopping center types,
and record the lowest vacancy levels.
Overall, the U.S. economy has taken off and is in a period of strong growth that we expect to last through 2015 and into 2016.
Employment, income and output will all grow strongly and reach new highs. We believe the risks to this outlook are modest.
The result should be the best year for the commercial real estate sector since at least 2007.
RETAIL MARKET AND TRADE AREA ANALYSIS
34
RETAIL MARKET AND TRADE AREA OVERVIEW
A retail center's trade area contains people who are likely to patronize that particular center, and its ability to draw
these people comes from the strength of the anchor tenants, complemented by regional and local tenants.
Customers are drawn by a given class of goods and services, and a successful combination of these elements
creates a destination for customers seeking both variety and the comfort and convenience of an integrated
shopping environment.
To define and analyze the market potential for Gateway Center at Bronx Terminal Market, we must first establish
the boundaries of the trade area from which customers will be drawn. In some cases, defining the trade area may
be complicated by the existence of other retail facilities on main thoroughfares within trade areas that are not
clearly defined or whose trade areas overlap with that of the subject.
As an urban retail power center facility, the subject will serve almost a dual purpose in the community. That is to
say that it acts as both a convenience center for those residents living in the immediate neighborhood area, as
well as a destination center by virtue of its unique size, and tenant mix.
Once the trade area is defined, the area's demographics and economic profile can be analyzed. This will provide
key insight into the area's dynamics as it relates to the subject. The sources of economic and demographic data
for the trade area analysis is as follows: Claritas, Inc., and Costar, Inc.
SCOPE
OF
TRADE AREA
Traditionally, a retail center's sales are principally generated from within its primary trade area, which is typically
within reasonably close geographic proximity to the center itself. Generally, between 55 and 65 percent of a
center's sales are generated within its primary trade area. The secondary trade area generally refers to more
outlying areas which provide less frequent customers to the center. Residents within the secondary trade area
would be more likely to shop closer to home due to time and travel constraints. Typically, an additional 20 to 25
percent of a center's sales will be generated from within the secondary area. For centers that have above
average regional accessibility, this percentage can sometimes be greater. The tertiary or peripheral trade area
refers to more distant areas from which occasional customers to the retail center reside. These residents may be
drawn to the center by a particular service or store that is not found locally. Industry experience shows that
between 10 and 15 percent of a center's sales are derived from customers residing outside of the trade area. This
potential is commonly referred to as inflow.
Before the trade area can be defined, it is necessary that we thoroughly review the retail market and the
competitive structure of the general marketplace, with consideration given as to the subject's position therein.
COMPETITIVE RETAIL STRUCTURE
To examine the subject property in its proper context we must also examine its most direct competition and give
consideration to the potential for new competition via proposed centers. The subject, Gateway Center at Bronx
Terminal Market, is a 4-level retail power center that contains 912,333 square feet of gross leasable area (GLA)
retail space and a 6-level parking garage and on-site parking for 2,575 spaces.
35
The subject property contains several national and credit tenants. Additionally, the subject property boasts
bringing many national retailers to the Bronx for the first time including: the first combined Toys ‘R Us / Babies ‘R
Us in New York State, BJ’s Wholesale Club, and Bed Bath and Beyond.
The potential trade area for the subject is defined by the location and drawing power of surrounding retail centers.
With its existing tenant mix, the subject’s most direct competitors are the larger retail centers with the market. The
following chart presents the competitive retail centers as primary (most directly competitive) or secondary
competition. In addition, we have also highlighted the proposed competition with the subject property. The map
shows the relative location of these centers.
COMPETITIVE RETAIL PROPERTIES
No.
Property
Description
Anchor Tenants
Occ.
97%
Distance
to Subject
PRIMARY COMPETITION
1
Bay Plaxa Power Center
Center Type:
Community Center
Total GLA:
492,857
Toys "R" Us
2136 -22 Batow Avenue
Year Built:
1988
Anchor GLA:
140,000
Bronx, New York
Renovation:
N/A
Anchor Ratio:
Pathmark
Raymour and Flannigan
28%
9.7 miles
N
Marshalls
2
3
River Plaza
Center Type:
Regional Center
Total GLA:
235,000
Target
West 225th Street, Major Deegan Expressway
Year Built:
2004
Anchor GLA:
164,638
Best Buy
4.2 miles
Bronx, New York
Renovation:
N/A
Anchor Ratio:
70%
Marshall's
NE
East River Plaza
Center Type:
Power Center
Total GLA:
524,498
FDR Drive & East 116th Street
Year Built:
2010
Anchor GLA:
401,515
Bronx, New York
Renovation:
N/A
Anchor Ratio:
77%
Costco
97%
97%
Target
2.4 miles
Burlington Coat Factory
SE
Marshalls
4
Bruckner Plaza Shopping Center
Center Type:
Community Center
Total GLA:
449,941
Kmart
1998 Bruckner Boulevard
Year Built:
1965
Anchor GLA:
186,584
Toys "R" Us
6.35 miles
Bronx, New York
Renovation:
1989
Anchor Ratio:
Marshall's
E
41%
96%
Old Navy
5
Throggs Neck Shopping Center
Center Type:
Power Center
Total GLA:
291,795
Target
815 Hutchinson River Parkway
Year Built:
2014
Anchor GLA:
207,437
Petco
4.9 miles
Bronx, New York
Renovation:
N/A
Anchor Ratio:
TJ Maxx
N
Concourse Plaza
Center Type:
Community Center
Total GLA:
228,638
National Amusements Theaters
220 East 161st Street
Year Built:
1990
Anchor GLA:
106,680
Waldbaums Supermarket
Bronx, New York
Renovation:
N/A
Anchor Ratio:
71%
90%
SECONDARY COMPETITION
6
7
Mall at Bay Plaza
Center Type:
Regional Mall
Total GLA:
200 Baychester Avenue
Year Built:
2014
Anchor GLA:
Bronx, New York
Renovation:
N/A
Anchor Ratio:
83%
N/A
1,300,000
323,645
25%
0.1 miles
NE
JC Penny's
55%
Macy's
9.7 miles
AMC Theaters
N
Raymour & Flanagan
8
Parkchester Retail District
Center Type:
Neighborhood Center
Total GLA:
358,234
Macy's
1441 Metropolitan Avenue
Year Built:
1988
Anchor GLA:
231,385
Marshall's
5.3 miles
Bronx, New York
Renovation:
N/A
Anchor Ratio:
65%
Rainbow
98%
NE
Blink Fitness
9
Riverdale Crossings
Center Type:
Power Center
Total GLA:
159,037
184-190 West 237th Street
Year Built:
2014
Anchor GLA:
118,423
Bronx, New York
Renovation:
N/A
Anchor Ratio:
Survey Total GLA
Survey Minimum
Survey Maximum
Survey Average
Compiled by Cushman & Wakefield, Inc.
BJ's Wholsesale Club
97%
4.9 miles
74%
N
3,064,670
228,638
55%
1,300,000
100%
510,778
88%
36
COMPETITION
The subject’s primary competition is from the major retail properties within Upper Manhattan and the Bronx. The
South Bronx is defined as the southwestern portion of the Bronx made up of Tremont, University Heights,
Highbridge, Morrisania, Soundview, Hunt’s Point and Castle Hill. The subject is located just south of Yankee
Stadium, west of Morrisania, east of the Harlem River and north of Manhattan. In addition, the MLS soccer
stadium that is proposed to be constructed just north of the subject site is considered to be an added draw if it
were to come to fruition. The area benefits from good access to the Major Deegan Expressway (I-87), Cross
Bronx Expressway (I-95), Bruckner Expressway (I-278), Sheridan Expressway (I-895) Triborough Bridge and
Grand Concourse. The subject is also within three blocks of the 2, 3, 4, B and D subway lines as well as, the
Metro North station located at East 153rd Street. The neighborhood benefits from dense population of over 1.2
million people within 3 miles.
We have profiled the primary and secondary competitive retail properties below. Thereafter, we have examined
any properties that are proposed or currently under construction that may serve as future competition to the
subject property. We have indentified the following competitive retail centers for the subject property:
Primary Competition
Bay Plaza Retail Center
The Bay Plaza Shopping Center is located at 220-2210 Bartow Avenue in the Bronx. This center contains
492,857 square feet of retail space with 140,000 square feet occupied by the anchors. The center was built in
1988 and is anchored by Toys “R” Us, Marshall’s, Raymour and Flannigan and Pathmark. The center is 97
percent occupied. There is parking available as an amenity to shoppers. The property is located 3.1 miles west of
the subject.
River Plaza
The River Plaza is located at 40 West 225th Street, in the Bronx. The subject consists of a two-story multi-tenant
shopping center and is 98 percent leased with 235,000 square feet. The center was built in 2004 and contains 16
stores. River Plaza is anchored by a 129,638 square foot Target Store (the first in the Bronx), Macy’s Furniture
Store, and Marshalls. Other tenants include Applebee’s Neighborhood Grill & Bar, Starbucks Coffee, and Payless
Shoe Source. River Plaza is located in a densely populated residential area. The center contains a 2-story
parking facility with 809 parking spaces. The parking is free for all shoppers. River Plaza is situated on the
northern Manhattan/Bronx border. The property is located 7.5 miles northwest of the subject.
East River Plaza
The East River Plaza power center is located along the FDR Drive between East 116th and 119th Streets within
the East Harlem neighborhood of Manhattan. The center is located 2.4 miles from the subject property and was
completed in early 2010. East River Plaza is a 5-level retail power center contains 524,498 square feet of gross
leasable area (GLA) retail space and a 7-level attached parking garage with 1,248 spaces. The property is 97
percent leased and anchored by Target, Costco, Burlington Coat Factory, and Marshalls.
37
Bruckner Plaza Shopping Center
The Bruckner Shopping Plaza is located at 1998 Bruckner Boulevard. The Bruckner Plaza Shopping Center
contains 449,941 square feet of retail along with 50,000 square feet of office space. The mall was built in 1964,
with a recent expansion in 1991. The center is 96 percent leased and anchored by Big Kmart, Toys R Us,
Conway, Old Navy and a Marshalls. Other tenants include Modell’s, Casual Male Big and Tall, and Radio Shack.
The property is located 1.2 miles west of the subject.
The recently completed Throggs Neck Shopping Center is located at 815 Hutchinson River Parkway and is subdivided into two retail condominium units totaling 291,795 square feet of gross leasable area. The center is
anchored by Target which occupies the entire lower level of the property or 168,462 square feet. The remainder
of the center is located on the ground level and comprises 123,333 square feet of gross leasable area within four
buildings. The property is 90.0 percent leased by 21 tenants and anchored by Target (168,462 SF), TJ Maxx
(28,417 SF) and Petco (10,538 SF). The center is located 4.9 miles north of the subject.
Secondary Competition
Concourse Plaza
Concourse Plaza is a 2-story multi-tenant community retail center located at 200 Baychester Avenue that is 83
percent leased and contains 228,638 square feet. The property is located 4.4 miles east from the subject property
at 220 East 161st Street. This retail property contains approximately 36 stores, and is anchored by a National
Amusements Cinema multiplex and a Waldbaum’s supermarket. Other tenants include Petland Discounts, and
CVS Drugs. Concourse Plaza provides on-site parking to shoppers. Concourse Plaza is located within a densely
populated area and is within close proximity to several municipal offices such as the Bronx Borough President’s
office and Bronx County Courthouse, situated across the street.
Mall at Bay Plaza
The Mall at Bay Plaza was recently completed and is immediately adjacent to the Bay Plaza retail center. The
project took just over 2 years and $300.0 million to complete. The mall comprises of a 3-story enclosed regional
mall totaling over 1.3 million square feet. The subject is anchored by JC Penney (163,645 SF) and Macy’s
(160,000 SF). The anchor tenants signed long term ground leases. In addition, the subject contains two parking
garages with a total of 1,661 spaces and a 21,634 square foot outparcel. The JC Penney department store was
completed in 1995, and is connected to the enclosed mall building. The mall benefits from its excellent highway
access and close proximity to Co-op City, one of the largest residential housing complexes in New York City. The
property is located 3.1 miles north of the subject.
Parkchester Retail District
The Parkchester retail district is a 10 block area generally located between Metropolitan and Westchester
Avenues within the Parkchester housing complex. This retail district is approximately 5.3 miles from the subject.
The Parkchester retail district contains approximately 400,000 square feet and is anchored by a Macy’s
department store. Marshall’s signed a lease and is opened there store September of 2014. Additional tenants
include The Children’s Place, Starbucks, and Payless Shoe Source.
38
RIVERDALE CROSSINGS
Riverdale Crossing is a newly completed 2-story, plus lower level, two building retail center located at 184-190
West 237th Street. The property contains 159,037 square feet of gross leasable area (GLA). The site as formerly
improved with the Stella D’oro Bakery which was razed for the Riverdale Crossings retail center development.
The center is anchored by BJ’s Wholesale Club, which has leased 118,423 square feet, or 74.5 percent of the
subject property and contains its own 2-story, plus lower level building with rooftop parking. The majority of the
BJ’s Warehouse Club retail space is located below grade. The remaining 40,714 square feet of in-line retail space
is comprised within the “northern building” and contains ground and second floor retail space along with rooftop
parking. The subject property is currently 100.0 percent leased to 9 tenants inclusive of BJ’s Wholesale Club,
Bank of America, Chipotle, Smashburger, T-Mobile, Subway, Buffalo Wild Wings and CityMD. The property is
located 5.3 miles northwest of the subject.
TYPICAL MARKET LEASE TERMS
TYPICAL LEASE TERM
Our survey of market participants has included a broad cross section of retail center owner/ developers and
leasing agents. Typical lease terms in region for local tenants vary from 5 to 10 years, with larger regional and
national tenants commanding longer terms of 10 to upwards of 20 years. Major/anchor leases typically run a
range of 15 to 30 years, with 20 years being typical. Inline tenant leases range between 10 to 15 years in
duration.
EXPENSE REIMBURSEMENT
Typically, retail leases in retail centers are structured on a net basis, with tenants responsible for a full pro-rata
share of taxes and common area maintenance (CAM) expenses. Common area maintenance recoveries will
typically have an administrative surcharge of 5.0 to 15.0 percent in addition to the pro-rata pass-through.
Periodically, the management fee may be recovered in lieu of this structure.
RENT ESCALATIONS
Rental increases in the form of a CPI increase or a fixed step-up are usually sought, but not always achieved. The
strength of a particular property or location generally dictates the ability of a landlord to command rental
increases. The two most common structures in the subject market appear to be annual escalations or fixed steps.
Annual increases are typically based upon CPI, or a lower stipulated rate, usually around 2.0 to 3.0 percent per
year. Fixed steps appear to equal nearly 5.0 to 10.0 percent every three years or 10 to 15 percent every five
years over the course of the term.
OVERAGE RENT
In addition to the minimum base rent, many retail tenants contract to pay a percentage of their gross annual sales
over a pre-established base amount as overage rent. Most leases in the market appear to have a natural
breakpoint. The average overage percentage for small space retail tenants is in a range of 4.0 to 6.0 percent.
Anchor tenants typically have the lowest percentage clauses, with ranges of 1.0 to 3.0 percent being most
common. Given the nature of the proposed project, we have not projected any percentage rent in our analysis.
39
CONCESSIONS
Concessions will vary considerably by property and tenant type. The level of rent that tenants are willing to pay is
often influenced by the magnitude of the build-out offered, as well as the amount, if any, of free rent granted.
Anchor tenants are generally in a better negotiating position to extract concessions in the form of free rent or
improvement allowances. However, if an anchor is strongly motivated to be in a particular market or center, it is
not unusual for an owner to be able to maintain a firm bargaining position, yielding little or no concessions.
We typically see tenant allowances ranging from $0.00 to as high as $40.00 per square foot for national retail
tenants with above average build-outs. Free rent concessions may range from 3 to 9 months.
LEASING COMMISSIONS
Leasing commissions have been based upon the generally accepted standard schedule. The standard schedule
quoted by Cushman & Wakefield, Inc. depends upon the length of the lease: 5 percent for year 1; 4 percent for
year 2; 3.5 percent for years 3 through 5; 2.5 percent for years 6 through 10; 2 percent for years 11 through 20.
This schedule results in the following percentages of the first year's base rent (excluding an override described
below):
L EA S ING C O M M I S S IO N S
5-Year:
19.5% or 3.90% per year
10-Year:
32.0% or 3.20% per year
15-Year:
42.0% or 2.80% per year
20-Year:
52.0% or 2.60% per year
Leasing commissions are typically higher for new tenants than renewal tenants. A new tenant typically causes a
full commission to be paid, whereas a renewing tenant typically results in a half commission. We have
incorporated this standard assumption in our cash flow projection:
TENANT PROFILES
The subject is anchored by Home Depot, Target, and BJ’s Wholesale Club which occupy 48.6 percent of the
subject. Furthermore, approximately 53.0 percent of the subject is leased to nine credit tenants inclusive of the
aforementioned Target and Home Depot, along with Marshall’s (TJX Companies), Bed Bath & Beyond, Toys R
Us, Michaels, JP Morgan Chase, AT&T, Best Buy Inc. and Staples. We have provided a profile of the credit and
larger national tenants in order analyze the tenant quality of the subject property.
STAPLES, INC. TENANT PROFILE
Staples, Inc. is the world's largest office supply retailer. The company sells office products, furniture, computers,
and other merchandise through 2,169 retail stores in the United States, Canada, Europe, Asia, and South
America. The U.S. accounts for over 70.0 percent of total locations and 85.0 percent of net sales. In addition to its
core brick and mortar retail business, Staples sells office products over the Internet and through direct mail. Instore retail accounts for 60.0 percent of Staple’s domestic revenue, with business-to-business sales and
catalogue retailing contribute the remaining 40.0 percent
Staples two main competitors in the US, Office Depot and OfficeMax, merged in late 2013 to create a combined
company with about $17.0 billion in annual sales, an amount that while impressive is still substantially below the
$24.0 billion Staples recorded in fiscal 2013. Most recently, Staples Inc and Office Depot Inc are now in advanced
40
talks to merge. Staples has a market value of about $11.0 billion, while Office Depot has a market value of about
$4.1 billion. A merger would help fend off intense competition from online retailers such as Amazon.com and bigbox chains such as Wal-Mart Stores that sell the same core office supplies, such as paper and ink toner, for less.
In July 2014, Staples acquired Vancouver-based PNI Digital Media, whose technology enables retailers to offer
on-demand personalized products, including business cards, invitations, and photo books, for about $67 million.
In October 2013, the company purchased San Mateo-based Runa, a software company that helps online retailers
increase sales by personalizing the shopping experience.
In a move that significantly enlarged its footprint in Europe, Staples acquired Netherlands-based business supply
wholesaler Corporate Express NV after a hard-fought deal valued at about $2.7 billion. Corporate Express is a
major office products wholesaler, with more than half of its sales generated in the US through Corporate Express
US. The acquisition also established Staples's contract business in Canada. The integration of Corporate Express
has taken several years, but is nearly complete. Staples is still in the process of transitioning all legacy Corporate
Express customers to its contract ordering website, StaplesAdvantage.com.
C R E D I T R AT I N G S
Staple’s is rated investment grade by Moody’s, Fitch, and Standard & Poor’s.
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Issuer/ Long-Term
Rating
Baa2
BBBBBB-
Last Rating Date
May-14
Feb-15
Feb-15
Outlook
Possible Downgrade
Negative
Watch - Negative
Source: Moody's, Fitch, S&P
A N N U AL F I L I N G D AT A
Staple’s total sales in fiscal 2013 dropped by 5.2 percent from the prior year to $23.1 billion. In addition, the
company recorded a net loss of $620.1 million for the year, a significant decrease from fiscal 2012 and 2011. In
fiscal 2013, North American comparable store sales figures dropped 4.0 percent. Declining sales of computers,
technology accessories, and software were partially offset by growth in facilities and breakroom supplies, tablets
and other mobile technology, and copy and print services.
The following is a profile of Staples’ annual financial performance:
STAPLES, INC. FINANCIAL OVERVIEW
Sales (in millions)
Sales Growth
Net Income (in millions)
Same Store Revenue Change
Gross Leasable Area* (SF in millions)
Average Store Size
Number of Stores (Year End)
Net Stores Opened
Number of Employees (Year End)
Source: Company filings
*Estimate
FY 2013
$23,114
-5.2%
-$620.1
-4.0%
43.4
20,000
2,169
-46
83,008
FY 2012
$24,381
-1.1%
-$210.7
-2.0%
44.3
20,000
2,215
-80
85,087
FY 2011
$24,664
2.2%
$984.7
0.0%
45.9
20,000
2,295
14
87,782
FY 2010
$24,135
1.4%
$881.9
-1.0%
45.6
20,000
2,281
38
89,019
FY 2009
$23,806
4.8%
$738.7
-2.0%
44.9
20,000
2,243
25
91,095
41
STORE OPENINGS / CLOSINGS
Staples closed 46 stores net of openings in fiscal 2013 and 80 stores net of openings in fiscal 2012. Staples does
not plan to open any new stores in fiscal 2014 and has taken to building smaller ones. The smaller locations are
designed to target urban and other niche markets.
Additionally, Staples announced it will close 225 stores in North America by mid-2014 as the company tries to trim
costs in the face of weaker sales. The store closings will come to about 12 percent of its stores in North America.
The closings build upon the 40 stores it closed in the region in 2013. Staples said it is aiming to save $500 million
annually through the closings and other cost cutting measures.
MICHAELS STORES, INC. TENANT PROFILE
Michaels Stores, Inc. is the largest arts and crafts retailer in the United States. The company operates Michaels
Stores and Aaron Brothers locations in 49 states and Canada. Michaels sells art and hobby supplies, décor,
frames, needlecraft kits, party supplies, seasonal products, and silk and dried flowers. Aaron Brother’s stores,
located mostly on the West Coast and in Texas, offer framing and art supplies. Additional company subsidiaries
include Star Decorators Wholesale stores, which offer wholesale merchandise to design professionals; and
Artistree, a manufacturer of frames and molding for Michaels and Aaron Brother’s stores.
In October 2006 Michaels was taken private by Bain Capital Partners and the Blackstone Group for $6.0 billion.
The company’s management acquired a minority stake and continued to file regular reports with the SEC through
2012.
In April 2012, Michaels filed for a $500 million initial public offering (IPO), but it was put on hold due to the chief
executive's illness. Michaels CEO John Menzer suffered a stroke and resigned in July of 2012. In 2013, the
company chose Chuck Rubin from Ulta Beauty as its president and CEO. Into 2014, Michaels is again pursuing
the opportunity to go public through a newly reissued IPO effort.
Michael’s is rated below investment grade by Moody’s.
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Issuer/ LongTerm Rating
B3
-
Last Rating
Affirmation
Dec-13
-
Outlook
Possible Upgrade
-
Michaels’ net sales in fiscal 2013 grew by 3.7 percent from the prior year to $4.6 billion. Michaels’ fiscal 2013
performance marks the fifth straight year of revenue growth for the company. As well, Michaels’ net income for
the year was $264.0 million, compared to $200.0 million in fiscal 2012. Comparable stores sales in fiscal 2013
increased by 2.9 percent.
A profile of Michaels sales and income performance is shown below:
42
MICHAELS STORES, INC. OPERATIONAL OVERVIEW
Net Sales (in millions)
Net Sales Growth
Gross Leasable Area (SF in millions)
Sales Per Square Foot
FY 2013
$4,570
3.7%
$264.0
2.9%
21.1
$218
1,257
50,600
FY 2012
$4,408
4.7%
$200.0
1.5%
20.6
$215
1,224
48,900
FY 2011
$4,210
4.4%
$157.0
3.2%
20.1
$212
1,198
45,300
FY 2010
$4,031
3.7%
$103.0
2.5%
19.9
$205
1,182
40,500
FY 2009
$3,888
1.9%
$103.0
0.2%
19.6
$201
1,175
38,000
Michaels currently operates 1,257 stores in the United States and Canada and believes future growth will come
from the addition of new stores and the sale of products to customers who already engage with the brand online,
according to a filing with the Securities and Exchange Commission. In 2014, the company expects to open
between 40 and 50 new stores. Ultimately, the company believes the combined United States and Canadian
markets can support a total of 1,400 to 1,600 Michael’s stores.
B E S T B U Y C O ., I N C . T E N A N T P R O F I L E
Best Buy is a specialty retailer of consumer electronics, home-office products, entertainment software, appliances
and related services. Best Buy operates more than 1,400 stores in the United States and more than 200
internationally. The company was founded by Dick Schulze with the “Sound of Music” store in 1966. Mr. Schulze
gradually broadened the Company’s product selection to appeal to a wider demographic. In 1983, Schulze
changed the company name to “Best Buy” and began opening larger format superstores. Best Buy is currently the
largest consumer electronics retailer in the United States with approximately one-third of total electronics,
appliance, and computer store sales according to the Census Bureau.
In August 2012, founder Richard Schulze, who is the company's largest shareholder with a 20.0 percent stake,
offered to buy the electronics retailer for as much as $8.8 billion but failed to line up financing to take the company
private.
In April 2013, Best Buy announced it was selling its European business after just five years. Best Buy sold its 50
percent stake to joint venture partner Carphone Warehouse for about $775.0 million in cash and shares. The joint
venture operates 2,400 stores across eight European countries and trades under the Carphone Warehouse and
Phone House brands.
Best Buy is currently rated investment grade by Moody’s and below investment grade by Fitch and Standard &
Poor’s:
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Rating
Baa2
BB
BB
Last Rating Action
Jul-14
Apr-15
Aug-13
Outlook
Stable
Stable
Stable
43
On November 2, 2011, Best Buy’s board approved a change in their fiscal year-end from the Saturday nearest
the end of February to the Saturday nearest the end of January, effective beginning with their fiscal year 2013. As
a result of this change, fiscal year 2013 transition period was 11 months and ended on February 2, 2013.
Best Buy’s total revenue was $40.34 billion in fiscal 2014, a 4.9 percent decrease from the previous year. The
company’s net income, however, increased 131.8 percent from $532.00 million to $1.23 billion in 2014. A
summary of the company’s annual financial performance is provided in the table below:
BEST BUY FINANCIAL OVERVIEW
FY2014
$40,339
-4.9%
$1,233
125,000
Revenues (in millions)
Change in Revenues
Number of Employees
FY 2013
$42,410
-5.9%
$532
140,000
FY 2012
$45,085
-11.1%
-$441
165,000
Source: Hoovers
T O Y S “R” U S
TENANT PROFILE
Toys "R" Us is among the world’s largest retailers of toys, baby products and children's apparel. The company
operates 1,577 stores around the world under the Toys “R” Us, and Babies "R" Us banners, including over 870
stores in the United States. Founder Charles Lazarus created the category-killer store model when he opened the
first company store in 1948. Toys "R" Us was acquired by affiliates of KKR, Bain Capital, and Vornado Realty
Trust for $6.6 billion in July 2005.
In February 2009, the company acquired eToys.com for $2.15 million from its parent company which had entered
bankruptcy proceedings in December 2008. The transaction also included BabyUniverse.com and
ePregnancy.com and is expected to add approximately $100.0 million in annual sales. In May 2009, the company
announced it had acquired longtime rival FAO Schwarz for an undisclosed sum. Following the acquisition Toys
“R” Us will continue to operate the two FAO Schwarz stores in New York City and the Forum Shops in Las Vegas,
as well as FAO Schwarz catalog and e-commerce operations. In fact, Toys “R” Us’ e-commerce business recently
ranked as the 29th largest in Internet Retailer’s The Top 500 Guide.
The company filed an IPO in 2010 but wild swings of the stock market and fears of a new recession prompted the
company to pull the offer in March of 2013 after putting it off for a couple years. More fundamentally, the toy
seller's sales growth has stalled, which hasn't helped its IPO prospects.
Toys “R” Us is rated non-investment grade by Moody’s, Fitch, and Standard & Poor’s.
CREDIT RATINGS
Agency
Moody's
Last Rating
Change
Outlook
Negative
B3
Apr-14
Fitch
CCC
Jun-14
-
S&P
B-
Dec-13
Stable
44
Toys “R” Us reported net sales of $12.5 billion in fiscal 2013, a 7.4 percent decrease year-over-year. Additionally,
the company’s net income for the year dropped significantly by $1,039.0 million, compared to a positive return of
$38.0 million in fiscal 2012. Much of this is due to diminishing comparable store sales in the United States, which
fell by 5.0 percent.
On the other hand, online sales during fiscal 2013, 2012 and 2011 for Toys “R” Us’ e-commerce business
generated net sales of approximately $1.2 billion, $1.1 billion and $1.0 million, respectively.
The following is a summary of Toys “R” Us’ annual financial performance:
TOYS "R" US FINANCIAL OVERVIEW
FY 2013
$12,543
FY 2012
$13,543
Change in Net Revenue
-7.4%
-2.6%
0.3%
2.2%
-1.1%
-$1,039.0
$38.0
$149.0
$168.0
$312.0
Domestic Comparable Store Sales
-5.0%
-3.5%
-1.7%
1.7%
-3.0%
1,363
Net Revenue (in millions)
FY 2011
$13,909
FY 2010
$13,864
FY 2009
$13,568
1,577
1,540
1,502
1,392
Domestic Store Count
873
875
876
868
849
International Store Count
704
665
626
524
514
Net Stores Opened
37
38
110
29
13
67,000
68,000
70,000
71,000
68,000
In fiscal 2013, Toys “R” Us operated 1,577 stores, a net increase from fiscal 2012 of 37 stores. Overall, Toys “R”
Us opened 79 new stores, closed 39 stores, relocated two stores and converted one during the year. The
company has not announced store development plans for fiscal 2014 and is focusing on its online offerings.
According to a recent release from Toys “R” Us, the company continues to see sales and operational benefits
from the integration of their juvenile and toy offerings under one roof. The side-by-side format features a Babies
“R” Us and Toys “R” Us together. As of February 2014, Toys “R” Us has converted existing stores into 283 sideby-side store formats. In addition, the company has opened 117 SBS stores (58 of which were relocations of
existing stores).
T H E TJX C O M P A N I E S , I N C . T EN A N T P R O F I L E
TJX is a leading off-price retailer of apparel and home fashions. The company operates 2,587 stores in the United
States and 808 stores in Canada and Europe. As of fiscal 2015, TJX operated 1,119 T.J. Maxx stores, 975
Marshall’s stores, 487 HomeGoods stores and six Sierra Trading Posts locations in the United States.
TJX traces its roots to the Zayre upscale discount chain incorporated in the 1950s. Zayre launched the T.J. Maxx
chain in 1977. By the second half of the 1980s, T.J. Maxx’s sales accounted for more than half of Zayre’s
revenue. To keep its specialty stores unhindered by its flagging Zayre stores, it established The TJX Companies
as a separate entity in 1987. Based in Framingham, Massachusetts, TJX is a public company listed on the New
York Stock Exchange.
TJX is rated above investment grade by Moody’s and Standard & Poor’s:
45
CREDIT RATINGS
A3
A+
Agency
Moody's
Fitch
S&P
Last Rating
Change Date
Sep-14
Dec-13
Outlook
Positive
Stable
A N N U AL F I L I N G
TJX’s net sales in fiscal 2015 grew by 6.0 percent, to $29.1 billion. Same store sales increased 2.0 percent in
fiscal 2015 over increases of 3.0 and 7.0 percent over the preceding two years. The fiscal 2015 increase was
driven by an increase in customer traffic and growth in TJX’s customer base. As well, the company’s net income
for the year increased to over $2.2 billion.
A profile of TJX's annual financial performance is shown below:
TJX COMPANIES, INC. FINANCIAL OVERVIEW
Net Sales Growth
Average Store Size
Sales Per Square Foot*
FY 2015
$29,078.0
6.0%
$2,215.0
2.0%
76.5
2,300
$380
3,395
198,000
FY 2014
$27,423.0
6.0%
$2,137.0
3.0%
73.2
23,000
$375
3,219
191,000
FY 2013
$25,878.0
11.6%
$1,907.0
7.0%
70.0
22,900
$369
3,050
179,000
FY 2012
$23,191.5
5.7%
$1,496.1
4.0%
67.2
23,100
$345
2,905
168,000
FY 2011
$21,942.2
8.2%
$1,343.1
4.0%
66.0
23,100
$331
2,859
166,000
*C&W Estimate
TJX opened 176 stores in fiscal 2015 net of closings. The company expects a net gain of approximately 181
stores in fiscal 2015. TJX estimates that store growth potential could surpass 5,400 locations, including totals of
over 3,000 T.J. Maxx and Marshall’s locations.
BED, BATH & BEYOND INC.
TENANT PROFILE
Bed, Bath & Beyond is the nation's #1 superstore domestics retailer with 1,496 stores throughout the US, Puerto
Rico, and Canada. The stores' floor-to-ceiling shelves stock better-quality goods in two main categories:
domestics and home furnishings. Bed, Bath & Beyond also operates three smaller specialty chains: Christmas
Tree Shops; buybuy BABY stores; and Harmon discount health and beauty shops. In 2012, the company bought
Cost Plus for $495.0 million, which operates under the World Market, Cost Plus World Market, and Cost Plus
Imports banners.
Beyond the US, the domestic retailer is growing in Canada and Mexico. Bed, Bath & Beyond opened its first
international store in Richmond Hill, Ontario, in 2007 and now has more than 25 stores in several Canadian
provinces. It also has a joint venture with Mexican retailer Home & More. Bed Bath & Beyond anticipates the joint
venture will be a springboard for future growth in Mexico.
Bed, Bath, & Beyond is rated investment grade by Standard & Poor’s.
46
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Issuer Rating
BBB+
Last Rating
Date
Jun-11
Outlook
Stable
Bed, Bath & Beyond’s net sales in fiscal 2013 grew by 5.4 percent to $11.5 billion. In 2013, the company’s net
income totaled $1,022.3 million. Comparable stores sales in fiscal 2013 increased by 2.4 percent, lifting the
company’s average sales per store to $10.6 million.
The following is a profile of Bed, Bath, & Beyond’s historical financial performance:
BED, BATH, & BEYOND INC. FINANCIAL OVERVIEW
Change in Net Sales
Comparable Store Net Sales (000's)
Average Store Size
FY 2013
$11,504.0
5.4%
$1,022.3
2.4%
42.6
$10,661
31,000
1,496
58,000
FY 2012
$10,914.6
14.9%
$1,037.8
2.7%
42.0
$9,820
31,000
1,471
57,000
FY 2011
$9,499.9
8.5%
$989.5
5.9%
36.1
$9,157
31,000
1,173
48,000
FY 2010
$8,758.5
11.9%
$791.3
7.8%
35.1
$8,339
31,000
1,139
45,000
FY 2009
$7,828.8
8.6%
$600.0
4.4%
33.7
$7,409
31,000
1,100
41,000
In the 22-year period from the beginning of fiscal 1992 to the end of fiscal 2013, the chain has grown from 34
stores to 1,496 stores plus its various websites, other interactive platforms and distribution facilities. The
company’s 1,496 stores operate in all 50 states, the District of Columbia, Puerto Rico and Canada, including:
1,014 Bed, Bath & Beyond stores operating in all 50 states, the District of Columbia, Puerto Rico and Canada;
265 Cost Plus World Market stores operating in 31 states and the District of Columbia; 90 Baby stores operating
in 31 states; 77 CTS stores operating in 21 states; and 50 Harmon stores operating in five states. Total store
square footage grew from approximately 0.9 million square feet at the beginning of fiscal 1992 to approximately
42.6 million square feet at the end of fiscal 2013. During fiscal 2013, the Bed, Bath & Beyond opened a total of 33
new stores, including 13 Bed, Bath & Beyond stores throughout the United States and Canada and five Cost Plus
World Market stores, eight Baby stores, four CTS stores and three Harmon stores throughout the United States.
TARGET CORPORATION TENANT PROFILE
Target Corporation is the second largest discount retailer in the United States, and the fifth largest domestic
retailer overall. The company operates 1,917 stores selling a wide variety of consumables, commodities,
electronics, sporting goods, toys, apparel & accessories, home furnishings, and other general merchandise. The
company’s total retail floor area would cover over eight square miles.
Target traces its history to Hudson’s department store, which first opened in 1881. The company introduced
merchandise return privileges and price marking instead of bargaining. By 1977 the Target discount chain was
the company’s top-earning subsidiary. More recently, Target has positioned itself as a cheap, yet chic, retailer.
47
The marketing campaign has helped drive impressive revenue growth over the last several years but made the
company more exposed to a decline in discretionary spending.
Target is rated investment grade by Moody’s, Fitch, and Standard & Poor’s.
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Issuer/LongTerm Rating
A2
AA
Last Rating Date
May-14
Sep-14
Mar-14
Outlook
Stable
Stable
Stable
Q U AR T E R L Y F I L I N G D AT A
According to Target’s third quarter filings, sales were $17,732 million for the three months ended November 1,
2014, an increase of $474.0 million or 2.7 percent from the same period in the prior year. Additionally, third
quarter U.S. Segment comparable sales grew 1.2 percent. Comparable sales reflect third quarter digital sales
growth of more than 30.0 percent. Net income for the third quarter of 2014 rose 3.2 percent to $352.0 million as
compared to $341.0 million recorded in the third quarter of 2013.
Considerations are as follows:
QUARTERLY REVENUE (IN MILLIONS)
Segment
Total Revenue
Net Income
3Q 2014
$17,732
$352
3Q 2013
$17,258
$341
Change
2.7%
3.2%
Target's retail sales declined 1.0 percent in fiscal 2013 to $72.6 billion, compared with $73.3 billion the prior year.
Target's fourth quarter US same-store sales (down 2.5 percent) swung from positive to negative following the
announcement on December 19, 2013 of a massive data breach. For the year, Target's same-store sales fell 0.4
percent in fiscal 2013, compared with increases of 2.7 percent and 3.0 percent in fiscal 2012 and 2011,
respectively. The sale of the company's US consumer credit card operation also had a negative impact on
revenue in fiscal 2013.
Target rang up $1.3 billion in sales in Canada in fiscal 2013, its first year in the market. The company opened 124
stores during the year, with approximately 55 percent of the stores opened during the first half of the year, 20
percent during the third quarter, and the remaining 25 percent opening during the fourth quarter.
A profile of Target Corp’s sales and income performance is shown below:
48
TARGET CORP. ANNUAL FINANCIAL PERFORMANCE
Revenue Growth
Comparable Store Sales Growth
Estimated Revenue per Square Foot
Average Store Size
FY 2013
$72,596
-1.0%
$1,971
-0.4%
254.2
$286
132,625
1,917
366,000
FY 2012
$73,301
4.9%
$2,999
2.7%
237.8
$308
133,746
1,778
361,000
FY 2011
$69,865
3.7%
$2,929
3.0%
235.7
$296
133,704
1,763
365,000
FY 2010
$67,390
3.1%
$2,920
2.1%
233.6
$288
133,496
1,750
355,000
FY 2009
$65,357
0.6%
$2,488
-2.5%
231.9
$282
133,299
1,740
351,000
During fiscal 2013, Target opened 15 new stores net of closings in the US. Additionally, the company opened 124
stores totaling 14.2 million square feet in Canada, marking the biggest single-year store opening cycle in the
company's history and first year of international retail operations.
THE HOME DEPOT, INC. TENANT PROFILE
The Home Depot, Inc. (“Home Depot”) is the world's largest home improvement retailer, and the second largest
retailer in the United States. The company operates 2,263 stores, including 1,976 stores in the U.S., 180 stores in
Canada, and 106 stores in Mexico. Home Depot targets both do-it-yourself and professional customers with a
wide variety of home improvement products. Major product lines include lumber, floor and wall coverings,
plumbing, gardening supplies, tools, paint, and appliances. Home Depot is listed on the New York Stock
Exchange under the “HD” ticker.
In August, 2007, the company closed on the sale of its HD Supply business to a trio of private equity firms for
$8.3 billion. Home Depot will retain a 12.5 percent equity stake in the new company and guarantee up to $1.0
billion in secured loans. In 2009, the company closed its EXPO Design Center, THD Design Center, Yardbirds,
and HD Bath businesses. The liquidation of these segments resulted in 41 store closings in fiscal 2009.
As Home Depot works to boost sales in the U.S., it's also aiming to leverage itself in international markets. About
12.0 percent of the retailer's stores are located in Canada and Mexico. The company operates 180 locations in
Canada. It shut its last store in China in 2012. Home Depot had hoped to capitalize on China's rapid
development, but instead is struggling there. The chain is faring better in Mexico, where it is the country's #1 do-ityourself operator.
The Home Depot, Inc. is rated above investment grade by Moody’s, Fitch, and Standard & Poor’s.
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Issuer/ Long-Term
Rating
Latest Rating Date
A2
Nov-13
AApr-14
AOct-13
Outlook
Stable
Stable
Stable
49
Net Sales for fiscal 2013 increased 5.4 percent to $78.8 billion from $74.8 billion for fiscal 2012. The increase in
net sales for fiscal 2013 reflects the impact of positive comparable store sales for fiscal 2013, partially offset by
$1.2 billion of net sales attributable to the additional week in fiscal 2012. Total comparable store sales increased
6.8 percent for fiscal 2013 compared to an increase of 4.6 percent for fiscal 2012. Comparable store sales for
Home Depot’s U.S. stores increased 7.5 percent in fiscal 2013.
The following is a summary of Home Depot’s annual financial performance:
THE HOME DEPOT, INC. FINANCIAL OVERVIEW
Net Sales Growth
Comparable Store Sales Change
Revenue per Square Foot
Average Store Size
FY 2013
$78,812
5.4%
$5,385
6.8%
235.0
$334
104,000
2,263
365,000
FY 2012
$74,754
6.2%
$4,535
4.6%
234.5
$319
104,000
2,256
340,000
FY 2011
$70,395
3.5%
$3,883
3.4%
235.9
$299
105,000
2,252
331,000
FY 2010
$67,997
2.8%
$3,338
2.9%
235.5
$289
105,000
2,248
321,000
FY 2009
$66,176
-7.2%
$2,661
-6.6%
235.2
$279
105,000
2,244
317,000
During fiscal 2013, Home Depot opened two new stores in the U.S. and closed one store. The company also
opened six new stores in Mexico. These actions brought the total store count at the end of fiscal 2013 to 2,263.
TRADE AREA ANALYSIS
We have considered several factors in defining boundaries for the subject's trade area. First, the property's
location with respect to transportation provides the basis for regional access to the area. Second, competition and
geographic boundaries help to define the potential size of the trade area as a measure of distance from the
property. Third, the merchandising mix and anchor alignment provides the basic draw of customers that are likely
to patronize the property.
Gateway Center at Bronx Terminal market benefits from good regional and local accessibility. Major roadways
such as, the Major Deegan Expressway and the Harlem River Drive, are in close proximity to the subject and
provide access to the regional highway network. The subject property is anchored by national retailers which
provides the necessary drawing power for the property. We anticipate the combination of subject’s anchor tenants
(Target, Home Depot, and BJ’s Wholesale Club) to be very successful at this location given the size and
configuration of the development and the lack of direct competition and favorable access features.
As discussed, the location and accessibility of competing centers has direct bearing on the formation and makeup of the subject's potential trade area as well. The subject competes most directly with the larger retail centers
within the region, although it’s merchandising mix allows it to draw from a more expanded trade area that
overlaps with some of the surrounding centers. The subject will compete to some degree with other freestanding
stores and power/ community centers in the region. Secondary competition is seen in other area community
centers that are anchored by competing anchor tenants, namely off-price or discount.
We analyzed the subject's trade area based on the following:
50

Highway accessibility, public transportation, including area traffic patterns, geographical constraints, and
nodes of residential development;

The position and nature of the area's retail structure, including the location of destination retail centers
which compete with the subject and the strength and composition of the retail infill; and

The size, tenancy, and merchandising composition of the subject property's tenants.
Given all of the above, we believe the subject property’s primary trade area would likely span an area
encompassing about three miles around the center. The subject's secondary trade area might span up to five
miles from the site given its regional accessibility and location of competitive properties.
Using these observations, we have analyzed a primary demographic profile for the subject based on a radius of
approximately three miles from the property. To add perspective to this analysis, we have segregated our survey
into one mile, three miles, and five miles concentric circles with a comparison to Bronx County, New York City,
and United States. This data is presented on the following page.
51
DEMOGRAPHIC SUMMARY
1.0-mile
3.0-mile
5.0-mile
Bronx
New York
New York
Radius
Radius
Radius
County
City
State
200,140
214,704
218,904
1,200,699
1,270,969
1,293,210
2,491,885
2,618,391
2,657,097
1,329,288
1,425,490
1,452,691
7,995,717
8,447,426
8,581,074
281,422,839
318,283,904
331,097,940
0.50%
0.39%
0.41%
0.35%
0.35%
0.29%
0.50%
0.38%
0.39%
0.31%
0.88%
0.79%
75,312
82,670
84,779
429,567
469,532
481,208
989,777
1,050,756
1,071,198
462,297
502,866
515,441
3,017,153
3,241,645
3,313,873
105,480,206
120,696,822
126,162,821
0.67%
0.51%
0.64%
0.49%
0.43%
0.39%
0.60%
0.50%
0.51%
0.44%
0.97%
0.89%
POPULATION STATISTICS
2000
2014
2019
Compound Annual Change
2000
2014
2014
2019
HOUSEHOLD STATISTICS
2000
2014
2019
2000
2014
2014
2019
AVERAGE HOUSEHOLD INCOME
2000
2014
2019
2000
2014
2014
2019
$30,927
$44,439
$51,035
$40,713
$56,216
$64,530
$64,910
$83,332
$94,287
$38,920
$47,259
$51,697
$58,507
$80,263
$89,613
$56,669
$75,020
$86,231
2.62%
2.81%
2.33%
2.80%
1.80%
2.50%
1.40%
1.81%
2.28%
2.23%
2.02%
2.82%
9.44%
90.56%
11.93%
88.07%
20.70%
79.30%
18.52%
81.48%
29.91%
70.09%
64.19%
35.81%
OCCUPANCY
Owner Occupied
Renter Occupied
SOURCE: Claritas, Inc.
POPULATION
Having established the subject’s trade area, our analysis focuses on the trade area's population. Claritas, Inc
provides historical, current and forecasted population estimates for the total trade area. Patterns of development
density and migration are reflected in the current levels of population estimates.
Between 2000 and 2014, Claritas, Inc., reports that the population within the primary trade area (3.0 mile radius)
increased at a compound annual rate of 0.41 percent. This trend is expected to continue into the near future albeit
at a slightly slower pace. Expanding to the total trade area (5.0 mile radius), population is expected to increase
0.35 percent per annum over the next five years.
The following page contains a graphic representation of the current population distribution within the subject’s
region.
52
The graphic on the second following page illustrates the projected population growth in the trade area over the
next five years (2014 - 2019). The trade area is clearly characterized by various levels of growth.
Overall, the existing population and density for the primary trade area of approximately 1,270,000 residents is a
good potential market for retailers.
CURR ENT POPULA TION MA P
Population
Population
Population
Population
- 1: 59,635 - 112,940
- 2: 39,398 - 59,634
- 3: 23,464 - 39,397
- 4: 0 - 23,463
53
PO PULA T ION GROWTH MA P
Population
Population
Population
Population
Growth - 1: 60,008 - 116,961
Growth - 2: 39,318 - 60,007
Growth - 3: 24,115 - 39,317
Growth - 4: 0 - 24,114
HOUSEHOLDS
A household consists of a person or group of people occupying a single housing unit, and is not necessarily a
family unit. When an individual purchases goods and services, these purchases are a reflection of the entire
household’s needs and decisions, making the household a critical unit to be considered when reviewing market
data and forming conclusions about the trade area as it impacts the retail center.
Figures provided by Claritas, Inc indicate that the number of households is increasing at a faster rate than the
growth of the population. Several changes in the way households are being formed have caused this
acceleration, specifically:

The population is living longer on average. This results in an increase of single- and two-person
households;

Higher divorce rates have resulted in an increase in single-person households; and

Many individuals have postponed marriage, also resulting in more single-person households.
54
According to Claritas, Inc,, the Primary Trade Area grew at a compound annual rate of 0.64 percent between
2000 and 2014. Consistent with national trends, the trade area is experiencing household changes at a rate that
varies from population changes. That pace is expected to continue through 2019, and is estimated at 0.49
percent.
Correspondingly, a greater number of smaller households with fewer children generally indicate more disposable
income. In 2000, there were 2.71 persons per household in the Primary Trade Area and by 2014, this number is
estimated to have decreased to 2.62 persons. Through 2019, the average number of persons per household is
forecasted to decline to 2.60 persons.
Overall, the existing households for the primary trade area of approximately 470,000 units provide a significantly
large market from which to draw customers. Additionally, there are 12,000 new households expected in the next
five years
TRADE AREA INCOME
Income levels either on a per capita, per family or household basis, indicate the economic level of the residents of
the trade area and form an important component of this total analysis. Average household income, when
combined with the number of households, is a major determinant of an area's retail sales potential.
Trade area income figures for the subject support the profile of a broad middle-income market. According to
Claritas, Inc average household income in the primary trade area in 2014 was approximately $56,216, 118.95
percent of the Bronx average ($47,259) and 70.04 percent of the New York City average ($80,263).
Further analysis shows a relatively broad-based distribution of income, although skewed toward the middle
income brackets, similar to the distribution within the larger CBSA. This information is summarized as follows:
DISTRIBUTION OF HOUSEHOLD INCOME
Category
$150,000 or more
$125,000 to $149,999
$100,000 to $124,999
$75,000 to $99,999
$50,000 to $74,999
$35,000 to $49,999
$25,000 to $34,999
$15,000 to $24,999
Under $15,000
1.0-mile
3.0-mile
5.0-mile
Bronx
New York
New York
Radius
Radius
Radius
County
City
State
3.46%
1.67%
2.85%
5.97%
12.64%
13.39%
11.86%
15.62%
32.54%
6.43%
2.45%
4.36%
6.91%
12.14%
12.10%
11.08%
14.66%
29.87%
12.68%
3.75%
6.21%
8.86%
13.78%
11.69%
9.63%
11.84%
21.55%
3.27%
2.36%
4.44%
7.93%
14.38%
14.28%
11.67%
14.60%
27.06%
11.26%
4.41%
7.45%
10.66%
15.99%
12.19%
9.47%
10.87%
17.69%
8.78%
4.54%
8.06%
12.21%
18.37%
13.78%
10.35%
10.96%
12.95%
Source: Claritas, Inc.
Below is a graphic presentation of the household income distribution throughout the trade area that clearly shows
the area surrounding the subject to be characterized by middle income households.
55
HOU S EHOLD INC OME MA P
Household Income - 1: $120,300 - 236,312
Household Income - 4: $0 - 58,186
RETAIL SALES
Perhaps an even more important measure of area income retail expenditures. Retail sales potential and growth
are also tracked by Claritas, Inc. At the time of the writing of this report, the total retail sale potential for the
primary trade area totaled $13.65 billion and $35.63 billion for the secondary trade area. By comparison, Bronx
County, New York City and the United States had potential retail sales of $16.79 billion, $116.11 billion and $5.09
trillion, respectively. Please see the exhibit below for the detailed retail potential and sales for each segment.
Retail Trade Potential
1.0 mile
Total Retail Demand
3.0 miles
5.0 miles
Bronx County
56
New York City or CEntire US
$2,183,819,686
$13,646,508,151
$35,628,250,389
$16,787,058,039
$116,108,462,519
$5,093,204,999,974
$223,691,044
$1,655,517,736
$5,151,436,963
$2,389,232,302
$17,512,033,059
$962,354,000,000
Furniture & Home Furnishings Stores
$47,879,579
$296,404,744
$798,608,599
$389,493,576
$2,621,082,879
$101,196,000,000
Electronics & Appliances Stores
$45,568,818
$282,451,838
$741,521,480
$355,484,124
$2,446,618,547
$101,042,000,000
Building Material, Garden Equipment Stores
$116,450,876
$769,681,138
$2,167,892,155
$1,034,876,724
$7,029,945,097
$312,404,999,969
Food & Beverage Stores
$357,320,594
$2,098,611,841
$4,984,123,839
$2,377,233,044
$16,015,923,489
$652,638,000,000
Motor Vehicle & Parts Dealers
Health & Personal Care Stores
$114,867,004
$706,794,209
$1,742,354,024
$813,660,096
$5,611,728,451
$285,860,000,000
Gasoline Stations
$235,272,298
$1,439,497,639
$3,550,485,036
$1,669,114,729
$11,531,809,887
$546,185,000,000
Clothing & Clothing Accessories Stores
$138,845,574
$808,304,196
$1,989,440,868
$950,574,761
$6,405,024,659
$250,625,000,002
$43,422,595
$259,030,511
$647,524,696
$305,506,220
$2,108,612,753
$90,225,000,000
$304,279,660
$1,807,033,236
$4,435,629,795
$2,057,936,589
$13,977,225,700
$659,070,000,000
Sporting Goods, Hobby, Book, Music Stores
General Merchandise Stores
Miscellaneous Store Retailers
$55,019,864
$343,689,312
$865,966,513
$408,450,912
$2,787,051,538
$126,599,000,003
Foodservice & Drinking Places
$251,944,649
$1,626,058,481
$4,552,114,184
$2,141,864,716
$14,820,297,782
$553,008,000,000
Retail Sales
1.0 mile
3.0 miles
5.0 miles
Bronx County
New York City or CEntire US
Total Consumer Expenditures - Including Food 2014
3,197,312,144
19,901,208,027
51,759,977,317
24,335,735,365
167,943,276,759
Total Consumer Expenditures - Not Including Food 2014
2,775,570,447
17,382,156,987
45,495,552,603
21,370,372,346
147,657,308,158
6,292,556,700,084
5,484,738,360,802
3,768,210,797
23,433,408,167
60,349,693,562
28,489,910,177
196,037,715,198
7,691,615,556,105
3,267,911,036
20,450,922,577
52,995,149,878
24,993,184,108
172,190,484,042
6,733,800,507,161
SUBJECT HISTORICAL SALES
The ownership has provided the historical sales figures from the limited tenants that are required to report annual
sales figures. The chart below exhibits the reported sales regarding fiscal years 2010 through 2013. These are
the most recent reported sales figures from the reporting tenants within the subject.
TOTAL PROPERTY TENANT SALES
Category
Anchor
BJ's Wholesale
Junior Anchor
Toy R Us
Marshalls
Subtotal
Actual
Actual
Actual
Actual
FY 2010
FY 2011
FY 2012
FY 2013
Total Sq/Ft Total Sales
Sales/SF
Sales/SF
Sales/SF
Total Sq/Ft
Total Sales
Sales/SF
130,099 SF
$128,767
$990
130,099 SF
$134,972
$1,037
130,099 SF
$139,021
$1,069
130,099 SF
$134,972
$1,037
77,638 SF
N/A
38,211 SF
115,849 SF
$17,269
N/A
$8,553
$25,822
$222
N/A
$224
$223
77,638 SF
N/A
38,211 SF
115,849 SF
$16,475
N/A
$8,709
$25,184
$212
N/A
$228
$217
77,638 SF
74,329 SF
38,211 SF
190,178 SF
$15,170
$15,531
$9,974
$40,675
$195
$209
$261
$214
77,638 SF
74,329 SF
38,211 SF
190,178 SF
$13,555
$17,815
$10,230
$41,600
$175
$240
$268
$219
In-Line
Skechers
Applebee's
Payless Shoes
GNC
Subtotal
8,741 SF
6,661 SF
3,053 SF
1,980 SF
20,435 SF
N/A
$3,998
$445
$349
$4,792
N/A
$600
$146
$176
$410
8,741 SF
6,661 SF
3,053 SF
1,980 SF
20,435 SF
$1,480
$4,340
$437
$470
$6,727
$169
$652
$143
$237
$329
8,741 SF
6,661 SF
3,053 SF
1,980 SF
20,435 SF
$1,553
$4,774
$408
$543
$7,278
$178
$717
$134
$274
$356
8,741 SF
6,661 SF
3,053 SF
1,980 SF
20,435 SF
$1,898
$4,987
$407
$569
$7,861
$217
$749
$133
$287
$385
Total
266,383 SF
$159,381
$598
266,383 SF
$166,883
$626
340,712 SF
$186,974
$549
340,712 SF
$184,433
$541
We have been supplied with the sales figures from several of the tenants within the subject property who have
reported sales over the last four years. The anchor, BJ’s Wholesale Club, reported sales figures ranging from
$128.76 million ($990/SF) in FY 2011 to $139.02 in FY 2012. The most recent sales were $134.97 million as of
FY 2013, which represents a 2.99 percent decrease year-over-year. However, the anchors sales have generally
improved over the analysis period and is one of BJ’s highest performing stores within the chain.
57
The subject contains four junior anchor tenants who reported sales including: Toys R Us, Burlington Coat Factory,
Marshall’s, and Michael’s. Michael’s is currently dark based on exercising a cotenancy agreement. However,
ownership indicated they will be operational again within the 3rd quarter 2015. As such, we have removed their
sales figures from our analysis. Toys R Us exhibited sales ranging from $13.55 million ($175/SF) in FY 2014 to
$17.27 million ($222/SF) in FY 2010. The most recent sales were $13.55 million as of FY 2013, which exhibited a
10 percent decrease year-over-year. The Toys R Us decline in sales is consistent with the overall chain that has
struggled over the last several years. Burlington Coat Factory exhibited sales ranging from $15.53 million
($209/SF) in FY 2014 to $17.82 million ($240/SF) in FY 2013. The most recent sales were $17.82 million as of FY
2013, which represents a 14.8 percent increase year-over-year. Marshall’s exhibited sales ranging from $8.55
million ($224/SF) in FY 2010 to $10.23 million ($268/SF) in FY 2013. The most recent sales were $10.23 million
as of FY 2013, which represents a 2.7 percent increase year-over-year. Overall, the Junior anchor tenants
exhibited an average of $219 per square foot, which was a 2.27 percent increase year-over-year.
The subject contains four inline tenants who reported figures sales including: Skechers, AppleBee’s, Payless
Shoes and GNC. Skecher’s exhibited sales ranging from $1.48 million ($169/SF) in FY 2011 to $1.89 million
($217/SF) in FY 2013. The most recent sales were $1.89 million as of FY 2013, Which represents 21.9 percent
increase year-over-year. AppleBee’s exhibited sales ranging from $3.98 million ($600/SF) in FY 2010 to $4.98
million ($749/SF) in FY 2013. The most recent sales were $4.98 million as of fiscal year 2013, which represents a
4.5 percent increase year-over-year. Payless Shoes exhibited sales ranging from $4.07 ($133/SF) in FY 2013 to
$4.45 million ($146/SF) in FY 2010. The most recent sales were $4.07 million as of fiscal year 2013, which
represents a 2.5 percent increase year-over-year. GNC exhibited sales ranging from $3.49 ($176/SF) in FY 2010
to $5.69 million ($287/SF) in FY 2013. The most recent sales were $5.69 million as of FY 2013, which represents
a 4.7 percent increase year-over-year. Overall, the reporting inline tenants exhibited average sales of $385 per
square foot, which was a 8.01 percent increase year over year. Overall, the subject property exhibited average
sales of $541 per square foot as of FY 2013, which was a slight (1.36 percent) decrease year over year. The
slight decrease was attributed mainly to the poor performance of Toys R Us. Overall, the ownership expects sales
to continue to improve as the overall economy and retail market continues to improve.
SUBJECT SALES PROJECTION
We have considered that competitive centers in the primary trade area are generally achieving sales levels
between $550 and $650 per square foot. These sales levels are critical in analyzing the achievable rents at the
subject through an occupancy cost analysis. Moreover, the limited in-line tenants who have reported average
sales in excess of $600 per square foot. While a more detailed analysis will be shown in the Income Capitalization
section in the report, we have concluded that the subject’s in-line tenants will only need to achieve sales levels of
approximately $475 to $500 per square foot to be an attractive center to national tenants.
Our forecasted sales figure of $550 per square foot for the subject property is within the range of the comparable
New York City retail properties as can been seen from the following chart.
COMPARABLE N EW YORK C ITY R ETA IL C ENTER S
( SALES PER SQUARE FOOT)
NAME / LOCATION
Gateway Center
SIZE (SF)
SALES/PSF
638,0000 SF
$700/SF
900,000 SF
$500/SF
1.0 million SF
$625/SF
396,000 SF
$570/SF
342,000 SF
$550/SF
615,000 SF
$500/SF
450,000 SF
$425/SF
922,000 SF
$990/SF
312,000 SF
$500/SF
450,000 SF
$550/SF
525,000 SF
$600/SF
Brooklyn, New York
Bronx, New York
Kings Plaza Mall
Brooklyn, NY
Atlantic Center
Brooklyn, New York
Rego Park Center
Queens, New York
Rego Park II
Queens New York
Queens Place
Queens, New York
Queens Center Mall
Queens, New York
Bay Terrace Shopping Center
Queens, New York
Bruckner Plaza
Bronx, New York
East River Plaza
Upper Manhattan, New York
58
59
We have considered that competitive centers in the primary trade area are generally achieving sales levels
between $500 and $600 per square foot for junior anchor and in-line leases. These sales levels are critical in
analyzing the achievable rents at the subject through an occupancy cost analysis.
CONCLUSION
We have analyzed the retail trade history, profile of the subject's region and primary trade area as well as, the
subject’s tenant profiles in order to make reasonable assumptions regarding the continued performance of the
property.
A metropolitan and locational overview was presented which highlighted important points about the trade area.
Demographic and economic data specific to the trade area were also presented. Marketing information relating to
these sectors was presented and analyzed in order to determine patterns of change and growth as it impacts
Gateway Center at Bronx Terminal Market. The data quantifies the dimensions of the total trade area, while our
comments provide qualitative insight into this market. A compilation of this data forms the basis for our projections
and forecasts for the subject property. The following are our key conclusions.

The subject is situated on 16.80 acres located along River Avenue and the Major Deegan
Expressway with excellent frontage, visibility and access. The subject has good accessibility via the
network of major and local arterials that provide linkages throughout this area of the Bronx. There is
bus and subway service available within close proximity to the site. The subject has good
accessibility via the network of major and local arterials that provide linkages throughout this area of
the Bronx. The subject benefits from subway transportation located less than 3 blocks from the site
by way of local service on the 2, 4, 5, B and D lines, as well as the 153rd Street Metro-North Station.
There is also bus service available to the site, via lines BXM1, BXM2, BXM3, BXM18, BX 11 and BX
13 located at along River Avenue and the Major Deegan Expressway. Lastly, the subject provides
good accessibility by car and excellent visibility from the Major Deegan Expressway. The property is
accessed by either River Avenue or Queens Major Deegan Expressway, which is the major
commercial thoroughfare of the Bronx.

The existing trade area structure is characterized by a mix of large and medium sized urban centers,
and secondary retail properties that are located along the major commercial arterials. The subject is
clearly a unique retail center within the market area given its size, layout, anchor, major, and
specialty tenants.

The anchor tenants, BJ’s Wholesale Club, Target and Home Depot, are part of national/regional
store chains which offer wide cohesive merchandising mixes. The subject features Marshall’s, Best
Buy, Toys ‘R Us/Babies ’R Us (The first of these combined stores in the nation), Bed Bath & Beyond,
Conway’s, Raymour and Flanagan and Applebee’s as junior anchor tenants. Shoppers have
become more cost conscience and will travel to seek out "big box" stores carrying discounted items.
Furthermore, there are only a limited number of smaller local and regional retailers that will directly
compete with the subject stores in the trade area. Larger regional/national chains have the benefit of
stronger advertising budgets and are more familiar to shoppers which generally results in higher
sales levels.

The addition of CUNY to the subject’s tenant roster bodes well for the retailers within the subject
property as there is a built-in pool of potential shoppers that are on-site for several hours per day.

As such we believe the property serves a market encompassing a radius of 3.0 miles to 5.0 miles.
Over the next five years, both the population and number of households in the subject’s trade area
are projected to remain fairly stable. Household income levels in the area are lower than the state or
CBSA both significantly above national levels.

The subject has good accessibility via the regional Interstate network and local arterials that provide
linkages throughout the New York CBSA.

The subject property possesses a 25-year tax abatement via the PILOT program. As the subject’s
leases are net leases the tenants directly benefit from the abatement which subsequently lowers the
occupancy costs of the tenants during the abatement period.

The combination of the demographic and competitive characteristics of the trade area creates an
environment where the subject property should flourish due to the subject’s trade area and tenant
mix. The subject is a unique urban shopping center within the market area given its size, quality,
tenant mix, location, and transportation access. The subject is 99.3 percent leased as of the date of
valuation. Clearly the forces of supply and demand that exist in the current market indicate that the
subject power center is a successful project that will maintain an occupancy level above 95 percent,
and achieve sales levels north of $550 per square foot.
60
SITE DESCRIPTION
SITE DESCRIPTION
Location:
658 River Avenue
The subject site is generally bounded by 149th Street to the south, the Metro-North
Rail Road tracks to the north, River Avenue to the west, and Exterior Street to the
east, across the Harlem River and adjacent to the Major Deegan Expressway (I-87).
Shape:
Irregular
Topography:
Slightly sloping
Land Area:
731,769 square feet; 16.80 acres
Frontage, Access
and Visibility:
The site has frontage on River Avenue and Exterior Street. Access and visibility of
the site is considered to be good. Furthermore, the subject has excellent visibility
from the Major Deegan Expressway.
Soil Conditions:
We were not given a soil report to review. However, we assume that the soil's loadbearing capacity is sufficient to support existing and/or proposed structure(s). We did
not observe any evidence to the contrary during our physical inspection of the
property. Drainage appears to be adequate.
Utilities:
Utility providers for the subject property are as follows:
Water & Sewer
Electricity & Gas
Telephone
City of New York
Consolidated Edison
Verizon Communications and others
Site Improvements: The site improvements include asphalt paved parking areas, curbing, signage,
landscaping, yard lighting and drainage.
Land Use
Restrictions:
We were not given a title report to review. We do not know of any easements,
encroachments, or restrictions that would adversely affect the site's use. However,
we recommend a title search to determine whether any adverse conditions exist.
Flood Zone
Description:
The subject property is located in flood zone X500 (Areas determined to be
inundated by the 500 year flood plain) as indicated by FEMA Map 360497 0091F,
dated September 5, 2007.
Wetlands:
We were not given a wetlands survey to review. If subsequent engineering data
reveal the presence of regulated wetlands, it could materially affect property value.
We recommend a wetlands survey by a professional engineer with expertise in this
field.
Hazardous
Substances:
We observed no evidence of toxic or hazardous substances during our inspection of
the site. However, we are not trained to perform technical environmental inspections
and recommend the hiring of a professional engineer with expertise in this field.
Overall Site Utility: The subject site is functional for its proposed use.
Location Rating:
Good
61
SITE DESCRIPTION
SUBJ ECT TA X MA P
62
IMPROVEMENTS DESCRIPTION
63
The following description of improvements is based on our physical inspection of the improvements and our
discussions with the subject property’s building manager.
GENERAL DESCRIPTION
Year Built:
2009
Number of Buildings:
4
Number of Stories:
4-story retail center, two 1-story retail buildings, and a 6-level parking structure.
Retail Building:
969,019 square feet
Parking Garage:
945,048 square feet
Total GBA:
Gross Leasable Area (GLA):
1,914,067 square feet (Per Tax Assessor)
RETAIL GLA SUMMARY
Component
Target
BJ's Wholesale Club
Home Depot
Total Anchor GLA
Junior Anchor
Retail B/D
Retail C
Retail E
Retail F
Prow Building
Total Non-Anchor GLA
Total Center GLA
Area
Total
188,446 SF 20.7%
130,099 SF 14.3%
124,955 SF 13.7%
443,500 SF 48.6%
379,956 SF 41.6%
10,634 SF
1.2%
21,817 SF
2.4%
10,131 SF
1.1%
25,944 SF
2.8%
20,351 SF
2.2%
468,833 SF 51.4%
912,333 SF 100.0%
CONSTRUCTION DETAIL
Basic Construction:
Reinforced concrete column pads and reinforced concrete spread footings on
engineered fill.
Foundation:
Reinforced concrete column pads and reinforced concrete spread footings.
Framing:
Structural steel and masonry.
Floors:
Reinforced concrete slab.
Exterior Walls:
Brick
Roof Type:
Flat with parapet walls.
Roof Cover:
The roof cover is a rubber membrane roof system.
Windows:
Storefront windows in aluminum frames.
Pedestrian Doors:
64
Glass in aluminum frames.
MECHANICAL DETAIL
Heat / Cooling:
Each tenant space is furnished with package HVAC units for its heating and
cooling.
Plumbing:
The plumbing system is assumed to be adequate for existing use and in
compliance with local law and building codes. The plumbing system is typical of
other retail properties in the area with a combination of PVC, steel, copper and
cast iron piping throughout the building. Adequate restrooms for men and women
are situated throughout the building.
Electrical Service:
The electrical service is assumed to be adequate for the existing use and in
compliance with local law and building codes.
Emergency Power
The subject contains 3 emergency generators.
Fire Protection:
100% sprinklered
Security:
The subject is under 24/7 security monitoring by security guards along with
exterior monitors situated along the building’s perimeter and the parking garage.
INTERIOR DETAIL
Layout:
The project consists of two 4-level retail buildings on the north and south end of
the site with a 6-level parking structure in between which services the retail
project. The buildings are wrapped by at grade retail space along River Avenue
and Exterior Street. These retail buildings function as one, and each level of the
garage corresponds to one level of retail.
Floor Covering:
Ceramic tile, carpet or resilient tile.
Walls:
Painted or wallpapered sheetrock.
Ceilings:
Open ceilings with slab to slab heights ranging between 18 and 20 feet
Lighting:
A mixture of fluorescent and incandescent light fixtures.
Restrooms:
The property features adequate restrooms for men and women.
SITE IMPROVEMENTS
Parking:
The subject possesses a 6-level parking structure with 2,575 parking spaces.
Other:
Other site improvements consist of concrete and asphalt paving, curbing, lighting,
and tenant signage.
PERSONAL PROPERTY
Personal property was excluded from our valuation.
SUMMARY
Condition:
Excellent
65
Quality:
Excellent
Property Rating:
After considering all of the physical characteristics of the subject, we have
concluded that this property has an overall rating that is excellent, when
measured against other properties in this marketplace.
Roof & Mechanical
Inspections:
We did not inspect the roof nor did we make a detailed inspection of the
mechanical systems. The appraisers are not qualified to render an opinion
regarding the adequacy or condition of these components. The client is urged to
retain an expert in this field if detailed information is needed.
Design and Functionality
Overall, the subject property is considered a well-designed destination retail power
center. The configuration of the center provides good customer flow and allows for
various points of ingress/egress. The layout and design of the center creates
covered parking for each retail level which is a strong attraction along with the
anchor and major tenants at the subject.
Actual Age:
6 Years
Effective Age:
5 Years
Expected Economic Life:
50 Years
Remaining Economic Life:
45 Years
CAPITAL EXPENDITURES
Known Costs:
We are not aware of any planned capital expenditures would have an impact on
the subject property.
FUNCTIONAL OBSOLESCENCE
Description:
There is no apparent functional obsolescence present at the subject property.
AMERICANS WITH DISABILITIES ACT
The Americans With Disabilities Act (ADA) became effective January 26, 1992. We have not made, nor are we
qualified to make a compliance survey of this property to determine whether or not it is in conformity with the
requirements of the ADA. It is possible that a compliance survey could reveal that the property is not in
compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the
value of the property. Since we have not been provided with the results of a survey, we did not analyze the results
of possible non-compliance.
HAZARDOUS SUBSTANCES
We are not aware of any potentially hazardous materials (such as formaldehyde foam insulation, asbestos
insulation, radon gas emitting materials, or other potentially hazardous materials) which may have been used in
the construction of the improvements. However, we are not qualified to detect such materials and urge the client
to employ an expert in the field to determine if such hazardous materials exist.
FLOOR PLANS
R IVER AVENU E GRAD E LEVEL 1 / GARAGE G2
66
FLOOR PLANS
EXTER IOR STR EET GRAD E LEVEL 1 / GARAGE G1
67
FLOOR PLANS
R IVER AVENU E GRAD E LEVEL 2 / GARAGE 3
68
FLOOR PLANS
1 S T LEVEL ABOVE GRAD E / GARAGE AG1
69
FLOOR PLANS
2 N D LEVEL ABOVE GRAD E / GARAGE AG2
70
FLOOR PLANS
3RD LEVEL AB OVE GRAD E / GARAGE AG3
71
REAL PROPERTY TAXES AND ASSESSMENTS
72
CURRENT PROPERTY TAXES
The subject property is located in the taxing jurisdiction of City of New York- Bronx County Tax Assessor’s Office.
The assessor’s parcel identification number is Block 2356; Lots 20 and 25 & Block 2357; Lots 35, 40, 42, and 45..
Assessments for the current and prior years are as follows:
NEW YORK CITY ASSESSMENT AND TAX ANALYSIS
Block 2356; Lot 20
ASSESSMENT INFORMATION
Actual
Assessed Value
Land:
Improvements:
Total:
$436,500
619,650
$1,056,150
2014/15
Transitional
$398,880
1,650,601
$2,049,481
Actual
$436,500
651,150
$1,087,650
2015/16
Transitional
$417,690
1,329,481
$1,747,171
Block 2356; Lot 25
Actual
Assessed Value
Land:
Improvements:
Total:
$315,000
35,100
$350,100
2014/15
Transitional
$417,337
112,182
$529,519
Actual
$315,000
226,350
$541,350
2015/16
Transitional
$400,580
272,740
$673,320
Block 2357; Lot 35
Actual
Assessed Value
Land:
Improvements:
Total:
$4,508,100
44,844,300
$49,352,400
2014/15
Transitional
$4,378,561
25,137,782
$29,516,343
Actual
$4,508,100
43,454,250
$47,962,350
2015/16
Transitional
$4,444,480
32,129,420
$36,573,900
Block 2357; Lot 40
Actual
Assessed Value
Land:
Improvements:
Total:
$4,500,000
12,641,400
$17,141,400
2014/15
Transitional
$3,802,626
16,286,756
$20,089,382
Actual
$4,500,000
13,867,200
$18,367,200
2015/16
Transitional
$4,151,888
14,791,601
$18,943,489
73
Block 2357; Lot 42
Actual
Assessed Value
Land:
Improvements:
Total:
$117,000
35,100
$152,100
2014/15
Transitional
$94,198
27,528
$121,726
Actual
$117,000
45,450
$162,450
2015/16
Transitional
$105,597
32,707
$138,304
Block 2357; Lot 45
Actual
Assessed Value
Land:
Improvements:
Total:
$5,328,000
36,912,500
$42,240,500
2014/15
Transitional
$3,815,000
24,981,387
$28,796,387
Actual
$5,328,000
37,912,500
$43,240,500
2015/16
Transitional
$4,571,500
30,713,618
$35,285,118
Total:
Actual
Assessed Value
Land:
Improvements:
Total:
$10,704,600
99,588,050
$110,292,650
Tax Rate
Calendar Year Taxes:
2014/15
Transitional
$9,103,976
71,998,862
$81,102,838
$76,982,106
10.684%
$8,224,768
Actual
$10,704,600
100,656,900
$111,361,500
2015/16
Transitional
$14,091,735
79,269,567
$93,361,302
$91,993,522
10.791%
$10,074,469
Real estate taxes in New York City are normally the product of the transitional assessed value times the tax rate,
for the fiscal year July 1 through June 30 (payable July 1 and January 1). The transitional assessed value is
based on a five-year phase-in of actual assessed value. If the actual assessed value is lower than the transitional
assessed value for that year, the actual assessed value is multiplied by the tax rate to determine the tax.
The 2014/15 Class 4 tax rate is 10.684 percent per $100 of assessed valuation. The 2014/15 Class 4 tax rate
reflects a 3.50 percent increase from the 2013/14 Class 4 tax rate of 10.323 percent per $100 of assessed
valuation. We have projected a 1.0 percent increase from the 2015/16 tax rate which reflects a tax rate of 10.791
per $100 of assessed valuation.
T AX C O M P AR I S O N S
Based on current tax assessments, it appears that the subject property is assessed below market levels and
comparable properties. Therefore, we researched comparable retail centers to estimate market level assessment
for the subject property. Listed below is a summary chart of the 2015/16 assessments for several properties
considered to have varying degrees of comparability to the subject property.
74
REAL ESTATE TAX COMPARABLES
No.
Property Name & Location
1 East River Plaza
2 Harlem USA
3 Triangle Junction
4 Gotham Plaza
5 Rego Park Center
Parcel No.
1715-22
Building
Area (SF)
1,124,327
Year
Built
2010
Assessment
$90,585,286
Assess/SF
$80.57
Total Taxes
$9,775,058
Taxes/SF
$8.69
1951-22
7576-1001
1774-30
2084-101
310,000
665,111
122,944
860,000
1998
2006
2001
2009
$31,871,427
$58,141,458
$9,593,550
$55,714,950
$102.81
$87.42
$78.03
$64.78
$3,439,246
$6,274,045
$1,035,240
$6,012,200
$11.09
$9.43
$8.42
$6.99
122,944
1,124,327
616,476
1998
2010
2005
$9,593,550
$90,585,286
$49,181,334
$64.78
$102.81
$82.72
$1,035,240
$9,775,058
$5,307,158
$6.99
$11.09
$8.93
STATISTICS
Low:
High:
Average:
The comparable urban multi-level retail power centers reflect assessment’s ranging from $64.78 to $102.81 per
square foot with an average of $82.72 per square foot of gross building area. Our survey of comparable retail
properties indicates taxes ranging from $6.99 to $11.09 per square foot of gross building area (GBA). The
average tax of the comparable properties is $8.93 per square foot. As mentioned earlier, the subject property is
currently abated under PILOT program that will be discussed in the following section. The subject’s unabated
fiscal year taxes are 9927021, or $5.21 per square foot, which is considered slightly below comparable properties.
PILOT
PROGRAM
The subject property as a commercial urban renewal project on New York City owned land has qualified for the
New York City 25-year, Payment in Lieu of Taxes (PILOT) program. Taxes are payable on the subject land based
on current assessments; however, the improvements are exempt from real estate taxes for 15 years. The chart
on the following chart simulates the PILOT exemption program utilizing the actual and improvement assessments
and growth estimates for the subject’s land and improvements. The building assessment is 100 percent exempt
for the first 16 years of the program. Taxes on the improvements are then phased in at 10 percent increments
from year 16 through year 25 when the exemption ends. The current 2014/15 tax rate is assumed to increase 1.0
percent throughout the projection.
The abated PILOT taxes have been used in the cash flow presented later in the Income Capitalization Approach.
The present value of the tax savings attributable to the PILOT (exhibited in the chart presented on the following
page) reflects $81,000,000. As the subject’s tenants have net leases, the tax savings from the PILOT tax
abatement is directly correlative with lower occupancy costs. This serves as a benefit to the tenants and a draw
for the subject property as the tenants will have subsidized occupancy costs through the expiration of the
abatement program in tax year 2031/32.
75
PILOT TAX PROJECTION
GATEWAY CENTER @ BRONX TERMINAL MARKET
BRONX, NEW YORK
ANALYSIS
PERIOD
ICIP
PERIOD
TAX
YEAR
PAYABLE
LAND AV
ACTUAL/EST.
BUILDING AV
TOTAL/EST.
AV
BENEFIT
BASE
ICIP
EXEMPT
AMOUNT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
2022/23
2023/24
2024/25
2025/26
2026/27
2027/28
2028/29
2029/30
2030/31
2031/32
2032/33
$14,373,077
$14,660,539
$14,953,749
$15,252,824
$15,557,881
$15,869,038
$16,186,419
$16,510,148
$16,840,351
$17,177,158
$17,520,701
$17,871,115
$18,228,537
$18,593,108
$18,964,970
$19,344,269
$19,731,155
$20,125,778
$77,620,445
$79,172,854
$80,756,311
$82,371,437
$84,018,866
$85,699,243
$87,413,228
$89,161,493
$90,944,723
$92,763,617
$94,618,889
$96,511,267
$98,441,492
$100,410,322
$102,418,529
$104,466,899
$106,556,237
$108,687,362
$91,993,522
$93,833,392
$95,710,060
$97,624,261
$99,576,747
$101,568,282
$103,599,647
$105,671,640
$107,785,073
$109,940,775
$112,139,590
$114,382,382
$116,670,029
$119,003,430
$121,383,499
$123,811,169
$126,287,392
$128,813,140
$77,620,445
$79,172,854
$80,756,311
$82,371,437
$84,018,866
$85,699,243
$87,413,228
$89,161,493
$90,944,723
$92,763,617
$94,618,889
$96,511,267
$98,441,492
$100,410,322
$102,418,529
$104,466,899
$106,556,237
$108,687,362
$77,620,445
$79,172,854
$80,756,311
$82,371,437
$84,018,866
$85,699,243
$87,413,228
$80,245,343
$72,755,778
$64,934,532
$56,771,334
$48,255,634
$39,376,597
$30,123,097
$20,483,706
$10,446,690
$0
$0
%
EXEMPT
PAYABLE
AV
TAX
RATE
FY TAXES
W/O ICIP
FY TAXES
W/ ICIP
CY TAXES
W/O ICIP
100%
100%
100%
100%
100%
100%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
0%
$14,373,077
$14,660,539
$14,953,749
$15,252,824
$15,557,881
$15,869,038
$16,186,419
$25,426,297
$35,029,295
$45,006,243
$55,368,256
$66,126,748
$77,293,432
$88,880,333
$100,899,793
$113,364,479
$126,287,392
$128,813,140
10.791
10.899
11.008
11.118
11.229
11.341
11.455
11.569
11.685
11.802
11.920
12.039
12.160
12.281
12.404
12.528
12.653
12.780
$9,927,021
$10,226,817
$10,535,667
$10,853,844
$11,181,630
$11,519,315
$11,867,199
$12,225,588
$12,594,801
$12,975,164
$13,367,014
$13,770,698
$14,186,573
$14,615,007
$15,056,380
$15,511,083
$15,979,518
$16,462,099
$127,274,059
$1,550,999
$1,597,839
$1,646,094
$1,695,806
$1,747,019
$1,799,779
$1,854,132
$2,941,673
$4,093,211
$5,311,618
$6,599,884
$7,961,116
$9,398,548
$10,915,540
$12,515,586
$14,202,320
$15,979,518
$16,462,099
$30,838,052
$4,963,510
$10,076,919
$10,381,242
$10,694,755
$11,017,737
$11,350,473
$11,693,257
$12,046,393
$12,410,194
$12,784,982
$13,171,089
$13,568,856
$13,978,635
$14,400,790
$14,835,694
$15,283,732
$15,745,300
$16,220,808
$120,590,552
ASSUMPTIONS
2015/2016 Land AV
2015/16 Improved AV
2015/16 Total AV
Current GBA:
2014/15 Tax Rate:
Proposed 2015/16 Tax Rate:
Land & Building AV Growth Rate
Tax Rate Growth
CY
TAXES PSF
W/O ICIP
$2.60
$5.29
$5.45
$5.61
$5.78
$5.96
$6.14
$6.32
$6.51
$6.71
$6.91
$7.12
$7.34
$7.56
$7.79
$8.02
$8.26
$8.51
CY TAXES
W/ ICIP
$775,499
$1,574,419
$1,621,966
$1,670,950
$1,721,412
$1,773,399
$1,826,956
$2,397,903
$3,517,442
$4,702,414
$5,955,751
$7,280,500
$8,679,832
$10,157,044
$11,715,563
$13,358,953
$15,090,919
$16,220,808
$27,538,110
FY
TAXES PSF
W/ ICIP
$0.41
$0.83
$0.85
$0.88
$0.90
$0.93
$0.96
$1.26
$1.85
$2.47
$3.13
$3.82
$4.56
$5.33
$6.15
$7.01
$7.92
$8.51
TAX
SAVINGS
$4,188,011
$8,502,500
$8,759,276
$9,023,806
$9,296,325
$9,577,074
$9,866,301
$9,648,491
$8,892,753
$8,082,568
$7,215,338
$6,288,356
$5,298,803
$4,243,746
$3,120,131
$1,924,778
$654,381
$0
$93,052,442
PRESENT VALUE OF THE TAX SAVINGS
$14,373,077
$77,620,445
$91,993,522
1,905,417
10.684%
10.791%
2.00%
1.00%
@ 5.0 PERCENT (FY 2015-2033)
PV of Tax Savings Rounded-As Is:
$80,699,993
$81,000,000
ZONING
76
ZONING
Map 6a of the Zoning Resolution of the City of The Bronx indicates that the subject property is situated in the
following zoning district: C4 General Central Commercial District. The City of New York indicates that the subject
property is zoned as follows:
Z ON IN G
D ESIGNATION
C4- 4; GENERAL C ENTRA L COMMERC IA L D ISTR IC T
Definition
These districts comprise the City’s major secondary shopping centers, which provide for
occasional family shopping needs and for essential services to business establishments
over a wide area, and which have a substantial number of large stores generating
considerable traffic. The district regulations are designed to promote convenient shopping
and the stability of retail development by encouraging continuous retail frontage and by
prohibiting service and manufacturing establishments that tend to break up such
continuity.
ZONING
COMPLIANCE
Property value is affected by whether or not an existing or proposed improvement complies to zoning regulations,
as discussed below.
COMPLYING USES
An existing or proposed use that complies to zoning regulations implies that there is no legal risk and that
the existing improvements could be replaced “as-of-right.”
P R E -E X I S T I N G , N O N -C O M P L Y I N G U S E S
In many areas, existing buildings pre-date the current zoning regulations. When this is the case, it is
possible for an existing building that represents a non-complying use to still be considered a legal use of
the property. Whether or not the rights of continued use of the building exist depends on local laws. Local
laws will also determine if the existing building may be replicated in the event of loss or damage.
N O N -C O M P L Y I N G U S E S
A proposed non-complying use to an existing building might remain legal via variance or special use permit.
When appraising a property that has such a non-complying use, it is important to understand the local laws
governing this use.
According to the New York City Department of City Planning, there was a zoning change effective February 1,
2006, that changed the zoning on the subject site from M2-1 to a C4-4. In addition, there was a number of special
permits filed with New York City to permit the development of the subject property. Some of the items are listed
below:

Zoning Resolution (ZR) Section 73-743 for bulk modifications for height and setback waivers along River
Avenue and Exterior Street, and distribution of floor area within the general large-scale district;

A special permit under ZR section 74-744 for signs not permitted under the Zoning Resolution;

A special permit under ZR section 62-736 for bulk waivers on waterfront blocks;

Authorization under ZR section 62-722 for modification of public access and visual corridors

Certification for a zoning lot subdivision under ZR Section 62-712;

A special permit pursuant to ZR section 74-512 to permit a public parking garage in excess of 150 spaces
ZONING
77
SUBJECT PROPERTY CONFORMANCE
The C4-4 designation permits a maximum as-of-right floor area ratio (FAR) of 3.4 times the lot area for
commercial and residential buildings, along with 6.50 times the lot area for community use facilities. In the
Property Description section of the report, we estimated the subject site contains 731,769 square feet. Therefore,
the maximum permitted commercial/retail zoning floor area (ZFA) as-of-right that could be constructed on the site
is 2,448,014 square feet.
The retail improvements consist of 945,048 square feet of above grade gross building area (GBA). In addition, the
parking garage consists of 969,019 square feet of above grade, gross building area (GBA) for a total above grade
gross building area of 1,914,067 square feet for the retail and parking garage components. We have been
provided with a zoning and requirements analysis prepared by The Planning and Resource Corporation dated
February 3, 2014. According to the analysis, the subject’s improvements represent a legal and complying use.
In addition, the analysis indicates that the subject property possesses 2,575 parking spaces (inclusive of 131
handicapped spaces) which complies with the parking requirement of 914 parking spaces, or one parking space
for every 1,000 square feet. From our review of public records the subject’s retail component possesses 969,019
square feet of Gross Building Area, requiring 969 parking spaces. Therefore, the subject property possesses well
more than the legal number of parking spaces required.
The subject property is currently under improved. Based on current market conditions and the speculative nature
of utilizing the subject’s excess development rights, we do not believe that a buyer in the marketplace would pay
a premium or ascribe any additional value to the subject property based on its excess development rights.
However, we have considered this in our selected investment rates.
O T H E R R ES T R I C T I O N S
We know of no deed restrictions, private or public, that further limit the subject property's use. The research
required to determine whether or not such restrictions exist is beyond the scope of this appraisal assignment.
Deed restrictions are a legal matter and only a title examination by an attorney or title company can usually
uncover such restrictive covenants. We recommend a title examination to determine if any such restrictions exist.
ZONING CONCLUSIONS
Detailed zoning studies are typically performed by a zoning or land use expert, including attorneys, land use
planners, or architects. The depth of our study correlates directly with the scope of this assignment, and it
considers all pertinent issues that have been discovered through our due diligence.
We are not experts in the interpretation of complex zoning ordinances but we have analyzed the zoning
requirements in relation to the subject property, and considered the compliance of the existing use as well as
reviewed the findings from the zoning analysis prepared by the Planning Resource Corporation (Dated February
3, 2014) and provided by the ownership. We are not experts in the interpretation of complex zoning ordinances
but based on our review of public information, the subject property is a complying use.
We note that this appraisal is not intended to be a detailed determination of compliance, as that determination is
beyond the scope of this real estate appraisal assignment. Exhibited below is a zoning map for the subject
property.
ZONING
Z ON IN G MA P
78
HIGHEST AND BEST USE
79
HIGHEST AND BEST USE DEFINITION
The Dictionary of Real Estate Appraisal, Fifth Edition (2014), a publication of the Appraisal Institute, defines the
highest and best use as:
The reasonably probable and legal use of vacant land or an improved property, which is
physically possible, appropriately supported, financially feasible, and that results in the
highest value. The four criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability.
To determine the highest and best use we typically evaluate the subject site under two scenarios: as if vacant
land and as presently improved. In both cases, the property’s highest and best use must meet the four criteria
described above.
HIGHEST AND BEST USE OF PROPERTY AS IF VACANT
LEGALLY PERMISSIBLE
The zoning regulations in effect at the time of the appraisal determine the legal permissibility of a potential use of
the subject site. As described in the Zoning section, the subject site is zoned C4-4; General Central Commercial
District by the City of New York. Permitted uses within this district include office, retail, residential, community
service and various commercial uses. We are not aware of any further legal restrictions that limit the potential
uses of the subject.
PHYSICALLY POSSIBLE
The physical possibility of a use is dictated by the size, shape, topography, availability of utilities, and any other
physical aspects of the site. The subject site contains 16.80 acres, or 731,769 square feet. The site is irregular
and slightly sloping. It has excellent frontage, good access, and good visibility. All public utilities are available to
the site including public water and sewer, gas, electric and telephone. Overall, the site is considered adequate to
accommodate most permitted development possibilities.
FINANCIALLY FEASIBLE
AND
MAXIMALLY PRODUCTIVE
In order to be seriously considered, a use must have the potential to provide a sufficient return to attract
investment capital over alternative forms of investment. A positive net income or acceptable rate of return would
indicate that a use is financially feasible. Financially feasible uses are those uses that can generate a profit over
and above the cost of acquiring the site, and constructing the improvements. Of the uses that are permitted,
possible, and financially feasible, the one that will result in the maximum value for the property is considered the
highest and best use.
CONCLUSION
The entire subject site comprises a total of 16.80 acres, or 731,769 square feet, in the Bronxchester
neighborhood of the Bronx, adjacent to the Major Deegan Expressway (Interstate 87), and across the Harlem
River. The subject site is a unique parcel in The Bronx, and New York City based on its size, utility, frontage and
visibility from the Major Deegan Expressway. Several features of the subject property indicate that a retail
development is the highest and best use of the site. Furthermore, the subject site is a large unique site that is
difficult to replicate in New York City.
80
Considering the subject site’s physical characteristics and location, as well as the state of the local market, it is
our opinion that the Highest and Best Use of the subject site as if vacant is a multi-level retail power center with a
parking garage developed to the highest density feasible.
HIGHEST AND BEST USE OF PROPERTY AS IMPROVED
The Dictionary of Real Estate Appraisal defines highest and best use of the property as improved as:
The use that should be made of a property as it exists. An existing improvement should be
renovated or retained “as is” so long as it continues to contribute to the total market value of
the property, or until the return from a new improvement would more than offset the cost of
demolishing the existing building and constructing a new one.
In analyzing the Highest and Best Use of a property as improved, it is recognized that the improvements should
continue to be used until it is financially advantageous to alter physical elements of the structure or to demolish it
and build a new one.
LEGALLY PERMISSIBLE
As described in the Zoning Analysis section of this report, the subject site is zoned C4-4; General Central
Commercial District. The site is improved with a multi-tenant retail power center and a 6-level parking garage
containing a total of 969,019 square feet of gross building area. In the Zoning section of this appraisal, we
determined that the existing improvements represent a legal complying use.
PHYSICALLY POSSIBLE
The subject improvements were constructed in 2009 and are in excellent condition. We know of no current or
pending municipal actions or covenants that would require a change to the current improvements.
FINANCIALLY FEASIBLE
AND
MAXIMALLY PRODUCTIVE
In our opinion, the improvements contribute significantly to the value of the site. It is likely that no alternate use
would result in a higher return.
CONCLUSION
It is our opinion, the existing improvements add value to the site as if vacant, therefore dictating a continuation of
its current use. In conclusion, it is our opinion that the Highest and Best Use of the subject property as improved
is as currently improved.
VALUATION PROCESS
81
VALUATION PROCESS
METHODOLOGY
There are three generally accepted approaches to developing an opinion of value: Cost, Sales Comparison and
Income Capitalization. We considered each in this appraisal to develop an opinion of the market value of the
subject property. In appraisal practice, an approach to value is included or eliminated based on its applicability to
the property type being valued and the quality of information available. The reliability of each approach depends
on the availability and comparability of market data as well as the motivation and thinking of purchasers.
The valuation process is concluded by analyzing each approach to value used in the appraisal. When more than
one approach is used, each approach is judged based on its applicability, reliability, and the quantity and quality
of its data. A final value opinion is chosen that either corresponds to one of the approaches to value, or is a
correlation of all the approaches used in the appraisal.
We considered each approach in developing our opinion of the market value of the subject property. We discuss
each approach below and conclude with a summary of their applicability to the subject property.
COST APPROACH
The Cost Approach is based on the proposition that an informed purchaser would pay no more for the subject
than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when
the property being appraised involves relatively new improvements which represent the Highest and Best Use of
the land; or when relatively unique or specialized improvements are located on the site for which there are few
improved sales or leases of comparable properties.
In the Cost Approach, the appraiser forms an opinion of the cost of all improvements, depreciating them to reflect
any value loss from physical, functional and external causes. Land value, entrepreneurial profit and depreciated
improvement costs are then added, resulting in an opinion of value for the subject property.
SALES COMPARISON APPROACH
In the Sales Comparison Approach, sales of comparable properties are adjusted for differences to estimate a
value for the subject property. A unit of comparison such as price per square foot of building area or effective
gross income multiplier is typically used to value the property. When developing an opinion of land value the
analysis is based on recent sales of sites of comparable zoning and utility, and the typical units of comparison are
price per square foot of land, price per acre, price per unit, or price per square foot of potential building area. In
both cases, adjustments are applied to the unit of comparison from an analysis of comparable sales, and the
adjusted unit of comparison is then used to derive an opinion of value for the subject property.
I N C O M E C A P I T A L I Z A T I O N A P PR O A C H
In the Income Capitalization Approach the income-producing capacity of a property is estimated by using contract
rents on existing leases and by estimating market rent from rental activity at competing properties for the vacant
space. Deductions are then made for vacancy and collection loss and operating expenses. The resulting net
operating income is divided by an overall capitalization rate to derive an opinion of value for the subject property.
The capitalization rate represents the relationship between net operating income and value. This method is
referred to as Direct Capitalization.
VALUATION PROCESS
82
Related to the Direct Capitalization Method is the Discounted Cash Flow Method. In this method periodic cash
flows (which consist of net operating income less capital costs) and a reversionary value are developed and
discounted to a present value using an internal rate of return that is determined by analyzing current investor yield
requirements for similar investments.
SUMMARY
This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our
analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that the Sales
Comparison Approach and the Income Capitalization Approach would be considered meaningful and applicable
in developing a credible value conclusion. Investors do not typically rely on the Cost Approach when purchasing a
property such as the subject of this report. Therefore, we have not relied upon the Cost Approach to develop an
opinion of market value.
GROUND LEASE ANALYSIS AND LAND VALUATION
83
The subject site is encumbered by a 49 year ground lease, and includes five 10 year renewal options which could
extend the ground lease term to 99 years. The ground lease has been summarized and analyzed as follows:
Ground Lessor
(Landlord):
City of New York
Ground Lessee
(Tenant):
BTM Development Partners LLC c/o Related Companies
Land Area:
731,769 square feet; 16.80 acres
Lease Date:
September 14, 2006
Rent Commencement
Date:
September 1, 2016
Initial Expiration Date:
September 13, 2055
Lease Term:
The subject property is ground leased for an initial 49 year base term, with 5
consecutive 10 year renewal options.
Ground Rent
Payments:
(i) During the interim period, the ground rent shall be $170,591. Commencing
on the day after the Interim Period (the “Step Up Date”) and continuing for five
(5) years, an amount per annum equal to the greater of (a) Three Hundred
Forty One Thousand One Hundred Eighty Two and 52/100 Dollars
($341,182.52) (the “Initial Base Amount”) or (b) two percent (2%) of Gross
Revenue.
(ii) Commencing on the fifth (5th) anniversary of the Step Up Date, and for five
years thereafter, an amount per annum equal to the greater of (a) 105% of the
Initial Base Amount (such adjusted Initial Base Amount, as hereafter further
adjusted, the “Adjusted Base Amount”) and (b) 3% of Gross Revenue.
(iii) Commencing on the tenth (10th) anniversary of the Step Up Date, and for
five years thereafter, an amount per annum equal to the greater of (a) 105% of
the immediately preceding Adjusted Base Amount and (b) 4% of Gross
Revenue.
Commencing on the fifteenth (15th) anniversary of the Step UP Date, and for
five years thereafter and every fifth anniversary of the Step Up Date thereafter
and for each five year period thereafter, Base Rent shall be an amount per
annum equal to the greater of (a) 105% percent of the Adjusted Base Amount
immediately preceding each such five year anniversary of the Step Up Date,
and (b) 5% of Gross Revenue.
Ground Rent Payments
(Continued):
Years 50 to 99: For each 10-year renewal period, ground rent shall be greater
of (1) 105% of prior rent for each 5-year period or (2) 5% of Gross Revenue.
Potential Gross
Revenue Calculation:
As per the ground lease agreement, the ground rent equals the greater of the
fixed amount ($341,183 in years 1-5) or 2.0% of gross revenue (based on the
specific formula calculating gross revenues). Based on the subject's projected
gross revenues (as defined in the ground lease), the ground rent will be
calculated based on the percentage of gross revenues less allowable
deductions such as management fee (3% of PGI) and on-site personnel costs.
As per the ground lease, the projected gross revenue of the subject includes
all the tenant base and percentage rent, along with the imputed annual gross
revenue from Target, which is considered the only buy down tenant, since it
paid the developer $46,394,000 for prepaid rent. The imputed annual rent for
the Target was calculated to be $3,150,153 by multiplying the Target buy down
amount by the buy down constant (defined as the mortgage constant equal to
the Moody’s Baa Corporate Rate at the time the lease was executed which
was 6.79%). We have detailed our projected calculation of the ground rent for
the entire holding period in a chart within the Addenda of this report.
The current ground rent has been estimated at $622,789 which equates to
$0.68 per square foot of GLA, excluding the ground rent credit. After deducting
the current ground rent credit ($200,000), the adjusted ground rent is
$422,789, which equates to $0.46 per square foot of GLA.
Ground Rent Credit:
Ground Rent shall be reduced by the amounts set forth below for each
respective Lease Year:
Year
Annual Rent
Credit
Year 1
$200,000
Year 2
$200,000
Year 3
$200,000
Year 4
$200,000
Year 5
$200,000
Year 6
$400,000
Year 7
$400,000
Year 8
$425,000
Year 9
$425,000
Year 10
$450,000
Year 11
$475,000
Year 12
$475,000
Year 13
$500,000
Year 14
$500,000
84
Transaction Payment:
According to the Section 12.1 of the ground lease, a “Transaction Payment” is
warranted for any potential refinancing or sale of the subject property. For a
potential sale or refinance of the subject property after, Substantial Completion
and on or prior to the expiration of the initial term, a 7.5 percent “Transaction
Payment” shall be paid to the Landlord (City of New York) in the event of the
sale or refinance of the subject property. In the case of a sale or refinancing
which occurs after the expiration of the initial term, a “Transaction Payment” of
15 percent shall be paid to the Landlord (City of New York) in the event of the
sale or refinancing of the subject property. The calculation of the respective
“Transaction Payments” are further defined below in the following
sections:
Net Financing
Proceeds:
“Net Finance Proceeds” means the cash proceeds received by Tenant in
connection a Financing, deducting there from (without duplication) (A) (1)
original principal indebtedness and then-outstanding interest and other sums
accrued thereon of the Project Loan satisfied, purchased or assigned to a new
lender in connection with such Financing, or, thereafter, (2) original principal
balance, and then outstanding interest and other sums accrued thereon, of the
then current Mortgage(s), (B) any Mortgage proceeds required to be escrowed
and/or applied for a specific purpose (for example, the establishment of a
working capital fund or repair or renovation of the Premises), (C) any Financing
proceeds used or intended to be used for construction work, (D) Financing
proceeds used to reimburse or pay for operating losses accrued after the
Commencement Date, (E) any expenses incurred in effecting such Financing,
(F) an amount equal to Net Financing Proceeds upon which a prior
Transaction Payment was made, (G) all cash equity of Tenant invested in the
Premises and (H) a developer's fee equal to 3% of Tenant’s development
costs for the Project. In calculating Net Financing Proceeds there shall in no
event be deducted from gross financing proceeds any amount paid as a
recapture or penalty in connection with any benefits for the Project provided by
the City or State of New York or any agency or instrumentality thereof. (Lease
§ 12.1).
Net Sales Proceeds
“Net Sales Proceeds” means, in the case of a Sale, the following amounts,
computed as of the closing date of such Sale, received by Tenant or the seller
of equity interests in Tenant as, or deemed to be, consideration for the Sale,
including, but not limited to: (A) all cash proceeds, (B) the fair market value of
any property, other than cash or debt obligations, (C) the principal amount of
any Mortgages assumed by the purchaser at such Sale or to which the Sale is
made subject, or a proportionate share of such Mortgage in the case of a Sale
affecting only a portion of the leasehold estate, (D) the face amount of any
purchase money note or debt obligation payable to Tenant or the seller of the
equity interests as of the closing date made in connection with such Sale and
(E) in the case of a Major Sublease, the difference between (x) all rental
payments received by Tenant under such Major Sublease and (y) the Rental
payable by Tenant allocable to that part of the Premises subleased for the term
of the Major Sublease as of the closing date, deducting from the amounts set
85
forth in clauses (A) through (E) above (without duplication) (1) the amounts
due under any Mortgage, or proportionate share thereof, satisfied with the
proceeds of Sale or assigned or purchased by a new lender or assumed or to
which the estate conveyed in such Sale is taken subject by the purchaser at
such Sale, (2) operating losses accrued after the Commencement Date, (3)
any reasonable or customary expenses incurred in effecting such Sale, (4) in
the event that in connection with any foreclosure of a Mortgage or an
Assignment, transfer of equity interests in Tenant, or Major Sublease in lieu of
a foreclosure of a Mortgage, a Mortgagee or any Control Affiliate (as defined in
the Lease) or nominee of a Mortgagee shall become Tenant hereunder and all
or any portion of the indebtedness secured by such Mortgage shall have been
discharged or reduced without full payment of such indebtedness, an amount
equal to the amount of the indebtedness so discharged or reduced, together
with interest and other charges which would have accrued with respect thereto
through the date of the Sale, absent such discharge or reduction, (5) an
amount equal to Net Sales Proceeds upon which a prior Transaction Payment
was made, (6) all cash equity of Tenant invested in the Premises and (7) a
developer's fee equal to 3% of Tenant’s development costs for the Project.
Notwithstanding the foregoing, in the case of any Sale involving consideration
described in (D) and/or (E) above, "Net Sales Proceeds" as of the closing on
the Sale shall be deemed to include only that consideration actually received
as of that date, but each time a subsequent payment of principal on the note or
debt obligation or payment of rental on the Major Sublease is received, it shall
be treated as a separate Sale (without regard to any minimum thresholds
which may be imposed elsewhere in Article 12 of the Lease for a transaction to
constitute a Sale), and a Transaction Payment shall be payable based on such
payment. For Sales of equity interests in Tenant, there shall be deducted from
the consideration described in (A) through (D) above the amount paid by the
Transferor to acquire such equity interest. For purposes of determining ''Net
Sales Proceeds" in the case of a Sale described in (D) or (E) above,
deductions from each installment of sales proceeds described in (1) through
(7) above, determined as of the closing date, shall be proportionate installment
of sales proceeds received by Tenant. In calculating Net Sales Proceeds there
shall in no event be deducted from sales proceeds any amount paid as a
recapture or penalty in connection with any benefits for the Project provided by
the City or State of New York or any agency or instrumentality thereof. (Lease
§ 12.1).
86
87
LAND VALUATION
METHODOLOGY
Using the Sales Comparison Approach, we developed an opinion of land value by comparing the subject site to
similar, recently sold properties in the surrounding or competing area. This approach relies on the principle of
substitution, which holds that when a property is replaceable in the market, its value tends to be set at the cost of
acquiring an equally desirable substitute property, assuming that no costly delay is encountered in making the
substitution.
By analyzing sales that qualify as arm’s-length transactions between willing and knowledgeable buyers and
sellers, we can identify value and price trends. The basic steps of this approach are:

Research recent, relevant property sales and current offerings in the competitive area;

Select and analyze properties that are similar to the subject property, analyzing changes in economic
conditions that may have occurred between the sale date and the date of value, and other physical,
functional, or locational factors;

Identify sales that include favorable financing and calculate the cash equivalent price;

Reduce the sale prices to a common unit of comparison such as price per land area (SF);

Make appropriate comparative adjustments to the prices of the comparable properties to relate them to
the subject property; and

Interpret the adjusted sales data and draw a logical value conclusion.
We used the Sales Comparison Approach to develop an opinion of land value for the subject site. In this method,
we analyzed prices buyers have recently paid for similar sites in the market, as well as examined current
offerings. In making comparisons, we adjusted the sale prices for differences between this site and the
comparable sites. If the comparable was superior to the subject, a downward adjustment was made to the
comparable sale. If inferior, an upward adjustment was made. We present on the following pages a summary of
pertinent details of sites recently sold that we compared to the subject site.
In the valuation of the subject site’s land value, the Sales Comparison Approach has been used to establish
prices being paid for comparably zoned land. The most widely used and market oriented unit of comparison for
properties with characteristics similar to those of the subject is the sale price per square foot of land area. All
transactions used in this analysis are analyzed on this basis.
The subject property is a 731,769 square feet, or 16.80 acres, commercially zoned parcel located within the
Bronxchester neighborhood of the Bronx. The majority of the subject site is improved with a 4-story retail power
center and a 6-level parking garage. At the outset of our investigation we searched for recent transactions in the
immediate area, which involved the sale of large commercial sites available for development. We found, however,
that there has been limited activity for development sites in Bronx County. Therefore, we have researched the
entire New York City market for recent land sales. We have cited five land sales, albeit significantly smaller and
inferior and adjusted them accordingly.
The major elements of comparison used to value the subject site include the property rights conveyed, the
financial terms incorporated into the transaction, the conditions or motivations surrounding the sale, changes in
market conditions since the sale, the location of the real estate, its utility and the physical characteristics of the
property. The chart on the following page details the land transactions that we have utilized in our analysis.
88
SUMMARY OF LAND SALES
PROPERTY INFORMATION
TRANSACTION INFORMATION
Land Area (sf)
Max
FAR
Potential
Building Area
Zoning
Grantor
Grantee
Sale Date
$/Land Area
COMMENTS
1
402-422 Snediker Avenue
B/w Dumon & Livonia Avenues
Brownsville, Brooklyn
45,741
1.00
45,741
M1-1
Hopkins Trading C.P
Confidential
Mar-15
$4,256,000
$93.05
This is the contract of sale for an irregular shaped through block development site located
along Snediker Avenue between Dumont and Livonia Avenues within the Brownsville
neighborhood of Brooklyn. At the time of contract, the property was improved with five
industrial buildings totaling 30,245 square feet of gross building area. The selling broker has
indicated that the site is proposed for redevelopment. We have estimated demolition costs of
$756,000, rounded ($25/GBA) for the existing improvements. Overall, the total consideration is
$4,256,000 or $93.05 per square foot of land area.
2
191-231 Moore Street
B/w Bushwick Avenue and White Street
East Williamsburg, Brooklyn
101,447
1.68
170,000
M1-1 / M1-2
Cooper Tank & Welding
Corp.
Heritage Equity
Partners
Dec-14
$29,423,000
$290.03
This is the sale of an irregular shaped through block development located along the south side
of Siegel Street and the north side of Moore Street between White Street and Bushwick
Avenue within the East Williamsburg neighborhood of Brooklyn. At the time of sale, the
property was improved with five industrial buildings totaling 46,900 square feet of gross
building area. The selling broker has indicated that the site is proposed for redevelopment. We
have estimated demolition costs of $1,173,000, rounded ($25/GBA) for the existing
improvements. Overall, the total consideration is $29,423,000 or $290.03 per land area.
3
44-62 Ferris Street
B/w Wolcott & Sullivan Streets
Red Hook, Brooklyn
50,007
2.00
100,014
M2-1
1989 Realty Corp.
Kenmare E4 LLC
Dec-14
$6,000,000
$119.98
This is the sale of a rectangular shaped, vacant, through block development site located along
Ferris Street between Wolcott and Sullivan Streets within the Red Hook neighborhood of
Brooklyn. There are no proposed plans at this time.
4
225 Pennsylvania Avenue
N/E/C Pitkin Avenues
East New York, Brooklyn
42,250
2.00
84,500
C8-2
Cumberland Farms
KLCC Investments
LLC
Aug-14
$5,035,000
$119.17
This is the sale of a rectangular shaped vacant development site located along Pennsylvania
Avenue at the northeast corner of Pitkin Avenue within the East New York neighborhood of
Brooklyn. There are no proposed plans at this time.
5
164 West Canal Street
N/W/C 135th Street
Bronxchester, Bronx
9,175
2.00
18,350
M1-4
Tld Deegan Realty LLC
Vertu Hospitality
LLC
Sep-14
$1,325,000
$144.41
This is the sale of a rectangular shaped, vacant, corner development site located along West
Canal Street at the northwest corner of Canal Street and 135th Street within the Bronxchester
neighborhood of the Bronx. There are no proposed plans at this time.
6
809 Neptune Avenue
B/w Shell & Stillwell Avenues
Coney Island, Brooklyn
133,407
2.00
266,814
M1-2
New York City Economic
Development Corp.
809 Neptune
Avenue LLC
Jul-13
$15,000,000
7
171 West 230th Street
B/w Major Deegan Expressway & Broadway
Kingsbridge, Bronx
79,501
3.40
270,303
C4-4
New York City Economic
Development Corp.
Equity One Inc.
Jun-12
$7,500,000
No. Location
Sale Price
$112.44 This is the sale of an irregular shaped vacant development site located along Neptune Avenue
between Shell and Stillwell Avenues within the Coney Island neighborhood of Brooklyn.
According to the selling broker, the site shares a parking lot with a currently under construction
Storage Deluxe. The site is proposed to be completed with a retail neighborhood center
comprising approximately 35,000 square feet. The site will possess nearly 600 feet of frontage
along Neptune Avenue and have prime frontage along the Belt Parkway.
$94.34
STATISTICS
Low
9,175
1.00
18,350
Jun-12
$1,325,000
$93.05
High
133,407
3.40
270,303
Mar-15
$29,423,000
$290.03
Average
65,933
2.01
136,532
Apr-14
$9,791,286
$139.06
This is the sale of irregular shaped development site located along West 230th Street between
Broadway and the Major Deegan Expressway within the Kingsbridge neighborhood of the
Bronx. The buyer redeveloped the site with a shopping center now known as Broadway Plaza
that was completed in October of 2014. The center comprises approximately 115,000 square
feet of gross leasable area (GLA), and is anchored down by a Sports Authority, occupying
30,000 square feet and T.J. Maxx, occupying 24,000 square feet. Additional tenants located
within Broadway Plaza include Aldi Food Market, occupying 18,000 square feet and Party City,
occupying 9,000 square feet. The center has approximately 140 parking spaces.
89
LAND SALE ADJUSTMENT GRID
Economic Adjustments (Cumulative)
Property Characteristic Adjustments (Additive)
No
Price/Land Area
& Date
Property
Rights
Conveyed
Conditions
of Sale
Market
Conditions
PSF/ Land
Area Subtotal
Location
Size (Land Area)
Zoning
Utility
Configuration
Other
Adj.
Price/ Land
Area
1
$93.05
Fee Simple
Arm's-Length
Inferior
$94.35
Similar
Smaller
Similar
Inferior
Inferior
Similar
$89.63
3/15
0.0%
0.0%
1.4%
1.4%
0.0%
-30.0%
0.0%
15.0%
10.0%
0.0%
-5.0%
2
$290.03
Fee Simple
Arm's-Length
Inferior
$297.57
Superior
Smaller
Similar
Similar
Superior
Similar
$119.03
12/14
0.0%
0.0%
2.6%
2.6%
-25.0%
-25.0%
0.0%
0.0%
-10.0%
0.0%
-60.0%
3
$119.98
Fee Simple
Arm's-Length
Inferior
$123.10
Superior
Smaller
Similar
Inferior
Inferior
Similar
$92.33
12/14
0.0%
0.0%
2.6%
2.6%
-20.0%
-30.0%
0.0%
15.0%
10.0%
0.0%
-25.0%
4
$119.17
Fee Simple
Arm's-Length
Inferior
$124.30
Superior
Smaller
Similar
Inferior
Inferior
Similar
$99.44
8/14
0.0%
0.0%
4.3%
4.3%
-15.0%
-30.0%
0.0%
15.0%
10.0%
0.0%
-20.0%
5
$144.41
Fee Simple
Arm's-Length
Inferior
$149.90
Similar
Smaller
Similar
Inferior
Inferior
Similar
$134.91
9/14
0.0%
0.0%
3.8%
3.8%
0.0%
-35.0%
0.0%
15.0%
10.0%
0.0%
-10.0%
6
$112.44
Fee Simple
Arm's-Length
Inferior
$123.57
Superior
Smaller
Similar
Inferior
Inferior
Similar
$105.03
7/13
0.0%
0.0%
9.9%
9.9%
-5.0%
-25.0%
0.0%
5.0%
10.0%
0.0%
-15.0%
7
$94.34
Fee Simple
Arm's-Length
Inferior
$109.34
Superior
Smaller
Similar
Inferior
Inferior
Similar
$98.40
6/12
0.0%
0.0%
15.9%
15.9%
-5.0%
-25.0%
0.0%
10.0%
10.0%
0.0%
-10.0%
(1)
(2)
STATISTICS
$93.05
- Low
Low -
$89.63
$290.03
- High
High -
$134.91
$139.06
- Average
Average -
$105.54
(1) Market Conditions Adjustment Footnote
Compound annual change in market conditions: 5.00%
(2) Utility Footnote
Utility includes s access, frontage, and visibility.
Date of Value (for adjustment calculations): 6/10/15
As Is Market Value-50 East 153rd Street
Land Value per SF of Land Area
Land Area (SF)
Inflection Point 2 (IP2):
7/19/2013
$100.00
x 731,769
$73,176,900
Indicated Value, Rounded
$73,000,000
Per Square Foot of Land Area:
$99.76
LAND SA LE LOCATION MA P
90
91
P E R C E N T A G E A D J U S T M E N T M ET H O D
ADJUSTMENT PROCESS
The sales we have used were the best available comparables to the subject property. The major points of
comparison for this type of analysis include the property rights conveyed, the financial terms incorporated into the
transaction, the conditions or motivations surrounding the sale, changes in market conditions since the sale, the
location of the real estate, its physical traits and the economic characteristics of the property.
The first adjustment made to the market data takes into account differences between the subject property and the
comparable property sales with regard to the legal interest transferred. Advantageous financing terms or atypical
conditions of sale are then adjusted to reflect a normal market transaction. Next, changes in market conditions
are accounted for, creating a time adjusted price. Lastly, adjustments for location, physical traits and the
economic characteristics of the market data are made in order to generate the final adjusted unit rate for the
subject property.
We have made a downward adjustment to those comparables considered superior to the subject and an upward
adjustment to those comparables considered inferior.
PROPERTY RIGHTS CONVEYED
The property rights conveyed in a transaction typically have an impact on the sale price of a property. Acquiring
the fee simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest
typically means that the property being acquired is encumbered by at least one lease, which is a binding
agreement transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of
a lease, which conveys the rights to use and occupy the property to the buyer for a finite period of time. At the
end of the lease term, there is typically no reversionary value to the leasehold interest. Since we are valuing the
fee simple interest as reflected by each of the comparables, no adjustment for property rights was required.
FINANCIAL TERMS
The financial terms of a transaction can have an impact on the sale price of a property. A buyer who purchases
an asset with favorable financing might pay a higher price, as the reduced cost of debt creates a favorable debt
coverage ratio. A transaction involving above-market debt will typically involve a lower purchase price tied to the
lower equity returns after debt service. We analyzed all of the transactions to account for atypical financing terms.
To the best of our knowledge, all of the sales used in this analysis were accomplished with cash or marketoriented financing. Therefore, no adjustments were required.
CONDITIONS
OF
SALE
Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. In many situations
the conditions of sale may significantly affect transaction prices. However, all sales used in this analysis are
considered to be "arms-length" market transactions between both knowledgeable buyers and sellers on the open
market. Therefore, no adjustments were required.
MARKET CONDITIONS
The sales that are included in this analysis occurred between June 2012 and March 2015. We have made a
positive adjustment for the improving market conditions at a rate of 5.0 percent per annum.
92
LOCATION
An adjustment for location is required when the locational characteristics of a comparable property differ from
those of the subject property. Location adjustments were intended to reflect differences with regard to the
character of the avenue or street, proximity to transportation, desirability with regard to location (reputation of the
surrounding buildings), and trends in future growth or decline. We have made a negative adjustment to those
comparables considered superior in location versus the subject. Conversely, a positive adjustment was made to
those comparables considered inferior. Each comparable was adjusted accordingly.
SIZE (LAND
AREA)
The adjustment for size generally reflects the inverse relationship between unit price and lot size. Smaller lots
tend to sell for higher unit prices than larger lots, and vice versa. This adjustment is based on the physical site
area and not the maximum zoning floor area. Positive adjustments are made to sites that yield a larger floor area,
and downward adjustments are made to sites that yield a smaller amount of land area. Each comparable was
adjusted accordingly.
ZONING
Many factors of zoning dictate the resultant use, density and design of a development. Density regulations are
determined not only by Floor Area Ratios, but by height limitations, mandatory street wall setbacks, rear yard
setbacks and requirements for retail continuity or pedestrian access. The zoning adjustment also considers
features, such as setback regulations, height restrictions, open space requirements, lot coverage requirements,
and the potential use groups available for a particular site. Each comparable was adjusted accordingly.
UTILITY
The adjustment for utility is intended to reflect differences in a plot’s development potential in regard to access,
frontage, and visibility. Mid-block sites and sites within areas with height limitations have inferior utility. Utility
adjustments consider soil/sub-soil conditions to the extent known. Given its overall physical characteristics and
zoning, the subject site is considered adequate to accommodate most permitted development possibilities. We
have considered all of these factors in our adjustment process and made adjustments as appropriate. Each
comparable was adjusted accordingly.
CONFIGURATION
An adjustment for configuration was intended to reflect differences with regard to plots, which were more irregular
in shape versus plots which were more square or rectangular. It also considers frontage to depth ratios and
perimeter areas. Configuration affects the shape of the prospective building’s floor plate and is an important factor
for developers and investors. Given the size and shape of the of the subject site, it offers a developer a good level
of flexibility in design features. Each comparable was adjusted accordingly.
OTHER
This category accounts for any other adjustments not previously discussed. Examples include soil or slope
conditions, restrictive zoning, easements, wetlands or external influences. No adjustments were required.
93
DISCUSSION OF COMPARABLE LAND SALES
COMPARABLE LAND SALE
NO. 1
This is the contract of sale for an irregular shaped through block development site located at 402-422 Snediker
Avenue between Dumont and Livonia Avenues within the Brownsville neighborhood of Brooklyn. A confidential
buyer is under contract to purchase the property from Hopkins Trading CP in March 2015 for $4,256,000,
inclusive of estimated demolition costs. The site contains 45,741 square feet of land and a maximum zoning floor
area of 45,741 square feet. At the time of contract, the property was improved with five industrial buildings totaling
30,245 square feet of gross building area. The site is proposed to be redeveloped according to the selling broker.
We have estimated demolition costs of $756,000, rounded ($25/GBA) for the existing improvements. The sale
price develops a unit price of $93.05 per square foot of land area. After all adjustments, this sale indicated an
adjusted unit price of $89.63 per square foot of land area.
COMPARABLE LAND SALE NO.
2
This is the sale of an irregular shaped through block development located at 191-231 Moore Street along the
south side of Siegel Street and the north side of Moore Street between White Street and Bushwick Avenue within
the East Williamsburg neighborhood of Brooklyn. Heritage Equity Partners purchased the property from Cooper
Tank & Welding Corp. in December 2014 for $28,250,000, inclusive of estimated demolition costs. At the time of
sale, the property was improved with five industrial buildings totaling 46,900 square feet of gross building area.
The site is proposed to be redeveloped according to the selling broker. We have estimated demolition costs of
$1,173,000, rounded ($25/GBA) for the existing improvements. The sale price develops a unit price of $290.03
per square foot of land area. After all adjustments, this sale indicated an adjusted unit price of $119.03 per square
foot of land area.
COMPARABLE LAND SALE NO.
3
This is the sale of a rectangular shaped, vacant, through block development site located at 44-62 Ferris Street
between Wolcott and Sullivan Streets within the Red Hook neighborhood of Brooklyn. Kenmare E4 LLC
purchased the property from 1989 Realty Corp. for $6,000,000 in December 2014. The parcel contains 50,007
square feet of land area and a maximum zoning floor area of 100,014 square feet. The sale price develops a unit
price of $119.98 per square foot of land area. After all adjustments, this sale indicated an adjusted unit price of
$92.33 per square foot of land area.
COMPARABLE LAND SALE NO. 4
This is the sale of a rectangular shaped development site located at 225 Pennsylvania Avenue at the northeast
corner of Pitkin Avenue within the East New York neighborhood of Brooklyn. KLCC Investments LLC purchased
the property from Cumberland Farms in August 2014 for $5,035,000, inclusive of estimated demolition costs. The
rectangular shaped corner parcel contains 42,250 square feet of land area and possesses frontage along
Pennsylvania and Pitkin Avenues. The site contains a maximum zoning floor area of 84,500 square feet. The
property was purchased by an owner-user who intends to develop the site with a 60,000 square feet storage
facility. The site was formerly utilized as a gas station and contained 1,300 square feet of gross building area. We
have estimated demolition costs at $35,000 ($25/GBA), rounded. The sale price develops a unit price of $119.17
per square foot of land area. After all adjustments, this sale indicated an adjusted unit price of $99.44 per square
foot of land area.
94
This is the sale of a rectangular shaped, vacant, corner development site located along at the northwest corner of
West Canal Street and 135th Street within the Bronxchester neighborhood of the Bronx. Vertu Hospitality LLC
purchased the property from Tld Deegan Realty LLC for $1,325,000 in September 2014. This site contains a land
area of 9,175 square feet with a maximum zoning floor area of 18,350 square feet. The sale price develops a unit
This is the sale of irregular shaped development site located at 809 Neptune Avenue between Shell and Stillwell
Avenues within the Coney Island neighborhood of Brooklyn. The property sold from Brooklyn Union Gas to 809
Neptune Avenue LLC for $16,000,000. This irregular shaped corner parcel contains 3.06 acres (133,407 SF) with
frontage along Neptune Avenue and Shell Road. The site permits a maximum zoning floor area of 266,814
square feet. According to the selling broker, the site shares a parking lot with a currently under construction
Storage Deluxe. The site is proposed to be completed with a retail neighborhood center comprising approximately
35,000 square feet. The sale price develops a unit price of $56.22 per square foot of land area. After all
adjustments, this sale indicated an adjusted unit price of $105.03 per square foot of land area.
This is the sale of irregular shaped development site located at 171 West 230th Street between Broadway and the
Major Deegan Expressway within the Kingsbridge neighborhood of the Bronx. The New York City Economic
Development (NYCEDC) Corporation sold the property to Equity One (Northeast Portfolio) Inc. in June 2012 for
$7,500,000. This irregular shaped block through parcel contains 1.83 acres (79,501 SF) with frontage along West
230th Street and Verveelen Place. The site permits a maximum zoning floor area of 270,303 square feet. The
buyer has redeveloped the site with a shopping center, known as Broadway Plaza. The center comprises
approximately 115,000 square feet of gross leasable area (GLA), and is anchored down by a Sports Authority,
occupying 30,000 square feet and T.J. Maxx, occupying 24,000 square feet. Additional tenants within the
shopping center to have signed leases are Aldi Food Market, occupying 18,000 square feet and Party City,
occupying 9,000 square feet. The center has approximately 140 parking spaces. The sale price develops a unit
CONCLUSION OF SITE VALUE
The entire subject site comprises a total of 16.80 acres in the Bronxchester neighborhood of the Bronx, adjacent
to the Major Deegan Expressway (Interstate 87), and across the Harlem River. As mentioned above, the majority
of the subject site is improved with a 4-story retail power center and a 6-level parking garage.
Based on the subject parcel’s size, location, and utility, we have considered that the subject site is unique in the
marketplace. The subject parcel represents a unique site that is difficult to duplicate in terms of size, access,
development potential, and visibility within The Bronx and New York City. However, based on its significantly
large size, the subject site has a limited number of potential investors that could develop the property.
95
As noted by the summary of comparables, the sales reflect a range of unadjusted price per square foot between
$93.05 and $290.03 per square foot of land area, with an average unadjusted price per square foot of $139.06
per square foot of land area. The sales occurred between June 2012 and March 2015. After adjustments, the
comparable improved sales reflect unit prices ranging from $89.63 to $134.91 per square foot of land area, with
an average adjusted price per square foot of $105.54 per square foot of land area. We have placed most reliance
on Sale Nos. 1, 6 and 7 based on their comparable locations and physical characteristics. These comparables
reflected a range in unit priced from $89.63 to $105.03 per square foot, with an average $97.69 per square foot.
After considering all of the available market data in comparison with the characteristics of the subject parcel, it is
our opinion that the proper unit value to apply to the subject site is $100.00 per square foot of land area. We
conclude that the indicated land value of the subject site, by the Sales Comparison Approach is as follows:
PERCEN T ADJU STMENT METHOD SU MMAR Y
LAND VALUE-AS VACANT:
Subject Site Land Area (SF):
Concluded Price Per SF of Land Area :
731,769
x $100.00
$73,176,900
Rounded:
$73,000,000
Per SF of Land Area:
$99.76
96
METHODOLOGY
Using the Sales Comparison Approach, we developed an opinion of value by comparing the subject property to
substitution.
By analyzing sales that qualify as arm’s-length transactions between willing and knowledgeable buyers and

Research recent, relevant property sales and current offerings in the competitive area;

Select and analyze properties that are similar to the subject property, analyzing changes in economic

Identify sales that include favorable financing and calculate the cash equivalent price;

Reduce the sale prices to a common unit of comparison such as price per square foot of Gross Leasable
Area or effective gross income multiplier;

Make appropriate comparative adjustments to the prices of the comparable properties to relate them to
the subject property; and

Interpret the adjusted sales data and draw a logical value conclusion.
ANALYSIS OF RETAIL SALES
We have researched the market for sales of comparable retail power centers within New York City. However,
based on the lack of comparable retail sales located in New York City, we have included sales of retail power
centers throughout the United States. In addition, we have also included the recent contract of the Kings Plaza
Mall in Brooklyn, New York. Based on the limited sales activity of large retail properties within New York City, we
wanted to include this sale, albeit a mall transaction, to indicate the premium paid by investors for well located
irreplaceable retail properties in major urban markets like New York City.
Due to the nature of the subject property and the level of detail available for the comparable data, we have
elected to analyze the comparables through application of a traditional adjustment grid using percentage
adjustments
We have presented a summary of several transactions involving retail centers from which price trends may be
identified for the extraction of value parameters. These transactions have been segregated by year of acquisition
so as to lend additional perspective on our analysis. Comparability in both physical and economic characteristics
are the most important criteria for analyzing sales in relation to the subject property. However, it is also important
to recognize the fact that retail centers are distinct entities by virtue of age and design, visibility and accessibility,
the market segmentation created by anchor stores and tenant mix, the size and purchasing power of the
particular trade area, and competency of management. Thus, the Sales Comparison Approach, when applied to a
property such as the subject can, at best, only outline the parameters in which the typical investor operates. The
sales deemed most comparable to the subject property are presented in the following table. The following pages
contain a summary of the improved properties that we compared to the subject property, and the adjustment
process.
VALUATION
97
SUMMARY OF COMPARABLE IMPROVED SALES
No.
1
Property Name
Address, City, State
Riverdale Crossings
Bronx, New York
Property Sub-Type
Retail Center
TRANSACTION INFORMATION
Total Center
GLA
159,037
Sold GLA
159,037
BJ’s Wholesale Club
Year Built
2014
Grantor
Confidential
Grantee
Confidential
Sale Date
Jan-2015
Contract
Anchors
Sale Price
$125,000,000
Price/
Sold
GLA
$785.98
NOI/SF
$40.16
OAR
5.11%
Occup.
100.00%
2
74-17 74-25 Grand Avenue
N/E/C 74th Street
Queens, New York
Retail Center
99,986
99,986
Stop and Shop
1997
CPT Grand
Avenue LLC
Shops at Grand
Avenue LLC
Oct-14
$56,000,000
$560.08
$28.00
5.00%
100.00%
3
2856 Steinway Street
N/E/C 28th Avenue
Queens, New York
Retail Center
51,079
51,079
Duane Reade and New
York Sports Club
1920
2856 Astoria
Boulevard
2856 Steinway
Street-Millbridge
LLC
Aug-14
$32,000,000
$626.48
$28.94
4.62%
100.00%
4
Waldbaums Shopping Center
152-59 10th Avenue,
Queens, New York
Neighborhood Center
62,000
62,000
Waldbaum's
1930
Whitestone
Grocery
Shopping Center
LLC
Feil Whitestone
LLC
Jan-14
$23,903,127
$385.53
$21.20
5.50%
100.00%
5
Pelham Manor Shopping Plaza
2 Penn Place
Pelham Manor, New York
Power Center
228,883
228,883
BJ's Wholesale
2007
Acadia Realty
Trust
Retail Properties
of America, Inc.
Jan-14
$58,529,960
Leasehold
$255.72
$14.95
5.85%
98.00%
6
Canarsie Plaza
8925 Avenue D
Brooklyn, New York
Neighborhood Center
277,907
277,907
BJ’s Wholesale Club,
Michael’s, PetSmart,
Five Below, Chase Bank
2011
Cole Real Estate
Investments
Acadia Realty
Dec-12
$124,000,000
$446.19
$27.66
6.20%
100.00%
7
Clocktower Plaza
9210 Atlantic Avenue
Queens, New York
Neighborhood Center
78,820
78,820
BJ's Wholesale
1985
Winstanley
Enterprises, Inc.
Equity One, Inc.
Sep-12
$56,000,000
$710.48
$42.63
6.00%
100.00%
8
Lake Grove Commons
110 - 150 New Moriches Road
Lake Grove, New York
Retail Center
141,382
141,382
Whole Food's
LA Fitness
2008
Lake Grove
Regency Centers
Enterprises LLC
Jan-12
$72,500,000
$512.80
$28.72
5.60%
100.00%
STATISTICS
Low
51,079
51,079
1920
Jan-12
$23,903,127
$255.72
$14.95
4.62%
98%
High
277,907
277,907
2014
Oct-14
$125,000,000
$785.98
$42.63
6.20%
100%
Mean
137,387
137,387
1984
Jul-13
$69,914,732
$535.41
$29.03
5.48%
100%
VALUATION
98
IMPROVED SALE ADJUSTMENT GRID
No.
1
2
3
4
5
6
7
8
ECONOMIC ADJUSTMENTS (CUMULATIVE)
Property
Rights
Conditions
Market (1)
Conveyed
of Sale
Conditions
Price PSF &
Date
Leased Fee
-10.0%
Leased Fee
-10.0%
Leased Fee
-10.0%
Leased Fee
-10.0%
Leasehold
0.0%
Leased Fee
-10.0%
Leased Fee
-10.0%
Leased Fee
-10.0%
$785.98
1/15
$560.08
10/14
$626.48
8/14
$385.53
1/14
$255.72
1/14
$446.19
12/12
$710.48
9/12
$512.80
1/12
$255.72
$785.98
$535.41
Arm's-Length
0.0%
Arm's-Length
0.0%
Arm's-Length
0.0%
Arm's-Length
0.0%
Arm's-Length
0.0%
Arm's-Length
0.0%
Arm's-Length
0.0%
Arm's-Length
0.0%
Inferior
2.2%
Inferior
3.4%
Inferior
4.3%
Inferior
7.3%
Inferior
7.3%
Inferior
13.1%
Inferior
14.5%
Inferior
18.3%
PROPERTY CHARACTERISTIC ADJUSTMENTS (ADDITIVE)
Subtotal
$722.95
-8.0%
$521.21
-6.9%
$588.08
-6.1%
$372.31
-3.4%
$274.39
7.30%
$454.18
1.8%
$732.15
3.0%
$545.97
6.5%
STATISTICS
Location
Superior
-5.0%
Inferior
15.0%
Inferior
15.0%
Inferior
15.0%
Inferior
25.0%
Inferior
5.0%
Inferior
5.0%
Inferior
20.0%
Size
Smaller
-20.0%
Smaller
-25.0%
Smaller
-30.0%
Smaller
-30.0%
Smaller
-15.0%
Smaller
-15.0%
Smaller
-25.0%
Smaller
-20.0%
Age, Quality
& Condition
Economics
Inferior
15.0%
Inferior
20.0%
Inferior
20.0%
Inferior
30.0%
Inferior
25.0%
Inferior
20.0%
Inferior
10.0%
Inferior
10.0%
Inferior
5.0%
Inferior
15.0%
Inferior
10.0%
Inferior
25.0%
Inferior
35.0%
Inferior
25.0%
Inferior
5.0%
Inferior
15.0%
- Low
- High
- Average
Other
Similar
0.0%
Similar
0.0%
Similar
0.0%
Similar
0.0%
Similar
0.0%
Similar
0.0%
Similar
0.0%
Similar
0.0%
$686.80
-5.0%
$651.51
25.0%
$676.29
15.0%
$521.23
40.0%
$466.46
70.0%
$613.14
35.0%
$695.54
-5.0%
$682.47
25.0%
Low High Average -
$466.46
$695.54
$624.18
(1)
Market Conditions Adjustment
PERCENT ADJUSTMENT METHOD SUMMARY
Market Value As-Is
Indicated Value Per GLA
Subject GLA
$675.00
x 912,333
Indicated Value
$615,824,775
Rounded
Per square foot
$616,000,000
Adj.
Price
PSF
$675.19
VALUATION
IMPR OVED SALE LOCATION MAP
99
VALUATION
100
PERCENTAGE ADJUSTMENT METHOD
ADJUSTMENT PROCESS
subject property.
The property rights conveyed in a transaction typically have an impact on the price that is paid. Acquiring the fee
simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest typically
means that the property being acquired is encumbered by at least one lease, which is a binding agreement
transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of a lease,
which conveys the rights to use and occupy the property to the buyer for a finite period of time. At the end of the
lease term, there is typically no reversionary value to the leasehold interest. The subject property is ground
leased through September 13, 2015. We have made a 10 percent downward adjustment to all of the leased fee
sales, which excludes Sale No. 5 which is also the sale of the leasehold interest.
FINANCIAL TERMS
lower equity returns after debt service. We have analyzed all of the transactions to account for atypical financing
terms. To the best of our knowledge, all of the sales used in this analysis were accomplished with cash or marketoriented financing.
CONDITIONS
OF
SALE
considered to be "arms-length" market transactions between both knowledgeable buyers and sellers on the open
market. Therefore, no adjustments were required.
MARKET CONDITIONS
The sales that are included in this analysis occurred between January 2012 and January 2015. As the market has
improved over this time period, we have made a positive adjustment for the improving market conditions at a rate
of 5.0 percent per annum.
VALUATION
101
LOCATION
those of the subject property. Each comparable was adjusted accordingly.
PHYSICAL TRAITS
Each property has various physical traits that determine its appeal. These traits include size, age, condition,
quality, and utility. Each comparable was adjusted accordingly.
ECONOMIC CHARACTERISTICS
The economic characteristics of a property include its occupancy levels, operating expense ratios, tenant quality,
and other items not covered under prior adjustments that would have an economic impact on the transaction.
Each comparable was adjusted accordingly.
OTHER
This category accounts for any other adjustments not previously discussed. Based on our analysis of these sales,
none required any additional adjustment.
DISCUSSION OF COMPARABLE RETAIL SALES
COMPARABLE SALE NO. 1
This is the contract of sale for a recently completed retail power center known as Riverdale Crossings, located at
184-190 West 237th Street within the Kingsbridge neighborhood of the Bronx. The property is being acquired by a
confidential buyer from AG-Metropolitan Riverdale Crossing, L.L.C. for a reported price of $125,000,000 or
$785.98 per square foot. The property was formerly improved with the Stella D’oro Bakery which was razed for
the development of Riverdale Crossings. The center is anchored by BJ’s Wholesale Club, which has leased
118,423 square feet (74.5%) of the subject property and contains its own 2-story, plus lower level building with
rooftop parking. The majority of the BJ’s Warehouse Club retail space is located below grade. The remaining
40,714 square feet of in-line retail space contains ground and second floor retail space along with rooftop parking.
The property was 100 percent leased to 9 tenants inclusive of BJ’s Wholesale Club, Bank of America, Chipotle,
Smashburger, TMobile, Subway, Buffalo Wild Wings and CityMD. The property is being purchased based upon
an overall capitalization rate of 5.11 percent. After all adjustments, this comparable indicated an adjusted unit
value of $686.80 per square foot.
This is the sale of the Shops at Grand Avenue retail center located at 74-17 74-25 Grand Avenue, at the
northeast corner of 74th Street within the Maspeth neighborhood of Queens. Shops at Grand Avenue LLC
purchased the property from CPT Grand Avenue LLC in October 2014 for $56,000,000. The property comprises a
total of 99,986 square feet of gross leasable area. At the time of sale, the property was anchored by a Stop and
Shop supermarket and six inline tenants inclusive of: NY Physical Therapy & Wellness, Party City, Premier
Medical Care, Ridgewood Savings, Sally Beauty and Sleep's. The property was purchased based on an overall
capitalization rate of 5.00 percent. The property was 100 percent leased at the time of sale. The sale price
equates to a unit price of $560.08 per square foot. After all adjustments, this comparable indicated an adjusted
unit price of $651.51 per square foot.
102
This is the sale of 2856 Steinway Street, a 3-story retail center on the northwest corner of 30th Avenue within the
Astoria neighborhood of Queens. 2856 Steinway Street-Millbridge LLC purchased the property from 2856 Astoria
LLC in August 2014 for $32,000,000. The property contains 51,079 square feet of gross leasable area. At the
time of sale, the property was 100 percent leased on a long term basis to three national tenants: Duane Reade
(10,990 SF), Chase Bank (4,549 SF), and New York Sports Clubs (35,540 SF). The property was purchased
based on an overall capitalization rate of 4.62 percent. The sale price equates to a unit price of $626.48 per
square foot. After all adjustments, this comparable indicated an adjusted unit price of $676.29 per square foot
This is the sale of a neighborhood shopping center located at 152-59 – 15301 10th Avenue in the Whitestone
neighborhood of Queens. Whitestone Shopping Grocery Shopping Center LLC sold the property to Feil
Whitestone LLC in January 2014 for $23,903,127. The property was 100 percent net leased to Waldbaum’s
through February 2024 and possess several renewal options. Waldbaum’s occupies approximately 56,000 square
feet (90.3%) and leases the remainder of the property to several retail tenants. The property was purchased
based on an overall capitalization rate of 5.50 percent. The property was previously purchased in December 2011
for $17,050,000, or $275 per square foot. The sale price equates to a unit price of $385.53 per square foot. After
all adjustments, this comparable indicated an adjusted unit value of $521.23 per square foot.
This is the sale of the leasehold interest in the Pelham Manor Shopping Center located at 2 Penn Place within the
Pelham Manor neighborhood of Westchester. Acadia Realty Trust sold the property to Retail Properties of
America for $58,529,960 or $255.72 per square foot in November 2013. This power center comprises 228,883
square feet of gross leasable area. The property was 98 percent leased to BJ’s Wholesale Club, Michael’s
PetSmart, Five Below, Chase Bank and a self-storage tenant. The initial term of the ground lease extends
through 2039, and possesses 60 years of renewal options thereafter. The property was purchased based upon an
overall capitalization rate of 5.85 percent. After all adjustments, this comparable indicated an adjusted unit value
of $466.46 per square foot.
This is the sale of a neighborhood shopping center known as Canarsie Plaza. The property is located at 8925
Avenue D in the Canarsie neighborhood of Brooklyn. The property contains a total gross leasable area (GLA) of
277,907 square feet. In December 2012, Canarsie Plaza LLC sold this property to Cole MT Brooklyn NY, LLC for
$124,000,000, or $446.19 per square foot. The center was anchored by BJ's Wholesale Club (177,135 SF), and
other tenants included Planet Fitness (15,000 SF), Petsmart (13,574 SF) and Dollar Tree (10,018 SF). BJ's
occupies 64 percent of the center's GLA and is leased through 2030, with 8 percent increases in 2015 and 2020,
and a 10 percent increase in 2025. It sits adjacent the Brooklyn Terminal Market. The property was purchased
based on an overall capitalization rate of 6.20 percent. After all adjustments, this comparable indicated an
adjusted unit price of $613.14 per square foot.
103
This is the sale of the Clocktower Shopping Center, located along Atlantic Avenue within the Ozone Park
neighborhood of Queens. Equity One purchased the property from Winstanley Enterprises Inc in September
2012 for $56,000,000, or $710.48 per square foot. This neighborhood center comprises 78,820 square feet of
gross leasable area. The property was 100 percent leased to Pathmark (62,668 SF), Fashion Bug (5,068 SF), a
Burger King (2,996 SF) and several small in-line tenants (totaling 8,088 SF). Pathmark occupies 80 percent of the
shopping center and is leased through 2023, with 5 percent increases every 5 years. Pathmark, Burger King and
Fashion Bug have exhibited successful annual sales of $56.1 mm, $1.4 mm and $1.3 mm, respectively. The
property was purchased based upon an overall capitalization rate of 6.00 percent. After all adjustments, this
comparable indicated an adjusted unit value of $695.54 per square foot.
This is the sale of Lake Grove Commons located at 110-150 New Moriches Road in Lake Grove, New York.
Regency Centers purchased the property from Lake Grove Enterprises in January 2012 for $75,200,000, or
$512.80 per square foot. The retail center contains 141,382 square feet of gross leasable area inclusive of anchor
tenants Whole Foods and LA Fitness. The center was 100.00 percent occupied. The property was constructed in
2010 and exhibits good quality and condition. At the time of sale, tenants at this shopping center included Petco,
Jared Jewlers, T-Mobile, and a Fidelity Investments. The overall capitalization rate at the time of sale was 5.60
percent. According to the seller, the property commanded substantial buyer interest and competitive bidding. After
all adjustments, this comparable indicated an adjusted value of $682.47 per square foot. Summary of Percentage
ADJUSTMENT METHOD
The subject property is a multi-level urban power retail center comprising 912,333 square feet of gross leasable
area (GLA) with an attached 6-level parking garage totaling 2,575 spaces. The property is 99.3 percent leased
and is anchored by Target, BJ’s Wholesale Club, Home Depot, Bed, Bath & Beyond, and Toys R Us/Babies R Us
on a 16.8 acre site in Bronxchester section of The Bronx, adjacent to the Major Deegan Expressway (Interstate
87), and Yankee Stadium. We have also considered the subject’s significant parking component in our analysis.
Prior to adjustments the sales reflected a range of price per square foot of $255.72 to $785.98 per square foot.
After adjustments, the sales reflect a range of price per square foot from $466.46 to $695.54 per square foot. The
average price per square foot exhibited by the comparables after all adjustments is $624.18 per square foot. We
have placed greatest reliance on Sale Nos. 1, 2, 7 and 8 as they are sales of retail shopping centers with similar
characteristics, tenancies and economic profiles as the subject property. These sales demonstrated adjusted unit
values ranging from $651.51 to $695.54 per square foot with an average of $679.08 per square foot. Therefore,
the As Is Market Value conclusion via the Sales Comparison Approach is as follows:
PERCEN T ADJU STMENT METHOD SU MMAR Y
MARKET VALUE AS IS:
Subject Gross Leasable Area:
Concluded Price Per GLA:
Indicated Value:
Rounded:
Per Square Foot of GLA:
912,333
x $660.00
$615,824,775
$616,000,000
$675.19
104
However, as detailed in the Ground Lease Analysis and Land Valuation section of this report, the leaseholder is
obligated for various future transaction payments in the event of a property sale, refinance or equity disposition.
Since our market value estimate in our valuation assumes a sale of the property as of the date of value,
and based on the defined Net Sale Proceeds calculation within Section 12.1b (vi) of the subject ground
lease, we have adjusted our preliminary market value by the defined 7.5 percent of net proceeds
obligated to be distributed to the landlord (New York City) by the lessee. Therefore, our reconciled overall
market value of the leasehold interest in the subject property is as follows:
Overall, we have estimated the market value of the subject property to be $616,000,000 as detailed in the
previous analysis within the Sales Comparison Approach section of this report. According to the Section 12.1b (vi)
of the ground lease, the Net Sale Proceeds are defined as the Gross Sale Proceeds (market value of the subject
property) less the following deductions:
(1) the amount of any Mortgage (including accrued interest and other sums), or proportionate share thereof,
satisfied with the proceeds of Sale or assigned or purchased by a new lender or assumed or to which the estate
conveyed in such Sale is taken subject by the purchaser at such Sale,
(2) accrued Operating Losses,
(3) any reasonable or customary expenses incurred in effecting such Sale, including, but not limited to, brokerage
commissions, attorneys' fees, transfer and transfer gains taxes, prepayment premiums, the costs of any repairs or
restorations required in connection with such Sale and title insurance premiums, provided however, that with
respect to any such expenses paid to Affiliates, such amounts shall be no more than would have been paid to an
unrelated party in an arm's length transaction,
(4) in the event that in connection with any foreclosure of a Mortgage or an Assignment, Transfer or Major
Sublease in lieu of a foreclosure of a Mortgage, a Mortgagee or any Control Affiliate or nominee of a Mortgagee
shall become Tenant hereunder and all or any portion of the indebtedness secured by such Mortgage shall have
been discharged or reduced without full payment of such indebtedness, an amount equal to the amount of the
indebtedness so discharged or reduced, together with interest and other charges which would have accrued with
respect thereto through the date of the Sale, absent such discharge or reduction,
(5) an amount equal to Net Sales Proceeds upon which a prior Transaction Payment was made,
(6) all cash equity of Tenant invested in the Premises and
(7) a developer’s fee equal to 3% of Development Costs.
105
We have reviewed a letter dated January 16, 2014, from the ground lessee (BTM Development Partners, LLC ) to
the City of New York (fee owner) which details the anticipated transaction costs related to the recent
$380,000,000 refinancing of the subject property. According to the ownership, the economics of the refinancing
are consistent with the current deductions. The letter, which is exhibited in the Addenda, details the allowable
deductions from the Gross Loan Proceeds and the calculation of the Net Cash Proceeds. Some of the deductions
defined in the ground lease used in calculating the transaction payment apply to both a refinancing or a sale
transaction. However, based on the pending $380,000,000 mortgage, we have utilized this amount as the
mortgage amount in the calculation of Net Sale Proceeds. Therefore, we have utilized the applicable deductions
(Nos. 1, 3, 6 & 7 referenced above) which total $466,726,757 which were detailed by the lessee while calculating
the Net Cash Proceeds from a refinance. In addition, we have also estimated transactions costs of 4.0 percent of
the sales price ($616,000,000) or $24,640,000 regarding sales commissions, sales transfer tax, legal, title,
professional fees, and other miscellaneous costs. Overall, our estimated deductions totaled $466,726,757. As a
result, our Net Sale Proceeds reflected $149,273,243. Based on the defined 7.5 percent formula in the ground
lease, the transaction payment due the landlord was calculated to be $11,195,493. We have rounded the
transaction payment to $11,000,000 for the income approach.
Exhibited below is our calculation of the actual “Net Sales Proceeds” and the Transaction Payment of 7.5 percent
of net proceeds:
CALCU LATION OF TH E TRAN SACTION PA YMEN T FROM SALE
Preliminary Market Value-Leasehold:
$616,000,000
Less: Deductions Per Ground Lease
1: Mortgage Amount:
$380,000,000
2: Operating Losses:
N/A
3: Sale Costs @ 4% (sales commissions, transfer tax, legal, title, etc.)
$24,640,000
4: Adjustment of any indebtedness discharged or reduced
N/A
5: Adjustment for prior Transaction Payment:
N/A
6: All cash equity of Tenant invested in the subject
$40,500,000
7: Developer fee equal to 3% of development costs
$13,960,734
Total Deductions:
$466,726,757
Net Sale Proceeds from Sale
$149,273,243
Transaction Payment due @7.5% from Sale
$11,195,493
Rounded:
$11,000,000
Therefore, our opinion of As Is market value via the Sales Comparison Approach is as follows.
SALES COMPAR ISON A PPROACH- CA PITALIZATION CONC LUSION-A FTER
N ET SA L E P R O C E ED S
Preliminary As Is Market Value:
$616,000,000
Less: Net Sale Proceeds Obligation
$ 11,000,000
As Is Market Value, rounded,
$605,000,000
106
107
METHODOLOGY
The Income Capitalization Approach determines the value of a property based on the anticipated economic
benefits. The principle of “anticipation” is essential to this approach, which recognizes the relationship between an
asset’s potential future income and its value. To value the anticipated economic benefits of a property, potential
income and expenses must be projected, and the most appropriate capitalization method must be selected.
The most common methods of converting net income into value are Direct Capitalization and Discounted Cash
Flow. In direct capitalization, net operating income is divided by an overall capitalization rate to indicate an
opinion of market value. In the discounted cash flow method, anticipated future cash flows and a reversionary
value are discounted to an opinion of net present value at a chosen yield rate (internal rate of return).
Investors acquiring this type of asset will typically look at year one returns but must also consider long-term
strategies. Hence, depending on certain factors, each of the income approach methods has merit. Considering all
of the aspects that would influence an investment decision in the subject property, we conclude that discounted
cash flow method is the most appropriate in this assignment.
POTENTIAL GROSS INCOME
Potential gross income (income before operating and fixed expenses) is determined by existing contract rents as
well as economic rents obtainable for the subject property’s vacant space and space at lease turnover. This
income is estimated by forecasting the earning potential of the property under prevailing and foreseeable market
conditions. Appropriate allowances for vacancy and operating expenses, based on market conditions, are then
deducted from the potential gross income or gross earnings. This process results in an estimate of net monetary
benefits to ownership, which can then be capitalized into value.
The total potential gross revenues generated by a retail property are composed of a number of distinct elements:
minimum rent determined by lease agreement; additional overage rent based upon a percentage of retail sales;
reimbursement of certain expenses incurred in the ownership and operation of the real estate; and other
miscellaneous revenues. Minimum base rent represents a legal contract establishing a return to investors in the
real estate, while the passing-on of certain expenses to tenants serves to maintain this return in an era of
continually rising costs of operation. Additional rent based upon a percentage of retail sales at the subject serves
to preserve the purchasing power of the residual income to an equity investor over time. Finally, parking income
adds an additional source of revenue in the complete operation of the subject property.
MINIMUM RENT
Minimum rents produced by the subject property are derived from that paid by the various tenant types. The
projection utilized in this analysis is based upon the existing roll and our projected leasing schedule in-place as of
the date of appraisal, together with our assumptions as to the absorption of the vacant space, market rent growth,
and renewal/turnover probability.
The rental income that an asset such as the subject property will generate for an investor is analyzed as to its
quality, quantity, and durability. The quality and probable duration of income will affect the amount of risk that an
informed investor may expect over the property's useful life. Segregation of the income stream along these lines
allows us to control the variables related to the center's forecasted performance with greater accuracy. Each
tenant type lends itself to a specific weighting of these variables as the risk associated with each varies.
108
Minimum rents forecasted at the subject property are essentially derived from various tenant categories, namely
specialty tenant revenues consisting of anchor, junior anchor, and in-line space, etc. In our investigation and
analysis of the marketplace, we have surveyed, and ascertained where possible, rent levels being commanded by
competing centers. However, it should be recognized that large retail centers are generally considered to be
separate entities by virtue of age and design, accessibility, visibility, tenant mix, and the size and purchasing
power of their trade area. Consequently, the best measure of minimum rental income is its actual rent roll leasing
schedule. As such, our analysis of recently negotiated leases for tenants at the subject provides important insight
into perceived market rent levels for the property. Inasmuch as a tenant's ability to pay rent is based upon
expected sales achievement, the level of negotiated rents is directly related to the individual tenant's perception of
their expected performance at the center.
SUBJECT TENANCY
The subject property is demised for multi-tenant occupancy. On the following pages we will discuss the subject's
occupancy, lease structure and rent levels, and we will contrast this information against comparable properties in
the market.
SPACE SUMMARY & LEASED STATUS
The following is a summary of the leased and vacant space within the subject property. The subject property
contains 912,333 square feet of space, of which 906,270 square feet is leased.
SPACE SUMMARY & OCCUPANCY STATUS
SPACE SUMMARY
Tenant Category
Retail C
River Ave-B
Retail F
Retail E
Retail P
Anchor
Junior Anchor
Total
Occ. SF
21,817
10,634
19,881
10,131
20,351
443,500
379,956
906,270
Vct. SF
6,063
6,063
Total SF Occupancy
21,817
100.0%
10,634
100.0%
25,944
76.6%
10,131
100.0%
20,351
100.0%
443,500
100.0%
379,956
100.0%
912,333
99.3%
There are a total of 30 tenant spaces, of which 29 spaces are leased and 1 is vacant. The chart summarizes the
leased level based on the leases in place as of the date of appraisal. It should be noted that the Michael’s retail
space is currently dark following a period of rent abatement which expired in December 2013. According to the
ownership, the tenant is currently paying rent and is expected to open in the third quarter 2015.
The subject property is anchored by Target, BJ’s Wholesale Club, and Home Depot, which lease a total of
443,500 square feet or 48.6 percent of the property. It should be noted that the majority of the subject property is
net leased long term at below current market rent levels.
Minimum rents forecasted at the subject property are derived from various tenant categories. We have grouped
the tenants into categories that enable us to make like-kind comparisons to other subject leases, which ultimately
allows us to make a meaningful comparison of each tenant category to the appropriate set of comparable rents.
As an aid to the reader, we preface our analysis of the subject’s leases with a discussion of their lease structure.
109
LEASE STRUCTURE
A lease typically defines the responsibilities of landlord and tenant with regard to the payment of operating
expenses. The Appraisal Institute advises that the following basic distinctions can be made:

Gross Lease - landlord pays all operating expenses.

Modified Lease - landlord and tenant share the cost of operating expenses.

Net Lease - tenant pays all operating expenses.
These terms do not always mean the same thing in all markets, and there are many variations to these common
terms. As each market has different nomenclature, it is important to understand the terms that are used locally,
and the resulting expense obligations that apply to both tenant and landlord.
It is essential to understand expense reimbursement clauses when determining the value of a property. Leases
can include expense stops, expense caps, specific billing pools and expense exclusions. The tenant’s share of
the expense can be pro-rata, derived by formula, or negotiated. Below we discuss the lease structures found in
the local market, as well as the structure of the leases within the subject property.
L O C A L M A R K E T L EA S E S T R U C T U R E
In the subject’s market, leases for retail centers similar to the subject property type are typically written on a net
basis. Under this lease structure, the tenant is obligated to pay its pro rata share of real estate taxes, and
common area maintenance (CAM) charges.
Lease terms are generally between 10 and 25 years in length. Some leases were leased for 5 years, with renewal
options that could extend the lease term to 10 or 15 years. Rent increase schedules vary, but typically include
rent escalations of 3.0 percent per annum, or 10.0 percent every 5 years.
SUBJECT PROPERTY LEASE STRUCTURE
The existing leases at the subject property are written on a net basis. Under this lease structure, the tenants are
responsible for its pro rata share of real estate taxes, and common area maintenance (CAM) charges including
insurance, security, and utilities.
At the subject property, lease terms are generally between 10 and 25 years in length. Generally, rent increases
reflect rent steps of 10 percent every 5 years.
ATTAINED RENT SCHEDULE
The attained base rent listed for each tenant equals current monthly base rent annualized, excluding any future
contractual rent increases, except for the contracted leases which start after the analysis start date, where the
initial monthly base rent is annualized.
As Of Value Date:
Jun-15
Start
Date
MARKET RENT
Market Rent
End
Date
Area
( SF )
Contract
Rent/Year
Contract
Rent/SF
COMPARISON
Comparison
Contract Rent
Versus Market Rent
Tenant Name
Suite
Retail C
AT&T
BTM Footwear
Chase
GameStop
GNC
Payless
Sprint
T-Mobile
Subtotal
C5a
C1
C3
C5b
C2
C4
C6
C7
May-09
Feb-10
Nov-13
Aug-09
Oct-09
Aug-09
Oct-11
May-09
Aug-19
May-20
Nov-23
Aug-19
Sep-19
Aug-24
Nov-21
Jun-19
3,412
4,585
2,030
1,518
1,980
3,053
2,511
2,728
21,817
$337,788
$220,080
$130,848
$150,288
$196,020
$268,668
$175,776
$270,072
$1,749,540
$99.00
$48.00
$64.46
$99.00
$99.00
$88.00
$70.00
$99.00
$80.19
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$341,200
$458,500
$203,000
$151,800
$198,000
$305,300
$251,100
$272,800
$2,181,700
River Ave-B
Sketchers
TMobile
Subtotal
D1
B1b
Jun-10
Mar-11
Sep-20
Apr-16
8,741
1,893
10,634
$218,520
$94,536
$313,056
$25.00
$49.94
$29.44
$45.00
$45.00
$45.00
$393,345
$85,185
$478,530
Retail F
Applebee's
CUNY
Marisco Centro
Subway
Subtotal
F1g
F1c
F1a
F1b
Mar-09
May-14
Mar-09
Dec-09
Jul-29
Jul-27
Feb-20
Dec-19
6,661
8,145
3,700
1,375
19,881
$512,892
$407,112
$240,504
$122,736
$1,283,244
$77.00
$49.98
$65.00
$89.26
$64.55
$55.00
$55.00
$55.00
$55.00
$55.00
$366,355
$447,975
$203,500
$75,625
$1,093,455
Retail E
CUNY
Subtotal
E1-3
May-14
Jul-27
10,131
10,131
$506,364
$506,364
$49.98
$49.98
$50.00
$50.00
$506,550
$506,550
0.04% below market
0.04% below market
Retail P
CUNY
Jaba Furniture
Subtotal
P1b
P1a
May-12
Oct-10
Jul-27
Sep-20
8,351
12,000
20,351
$502,068
$480,000
$982,068
$60.12
$40.00
$48.26
$60.00
$60.00
$60.00
$501,060
$720,000
$1,221,060
0.20% above market
33.33% below market
19.57% below market
Anchor
BJ's Warehouse
Home Depot
Target
Subtotal
B1a
A1a
A3a
Aug-09
Feb-09
Oct-08
Aug-29
Feb-34
Oct-33
130,099
124,955
188,446
443,500
$4,878,708
$5,498,016
$1,043,988
$11,420,712
$37.50
$44.00
$5.54
$25.75
$40.00 $5,203,960
$40.00 $4,998,200
$40.00 $7,537,840
$40.00 $17,740,000
6.25%
10.00%
86.15%
35.62%
below market
above market
below market
below market
Junior Anchor
Bed, Bath & Beyond
Best Buy
Marshalls
Chuck E Cheese
Michaels
Raymour & Flanigan
Staples
Toys/Babies R Us
Subtotal
B3b
B3c
B3a
A23
A23
A2b
B2b
A1b
B2a
Sep-09
Aug-09
Aug-09
Jul-13
Jan-12
Jan-14
Apr-09
Jun-09
Aug-09
Jan-25
Jan-20
Aug-19
Dec-28
Jan-28
Sep-21
Oct-24
Jun-24
Jan-20
33,877
52,086
37,401
19,834
74,329
23,204
46,814
15,490
76,921
379,956
$1,253,448
$2,578,260
$1,346,436
$654,528
$1,932,552
$884,076
$2,059,812
$775,272
$1,769,184
$13,253,568
$37.00
$49.50
$36.00
$33.00
$26.00
$38.10
$44.00
$50.05
$23.00
$34.88
$45.00 $1,524,465
$45.00 $2,343,870
$45.00 $1,683,045
$32.00
$634,688
$35.00 $2,601,515
$45.00 $1,044,180
$45.00 $2,106,630
$45.00
$697,050
$45.00 $3,461,445
$42.37 $16,096,888
17.78%
10.00%
20.00%
3.13%
25.71%
15.33%
2.22%
11.22%
48.89%
17.66%
below market
above market
below market
above market
below market
below market
below market
above market
below market
below market
906,270
$29,508,552
$32.56
$43.38 $39,318,183
24.95% below market
GRAND-TOTALS
29 tenants in occupancy
Rent/SF Annualized
110
1.00%
52.00%
35.54%
1.00%
1.00%
12.00%
30.00%
1.00%
19.81%
below market
below market
below market
below market
below market
below market
below market
below market
below market
44.45% below market
10.98% above market
34.58% below market
40.00%
9.12%
18.18%
62.30%
17.36%
above market
below market
above market
above market
above market
Note: Attained rent equals current rent annualized for twelve months, and it excludes contractual rent increases
A total of 29 tenants currently lease space within the property. The average rent for all of the existing tenants is
$32.56 per square foot, which is below current market rent levels. It should be noted that Target paid the
developer $46,394,000, which reflected a 75 percent pre-payment of their entire contract rent throughout the 25year lease term, in addition to the rent payments detailed in the lease agreement. The grand-totals exhibited in
the attained rent schedule for contract rent do not incorporate lease-up or downtime provisions. Hence, the grandtotals might differ from the projections shown later in this section.
ANALYSIS OF COMPARABLE ANCHOR TENANT RENTS
The following table summarizes rental activity for comparable anchor space in competing buildings in the market.
111
MAJOR ANCHOR RENT COMPARABLES
INITIAL
RENT/SF
LEASE TYPE
TERM (yrs.)
Proposed CityPoint Tower
1 Dekalb Avenue
Brooklyn, New York
700,000
2015 Century 21
7/15
108,855
15
$27.27
10% every 60
months
Net
This is an anchor tenant lease within a proposed retail
center in Downtown Brooklyn. The property is expected to
be delivered in 2015.
2
Gateway Center II
339-579 Gateway drive
Brooklyn, New York
598,279
2014 Burlington Coat
10/14
74,348
15
$34.00
Annual Increases
Net
This is an anchor tenant lease within a recently developed
retail center in Brooklyn.
3
Gateway Center II
Brooklyn, New York
598,279
2014 Shope Rite
10/14
89,782
20
$27.50
Annual Increases
Net
retail center in Brooklyn.
4
Riverdale Crossings
Bronx, NY
159,037
2014 BJ Wholesale
8/13
107,000
20
$39.00
10% every 60
months
Net
retail center in the Bronx.
5
East River Plaza
517 East 116th Street
Upper Manhattan, NY
494,560
2009 Target
7/10
130,664
20
$25.38
10% every 60
months
Net
This is an anchor tenant lease within an urban, vertical
power center located in Harlem.
6
East River Plaza
517 East 116th Street
Upper Manhattan, NY
494,560
2009 Costco
11/09
110,074
20
$45.42
10% every 60
months
Net
This is an anchor tenant lease within a urban, vertical
power center located in Harlem.
7
Rego Park Center
61-01 Junction Boulevard
Queens, NY
926,180
2010 Costco
6/09
136,451
25
$36.30
9% Every 3 Yrs
Net
This property is an anchor tenant lease in a multi-level retail
power center located between Queens Boulevard and the
Long Island Expressway.
8
Rego Park Center
61-01 Junction Boulevard
Queens, NY
926,180
2010 Century 21
5/09
140,537
20
$31.08
5% Yr. 2; 3% Inc.
Annually
Net
This property is an anchor tenant lease in a multi-level retail
power center located between Queens Boulevard and the
Long Island Expressway.
Low
159,037
2009
5/09
74,348
15
$25.38
High
926,180
2015
7/15
140,537
25
$45.42
612,134
Average
2012
3/12
112,214
19
$33.24
Property Name
RENT
STEPS
SIZE (NRA)
1
NO
TENANT
NAME
LEASE
DATE
YEAR BUILT
LEASE INFORMATION
CENTER GLA
Factory
STATISTICS
COMMENTS
COMPARABLE ANCHOR R EN TAL MA P
112
DISCUSSION
OF
COMPARABLE
ANCHOR TENANT
113
RENTS
We have analyzed anchor leases negotiated in competitive buildings in the marketplace. The comparables range
in size from 74,348 square feet to 140,537 square feet. These are all located in multi-level retail centers similar in
class to the subject, and in the subject’s competitive market. The comparable leases have terms ranging from 15
to 25 years. The comparables exhibit a range of rents from $25.38 to $45.42 per square foot, with an average of
$33.24 per square foot. Rent escalation clauses vary, with most having percentage increases ranging from 5 to
10 percent every 5 years. All of these are net leases in which the tenant is required to pay pro-rata share of real
estate taxes and CAM expenses.
The subject’s anchor tenant contract rents ranged between $37.50 and $40.00 per square foot, excluding the
Target prepaid rent. Exclusive of the Target space, the subject’s anchor tenants are leased within current market
rent levels.
CONCLUSION
OF
MARKET RENT
FOR ANCHOR
RETAIL SPACE
Based on leasing activity in the marketplace and our analysis of the comparables, we have concluded the
following market rents for the subject’s anchor retail tenants:
CONC LU SION OF ANCHOR SPAC E MARK ET R EN T
TENANT
MARKET
LEASE
CATEGORY
RENT
TERM
Anchor
$35 to $40
20
LEASE TYPE
RENT INCREASE
Net
10% every 5 years
ANALYSIS OF COMPARABLE JR. ANCHOR RETAIL RENTS
The following table summarizes rental activity for comparable junior anchor space in competing buildings
in the market.
114
JUNIOR ANCHOR RETAIL RENT COMPARABLES
INITIAL
RENT/SF
TJ Maxx
2015
28,053
10
$30.00
2
Gateway Center
Brooklyn, New York
Nordstrom Rack
2014
32,792
12
$40.00
815 Hutchinson River Parkway
Bronx, New York
TJ Maxx
Gateway Center
Brooklyn, New York
The Sports
Authority
2014
5
Bay Plaza Mall
Bronx, New York
Old Navy
2014
11,010
15
$78.00
10% increase
every 5 years
This is a recent inline lease within the recently completed Bay
Plaza Mall located in the Parkchester neighborhood of the
Bronx.
6
Gateway Center II
Brooklyn, New York
Gap
2014
10,500
10
$75.00
10% increase
every 5 years
This is a recent lease within Gateway Center II, a recently
completed shopping center in the East New York
neighborhood of Brooklyn.
7
Bay Plaza Mall
Bronx, New York
Ultra Cosmetic
2014
11,831
10
$77.00
10% increase
every 5 years
This is a recent inline lease within the recently completed Bay
Plaza Mall located in the Parkchester neighborhood of the
Bronx.
8
Gateway Center
Brooklyn, New York
Raymour and
Flanigan
2014
31,616
13
$35.00
Gateway Center
Brooklyn, New York
TJ Maxx
2014
56,859
10
$40.00
10 Shops at Northern Boulevard
Marshalls
2014
34,108
5
$30.11
3
4
9
Property Name
RENT
STEPS
TERM (yrs.)
1
Utopia Center
176-60 Union Turnpike
Queens, New York
NO.
TENANT
NAME
SIZE (NRA)
LEASE INFORMATION
LEASE
DATE
PROPERTY INFO
10% every 60
months
Annual Increases This is a recent lease within Gateway Center II, a recently
completed shopping center
2014
28,417
10
$30.00
the
East
New
York
center, a recently completed shopping center in the Throggs
Neck neighborhood of the Bronx
33,500
12
$35.00
in
the
East
New
York
10% every 60
months
in
the
East
New
York
Annual Increases This is a recent lease within the Shops at Northern Boulevard,
a community center located along the prime Northern
Boulevard.
Petco
2014
12,000
15
$62.00
10% every 60
months
GNC
2013
10,093
10
$63.00
10% every 60
months
This is an inline tenant lease in a multi-level retail power
center located within the Shops at Skyview Park Center in
Flushing Queens.
Brooklyn, New York
12 Shops at Skyview Park
in
Annual Increases This is a recent lease within the Thoggs Neck Shopping
48-18 Northern Boulevard
Queens, NY
11 Gateway Center
COMMENTS
This is a junior anchor within a mixed-use medical office
building that features ground floor retail space known as the
Utopia Center
40-24 College Point Blvd
Flushing, Queens
STATISTICS
Low
10,093
5
$30.00
High
56,859
15
$78.00
Average
25,065
11
$49.59
115
COMPARABLE JUN IOR ANCHOR R EN TAL MA P
DISCUSSION
OF
COMPARABLE JUNIOR ANCHOR RENTS
We have analyzed recent leases negotiated in competitive buildings in the marketplace. The comparables range
in size from 10,093 square feet to 56,859 square feet. These are all located in retail centers similar in class to the
subject, and in the subject’s competitive market. The comparable leases have terms ranging from 5 to 15 years.
The comparables exhibit a range of rents from $30.00 to $78.00 per square foot, with an average of $49.59 per
square foot. Rent escalation clauses vary, with most having annual percentage increases ranging from 5 to 10
percent every 5 years, or annual increases. All of these are net leases in which the tenant is required to pay prorata share of real estate taxes and CAM expenses.
The subject junior anchor contract rents ranged between $23.00 and $49.50 per square foot, depending on the
size, and location. Based on our review of the market, the average rent for the subject’s junior anchor tenants are
below current market rent levels.
116
CONCLUSION OF MARKET RENT FOR JUNIOR ANCHOR RETAIL
SPACE
Based on recent leasing activity at the subject property and our analysis of the comparables, we have concluded
the following market rents for the subject’s junior anchor retail tenants:
CONC LU SION OF MARK ET R ENT
TENANT
MARKET
LEASE
CATEGORY
RENT
TERM
Jr. Anchor
$30 - $50
15
LEASE TYPE
RENT INCREASE
Net
10% every 5 years
ANALYSIS OF COMPARABLE IN-LINE RENTS
The following table summarizes rental activity for comparable in-line retail space in competing buildings in the
market.
117
INLINE RETAIL RENT COMPARABLES
TERM (yrs.)
INITIAL
RENT/SF
RENT
STEPS
1
699 Morris Park Avenue,
Bronx, NY
Zaid Paid Cell Phone
2015
780
10
$40.00
Annual Increases
This is a recent lease of a retail tenant along
Morris Park Avenue within the Morris Park
neighborhood of the Bronx.
2
Parkchester Condominiums
1386 Metropolitan Avenue
Bronx, New York
Chase
2015
3,595
10
$91.16
Annual Increases
This is an inline tenant lease within a strip center
located in the Parkchester neighborhood of the
Bronx.
3
Jackson Heights Shopping Center
7507 31st Avenue
Queens, New York
Vision Works
2015
1,791
10
$90.00
Annual Increases
This is an inline lease within the Jackson Heights
Shopping Center, with the Jackson Heights
neighborhood of Queens.
4
Jackson Heights Shopping Center
7507 31st Avenue
Queens, New York
Santander Bank
2014
1,470
10
$62.00
Annual Increases
This is an inline tenant lease within a retail center
in Queens.
5
Riverdale Crossings
Bronx, NY
Petco
2014
9,566
10
$65.00
Annual Increases
This is a recent inline lease within the Riverdale
Crossings a recently completed community
center located in the Kingsbridge neighborhood of
the Bronx.
6
Riverdale Crossings
Bronx, NY
Buffalo Wild Wings
2014
9,564
12
$68.00
Annual Increases
This is a recent inline lease within the Riverdale
Crossings a recently completed community
center located in the Kingsbridge neighborhood of
the Bronx.
7
Bay Plaza Mall
Bronx, New York
Zinburger
2014
6,306
15
$80.00
Annual Increases
This is a recent inline lease within the recently
completed Bay Plaza Mall located in the
Parkchester neighborhood of the Bronx.
8
Gateway Center II
Brooklyn, New York
Bath & Body Works
2014
3,500
12
$85.00
9
Atlantic Terminal,
139 Flatbush Avenue
Brooklyn, NY
Verizon Wireless
2014
2,195
5
$101.04
Annual Increases
This is a recent lease within Atlantic Center, a
community center located along the prime Atlantic
Avenue within Downtown Brooklyn.
10
The Shops at Bruckner Plaza,
1910 Story Avenue
Bronx, NY
Porta Bella Menswear
2014
5,400
5
$40.00
Annual Increases
This is a recent lease within The Shops at
Bruckner Plaza, a neighborhood center located
along the Story Avenue within the Parkchester
neighborhood of the Bronx.
11
Atlantic Terminal,
139 Flatbush Avenue
Brooklyn, NY
Coldstone Creamery
2014
1,090
5
$115.08
Annual Increases
12
Atlantic Terminal,
139 Flatbush Avenue
Brooklyn, NY
The Children's Place
2014
5,500
5
$81.64
Annual Increases
13
Queens Place,
88-01 Queens Boulevard
Queens, NY
Coldstone Creamery
2013
1,300
10
$89.06
Annual Increases
This is a recent lease within Queens Place, a
community center located along the prime
Queens Boulevard.
14
Queens Place,
88-01 Queens Boulevard
Queens, NY
Afaze
2013
1,050
5
$95.00
Annual Increases
This is a recent lease within Queens Place, a
community center located along the prime
Queens Boulevard.
15
776 Morris Park Avenue,
Bronx, NY
Promo Fight Shop
2013
780
10
$37.33
Annual Increases
This is a recent lease of a retail tenant along
Morris Park Avenue.
NO.
TENANT
NAME
SIZE (NRA)
LEASE INFORMATION
LEASE
DATE
Property Name
COMMENTS
10% increase every This is a recent lease within Gateway Center II, a
recently completed shopping center in the East
5 years
New York neighborhood of Brooklyn.
STATISTICS
Low
2/11
780
5
$37.33
High
7/05
9,566
15
$115.08
Average
7/05
3,592
9
$76.02
118
COMPARABLE IN- L IN E R ENTAL MA P
DISCUSSION OF COMPARABLE IN-LINE RENTS
We have analyzed recent leases negotiated in competitive buildings in the marketplace. The comparables range
in size from 780 square feet to 9,566 square feet. These are all located in retail centers similar in class to the
subject, and in the subject’s competitive market. The comparable leases have terms averaging 10 years. The
comparables exhibit a range of rents from $37.33 to $115.08 per square foot, with an average of $76.02 per
square foot. Rent escalation clauses vary, with most having percentage increases ranging from 5 to 10 percent
every 5 years, or annual increases. All of the comparable are net leases in which the tenant is required to pay
pro-rata share of real estate taxes and CAM expenses.
The subject in-line tenant contract rents ranged between $25.00 and $99.00 per square foot, depending on the
size, and location. Based on our review of the market, the average rent for the subject’s in-line tenants are below
current market rent levels.
CONCLUSION
OF
MARKET RENT
FOR IN-LINE
RETAIL SPACE
Based on recent leasing activity at the subject property and our analysis of the comparables, we have concluded
the following market rents for the subject’s in-line retail tenants:
119
CONC LU SION OF IN-LIN E R ETA IL MARKET R EN T
CONCLUSION
TENANT
MARKET
LEASE
CATEGORY
RENT
TERM
In-line - Retail B
$45.00
In-line - Retail C
LEASE TYPE
RENT INCREASE
15
Net
10% every 5 years
$100.00
15
Net
10% every 5 years
In-line - Retail E
$50.00
10
Net
10% every 5 years
In-line - Retail F
$50.00
10
Net
10% every 5 years
In-line - Retail P
$60.00
10
Net
10% every 5 years
OF
SUBJECT CONTRACT RENTS
After considering all of the above, relative to the subject’s position in the market, we have developed a weighted
average rental rate of approximately $39.65 per square foot (exclusive of the Target tenant space) for the entire
property based upon a relative weighting of tenant space by size, location, and visibility within the center. The
existing base contract rent (exclusive of the Target tenant space) reflects and average contract rent of $32.56 per
square foot. Considering the subject’s construction, location, size, and condition, we are of the opinion that the
existing contract rents are approximately 25 percent below current market levels as exhibited by comparable retail
spaces.
When a property is acquired with leases that are at or close to market rent levels, the level of risk involved with
the investment is generally low. However, the potential increase to the income stream in this scenario is typically
limited, which tends to normalize the investment parameters of participants for these types of properties.
When a property has attained rent levels that are below market, the early returns are generally limited but there is
greater potential for the income stream to increase as the below market leases rollover. There is less risk involved
with tenants with below market leases, as they have a greater ability to pay the lower rent than they would market
level rent. Buyers of properties with below market leases are often entering a lower risk investment with greater
upside to their eventual income earning potential, resulting in overall rates that tend to be lower than normal.
Properties that are encumbered by leases with average rents that are significantly above market have increased
risk in several key areas. When a property has an average rent that is above market, there is increased risk of
default, slow payment or lack of payment by those tenants in that category. In addition, at some point, the above
market leases will expire, at which time the spaces will be re-leased at market levels. When this occurs, there is a
decline in rental revenue for the property, which many times leads to a declining net income stream. When this is
the case, investors will require a higher initial return to offset the declining income stream, and to guard against
the heightened risk of tenant defaults.
OCCUPANCY COST - TEST
OF
120
REASONABLENESS
In further support of our forecast for market rent levels, we undertook a comparison of minimum rent-to-sales and
total occupancy costs-to-sales ratios. Generally, our research and experience with other urban centers shows that
the ratio of minimum rent-to-sales falls within the 7.0 to 10.0 percent range in the initial year of the lease, with 7.5
percent to 8.5 percent being most typical. By adding additional costs to the tenant, such as real estate tax and
common area maintenance recoveries, a total occupancy cost may be derived. Expense recoveries and other
tenant charges can add up to 100.0 percent of minimum rent and comprise the balance of total tenant costs.
The typical range for total occupancy cost-to-sales ratios falls between 11.0 and 15.0 percent. As a general rule,
where sales exceed $300 per square foot, 13.0 to 14.0 percent would be a reasonable cost of occupancy.
Experience and research show that most tenants will resist total occupancy costs that exceed 15.0 to 18.0
percent of sales. Obviously, this comparison will vary from tenant to tenant and property to property.
NOTE: In higher-end or dense markets, such as the subject property’s, where tenants are able to generate sales
above industry averages, tenants can generally pay rents that fall toward the upper-end of the ratio range. As the
subject is located in a high density area within the Bronx, higher rents and a higher occupancy cost is expected
and supported. This is not uncommon in urban markets such as NYC where tenants are willing to pay a higher
cost of occupancy to have a presence in the market. We see many instances of occupancy costs above 20.0
percent along comparable high density urban retail locations.
We have presented the subject’s fiscal year 2010 through 2013 retail sales. In addition, we have detailed the total
occupancy costs for the reporting tenants along with the respective occupancy cost ratios.
TOTAL PROPERTY TENANT SALES AND OCCUPANCY COSTS
Category
Anchor
BJ's Wholesale
Junior Anchor
Toy R Us
Marshalls
Actual
Actual
Actual
Actual
FY 2010
FY 2011
FY 2012
FY 2013
Sales/SF
Sales/SF
Contract
Rent
Sales/SF
Total Sq/Ft
Total Sales
Sales/SF
Occupancy Costs
CAM &
TAXES
Occ. Cost
130,099 SF
$128,767
$990
130,099 SF
$134,972
$1,037
130,099 SF
$139,021
$1,069
130,099 SF
$134,972
$1,037
$37.50
$12.45
4.81%
77,638 SF
N/A
38,211 SF
115,849 SF
$17,269
N/A
$8,553
$25,822
$222
N/A
$224
$223
77,638 SF
N/A
38,211 SF
115,849 SF
$16,475
N/A
$8,709
$25,184
$212
N/A
$228
$217
77,638 SF
74,329 SF
38,211 SF
190,178 SF
$15,170
$15,531
$9,974
$40,675
$195
$209
$261
$214
77,638 SF
74,329 SF
38,211 SF
190,178 SF
$13,555
$17,815
$10,230
$41,600
$175
$240
$268
$219
$23.00
$26.00
$36.00
$28.33
$12.45
$12.45
$12.45
$0
20.30%
16.04%
18.10%
18.15%
Subtotal
8,741 SF
6,661 SF
3,053 SF
1,980 SF
20,435 SF
N/A
$3,998
$445
$349
$4,792
N/A
$600
$146
$176
$410
8,741 SF
6,661 SF
3,053 SF
1,980 SF
20,435 SF
$1,480
$4,340
$437
$470
$6,727
$169
$652
$143
$237
$329
8,741 SF
6,661 SF
3,053 SF
1,980 SF
20,435 SF
$1,553
$4,774
$408
$543
$7,278
$178
$717
$134
$274
$356
8,741 SF
6,661 SF
3,053 SF
1,980 SF
20,435 SF
$1,898
$4,987
$407
$569
$7,861
$217
$749
$133
$287
$385
$25.00
$77.00
$88.00
$99.00
$72
$12.45
$12.45
$12.45
$12.45
$12
17.25%
11.95%
75.35%
38.78%
35.83%
Total
266,383 SF
$159,381
$598
266,383 SF
$166,883
$626
340,712 SF
$186,974
$549
340,712 SF
$184,433
$541
Subtotal
In-Line
Skechers
Applebee's
Payless Shoes
GNC
$12
The subject’s three reporting junior anchor tenants averaged a projected occupancy cost ratio of 20.5 percent,
and the in-line reporting tenants exhibited an average projected occupancy cost ratio of 11.12 percent as of FY
2013. In addition, While the BJ Wholesale Club is not required to report sales we have been provided with their
fiscal year 2013 sales of $134.97 million, or $1,037 per square foot. Furthermore, the ownership has stated that
the majority of the non-reporting tenants have stated that they are performing well and exhibiting sales above
their projected levels. Moreover, according to the ownership, Target (although not required to report sales) has
indicated that they are on pace to reach $80.0 million in sales for 2014 which reflects $424.52 per square foot,
and an increase of 14.0 percent above 2012 sales.
121
Our weighted average rent can next be tested against total occupancy costs in the center based upon the
standard recoveries for new retail tenants. A total built-up occupancy cost can be derived by taking the weighted
average rent and adding projected occupancy costs for all tenants, excluding anchor tenants in the property. This
total can then be tested against the average sales for retail tenants. Our occupancy cost analysis can be found on
the following chart.
OCCUPANCY COST ANALYSIS- IN LINE & JR. ANCHORS
Tenant Cost
Estimated
$/SqFt
Economic Base Rent
Weighted Average Rent - Excluding Anchors
$39.29
Occupancy Costs
CAM
Real Estate Taxes-Inclusive of PILOT
Total Tenant Costs
$11.60
$0.85
$51.74
Projected Average Sales
$550.00
Rent-to-Sales Ratio
7.14%
Cost of Occupancy Ratio
9.41%
Our concluded average market rent equates to a rent to sales ratio of 7.14 percent and a total occupancy cost of
9.41 percent of average sales, which is within the low end of the range of comparable retail centers. These rates
are considered reasonable based on the subject’s caliber as one of the prime retail centers in the Bronx. It should
be noted that the subject property possesses a 25-year real estate tax abatement through the PILOT exemption
period. As the subject’s leases are net leases the tenants directly benefit from the lower occupancy costs.
In our opinion, a sales projection of $550 per square foot for the subject property is reasonable based upon the
subject’s location, historical sales and market parameters. Based upon the market analysis presented earlier, this
level of sales should be achievable by the subject property. Based on our sales projection, the subject tenant’s
projected occupancy cost ratio is 9.41 percent, which is reasonable based upon the subject’s location and market
parameters.
122
Our forecasted sales figure of $550 per square foot for the subject property is within the range of the market
parameters of comparable New York City retail properties as can been seen from the following chart. It should be
noted that comparable retail centers do not typically publish their sales figures per square foot. The chart below
represents the most updated information that we have been able to ascertain.
COMPARABLE N EW YORK C ITY R ETA IL C ENTER S
( SALES PER SQUARE FOOT)
NAME / LOCATION
Queens Center Mall
SIZE (SF)
SALES/PSF
921,500 SF
$990/SF
450,000 SF
$550/SF
371,000 SF
$500/SF
1.0 million SF
$625/SF
1.0 million SF
$600/SF
525,000 SF
$600/SF
900,000 SF
$500/SF
343,248 SF
$550/SF
Queens, New York
Bruckner Plaza
Bronx, New York
Atlantic Terminal
Brooklyn, New York
Kings Plaza Mall
Brooklyn, New York
Cross County Mall
Yonkers, New York
East River Plaza
Upper Manhattan, New York
Bronx, New York
Rego Park Center
Queens, New York
According to discussions with leasing brokers and market participants, the occupancy costs for the above
referenced retail centers range between 12 and 20 percent, and are reflective of their high-density urban retail
locations.
ABSORPTION
OF
VACANT SPACE
There is one vacant tenant space totaling 6,063 square feet available for lease. In our analysis, we have assumed
that the 6,063 square feet of vacant space is leased by October 2015.
123
ABSORPTION SCHEDULE
Vacant Space Name
VACANT
Ff
Total
GLA
6,063
6,063
Date
Oct-15
Tenant
Category
Retail F
Market
Rent (1)
$55.00
$55.00
Annual
$333,465
$333,465
(1) Reflects current market rent, which will grow at our forecasted growth rate discussed herein.
ABSORPTION STATISTICS
Analysis Start Date
Absorption Commencement
Absorption Completion
Total Absorption Period (Months)
Absorption Per Month (SF)
07/01/15
10/01/15
10/01/15
3
2,005
Lease Expirations (ALL TERMS)
The lease expiration schedule is an important investment consideration. As leases rollover, the landlord will be
required to negotiate a renewal lease with the existing tenant, or to secure a new tenant for the space. The
following graphic projects the lease expiration schedule for this property incorporating all projected lease
expirations forecast during the analysis period.
As noted earlier, the majority of the subject property is net leased long term at below current market rent levels.
Less than one percent of the subject’s net rentable area (0.37 percent) is scheduled to expire within the first five
years of the projected holding period. Extending to ten years approximately 26 percent of the subject’s leases are
scheduled to expire. However, the majority (85%) of these tenants have below market renewal options which we
have projected will be exercised, and significantly reduces any near term rollover.
124
LEASE EXPIRATION SCHEDULE
Year
1
2
3
4
5
6
7
8
9
10
11
Square
Feet
Expiring
1,893
0
0
2,728
182,978
20,741
25,715
0
17,520
265,204
26,804
Percent of
Property
0.21%
0.00%
0.00%
0.30%
20.06%
2.27%
2.82%
0.00%
1.92%
29.07%
2.94%
Cumulative
Sq Ft
1,893
1,893
1,893
4,621
187,599
208,340
234,055
234,055
251,575
516,779
543,583
Cumulative
Percent
0.21%
0.21%
0.21%
0.51%
20.56%
22.84%
25.65%
25.65%
27.57%
56.64%
59.58%
Lease Expiration Schedule
S
Q
U
A
R
E
F
E
E
T
600,000
500,000
400,000
300,000
200,000
100,000
0
1
2
3
4
5
6
7
8
9
10
11
ANALYSIS YEAR
Cumulative Square Feet
Square Feet Per Year
LEASE EXPIRATION ANALYSIS
Total GLA of Subject Property (SF)
Year of Peak Expiration
SF Expiring in Peak Year
Five Year Cumulative Expirations (SF)
Ten Year Cumulative Expirations (SF)
912,333
10
265,204
187,599
516,779
100.00%
29.07%
20.56%
56.64%
Based on the lease turnover in Year 10 and 11, we have extended our projection period to 12 years, to reflect a
stabilized reversion.
REVENUE & EXPENSE ANALYSIS
We have developed an opinion of the property’s annual income and operating expenses after reviewing the
historical expenses and the budget provided by ownership and the operating performance of similar properties.
We analyzed each item of expense and developed an opinion regarding what an informed investor would
consider typical. The historical revenue and expenses along with developer’s budget for the current year and our
opinion of the subject’s income and expenses are presented on the following chart, followed by an analysis of
subject property’s revenue and expenses.
SUMMARY OF INCOME & EXPENSE ANALYSIS
Actual 2013
Total
POTENTIAL GROSS REVENUE
Rental Income
Additional Rent Income
Percentage Rent Income
CAM Income
Utility Income
Actual 2014
Per SF
Total
$26,597,777
$67,080
$17,662
$8,144,989
$29.15
$0.07
$0.02
$8.93
2015 Budget
Per SF
$29,846,092
$53,880
$7,382
$8,616,696
$32.71
$0.06
$0.01
$9.44
Total
2015 C&W Forecast
Per SF
$30,287,606
$53,880
$15,300
$8,696,586
$33.20
$0.06
$0.02
$9.53
Total
Per SF
$29,690,632
$0
$0
$8,352,712
$32.54
$0.00
$0.00
$9.16
$757,263
$0.83
$503,576
$0.55
$477,028
$0.52
$930,999
$1.02
Parking
Other Miscellaneous Income
Real Estate Tax Income
TOTAL POTENTIAL GROSS REVENUE
Vacancy and Collection Loss
EFFECTIVE GROSS REVENUE
$4,049,272
$306,190
$1,263,453
$41,203,686
$0.00
$41,203,686
$4.44
$0.34
$1.38
$45.16
$0.00
$45.16
$4,116,966
$215,907
$1,440,033
$44,800,532
$0.00
$44,800,532
$4.51
$0.24
$1.58
$49.11
$0.00
$49.11
$4,208,029
$201,225
$1,593,508
$45,533,162
$0
$45,533,162
$4.61
$0.22
$1.75
$49.91
$0.00
$49.91
$4,200,000
$150,000
$783,824
$44,108,167
($782,782)
$43,325,385
$4.60
$0.16
$0.86
$48.35
-$0.86
$47.49
OPERATING EXPENSES
Insurance
CAM
Shared HVAC
Direct Billed- Utilities
Security
General and Administrative
Legal & Professional Fees
Miscellaneous /Non Recoverable Expenses*
Management Fees
Subtotal
$384,071
$5,989,692
$398,400
$476,939
$1,488,487
$0
$174,181
$325,498
$1,900,692
$11,137,960
$0.42
$6.57
$0.44
$0.52
$1.63
$0.00
$0.19
$0.36
$2.08
$12.21
$461,523
$5,815,361
$413,926
$582,177
$1,515,827
$68,667
$424,582
$396,632
$1,737,873
$11,416,568
$0.51
$6.37
$0.45
$0.64
$1.66
$0.08
$0.47
$0.43
$1.90
$12.51
$511,273
$5,932,139
$360,139
$476,939
$1,674,835
$70,744
$414,100
$390,443
$1,649,834
$11,480,446
$0.56
$6.50
$0.39
$0.52
$1.84
$0.08
$0.45
$0.43
$1.81
$12.58
$500,000
$5,200,000
$400,000
$550,000
$1,600,000
$300,000
$175,000
$750,000
$1,299,762
$10,774,762
$0.55
$5.70
$0.44
$0.60
$1.75
$0.33
$0.19
$0.82
$1.42
$11.81
Ground Rent
Real Estate Taxes*
$434,468
$1,319,824
$0.48
$1.45
$395,190
$1,479,869
$0.43
$1.62
$411,435
$1,694,756
$0.45
$1.86
$434,171
$775,499
$0.48
$0.85
TOTAL EXPENSES
$12,892,252
$14.13
$13,291,627
$14.57
$13,586,637
$14.89
$11,984,432
$177.69
$35.02
$31,340,953
$464.70
NET OPERATING INCOME
$28,311,434
$31.03
$31,508,905
$34.54
$31,946,525
* The historical and budget Real Estate Taxes provided by ownership are reflective of the ICIP abated taxes. The C&W projection is reflective of unabated taxes.
*** 2013, 2014 and 2015 Non recoverable expense include signage, construction management fees and miscellaneous expenses. According to management the miscellaneous
expense will be higher than historical expenses and the budget based on increasing costs related with marketing and leasing out of event media space.
125
126
EXPENSE REIMBURSEMENTS
We have analyzed the historical and budgeted reimbursement revenue, and have made a projection of the future
expense reimbursement revenue based on these figures. We have also considered the contractual terms of the
existing leases, together with our assumptions related to future leasing. The existing and future tenants will be
responsible for their pro-rata share of real estate taxes and common area maintenance (CAM) expenses,
including insurance, security, shared HVAC, direct utilities, and administrative. Based on our analysis, we have
estimated total reimbursement revenue for year one at $9,269,471, which equates to $10.16 per square foot.
PARKING GARAGE REVENUE
Additional income to the property is provided by the 6-level parking garage which contains 2,575 spaces. Parking
garages are generally operated in either under a lease agreement or a management agreement. The parking
garage at the subject property is being operated under a management agreement. The parking rates at the
subject property are within the range exhibited by competitive retail centers in the market. In our opinion, the
existing rates not deter customers from shopping at the subject due to the cost of parking. The subject parking
management agreement is with M.P. BTM, L.L.C. commenced on April 5, 2007 and initially expired on April 4,
2012. However, according to the first amendment to the agreement, the expiration date was extended to August
31, 2014.
The subject’s net parking garage income has ranged between $4,049,272 ($1,573/space) in 2013 and
$4,116,966 ($1,599 /space) in 2014. The 2015 budgeted net parking garage income is projected at $4,208,029
($1,634/space). Furthermore, we have researched several other New York City retail centers that had large
multi-level parking garage components. The net parking garage revenues from the comparable are exhibited
below:
COMPARABLE NEW YORK CITY RETAIL CENTERS
NET PARKING GARAGE REVENUES
Name/Location
Rego Park Center
Center GLA
Total Parking
Spaces
Net Revenue/Space
600,000 SF
1,265
$1,261/Space
1,200,000 SF
3,739
$1,118/Space
900,000 SF
650
$3,300/Space
525,000 SF
1,248
$2,404/Space
Queens, NY
Kings Plaza Mall
Queens, NY
Atlantic Center
Brooklyn, NY
East River Plaza
New York, NY
Rego Park Plaza
Budget
565,000 SF
1,390
$975/Space
Queens, NY
Average
$1,812/Space
127
Based on the subject property’s historical and budgeted net parking garage revenue, our analysis of the parking
garage at comparable retail centers, and the specific attributes of the subject parking such as its size, condition,
and location, we have concluded to a net parking revenue of $4,200,000 or $1,631 space in Year 1. Our figure is
within the range of the subject’s historical, the budget and along with comparable retail properties and market
parameters. We have assumed that the subject parking garage would continue to be operated under a similar
management agreement to the existing one which is within market parameter, In addition, we have projected the
net parking garage income to grow at 2.0 percent per annum.
MISCELLANEOUS REVENUE
The subject’s miscellaneous income includes kiosk income, signage income, along with various tenant
reimbursable services income. The subject’s miscellaneous income has ranged between $215,907 ($0.24/SF) in
2014 and $306,190 ($0.34/SF) in 2013. The 2015 budget reflected $201,225 ($0.22/SF) in miscellaneous income.
Based on the subject property’s historical miscellaneous revenue, we have projected miscellaneous revenue of
$150,000 in Year 1. Our figure is within the subject’s range of the historical figures.
VACANCY AND COLLECTION LOSS
Vacancy and collection loss is a function of the interrelationship between absorption, lease expiration, renewal
probability, estimated downtime between leases, and a collection loss factor based on the relative stability and
credit of the subject’s tenant base. Based on the current vacancy in the market, and our perception of future
market vacancy, we have projected a total vacancy and collection loss is equal to 3.0 percent.
The majority of the subject is net leased on a long term basis with limited near term rollover. Furthermore, 53.1
percent of the subject retail space (484,324 SF) is net leased to credit tenants. As a result of the subject
occupancy and strong tenancy, we have excluded the collection loss factor for the anchor and credit tenants. The
vacancy and collection loss is projected to be $782,782 in year 1.
CREDIT TENANT SUMMARY
Due to their investment grade credit rating and low credit risk, the following credit tenants have been excluded
from this collection loss deduction:
CREDIT TENANT SUMMARY
Tenant Name
Rating
Outlook
Rating Agency
Investment Grade Tenants
Home Depot
Bed, Bath & Beyond
Marshall's (TJX Companies)
Best Buy, Inc
A3
BBB+
A3
Stable
Positive
Stable
Baa2
Baa2
A2
A2
A3
A3
Developing
Moody's
Standard & Poors
Moody's
Moody's
Moody's
Moody's
Moody's
Moody's
Moody's
Staples Inc.
Target
CUNY
Chase
AT&T
Stable
Stable
Stable
Stable
Stable
Size
124,955
33,877
37,401
52,086
15,490
188,446
26,627
2,030
3,412
ANALYSIS
Number of Investment Grade Credit Tenants
Total Credit Tenant GLA
% of Total Space
9
484,324
53.0%
The subject property has a total of 9 credit tenants occupying a total of 53 percent of the subject's space. Given
this comparison, the investment rates selected will be slightly more aggressive than market indicators.
128
DISCUSSION OF EXPENSES
We have analyzed each expense item in making our forecast, with our conclusions summarized on the previous
table. In most cases, our forecast is well supported by the historical or budget information. However, in some
cases, further clarification is provided below:
S UM M A R Y OF OP ER A TIN G EXP E N S E S
Property Insurance:
This is the insurance expense associated with the subject
property. This expense has ranged from $384,071 to
$461,523 in our analysis. The 2015 budget reflected an
expense of $511,273. Our forecast for this expense is
$500,000 or $0.55 per square foot, which is within the range
of historical expenses, the budget, comparable properties and
market parameters.
Common Area Maintenance:
CAM expenses include payroll, repairs and maintenance,
professional services, and utilities. This expense has ranged
from $5,815,361 to $5,989,692. The 2015 budget reflected an
expense of $5,932,139. Our forecast for this expense is
$5,200,000 or $5.70 per square foot, which is slightly below
the range of historical expenses and the budget but within the
range of comparable properties. According to our review of
the CAM budget there are certain expenses that are above
market and non-reoccurring including miscellaneous
maintenance fees such as repairing ADA compliant ramps,
repairing sidewalks, replacing garage leaks, gate repairs, etc.
Shared HVAC:
This expense is associated with the shared HVAC facility
expenses for the subject property. This expense has ranged
from $398,400 to $413,726 in our analysis. The 2015 budget
reflected an expense of $360,139. Our forecast for this
expense is $400,000 or $0.60 per square foot, which is within
the range of historical expenses, the budget, comparable
properties and market parameters.
Direct Billed Utilities:
This expense includes various utilities including water/steam,
electricity, etc. This expense has ranged from $476,939 to
$582,177 in our analysis. The 2015 budget reflected an
expense of $476,939. Our forecast for this expense is
$550,000 or $0.60 per square foot, which is within the range
of historical expenses, the budget, comparable properties and
market parameters.
129
Security:
This expense is associated with the security for the subject
property. This expense has ranged from $1,488,487 to
$1,515,827 in our analysis. The 2015 budget reflected an
expense of $1,674,835. Our forecast for this expense is
$1,600,000 or $1.75 per square foot, which is within the
slightly above the historical expenses but within the range of
the budget, comparable properties and market parameters.
General & Administrative:
This expense is related to the on-going administrative
expenses to operate the property. There was no expense
allocated in 2013. The 2014 expense was 68,667. The 2015
budget reflected an expense of $70,744. Our forecast for this
expense is $300,000 or $0.33 per square foot, which is above
the historical expenses and the budget but within the within
the range of comparable properties and market parameters.
Legal & Professional Fees:
These costs include legal and professional fees. This
expense has ranged from $174,181 to $424,582 in our
analysis. According to the ownership, there were several onetime, non-reoccurring legal fees in 2014 regarding the
Michaels tenant going dark. The 2015 budget reflected an
expense of $414,100. The budget is inclusive of a one-time
ADA legal non-compliance expense. Our forecast for this
expense is $175,000 or $0.19 per square foot, which is within
the range of the 2013 expense and that of comparable
properties and market parameters. Moreover, our expense is
in-line with the normalized property expense when excluding
the one-time non-reoccurring expenses.
Miscellaneous/Non Recoverable:
This expense is associated with various other expenses for
the subject property. This expense has ranged from $325,498
to $396,632 in our analysis. The 2015 budget reflected an
expense of $390,443. This expense is inclusive of events and
media expenses, and other non recoverable expenses.
According to management the miscellaneous expense will be
higher than historical expenses and the budget based on
increasing costs related with marketing and leasing out of
event media space. Our forecast for this expense is $750,000
or $0.82 per square foot, which is above the range of the
historical expenses and the budget but is considered
reasonable based on the up-coming event and media
expenses.
Management Fees:
The subject property is managed by the ownership. This
expense has ranged from $1,737,873 to $1,900,692 in our
analysis. The 2015 budget reflected an expense of
$1,649,834. It should be noted that management fees for
comparable retail properties typically range from 2.0 to 4.0
130
percent. Based on the size of the subject, and number of
tenants, we have utilized a management fee of 3.0 percent,
which we consider to be market oriented. Our forecast for this
expense is $1,299,762 or $1.42 per square foot, which is
within the range of market parameters, and comparable
properties.
Ground Rent:
The subject site is ground leased for a base term of 49 years,
with an additional five 10-year renewal options which extend
the lease term to 99 years. As per the ground lease
agreement, the ground rent equals the greater of fixed
amount ($341,183 in years 1-5) or 2.0% of gross revenue
(based on the specific formula calculating gross revenues).
Based on the subject's projected gross revenues (as defined
in the ground lease), the ground rent will be calculated based
on the percentage of gross revenues. A complete discussion
of the ground lease is detailed in the Ground Lease section of
this report. Furthermore, we have included our calculation of
ground rent for the entire holding period in the Addenda of
this report.
The current ground rent has been estimated at $634,171
which equates to $0.70 per square foot of GLA, excluding the
ground rent credit. After deducting the current ground rent
credit ($200,000), the adjusted ground rent is $434,171,
which equates to $0.48 per square foot of GLA.
Ground Rent Credit:
The subject will receive ground rent credits based on the
specific amounts detailed in the ground lease for the first 14
years (2009 to 2022). The ground rent credits range between
$200,000 and $500,000 per annum. These credits are due
based on an agreement with the City of New York. A
complete discussion of the ground rent credit is detailed in the
Ground Lease section of this report.
Real Estate Taxes-PILOT:
We forecasted that the calendar year 2015 PILOT taxes,
inclusive of the PILOT exemption equates to $775,499 or
$0.85 per square foot of net rentable area ($0.80 per square
foot of the building gross building area of 969,019 square feet,
exclusive of the parking garage). A complete discussion of the
taxes is included in the Real Property Taxes and
Assessments section of this report.
131
OPERATING EXPENSE CONCLUSION
We have analyzed the subject’s historical operating expenses, the ownership’s current year budget along with the
expenses of similar properties, and we used this information to make our projections. We have forecast total
operating expenses for the subject property (excluding real estate taxes and ground rent) to be $10,744,762
equating to $11.81 per square foot. The operating expenses estimated for the subject property are within the
range of actual operating expenses of comparable retail centers and are presented on the following chart.
COMPARABLE EXPENSE ANALYSIS
Comparable Number
Property Name
Property City
Property State
Building Size
Building Age
Statement Type
Year of Record
TOTAL OPERATING EXPENSES
One
Two
Three
Four
East River Plaza
Upper Manhattan
NY
525,000
2010
Actual
2010
GLA (SF)
$7.88
Bay Terrace Shopping Center
Bronx
NY
312,000
2012
Actual
2012
GLA (SF)
$10.16
Coop City Retail Centers
Bronx
NY
270,000
2011
Actual
2012
GLA (SF)
$11.57
Atlantic Center
Brooklyn
NY
396,224
1995
Actual
2012
GLA (SF)
$13.26
The three expense comparables reflect a range of $7.88 to $13.26 per square foot, with an average of $10.72 per
square foot. These retail centers have varying degrees of similarity with the subject property in terms of age, size,
tenancy and quality. In our judgment, the projection of $11.81 per square foot is considered reasonable for the
subject property considering its age, size, and quality.
EXPENSE GROWTH RATE
Our cash flow projections assume that operating expenses and tenant improvement costs will grow at the rate of
3.00 percent per year during the holding period. Real estate taxes are projected to increase 3.0 percent per
annum after the PILOT abatement expires.
RESERVES
FOR
R EP L A C E M E N T S
It is customary and prudent to deduct an annual sum from effective gross income to establish a reserve for
replacing short-lived items throughout the building. These costs may include roof repair, and HVAC upgrades.
Our projection of $0.15 per square foot of gross building area is a reasonable amount to cover the cost of capital
expenditures over the course of the investment-holding period.
DISCOUNTED CASH FLOW ANALYSIS
In the Discounted Cash Flow Method, we employed Argus for Windows software to model the income
characteristics of the property and to make a variety of cash flow assumptions. We attempted to reflect the most
likely investment assumptions of typical buyers and sellers in this particular market segment. The following table
illustrates the assumptions used in the discounted cash flow analysis.
132
LEASING ASSUMPTIONS
TENANT CATEGORY
WEIGHTED ITEMS
Renewal Probability
Market Rent
Months Vacant
Tenant Improvements
New Leases
Renewal Leases
Leasing Commissions
New Leases
Renewal Leases
Free Rent
New Leases
Renewal Leases
NON-WEIGHTED ITEMS
Lease Term (years)
Lease Type (reimbursements)
Contract Rent Increase Projection
Inline
Anchor
Junior Anchor
70.00%
$45 - $100
6.00
70.00%
$35 - $40
6.00
70.00%
$30 - $50
6.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
3.50%
1.75%
3.50%
1.75%
3.50%
1.75%
3
1
6
3
6
3
15
Gross
10% every 5 Yrs
15
Gross
10% every 5 Yrs
15
Gross
10% every 5 Yrs
INVESTMENT CONSIDERATIONS
OVERVIEW
The U.S. economic expansion hit a soft spot in the fourth quarter of 2014, a spot that carried over into first quarter
2015. The U.S. gross domestic product (GDP) slowed to a growth rate between 1.0-1.5 percent annual rate in the
first quarter, down from 2.2 percent in the fourth quarter 2014. The main reason for the slowdown was a
slowdown in consumer spending caused by a second consecutive year of severe winter weather. Although the
economy grew at a slower pace in first quarter, we expect stronger growth for the balance of the year to boost full
year GDP growth to about 3.0 percent to 3.5 percent.
The economy also benefitted from the steep drop in oil prices that began in mid-2014 but accelerated in the fourth
quarter. The price of a barrel of oil remained between $40 and $50 per barrel for most of the first quarter. This is
less than half the $98.57 per barrel price recorded in first quarter 2014. The Bureau of Economic Analysis
estimates that the proportion of household’s after-tax income that consumers spent on energy in the first two
months of 2015 was the lowest since 2002. As a result, consumers are becoming more optimistic about the
economy. Through March 2015, U.S. payroll employment increased by a weaker than expected 126,000 jobs,
according to the latest payroll report from the Bureau of Labor Statistics. March was the first month since
February 2014 that employment growth dropped below 200,000 jobs. Although total job growth was slower than
recent months, employment in key office-using sectors increased by a total of 50,000 jobs. In addition, average
hourly earnings increased by 0.3 percent, the third time in the past five months that earnings have risen by 0.3
percent or more.
Interest rates remained low in the fourth quarter, with the yield on the 10-year Treasury note falling to 30 basis
points during the past month. The decline is still somewhat of a surprise due to the Federal Reserve’s ending of
its quantitative easing policy, which should have reduced demand for U.S. Treasury securities. But a combination
of lower inflation and concerns about global growth and stability caused investors to look to the safety of U.S.
Treasury securities and pushed down yields. We expect that as the U.S. economy grows in 2015, interest rates
will increase in anticipation that the Federal Reserve will begin to tighten monetary policy.
133
CURRENT ECONOMIC CONDITIONS
The evidence of a stronger economy prompted the Federal Reserve’s Open Market Committee (FOMC) to
announce that the Central Bank would gradually reduce its purchases of long-term Treasury securities and
mortgage backed securities widely referred to as quantitative easing. During 2014, the FOMC continued to
reduce the amount of bonds purchased each month, indicating the Central Bank’s confidence that the economy
does not require the additional stimulation that this policy has been providing. A statement released after the
FOMC meeting in December was the clearest indication that the Central Bank will begin to raise interest rates in
2015. Strong economic growth will be the main factor pushing rates higher, and although wages are lagging many
feel the jobs numbers are good enough to allow the Central Bank to stay on course in terms of adjusting policy as
the economy grows.
The biggest surprise of 2014 and early 2015 has been the nearly 50.0 percent decline in oil prices, which caught
many by surprise and the ramifications are just starting to be debated. The lower oil prices set the economy up for
stronger growth in 2015 as it will stimulate consumer spending, cut costs in manufacturing and transportation and
lower the trade deficit, all of which are likely to boost GDP even more than is currently anticipated. The U.S. will
be the global growth leader in 2015.
The following graph displays historical and projected U.S. Real GDP percent change (annualized on a quarterly
basis) from first quarter 2009 through first quarter 2019 (red bar highlights the most recent quarter-14Q4):
Historical and Projected U.S. Real GDP
2009Q1 - 2019Q1
Real GDP, % Change
7.5
5.0
2.5
0.0
-2.5
-5.0
-7.5
Forecast
Source: Historical Data Courtesy of the Bureau of Economic Analysis; Forecast Data Courtesy of Moody's Economy.com
Notable concerns regarding current economic conditions are as follows:

The U.S. Continues to outperform most other markets. The missing piece in the current, nearly six-yearold economic expansion has been higher wages. Conditions in labor markets suggest that this is about
to change. If so, it will help to propel growth for the rest of 2015 and into 2016.

The latest numbers from the BEA show that the U.S. GDP increased 2.2 percent annual rate during
fourth quarter 2014. Much of the economic data for the U.S. in the first quarter of 2015 has been
released. The data suggest that the economy remained sluggish in the first quarter of the year, and the
U.S. GDP grew somewhere between 1.0-1.5 percent. The biggest reason for the slowdown is weaker
consumer spending caused by a second consecutive year of severe winter weather.

Based on data from Commercial Real Estate Direct, CMBS issuance was strong during 1Q2015 at $25.2
billion. Total issuance was up 47.0 percent from $17.2 billion during 1Q2014. Multi-borrower pool
decreased a modest 4.0 percent year-over-year to $13.2 billion while several large deals helped
increased single borrower securitizations by 248.0 percent year-over-year to $12.1 billion. Current
consensus is for CMBS issuance to close the year at ~$124.0 billion.

As employment continues to rise, the odds that the Federal Reserve will start to raise short term interest
rates increases as well. The timing and extent of the interest rate increases will depend on how the
economy performs over the next several months, but there seems to be a consensus that the Fed will
start to test rate increases in the first half of 2015.

Morgan Stanley estimates $125.0 billion of private-label CMBS issuance for 2015 comprised of $80.0
billion conduit and $45.0 billion SASB (Sustainability Accounting Standards Board) and floaters. A bear
case scenario where insurance companies are more competitive for larger loans is estimated to be
$100.0 billion and a bull case scenario where M&A activity drives SASB and floaters is estimated to be
$140.0 billion.
134
US R E A L E S T A T E M A R K E T I M P L I C A T I O N S
The commercial real estate market started to pick up in 2012 and continued to progress in 2013 and 2014.
According to Real Capital Analytics, 23,015 properties traded hands in 2013 for a total transaction volume of
approximately $338.9 billion. Commercial real estate sales volume remained strong throughout 2014, as
transaction volume totaled $401.9 billion. Property prices at an aggregate level surpassed the 2007 peak and cap
rates in many sectors are at all-time lows. As volume and price levels head into uncharted territory, investors are
reassessing risk and took their foot off of the gas towards the end of 2014. Through first quarter 2015, 6,795
properties changed hands as volume reached $124.3 billion in the first three months of 2015. Portfolio and entitylevel transactions were big components of transaction activity in first quarter, this trend will likely continue into
second quarter as there were a number of deals in the works at the close of first quarter. Commercial property
prices as measured by the CPPI are up for the year across all property types. Not all property types have
recovered to the peak levels set prior to the Global Financial Crisis (GFC). The combination of growing volume
and prices across all property sectors suggests that investors have an appetite for commercial real estate, though
how they are placing capital is evolving. The big story of this quarter was the heavy activity in the portfolio and
entity-level transactions. These sorts of transactions played an important role in the run-up of asset process that
proceeded the calamitous fall into the GFC. Combine this activity with cap rates now at or below the precious lowwater marks seen before the GFC and some investors are worried that we will face a similar downturn in the near
future given the same signals.
Cap rates continued to fall in first quarter across all property types. Suburban office assets posted some of the
biggest year-over-year declines with cap rates down 60 basis points from a year earlier to hit 6.8 percent. The
current equity and debt spreads appear to be wide enough to absorb a fairly large near-term spike in interest
rates without cap rates changing too much. Although the longer interest rates remain low, this spread will begin to
erode and so will the market’s ability to absorb an interest rate increase.
The following graph compares national transaction volume by property between 2003 and first quarter 2015:
135
National Transaction Volume By Property Type
600.0
Volume, billions $
500.0
400.0
Retail
Office
Industrial
Hotel
Apartment
300.0
200.0
100.0
0.0
Source: Real Capital Analytics, Inc. Note: Hotel data not avail. until 2005,
CONCLUSIONS
Despite the slower economic growth in the early part of 2014, the commercial real estate investment market did
not skip a beat, an event many expect to repeat itself in 2015. Transaction volume totaled $401.9 billion in 2014,
up from the same time last year, as the access to capital continues to be relatively easy for most investors.
What’s more, transaction volume might have been higher, if not for the lack of quality offerings in the marketplace.
Real estate markets are now in a sweet spot in the cycle. Demand is rising. Supply is beginning to increase, but is
still contained. As a result, when vacancy rates continue to decline across markets and property types, it will tend
to put upward pressure on rents. The next year should continue to see steady improvement in real estate markets
across the U.S.
Going forward, prices for prime assets are expected to stay high, as the competition among buyers remains
fierce, especially in core markets. Investors expect positive trends to continue through 2015. Even though many
foresee rising interest rates, it is widely believed that the commercial real estate industry can handle the
anticipated increases in rates without serious disruption to its performance, according to PricewaterhouseCoopers
First Quarter 2105 Investment Survey. As a result, competition among buyers is likely to remain strong and keep
prices elevated for the best properties offered.
The factors listed below have been key to our valuation of this property and will have an impact on our selection
of all investor rates.
136
Attained Rents Versus Market:
Overall, the subject's current contract rents (exclusive of expense contributions) are
approximately 10 percent below market rent levels (exclusive of the Target's rent
which was pre-paid). Given this comparison the investment rates considered would
be slightly more aggressive than typical market parameters.
NOI Growth:
The subject's NOI is expected to grow 1.93 percent per annum from the first year of
the analysis through the holding period. This rate of growth is below levels expected
in this market but reflective of the subject's long term below market leases.
Lease Expiration Exposure:
Within the first five years of the analysis a total of 20.56 percent of the total net
rentable area is scheduled to rollover. Extending to a ten-year period, a total of
56.64 percent of the space is scheduled to expire. It should be noted that several of
the tenants have below market renewal options that are projected to be executed
which diminishes the roll over exposure. This is considered a moderate rollover
exposure within this market.
Real Estate Market Trends:
Real estate market trends have a significant bearing on the value of real property.
The real estate market in which the subject property is located is currently
improving.
Tenant Quality:
The quality of a property's tenant base is an important factor that is scrutinized by
investors prior to acquiring real property. The quality of the subject's tenant roster is
considered to be good.
Property Rating:
concluded that this property has an overall rating that is good, when measured
against other properties in this marketplace.
Location Rating:
After considering all of the locational aspects of the subject, including regional and
local accessibility, veichular transportation, public transportation as well as overall
visibility, we have concluded that the location of this property is good. The property
exhibits a strong popilation base which should contribute to the potential sales
potential within the subject.
Overall Investment Appeal:
There are many factors that are considered prior to investing in this type of property.
The subject is 99.3 percent leased on a long term basis and 53.1 percent leased to
credit tenants. In addition, the subject has limited turnover during the next 10 years.
After considering all of these factors, we conclude that this property has good
overall investment appeal.
137
INVESTOR SURVEY TRENDS
Historic trends in real estate investment help us understand the current and future direction of the market.
Investors’ return requirements are a benchmark by which real estate assets are bought and sold. The following
graph shows the historic trends for the subject’s asset class spanning a period of four years as reported in the
PwC Real Estate Investor Survey published by PricewaterhouseCoopers.
INVESTOR SURVEY HISTORICAL RESULTS
PwC
End Quarter:
NATIONAL POWER CENTER
1Q 15
Survey:
Property Type:
Quarter
2Q 11
3Q 11
4Q 11
1Q 12
2Q 12
3Q 12
4Q 12
1Q 13
2Q 13
3Q 13
4Q 13
1Q 14
2Q 14
3Q 14
4Q 14
1Q 15
OAR (average)
7.48%
7.50%
7.35%
7.32%
7.14%
7.04%
6.98%
6.98%
6.66%
6.71%
6.66%
6.66%
6.65%
6.65%
6.60%
6.56%
Terminal OAR (average)
7.80%
7.88%
7.43%
7.52%
7.41%
7.44%
7.27%
7.19%
7.19%
7.19%
7.13%
7.17%
7.15%
7.15%
7.08%
7.02%
IRR (average)
8.73%
8.73%
8.31%
8.33%
8.32%
8.29%
8.17%
8.17%
8.17%
8.17%
8.17%
8.17%
8.13%
8.13%
8.02%
7.92%
OAR (average)
IRR (average)
8.75%
8.50%
8.25%
RATES
8.00%
7.75%
7.50%
7.25%
7.00%
6.75%
6.50%
2Q 11
3Q 11
4Q 11
1Q 12
2Q 12
3Q 12
4Q 12
1Q 13
2Q 13
3Q 13
4Q 13
1Q 14
2Q 14
3Q 14
4Q 14
1Q 15
ANALYSIS PERIOD
LEASING ASSUMPTIONS
The contract lease terms for the existing tenants were used within the Yield Capitalization analysis with market
leasing assumptions applied for renewals and absorption tenants. The income and expense information that was
previously presented has been used as the basis for our market leasing projections. The following chart
summarizes the leasing assumptions that were used in preparing our Yield Capitalization analysis.
138
CAPITALIZATION RATE FROM COMPARABLE SALES
The following table summarizes overall capitalization rates derived from the improved property sales.
CAPITALIZATION RATE SUMMARY
No. Name and Location
1 Riverdale Crossings
Bronx, New York
2 74-17 74-25 Grand Avenue
N/E/C 74th Street
Queens, New York
3 2856 Steinway Street
N/E/C 28th Avenue
Queens, New York
4 Waldbaums Shopping Center
152-59 10th Avenue,
Queens, New York
5 Pelham Manor Shopping Plaza
2 Penn Place
6 Canarsie Plaza
8925 Avenue D
Brooklyn, New York
7 Clocktower Plaza
Queens, New York
8 Lake Grove Commons
Sales Date
Jan-2015
Contract
Capitalization
Rate
5.11%
10/2014
5.00%
8/2014
4.62%
1/2014
5.50%
1/2014
5.85%
12/2012
6.20%
9/2012
6.00%
4/2012
5.60%
8
1/2012
10/2014
5/2013
8
4.62%
6.20%
5.48%
STATISTICS
Sample Size
Low
High
Average
CAPITALIZATION RATE FROM INVESTOR SURVEYS
We have considered data extracted from the PwC Real Estate Investor Survey for competitive properties. Earlier
in the report, we presented historical capitalization rates for the prior four year period. The most recent
information from this survey is listed below:
CAPITALIZATION RATES
Survey
PwC
Date
First Quarter 2015
Range
5.50% - 8.00%
Average
6.56%
PwC - Refers to National Power Center market regardless of class or occupancy
Most retail properties that are considered institutional grade are existing, seasoned centers with good inflation
protection that offer stability in income and are strongly positioned to the extent that they are formidable barriers
to new competition. Equally important are centers which offer good upside potential after face-lifting, renovations,
or expansion. With new construction down substantially, owners have accelerated renovation and remerchandising programs. Little competition from over-building is likely in most mature markets within which these
139
centers are located. Environmental concerns and "no-growth" mentalities in communities are now serious
impediments to new retail development. Investors have recognized that the retail landscape has been
fundamentally altered by consumer lifestyles changes, industry consolidations and bankruptcies. This trend has
strongly been in evidence during the past two years.
TERMINAL CAPITALIZATION RATE SELECTION
We based the estimate of property value at reversion on assumed resale at the end of Year 11, using our forecast
of Year 12 net operating income. The reversion value was calculated by applying a capitalization rate of 5.25
percent to the FY 2026/27 NOI and subtracting sales expenses of 4.00 percent. The net cash flows and the net
reversion were discounted to net present value using a discount rate of 6.25 percent, the derivation of which is
discussed below.
A terminal capitalization rate was used to develop an opinion of the market value of the property at the end of the
assumed investment holding period. The rate is applied to the net operating income following year 12 before
making deductions for leasing commissions, tenant improvement allowances and reserves for replacement. We
have developed an opinion of an appropriate terminal capitalization rate based on indicated rates in current
investor surveys.
TERMINAL CAPITALIZATION RATES (OARout)
Survey
PwC
Date
First Quarter 2015
Range
6.00% - 9.00%
Average
7.02%
PwC - Refers to National Power Center market regardless of class or occupancy
Investors will typically use a slightly more conservative overall rate when exiting an investment versus the rate
that would be used going into the investment. This accounts both for the aging associated with the improvements
over the course of the holding period, and for any unforeseen risks that might arise over that time period.
A premium was added to today’s rate to allow for the risk of unforeseen events or trends which might affect our
estimate of net operating income during the holding period, including a possible deterioration in market conditions
for the property. Investors typically add 20 to 150 basis points to the “going-in” rate to arrive at a terminal
capitalization rate, according to Cushman & Wakefield’s periodic investor surveys. The difference between goingin capitalization rates and terminal capitalization rates is typically risk related due to time (market conditions).
Based on the overall characteristics of the subject property, we have applied a 5.25 percent terminal capitalization
rate in our analysis. This rate is within the range demonstrated by the investor survey, and is reflective of the
overall quality of the real estate, and the perceived durability of the income in Year 12. Furthermore, the selected
rate reflects a premium paid by investors for well located retail properties in major urban markets like New York
City. Moreover, our selected terminal rate is 24 basis points above the implied overall capitalization rate, which is
considered reasonable based on the overall performance of the cash flow
DISCOUNT RATE ANALYSIS
We estimated future cash flows, including property value at reversion, and discounted that income stream at an
internal rate of return (yield rates) currently required by investors for similar-quality real property. The yield rate
(internal rate of return or IRR) is the single rate that discounts all future equity benefits (cash flows and equity
reversion) to an estimate of net present value.
PriceWaterhouseCoopers, Inc. periodically surveys national real estate investors to determine internal rates of
return and overall rates considered acceptable by respondents. The most recent national market indicators
published by PwC, is summarized as follows:
140
DISCOUNT RATES (IRR)
Survey
PwC
Date
First Quarter 2015
Range
6.00% - 10.00%
Average
7.92%
The above table summarizes the investment parameters of some of the most prominent investors currently
acquiring similar investment properties in the United States. We realize that this type of survey reflects target
rather than transactional rates. Transactional rates are usually difficult to obtain in the verification process and are
actually only target rates of the buyer at the time of sale. The property’s performance will ultimately determine the
actual yield at the time of sale after a specific holding period.
The subject property is a multi-story urban retail power center that contains a total of 912,333 square feet of gross
leasable area (GLA) retail space and a 6-level parking garage with 2,575 spaces located in The Bronx, adjacent
to Yankee Stadium. The subject property also includes two 1-story commercial buildings. The subject
improvements were constructed in 2009 and are situated on a 16.8-acre site. The subject is 99.3 percent leased
on a long term basis and is anchored by Target, BJ’s Wholesale Club, and Home Depot which occupy 48.6
percent (443,500 SF) of the property. In addition, the subject has strong tenancy as approximately 53.1 percent
(484,324 SF) of the subject is leased to credit tenants. The subject’s net operating income (NOI) is projected to
increase 1.91 percent per annum through the analysis period. In addition, the subject has limited turnover during
the next 10 years. Furthermore, 85 percent of the tenants with base lease terms expiring during the initial 10
years of our projection have renewal options at below market rents. The subject property also benefits from a 25year PILOT tax abatement, which is passed directly along to the tenants since the subject is net leased.
Therefore, taking into consideration subject’s recent construction, prime New York City location, good and credit
quality tenancy, long term net leases at below market level rents, parking income, long term ground lease, PILOT
tax benefits, and returns expected by investors in the current market in relation to other comparable properties,
we discounted our cash flow and reversionary value projections at an internal rate of return at 6.25 percent in our
analysis. Our selection of discount rates is considered reasonable given the respective cash flow of the subject
property. This rate is within the range of the comparable sales and investor surveys, and is reflective of the overall
quality of the real estate, and perceived durability of the income We have also considered the subject significant
parking income and the expiration of the PILOT tax abatement.
D I S C O U N T E D C A S H F L O W M ET H O D C O N C L U S I O N
Based on the discount rate selected above, market value would be $625,000,000 rounded. The reversionary sale
contributes 57.91 percent to this value estimate. The 12 year discounted cash flow summary table is presented
on the following page.
ANNUAL CASH FLOW REPORT
1
Jul-15
Jun-16
For the Years Beginning
For the Years Ending
2
Jul-16
Jun-17
3
Jul-17
Jun-18
4
Jul-18
Jun-19
5
Jul-19
Jun-20
6
Jul-20
Jun-21
7
Jul-21
Jun-22
8
Jul-22
Jun-23
9
Jul-23
Jun-24
10
Jul-24
Jun-25
11
Jul-25
Jun-26
12
Jul-26
Jun-27
141
Annual
Growth
Year 1 Year 11
Base Rental Revenue
Absorption & Turnover Vacancy
Base Rent Abatements
Scheduled Base Rental Revenue
$ 29,788,196 $ 30,047,108 $ 30,332,304
(14,198)
0
0
(83,366)
(11,699)
0
$ 29,690,632 $ 30,035,409 $ 30,332,304
$ 30,687,220
0
0
$ 30,687,220
$ 32,345,216 $ 33,017,254
(28,475)
0
(22,780)
0
$ 32,293,961 $ 33,017,254
$ 33,302,989
0
0
$ 33,302,989
$ 33,658,929
0
0
$ 33,658,929
$ 34,052,809 $ 35,741,771 $ 36,926,841 $ 37,206,751
(42,859)
(184,751)
(375,415)
(57,930)
(34,287)
(107,917)
(341,410)
(46,344)
$ 33,975,663 $ 35,449,103 $ 36,210,016 $ 37,102,477
2.04%
13.64%
-5.20%
2.05%
CAM Reimbursement
RE Taxes-PILOT
Total Reimbursement Revenue
9,283,711
783,824
$ 10,067,535
9,615,245
1,595,681
$ 11,210,926
9,923,549
1,643,869
$ 11,567,418
10,241,954
1,693,515
$ 11,935,469
10,571,601
1,744,103
$ 12,315,704
10,907,348
1,851,563
$ 12,758,911
11,465,998
2,478,704
$ 13,944,702
11,907,225
3,659,690
$ 15,566,915
12,284,288
4,890,731
$ 17,175,019
12,659,519
6,183,957
$ 18,843,476
13,096,627
7,550,918
$ 20,647,545
13,607,136
9,054,100
$ 22,661,236
3.54%
24.91%
7.65%
Net Parking Income
Miscellaneous
TOTAL GROSS REVENUE
4,200,000
150,000
$ 44,108,167
4,284,000
153,000
$ 45,683,335
4,369,680
156,060
$ 46,425,462
4,457,074
159,181
$ 47,238,944
4,546,215
162,365
$ 49,318,245
4,637,139
165,612
$ 50,578,916
4,729,882
168,924
$ 52,146,497
4,824,480
172,303
$ 54,222,627
4,920,969
175,749
$ 56,247,400
5,019,389
179,264
$ 59,491,232
5,119,777
182,849
$ 62,160,187
5,222,172
186,506
$ 65,172,391
2.00%
2.00%
3.61%
General Vacancy
Collection Loss
(427,026)
(456,833)
(464,255)
(472,389)
(464,992)
(505,789)
(521,465)
(542,226)
(520,044)
(412,009)
(249,941)
(594,373)
(355,756)
(371,337)
(379,064)
(385,231)
(397,163)
(411,668)
(429,687)
(447,765)
(461,141)
(569,946)
(676,372)
(716,233)
$ 43,325,385 $ 44,855,165 $ 45,582,143 $ 46,381,324 $ 48,456,090 $ 49,661,459 $ 51,195,345 $ 53,232,636 $ 55,266,215 $ 58,509,277 $ 61,233,874 $ 63,861,785
CAM
Insurance
Security
Shared Facilities HVAC
General and Administrative
Direct Utilities
RE Taxes-PILOT
Ground Rent Credit
Management Fee
Ground Rent
Legal & Professional Fees
Miscellaneous
5,200,000
5,356,000
5,516,680
5,682,180
5,852,646
6,028,225
6,209,072
6,395,344
6,587,204
6,784,821
500,000
515,000
530,450
546,363
562,754
579,637
597,026
614,937
633,385
652,387
1,600,000
1,648,000
1,697,440
1,748,363
1,800,814
1,854,839
1,910,484
1,967,798
2,026,832
2,087,637
400,000
412,000
424,360
437,091
450,204
463,710
477,621
491,950
506,708
521,909
300,000
309,000
318,270
327,818
337,653
347,782
358,216
368,962
380,031
391,432
550,000
566,500
583,495
601,000
619,030
637,601
656,729
676,431
696,724
717,625
775,499
1,574,419
1,621
1,670,950
1,721,412
1,826,956
2,397,903
3,517,442
4,702,414
5,955,751
(200,000)
(400,000)
(400,000)
(425,000)
(425,000)
(450,000)
(475,000)
(475,000)
(500,000)
0
1,299,762
1,345,655
1,367,464
1,391,440
1,453,683
1,489,844
1,535,860
1,596,979
1,657,986
1,755,278
634,171
961,290
969,929
980,258
1,027,014
1,048,062
1,408,473
1,422,312
1,434,602
1,491,771
175,000
180,250
185,658
191,227
196,964
202,873
208,959
215,228
221,685
228,335
750,000
772,500
795,675
819,545
844,132
869,456
895,539
922,405
950,078
978,580
$ 11,984,432 $ 13,240,614 $ 11,991,042 $ 13,971,235 $ 14,441,306 $ 14,898,985 $ 16,180,882 $ 17,714,788 $ 19,297,649 $ 21,565,526
6,988,365
671,958
2,150,266
537,567
403,175
739,154
7,280,500
7,198,016
692,117
2,214,774
553,694
415,270
761,329
8,679,832
1,837,016
1,549,107
235,185
1,007,937
$ 23,400,230
1,915,854
1,559,968
242,241
1,038,175
$ 25,271,270
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
24.55%
-100.00%
3.59%
8.53%
3.00%
3.00%
7.02%
$ 31,340,953
$ 31,614,551
$ 33,591,101
$ 32,410,089
$ 34,014,784
$ 34,762,474
$ 35,014,463
$ 35,517,848
$ 35,968,566
$ 36,943,751
$ 37,833,644
$ 38,590,515
1.91%
136,850
60,630
136,721
334,201
140,955
0
32,769
173,724
145,184
0
0
145,184
149,540
0
0
149,540
154,026
0
63,810
217,836
158,647
0
0
158,647
163,406
0
0
163,406
168,308
0
0
168,308
173,357
0
96,042
269,399
178,558
0
264,432
442,990
183,915
0
809,160
993,075
189,432
0
129,814
319,246
3.00%
-100.00%
-0.47%
-0.42%
$ 38,271,269
1.93%
Capital Reserves
Tenant Improvements
Leasing Commissions
TOTAL LEASING & CAPITAL COSTS
$
CASH FLOW BEFORE DEBT SERVICE $ 31,006,752
Implied Overall Rate
Cash on Cash Return
5.01%
4.96%
$
$ 31,440,827
5.06%
5.03%
$
$ 33,445,917
5.37%
5.35%
$
$ 32,260,549
5.19%
5.16%
$
$ 33,796,948
5.44%
5.41%
$
$ 34,603,827
5.56%
5.54%
$
$ 34,851,057
5.60%
5.58%
$
$ 35,349,540
5.68%
5.66%
$
$ 35,699,167
5.75%
5.71%
$
$ 36,500,761
5.91%
5.84%
$
$ 36,840,569
6.05%
5.89%
$
3.05%
6.57%
3.59%
142
DISCOUNTED CASH FLOW MODELING ASSUMPTIONS
VALUATION SCENARIO:
Market Value As-Is
GENERAL CASH FLOW ASSUMPTIONS
GROWTH RATES
Cash Flow Software:
Cash Flow Start Date:
Calendar or Fiscal Analysis:
Investment Holding Period:
Analysis Projection Period:
Market Rent:
Consumer Price Index (CPI):
Expenses:
Tenant Improvements:
Real Estate Taxes:
na
ARGUS - Version 15
7/1/2015
Fiscal
11 Years
12 Years
VACANCY & COLLECTION LOSS
Global Vacancy:
Global Collection Loss:
Total Vacancy & Collection Loss:
RATES OF RETURN
Internal Rate of Return: (Cash Flow)
Internal Rate of Return: (Reversion)
Reversionary Sales Cost:
Basis Point Spread (OARout vs. OARin)
1.00%
2.00%
3.00%
Reserves for Replacement ($/SF):
3.00%
3.00%
3.00%
3.00%
3% after PILOT expires
na
6.25%
6.25%
5.25%
4.00%
54 pts
VALUATION
Market Value As-Is
LESS Curable Depreciation
Adjusted Value
Rounded to nearest $1,000,000
Value $/SF
$0.15
$625,532,651
$0
$625,532,651
$625,000,000
$685.06
$45,000,000
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$1
2
3
4
5
6
Net Operating Income
7
8
9
10
11
12
Cash Flow Before Debt Service
PRICING MATRIX - Market Value As-Is
Terminal
Cap Rates
Discount Rate (IRR) for Cash Flow
6.00%
6.25%
5.75%
6.50%
6.75%
4.75%
$
692,018,262
$
677,654,247
$
663,661,225
$
650,028,444
$
636,745,488
5.00%
$
670,934,696
$
657,111,256
$
643,643,724
$
630,521,802
$
617,735,516
5.25%
$
651,859,089
$
638,524,740
$
625,532,651
$
612,872,935
$
600,536,017
5.50%
$
634,517,628
$
621,627,907
$
609,068,039
$
596,828,511
$
584,900,109
5.75%
$
618,684,120
$
606,200,364
$
594,035,132
$
582,179,254
$
570,623,845
IRR Reversion
Cost of Sale at Reversion:
Percent Residual:
Rounded:
5.75%
6.00%
6.25%
6.50%
4.00%
57.91%
$625,000,000
$685.06
6.75%
143
Based on the discount rate selected above, market value would be $625,000,000 rounded. The reversionary sale
contributes 57.91 percent to this value estimate.
DIRECT CAPITALIZATION VALUATION METHOD
In the direct capitalization method, we estimated market value by dividing stabilized net operating income by an
overall rate derived from our analyses of market sales and computed by dividing the net operating income from a
sold property by its sale price. We have utilized the sales exhibited in the respective Sales Comparison
Approaches. The overall capitalization rates derived from the most applicable improved property sales are shown
below:
CAPITALIZATION RATE SUMMARY
No. Name and Location
1 Riverdale Crossings
Bronx, New York
2 74-17 74-25 Grand Avenue
N/E/C 74th Street
Queens, New York
3 2856 Steinway Street
N/E/C 28th Avenue
Queens, New York
4 Waldbaums Shopping Center
152-59 10th Avenue,
Queens, New York
5 Pelham Manor Shopping Plaza
2 Penn Place
6 Canarsie Plaza
8925 Avenue D
Brooklyn, New York
7 Clocktower Plaza
Queens, New York
8 Lake Grove Commons
Sales Date
Jan-2015
Contract
Capitalization
Rate
5.11%
10/2014
5.00%
8/2014
4.62%
1/2014
5.50%
1/2014
5.85%
12/2012
6.20%
9/2012
6.00%
4/2012
5.60%
8
1/2012
10/2014
5/2013
8
4.62%
6.20%
5.48%
STATISTICS
Sample Size
Low
High
Average
The comparable sales vary in location but are generally located within comparable retail markets. The overall
rates derived from the retail properties ranged between 4.62 and 6.20 percent, with an average of 5.48 percent.
The comparable sales vary in location but are generally located within comparable retail markets. These sales are
the most comparable in terms of location, tenancy and income profiles.
144
Gateway Center at Bronx Terminal Market is a multi-level retail urban power center that contains a total of
912,333 square feet of gross leasable area (GLA) retail space and a 6-level parking garage with 2,575 spaces
located in the Bronx, adjacent to Yankee Stadium. The subject property also includes two 1-story commercial
buildings. The subject improvements were constructed in 2009 and are situated on a 16.80-acre site. The subject
is 99.3 percent net leased at below current market levels on a long term basis and is anchored by Target, BJ’s
Wholesale Club, and Home Depot which occupy 48.6 percent (443,500 SF) of the property. In addition, the
subject has a strong tenancy as 53.1 percent (484,324 SF) of the subject is leased to credit tenants. The subject
net operating income (NOI) is projected to increase 1.91 percent per annum through the analysis period. In
addition, the subject has limited turnover during the next 10 years. Furthermore, 85 percent of the tenants with
base lease terms expiring during the initial 10 years of our projection have renewal options at below market rents.
Based on the specific characteristics of the subject property, along with our observations and analysis suggest
that a going-in capitalization rate of 5.00 percent represents reasonable investor criteria under current market
conditions. A summary of the direct capitalization method is shown below.
I ND ICAT ED VALU E BA S ED ON D IR ECT CA PITA LIZATION OF NOI
DIRECT CAPITALIZATION METHOD
Market Value As-Is
$31,340,953
$34.35
Value
$/SF GLA
Sensitivity Analysis (0.25% OAR Spread)
Based on Low-Range of 4.75%
$659,809,537
$723.21
Based on Most Probable Range of 5.00%
$626,819,060
$687.05
Based on High-Range of 5.25%
$596,970,533
$654.33
$626,819,060
$687.05
Indicated Value
$625,000,000
$685.06
R ECONCILIATION W ITHIN I NCOME C APITALIZATION A PPROACH
SUMMAR Y OF INCOME CA PITALIZATION METHODS
Value Indicated by the Discounted Cash Flow Method:
$625,000,000
Value Indicated by the Direct Capitalization Method:
$625,000,000
We have placed equal reliance on the Discounted Cash Flow Method and the Direct Capitalization Method.
Therefore, our opinion of market value via the Income Capitalization Approach is as follows.
INCOME CA PITA LIZATION CONCLU SION
Market Value - Not adjusted for any Transactions Costs:
$625,000,000
145
However, as detailed in the Ground Lease Analysis and Land Valuation section of this report, the leaseholder is
obligated for various future transaction payments in the event of a property sale, refinance or equity disposition.
Since our market value estimate in our valuation assumes a sale of the property as of the date of value,
and based on the defined Net Sale Proceeds calculation within Section 12.1b (vi) of the subject ground
lease, we have adjusted our preliminary market value by the defined 7.5 percent of net proceeds
obligated to be distributed to the landlord (New York City) by the lessee. Therefore, our reconciled overall
market value of the leasehold interest in the subject property is as follows:
Overall, we have estimated the market value of the subject property to be $625,000,000 as detailed in the
previous analysis within the Income Capitalization Approach section of this report. According to the Section 12.1b
(vi) of the ground lease, the Net Sale Proceeds are defined as the Gross Sale Proceeds (market value of the
subject property) less the following deductions:
(1) the amount of any Mortgage (including accrued interest and other sums), or proportionate share thereof,
satisfied with the proceeds of Sale or assigned or purchased by a new lender or assumed or to which the estate
conveyed in such Sale is taken subject by the purchaser at such Sale,
(2) accrued Operating Losses,
(3) any reasonable or customary expenses incurred in effecting such Sale, including, but not limited to, brokerage
commissions, attorneys' fees, transfer and transfer gains taxes, prepayment premiums, the costs of any repairs or
restorations required in connection with such Sale and title insurance premiums, provided however, that with
respect to any such expenses paid to Affiliates, such amounts shall be no more than would have been paid to an
unrelated party in an arm's length transaction,
(4) in the event that in connection with any foreclosure of a Mortgage or an Assignment, Transfer or Major
Sublease in lieu of a foreclosure of a Mortgage, a Mortgagee or any Control Affiliate or nominee of a Mortgagee
shall become Tenant hereunder and all or any portion of the indebtedness secured by such Mortgage shall have
been discharged or reduced without full payment of such indebtedness, an amount equal to the amount of the
indebtedness so discharged or reduced, together with interest and other charges which would have accrued with
respect thereto through the date of the Sale, absent such discharge or reduction,
(5) an amount equal to Net Sales Proceeds upon which a prior Transaction Payment was made,
(6) all cash equity of Tenant invested in the Premises and
(7) a developer’s fee equal to 3% of Development Costs.
146
We have reviewed a letter dated January 16, 2014 from the ground lessee (BTM Development Partners, LLC ) to
the City of New York (fee owner) which details the anticipated transactions costs related to the recent
$380,000,000 refinancing of the subject property’s. According to the ownership, the economics of the refinancing
are consistent with the current deductions. The letter, which is exhibited in the Addenda, details the allowable
deductions from the Gross Loan Proceeds and the calculation of the Net Cash Proceeds. Some of the deductions
defined in the ground lease used in calculating the transaction payment apply to both a refinancing or a sale
transaction. However, based on the pending $380,000,000 mortgage, we have utilized this amount as the
mortgage amount in the calculation of Net Sale Proceeds. Therefore, we have utilized the applicable deductions
(Nos. 1, 3, 6 & 7 referenced above) which total $459,460,734 which were detailed by the lessee while calculating
the Net Cash Proceeds from a refinance. In addition, we have also estimated transactions costs of 4.0 percent of
the sales price ($625,000,000) or $25,000,000 regarding sales commissions, sales transfer tax, legal, title,
professional fees, and other miscellaneous costs. Overall, our estimated deductions totaled $459,460,734. As a
result, our Net Sale Proceeds reflected $157,913,243. Based on the defined 7.5 percent formula in the ground
lease, the transaction payment due the landlord was calculated to be $11,843,493. We have rounded the
transaction payment to $12,000,000 for the income approach.
Exhibited below is our calculation of the actual “Net Sales Proceeds” and the Transaction Payment of 7.5 percent
of net proceeds:
CALCU LATION OF TH E TRAN SACTION PA YMEN T FROM SALE
Preliminary Market Value-Leasehold:
$625,000,000
Less: Deductions Per Ground Lease
1: Mortgage Amount:
$380,000,000
2: Operating Losses:
N/A
3: Sale Costs @ 4% (sales commissions, transfer tax, legal, title, etc.)
$25,000,000
4: Adjustment of any indebtedness discharged or reduced
N/A
5: Adjustment for prior Transaction Payment:
N/A
6: All cash equity of Tenant invested in the subject
$40,500,000
7: Developer fee equal to 3% of development costs
$13,960,734
Total Deductions:
$459,460,734
Net Sale Proceeds from Sale
$157,913,243
Transaction Payment due @7.5% from Sale
$11,843,493
Rounded:
$12,000,000
Therefore, our opinion of As Is market value via the Income Capitalization Approach is as follows.
INCOME CA PITA LIZATION CONCLU S I ON - A F T ER N ET SA L E PROC E ED S
Preliminary As Is Market Value:
$625,000,000
Less: Net Sale Proceeds Obligation
$ 12,000,000
As Is Market Value, rounded,
$613,000,000
147
RECONCILIATION AND FINAL VALUE OPINION
148
VALUATION METHODOLOGY REVIEW AND RECONCILIATION
analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that the Sales
Comparison Approach and the Income Capitalization Approach would be considered meaningful and applicable
in developing a credible value conclusion. Investors do not typically rely on the Cost Approach when purchasing a
property such as the subject of this report. Therefore, we have not relied upon the Cost Approach to develop an
opinion of market value.
The applicable approaches indicated the following:
METHODOL OG Y
Sales Comparison Approach- Adjusted for Net Sale Proceeds:
$605,000,000
Income Capitalization Approach-Adjusted for Net Sale Proceeds:
$613,000,000
We have given most weight to the Income Capitalization Approach because this mirrors the methodology used by
purchasers of this property type. We have also considered the Sales Comparison Approach for additional
support.
MARKET VALUE AS IS
Based on the agreed to Scope of Work, and as outlined in the report, we developed an opinion that the Market
Value of the Leasehold estate of the above property, after adjusting for Transactions Costs via Net Sale
Proceeds to be paid by the landlord as per the ground lease, subject to the assumptions and limiting
conditions, certifications, extraordinary assumptions and hypothetical conditions, if any, and definitions, “As-Is” on
June 10, 2015, was:
SIX HUNDRED THIRTEEN MILLION DOLLARS
$613,000,000
The value opinion reported above assumes a sale of the subject property as of the date of value. The
value considers the 7.5 percent Transaction Cost deduction based on the Net Sales Proceeds.
EXPOSURE TIME AND MARKETING TIME
Based on our review of national investor surveys, discussions with market participants and information gathered
during the sales verification process, a reasonable exposure time for the subject property at the value concluded
within this report would have been approximately 9 (nine) months. This assumes an active and professional
marketing plan would have been employed by the current owner.
ASSUMPTIONS AND LIMITING CONDITIONS
149
"Report" means the appraisal or consulting report and conclusions stated therein, to which these Assumptions and Limiting
Conditions are annexed.
"Property" means the subject of the Report.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary that issued the Report.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the Report.
The Report has been made subject to the following assumptions and limiting conditions:

No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters
that are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title
to the Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.

The information contained in the Report or upon which the Report is based has been gathered from sources the
Appraiser assumes to be reliable and accurate. The owner of the Property may have provided some of such
information. Neither the Appraiser nor C&W shall be responsible for the accuracy or completeness of such information,
including the correctness of estimates, opinions, dimensions, sketches, exhibits and factual matters. Any authorized
user of the Report is obligated to bring to the attention of C&W any inaccuracies or errors that it believes are contained
in the Report.

The opinions are only as of the date stated in the Report. Changes since that date in external and market factors or in
the Property itself can significantly affect the conclusions in the Report.

The Report is to be used in whole and not in part. No part of the Report shall be used in conjunction with any other
analyses. Publication of the Report or any portion thereof without the prior written consent of C&W is prohibited.
Reference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the
letter of engagement, the Report may not be used by any person(s) other than the party(ies) to whom it is addressed
or for purposes other than that for which it was prepared. No part of the Report shall be conveyed to the public through
advertising, or used in any sales, promotion, offering or SEC material without C&W's prior written consent. Any
authorized user(s) of this Report who provides a copy to, or permits reliance thereon by, any person or entity not
authorized by C&W in writing to use or rely thereon, hereby agrees to indemnify and hold C&W, its affiliates and their
respective shareholders, directors, officers and employees, harmless from and against all damages, expenses, claims
and costs, including attorneys' fees, incurred in investigating and defending any claim arising from or in any way
connected to the use of, or reliance upon, the Report by any such unauthorized person(s) or entity(ies).

Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in
any court or administrative proceeding relating to the Property or the Appraisal.

The Report assumes (a) responsible ownership and competent management of the Property; (b) there are no hidden
or unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no
responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover
them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws,
unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of
occupancy and other governmental consents have been or can be obtained and renewed for any use on which the
value opinion contained in the Report is based.

The physical condition of the improvements considered by the Report is based on visual inspection by the Appraiser or
other person identified in the Report. C&W assumes no responsibility for the soundness of structural components or
for the condition of mechanical equipment, plumbing or electrical components.

The forecasted potential gross income referred to in the Report may be based on lease summaries provided by the
owner or third parties. The Report assumes no responsibility for the authenticity or completeness of lease information
provided by others. C&W recommends that legal advice be obtained regarding the interpretation of lease provisions
and the contractual rights of parties.
150

The forecasts of income and expenses are not predictions of the future. Rather, they are the Appraiser's best opinions
of current market thinking on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is
not the Appraiser's task to predict or in any way warrant the conditions of a future real estate market; the Appraiser
can only reflect what the investment community, as of the date of the Report, envisages for the future in terms of rental
rates, expenses, and supply and demand.

Unless otherwise stated in the Report, the existence of potentially hazardous or toxic materials that may have been
used in the construction or maintenance of the improvements or may be located at or about the Property was not
considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos
insulation and other potentially hazardous materials) may adversely affect the value of the Property. The Appraisers
are not qualified to detect such substances. C&W recommends that an environmental expert be employed to
determine the impact of these matters on the opinion of value.

Unless otherwise stated in the Report, compliance with the requirements of the Americans with Disabilities Act of 1990
(ADA) has not been considered in arriving at the opinion of value. Failure to comply with the requirements of the ADA
may adversely affect the value of the Property. C&W recommends that an expert in this field be employed to
determine the compliance of the Property with the requirements of the ADA and the impact of these matters on the
opinion of value.

If the Report is submitted to a lender or investor with the prior approval of C&W, such party should consider this
Report as only one factor, together with its independent investment considerations and underwriting criteria, in its
overall investment decision. Such lender or investor is specifically cautioned to understand all Extraordinary
Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in this Report.

In the event of a claim against C&W or its affiliates or their respective officers or employees or the Appraisers in
connection with or in any way relating to this Report or this engagement, the maximum damages recoverable shall be
the amount of the monies actually collected by C&W or its affiliates for this Report and under no circumstances shall
any claim for consequential damages be made.

If the Report is referred to or included in any offering material or prospectus, the Report shall be deemed referred to or
included for informational purposes only and C&W, its employees and the Appraiser have no liability to such
recipients. C&W disclaims any and all liability to any party other than the party that retained C&W to prepare the
Report.

Any estimate of insurable value, if included within the agreed upon scope of work and presented within this report, is
based upon figures derived from a national cost estimating service and is developed consistent with industry practices.
However, actual local and regional construction costs may vary significantly from our estimate and individual insurance
policies and underwriters have varied specifications, exclusions, and non-insurable items. As such, we strongly
recommend that the Client obtain estimates from professionals experienced in establishing insurance coverage for
replacing any structure. This analysis should not be relied upon to determine insurance coverage. Furthermore, we
make no warranties regarding the accuracy of this estimate.

By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting
Conditions, Hypothetical Conditions and Extraordinary Assumptions stated herein.
CERTIFICATION OF APPRAISAL
151
We certify that, to the best of our knowledge and belief:

The statements of fact contained in this report are true and correct.

The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions,
and are our is my personal, impartial, and unbiased professional analyses, opinions, and conclusions.

We I have no present or prospective interest in the property that is the subject of this report, and no personal interest with
respect to the parties involved.

We have no bias with respect to the property that is the subject of this report or to the parties involved with this
assignment.

Our engagement in this assignment was not contingent upon developing or reporting predetermined results.

Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined
value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a
stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with
the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal
Institute, which include the Uniform Standards of Professional Appraisal Practice.

The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized
representatives.

John A. Katinos, MAI and James P. Stuckey Jr. did make a personal inspection of the property that is the subject of this
report.

We have performed prior services involving the subject property within the three-year period immediately preceding the
acceptance of the assignment. The most recent services included a previous appraisal in April 2013.

No one provided significant real property appraisal assistance to the persons signing this report.

As of the date of this report, John A. Katinos, MAI, has completed the continuing education program of the Appraisal
Institute.

As of the date of this report, James P. Stuckey Jr. has completed the Standards and Ethics Education Requirements for
Candidates/Practicing Affiliates of the Appraisal Institute.
Senior Director
NY Certified General Appraiser
License No. 46000028780
john.katinos@cushwake.com
(212) 479-1820 Fax
Associate Director
NY State Certified Appraiser Assistant
License No. 48000049048
(212) 479-1687 Fax
GLOSSARY OF TERMS & DEFINITIONS
152
The following definitions of pertinent terms are taken from The Dictionary of Real Estate Appraisal, Fifth Edition (2010), published by the Appraisal Institute,
Chicago, IL, as well as other sources.
AS IS MARKET VALUE
The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date. (Proposed Interagency Appraisal and
Evaluation Guidelines, OCC-4810-33-P 20%)
BAND OF INVESTMENT
A technique in which the capitalization rates attributable to components of a capital investment are weighted and combined to derive a weighted-average rate
attributable to the total investment.
CASH EQUIVALENCY
An analytical process in which the sale price of a transaction with nonmarket financing or financing with unusual conditions or incentives is converted into a price
expressed in terms of cash.
DEPRECIATION
1. In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market
value of the improvement on the same date. 2. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using
a specified method.
ELLWOOD FORMULA
A yield capitalization method that provides a formulaic solution for developing a capitalization rate for various combinations of equity yields and mortgage terms.
The formula is applicable only to properties with stable or stabilized income streams and properties with income streams expected to change according to the J- or
K-factor pattern. The formula is
RO = [YE – M (YE + P 1/Sn¬ – RM) – ∆O 1/S n¬] / [1 + ∆I J]
where
RO = Overall Capitalization Rate
YE = Equity Yield Rate
M = Loan-to-Value Ratio
P = Percentage of Loan Paid Off
1/S n¬ = Sinking Fund Factor at the Equity Yield Rate
RM =Mortgage Capitalization Rate
∆O = Change in Total Property Value
∆I = Total Ratio Change in Income
J = J Factor
Also called mortgage-equity formula.
EXPOSURE TIME
1. The time a property remains on the market. 2. The estimated length of time the property interest being appraised would have been offered on the market prior to
the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events
assuming a competitive and open market. See also marketing time.
EXTRAORDINARY ASSUMPTION
An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s
opinions or conclusions.
Comment: Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property;
or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.
FEE SIMPLE ESTATE
Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent
domain, police power, and escheat.
A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results,
but is used for the purpose of analysis.
Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions
external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.
153
INSURABLE VALUE
A type of value for insurance purposes.
INTENDED USE
The use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser
based on communication with the client at the time of the assignment.
INTENDED USER
The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the
basis of communication with the client at the time of the assignment.
LEASED FEE INTEREST
A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a
lease).
L E A S E H O L D I N T E R E ST
The tenant’s possessory interest created by a lease. See also negative leasehold; positive leasehold.
MARKET RENT
The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including
permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs).
M A R K E T VA L U E
As defined in the Agencies’ appraisal regulations, the most probable price which a property should bring in a competitive and open market under all conditions
requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

Buyer and seller are typically motivated;

Both parties are well informed or well advised, and acting in what they consider

A reasonable time is allowed for exposure in the open market;

Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone
associated with the sale.1
their own best interests;
MARKETING TIME
An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the
effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory
Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, “Reasonable Exposure Time in Real
Property and Personal Property Market Value Opinions” address the determination of reasonable exposure and marketing time.) See also exposure time.
MORTGAGE-EQUITY ANALYSIS
Capitalization and investment analysis procedures that recognize how mortgage terms and equity requirements affect the value of income-producing property.
OPERATING EXPENSES
Other Taxes, Fees & Permits - Personal property taxes, sales taxes, utility taxes, fees and permit expenses.
Property Insurance – Coverage for loss or damage to the property caused by the perils of fire, lightning, extended coverage perils, vandalism and malicious
mischief, and additional perils.
Management Fees - The sum paid for management services. Management services may be contracted for or provided by the property owner. Management
expenses may include supervision, on-site offices or apartments for resident managers, telephone service, clerical help, legal or accounting services,
printing and postage, and advertising. Management fees may occasionally be included among recoverable operating expenses
Total Administrative Fees – Depending on the nature of the real estate, these usually include professional fees and other general administrative expenses,
such as rent of offices and the services needed to operate the property. Administrative expenses can be provided either in the following expense
1
“Interagency Appraisal and Evaluation Guidelines.” Federal Register 75:237 (December 10, 2010) p. 77472.
154
subcategories or in a bulk total. 1) Professional Fees – Fees paid for any professional services contracted for or incurred in property operation; or 2) Other
Administrative – Any other general administrative expenses incurred in property operation.
Heating Fuel - The cost of heating fuel purchased from outside producers. The cost of heat is generally a tenant expense in single-tenant, industrial or retail
properties, and apartment projects with individual heating units. It is a major expense item shown in operating statements for office buildings and many
apartment properties. The fuel consumed may be coal, oil, or public steam. Heating supplies, maintenance, and workers’ wages are included in this expense
category under certain accounting methods.
Electricity - The cost of electricity purchased from outside producers. Although the cost of electricity for leased space is frequently a tenant expense, and
therefore not included in the operating expense statement, the owner may be responsible for lighting public areas and for the power needed to run elevators
and other building equipment.
Gas - The cost of gas purchased from outside producers. When used for heating and air conditioning, gas can be a major expense item that is either paid by
the tenant or reflected in the rent.
Water & Sewer - The cost of water consumed, including water specially treated for the circulating ice water system, or purchased for drinking purposes. The
cost of water is a major consideration for industrial plants that use processes depending on water and for multifamily projects, in which the cost of sewer
service usually ties to the amount of water used. It is also an important consideration for laundries, restaurants, taverns, hotels, and similar operations.
Other Utilities - The cost of other utilities purchased from outside producers.
Total Utilities - The cost of utilities net of energy sales to stores and others. Utilities are services rendered by public and private utility companies (e.g.,
electricity, gas, heating fuel, water/sewer and other utilities providers). Utility expenses can be provided either in expense subcategories or in a bulk total.
Repairs & Maintenance - All expenses incurred for the general repairs and maintenance of the building, including common areas and general upkeep.
Repairs and maintenance expenses include elevator, HVAC, electrical and plumbing, structural/roof, and other repairs and maintenance expense items.
Repairs and Maintenance expenses can be provided either in the following expense subcategories or in a bulk total. 1) Elevator - The expense of the
contract and any additional expenses for elevator repairs and maintenance. This expense item may also include escalator repairs and maintenance. 2)
HVAC – The expense of the contract and any additional expenses for heating, ventilation and air-conditioning systems. 3) Electrical & Plumbing - The
expense of all repairs and maintenance associated with the property’s electrical and plumbing systems. 4) Structural/Roof - The expense of all repairs and
maintenance associated with the property’s building structure and roof. 5) Pest Control – The expense of insect and rodent control. 6). Other Repairs &
Maintenance - The cost of any other repairs and maintenance items not specifically included in other expense categories.
Common Area Maintenance - The common area is the total area within a property that is not designed for sale or rental, but is available for common use by
all owners, tenants, or their invitees, e.g., parking and its appurtenances, malls, sidewalks, landscaped areas, recreation areas, public toilets, truck and
service facilities. Common Area Maintenance (CAM) expenses can be entered in bulk or through the sub-categories. 1) Utilities – Cost of utilities that are
included in CAM charges and passed through to tenants. 2) Repair & Maintenance – Cost of repair and maintenance items that are included in CAM charges
and passed through to tenants. 3) Parking Lot Maintenance – Cost of parking lot maintenance items that are included in CAM charges and passed through
to tenants. 4) Snow Removal – Cost of snow removal that are included in CAM charges and passed through to tenants. 5) Grounds Maintenance – Cost of
ground maintenance items that are included in CAM charges and passed through to tenants. 6) Other CAM expenses are items that are included in CAM
charges and passed through to tenants.
Painting & Decorating - This expense category is relevant to residential properties where the landlord is required to prepare a dwelling unit for occupancy in
between tenancies.
Cleaning & Janitorial - The expenses for building cleaning and janitorial services, for both daytime and night-time cleaning and janitorial service for tenant
spaces, public areas, atriums, elevators, restrooms, windows, etc. Cleaning and Janitorial expenses can be provided either in the following subcategories or
entered in a bulk total. 1) Contract Services - The expense of cleaning and janitorial services contracted for with outside service providers. 2) Supplies,
Materials & Misc. - The cost any cleaning materials and any other janitorial supplies required for property cleaning and janitorial services and not covered
elsewhere. 3) Trash Removal - The expense of property trash and rubbish removal and related services. Sometimes this expense item includes the cost of
pest control and/or snow removal .4) Other Cleaning/Janitorial - Any other cleaning and janitorial related expenses not included in other specific expense
categories.
Advertising & Promotion - Expenses related to advertising, promotion, sales, and publicity and all related printing, stationary, artwork, magazine space,
broadcasting, and postage related to marketing.
Professional Fees - All professional fees associated with property leasing activities including legal, accounting, data processing, and auditing costs to the
extent necessary to satisfy tenant lease requirements and permanent lender requirements.
Total Payroll - The payroll expenses for all employees involved in the ongoing operation of the property, but whose salaries and wages are not included in
other expense categories. Payroll expenses can be provided either in the following subcategories or entered in a bulk total. 1) Administrative Payroll - The
payroll expenses for all employees involved in on-going property administration. 2) Repair & Maintenance Payroll - The expense of all employees involved in
on-going repairs and maintenance of the property. 3) Cleaning Payroll - The expense of all employees involved in providing on-going cleaning and janitorial
services to the property 4) Other Payroll - The expense of any other employees involved in providing services to the property not covered in other specific
categories.
Security - Expenses related to the security of the Lessees and the Property. This expense item includes payroll, contract services and other security
expenses not covered in other expense categories. This item also includes the expense of maintenance of security systems such as alarms and closed
circuit television (CCTV), and ordinary supplies necessary to operate a security program, including batteries, control forms, access cards, and security
uniforms.
Roads & Grounds - The cost of maintaining the grounds and parking areas of the property. This expense can vary widely depending on the type of property
and its total area. Landscaping improvements can range from none to extensive beds, gardens and trees. In addition, hard-surfaced public parking areas
with drains, lights, and marked car spaces are subject to intensive wear and can be costly to maintain.
Other Operating Expenses - Any other expenses incurred in the operation of the property not specifically covered elsewhere.
Real Estate Taxes - The tax levied on real estate (i.e., on the land, appurtenances, improvements, structures and buildings); typically by the state, county
and/or municipality in which the property is located.
155
PROSPECTIVE OPINION OF VALUE
A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some
specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under
conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.
PROSPECTIVE VALUE UPON REACHING STABILIZED OCCUPANCY
The value of a property as of a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of
long-term occupancy. At such point, all capital outlays for tenant improvements, leasing commissions, marketing costs and other carrying charges are assumed to
have been incurred.
SPECIAL, UNUSUAL, OR EXTRAORDINARY ASSUMPTIONS
Before completing the acquisition of a property, a prudent purchaser in the market typically exercises due diligence by making customary enquiries about the
property. It is normal for a Valuer to make assumptions as to the most likely outcome of this due diligence process and to rely on actual information regarding such
matters as provided by the client. Special, unusual, or extraordinary assumptions may be any additional assumptions relating to matters covered in the due
diligence process, or may relate to other issues, such as the identity of the purchaser, the physical state of the property, the presence of environmental pollutants
(e.g., ground water contamination), or the ability to redevelop the property.
ADDENDA CONTENTS
ADDENDUM A: COMPARABLE IMPROVED SALES DATASHEETS
ADDENDUM B: GROUND LEASE CALCULATION
ADDENDUM C: LESSEE PROVIDED “TRANSACTION COSTS” CALCULATION
ADDENDUM D: QUALIFICATIONS OF THE APPRAISERS
ADDENDA CONTENTS
156
ADDENDA CONTENTS
ADDENDUM A: COMPARABLE IMPROVED
SALES DATASHEETS
157
IMPROVED SALE COMPARABLE - 1
Shopping Center
Bronx NY
MSA: N/A
Property Type:
Property Subtype:
ID:
APN:
Site Area (Acres):
Site Area (SqFt):
L:B Ratio:
Parking Spaces:
Parking Ratio:
Year Built:
Last Renovation:
Quality:
Condition:
Shopping Center
N/A
302076
N/A
Anchors
N/A
N/A
N/A
N/A
N/A
2014
N/A
N/A
N/A
Included
in Sale
GLA
BJ'S Wholesale
IN-Line
X
X
118,423
40,714
Total Anchor GLA
Inline GLA
X
159,137
N/A
Total GLA
Sold GLA
159,137
159,137
SALE INFORMATION
Sale Status:
Transaction Date:
Sale Price:
Price per SqFt:
Value Interest:
Grantor:
Grantee:
Condition of Sale:
In-Contract
1/2015
$125,000,000
$785.49
Leased Fee
Confidential
Confidential
None
OAR:
NOI:
NOI per SqFt:
Occupancy:
Expense Ratio:
EGIM:
5.11%
$6,387,500
$40.14
97.00%
N/A
N/A
VERIFICATION COMMENTS
C&W Research
COMMENTS
This is the contract of sale for a newly constructed retail power center a known as Riverdale Crossings, located at 184-190 West
237th Street within the Kingsbridge neighborhood of the Bronx. The property is being acquired by a confidential buyer from AGMetropolitan Riverdale Crossing, L.L.C. for a reported price of $125,000,000 or $785.98 per square foot. . The property was formerly
improved with the Stella D’oro Bakery which was razed for the Riverdale Crossings retail center development. The center is anchored
by BJ’s Wholesale Club, which has leased 118,423 square feet (74.5%) of the subject property and contains its own 2-story, plus
lower level building with rooftop parking. The majority of the BJ’s Warehouse Club retail space is located below grade. The remaining
40,714 square feet of in-line retail space is be and will contains ground and second floor retail space along with rooftop parking. The
subject property is currently 96.7 percent leased to 8 tenants inclusive of BJ’s Wholesale Club, Bank of America, Chipotle,
Smashburger, TMobile, Subway, Buffalo Wild Wings and CityMD. The property was purchased based upon an overall capitalization
rate of 5.11 percent.
VALUATION & ADVISORY
Shops at Grand Avenue
74-25 Grand Avenue
Maspeth NY 11378
MSA: New York
Queens County
Property Type:
Property Subtype:
ID:
APN:
Site Area (Acres):
Site Area (SqFt):
L:B Ratio:
Parking Spaces:
Parking Ratio:
Year Built:
Last Renovation:
Quality:
Condition:
Shopping Center
Neighborhood Center
167346
N/A
Anchors
4.46
194,278
1.94:1
N/A
N/A
N/A
1997
Good
Good
Included
in Sale
Stop & Shop
TJ Maxx
Total Anchor GLA
Inline GLA
Other GLA
Total GLA
Sold GLA
X
X
GLA
(SF)
N/A
N/A
99,986
99,986
99,986
SALE INFORMATION
Sale Status:
Transaction Date:
Sale Price:
Price per SqFt:
Value Interest:
Grantor:
Grantee:
Condition of Sale:
Recorded Sale
10/2014
$56,000,000
$560.08
Leased Fee
CPT Grand Avenue LLC
Shops at Grand Avenue LLC
N/A
OAR:
NOI:
NOI per SqFt:
Occupancy:
Expense Ratio:
EGIM:
5.00%
$2,800,000
$28.00
100.00%
N/A
N/A
cw research, acris
COMMENTS
This is the sale of a neighborhood center located in Queens County. The property is anchored by a Stop & Shop, TJ Maxx and features
Party City, Mandees and Ridgewood Savings Bank. The property is in a predominantly residential neighborhood.
2856 Steinway Street
Astoria NY 11103
MSA: New York
Queens County
Property Type:
Property Subtype:
ID:
APN:
Site Area (Acres):
Site Area (SqFt):
L:B Ratio:
Parking Spaces:
Parking Ratio:
Year Built:
Last Renovation:
Quality:
Condition:
Shopping Center
Other
141352
Block 662 Lot 41
Anchors
0.44
19,041
0.37:1
N/A
N/A
1920
2002
Good
Good
Included
in Sale
GLA
Duane Reade
Washington Mutual
NYSC
X
X
X
10,990
4,519
35,468
Total Anchor GLA
Inline GLA
X
50,977
N/A
Total GLA
Sold GLA
50,977
50,977
SALE INFORMATION
Sale Status:
Transaction Date:
Sale Price:
Price per SqFt:
Value Interest:
Grantor:
Grantee:
Condition of Sale:
Recorded Sale
8/2014
$32,000,000
$627.73
Leased Fee
C&K Steinway LLC
2856 Steinway Street-Millbridge LLC
N/A
OAR:
NOI:
NOI per SqFt:
Occupancy:
Expense Ratio:
EGIM:
4.62%
$1,478,400
$29.00
100.00%
N/A
N/A
CW Research
COMMENTS
This is the sale of 2856 Steinway Street, a 3-story retail center on the northwest corner of 30th Avenue within the Astoria
neighborhood of Queens. 2856 Steinway Street-Millbridge LLC purchased the property from 2856 Astoria LLC in August 2014 for
$32,000,000. The building contains 51,079 square feet. At the time of sale, the property was leased on a long term basis to three
national tenants: Duane Reade (10,990 SF), Chase Bank (4,549 SF), and New York Sports Clubs (35,540 SF). The property was
purchased based on an overall capitalization rate of 4.62 percent. The sale price equates to a unit price of $626.48 per square foot.
After all adjustments, this comparable indicated an adjusted unit price of $190.58 per square foot
Waldbaum's Shopping Center
152-59 10th Avenue
Whitestone NY 11357
MSA: New York
Queens County
Property Type:
Property Subtype:
ID:
APN:
Site Area (Acres):
Site Area (SqFt):
L:B Ratio:
Parking Spaces:
Parking Ratio:
Year Built:
Last Renovation:
Quality:
Condition:
Shopping Center
Neighborhood Center
284943
N/A
Anchors
4.60
200,376
3.23:1
N/A
N/A
1930
1990
Average
Average
Included
in Sale
GLA
Waldbaum's
X
56,000
Total Anchor GLA
Inline GLA
X
56,000
6,000
Total GLA
Sold GLA
62,000
62,000
SALE INFORMATION
Sale Status:
Transaction Date:
Sale Price:
Price per SqFt:
Value Interest:
Grantor:
Grantee:
Condition of Sale:
Recorded Sale
1/2014
$23,903,127
$385.53
Leased Fee
Whitestone Grocery SC, LLC
Feil Whitestone, LLC
None
OAR:
NOI:
NOI per SqFt:
Occupancy:
Expense Ratio:
EGIM:
5.50%
$1,314,672
$21.20
99.00%
N/A
N/A
Costar, Inc. Copy of Deed
COMMENTS
Sale of a 1-story retail center located along 152-59 Tenth Avenue between the Whitestone Expressway and 147th Street. At the time
of sale the property was 100 percent net leased to Walbaum's. Waldbaum's has a master lease on the entire center and occupies
approximately 56,000 square feet. They sublease the balance of the center to smaller inline tenants. The Waldbaum's net lease runs
through February 2024. The property was purchased based on an overall capitalization rate of 5.50 percent.
Pelham Manor Shopping Plaza
2 Penn Place
Pelham Manor NY
MSA: New York
Westchester County
Property Type:
Property Subtype:
ID:
APN:
Ground Lease:
Site Area (Acres):
Site Area (SqFt):
L:B Ratio:
Parking Spaces:
Parking Ratio:
Year Built:
Last Renovation:
Quality:
Condition:
Shopping Center
Power Center
267261
N/A
Yes
Anchors
16.22
706,543
2.22:1
911
2.86:1,000
2007
2011
Good
Good
BJ's Wholesale
Michael's Crafts
PetSmart
Total Anchor GLA
Inline GLA
Self-Storage:
Total GLA
Sold GLA
Included
in Sale
X
X
X
X
GLA
129,405
20,149
19,958
169,512
59,371
89,375
318,258
228,883
SALE INFORMATION
Sale Status:
Transaction Date:
Sale Price:
Price per SqFt:
Value Interest:
Grantor:
Grantee:
Condition of Sale:
Recorded Sale
11/2013
$58,529,960
$255.72
Leasehold
Acadia Realty Trust JV
Retail Properties of America, Inc.
None
OAR:
NOI:
NOI per SqFt:
Occupancy:
Expense Ratio:
EGIM:
5.85%
$3,424,003
$14.96
98.00%
N/A
N/A
Appraiser, seller, public record & broker
COMMENTS
This is the sale of a BJ`s Wholesale Club-anchored power center. Other tenants include Michaels, PetSmart, Five Below, Chase, and
a self storage tenant. The center is subject to a long-term ground lease with an initial term through 2039 and 60 years of renewal
options. The ground rent at sale was $9.91 per GLA.
Canarsie Plaza
8925 Avenue D
Brooklyn NY 11236
MSA: New York
Kings (Brooklyn) County
Property Type:
Property Subtype:
ID:
APN:
Shopping Center
Neighborhood Center
238917
N/A
Anchors
Site Area (Acres):
Site Area (SqFt):
L:B Ratio:
Parking Spaces:
Parking Ratio:
Year Built:
Last Renovation:
Quality:
Condition:
12.48
543,629
1.96:1
638
2.30:1,000
2011
N/A
Good
Good
BJ's Wholesale
Planet Fitness
PetSmart
Total Anchor GLA
Inline GLA
Other GLA:
Total GLA
Sold GLA
Included
in Sale
X
X
X
X
X
GLA
177,135
15,000
13,574
205,709
N/A
72,198
277,907
277,907
SALE INFORMATION
Sale Status:
Transaction Date:
Sale Price:
Price per SqFt:
Value Interest:
Grantor:
Grantee:
Condition of Sale:
Recorded Sale
12/2012
$124,000,000
$446.19
Leased Fee
Cole Real Estate Investments
Acadia Realty
None
OAR:
NOI:
NOI per SqFt:
Occupancy:
Expense Ratio:
EGIM:
6.26%
$7,757,395
$27.91
96.00%
18.30%
N/A
Verified by HFF, selling broker and CoStar
COMMENTS
The center was anchored by BJ's Wholesale Club (177,135 SF), and other tenants included Planet Fitness (15,000 SF), Petsmart
(13,574 SF) and Dollar Tree (10,018 SF). BJ's occupies 64 percent of the center's NRA and is leased through 2030, with 8 percent
increases in 2015 and 2020, and a 10 percent increase in 2025. The motivation for the buyer was a high-quality asset that is
attractively located in the Canarsie section of Brooklyn, a vibrant and densely populated borough of New York City to add to their
portfolio. Moreover, the property holds long-term leases with nationally recognized retailers who benefit from the strong retail traffic
created by the location's dense population and nearby public transportation. It sits adjacent the Brooklyn Terminal Market. The
property was purchased based on an overall capitalization rate of 6.26 percent.
Clocktower Plaza
Ozone Park NY 11416
MSA: New York
Queens County
Property Type:
Property Subtype:
ID:
APN:
Ground Lease:
Site Area (Acres):
Site Area (SqFt):
L:B Ratio:
Parking Spaces:
Parking Ratio:
Year Built:
Last Renovation:
Quality:
Condition:
Shopping Center
Neighborhood Center
242253
9027-11, 9028-1
Yes
Anchors
6.66
290,250
3.68:1
360
4.57:1,000
1985
1995
Average
Average
Included
in Sale
GLA
Pathmark
X
62,668
Total Anchor GLA
Inline GLA
X
62,668
16,152
Total GLA
Sold GLA
78,820
78,820
SALE INFORMATION
Sale Status:
Transaction Date:
Sale Price:
Price per SqFt:
Value Interest:
Grantor:
Grantee:
Condition of Sale:
Recorded Sale
9/2012
$56,000,000
$710.48
Leased Fee
Winstanley Enterprises, Inc.
Equity One, Inc.
None
OAR:
NOI:
NOI per SqFt:
Occupancy:
Expense Ratio:
EGIM:
6.00%
$3,360,000
$42.63
100.00%
N/A
N/A
Verified with NYC deed
COMMENTS
Sale of a Pathmark anchored neighborhood shopping center known as Clocktower Plaza along Atlantic Avenue on the northeast
corner of 92nd Street and Atlantic Avenue within the Woodhaven neighborhood of Brooklyn. The property is currently 100 percent
leased to Pathmark (62,668 SF), Fashion Bug (5,068 SF), a Burger King (2,996 SF) and several small in-line tenants (totaling 8,088
SF). Pathmark occupies 80 percent of the shopping center and is leased through 2023, with 5 percent increases every 5 years.
Pathmark, Burger King and Fashion Bug have exhibited successful operations with annual sales of $56.1 mm, $1.4mm and $1.3mm,
respectively. The property was purchased based on an overall capitalization rate of 6.00 percent.
IMPROVED SALE COMPARABLE -8
Lake Grove Commons
130 New Moriches Road
Lake Grove NY
MSA: Nassau-Suffolk
Suffolk County
Property Type:
Property Subtype:
ID:
APN:
Site Area (Acres):
Site Area (SqFt):
L:B Ratio:
Parking Spaces:
Parking Ratio:
Year Built:
Last Renovation:
Quality:
Condition:
Shopping Center
Power Center
219642
N/A
Anchors
15.83
689,555
4.88:1
1,500
10.61:1,000
2010
N/A
Good
Good
Included
in Sale
Whole Foods
LA Fitness
Petco
X
X
X
Total Anchor GLA
Inline GLA
X
Total GLA
Sold GLA
GLA
N/A
141,382
141,382
141,382
SALE INFORMATION
Sale Status:
Transaction Date:
Sale Price:
Price per SqFt:
Value Interest:
Grantor:
Grantee:
Condition of Sale:
Recorded Sale
1/2012
$72,500,000
$512.80
Leased Fee
Lake Grove Enterprises-Blumenfeld RE
Regency Centers
None
OAR:
NOI:
NOI per SqFt:
Occupancy:
Expense Ratio:
EGIM:
5.60%
$4,060,000
$28.72
100.00%
N/A
N/A
Broker & Appraiser
COMMENTS
The center contains 141,382 square feet of gross leasable area inclusive of anchor tenants Whole Foods and LA Fitness. The center
was 100.00 percent occupied. The property was constructed in 2010 and exhibits good quality and condition. At the time of sale,
tenants at this shopping center included Petco, Jared Jewlers, T-Mobile, and a Fidelity Investments. The overall capitalization rate at
the time of sale was 5.60 percent. According to the seller, the property commanded substantial buyer interest and competitive
bidding.
ADDENDA CONTENTS
158
ADDENDUM B: GROUND LEASE CALCULATION
ADDENDA CONTENTS
GROUND RENT PROJECTION
Ground Rent Projection (Fiscal Year)
Potential Gross Revenue
Imputed Gross Revenue for Target (Buy down tenant)**
Allowed Deductions
Management Fee @ 3% of PGI
On‐Site Costs
Gross Revenue
Specified Percentage @
Ground Rent
**Target Buydown amount times 6.79% (buydown constant)
2015
Year 1
29,690,632
2016
Year 2
30,035,409
2017
Year 3
30,332,304
2018
Year 4
30,687,220
2019
Year 5
32,293,961
2020
Year 6
33,017,254
2021
Year 7
33,302,254
2022
Year 8
33,658,929
2023
Year 9
33,975,663
2024
Year 10
35,449,103
$3,150,153
$32,840,785
$3,150,153
$33,185,562
$3,150,153 $3,150,153
$33,482,457 $33,837,373
$3,150,153
$35,444,114
$3,150,153
$36,167,407
$3,150,153
$36,452,407
$3,150,153
$36,809,082
$3,150,153
$37,125,816
$3,150,153
$38,599,256
($985,224)
($147,000)
$31,708,561
2.0%
$634,171
($995,567)
($147,000)
$32,042,995
3.0%
$961,290
($1,004,474) ($1,015,121)
($147,000) ($147,000)
$32,330,983 $32,675,252
3.0%
3.0%
$969,929
$980,258
($1,063,323)
($147,000)
$34,233,791
3.0%
$1,027,014
($1,085,022)
($147,000)
$34,935,385
3.0%
$1,048,062
($1,093,572)
($147,000)
$35,211,835
4.0%
$1,408,473
($1,104,272)
($147,000)
$35,557,810
4.0%
$1,422,312
($1,113,774) ($1,157,978)
($147,000)
($147,000)
$35,865,042 $37,294,278
4.0%
4.0%
$1,434,602
$1,491,771
2025
Year 11
36,926,841
$3,150,153
$40,076,994
2026
Year 12
37,206,751
$3,150,153
$40,356,904
($1,202,310) ($1,210,707)
($147,000)
($147,000)
$38,727,684 $38,999,197
4.0%
4.0%
$1,549,107
$1,559,968
159
ADDENDA CONTENTS
ADDENDUM C: LESSEE PROVIDED
“TRANSACTION COSTS” CALCULATION
160
BTM DEVELOPMENT PARTNERS, LLC
60 Columbus Circle, 19th Floor
New York, New York 10023
January 16, 2014
By Overnight Courier
The City of New York
do New York City Economic Development Corporation
110 William Street
Attn.: Darryl Connelly Lease Administrator
-
Bronx Terminal Market
Bronx, New York
Dear Sir or Madam:
Reference is made to that certain Agreement of Lease, dated as of September 14, 2006, between
The City of New York, as landlord (“Landlord”), and New York City Economic Development
Corporation, as tenant (“EDC’), the tenant’s interest in which was assigned pursuant to Assignment and
Assttmption of Lease, dated as of September 14, 2006, by EDC, as assignor, to BTM Development
Partners, LLC, as assignee (“Tenant”) (collectively, the “Ground Lease”). Capitalized terms not
otherwise defined in this letter shall have the respective meanings given to them in the Ground Lease.
This letter constitutes notice, in accordance with Section 12.1(d) of the Ground Lease, that the
closing of a financing is anticipated to occur on february 14, 2014. As required by said Section 12.1(d)
of the Ground Lease, enclosed please find a statement of the anticipated Net Financing Proceeds.
Reference is hereby expressly made to Section 12.1(e) of the Ground Lease, and to the provisions
thereof pursuant to which Landlord has ten (10) Business Days after receipt of the statement of
anticipated Net Financing Proceeds to notify Tenant if Landlord disagrees with Tenant’s determination of
the anticipated Net financing Proceeds (in which case, stich notice shall indicate in reasonable detail the
nature of such disagreement) or if Landlord reasonably requires further information. Landlord shall be
deemed to have agreed with Tenant’s calculation of the anticipated Net Financing Proceeds if Landlord
fails to deliver such notice within ten (10) Business Days after receipt of the statement of anticipated Net
Financing Proceeds.
If you have any questions regarding the foregoing, please do not hesitate to contact Avi
Kollenscher at (212) 801-1083.
Very truly yours,
BTM DEVELOPME T PARTNERS, LLC
Name: Glenn Goldstein
Title: Executive Vice President
Enclosure
cc (by overnight courier):
New York City Law Department
100 Church Street
New York, New York
Attn.: Chief, Economic Development Division
BTM Development Partners LIC
Statement of the Anticipated Net Financing Proceeds
1/16/2014
Gross Loan Proceeds From Refinancing
(fl
U
[
380,000000
Deductions Per Ground Lease:
(A) Original Indebtedness
(B) Required Mortgagee Escrow / Working Capital
(C) Financing Proceeds Used or Intended to Be Used For Construction Work
(0) Financing Proceeds Used to Reimburse or Pay For Accrued Operating Losses
)t) Financing Costs
(F) An Amount Equal to Net Financing Proceeds Upon Which a Prior Transaction Payment Was Made
)G) All Cash Equity of Tenant Invested in The Premisen
(H) Developer Fee Equal to 3% of Development Costs
Total Deductions
(358,865,329) Tab A
-
(7,500,000)
-
(7,626,023) Tab B
-
(40,500,000) Tab C
(13,960,734) Tab 0
(428,452,086)
Net Cash Proceeds From Refinance
(48,452,086)
Transaction Payment Due to The City of New York
0
(A) Original Indebtedness
TrancheA
Balance Per 11/18/13 Interest Invoice
lnv#42416
lnv#41810
228,350,820
91,754,693
31,014,509
7,745,307
259,365,329
99,500,000
Tranche B
Total
Total
320,105,512
38,759,817
358,865,329 Tab A
)C) Financing Proceeds Used or Intended to Be Used For Construction Work
Replacement of Toys R Us 75,000sf @ $100 psf
7,500,000
)E) Financing Costs
Tranche A Prepayment Penalty
Swap Breakage Costs
Tranche B )QEI 2) Interest Reserve: 3/1/14
Eastdil Fee
Legal
Title
Misc
MRT
2,308,186
1,140,000
888,424
300,000
780,000
718,333
100,000
1,391,079
-
12/18/14
7,626,023 Tab B
)G) Equity Invested
Tenant’s Equity
40,500,000 Tab C
)H) Developer Fee
Development Costs
Building and Tenant Improvements
Building and Tenant Improvements Post Cost Seg Study
Ground Lease Acquisition Costs
Financing Costs
Leasing Costs
-
Cost Seg Study
Escel Summary
2012 Audit Report
2012 Audit Report
2012 Audit Report
394,105,970
8,466,784
47,567,020
8,352,457
6,865,575
465,357,806
3%
13,960,734
Tab
Tab
Tab
Tab
Tab
0
D
0
0
0
ADDENDA CONTENTS
ADDENDUM D: QUALIFICATIONS OF THE
APPRAISERS
161
A PROPOSAL FOR
C&W BIOGRAPHY
PROFESSIONAL
QUALIFICATIONS
JOHN A. KATINOS
SENIOR DIRECTOR | VALUATION & ADVISORY
John A. Katinos is a Senior Director with Cushman & Wakefield, Inc. Valuation & Advisory. He joined
Cushman & Wakefield, Inc. in August, 1989.
EXPERIENCE
Appraisal and consulting assignments have included office buildings, retail centers, regional malls, vacant land,
transferable development rights (TDRs), historic and preservation easements, cooperative, condominium and
rental apartment buildings, feasibility and market studies, industrial properties, residential subdivisions, existing
and proposed investment properties throughout the United States. Served as an arbitrator for numerous real
estate maters including ground rent redetermination, office and retail space rent renewal determinations.
EDUCATION
 New York University (New York, NY)
− Degree: Master of Science in Real Estate – Real Estate Valuation and Analysis
 Drexel University (Philadelphia, PA)
− Degree: Bachelor of Science in Business Administration – Finance
MEMBERSHIPS, LICENSES AND PROFESSIONAL AFFILIATIONS
 Designated Member, Appraisal Institute (MAI #12185)
− As of the current date, John Katinos, MAI has completed the requirements of the continuing education
program of the Appraisal Institute.
 Member, Board of Directors, Metropolitan NY Chapter of the Appraisal Institute
 Certified General Real Estate Appraiser in the following state:
− New York – 46000028780
CUSHMAN & WAKEFIELD
1
A PROPOSAL FOR
C&W BIOGRAPHY
PROFESSIONAL
QUALIFICATIONS
NEW YORK
CUSHMAN & WAKEFIELD
2
A PROPOSAL FOR
C&W BIOGRAPHY
PROFESSIONAL
QUALIFICATIONS
JAMES P. STUCKEY JR.
ASSOCIATE DIRECTOR | VALUATION & ADVISORY
BACKGROUND
James Stuckey is an appraiser with Cushman & Wakefield, Inc. Valuation & Advisory Group. He joined
Cushman and Wakefield, Inc. in August 2007.
APPRAISAL EXPERIENCE
and proposed investment properties throughout New York State.
EDUCATION
 University of Scranton, Pennsylvania
− Degree: Bachelors of Science in Political Science
APPRAISAL EDUCATION
 Metropolitan New York Chapter of the Appraisal Institute
− Basic Appraisal Principles (R1)
− Fair Housing, Fair Lending and Environmental Issues (AQ1)
− 15-Hour National Uniform Standards of Professional Appraisal Practice (USPAP)
− Basic Appraisal Procedures (R2)
 Practicing Affiliate, Appraisal Institute – Metropolitan New York Chapter
 State of New York Certified Appraiser Assistant, License No. 48000049048
CUSHMAN & WAKEFIELD
1
A PROPOSAL FOR
C&W BIOGRAPHY
PROFESSIONAL
QUALIFICATIONS
CHARLES R. LOONEY
APPRAISER | VALUATION & ADVISORY
Charles R. Looney is an Associate Appraiser of Valuation & Advisory for Cushman & Wakefield. He joined
Cushman and Wakefield, Inc. in July, 2014.
Mr. Looney has contributed to appraisal and consulting assignments involving the valuation of multiple
property types, including office buildings, retail centers, cooperative, condominium and Rental apartment
buildings, retail centers, regional malls, vacant land, transferable development rights (TDRs), historic and
preservation easements, and existing and proposed investment properties throughout New York State. Mr.
Looney works as an associate to John A. Katinos, MAI, who specializes in the valuation of various property
types in all five boroughs.
EDUCATION
 Marist College– Graduated 2014
− Degree: Bachelor of Science – School of Biological Sciences
CUSHMAN & WAKEFIELD
1
V&A Regional Manager
1290 Avenue of the Americas
New York, NY 10104
Direct +1 212 841 5048
Fax
+1 212 479 1878
robert.nardella@cushwake.com
cushmanwakefield.com
November 18, 2015
To: Related Commercial Portfolio Ltd.
RE: Value Appraisals – Consent to include within Financial Statements
We hereby give our full consent to Related Commercial Portfolio Ltd. (the "Company") to the
inclusion of our Appraisal Report dated July 13, 2015 (Effective date – June 10, 2015) regarding the
retail condominium unit within One Union Square South New York, New York in its entirety,
within the Company's Financial Statements for September 30, 2015, to be published by the
Company no later than November 30, 2015, and any ensuing financial statements, and within any
other filing to be filed and/or disclosed by the Company to the Israel Securities Authority and/or to be
published by the Company.
In addition, we hereby give our full consent to the inclusion of a copy of this letter within the
Company's Financial Statements and other filings as aforesaid.
Yours sincerely,
RSN:pl
No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein, and same is submitted subject to errors,
omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions, imposed by our principals.
APPRAISAL OF REAL PROPERTY
Retail Condominium Unit within
One Union Square South
New York, New York County, NY 10003
IN AN APPRAISAL REPORT
As of June 10, 2015
Prepared For:
Related Commercial Portfolio, LTD. c/o Related Companies
60 Columbus Circle
Prepared By:
Valuation & Advisory
1290 Avenue of the Americas, 9th Floor
C&W File ID: 15-12002-901504
July 13, 2015
Mr. David Zussman
Vice President
Related Commercial Portfolio, LTD. c/o Related Companies
60 Columbus Circle
Re:
Appraisal of Real Property
In An Appraisal Report
C&W File ID:
15-12002-901504
Dear Mr. Zussman:
In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our appraisal
of the above property in an appraisal report dated July 13, 2015. The effective date of value is June 10, 2015.
The subject property comprises a multi-level retail condominium unit totaling 236,215 square feet of net rentable
area within five levels (inclusive of one below grade level) of the luxury mixed-use development located at One
Union Square South. The subject is 100.0 percent leased to seven retail tenants. The subject is anchored by
Regal Cinemas, Best Buy, and Nordstrom Rack, which occupy 83.7 percent of the subject. The subject site is
ground leased through December 31, 2095, with no renewal options.
One Union Square South is a 22-story luxury residential building, with a 5-level retail component (subject
property) containing a total gross building area of 431,677 square feet on a 48,223 square foot parcel of land. The
entire mixed-use property contains approximately 240 residential rental apartment units (208,961 SF), and
236,215 square feet of multi-level retail space. The residential component of the building is not part of the
subject property.
This report was prepared for Related Commercial Portfolio, LTD. c/o Related Companies and/or affiliates and is
intended only for their specified use. It may not be distributed to or relied upon by any other persons or entities
without the written permission of Cushman & Wakefield, Inc.
MR. DAVID ZUSSMAN
RELATED COMMERCIAL PORTFOLIO, LTD. C/O RELATED
COMPANIES
JULY 13, 2015
PAGE 2
MARKET VALUE
Based on the agreed to Scope of Work, and as outlined in the report, we have developed an opinion that the
market value of the leasehold estate of the above property, subject to the assumptions and limiting conditions,
certifications, extraordinary and hypothetical conditions, if any, and definitions on June 10, 2015, was:
THREE HUNDRED EIGHTY MILLION DOLLARS
$380,000,000
The value opinion in this report is qualified by certain assumptions, limiting conditions, certifications, and
definitions.
This appraisal does not employ any extraordinary assumptions. For a definition of Extraordinary Assumptions
please see the Glossary of Terms & Definitions.
This appraisal does not employ any hypothetical conditions. For a definition of Hypothetical Conditions please see
the Glossary of Terms & Definitions.
This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and
Addenda.
Respectfully submitted,
Senior Director
New York Certified General Appraiser
License No. 46000028780
john.a.katinos@cushwake.com
(212) 479-1820 Fax
Associate Director
New York Certified Appraiser Assistant
License No. 48000049048
(212) 479-8325 Fax
ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
GENERAL INFORMATION
Location:
The subject site is located on the entire city block bounded by Union
Square South to the north, Fourth Avenue to the east, East 13th Street
to the south and Broadway to the west in the Union Square
neighborhood of Manhattan.
The subject property comprises a multi-level retail condominium unit
totaling 236,215 square feet of net rentable area within five levels
(inclusive of one below grade level) of the luxury mixed-use
development located at One Union Square South. The subject is 100.0
percent leased to seven retail tenants. The subject is anchored by
Regal Cinemas, Best Buy, and Nordstrom Rack, which occupy 83.7
percent of the subject. The subject site is ground leased through
December 31, 2095, with no renewal options.
One Union Square South is a 22-story luxury residential building, with
a 5-level retail component (subject property) containing a total gross
building area of 431,677 square feet on a 48,223 square foot parcel of
land. The entire mixed-use property contains approximately 240
residential rental apartment units (208,961 SF), and 236,215 square
feet of multi-level retail space. The residential component of the
building is not part of the subject property.
Assessor's Parcel Number:
Block 565, Lot 21
Interest Appraised:
Leasehold Estate
Date of Value:
June 10, 2015
Date of Inspection:
June 10, 2015
Ownership:
The fee ownership of the site is held by First Sterling Corporation and
West Realty Co. The leasehold interest in the subject site is held by
Union Square Retail Trust, in care of The Related Companies, L.P.
Occupancy:
The subject is 100.0 percent leased by 7 retail tenants.
Current Property Taxes
FY 2015/16 Assessment:
$78,696,450
CY 2015 Property Taxes:
$6,723,074
EXECUTIVE SUMMARY
Highest and Best Use
If Vacant:
A mixed-use development comprising of residential units on the upper
floors, and multi-level retail space on the lower floors.
As Improved:
As currently improved.
SITE & IMPROVEMENTS
Zoning:
C6-4 and C6-1; Restricted Central Commercial District
Land Area:
48,223 square feet
Number of Stories:
Entire Mixed-use Development:
22 stories, plus 1 below grade level
Subject Retail Unit:
Year Built:
1996
Type of Construction:
Steel and masonry
Gross Building Area- Subject:
236,215 square feet (Per Tax Assessor)
Net Rentable Area- Subject:
236,215 square feet (Per Rent Roll)
VALUE INDICATORS
SALES COMPARISON APPROACH:
$380,000,000
$1,608.70
DIRECT CAPITALIZATION
Net Operating Income:
$17,778,083
Capitalization Rate:
4.50%
$395,000,000
$1,672.21
DISCOUNTED CASH FLOW
Projection Period:
12 years
Holding Period:
11 years
5.00% (applied to reversion year net operating income)
Discount Rate:
6.00% (see Discount Rate Analysis)
$360,000,000
$1,524.04
EXECUTIVE SUMMARY
INCOME CAPITALIZATION APPROACH CONCLUSION
Indicated Value:
$380,000,000
$1,608.70
FINAL VALUE CONCLUSION
Market Value of the Leasehold
Estate:
$380,000,000
$1,608.70
Implied Capitalization Rate:
4.68%
EXPOSURE TIME
within this report would have been approximately nine (9) months. This assumes an active and professional
MARKETING TIME
We believe, based on the assumptions employed in our analysis, as well as our selection of investment
parameters for the subject, that our value conclusion represents a price achievable within nine (9) months.
For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions. This appraisal does
not employ any extraordinary assumptions.
For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions. This appraisal does
not employ any hypothetical conditions.
SUBJECT PHOTOGRAPHS
VIEW OF SUBJEC T PROPERTY ACROSS UN ION SQUAR E SOUTH .
VIEW OF SUBJEC T PROPERTY ALONG UNION SQUAR E SOUTH.
SUBJECT PHOTOGRAPHS
V I E W O F B E S T B U Y R ET A I L SPAC E W ITH IN TH E SUBJ EC T .
VIEW OF THE MOVIE THEA TRE SPACE W ITH IN TH E SUBJECT.
SUBJECT PHOTOGRAPHS
VIEW O F T HE NO RDSTRO M ’ S LE V E L R ETAIL SPACE WITHIN THE SUBJECT.
VIEW OF TH E DUAN E R EAD E RETA IL SPAC E W ITH IN TH E SUBJECT.
SUBJECT PHOTOGRAPHS
VIEW LOOK ING EA ST A LON G UN ION SQUAR E SOUTH
VIEW LOOK ING W EST A LON G UN ION SQUAR E SOUTH
INTRODUCTION
TABLE OF CONTENTS
INTRODUCTION ---------------------------------------------------------------------------------------------------------------------------------------------------- 1 NEW YORK CITY REGIONAL ANALYSIS ------------------------------------------------------------------------------------------------------------- 4 LOCAL AREA ANALYSIS ------------------------------------------------------------------------------------------------------------------------------------ 19 NATIONAL RETAIL MARKET ANALYSIS ----------------------------------------------------------------------------------------------------------- 21 MANHATTAN RETAIL MARKET ANALYSIS ------------------------------------------------------------------------------------------------------ 32 RETAIL TRADE AREA ANALYSIS ---------------------------------------------------------------------------------------------------------------------- 44 MOVIE THEATER OVERVIEW ----------------------------------------------------------------------------------------------------------------------------- 59 PROPERTY ANALYSIS --------------------------------------------------------------------------------------------------------------------------------------- 69 PROPERTY TAXES AND ASSESSMENTS --------------------------------------------------------------------------------------------------------- 76 HIGHEST AND BEST USE ----------------------------------------------------------------------------------------------------------------------------------- 82 VALUATION PROCESS --------------------------------------------------------------------------------------------------------------------------------------- 84 SALES COMPARISON APPROACH ------------------------------------------------------------------------------------------------------------------- 86 INCOME CAPITALIZATION APPROACH ------------------------------------------------------------------------------------------------------------ 97 RETAIL RENT MAP ------------------------------------------------------------------------------------------------------------------------------------------ 104 MULTI-LEVEL RETAIL RENT MAP ------------------------------------------------------------------------------------------------------------------ 105 RECONCILIATION AND FINAL VALUE OPINION ------------------------------------------------------------------------------------------- 129 ASSUMPTIONS AND LIMITING CONDITIONS ----------------------------------------------------------------------------------------------- 130 CERTIFICATION OF APPRAISAL -------------------------------------------------------------------------------------------------------------------- 132 GLOSSARY OF TERMS & DEFINITIONS -------------------------------------------------------------------------------------------------------- 133 ADDENDA CONTENTS ------------------------------------------------------------------------------------------------------------------------------------ 136 ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM
INTRODUCTION
1
INTRODUCTION
SCOPE OF WORK
Cushman & Wakefield, Inc. has an internal Quality Control Oversight Program. This Program mandates a
“second read” of all appraisals. Assignments prepared and signed solely by designated members (MAIs) are read
by another MAI who is not participating in the assignment. Assignments prepared, in whole or in part, by nondesignated appraisers require MAI participation, Quality Control Oversight, and signature.
In the process of preparing this appraisal, we:

Inspected the exterior and interior of the building and site improvements.

Reviewed leasing policy, concessions, tenant build-out allowances, and history of recent rental rates and
occupancy with several leasing and investment sales brokers and market research analysts.

We have reviewed the lease abstracts provided by the ownership.

We have review the subject 99-year ground lease dated December 13, 1996.

Conducted market research of occupancies, asking rents, concessions and operating expenses of
comparable properties, which involved interviews with on-site managers and a review of our own data base
from previous appraisal files.

Prepared an opinion of stabilized income and expense (for capitalization purposes).

Conducted market inquiries into recent sales of comparable retail properties to ascertain sales price per
square foot and capitalization rates. This process involved telephone interviews with sellers, buyers and/or
participating brokers.

This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on
our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that
these approaches would be considered applicable and/or necessary for market participants. Typical
purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of
this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value.

The scope of this analysis, and the analysis contained herein, is reflective of “the type and extent of research
and analyses in an assignment” (2014-15 USPAP).
INTRODUCTION
2
REPORT OPTION DESCRIPTION
USPAP identifies two written report options: Appraisal Report and Restricted Appraisal Report. This document is
prepared as an Appraisal Report in accordance with USPAP guidelines. The terms “describe,” summarize,” and
“state” connote different levels of detail, with “describe” as the most comprehensive approach and “state” as the
least detailed. As such, the following provides specific descriptions about the level of detail and explanation
included within the report:

Describes the real estate and/or personal property that is the subject of the appraisal, including physical,
economic, and other characteristics that are relevant

States the type and definition of value and its source

Describes the Scope of Work used to develop the appraisal

Describes the information analyzed, the appraisal methods used, and the reasoning supporting the analyses
and opinions; explains the exclusion of any valuation approaches

States the use of the property as of the valuation date

Describes the rationale for the Highest and Best Use opinion
IDENTIFICATION OF PROPERTY
Location:
The subject site is located on the entire city block bounded by Union Square
South to the north, Fourth Avenue to the east, East 13th Street to the south and
Broadway to the west in the Union Square neighborhood of Manhattan.
The subject property comprises a multi-level retail condominium unit totaling
236,215 square feet of net rentable area within five levels (inclusive of one below
grade level) of the luxury mixed-use development located at One Union Square
South. The subject is 100.0 percent leased to seven retail tenants. The subject is
anchored by Regal Cinemas, Best Buy, and Nordstrom Rack, which occupy 83.7
percent of the subject. The subject site is ground leased through December 31,
2095, with no renewal options.
One Union Square South is a 22-story luxury residential building, with a 5-level
retail component (subject property) containing a total gross building area of
431,677 square feet on a 48,223 square foot parcel of land. The entire mixed-use
property contains approximately 240 residential rental apartment units (208,961
SF), and 236,215 square feet of multi-level retail space. The residential
component of the building is not part of the subject property.
Assessor's Parcel Number: Block 565, Lot 21
Legal Description:
We have not been provided with a metes and bounds legal description for the
property. However, the property is identified on the tax maps of the City of New
York as Block 565, Lot 21.
INTRODUCTION
3
PROPERTY OWNERSHIP AND RECENT HISTORY
Current Ownership:
The fee ownership of the site is held by First Sterling Corporation and West Realty
Co. The leasehold interest in the subject site is held by Union Square Retail Trust,
in care of The Related Companies, L.P.
Sale History:
To the best of our knowledge, the property has not transferred within the past
three years.
Current Disposition:
To the best of our knowledge, the property is not under contract of sale nor is it
being marketed for sale.
DATES OF INSPECTION AND VALUATION
Date of Valuation:
June 10, 2015
Date of Inspection:
June 10, 2015
Property inspection was
performed by:
John A. Katinos, MAI, James P. Stuckey Jr. and Charles R. Looney
INTENDED USE AND USERS OF THE APPRAISAL
Intended Use:
This appraisal is intended to provide an opinion of the market value of the
leasehold interest in the property for internal business decisions by the client. All
other uses are unintended, unless specifically stated in the letter of transmittal. All
other uses and users are unintended.
Intended User:
This appraisal report was prepared for the exclusive use of Related Commercial
Portfolio, LTD. c/o Related Companies and/or its affiliates. All other uses and
users are unintended.
This appraisal does not employ any extraordinary assumptions.
This appraisal does not employ any hypothetical conditions.
New York City Regional Analysis
R EG IONA L MA P
4
5
INTRODUCTION
MARKET DEFINITION
New York City consists of five counties at the mouth of the Hudson River in the southeast area of New York
State. The borough of Manhattan, also referred to as New York County, forms the political, financial and cultural
core of the city. It is the economic growth engine of the Greater New York Region. The city’s other boroughs are
Brooklyn, Queens, Staten Island, and the Bronx, otherwise known as Kings, Queens, Richmond, and Bronx
counties, respectively. The area’s vast mass transit infrastructure connects the five boroughs as well as the
surrounding suburban areas, forming the Greater New York Region. This region covers 21 counties in the
southeastern section of New York State, southwestern corner of Connecticut, and Central and Northern New
Jersey.
The following are notable points about New York City:

The city is home to the two largest stock exchanges in the world, the New York Stock Exchange and the
NASDAQ.

New York houses many large financial institutions, including Citigroup, JP Morgan Chase, Goldman Sachs,
Barclay’s and Bank of America.

New York City is home to the headquarters of 48 companies on the 2014 Fortune 500 list.
The following map highlights the Metropolitan Statistical Area (MSA) of New York, NY:
NEW YORK CITY COUNTIES
CURRENT TRENDS
New York City’s economy is growing modestly on the strength of steady employment gains over the past few
years. The city has recovered all of the jobs lost during the great recession, well ahead of most cities in the
nation, and total employment recently reached an all-time high. The recent job gains have come in many sectors,
and the city’s employment diversity has helped weather the finance industry’s struggles. A major source of recent
6
economic growth has been the city’s tourism industry. NYC & Company, the city’s tourism bureau, estimates that
New York City had a record 56.4 million visitors in 2014, up from 54.3 million in 2013. They created $61.3 billion
in economic impact and sustained 359,000 tourism-related jobs paying $21.0 billion in wages. This boom in the
industry explains the city’s expansion in related employment sectors, and will continue to help the local economy.
A huge boom in tourism has subsequently enabled hotel occupancy rates to keep up with room boom beyond
Manhattan. A growing number of independent and brand-name hotels have been lining the city’s outer boroughs.
In fact, between January and November 2014, outer-borough occupancy rates ran as high as 81.0 percent,
according to STR, a hospitality-industry research firm. Most hotel markets operate at 65.0 occupancy, while
Manhattan is pushing 83.0 percent. Many hoteliers have turned to the outer boroughs to accommodate tourists
who cannot get a reservation in Manhattan’s tight hotel market or think it is too pricey. More than 100 hotels are
scheduled to open across Brooklyn, Queens, Staten Island and the Bronx over the next 36 months. Queens is on
pace to add nearly 50 properties in the next four years, 23 of which will be in Long Island City. Meanwhile,
Brooklyn added two new hotels last year, bringing its total to 50, and occupancy to 81.1 percent. STR projected
that by the end of 2017, Brooklyn will have a total of 70 hotels, a 150.0 percent increase from the 28 properties
the borough had in 2008.
Another source of New York City’s economic prosperity comes from the construction of cultural institutions. A new
study from the New York Building Congress found that cultural institutions accounted for $1.3 billion in new
construction spending for the five years ended in 2014. Notable projects such as the $422.0 million Whitney
Museum, the $65.0 million renovation of the Met Museum’s fountains, the $81.3 million renovation of the Cooper
Hewitt Smithsonian Design Museum, and the expansion of the Queens Museum created 10,000 jobs during the
five-year period. While the cultural projects represent only a tiny portion of the $32.0 billion in annual construction
spending (industries like health care and education outrank cultural construction spending), the sector is vital to
the city’s economy as it attracts tourists from around the world.
Last year, the Independent Budget Office (IBO) released its annual assessment of the city’s economy. The IBO
predicts that the city will show a gain of 413,000 jobs in the current expansion, which is the largest for any
comparable period since the record-keeping started in 1950. Employment increases will continue for the next two
years, and more importantly, the IBO forecasts that wages will finally rise for most workers, not just the wealthy.
While in 2013 household income stagnated in places throughout the U.S., it rose more than 3.0 percent in New
York City. These gains are expected to broaden out when the latest numbers come in. Further, the IBO estimates
the city will generate $6.0 billion more in revenue than the forecast made by the de Blasio administration over the
next four years.
New York City has created more jobs over the past five years than during any five-year period in the last half
century. This spurt of employment growth did not come from Wall Street, however. The big investment banks and
brokerage firms used to form the powerful engine that pulled New York’s economy out of recessions. During the
boom years of the 1990’s, the high-paying securities industry accounted for more than 10.0 percent of all the jobs
added in the city’s private sector. This time around, it has contributed less than 1.0 percent. This proves that New
York City can grow at a rapid pace without leaning on Wall Street. About 425,000 jobs were added since the end
of 2009, bringing total employment to 4.1 million jobs. Although many of these jobs are in lower-paying
businesses, such as hotels and restaurants, fast-growing and well-paying tech companies like Google, Facebook
and BuzzFeed are adding jobs at a fast pace. These major companies have been joined by small startups
throughout the city in creating a thriving tech ecosystem. According to a 2013 study presented at the Bloomberg
Technology Summit, the city’s tech boom has been responsible for roughly one-third of its private sector job
creation since 2007. New York City’s government is helping to nurture the growth with economic development
and education initiatives. As a result, Cornell, NYU, Columbia, and Carnegie Mellon are all opening or expanding
tech-oriented campuses in the city, in an effort to meet the need for highly educated workers.
7
Another 2015 report, issued by the Center for an Urban Future, found that nearly 88.0 percent of all the state’s job
growth was in New York City. Between 2004 and 2014, the city added almost 530,000 jobs, while the rest of the
state gained about 70,000. Over the same time period, private sector jobs in the city jumped 17.3 percent,
whereas they only grew 3.5 percent statewide. The city’s gain was powered by the retail, health care, technology
and creative services sectors. In 2014 alone, health care added 20,900 jobs, retail added 9,700 jobs, and the
creative industry added 7,000 jobs.

A report from 2014, which was commissioned by the Association for a Better New York, found that New
York’s growing technology industry generates more than a half-million jobs, almost $125.0 billion in annual
output, and $5.6 billion in tax revenues.

Media giant Viacom is laying off 264 employees in New York City to save $250.0 million. The company is in
the midst of a corporate restructuring that will combine its Comedy Central and Spike channels with MTV and
VH1.

MetLife is quadrupling its space at 200 Park Avenue, and will consolidate all of its New York City employees
to its namesake tower in Midtown. The new lease covers about 550,000 square feet, which is approximately
430,000 square feet more than its current lease. The company expects to complete all the moves by the first
half of 2017.

Domestic merchandise and home furnishings retailer Bed Bath & Beyond signed a lease in January to take
more than 100,000 square feet of space at Liberty View Industrial Plaza in Sunset Park, Brooklyn. The deal
happened as Brooklyn continues to gain popularity as a place to live and work among tech tenants.

A 2014 CPEX retail report identified 43 additional retail corridors in Brooklyn, bringing the total number to 88.
Of those 88 retail districts, 10 corridors had retail rents over $100.0 per square foot compared with just two
corridors five years ago.

California-based real estate brokerage Marcus & Millichap aims to double its New York footprint by looking to
take 40,000 square feet of office space. The company, whose current office is located at 270 Madison
Avenue, said that the new office could accommodate up to 250 staffers.

Facebook continues to expand its footprint at 770 Broadway in Midtown South. The social media giant will
add 80,000 square feet of space, bringing its total to 270,000 square feet. The additional space will have
nearly tripled its size at the property since it first occupied the building two years ago. Rents are believed to
be more than $100.0 per square foot for the new space occupying the entire 15th floor.

Test-prep company Kaplan is subleasing 80,000 square feet of space from Condé Nast at 750 Third Avenue
in Midtown. Kaplan will dispose of its current space of roughly 140,000 square feet at 395 Hudson Street by
subleasing it to WebMD.

Media conglomerate Bloomberg LP is expanding its footprint onto Third Avenue, taking roughly 150,000
square feet at 919 Third Avenue. The company becomes one of the latest in a growing line of companies to
lease big blocks of space on Third Avenue, which is considered midtown’s street of bargains.

Furniture and home-décor retailer Design Within Reach signed a lease for 40,000 square feet at Industry City
industrial complex in Sunset Park. It will also include a repair facility, a design studio and showroom. It is
expected to be operational in late spring and will bring 25 jobs to the site.

Office-suite provider Regus signed a deal to take about 34,000 square feet at the Falchi Building in Long
Island City, Queens. Regus and its rival, WeWork, have rapidly expanded across the city to meet an uptick in
demand for office suites.

York Studios is set to bring Film & Television back to the Bronx with the construction of 3 buildings totaling
about 300,000 square feet. The company currently operates out of a 40,000 square foot facility in Queens.
Construction is scheduled to begin this summer and be completed by summer 2016.
8

Simone Development Companies is in a process of completing a $16.0 million deal that would allow
construction of a 1.9 million square foot mixed-use office, academic and medical complex on a 33-acre site at
1500 Waters Place in the east Bronx. Simone plans to construct two one-story retail buildings, totaling 40,000
square feet; and four 10-story buildings of 250,000 square feet each. Plans will also include a hotel and
100,000 square feet of space for high education. Several thousand permanent jobs are expected to be
created through the development.

Los Angeles-based Estate Four plans to build a 1.2 million square foot project that will include a mixed-use of
offices, shops, performance spaces and a promenade in the Red Hook industrial neighborhood of Brooklyn.
The new development, called the Red Hook Innovation District, would be built over five years at a cost of
$400.0 million.

In March 2015, a partnership of developers between Jamestown, Belvedere Capital and Angelo Gordon
unveiled a massive redevelopment plan for Brooklyn’s Industry City. The plan calls for a $1.0 billion
investment over the next 12 years and 13,300 jobs at Industry City, including the ones currently there. The
developers estimate that another 5,800 jobs would be created throughout the city as a result of the project.
The planned expansion, however, cannot go forward without Mayor de Blasio’s administration’s approval for
the creation of a “special innovation zoning district.”

Jones New York, the women’s clothing brand owned by Sycamore Partners, will close all of its 127 outlet
stores throughout 2015. The company will also discontinue its wholesale business as it seeks strategic
alternatives. The Jones New York brand, which is sold in mid-priced department stores like Macy’s, has
struggled in recent years as retailers ramped up their exclusive-label goods to draw shoppers.

Cornell University broke ground on its Roosevelt Island tech campus in January 2014. The $2.0 billion
project, which won the city’s “Applied Sciences NYC” competition, will add some 2.0 million square feet of
academic, residential, and commercial space over the next two decades. Slated to open in 2017, the new
campus will house approximately 2,000 students and 280 faculty members, and create 8,000 permanent jobs
by 2037. The project more recently received $50.0 million from Verizon to develop an executive education
center.

An October 2014 report from the New York Building Congress forecasts overall construction spending in 2014
to be $32.9 billion, an increase of 17.0 percent from the previous year. A majority of the non-infrastructure
construction spending will be from new residential projects. Despite the optimistic forecast, the New York
Building Congress reported in January 2015 that construction costs increased by 5.0 percent in 2014 after a
nearly 5.0 percent increase in previous year.

Mayor Bill de Blasio and his administration are in the early stage of formulating a rezoning plan for a 57-blocklong corridor along Jerome Avenue that would bring more housing and new businesses to the South Bronx
area. The first step is completion of the Cromwell-Jerome Neighborhood Study, which is expected to be ready
by the end of the year.

Square, a San Francisco based mobile payment devices and software maker, expanded its size by moving
into its brand new 40,000 square foot SoHo office space in October 2014. The company plans to increase its
New York based staff to 385 employees. As of October 2014, the company employed a total of 75
employees.

Amazon received $5.0 million in tax credits from New York state at the end of 2014. The company expects to
use the money to bring 500 jobs to New York City at a property in Herald Square shopping district.

Samsung Electronics is looking to purchase as much as 1.0 million square feet of new or existing office space
in Manhattan. According to the Wall Street Journal, offices of that size generally could hold between 5,000
and 7,000 employees. The purchase (if the deal is reached) would be one of largest corporate expansions in
the city in years.
9

General Motors is reorganizing its Cadillac brand into a separate business unit and relocating the new
company’s headquarters to New York City at the beginning of June 2015. Cadillac expects about 130 to 140
people to be working for Cadillac in New York by the end of the year; many will be new hires. It also expects
that number to double to about 300 in the next three years.

The New York Times began its layoff process in December 2014 as the newspaper company did not receive
enough voluntary buyouts to cover newsroom budget cuts. The company expects to cut more than 100
newsroom jobs.

The State University of New York reached an agreement with the Fortis Property Group to build out NYU
Langone Medical Center at a former site of Long Island College Hospital in Cobble Hill, Brooklyn. Expected to
be completed by 2018, the 125,000 square foot complex, will have 70 doctors and a total staff of 400. NYU
Langone planned to invest $175.0 million to build out the facility.

Rockefeller University is planning a two acre campus extension over the FDR Drive. The project will involve
building a platform over the highway to support four new buildings, and is estimated to cost between $425.0
million and $450.0 million. It is expected to break ground in the second half of 2015, and construction is
expected to be finished in four years.

Online grocer FreshDirect broke ground in December 2014 on its 500,000 square foot corporate
headquarters in Mott Haven, South Bronx. The company reached a deal with the city in 2012 to relocate to
the Bronx (as opposed to New Jersey), keeping its 3,000 jobs in the city. In addition, the relocation is
expected to create 1,000 new jobs for Bronx residents.

New York City is investing $140.0 million to expand manufacturing and create 3,000 jobs at the Brooklyn
Navy Yard. The project, which was announced by Mayor Bill de Blasio in November 2014, will build on earlier
city plans for what is known as Building 77. The building is scheduled to open by mid to late 2016. In addition
to Building 77, The New Lab, a high-tech manufacturing consortium, is expected to expand to 84,000 square
feet, from its current 8,000 square foot space, when it moves into the new Green Manufacturing Center, a
250,000 square foot facility under construction at the Navy Yard.

Numerous high-profile redevelopment projects in various stages of the development pipeline will contribute to
New York City construction spending well into the future. Notable among these include Hudson Yards, Pacific
Park (formerly known as Atlantic Yards), the World Trade Center site, Flushing Commons, Greenpoint
Landing, Domino Sugar Factory, the Staten Island ferris wheel and outlet mall, Willets Point, City Point,
Hallets Point, and Seward Park.

Broadway Stages, a Brooklyn-based studio, has plans to build a $20.0 million film production complex on
Staten Island. The plan will generate 800 jobs over the next two years and as many as 1,500 jobs over the
next five years.

IBM announced that it will be investing $1.0 billion in its new Watson supercomputer division, which will be
headquartered in 51 Astor Place in Manhattan. The money will be partially invested in startup companies and
the hiring of several hundred employees at the new headquarters location.
DEMOGRAPHIC TRENDS
DEMOGRAPHIC CHARACTERISTICS
New York City exceeds the national average in household income at both the top and bottom of the spectrum. As
a result, the city’s middle income brackets are relatively small. The high cost of living in New York City pushes out
many of those who are not poor enough to qualify for subsidized rents or wealthy enough to afford market-rate
housing. A 2012 study from the Center for Housing Policy found that for the decade ended in 2010, housing and
transportation costs in New York City rose 55.0 percent. Over the same time period, income in the area only grew
by 31.0 percent.
10
The city also has a gap in educational attainment. A higher percentage of New York City residents are without a
high school diploma than the national population, and likewise for residents with at least a bachelor’s degree.

The median person in New York City is 36 years old, one year younger than the national median.

New York City’s average household income ($78,499) is significantly higher than the country’s ($71,318).
When looking at median household income, however, the roles are reversed. Median income in New York is
$50,493, while the country’s median household income is $51,352. Medians are typically a better measure of
central tendency, as means are more easily influenced by outliers. As discussed above, New York is full of
outliers at the upper and lower ends of the income scale.

A survey set released by the U.S. Census in September 2013 revealed that in 2011, 21.2 percent of New
York City residents were under the poverty line, compared to only 15.9 percent for the nation as a whole. This
marked the fourth straight year that the percentage increased. The stat seems to suggest that much of the
region’s recent job growth has been in industries with low wages.

New York City bests the national average in residents with at least a bachelor’s degree by 5.5 percentage
points. The city boasts a large number of institutions of higher learning, along with industries that require such
education. The educated labor pool makes New York City an attractive destination for many businesses.
The following table compares the demographic characteristics of New York City with those of the United States:
Demographic Characteristics
2014 Estim ates
Characteristic
Median Age (years)
New York
City
United
States
36.0
37.0
Average Annual Household Income
$78,499
$71,318
Median Annual Household Income
$50,493
$51,352
<$25,000
28.3%
24.4%
$25,000 to $49,999
21.3%
24.4%
$50,000 to $74,999
15.7%
17.9%
$75,000 to $99,999
10.6%
11.9%
$100,000 plus
24.1%
21.3%
< High School
20.3%
14.3%
High School Graduate
25.0%
28.4%
College < Bachelor Degree
20.8%
29.0%
Households by Annual Income Level:
Education Breakdown:
Bachelor Degree
20.0%
17.8%
Advanced Degree
13.9%
10.6%
POPULATION
According to Moody’s Analytics, the current population of New York City is estimated at over 8.4 million. Rapid
population growth is and always will be a challenge for New York City, as the densely populated metro area has
little room for growth. The recent trend of redeveloping former industrial and office buildings into residential
buildings could help, but the city will likely never grow as quickly as the rest of the country. Of all the boroughs,
Brooklyn is expected to grow the most quickly in the near future, as its current renaissance continues. According
to Moody’s Analytics, the borough is forecast to grow by an average annual rate of 0.7 percent through 2019.
11

From 2004 through 2014, New York City had average annual population growth of 0.5 percent. Over the
same time frame, however, the nation grew at an average annual rate of 0.9 percent.

Population growth for the next five years will continue to be relatively low in New York. The average annual
rate is forecast at 0.5 percent, lower than the nation’s forecast annual growth of 0.8 percent.

People typically follow jobs, so the recent trend of private sector job growth is a likely driver behind New
York’s population growth since the recession. The city’s annual growth rate peaked at roughly 1.1 percent in
2011.
The following chart compares historical and projected population growth between New York City and the United
States as a whole:
POPULATION GROWTH BY YEAR
1.3%
United States
New York City
Forecast
1.0%
0.7%
0.4%
0.1%
-0.2%
-0.5%
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
The following table shows New York City’s annualized population growth by county:
Annualized Population Growth by County
New York City
2004-2019
Population (000’s)
United States
2004
2014
Com pound
Annual
Forecast Forecast Grow th Rate
2015
2019
04-14
292,805.3 318,857.1 321,304.5 332,313.4
0.9%
Com pound
Annual
Grow th Rate
15-19
0.8%
New York City
8,043.4
8,469.4
8,523.9
8,698.1
0.5%
0.5%
Bronx County
1,359.0
1,429.6
1,438.6
1,466.1
0.5%
0.5%
0.7%
Kings County
2,459.1
2,615.9
2,637.5
2,710.9
0.6%
Queens County
2,198.5
2,314.9
2,331.7
2,385.1
0.5%
0.6%
Richmond County
456.8
475.0
476.7
478.4
0.4%
0.1%
New York County
1,569.9
1,633.9
1,639.4
1,657.6
0.4%
0.3%
Source: Data Courtesy of Moody's Analytics, Cushman & Wakefield Valuation & Advisory
HOUSEHOLDS
Much like population growth, New York City continually lags the country in household formation. This is largely
due to issues endemic to New York City. For example, the extremely high cost of living discourages household
formation, especially as young residents group together in apartments to live more affordably. It is not uncommon
for living rooms to be converted into extra bedrooms. Indeed, recent census data show that New York City leads
the nation in nonfamily households, with almost two-thirds of households having members with no familial
relationship.
12

From 2004 to 2014, the number of households in the city grew at an average annual rate of 0.3 percent, lower
than the national rate of 0.9 percent per year.

Over the next five years, the city’s average growth rate is expected to be 1.0 percent per year, while the rest
of the nation is forecast to have an average growth rate of 1.4 percent.
The chart below compares historical and projected household formation growth between New York City and the
United States as a whole:
HOUSEHOLD FORMATION BY YEAR
2.0%
United States
New York City
Forecast
1.5%
1.0%
0.5%
0.0%
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
ECONOMIC TRENDS
GROSS METRO PRODUCT
As discussed earlier, one of the city’s biggest new growth drivers since the recession has been the tech industry.
Giants like Microsoft, eBay, Yahoo!, Google, Facebook, Twitter, and LinkedIn have been expanding, while smaller
tech firms and startups are popping up in “Silicon Alley” and other areas of the city. Notable among these are
Etsy, Shutterstock, Kickstarter, MongoDB, Gilt Groupe, and Tumblr. The industry has also been one of the
biggest consumers of office space in the city in recent quarters. Expansion is expected to continue as Cornell
University’s proposed $2.0 billion high-tech graduate school on Roosevelt Island begins to come to fruition. It may
take some time before new jobs and businesses arise from the initiative, but the industry will continue to own a
growing share of the city’s economic output.
According to Moody’s Analytics, the city’s economy grew by 1.4 percent by in 2014, lower than the nation’s
growth of 2.4 percent. The city’s growth is expected accelerate this year and will surpass the nation’s growth. The
city’s economy is well diversified now, and growth will further intensify when financial companies return to
expansion.

For the purpose of comparing the economies of New York City and the United States, we use Gross Metro
Product (GMP) and Gross Domestic Product (GDP), respectively. The measures are analogous in what they
attempt to capture, but GDP is on a much larger scale than GMP.

From 2004 through 2014, New York City averaged 2.2 percent annual GMP growth, moderately better than
the nation’s annual GDP growth of 1.6 percent over the same time period.

13
The city’s GMP growth is expected to very slightly lag the nation’s GDP growth over the next five years,
growing by an annual average rate of 2.6 percent. The nation’s GDP is forecast to have 2.7 percent annual
growth.
The following chart compares historical and projected GMP growth by year for New York City and GDP growth for
the United States:
REAL GROSS PRODUCT GROWTH BY YEAR
8.0%
United States
Forecast
New York City
5.0%
2.0%
-1.0%
-4.0%
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
EMPLOYMENT DISTRIBUTION
New York City is heavily weighted in office-using employment sectors, which comprise 31.6 percent of jobs
compared to 24.4 percent for the nation. This helps to explain the high wages and job growth found in the metro
area. Furthermore, the city’s abundance of service jobs has shielded it from the gradual decay in manufacturing
employment across the nation.

More New York City workers are employed in education/health services than in any other sector, comprising
20.5 percent of the workforce. The national representation for this sector is currently at 15.5 percent.

The sector with the lowest employment representation in the city is manufacturing, which accounts for only
1.8 percent of the workforce. By contrast, the sector accounts for 8.7 percent of national employment. This is
a reflection of the service-heavy orientation of New York City, the high cost of land, and the lack of space for
large manufacturing facilities.

The percentage of New York City jobs in the financial activities sector is nearly double that of the national
proportion, with 10.7 percent of total employment. This is not surprising, as New York City is the financial
capital of the United States and home to Wall Street.

The area also has more than two times the information sector representation than the rest of the country.
Recent growth in this sector is a result of the tech boom.
The following chart compares non-farm employment sectors for New York City and the United States as a whole:
14
EMPLOYMENT BY SECTOR
2015 Estimates
Construction
Manufacturing
Trade, Transportation & Utilities
Information
United States
Financial Activities
New York City
Professional & Business Services
Education & Health Services
Leisure & Hospitality
Other Services (except Govt.)
Government
0%
4%
8%
12%
16%
20%
24%
MAJOR EMPLOYERS
New York City’s major employers are a good reflection of the city’s employment distribution. Just as many New
York City jobs are in education/health services and financial activities, many of the largest employers are found in
those sectors. Of the ten largest private employers in the city, five work in healthcare, three are banks, one is in
communications, and one is a major retailer.

JP Morgan Chase & Co., Citibank NA, and Bank of America are the three largest banks in the city, employing
more than 81,000 people combined. Their appearance on this list is not surprising, given New York’s status in
the financial world.

As previously stated, the education/health services sector is the largest in the city, and the rest of the list
reflects this. The five largest hospital systems (North Shore-Long Island Jewish Health System, Mount Sinai
Health System, New York-Presbyterian, Continuum Health Partners, and Montefiore Medical Center) employ
nearly 140,000 New Yorkers.
The following table lists New York City’s largest private employers:
15
Largest Private Employers
New York City, NY
Com pany
No. of
Em ployees
Business
Type
North-Shore Long Island Jew ish Health System
48,650
Healthcare
JPMorgan Chase & Co.
37,363
Financial Services
Mount Sinai Medical Center
32,056
Healthcare
Macy's Inc.
31,200
Retailer
Citibank NA
24,991
Financial Services
New York-Presbyterian Healthcare System
21,802
Healthcare
Bank of America
19,500
Financial Services
Continuum Health Partners Inc.
18,974
Healthcare
Verizon Communications
18,650
Communications
Montefiore Medical Center
18,030
Healthcare
Source: Crain's New York Business & Cushman & Wakefield Valuation & Advisory
EMPLOYMENT GROWTH
Employment growth in New York City remains steady, and has now outpaced the nation’s job growth over much
of the past decade. New York City has long since recovered all of the jobs lost during the great recession and is
now in a period of sustained expansion.
According to the New York State Department of Labor, total employment in the city grew by 2.9 percent during
the 12 month period ending in January 2015, adding 115,600 jobs. Private sector job growth in New York City
was even more pronounced, increasing by 3.3 percent from the same time last year, which outpaced both the
state’s growth rate (2.0 percent) and the nation’s growth rate (2.8 percent).
Job growth continues to be broad-based, with almost all major private sectors posting year-over-year gains. The
city’s employment growth over the past year has been led by the following sectors: education/health services
(which grew by 40,800 jobs, representing the fastest growth rate at 4.9 percent growth rate),
professional/business services (which added 24,800 jobs, a 3.8 percent growth rate), leisure/hospitality (which
added 14,400 additional jobs, representing growth rate of 3.8 percent). trade/transportation/utilities (adding
13,700 positions, a 2.2 percent increase), financial activities (which added 8,300 jobs, a 1.9 percent growth rate),
and information (which added 2,900 jobs, a 1.6 percent growth rate).
Every sector except manufacturing (which contracted by 1,600 jobs) added jobs for the 12-month period ending
January 2015. Government employment, which has seen constant contraction in recent months, rose by 3,300
jobs (a 0.6 percent increase) over the past year. The city’s important securities industry has begun to pick up the
pace and will continue to steady after a double-dip contraction, but growth will remain modest. While the industry
payrolls have rebounded to their highest level in more than two years, some concerns still remain. For instance,
Citigroup’s fourth quarter profits were nearly offset by its $3.5 billion legal expenses, while legal costs and
disappointing trading revenue hurt JPMorgan Chase and Bank of America. This wave of bad news will likely have
a consequential impact on future hiring and, combined with ongoing efforts to adapt to tight regulation, keep
financial services in check.
Additional considerations for employment growth are as follows:

Between 2004 and 2014, New York City’s total non-farm employment grew by an annual average of 1.3
percent. This was much better than the nation’s 0.5 percent annual average job growth over the same time
period.

16
Over the next five years, the city’s total non-farm employment is forecast to grow by an annual average of 1.1
percent, slightly below the nation’s 1.3 percent annual growth.
The following chart illustrates total non-farm employment growth per year for New York City and the United
States:
TOTAL EMPLOYMENT GROWTH BY YEAR
4.0%
United States
Forecast
New York City
2.0%
0.0%
-2.0%
-4.0%
-6.0%
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
UNEMPLOYMENT
According to the New York State Department of Labor, New York City’s seasonally adjusted unemployment rate
in January 2015 was 6.5 percent, reaching its lowest level since October 2008. Year over year, the current
unemployment rate represents a 1.5 percentage point improvement from January 2014. The rate remains above
the state (5.8 percent) and national (5.7 percent) rates, however. This paradox of a high unemployment rate
combined with steady job growth is partly a result of discouraged workers returning to the city’s labor force as job
prospects improve.

New York City’s unemployment rate averaged 6.8 percent between 2004 and 2014, falling in line with the
nation’s average rate, but slightly higher than the state’s average rate of 6.7 percent. During the early 2000s
the city had a much higher unemployment rate than the nation, a trend which returned in 2012.

Over the next five years, Moody’s Analytics forecasts that New York City’s unemployment rate will average
4.5 percent, lower than the nation’s 5.1 percent average rate. The city’s unemployment rate will dip below 5.0
percent in 2016.
The following graph compares historical and projected unemployment rates for New York City, the state of New
York, and the United States as a whole:
17
UNEMPLOYMENT RATE BY YEAR
New York City vs. New York vs. United States, 2004-2019
11%
United States
New York
New York City
Forecast
9%
7%
5%
3%
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
CONCLUSION
New York City has fared well in the past few years and expansion is firmly in place. The city has experienced
moderate economic growth and employment gains that have outpaced the nation’s. Economic expansion is
expected to accelerate in 2015 as the tech industry drives employment and financial services begins to recover.
Additional items to consider for New York City:

New York City has had steady private sector job growth since 2011, record tourism numbers, and features a
well-diversified economy that is no longer dependent on Wall Street. As the tech and tourism industries grow
further, New York City will continue to see economic growth in line with the rest of the country.

New York City’s unemployment rate has been trending downward and will experience steady improvement
over the next several years.

Affordability will continue to be a problem in the near term for New York City’s middle class, sustaining the
trend of “a city of extremes”. The shifting employment composition could exacerbate this problem.
LOCAL AREA MAP
LOCAL AREA MAP
LOCAL AREA MA P
18
LOCAL AREA ANALYSIS
19
Local Area Analysis
LOCATION
The subject site is located on the entire city block bounded by Union Square South to the north, Fourth Avenue to
the east, East 13th Street to the south and Broadway to the west in the Union Square neighborhood of
Manhattan. The Union Square neighborhood centers on Union Square and East 14th Street between Park and
Sixth Avenues. This neighborhood borders Greenwich Village to the south, Chelsea to the west, Madison Square
to the north and Gramercy Park to the east. Union Square Park is located immediately across from the subject
property.
NEARBY AND ADJACENT USES
This immediate area is developed with a variety of retail, office, and residential properties. Immediately to the
west of the subject property is the most significant use in the immediate area known as Union Square Park. The
park is bound by 14th Street to the south, 17th Street to the north Union Square East to the east and Union Square
west to the west. Outlying areas feature a mixture of high density retail, residential, and office uses.
The perimeter of the of the park and the surrounding area is lined with various retailers such as American Eagle,
Babies R' Us, Barnes & Noble, Whole Foods, Capital One Bank, Children's Place, Diesel Jeans, DSW, Forever
21, Jamba Juice, Lucky Brand Jeans, Lululemon, Mexx, P.C. Richards, Petco, Rothmann's, Sephora, Sketchers,
Staples, The Sports Authority, Subway, Trader Joe's, Nordstrom Rack, Best Buy, Vitamin Shoppe, Walgreens
and Whole Foods. Immediately adjacent to the subject property, between University Place and Sixth Avenue, is a
mixed-use building with multi-level retail space. The multi-level formerly occupied by Filene’s Basement (Sym’s)
was marketed for just over 6 months prior to Burlington Coat Factory securing the space. Burlington Coat Factory
had its grand opening in the third quarter 2012. Within the nearby area there is also W Hotel, and New York
University has also developed several dormitory buildings in the area.
LOCAL AREA CHARACTERISTICS
Continuing to anchor the district’s employment base includes Con Edison, one of the nation’s largest investorowned energy companies; New York University, one of the largest private universities in the United States; Beth
Israel Medical Center, a distinguished voluntary teaching hospital and member of parent company, Continuum
Health Partners; and The New School, a leading progressive university in New York City. These prestigious
institutions are in good company with other prominent businesses such as Danny Meyer’s distinguished Union
Square Hospitality Group, and Fortune 500 Company, Barnes & Noble, the world’s largest bookseller and the
nation’s highest rated bookselling brand.
According to the Union Square Partnership, the leading advocate for the Union Square-14th Street community,
more than 65 new retailers, eateries and companies have opened in or around Union Square over the past year.
Area retailers and eateries continue to offer a wide variety of cuisine and prices, suitable for the diverse needs of
this market. With nearly 70,000 residents, over 142,000 employees and more than 40,000 students from New
York University and The New School alone, Union Square remains one of the City’s most vibrant, 24/7, mixeduse neighborhoods.
For these reasons and more, retail vacancy rates in the district remain low at approximately 3 percent, and
pedestrian counts remain high with an average of 188,000 pedestrians coming through Union Square each day.
Further, the residential population as well as the area median income is on the rise, lending more purchasing
power to the neighborhood. Ground floor rents around Union Square reflect this data with 2011 rents somewhere
between $400 and $450 a square foot.
LOCAL AREA ANALYSIS
20
ACCESS
Access to the area is considered favorable as the 14th Street station at the south side of Union Square Park
provides access to the L, N, Q, R, W, 4, 5, and 6 trains. Additionally, bus service is available on 14th Street and 5th
and 6th Avenues. Furthermore, access to the PATH train is located two blocks to the west. Overall, access to the
area is considered good. The cross-town bus can be accessed along 14th and 23rd Streets. Additionally,
downtown local and express buses can be accessed along Broadway and uptown local and express buses can
be accesses along Madison and Sixth Avenues.
SPECIAL HAZARDS OR ADVERSE INFLUENCES
We observed no detrimental influences in the local market area, such as landfills, flood areas, noisy or air
polluting industrial plants, or chemical factories.
CONCLUSION
The strength of the economy will be an influential factor in the health of the local Manhattan real estate market for
the final half of 2012. Although economic uncertainty still lingers and consumer confidence is down, New York
City tends to outperform other markets and this is especially true to retail. Tourism continues to play a vital role
towards the success of major retailers, and with the final half of the year predicted to exceed previous years in
number of domestic and international tourists.
Union Square has developed into a thriving and desirable residential and retail/commercial area. Its residential
space, retail shops, restaurants, park, and boutique hotels attract both tourists and New Yorkers. The immediate
area has shown signs of stabilization and we anticipate overall growth over the long-term given the demand
drivers in the local area.
21
National Retail Market Analysis
INTRODUCTION
The year 2015 is expected to be the strongest year for the U.S. economy since at least 2005. Real gross
domestic product (GDP) is forecast to increase at a 3.3 percent rate, roughly 50 percent faster than the 2.2
percent average since the recovery began in mid-2009. The drivers of growth are consumer spending, business
investment and, to a lesser extent, housing. Additionally, declining oil prices are a net positive for the economy,
boosting the income available for discretionary purchases and reducing costs in a wide range of industries. This
anticipated acceleration will have a strong positive impact on the U.S. commercial real estate sector, leading to
higher demand in all major sectors: office, industrial, retail, multifamily and hospitality.
The strength of the economy at the end of the year was evident in a wide range of indicators, from employment to
manufacturing to consumer spending. Virtually every measure of the health of the labor market improved
substantially during 2014. Perhaps the most important shift of the past year has been in hiring. Businesses are
now looking for more people and creating more jobs than at any time since the 1990s. There were 2.95 million
more jobs in the U.S. than at the end of 2013. That’s more job growth in 12 months than in any full year since
1999. The pace of job growth accelerated notably in 2014. In addition, the number of job openings in the U.S. is
at the highest level since 2001, indicating that job growth is likely to remain strong in the next several quarters.
As job growth has accelerated and income has increased, households have begun to spend more on durable
goods, making purchases they have put off for the past several years. The best example of this is motor vehicle
purchases. In 2014, U.S. motor vehicle sales totaled 16.4 million units, the highest volume since 2006. Sales of
autos are one of the best indicators of the health of consumers. When auto sales are strong, households are
confident about the future and their financial situation, and U.S. motor vehicle sales are expected to remain strong
throughout 2015. In addition, the expectation is that spending on other consumer durable goods, like furniture and
appliances, are expected to increase in the coming year as more households look to replace worn-out goods.
Another important and positive development that bodes well is the steady improvement in the housing sector. The
housing sector is continuing to grow at a moderate pace. New construction and sales of houses are not booming,
but, on balance they are increasing. In the six months to November, new home construction has run at an annual
rate of 1.01 million units, the strongest level of activity since mid-2008. With the latest increase, home prices are
now up over 4.0 percent over the past year. This slow but steady growth will continue to generate greater
employment in the construction sector, as well as to increase consumer spending on everything from furniture
and appliances to utilities and financial services.
For the retail sector, the combination of solid income and employment growth and a return to more seasonal
weather boosted retail sales. Adjusted for inflation, retail sales grew at a 3.3 percent annual rate in January 2015.
The gains were widespread, with auto sales up at a 10.7 percent annual rate, and GAFO sales up at an estimated
2.9 percent annual pace. Over the last couple years, retail industry sales have grown at a rate faster than many
other industries. Through December 2014, preliminary estimates from the U.S. Census Bureau indicate retail
sales totaled over $5.3 trillion, a 4.0 percent increase over the same time-period in 2013. This proliferation marks
47 consecutive quarters of growth. Given the improving market, increased wages, and strong job growth, we
remain confident that consumers will continue to increase spending at a healthy clip, which will boost the need for
both retail and industrial space in the coming year.
22
NATIONAL RETAIL INVESTMENT SALES MARKET
Retail Transaction Activity
As the economy continues to improve, retail transaction volumes are beginning to rebound. Real Capital Analytics
reported that year-end 2013 retail transaction volumes reached $60.8 billion, surpassing the 12-month totals for
the previous consecutive five years. Still, the 2013 totals remain 24.0 percent below peak levels of the $80.2
billion recorded in 2007. These increased volumes are, nevertheless, a strong indication that investors feel there
is growth potential in the retail market.
Through year-end 2014, pricing metrics have strengthened for retail properties with per-square-foot prices rising,
average cap rates for primary assets falling and the Commercial Property Price Index reaching its highest post
recession level. Year-end 2014 data available from Real Capital Analytics indicates that retail transactions have
totaled over $83.6 billion, already a 32.9 percent increase over the $62.9 billion in transactions recorded in the
previous year.
$44.6
$62.9
$22.1
$16.3
$25.5
$57.1
$81.6
$63.9
$58.0
$61.1
$36.2
$28.6
$14.0
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
$83.6
The following graph displays annual retail transaction volume since 2001:
Retail Capitalization Rates
As the credit markets continue to loosen, transaction activity is on the rise. Investors have increasingly focused on
real assets, such as commercial real estate, as a hedge against inflation in the wake of previous economic
uncertainty. Capitalization rates (OARs) are compressing as demand increases. The PwC Real Estate Investor
Survey reports that national power center and strip shopping center OARs at their lowest levels bottomed in the
third quarter of 2007 at an average of 7.0 percent and 7.2 percent, respectively, while regional mall cap rates
reached a low of 6.7 percent in the first quarter of 2008. Average rates for all three property types peaked in the
first quarter of 2010 at nearly 8.5 percent.
Through year-end 2014, capitalization rates continue to strengthen. Power center OARs averaged 6.6 percent,
while regional mall and strip shopping center OARs averaged 6.2 and 7.1 percent, respectively. In the current
market, investors are viewing higher-quality assets in primary urban and first-tier suburban markets most
favorably. However, with significant investor interest in the most dominate markets, capitalization rates have
compressed notably among much of the most desirable product. As such, secondary markets are beginning to
gather more attention as sources of opportunity. It should also be noted that the combination of relatively low
23
interest rates and increasing loan-to-value ratios are driving many investors to turn to real estate as an alternative
investment vehicle. The added demand should continue to lead to an increase in real estate values and the
subsequent compression of cap rates.
The following graph depicts quarterly national retail capitalization rates by property type since 2008:
National Retail Cap
9.0%
8.5%
8.0%
7.5%
7.0%
6.5%
6.0%
National Power Center
National Regional Mall
National Strip Shopping Center
CMBS Market
The availability of debt including the gradual resurgence of Commercial Mortgage Backed Securities (CMBS) has
contributed to the increase in transaction activity. At its peak in 2007, CMBS issuance totaled nearly $230.0 billion
in the United States, and retail assets accounted for approximately one-third of total CMBS volume. During the
financial crisis that began in late 2008, funding dramatically plunged. Total CMBS issuance in 2008 dropped to
just $12.0 billion, followed by a nearly non-existent $2.7 billion in 2009. Issuance rebounded in 2010, reaching
$11.7 billion as investors began returning to the market, but the European debt crisis, coupled with the slow U.S.
economic recovery and admissions from Standard & Poor’s that it had “potentially conflicting methods” in how it
was rating securitizations, caused bond buyers to become very conservative in their underwriting and pricing. To
that end, many “balance sheet lenders,” such as local savings and loan banks and life insurance companies, saw
notable increases in lending activity. According to Commercial Mortgage Alert, CMBS issuance still managed to
total nearly $33.0 billion and $48.2 billion, respectively, in 2011 and 2012. Demand doubled in 2013, due in part to
low rates, improving economic conditions and an increased appetite from bond buyers. As such, in 2013 CMBS
issuance totaled $86.1 billion.
According to Trepp LLC, after falling below 6.0 percent and hitting its lowest level in five years in November, the
delinquency rate fell five basis points in December 2014. The delinquency rate for US commercial real estate
loans in CMBS is now 5.75 percent, down 168 basis points from 7.43 percent in December 2013. The CMBS
market heads into the new year with a lot of momentum. For most of 2014, issuance levels lagged behind most
experts’ opinions. A surge in the second half of the year helped the market reach almost $100.0 billion in deals,
leading many lenders to predict that issuance will exceed that barrier in 2015.
24
The following table compares annual CMBS volume over the last eight years:
U.S. CMBS ISSUANCE (IN BILLIONS)
2007
TOTALS $228.6
2008
2009
2010
2011
2012
2013
2014
$12.1
$2.7
$11.6
$32.7
$48.2
$86.1
$94.1
Source: Commercial Mortgage Alert
Five years after the financial crisis that caused $72.1 billion loans to default in the retail sector, a third of that total
remains outstanding. However, lenders are making steady progress reducing distress levels, and while distressed
sales will continue for some time, distress is no longer a significant factor weighing on the marketplace.
The following graphic shows recorded and estimated commercial real estate loan maturities by investor type
through 2020:
25
Commercial Property Price Index
The Moody’s/RCA Commercial Property Price Index (CPPI) is a periodic same price change index of U.S.
commercial investment properties. The Moody’s/RCA CPPI uses advanced repeat-sale regression analytics to
measure price changes in U.S. commercial real estate.
As of October 2014, the most recent figures published, Moody’s/RCA CPPI for all properties measured an
increase of 14.2 percent year-over-year. Currently at 185.2, the index is now near its peak of 186.06 measured in
the December 2007. For retail properties, CPPI figures reported by Moody’s/RCA have indicated growth at 4.8
percent during the year-ending December 2014. The current Moody’s/RCA CPPI figure for retail properties is
160.56, or 16.9 percent off the index peak of 190.8 witnessed in September 2007.
The following graph displays the CPPI Index between January 2001 and December 2014:
Commercial Property Price Index Comparison
200
460
180
410
160
360
140
310
120
260
100
210
80
2001
2002
2003
2004
2005
2006
Moody's National - All Property (left axis)
2007
2008
2009
2010
Moody's National Retail (left axis)
2011
2012
2013
2014
NCREIF National Aggregate (right axis)
Similarly, the National Council of Real Estate Investment Fiduciaries (NCREIF) also compiles a property price
index based on a large pool of individual commercial real estate properties. The NCREIF Property Price Index is
a quarterly time series composite total rate of return measure of investment performance of said commercial real
estate properties acquired in the private market for investment purposes only. Based on data from NCREIF, the
property price index peaked in the first quarter of 2008 at 419.88 before falling 29.3 percent to 296.81 in the first
quarter of 2010. Since bottoming, the NCREIF Property Price Index has climbed to near its pre-recession levels,
standing at 428.43 as of third quarter 2014 (most recent data available), reflecting the increase in commercial real
estate values over recent quarters.
26
RETAIL MARKET CONDITIONS
Retail Construction Activity
Despite improving fundamentals in the retail real estate market, developers are still concerned about investing in
new construction projects. The exception being outlet center development and projects located in the highestperforming markets with strong tenant mixes possibly including grocery retailers, drug stores or similar net leased
properties that have shown notable strength in the current market. According to data from the CoStar Group,
retail construction starts peaked at 66.0 million square feet in the second quarter of 2006. Given the collapse of
credit markets and consumer demand during the recent recession, construction starts have fallen significantly
over the last few years. Recently, retail construction starts totaled just 5.9 million square feet in the fourth quarter
of 2014.
The following graph shows retail construction starts from the second quarter of 2006 through the fourth quarter of
2014:
Retail Construction Starts (SF in Millions)
Retail Construction Starts Peaked at66.0 Million Square Feet in Q2 2006
60.0
50.0
40.0
30.0
5.9
8.5
11.2
11.1
10.0
15.8
15.2
11.6
18.8
11.6
13.5
14.0
9.2
10.9
13.1
9.3
10.6
8.9
10.3
9.7
12.8
13.4
15.4
18.9
26.2
33.2
40.4
28.6
55.1
52.2
54.0
36.2
64.2
10.0
7.0
Just 5.9 Million Square Feet Commenced in Q4 2014
20.0
66.0
SQUARE FEET IN MILLIONS
70.0
0.0
Source: CoStar Group
Looking forward, new construction activity is expected to remain tepid until the industry works through the large
amounts of debt maturities scheduled to come due between now and 2017. At the moment there continues to be
a significant amounts of available space for retailers to choose from. We expect retail construction starts to
remain tepid moderate through 2015.
Retail Price Per Square Foot
Following the decline in sales volume, pricing levels achieved by shopping centers and other retail properties
trended downward rapidly before rising in recent quarters. Between 2003 and 2008, a time from when the market
had picked up after the last recession, up until the most recent market fall-out, the average price per square foot
for retail assets increased by 50.8 percent to a peak of $187 per square foot in 2008. However, in 2010, the
average price per square foot for all retail property would sharply decline to a low of $142 per square foot. Not
27
until late 2010/early 2011 did the price per square foot begin to recover, and in 2012 it jumped to $182 per square
foot, a 28.1 percent increase over 2010.
Year-to-date, or fourth quarter data, continued to indicate strength. Total retail property sales are averaging $203
per square foot. The 2014 average has surpassed the recent the 2008 peak, and baring some shift in
fundamentals should continue to set new highs for the foreseeable future. We would note that RCA reports that
there is a widening gap between unit prices paid in primary markets vs. secondary and tertiary markets. A flight to
quality is prevalent in all of the major CRE market groups, including retail.
$297
The following graph depicts the historical average price per square foot for retail assets as surveyed by RCA
through fourth quarter 2014:
$153
$203
$325
$300
$275
$250
$225
$200
$175
$150
$125
$100
$75
Mall & Other
Strip
Total Retail
Vacancy And Rental Rates
The graph below shows the severity of the last recession in terms of declining absorption and rising vacancy
rates. In 2008, retail absorption was negative for the first time since Reis began collecting data in 1986. Mirroring
the rebound in other commercial property sectors, leasing and occupancy of U.S. malls and shopping centers
saw improved fundamentals through 2014. According to Reis, the low amount of new supply of retail space
should reflect as a decline in retail vacancy rates through 2019. Between 2015 and 2019, Reis data forecasts
absorption in the retail market to average approximately 21.2 million square feet per year while construction
completions average approximately 15.1 million square feet per year. Given this forecast, overall vacancy rates in
the national retail market are projected to fall approximately 180 basis points to 8.4 percent from their current
reading near 10.2 percent.
28
The subsequent graph depicts annual market conditions within retail markets across the U.S.:
RENT GROWTH PERCENTAGE
Annual Retail Market Conditions
50
12%
40
10%
30
8%
20
10
6%
0
4%
-10
FORECAST
-20
2%
0%
-30
COMPLETIONS
NET ABSORPTION
VACANCY RATE
Source: Reis, Inc.
During 2014, falling vacancy rates and rising demand in the retail market has brought the start of meaningful rent
growth for landlords in major U.S. retail markets. According to Reis data, prior to the latest economic recession,
annual effective retail rental rates grew at an average rate of 2.4 percent. Following nearly four years of negative
rent growth during the economic fallout from 2008 to 2011, effective retail rental rate growth figures are now
averaging about 1.0 percent.
The following graph shows a composite of asking and effective annual rent growth within retail markets across the
U.S.:
29
Annual Retail Rent Growth
Rent Growth Percentage
5%
4%
3%
2%
1%
0%
-1%
FORECAST
-2%
-3%
-4%
ASKING RENT % CHANGE
EFFECTIVE RENT % CHANGE
Source: Reis, Inc.
Store Closings
According to the most recent annual data collected by the International Council of Shopping Centers (ICSC),
retailers and restaurateurs announced that nearly 5,500 establishments closed in 2014. The annual closing totals
are more than double the previous years. The majority of retailers announcing store closings are mall-based
tenants which has proven very problematic for mall owners with class-B and class–C properties.
The following is a list of space closed by segment:
ANNUAL STORE CLOSINGS
1ST HALF-YEAR
2014
2ND HALF-YEAR
4,403
2013
1,310
1,080
1,282
2012
3,511
2011
953
2,329
1,743
2010
4,396
2009
1,176
2,917
2008
1,894
3,272
2007
3,641
3,081
2006
1,522
2,749
2005
1,981
1,897
2,372
2004
3,750
2003
2,553
2,972
2002
2,001
3,227
2001
2,723
4,149
0
Source: ICSC
1,000
2,000
2,892
3,000
4,000
5,000
6,000
7,000
8,000
30
Discount department store retailers announced that they will close over 2.6 million square feet. In addition,
traditional department stores, such as Sears and Saks Fifth Avenue announced their plans to reduce space by
2.3 million square feet over the coming years. Additionally, retailers Staples and Radio Shack recently announced
the closing of 225 and 1,100 stores, respectively. For Staples and Radio Shack, the closures reflect both
struggling sales totals, as well as a shift away from brick-and-mortar business to online retail.
While declining sales have forced many retailer chains to pare down their number of outlets, other retailers are
closing due to shifts in the marketplace. As such, many struggling retailers have been forced to reinvent how they
reach customers.
E-Commerce
In the age of Amazon.com, stores are trying to reinvent themselves, generally using one of two strategies: deliver
products more quickly than and nearly as inexpensively as online sellers, or offer shopping experiences that
entice people to visit their establishment and buy something. With the rise of online purchasing and increased
price-sensitivity from consumers, retailers without a notable e-commerce platform will suffer while online-sales
and sales from smartphones continue to grow at a quicker pace than brick-and-mortar sales.
Forrester Research estimates that by 2017, 60.0 percent of all U.S. retail sales will involve the internet in some
way, either as a direct e-commerce transaction or as part of a shopper’s research on a laptop or mobile device.
Additionally, Forrester Research forecasts that approximately 11.0 percent of total retail sales in the U.S. in 2018
will be online purchases. In contrast, e-commerce sales were 5.2 percent of retail sales in 2013.
The following chart tracks e-commerce sales in 2012 and 2013 as well as sales from 2014 thru 2018, as
forecasted by InternetRetailer.com:
E-Commerce Sales: 2012 - 2018
$480
$430
$380
$330
$304
$347
$338
$440
$492
$230
$263
$280
$225
E-COMMERCE SALES (IN BILLIONS)
$530
2012
2013
2014
2015
2016
2017
2018
$180
Source: InternetRetailer.com, Forrester Inc.
Additionally, many retailers are beginning to realize that rather than close stores, they can sustain them by giving
them a much-needed facelift. Reinventing the store involves a thorough rework that often includes creating a
"brand story" to engage and involve a consumer in the shopping experience.
31
NATIONAL RETAIL MARKET SUMMARY
Market conditions for the retail sector are improved and continue to be very optimistic. Retail sales have
increased, tenant rent concessions have abated, and leasing velocity is on the rise. Furthermore, while many
traditional mall tenants are not currently in growth mode, malls continue to outperform all shopping center types,
and record the lowest vacancy levels.
Overall, the U.S. economy has taken off and is in a period of strong growth that we expect to last through 2015
and into 2016. Employment, income and output will all grow strongly and reach new highs. We believe the risks to
this outlook are modest. The result should be the best year for the commercial real estate sector since at least
2007.
MANHATTAN RETAIL MARKET ANALYSIS
32
INTRODUCTION
CURRENT TRENDS
New York City’s collection of cultural and historical landmarks positions it as the number one tourist destination in
the country. Major tourist areas like Times Square, Rockefeller Center, and Central Park produce consistent foot
traffic in the Times Square bowtie and along Fifth and Madison Avenues. As a result, the retail spaces in these
major corridors exhibit some of the highest rents in the world. Moreover, the combination of a dense population
and the steady influx of tourists enable the Manhattan retail market to withstand down markets and recessions.
New York City’s tourism and marketing group, NYC & Co. reports that tourism rose to record levels once again in
2014 with 56.4 million tourists in total, up nearly 4.0 percent from 54.3 million in 2013. This translated to more
than $4.0 billion in spending at local businesses. Spending on Broadway shows alone grossed nearly $1.4 billion
in 2014, the highest ever. This surge in the tourism industry coupled with improving economic conditions means
positive growth in the Manhattan retail market. Rental rates will see positive growth in the foreseeable future as
retailers continue to take advantage of favorable conditions.
The Manhattan retail market is considered an anomaly when compared to other metropolitan retail markets. The
relative lack of available retail sites requires retailers to utilize non-traditional space layouts. The majority of the
retail space within the Manhattan market is comprised of street-level suites within the base of residential and
commercial buildings. The lack of available space often incentivizes retailers to maximize their space with lower
or mezzanine levels. Retail space along major corridors typically will build out below-grade selling space while
secondary markets utilize this space for storage.
The following list highlights the Manhattan retail market:

Retail asking rents continue to grow with major increases for prime space. All but one submarket showed
increases from a year ago.

Availabilities increased in some retail submarkets while decreasing in others over the past year. A big reason
for the increase has been landlords boosting asking rents for existing tenants in the hopes of attracting
flagship stores.

Toys “R” Us’ decision to vacate its 110,000 square foot flagship at 1514 Broadway and Pearl River Mart’s
decision not to renew its 30,000 square foot lease at 477 Broadway are a perfect example of the
aforementioned occurrence. Toys “R” Us is paying half of the current $2,500 per square foot asking price at
the 150,000 square foot property. Pearl River Mart is paying a monthly rent of more than $100,000 at its
SoHo location, but there have been reports that the landlord wants to raise rents to over $500,000 a month.
Pearl River Mart’s lease will expire at the end of 2015, while Toys “R” Us’ lease will expire in 2016 and will
vacate the property by February 2016.

During first quarter 2015, BFX Studio signed a lease at 1231 Third Avenue for 11,000 square feet. BFX will
take up the entire basement as well as some space on the ground floor. BFX Studio is a gym that offers a
complete multi-discipline, cross-training approach to fitness and well-being.

Dolce & Gabbana, an Italian luxury retailer, will occupy all four levels of a building located at 155 Mercer
Street in SoHo. The retailer signed a lease for 15,000 square feet at the property where the company intends
to create a “premier” location.

Upscale fitness club Equinox Fitness will open a new four-level center in 2016 at SL Green Realty Corp.’s 10
East 53rd Street in the Plaza District. The full-service fitness club, which operates 73 centers in the United
States, London and Toronto, signed a 25-year, 32,000 square foot lease.

33
Some major retailers are beginning to open stores in less established retail environments in an effort to create
excitement around the brand and make an impact on the new neighborhood.
MARKET CHARACTERISTICS
To provide the most comprehensive picture possible, this analysis uses primarily Cushman & Wakefield Research
Service’s statistics, along with the latest retail statistics from the Real Estate Board of New York (REBNY) for
comparison.
Cushman & Wakefield Research Services tracks 11 major retail submarkets in Manhattan:

Upper Fifth Avenue (between 49th and 60th Streets)

Lower Fifth Avenue (between 42nd and 49th Streets)

Madison Avenue (between East 57th and East 72nd Streets)

SoHo (Broadway to West Broadway, West Houston Street to Canal Street)

Upper West Side (on Broadway between West 60th and West 86th Streets, and on Columbus between West
66th and West 72nd Streets)

Times Square (on Broadway between West 42nd and West 47th Streets)

Third Avenue (between 57th and 79th Streets)

Flatiron (on Fifth Avenue between East 14th and East 23rd Streets, and Broadway between East 17th and East
23rd Streets)

The Meatpacking District (from Gansevoort to West 16th Street and westward from Ninth Avenue)

Lower Manhattan (Broadway, Wall Street and Fulton Street)

Herald Square (West 34th Street from Fifth Avenue to Seventh Avenue)
Submarkets are the main strips of retail space with high visibility and traffic. Neighborhood space surrounds the
main corridor and is often less visible. In the Manhattan retail market, most main corridor space lies along
avenues, where pedestrian traffic is high. Neighborhood space is often on the streets that branch off these
avenues.
The map on the following page is produced by Cushman & Wakefield Research Services and indicates the retail
neighborhoods in the borough of Manhattan:
34
35
SUPPLY ANALYSIS
AVAILABILITY
The number of available retail spaces in many submarkets fluctuated between last quarter and the first quarter of
this year. In total, five submarkets (Upper Fifth Avenue, Times Square, Flatiron, Meatpacking District, and Lower
Manhattan) experienced a decline in availability rates, while five others (Lower Fifth Avenue, SoHo, Third Avenue,
Upper West Side, and Herald Square) experienced an increase. Madison Avenue’s quarter-over-quarter
availability rate remained unchanged. Similarly, the number of available retail spaces shrank in five submarkets
(Lower Fifth Avenue, Madison Avenue, Third Avenue, Times Square, and Lower Manhattan) over the past year,
while increasing in the other five submarkets (Upper Fifth Avenue, SoHo, Upper West Side, Flatiron, and
Meatpacking District). Herald Square’s available space remained static over the year. Recent rent escalation in
retail space has priced older tenants (including Times Square’s Toys “R” Us and Pearl River Mart at 477
Broadway) out, and caused landlords to wait for flagship store opportunities and other upscale tenants able to
afford higher rents.
It should be noted that the availability rate (as tracked by Cushman & Wakefield Research Services) is a distinct
measure from vacancy. Whereas vacancy is calculated on a square-footage basis, availability is derived from the
number of retail spaces available divided by the total number of retail spaces in a given market.
Further considerations on availability are as follows:

Availability in the Upper Fifth Avenue submarket increased by 1.4 percentage points over the past year to 8.8
percent. Over the past quarter, however, it decreased by 3.0 percentage points as a result of almost 25,000
square feet of new leasing.

Lower Fifth Avenue’s availability rate increased by 1.5 percentage points during the quarter at 24.5 percent.
In contrast, the submarket’s availability rate decreased by 1.6 percentage points over the past year. Sephora
completed a lease at 580 Fifth Avenue and will be relocating across the street and further south from its
current location at 597 Fifth Avenue.

In the Madison Avenue submarket, availability fell by 1.7 percentage points over the past year. Over the past
quarter, availability remained unchanged at 13.0 percent. New commitments were announced including highend fashion brand Brion’s lease at 680 Madison Avenue and British woman’s designer L.K. Bennett’s lease at
655 Madison Avenue.

SoHo’s availability increased in both quarter-over-quarter and year-over-year statistics, by 2.7 percentage
points and 1.7 percentage points, respectively. The submarket is currently sitting at 16.4 percent availability
rate.

Retail availability on Third Avenue experienced a slight increase during the first quarter, rising 0.4 percentage
points to 7.5 percent. It decreased by 0.8 percentage points over the past year, however. New leases
announced included fitness studio BFX's lease at 1231 Third Avenue and a New Balance store that will be
opening at 1172 Third Avenue. Moreover, six new availabilities were added to the market during the first
quarter.

At 13.3 percent, availability decreased by 2.3 percentage points in Times Square over the past quarter, as
well as decreasing by 2.3 percentage points over the year. The decrease was due to several leases on
Broadway including T-Mobile, Swatch, and Invicta Watches.

The Upper West Side submarket’s availability rate during the first quarter was 9.7 percent. This was 1.2
percentage points higher than the previous quarter, and an increase of 2.1 percentage points from the
previous year. The increase in vacancy can be attributed to ten new stores that entered the inventory sample
including: Radio Shack, Clarins’ skin-care store, Canadian boutique Judith & Charles, Wells Fargo, and
Danskin Hosiery.
36

Over the past year, retail availability in the Flatiron submarket increased by 0.6 percentage points, while
dropping 1.3 percentage points during the quarter to 11.6 percent. Two availabilities as well as four new
leases came to the market.

The Meatpacking District’s availability rate increased by 0.6 percentage points over the past year, but
decreased by 1.3 percentage points to 18.3 percent during the first quarter. New availabilities included
spaces from the Anj Bar at 25 Little West 12th Street and 860 Washington Street, a new development at the
corner of West 13th Street.

In Lower Manhattan, the availability decreased by 0.5 percentage points in the first quarter to 8.6 percent, and
decreased by 0.5 percentage points from the previous year. New leases included restaurant giant Nobu’s
expansion at 195 Broadway and Open Kitchen’s lease at 120 Wall Street.

In Herald Square, Cushman & Wakefield’s newly tracked submarket, 12.5 percent of the retail spaces were
available during the first quarter. Availability was unchanged over the year, but increased by 1.8 percentage
points over the quarter. One new availability was added to the submarket by ladies retailer Mango.
The following table contains availability rates for the Manhattan retail market according to Cushman & Wakefield
Research Services:
Manhattan Retail Market Statistics
Availability Rates
Market
1Q15
4Q14
1Q14
Annual
Percentage
Point Change
Upper Fifth Avenue
8.8%
11.8%
7.4%
1.4
Quarterly
Percentage
Point Change
-3.0
Low er Fifth Avenue
24.6%
23.1%
26.2%
-1.6
1.5
Madison Avenue
13.0%
13.0%
14.7%
-1.7
0.0
SoHo
16.4%
13.7%
14.7%
1.7
2.7
Third Avenue
7.5%
7.1%
8.3%
-0.8
0.4
Times Square
13.3%
15.6%
15.6%
-2.3
-2.3
Upper West Side
9.7%
8.5%
7.6%
2.1
1.2
Flatiron
11.6%
12.9%
11.0%
0.6
-1.3
Meatpacking District
18.3%
19.6%
17.7%
0.6
-1.3
9.1%
-0.5
-0.5
12.5%
0.0
1.8
Low er Manhattan
8.6%
9.1%
Herald Square*
12.5%
10.7%
Source: Cushman & Wakefield Research Services
*New ly created statistical submarket
CONSTRUCTION
Inventory in Manhattan’s retail market has remained generally constant due to a lack of developable sites. The
lack of viable development sites has lead to the retail borders being pushed west and north. The gentrification of
northern Manhattan has opened up new opportunities for retail development, particularly along 125th Street. The
newer development in upper Manhattan is comprised of big box users interspersed with neighborhood uses
typically in the form of shopping centers.
In addition, the escalation of retail rents has caused owners in some neighborhoods to convert ground floor
residential space to retail space. These conversions have been most appealing in trendier neighborhoods like
SoHo and the West Village.
Some notable retail developments and redevelopments are discussed below:
37

The retail portion of the World Trade Center site, called Westfield World Trade Center, is estimated to be
completed in fall 2015. The current plan includes some 350,000 square feet of initial retail space within an
underground mall, all of which is now owned by Westfield. When the $1.4 billion project opens, it will be filled
by brands such as Hugo Boss, John Varvatos, Michael Kors, Stuart Weitzman and Turnbull & Asser as well
as fashion favorites LK Bennett, Zadig et Voltaire, Reiss and Banana Republic.

The Howard Hughes Corporation is currently rebuilding Pier 17 near the Seaport, and constructing a sleeker
high-end retail complex with a green roof. The 365,000 square foot project is estimated to cost $425.0 million
and is expected to be finished in 2016.

Brookfield Place (formerly known as World Financial Center) opened its doors to its swanky new fashion
stores and food marketplace in late March 2015. The project, which took four years and $300.0 million to
complete, included a renovation of the site to transform the waterfront portion into a European-style
marketplace with dining from high-end restaurants and luxury retailers. Other renovations on the site included
a new lobby, a retail corridor, an entry pavilion, and a dining terrace. The transformation attracted several
notable tenants including Burberry, Tony Burch, Hermès, J.Crew, Michael Kors, and multiple restaurants.

Fosun Group, the real estate arm of Chinese company Fosun International, purchased 28 Liberty Street
(formerly known as One Chase Manhattan Plaza) at the end of 2013 for $725.0 million. The company is
spending between $100.0 million and $200.0 million to renovate the 2.2 million square foot tower, including
an expansion of the retail space by 175,000 square feet as well as converting another 130,000 square feet of
space below ground level into shops and restaurants.

The future location of Nordstrom’s flagship New York store is being constructed in the base of an 88-story
tower at 217 West 57th Street. Nordstrom’s new store will be approximately 285,000 square feet. Opening day
is expected in 2018.

Essex Crossing, a massive project on the former Seward Park Urban Renewal Area, will start first phase of
construction as early as this summer. It will include 561 apartments, a new space for the Andy Warhol
museum, the new Essex Street Market, a supermarket, and other retail and commercial space. Regal Cinema
signed a lease to take up 65,000 square feet at 115 Delancey Street.

The Related Companies’ ongoing development project at Hudson Yards on the west side of Manhattan will
contain space for over 100 retail shops, including Neiman Marcus, which will open its first location in the city
in fall 2018.

Samyon Ruvinsky filed a permit in February for a new building at 639 Eleventh Avenue. It will be consisted of
five floors, each containing 5,000 square feet. It is designed to suit retail, showroom, office, rehearsal space,
and/or film/music studio use.

A developer was issued construction permits during the fourth quarter of 2013 for a new development at 100
West 125th Street. The new building will be five stories tall and feature 180,000 square feet of retail space, to
be completed later in 2015. Whole Foods is set to anchor the development and as of March, construction of
the store had reached ground level.

In June 2014, a developer filed plans to construct a four-story, 52-foot glass retail building on a vacant parcel
of land at 144 Spring Street in SoHo. In September, the developer received a unanimous approval from the
Landmarks Preservation Committee. Designed by Higgins Quasebarth & Partners and Bohlin Cywinski
Jackson, the building will have two floors and two mezzanines and draw inspiration from the Lever House and
Seagram Building.

The proposed Silverstein Properties residential development at 520 West 41st Street (also known as 514
Eleventh Avenue) will contain a podium with 300,000 square feet of retail space.
ASKING RENTS
Over the past year, asking rents grew steadily in most submarkets, with Upper Fifth Avenue being the only
exception. In contrast, some submarkets exhibited a drop in rental rates during the first quarter of 2015 while
38
others showcased an increase. During the quarter, asking rents decreased in Upper Fifth Avenue, Madison
Avenue, Upper West Side, Lower Manhattan and Herald Square. Lower Fifth Avenue, SoHo, Third Avenue,
Flatiron and Meatpacking District experienced lower rental rates in the first quarter. Times Square did not
experience any change in rental rate during the quarter. The changing composition of available spaces as a result
of high-end space being leased was partly responsible for the slowdowns in some of these submarkets. Asking
rents are typically tracked based on the ground floor space only. Below grade and upper level retail space is
generally leased at a discount to the ground floor.
Additional info regarding each submarket includes:

Upper Fifth Avenue continues to have the highest asking rents in Manhattan despite a quarterly and an
annual decrease in the average asking rent. The average asking rent fell by 2.0 percentage points over the
past year and by 9.0 percentage points from the end of last quarter. During the first quarter of 2015, tenants
found landlords asking an average of $3,350 per square foot for direct space. The highest asking rent on the
corridor was $3,800 per square foot at 685 Fifth Avenue.

Lower Fifth Avenue asking rents increased by 2.5 percent during the first quarter to $1,238 per square foot.
Over the past year, the average asking rent rose by 17.1 percent. Five years ago, the submarket’s average
asking rent was only $458 per square foot, highlighting its recent transformation into a destination for flagship
stores.

On Madison Avenue, the average asking rent fell by 1.1 percent during the first quarter but rose by 8.0
percent over the past year at $1,584 per square foot. Prior to the quarterly decline, the average asking rent
increased in each of the last six quarters. In addition, space at 761 Madison Avenue had the highest asking
rent at $2,100 per square foot.

SoHo’s average asking rent rose by 0.4 percentage points during the quarter and 13.8 percentage points
over the year at $519 per square foot. The market’s high streets of Broadway, Prince, and Spring have
average asking rents of $884 per square foot, with Prince Street registering the highest average asking rents
at over $1,000 per square foot.

Third Avenue’s average asking rent increased by 18.8 percentage points over the past year and 10.1
percentage points during the first quarter, closing the quarter at $328 per square foot. Typically, this
submarket receives considerably less foot traffic than other more prominent ones in Manhattan, resulting in
an average rental rate of less than $300 per square foot. This is the first time since at least the third quarter of
2009 where the average asking rent exceeded $300 per square foot.

Times Square’s average asking rate remained unchanged during the first quarter at $2,508 per square foot,
with a 4.2 percent increase over the year. Five years ago, asking rents in this corridor registered only $647
per square foot. In comparison to all other submarkets tracked, this submarket continued to experience the
greatest long term increase, a 287.0 percent jump in five-year growth in asking rents.

The Upper West Side’s average asking rent decreased by 2.3 percentage points during the first quarter at
$388 per square foot. Over the year, however, it has increased by 2.1 percent.

Average asking rents in Flatiron increased by 1.7 percent during the quarter, and are now at an all-time high
of $424 per square foot. This is attributed to the popularity of this shopping neighborhood which continues to
lure high-end retail tenants, resulting in landlords seeking an increase in asking retail rental rates.

The Meatpacking District’s evolution into a hip shopping district has led to a 7.7 percent increase in the
average rental rate over the past year. During the first quarter, the submarket’s average rate rose 3.0 percent
to $376 per square foot.

Even though Lower Manhattan’s retail market statistics do not include any data from the World Trade Center
retail complex or Brookfield Place, the submarket continues to benefit from Brookfield Place’s repositioning
and the ongoing development of the World Trade Center sites. Retail asking rents rose substantially by 57.6
percent over the past year despite falling 3.0 percentage points during the quarter.

39
The average asking rent for retail spaces in Herald Square was $791 per square foot during the first quarter,
the fifth highest of any submarket in Manhattan. The average asking rent increased by 7.5 percentage points
over the past year while falling 3.9 percentage points during the quarter. Select spaces along the corridor are
asking up to $1,100 per square foot.
The following table contains the average asking rent for ground floor retail space along the main corridors tracked
by Cushman & Wakefield Research Services. Asking rents for neighborhood space outside of the main corridors
will vary:
Manhattan Retail Market Statistics
Rental Rates
Market
1Q15
4Q14
1Q14
Annual
Percent
Change
Upper Fifth Avenue*
$3,350
$3,683
$3,417
-2.0%
Low er Fifth Avenue
$1,238
$1,208
$1,057
17.1%
2.5%
Madison Avenue
$1,584
$1,602
$1,466
8.0%
-1.1%
$519
$517
$456
13.8%
0.4%
10.1%
SoHo
Quarterly
Percent
Change
-9.0%
Third Avenue
$328
$298
$276
18.8%
Times Square
$2,508
$2,507
$2,407
4.2%
0.0%
Upper West Side
$388
$397
$380
2.1%
-2.3%
Flatiron
$424
$417
$378
12.2%
1.7%
Meatpacking District
$376
$365
$349
7.7%
3.0%
Low er Manhattan
$394
$406
$250
57.6%
-3.0%
Herald Square**
$791
$823
$736
7.5%
-3.9%
*Direct space only on Asking Rent for Upper Fifth Avenue
**New ly created statistical submarket
REBNY
Findings in the Spring 2015 retail report (the report is released bi-annually in the spring and fall) from the Real
Estate Board of New York (REBNY) reflect much of Cushman & Wakefield’s own. Rental rates in most
submarkets are showing an overall upward trend from the fall of 2014, as well as from the spring of 2014. The
report suggests that this continued rent growth is a result of the city’s strong tourism industry and its cachet for
global retail brands.
Further considerations:

Asking rents in the Upper East Side along Third Avenue between 60th and 72nd Streets rose most rapidly
among the primary retail markets and corridors. The submarket’s asking rents rose by 36.0 percent from the
fall of 2014 to the spring of 2015.

Retail spaces along 57th Street between Fifth Avenue and Park Avenue have begun to command higher
rents, with the average asking rent increasing by 28.0 percent from the fall 2014 report. This trend is expected
to continue due to the recent influx of ultra-luxury residential developments on 57th Street.
The following chart details average asking rents for Spring 2015 according to REBNY. The boundaries for each
submarket may not perfectly coincide with Cushman & Wakefield’s:
Primary Retail Markets
and Corridors
40
Spring '15
Fall '14
Percent Change From
Average Asking Rents Average Asking Rents
Fall '14
Eastside
Upper East Side
Third Ave: 60th-72nd St.
$363
$266
36%
East 86th St: Lexington Ave - 2nd Ave
$456
$423
8%
$1,700
$1,709
-1%
Broadw ay: 72nd-86th St.
$390
$377
3%
Columbus Ave: 66 -79 St.
$447
$347
29%
$1,600
$1,250
28%
$3,683
$3,420
8%
$1,200
$1,095
10%
$2,413
$2,317
4%
$1,000
$891
12%
Fifth Ave: 14th-23rd St.
$403
$403
0%
Broadw ay: 14-23rd St.
$435
$359
21%
$372
$339
10%
$234
$265
-12%
$977
$830
18%
$481
$484
-1%
$141
$130
8%
Madison Ave: 57th-72nd St.
Westside
Upper West Side
Midtow n
East 57th St: 5th Ave-Park Ave
Upper Fifth Avenue
Fifth Ave: 49th-59th St.
Lower Fifth Avenue
Fifth Ave: 42nd - 49th St.
Times Square
Broadw ay & 7 Ave: 42 - 47 St.
Midtow n South
Herald Square
34th St: 5th-7th Ave.
Flatiron
Dow ntow n
Meatpacking
14 St. 9 - 10 Ave
Financial District
Broadw ay: Battery Park-Chambers St.
SoHo
Broadw ay: Houston-Broome St.
West Villlage
Bleeker St: 7 Ave South - Hudson St
Upper Manhattan
Harlem
125th Street: (River to River)
Source: The Real Estate Board of New York Spring 2015 Retail Report and Cushman & Wakefield Valuation & Advisory
DEMAND ANALYSIS
LEASING ACTIVITY
Retail leasing activity in the city continues to remain healthy. Since 2010 many of the major players in the market
have been fast-fashion clothiers like H&M and Uniqlo and bargain department stores like TJ Maxx and Century
21. Fast casual restaurants are making moves in the market now as Chipotle, Shake Shack, Goodburger and
their counterparts spread across Manhattan. In addition, upscale grocery stores like Fairway and Whole Foods
have been expanding in Manhattan recently. Other recent leasing activity has come from more upscale
department stores pushing the boundaries in new retail neighborhoods, like Neiman Marcus.
Further considerations:
41

The largest transaction in the first quarter was Equinox signing a lease at 10 East 53rd Street. The upscale
fitness club is taking 29,851 square feet of space in the Plaza District. Equinox Fitness is a full-service fitness
club that operates 73 centers in major U.S. markets, London and Toronto.

Urban Market signed a lease for more than 27,000 square feet of space at 525 West 52nd Street in Midtown
West. The location will be the grocery’s first Manhattan outpost. Urban Market, a full-service market, is a
spinoff of Key Foods that opened its first location in late 2013 in South Williamsburg in Brooklyn.

Gymnastics studio NYC Elite signed the third largest lease during the quarter, taking more than 25,000
square feet of space at 40 Worth Street in TriBeCa. The studio has three locations in Manhattan and will be
relocating from its current space at 100 Avenue of the Americas. NYC Elite will move into its new space this
fall.
The following table details some of the most significant retail leases within Manhattan during the first quarter:
Significant Retail Lease Transactions
Manhattan 1st Quarter 2015
Building Address
Subm arket
10 East 53rd Street
Tenant
Size (sf)
Plaza
Equinox
29,851
Midtow n West
Urban Market
27,416
40 Worth Street
TriBeCa
NYC Elite
25,014
2085 Broadw ay
Upper West Side
Bloomingdale's Outlet
24,985
Harlem
TD Bank
20,000
525 West 52nd Street
TOURISM
New York’s wealth of historical and cultural landmarks attracts visitors from across the globe. This international
presence has long provided a substantial flow of spending in the market, creating large demand for retail space.
The great recession caused a dip in tourism and associated revenues in 2009, just as it did after September 11th
and the recession of 2001. The city has bounced back strongly since then, due largely to the global economic
recovery and advertising efforts by the City’s tourism agency.

New York City’s tourism industry continues to expand. According to NYC & Company, a record 56.4 million
people visited the city in 2014, up nearly 4.0 percent from 54.3 million in 2013. It also had a total tourism
spending of $40.3 billion.

NYC & Company had set a goal to reach 50.0 million visitors by 2012. The city surpassed the 50.0 million
visitor mark in 2011, one year ahead of schedule. NYC & Company had also set a new goal for the city to
reach 55.0 million visitors by 2015. That goal was also accomplished as demonstrated by the 2014’s tally of
56.4 million visitors.
The following chart contains information on yearly direct tourism sales for Manhattan through 2014:
$45.0
Total Visitor Spending in NYC
40.3
$40.0
$35.0
billions
$30.0
$25.0
$20.0
$15.0
$10.0
$5.0
$0.0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: NYC & Company
The following chart portrays the number of visitors New York City has received annually through 2014:
60
Total Visitors to NYC
56.4
50
millions
40
30
20
10
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: NYC & Company
42
43
CONCLUSION
Despite a recent slowdown in the Upper Fifth Avenue submarket, Manhattan remains one of the strongest retail
markets in the country, particularly in the prime corridors on Times Square. New York City’s constant foot traffic
and robust tourism industry has led to rising rents and an influx of flagship stores. As empty spaces on the major
high streets are absorbed, secondary corridors will continue to evolve.

Nearly every Manhattan retail submarket witnessed rising asking rents over the past year. Times Square has
rapidly emerged as a world-class retail corridor on par with Upper Fifth Avenue, and SoHo is poised for a
similar ascent.

With major retail projects such as Brookfield Place and the World Trade Center garnering increased attention,
Lower Manhattan is beginning transform into a retail destination.

The boom in tourism will see local retailers reaping rewards for years to come. Through NYC & Company,
New York City continues its global marketing operation which ensures the area’s status as a top travel
destination.

The subject property is a well located multi-level retail condominium within the Union Square neighborhood of
Manhattan. The subject contains a good mix of national and credit tenants that provide a good draw to the
property.
RETAIL TRADE AREA ANALYSIS
44
RETAIL MARKET OVERVIEW
Retail properties typically track a trade area which contains people who are likely to patronize their particular
store. These customers are drawn by a given class of goods and services from a particular tenant mix. A local
retail building’s fundamental drawing power comes from the strength of the tenants, as well as the population in
the local area. A successful combination of these elements creates a destination for customers seeking a variety
of goods and services within a self-contained environment.
In order to define and analyze the market potential for the subject property it is important to first the typical market
lease terms followed by establishing the boundaries of the trade area from which the subject will draw its
customers. In some cases, defining the trade area may be complicated by the existence of other retail facilities on
main thoroughfares within trade areas that are not clearly defined or whose trade areas overlap with that of the
subject.
Once the trade area is defined, the area's demographics and economic profile can be analyzed. This will provide
key insight into the area's dynamics as it relates to the subject.
TRADE AREA ANALYSIS
In defining boundaries for the subject's trade area, several factors have been considered. First, the property's
location with respect to transportation provides the basis for regional access to the area. Second, local
competition and geographic boundaries help to define the potential size of the trade area as a measure of
distance from the property. Third, the merchandising mix and anchor alignment provides the basic draw of
customers that are likely to patronize the property.
The existing large scale retail developments in Manhattan are clustered into self-contained districts that serve
primarily the immediate office and residential populations. The subject is located on south side of Union Square
South between University Place and Broadway within the Union Square neighborhood of Manhattan. The
immediate surrounding environs are residential in nature with retail and commercial uses to the west and south.
The property also benefits from excellent frontage across Union Square Park and within close proximity to the 4,
5, 6, L, N, Q and R subway lines.
As discussed, the location and accessibility of competing properties has a direct bearing on the formation and
make-up of the subject's potential trade area as well. The subject property is a unique asset in the market in
terms of its size, visibility, and location that is not easily duplicated in the marketplace. Therefore, the subject’s
limited competition is with other large multi-level retail properties, and the surrounding retail districts in Manhattan.
The foundation of our analysis in the delineation of the subject's trade area may be summarized as follows:

Good subway access, highway accessibility, geographical constraints, and nodes of residential,
and office development;

The position and nature of the area's retail structure, including the location of destination retail
properties which compete with the subject and the strength and composition of the retail infill; and

The size, layout, quality, tenancy, and merchandising composition of the subject property.
45
Given all of the preceding, and considering the population density surrounding the subject, we believe that the
primary trade area for the subject property would be made up of the area from Water Street, the southernmost
point of Manhattan, up to 23rd Street. The subject’s secondary trade area encompasses the area from 23rd Street
to Central Park South (a/k/a 60th Street). We have analyzed the demographics based on the respective zip codes
of the subject's primary and secondary trade areas in Manhattan. To add perspective to our analysis of the
primary and secondary trade area, we have included comparison data for the Manhattan, New York City, and
New York State.
MARKET ASSUMPTIONS
T YPICAL L EASE T ERM
Our survey of market participants has included a broad cross section of retail center owner / developers and
leasing agents. Typical lease terms in the region for local tenants vary from 5 to 10 years, with larger regional and
national tenants commanding longer terms of 10 to upwards of 20 years. Major / anchor leases typically run a
range of 15 to 30 years, with 20 years being typical. Inline tenant leases range between 10 to 15 years in
duration.
E XPENSE R EIMBURSEMENT
Typically, retail leases in comparable retail centers are structured on a net basis, with tenants responsible for a
full pro-rata share of taxes and common area maintenance (CAM) expenses. Common area maintenance
recoveries will typically have an administrative surcharge of 5.0 to 15.0 percent in addition to the pro-rata passthrough. Periodically, the management fee may be recovered in lieu of this structure.
R ENT E SCALATIONS
Rental increases in the form of a CPI increase or a fixed step-up are usually sought, but not always achieved. The
strength of a particular property or location generally dictates the ability of a landlord to command rental
increases. The two most common structures in the subject market appear to be annual escalations or fixed steps.
Annual increases are typically based upon CPI, or a lower stipulated rate, usually around 2.0 to 3.0 percent per
year. Fixed steps appear to equal nearly 5.0 to 10.0 percent every three years or 10 to 15 percent every five
years over the course of the term.
O VERAGE R ENT
over a pre-established base amount as overage rent. Most leases in the market appear to have a natural
breakpoint. The average overage percentage for small retail tenants is in a range of 4.0 to 6.0 percent. Anchor
tenants typically have the lowest percentage clauses, with ranges of 1.0 to 3.0 percent being most common.
C ONCESSIONS
Concessions will vary considerably by property and tenant type. The level of rent that tenants are willing to pay is
often influenced by the magnitude of the build-out offered, as well as the amount, if any, of free rent granted.
Anchor tenants are generally in a better negotiating position to extract concessions in the form of free rent or
improvement allowances. However, if an anchor is strongly motivated to be in a particular market or center, it is
not unusual for an owner to be able to maintain a firm bargaining position, yielding little or no concessions. We
typically do not see tenant allowances for existing retail centers in the marketplace.
46
L EASING C OMMISSIONS
Leasing commissions have been based upon the generally accepted standard schedule. The standard schedule
quoted by Cushman & Wakefield, Inc. depends upon the length of the lease: 5 percent for year 1; 4 percent for
year 2; 3.5 percent for years 3 through 5; 2.5 percent for years 6 through 10; 2 percent for years 11 through 20.
This schedule results in the following percentages of the first year's base rent (excluding an override described
below):
L EA S ING C O M M I S S IO N S
5-Year:
19.5% or 3.90% per year
10-Year:
32.0% or 3.20% per year
15-Year:
42.0% or 2.80% per year
20-Year:
52.0% or 2.60% per year
Leasing commissions are typically higher for new tenants than renewal tenants. A new tenant typically causes a
full commission to be paid, whereas a renewing tenant typically results in a half commission. We have
incorporated this standard assumption in our cash flow projection:
47
DEMOGRAPHIC SUMMARY
Primary
Secondary
New York
New York
State of
United
Trade
Trade
County
City
New York
States
POPULATION STATISTICS
2000
2014
2019
2000
2014
2014
2019
380,539
424,169
438,161
599,316
678,201
702,944
1,534,071
1,639,470
1,672,934
7,995,717 18,963,706
8,447,426 19,705,465
8,581,074 19,996,178
281,422,839
318,283,904
331,097,940
0.78%
0.65%
0.89%
0.72%
0.48%
0.40%
0.39%
0.31%
0.27%
0.29%
0.88%
0.79%
190,112
214,137
222,462
322,421
362,724
377,733
737,359
793,378
814,079
3,017,153
3,241,645
3,313,873
7,052,365
7,482,075
7,641,317
105,480,206
120,696,822
126,162,821
0.85%
0.77%
0.84%
0.81%
0.52%
0.52%
0.51%
0.44%
0.42%
0.42%
0.97%
0.89%
HOUSEHOLD STATISTICS
2000
2014
2019
2000
2014
2014
2019
AVERAGE HOUSEHOLD INCOME
2000
2014
2019
2000
2014
2014
2019
$81,679
$129,028
$149,804
$93,926
$139,172
$160,528
$88,207
$124,230
$143,034
$58,507
$80,263
$89,613
$61,885
$84,302
$95,243
$56,669
$75,020
$86,231
3.32%
3.03%
2.85%
2.90%
2.48%
2.86%
2.28%
2.23%
2.23%
2.47%
2.02%
2.82%
22.56%
77.44%
24.58%
75.42%
22.58%
77.42%
29.91%
70.09%
52.01%
47.99%
64.19%
35.81%
OCCUPANCY
Owner Occupied
Renter Occupied
SOURCE: Claritas, Inc.
POPULATION
Having established the subject’s trade area, our analysis focuses on the trade area's population. Claritas, Inc
provides historical, current and forecasted population estimates for the total trade area. Patterns of development
density and migration are reflected in the current levels of population estimates.
Between 2000 and 2014, Claritas, Inc., reports that the population within the primary trade area (23rd Street
south to the tip of Manhattan) increased at a compound annual rate of 0.78 percent. This trend is expected to
continue into the near future albeit at a slightly slower pace. Expanding to the secondary trade area (23rd Street
south to 60th Street), population is expected to increase 0.72 percent per annum over the next five years.
The following page contains a graphic representation of the current population distribution within the subject’s
region.
48
The graphic on the second following page illustrates the projected population growth in the trade area over the
next five years (2014 - 2019). The trade area is clearly characterized by various levels of growth.
Overall, the existing population and density for the primary trade area of approximately 424,100 residents is a
good potential market for retailers.
CURR ENT POPULA TION MA P
Population
Population
Population
Population
- 1: 60,462 - 112,940
- 2: 38,198 - 60,461
- 3: 18,163 - 38,197
- 4: 0 - 18,162
49
PO PULA T ION GROWTH MA P
Household Income - 4: $0 - 59,063
HOUSEHOLDS
A household consists of a person or group of people occupying a single housing unit, and is not necessarily a
family unit. When an individual purchases goods and services, these purchases are a reflection of the entire
household’s needs and decisions, making the household a critical unit to be considered when reviewing market
data and forming conclusions about the trade area as it impacts the retail center.
Figures provided by Claritas, Inc indicate that the number of households is increasing at a faster rate than the
growth of the population. Several changes in the way households are being formed have caused this
acceleration, specifically:
50
The population is living longer on average. This results in an increase of single- and two-person households;

Higher divorce rates have resulted in an increase in single-person households; and

Many individuals have postponed marriage, also resulting in more single-person households.
According to Claritas, Inc., the Primary Trade Area grew at a compound annual rate of 0.85 percent between
2000 and 2014. Consistent with national trends, the trade area is experiencing household changes at a rate that
varies from population changes. That pace is expected to continue through 2019, and is estimated at 0.65
percent.
Correspondingly, a greater number of smaller households with fewer children generally indicate more disposable
income. In 2000, there were 1.77 persons per household in the Primary Trade Area and by 2014, this number is
estimated to have increased to 1.78 persons. Through 2019, the average number of persons per household is
forecasted to decline to 1.77 persons.
Overall, the existing households for the primary trade area of approximately 214,000 units provide a significantly
large market from which to draw customers.
TRADE AREA INCOME
Income levels either on a per capita, per family or household basis, indicate the economic level of the residents of
the trade area and form an important component of this total analysis. Average household income, when
combined with the number of households, is a major determinant of an area's retail sales potential.
Trade area income figures for the subject support the profile of a broad middle-income market. According to
Claritas, Inc average household income in the primary trade area in 2014 was approximately $139,172, 173.39
percent of the CBSA average ($80,263) and 165.09 percent of the state average ($84,302).
Further analysis shows a relatively broad-based distribution of income, although skewed toward the middle
income brackets, similar to the distribution within the larger CBSA. This information is summarized as follows:
DISTRIBUTION OF HOUSEHOLD INCOME
Category
$150,000 or more
$125,000 to $149,999
$100,000 to $124,999
$75,000 to $99,999
$50,000 to $74,999
$35,000 to $49,999
$25,000 to $34,999
$15,000 to $24,999
Under $15,000
Primary
Secondary
New York
New York
State of
United
Trade
Trade
County
City
New York
States
25.23%
5.70%
9.39%
10.18%
11.89%
7.96%
6.52%
7.96%
15.17%
27.80%
6.13%
9.48%
10.34%
11.78%
7.84%
6.16%
7.29%
13.18%
23.61%
5.33%
8.32%
9.94%
12.30%
8.80%
7.18%
8.63%
15.90%
11.26%
4.41%
7.45%
10.66%
15.99%
12.19%
9.47%
10.87%
17.69%
11.76%
5.17%
8.57%
12.03%
17.25%
12.11%
9.24%
10.21%
13.66%
8.78%
4.54%
8.06%
12.21%
18.37%
13.78%
10.35%
10.96%
12.95%
Source: Claritas, Inc.
The following graphic presentation of the household income distribution throughout the trade area that clearly
shows the area surrounding the subject to be characterized by middle income households.
51
HOU S EHOLD INC OME MA P
Household Income - 1: $88,004
- 230,932
- 88,003
- 69,920
- 57,441
RETAIL SALES
Perhaps an even more important measure of area income retail expenditures. Retail sales potential and growth
are also tracked by Claritas, Inc. At the time of the writing of this report, the total retail sale potential for the
primary trade area totaled $7.65 billion and $13.35 billion for the secondary trade area. By comparison, New York
County had potential retail sales of $27.94 billion and New York City contained a retail trade potential of $116.11
billion.
Retail Trade Potential
Primary Trade
Secondary Trade
New York County
New York City
New York State
52
United States
Total Retail Demand
$7,651,588,216
$13,349,265,641
$27,939,467,039
$116,108,462,519
$288,236,796,060
$5,093,204,999,974
Motor Vehicle & Parts Dealers
$1,181,228,111
$2,109,445,227
$4,197,776,045
$17,512,033,059
$46,618,768,099
$962,354,000,000
Furniture & Home Furnishings Stores
$182,502,233
$323,497,551
$656,338,620
$2,621,082,879
$6,349,079,596
$101,196,000,000
Electronics & Appliances Stores
$159,372,356
$278,186,818
$582,604,131
$2,446,618,547
$6,128,484,734
$101,042,000,000
Building Material, Garden Equipment Stores
$479,771,008
$852,233,959
$1,769,082,483
$7,029,945,097
$18,781,183,790
$312,404,999,969
$1,003,646,535
$1,724,764,763
$3,759,911,317
$16,015,923,489
$36,820,356,536
$652,638,000,000
Health & Personal Care Stores
$347,108,840
$598,729,761
$1,316,105,404
$5,611,728,451
$14,180,949,034
$285,860,000,000
Gasoline Stations
$738,032,981
$1,270,515,774
$2,717,622,754
$11,531,809,887
$27,958,567,830
$546,185,000,000
Clothing & Clothing Accessories Stores
$432,618,596
$751,078,301
$1,566,819,109
$6,405,024,659
$15,223,602,560
$250,625,000,002
Sporting Goods, Hobby, Book, Music Stores
$139,506,599
$241,859,756
$509,795,596
$2,108,612,753
$5,265,233,152
$90,225,000,000
General Merchandise Stores
$893,314,914
$1,543,973,768
$3,319,957,115
$13,977,225,700
$33,078,939,316
$659,070,000,000
Food & Beverage Stores
Miscellaneous Store Retailers
Foodservice & Drinking Places
Retail Sales
$180,687,999
$313,394,874
$669,285,305
$2,787,051,538
$7,079,585,417
$126,599,000,003
$1,063,567,325
$1,862,031,281
$3,729,703,243
$14,820,297,782
$37,361,057,160
$553,008,000,000
Primary Trade
Secondary Trade
New York County
New York City
New York State
United States
11,246,473,474
19,619,380,398
40,798,338,264
167,943,276,759
412,903,213,412
9,919,052,718
17,320,072,931
35,923,971,368
147,657,308,158
365,075,683,068
5,484,738,360,802
13,411,655,508
23,383,867,773
47,923,084,309
196,037,715,198
484,685,111,544
7,691,615,556,105
11,814,255,211
20,619,020,534
42,154,178,911
172,190,484,042
428,392,834,228
6,733,800,507,161
6,292,556,700,084
OVERAGE RENT
over a pre-established base amount as overage rent. Most leases within large retail centers in the market appear
to have a natural breakpoint. The average overage percentage for small space retail tenants is in a range of 5.0
to 10.0 percent. Anchor tenants typically have the lowest percentage clauses, with ranges of 1.0 to 5.0 percent
being most common. Within the subject property only Nordstrom’s Rack has reached the threshold for overage
rent. The overage rent equated to $40,000, or $1.26 per square foot in 2014. In the next section we will overview
the subject’s historical sales
SUBJECT HISTORICAL SALES
Several of the subject tenants are responsible for reporting sales figures. Exhibited on the following chart are the
sales figures for the last 5 years:
CATEGORY
Anchor
Regal Cinemas
In-Line
Best Buy
Duane Reade
Nordstrom Rack
US Wines
Inline Subtotal
Total Sq/Ft
Actual 2010
Sales/SF
Total Sq/Ft
TOTAL PROPERTY TENANT SALES
Actual 2011
Sales/SF
Actual 2012
Sales/SF
Actual 2013
Sales/SF
Total Sq/Ft
Actual 2014
Sales/SF
118,779 SF
$24,841,292
$209
118,779 SF
$24,247,728
$204
$26,655,507
$224
$23,779,697
$200
118,779 SF
$24,780,595
$209
46,088 SF
N/A
32,136 SF
6,419 SF
84,643 SF
$69,175,630
N/A
$21,991,328
$6,797,460
$97,964,418
$1,501
N/A
$684
$212
$1,157
46,088 SF
13,947 SF
32,136 SF
6,419 SF
98,590 SF
$75,199,424
$14,944,242
$29,112,729
$6,709,381
$125,965,776
$1,632
$1,072
$906
$209
$1,488
$72,507,670
$15,536,936
$34,580,086
$6,897,630
$129,522,322
$1,573
$1,114
$1,076
$215
$1,530
$66,241,268
$15,320,855
$41,496,558
$6,769,394
$129,828,075
$1,437
$1,099
$1,291
$211
$1,534
N/A
N/A
32,136 SF
N/A
32,136 SF
N/A
N/A
$47,044,057
N/A
$47,044,057
N/A
N/A
$1,464
N/A
$556
We have utilized the most recent sales information provided by the ownership which for the majority of the
tenants was as of yearend 2013. Regal Cinemas has exhibited sales ranging from $23.8 million in 2013 to $24.8
million in 2010. Regal exhibited sales of $24.8 million in 2014, which exhibited a continued appreciation over the
previous three years. Best Buy has reported sales for calendar years 2010 through 2013. The sales have ranged
from $66.2 million in 2013 to $75.2 million in 2011. The most recent sales exhibited a slight decrease over the
previous two years. Duane Reade has reported sales for calendar years 2011 through 2013. The sales have
ranged from $14.9 million in 2011 to $15.4 million in 2012. The sales have remained fairly stable over the last two
years. Nordstrom Rack has reported sales for calendar years 2010 through 2014. The sales have ranged from
$21.9 million in 2010 to $47.0 million in 2014. The sales have exhibited significant increases over the analysis
period. US wines has reported sales for calendar years 2010 through 2013. The sales have ranged from $6.7
million in 2010 to $6.9 million in 2012. The sales have remained fairly stable over the analysis period. Overall, the
subject sales have increased over the analysis period. We have assumed the subject sales will increase 3.0
percent per annum going forward based on improving market conditions.
53
TENANT PROFILES
The subject is 100.0 percent leased to seven retail tenants. The subject is anchored by Best Buy, Duane Rease,
Regal Cinemas, and Nordstrom Rack, which occupy 83.7 percent of the subject. We have provided a profile of
the larger and credit tenants in order analyze the tenant quality of the subject property.
DUANE READE TENANT PROFILE
Duane Reade is a chain of drugstores located in the metropolitan New York area. The chain, which was opened
in 1960, operates over 250 stores in commercial and residential neighborhoods throughout New York. Duane
Reade was purchased by Walgreen Company (parent company of the Walgreen’s national drugstore chain) in
2010.
Walgreen Company is the largest drug store chain in the United States by sales. At the end of fiscal 2013, the
company operated some 8,300 retail drugstores in all 50 States, the District of Columbia, Puerto Rico, as well as
two mail-order facilities. Walgreen’s fill over 650.0 million prescriptions annually, and 65.0 percent of the
company’s revenue is derived through the sale of prescription drugs. Walgreen’s stores also sell non-prescription
drugs, general merchandise, cosmetics, toiletries, household items, food and beverages. The company owns
20.0 percent of its retail stores and leases the remainder. Customers can have prescriptions filled at the drugstore
counter, as well as through mail, by telephone and on the Internet.
On the last day of 2014, Walgreen took full ownership of European drugstore chain Alliance Boots for more than
$15.0 billion in cash and stock. The deal created a network of nearly 13,000 stores across two dozen countries,
with Walgreen Company becoming a subsidiary of newly formed Walgreens Boots Alliance.
Company founder Charles Walgreen opened his first namesake store in Chicago in 1901. The Company grew
rapidly throughout the Chicago metro area, reaching 20 stores in 1920. Walgreen took the company public in
1927 with nearly 400 stores. Walgreens was a pioneer of self-service stores after World War II. In recent years,
the company has expanded aggressively into other health care sectors, including home care and prescription
management. The company’s stock is publicly traded on the New York Stock Exchange under the ticker symbol
“WAG”.
Credit Ratings
Walgreen Company is rated investment grade by Moody’s and Standard & Poor’s. A summary of the company’s
credit profile is provided in the table below:
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Rating
Baa2
BBB
Last Rating Action
Dec-14
Aug-12
Outlook
Stable
Stable
Annual Financial Data
Walgreen Company’s net sales in fiscal 2014 were $76.4 billion, an increase of nearly 6.0 percent from $72.2
billion in fiscal 2013. Net income for the year fell by 21.1 percent to $1.9 billion. The following table is a profile of
the company’s annual financial performance:
54
WALGREEN COMPANY FINANCIAL OVERVIEW
FY2014
$76,392
5.8%
$1,932
251,000
Change in Revenues
Number of Employees
FY 2013
$72,217
0.8%
$2,450
248,000
FY 2012
$71,633
-0.8%
$2,127
240,000
Source: Hoovers
NORDSTROM, INC. TENANT PROFILE
Nordstrom, Incorporated is a leading national upscale department store retailer. Nordstrom operates 294 stores
across 38 states. The company operations include 116 full-line ‘Nordstrom’ department stores, 178 discount
‘Nordstrom Rack’ stores, five “Trunk Club” clubhouses, one clearance, and other retail channels including their
online private sale subsidiary “HauteLook” and two “Jeffrey” boutiques.
Company founder John Nordstrom, a former lumberjack and gold miner, opened a shoe store with his Alaska
Gold Rush earnings in 1901. The Nordstrom family is heavily involved in the management of the company and
owns an estimated 15.0 percent of Nordstrom’s outstanding shares. Once the largest independent shoe chain in
the country, the company grew quickly and was taken public in 1971.
Nordstrom has grown from a regional department store to a national chain by opening new stores rather than by
acquisition of other retailers. In early 2011, the company acquired HauteLook, a Los Angeles-based online retailer
that offers flash sales on designer goods. The deal includes Nordstrom paying $180.0 million in stock and a threeyear "earn-out" payment based on HauteLook's financial performance.
Credit Ratings
Nordstrom is rated investment grade by Moody’s, Fitch, and Standard & Poor’s. A summary of the company’s
credit ratings is provided in the table below:
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Rating
Baa1
BBB+
A-
Last Rating Action
Jan-14
Apr-15
Feb-12
Outlook
Stable
Stable
Stable
Annual Filing Data
Nordstrom’s revenue in fiscal 2014 grew by 7.7 percent year-over-year to more than $13.51 billion. The
company’s net income for the year was $720.00 million, slightly lower than the $734.00 million generated in the
previous year. A summary of the company’s annual financial performance is provided in the table below:
NORDSTROM, INCORPORATED FINANCIAL OVERVIEW
Change in Revenues
Number of Employees
Source: Hoovers
FY2014
$13,506
7.7%
$720
67,000
FY 2013
$12,540
3.2%
$734
62,500
FY 2012
$12,148
11.7%
$735
61,000
55
REGAL ENTERTAINMENT GROUP TENANT PROFILE
Regal Entertainment Group is the U.S.'s largest theater owner. The company has 7,324 screens within 569
theaters in 42 states through its Regal Cinemas, Edwards Theatres, United Artists Theatre Company, and Hoyts
Cinema brands. Regal Entertainment Group was founded in 2002 when Philip Anschutz bought and combined
controlling interests in the bankrupt Regal Cinemas, United Artists, and Edwards Theatres through his firm, The
Anschutz Corporation. Anschutz owns about half of Regal Entertainment Group and controls 78.0 percent of its
voting power.
Regal Entertainment Group's theaters house an average of 12.7 screens, and more than 75.0 percent of its
screens are in theaters with stadium seating. The company makes nearly 70.0 percent of its revenues from ticket
sales, and also generates about a quarter of its revenues from concession sales. Additional revenues come from
vendor marketing programs, gift cards, and discount ticket programs.
The company operates solely in the US, and targets midsized metropolitan markets and suburban growth areas
of larger cities. It has a large number of theaters in California, Florida, and New York; those three states together
account for more than a third of REG's locations.
Credit Ratings
Regal Entertainment Group is rated below investment grade by Moody’s, Fitch, and S&P. A summary of the
company’s credit ratings is provided in the table below:
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Rating
B1
B+
B+
Last Rating Action
May-14
Sep-14
Jan-15
Outlook
Stable
Stable
Stable
Annual Filing Data
Company-wide revenue for fiscal 2014 decreased 1.6 percent over the prior year, to over $2.99 billion. As well,
Regal Entertainment Group’s net income for the year fell to $105.60 million, a significant decrease following
recorded net income of $157.70 million 2013. A summary of the company’s annual financial performance is
provided in the table below:
REGAL ENTERTAINMENT GROUP FINANCIAL OVERVIEW
Change in Revenues
Number of Employees
FY2014
$2,990
-1.6%
$106
23,168
FY 2013
$3,038
7.6%
$158
24,201
FY 2012
$2,824
5.3%
$145
22,056
Source: Hoovers
BEST BUY CO., INC. TENANT PROFILE
Best Buy is a specialty retailer of consumer electronics, home-office products, entertainment software, appliances
and related services. Best Buy operates more than 1,400 stores in the United States and more than 200
internationally. The company was founded by Dick Schulze with the “Sound of Music” store in 1966. Mr. Schulze
gradually broadened the Company’s product selection to appeal to a wider demographic. In 1983, Schulze
changed the company name to “Best Buy” and began opening larger format superstores. Best Buy is currently the
56
largest consumer electronics retailer in the United States with approximately one-third of total electronics,
appliance, and computer store sales according to the Census Bureau.
In August 2012, founder Richard Schulze, who is the company's largest shareholder with a 20.0 percent stake,
offered to buy the electronics retailer for as much as $8.8 billion but failed to line up financing to take the company
private.
In April 2013, Best Buy announced it was selling its European business after just five years. Best Buy sold its 50
percent stake to joint venture partner Carphone Warehouse for about $775.0 million in cash and shares. The joint
venture operates 2,400 stores across eight European countries and trades under the Carphone Warehouse and
Phone House brands.
Credit Ratings
Best Buy is currently rated investment grade by Moody’s and below investment grade by Fitch and Standard &
Poor’s:
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Rating
Baa2
BB
BB
Last Rating Action
Jul-14
Apr-15
Aug-13
Outlook
Stable
Stable
Stable
Annual Filing Data
On November 2, 2011, Best Buy’s board approved a change in their fiscal year-end from the Saturday nearest
the end of February to the Saturday nearest the end of January, effective beginning with their fiscal year 2013. As
a result of this change, fiscal year 2013 transition period was 11 months and ended on February 2, 2013.
Best Buy’s total revenue was $40.34 billion in fiscal 2014, a 4.9 percent decrease from the previous year. The
company’s net income, however, increased 131.8 percent from $532.00 million to $1.23 billion in 2014. A
summary of the company’s annual financial performance is provided in the table below:
BEST BUY FINANCIAL OVERVIEW
Change in Revenues
Number of Employees
FY2014
$40,339
-4.9%
$1,233
125,000
FY 2013
$42,410
-5.9%
$532
140,000
FY 2012
$45,085
-11.1%
-$441
165,000
Source: Hoovers
CITIBANK TENANT PROFILE
Founded in New York in 1812, Citibank represents the consumer banking operations of financial services giant
Citigroup. The unit has more than 1,000 branches in more than a dozen US states. California, New York, and
Texas are its largest markets, but the bank also has a significant presence in the Northeast, as well as in Chicago
and Miami. It has about 300 international locations in some 40 countries, with a focus on emerging markets in
Asia, Latin America, and Central and Eastern Europe. Citibank provides standard banking fare such as deposit
accounts, credit cards, and loans to consumers and small businesses, and utilizes its parent's breadth of financial
services to also offer investment and financial planning services.
57
In 2009 Citigroup restructured itself into two primary divisions -- Citicorp and Citi Holdings. Citicorp comprises the
group's core regional consumer and institutional banking operations, including Citibank. Citi Holdings contains
Citigroup's riskier operations that it planned to spin off or wind down, such as CitiMortgage and CitiFinancial.
Citigroup expands its investment in the commodities business by purchasing Deutsche Bank’s metals-, powerand oil-trading books in October 2014, as well as the commodity trading books of Credit Suisse in December
2014. The transactions are a part of Citigroup’s undertaking on a multiyear effort to gain revenue and market
share in commodities.
Credit Ratings
Citigroup Incorporated is rated investment grade by Moody’s, Fitch and Standard & Poor’s. The table below
details Citigroup’s credit ratings:
CREDIT RATINGS
Agency
Moody's
Fitch
S&P
Rating
Baa1
A
A-
Last Rating Action
May-15
May-15
Nov-11
Outlook
Stable
Stable
Negative
Annual Performance
Citigroup Incorporated’s total revenue in fiscal 2014 was $90.57 billion, a decrease of 2.1 percent from $92.54
billion in fiscal 2013. Net income for the year was $7.31 billion, down 46.5 percent from $13.67 billion in fiscal
year 2012. The following table is a profile of Citigroup’s annual financial performance:
CITIGROUP FINANCIAL OVERVIEW
Change in Revenues
Number of Employees
FY2014
$90,572
-2.1%
$7,313
241,000
FY 2013
$92,543
2.0%
$13,673
251,000
FY 2012
$90,708
-18.2%
$7,541
259,000
Source: Hoovers
CONCLUSION
We have analyzed the profile of the subject's region and primary and secondary trade areas in order to make
reasonable assumptions as to the continued performance of the property. Demographic and economic data
specific to the trade area were also presented. The following summarizes our key conclusions.

The subject benefits from its location in one of the nation's largest metropolitan areas. The location is
extremely dense in population, with an adequate number of households and very good income levels for
retailers. The subject is one of the largest Manhattan retail properties in the competitive market and is
situated in along the prime Union Square South corridor across from Union Square Park.
58

The subject has excellent access immediately outside of the property including the 4, 5, 6 L, N, Q and R
subway lines and multiple public transportation buses and major thoroughfares.

The subject property comprises the 5-level retail condominium unit within a 22-story luxury residential building
that features approximately 240 luxury residential rental apartments.

The subject property is considered to be one of the premier large retail properties in Manhattan market.
Furthermore, based on its location, excellent condition, layout, quality and tenant mix, the subject property is
classified as a Class A retail property in a major urban market.

The subject property is 100 percent leased by 7 retail tenants. Approximately, 47.9 percent of the subject is
leased to four credit tenants inclusive of Best Buy, Duane Reade, Nordstrom’s, and Citibank. The remaining
tenants include a Regal Entertainment which is operated as a multi-plex theater, a wine store along Fourth
Avenue and a small medical office on the lower level. The property is considered to be leased to a mix of
credit and good quality tenants.

The combination of the demographic and competitive characteristics of the trade area creates an environment
where the subject property should continue to perform well due to the subject’s location and tenant mix. The
subject is a prime retail property within the market given its size, quality, location, and transportation access.
Clearly the forces of supply and demand that exist in the current market along with the demographic profile of
the subject location indicate that the subject property is a sustainable and stable asset.
MOVIE THEATER OVERVIEW
59
M O V I E T HE A T E R O V E R V I E W
INTRODUCTION
The Motion Pictures Association of America reports that total U.S./Canadian box office sales in 2014 were $10.4
billion, down 5.0 percent compared to $10.9 billion in 2013. Admissions, or tickets sold (1.27 billion), and average
tickets sold per person (3.7) both declined 6.0 percent in 2014. Admissions fell during the year but are generally
consistent with recent trends.
The stability of ticket sales demonstrates the movie theater’s key role in our national psyche. More than two-thirds
of the U.S./Canada population (68.0 percent) – or 229.7 million people – went to the movies at least once in 2014,
consistent with prior years. Ticket sales continue to be driven by frequent moviegoers who, by definition, attend
movies once a month or more. In 2014, frequent moviegoers represented 11.0 percent of the population and 51.0
percent of all movie tickets. The typical moviegoer bought 5.5 tickets over the course of the year, down from 5.9
tickets in 2013. This suggests that the decrease in ticket sales in 2014 was among moviegoers who decreased
their attendance to at least once a month from intervals of once a month or more in 2013.
The following chart displays U.S. box office sales since 2001:
U.S. Theater Statistics ‐ 2014
$11.0
1.8
$10.0
1.7
$9.0
1.6
$8.0
1.5
$7.0
1.4
$6.0
$10.4
$8.17
$10.9
$8.13
$10.8
$7.96
$10.2
$7.93
$10.6
$7.89
$10.6
$7.50
$9.6
$7.18
$9.6
$6.88
$9.2
$6.55
$8.8
$6.41
$9.3
$6.21
$9.2
$6.03
$9.1
$5.80
1.3
$8.1
$5.65
$5.0
$4.0
1.2
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Box Office Sales ($ Bil.)
Average Ticket Price
Admissions (Bil.)
Source: mpaa.org
PHASES OF MOTION PICTURE INDUSTRY
Production
Production peaked after World War II at 491 releases in 1949. It would take nearly 50 years to reach 500
releases, which occurred for the first time in 1997. During the intervening decades releases bottomed out at 186
60
in 1977. Releases gradually increased through the 1980s, finally tying the 1929 mark with 491 in 1988. Many of
these films play only limited runs in major cities, while others are released direct to video and/or DVD. A total of
707 films were released during 2014.
Distribution
A finished movie moves into the distribution phase of the business. This sector of the industry is dominated by the
established studios, who routinely command around 95.0 percent of domestic box office dollars. The distributor
finances national advertising (local advertising is shared by the exhibitor) and the production of prints. There are
two common formulas, one which is based on a declining percentage of gross revenue each week and one based
on the excess of revenue over the "house nut" (the theater's expenses). The industry average is 50.0 percent of
box office to the distributor and 50.0 percent to the exhibitor. In return, the distributor receives a percentage of
box office receipts. Production costs in excess of $100.0 million for major releases are a high barrier to entry.
Exhibition
Until 1948, vertically-integrated movie studios owned their own theaters. Anti-trust prosecution forced the studios
to divest their theater chains, and the modern exhibition industry was born.
The movie theater industry is highly competitive, particularly in the licensing of films, attracting patrons, and
finding new theater sites. Theaters operated by national and regional circuits, and by smaller independent
exhibitors, tend to compete with each other. Some of the principal competitive factors in film licensing include:
licensing terms, seating capacity, location and reputation of an exhibitor’s theaters, quality of projection and
sound equipment at the theaters, and the exhibitor’s ability and willingness to promote the films.
The studios distribute films to the exhibitors based on a zone system. Generally studios only release copies of a
film to a single exhibitor within a zone. Depending on demographics characteristics of a given area and the
locations of all exhibitors in the area, theaters will either have a captive zone, or a split zone. In captive zones the
studio and the exhibitor are free to negotiate the terms to exhibit each film and if terms are agreed upon, the
exhibitor will rent the film. In a split zone, the studio will alternate between the exhibitors within that zone.
Although this system is designed to give each exhibitor an equal share of revenues from any given studio, the
success of each film and the capacity of the exhibitors within the market often leads to a 40/60 percent split in
annual revenues when two exhibitors share a zone.
In 1963, the first twin-screen theater opened in the U.S. The industry had approximately 10,000 indoor screens in
1970, and grew to 14,171 indoor screens by 1980, a 42.0 percent increase. At the end of 2013 there were
reportedly 39,368 screens, a 178.0 percent increase since 1980.
61
The following table displays the top ten movie exhibitors by screen count:
TOP TEN MOVIE EXHIBITORS ‐ 2014 RANK EXHIBITOR USA THEATER TOTAL USA SCREEN TOTAL MARKET SHARE 1 Regal Entertainment Group 574
7,367 18.9%
2 AMC Entertainment, Inc. 348
4,960 12.6%
3 Cinemark USA, Inc.
430
4,945 11.4%
4 Carmike Cinemas, Inc.
274
2,897 6.8%
5 Cineplex Entertainment LP 136
1,672 4.3%
6 Marcus Theatres Corp.
55
685 1.8%
7 Southern Theatres LLC
38
444 1.1%
8 Harkins Theatres
30
432 1.1%
9 National Amusements, Inc. 32
424 0.9%
10 B&B Theatres
50
409 0.8 %
Total 1,967
24,235 59.7 %
Source: National Association of Theatre Owners; * as of July 2014 Although there are well over 400 exhibitors in the United States and Canada, the Top 10 operate approximately
36.0 percent of the sites, and 59.7 percent of the screens. The discrepancy between the share of sites and
screens is a result of hundreds of single-site/single-screen exhibitors. In 1985, the top ten exhibitors owned about
25.0 percent of the screens in the U.S. The industry has since consolidated, most recently with the mergers of
Regal Cinemas, Edwards Theater Circuit and United Artists, and the AMC/Loews merger.
There is an ever-widening gap in the marketplace between vintage single screen theaters, and newer megaplexes. Data from the top 10 exhibitors reveals an average of 12.5 screens per theater. New multi-plex
construction trends will continue to boost this figure, with most new and proposed multiplexes having at least
eight screens, and several existing or proposed theaters containing as many as 24 screens.
Through consolidation, the exhibition industry has realized cost savings. It is feasible for a theater operator with
critical mass of more than 100 screens to utilize an electronic management information system for monitoring
ticket and concession sales from a central location. With such data quickly available, central management can
precisely adjust film selection, staffing requirements, and concession supplies. Typically, theater chains with
economies of scale can also exact more favorable terms from concession suppliers, and film distributors.
However, film rental rates usually depend more on the dynamics of specific local markets than the overall size of
an exhibitor chain.
62
THE EVOLUTION OF MOVIE THEATERS
Single screen motion picture theaters first emerged at the turn of the 19th century. With the advent of full-length
feature films around 1915, the development of increasingly ornate “movie palaces” swept across the country. In
1948, the landmark Supreme Court case United States vs. Paramount Pictures broke the Hollywood studio
system by forcing the studios to divest their theaters. As the multiplex concept caught on beginning in the 1960s,
the number of indoor screens has grown exponentially, doubling approximately every twenty years since 1970.
The following table highlights the growth of U.S. movie theater screens from 1948 through 2013:
Total Screen Count
45,000
40,000
35,000
30,000
39,368
39,056
38,974
38,902
37,092
26,995
18,327
14,171
12,168
10,000
9,240
9,150
12,291
5,000
14,716
10,000
17,811
15,000
22,904
20,000
35,597
25,000
0
1948 1954 1958 1963 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2011 2012 2013
Source: National Association of Theatre Owners
Drive-In theaters entered a protracted decline after their heyday in the 1960s, when they accounted for nearly one
out of three screens. In 1999, overbuilding finally caught up with the industry, leading to a 5.4 percent decline in
indoor screen count over the next two years as market pressure forced functionally obsolete theaters to close
their curtains. Growth picked back up in 2001, and in 2005 the number of indoor screens surpassed the previous
record set in 1999. Total indoor screen count at the end of 2013 stood at 39,368, up over 10.0 percent over the
last 10 years.
63
The following table provides industry statistics from 1980:
U.S. THEATRE INDUSTRY OVERVIEW ADMISSIONS YEAR NEW PICTURES RELEASED NUMBER OF INDOOR SCREENS TOTAL IN MILLIONS PER SCREEN TOTAL IN MILLIONS PER SCREEN 1980 193 14,171 1,022 72,084 $2,749 $193,98
$2.69 1985 1990 389 385 18,327 22,904 1,056
1,190 57,620
51,956 $3,749 $5,020 $204,56
$219,17
$3.55
$4.22 1995 2000 370 482 26,995 35,696 1,211
1,383 44,860
38,744 $5,269 $7,510 $195,18
$210,38
$4.35
$5.39 2005 2010 507 569 37,040 38,902 1,376
1,340 37,149
34,446 $8,820 $10,580 $238,12
$272,48
$6.41
$7.89 2011 2012 2013 2014 607 677 659 707 38,974 39,056 39,368 40,158* 1,280
1,360
1,340
1,270
32,842
34,070
34,038
31,625*
$10,180
$10,790
$10,920
$10,376*
$261,71
$270,55
$277,38
$258,37
$7.93
$7.96 $8.13
$8.17
TICKET SALES AVG. TICKET PRICE Source: National Association of Theatre Owners, Motion Picture Association of America *estimate
As part of their effort to continually lure consumers, movie theaters have grown in size, enabling the exhibitor to
market a wider selection of releases at each location. Smaller boutique theaters have made a comeback in recent
years, yet the vast majority of new construction dollars are spent on "multi-plexes" (8 to 15 screens) and “megaplexes” (16+ screens). By enabling operators to show a wider variety of films for longer periods of time, additional
screens generally ensure higher profits. Key benefits include longer run times enabling a theater operator to
receive a larger share of the ticket revenue, and higher concession stand sales that are an important part of an
exhibitors bottom-line. Up to 70.0 percent of every dollar spent on concessions represents profits to the exhibitor.
Additionally, operations are more profitable at multiplexes since employees at the box office and concessions
stands can be used more productively with rolling starting times.
Larger screens are also part of an industry-wide shift, another inducement designed to lure the consumer from
the comfort of home with its smaller screen. The small screens and "shoe-box" theaters that cropped up in the
1980s have fallen into disfavor, as operators recognize that customers demand and expect the movie experience
to be as grand as possible.
There is minimal demand for shuttered movie theaters for their original use. Many of the older, smaller, theaters
have been purchased for their historic value, or conversion to office or retail space. Smaller theaters that compete
directly with larger franchises have been increasingly losing market share. Large franchise theaters operate on a
higher budget and can draw larger crowds, commanding higher ticket and concession prices. Ticket and
concession prices generally increase proportionately with the population of the trade area they serve.
Between 2002 and 2014, average ticket prices increased by over 35.0 percent. Over the past decade ticket prices
have risen at roughly 4.0 percent per annum, reaching an average of $8.17 at year-end 2014 according to
MPAA’s annual theater industry report.
64
INDUSTRY CONSOLIDATION
By 1999, many analysts believed that the cinema industry was oversaturated. Several national theater operators
struggled after taking on excessive debt to finance aggressive expansion campaigns. As companies opened
large, luxurious mega-plexes, they often found that they were taking business away from their smaller multiplexes, which often lacked up to date amenities. Many smaller theaters operated under long-term leases that
prevented their owners from closing underperforming locations. At the same time, bank lenders tightened their
credit standards, making it more difficult to obtain new cash or refinance existing debt.
As a result, a flood of exhibitors who were top-heavy with expansion debt filed for Chapter 11 bankruptcy
protection. Filing Chapter 11 allowed the companies to escape long-term leases and close money-losing
locations. Over the past few years, Regal Cinemas, Loews Cineplex, Carmike Cinemas, United Artists, Edwards
Cinemas, Silver Cinemas, Cinema Star Luxury Theaters, West Star Cinemas, Mann Theaters, Resort Theaters of
America, and General Cinemas all declared bankruptcy. In addition, other companies that were in a financial
strain attempted to keep their heads above water by restructuring debt, renegotiating leases, closing theaters,
completing sale-leasebacks, and obtaining equity infusions. Theater chains with older facilities, as well as those
with shallow market penetration, were the most vulnerable to the oversaturated market.
Reversing course after the 1990s mega-plex boom, chain owners came to grips with the glut of theater seating.
The total number of U.S. screens (both indoor and drive-in) declined by over 5.0 percent between 1999 and 2001.
Screen count slowly rebounded after 2001, surpassing the high-mark set in 1999 by 2005.
After years of consolidation a handful of national chains now control nearly two-thirds of the cinema market.
Notable deals over the last five years include Madison Dearborn Partners acquisition of Century Theaters in
2006. In 2005, AMC Entertainment Inc., the second largest US exhibitor announced that they had entered a
definitive merger agreement with Loews Cineplex Entertainment, the sixth largest U.S. exhibitor. The merger
closed in January, 2006.
In December 2009, Sumner Redstone’s National Amusements Inc. agreed to sell 35 theaters to Rave Cinemas
LLC. as part of an effort to refinance loans of $1.46 billion that threatened his control of CBS Corp. and Viacom
Inc. Financial terms weren’t disclosed. Rave Cinemas also acquired the four-theater operation of Boston Ventures
Management LLC’s Rave Reviews Cinemas LLC in late 2009. The company expects to own or manage 65
theaters with 1,000 screens in 20 states.
More recently, AMC completed the acquisition of 92 theaters and 928 screens from Kerasotes Showplace
Theaters in May 2010 for total consideration of $275.0 million. Kerasotes operated 95 theaters and 972 screens
in 21 mid-sized suburban and metropolitan markets, primarily in the Midwest.
MOVIE THEATER INVESTMENT TRENDS
From an investment perspective, movie theaters are unique assets due to their high cost of occupancy and large
space requirements. Accordingly, investment in movie theaters is generally limited to a small pool of owneroperators and specialized institutions. Our review of the 2008 edition of Dollars & Cents of Shopping Centers (the
most recent available) published by the International Council of Shopping Centers and the Urban Land Institute
reveals that movie theaters have the highest median occupancy cost ratio of all the major shopping center
anchors covered in the survey. Our proprietary survey of nearly 100 national chain theaters primarily located in
super regional malls and lifestyle centers lends additional support to Dollars & Cents, with an average annual rent
per square foot of $20.93 and an average lease term of 17.6 years.
65
The following chart summarizes the current Dollars & Cents survey results:
ANCHOR RENT AND OCCUPANCY COSTS CENTER CLASSIFICATION MEDIAN SALES PER SQ.
FOOT MEDIAN RENT PER SQ. FOOT MEDIAN RENT/ SALES RATIO MEDIAN GLA TOTAL CHARGES; % OF SALES SUPER REGIONAL MALL
Department Store $163.99 $3.35
2.04%
108,731 3.24%
Discount Department Store $201.83 $6.08
3.01%
89,690 3.17%
Cinema $100.80 $17.45
17.31%
50,000 20.23%
Furniture $98.40 $6.56
6.67%
26,771 11.31%
Sporting Goods $279.80 $10.93
3.91%
39,287 6.64%
Books $235.67 $15.11
6.41%
25,278 8.19%
Department Store $115.79 $3.30
2.85%
121,099 3.24%
Cinema $78.47 $11.02
14.04%
26,340 20.02%
Books $199.98 $15.43
7.72%
26,484 9.60%
Other Retail $265.27 $6.25
2.36%
48,636 4.01%
Overall Mean $174.00 $9.55
6.63%
56,232 8.97%
REGIONAL MALL
Source: ICSC/ULI Dollars & Cents of Shopping Centers 2008 As displayed in the preceding chart, high movie theater occupancy costs are the result of low median sales
productivity and high median rents. The low sales productivity of movie theaters is the result of an overabundance of supply. Growth in movie theater screens since 1980 has greatly exceeded population growth. In
fact, the number of indoor screens increased by 182.0 percent over the period, compared to a 36.0 percent
increase in the U.S. population. This disparity has caused an approximate 50.0 percent decrease in annual
admissions per screen. Total admissions over the period increased by approximately 31.0 percent, or somewhat
below population growth.
The following table compares the sales, size, and credit of the publicly traded movie theater operators:
MOVIE THEATER SALES COMPARISON RETAILER 2010 SALES PER SCREEN 2011 SALES PER SCREEN 2012 SALES PER SCREEN 2013 SALES PER SCREEN 2014 SALES PER SCREEN TOTAL NUMBER OF THEATERS TOTAL SCREEN COUNT MOODY'S RATING Regal Entertainment Group $418,318 $404,581 $409,883 $410,887 $405,877 574 7,367 B1 AMC Entertainment, Inc. $542,398 $476,126 $518,072 $552,537 $543,425 348 4,960 B2 Cinemark USA $432,992 $442,471 $472,047 $482,274 $432,991 430 4,945 ‐ Carmike Cinemas, Inc. $213,416 $209,405 $213,389 $238,646 $238,142 274 2,897 B2 Average $401,781 $383,145 $403,347 $421,086 $405,108 1,626 20,169 Source: Annual Filings, *Sales Per Screen calculation includes revenues from international theaters
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Capitalization Rates
Capitalization rates for movie theater assets are somewhat opaque due to the limited amount of transaction
activity and high number of sales between privately-owned companies. Market participants we surveyed noted
that investment in movie theaters over the last two years has been very low. Access to capital is generally either
too costly or simply not available for this asset type. The acquisition requirements for one respondent, a large
REIT, are generally no less than 12.0 percent based on stabilized year one net operating income for un-leveraged
yield returns. According to our sources that acquire these special purpose properties, the rate should factor the
competitive nature of a cinema’s given market area.
Concerns that must be addressed generally include how the property measures up to its local competition e.g.
market share, demographics/location, and most importantly, sales performance. These key economic and
location attributes will dictate the risk level of a given investment. Markets that have screen over-supply or
cinemas that have declining sales are far more difficult to sell. Markets that leave room for more competition are
also of concern.
Established cinemas in built-out markets are most attractive to the typical investor as the barriers to market entry
are far more difficult and more costly to operators desirous of expansion. The established locations help assure
stability, which keeps the rate lower for this investment type. A representative of the seller for a recent sale of a
seven-property Carmike Cinema portfolio believes historical capitalization rates are not applicable in present
market conditions. While very few recent transactions have occurred, the broker holds the opinion that these
special use properties would likely trade in the 10.0 to 12.0 percent capitalization rate range. The operator,
location and historical sales performance would dictate the low and high end of the stated range.
COMPETITION OF THE FUTURE
A multitude of technological advances will make new at-home entertainment alternatives possible over the next
several years. The impact of such developments on the health of the movie theater industry has yet to be
determined, but exhibitors consider advancements in entertainment-related technology seriously. A new and
illegal form of competition has developed in recent years largely due to technological advances and the
increasing number of internet users. Labeled piracy and considered illegal under copyright laws, it has become an
increasingly greater burden on the movie theater industry.
High-Definition Television (HDTV)
The most imminent technological breakthrough in the entertainment industry is High Definition Television, or
HDTV, which came to market in 1999. HDTV utilizes digital technology, which produces clearer images and
sounds than the analog transmissions used in television broadcasts today. An HDTV broadcast would be
received on wide screen television sets that mimic the dimensions of a movie screen. Sales of digital television
sets, many of which are HD compatible, have exploded due to advances in technology and lower prices.
Home Theater
Current technology provides consumers with the ability to create a home theater for movie viewing. State-of-theart audio and video equipment may be combined to create the effect of watching a film in a movie theater, albeit
on a smaller scale. It is estimated that 62.0 million households in the U.S. owned a home-theater system in 2006.
However, the majority of moviegoers feel that the theater offers the ultimate movie-watching experience as seen
in the study by Nielsen EDI that concluded 69.0 percent prefer watching a movie in the theater due to the overall
experience.
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First Run Movies on Cable
While the opening of the interactive cable networks is still several years away, the potential for first run movies to
be shown on cable channels is more imminent. Some of the smaller film distributors are spearheading the
movement toward first-run cable releases. The National Association of Theater Owners, the trade group that
represents exhibitors, has vociferously denounced the practice and some of the larger studios, many of which
own movie theater chains, have vowed to oppose the practice as well. Thus, while first-run movies will probably
be available on cable in the near future, the practice is unlikely to be widespread, nor to cause the downfall of the
traditional movie theater.
Piracy: Hard Goods and Internet
While this form of competition is fairly new, in recent years according to a 2005 study by the MPAA it has caused
a $1.3 billion loss in revenue in US studios and $4.8 billion internationally, with nearly half of that loss occurring in
Europe. There are three types of piracy explained in the study; bootlegging is obtaining movies by either
purchasing an illegally copied VHS/DVD/VCD or acquiring hard copies of bootleg movies, illegal copying is
making illegal copies for self or receiving illegal copies from friends of a legitimate VHS/DVD/VCD, and Internet
piracy is obtaining movies by either downloading them from the Internet without paying or acquiring hard copies of
illegally downloaded movies from friends or family.
INNOVATIONS IN THE MOVIE THEATER INDUSTRY
Movie theaters have become more competitive over the last decade, facing up to a market that has shrunk and is
now controlled by a relatively small number of large operators. In addition to building multiplexes with large
screens, movie theater chains are instituting a variety of new services geared toward patron comfort, convenience
and enjoyment. The sound wave of the future for movie theaters is digital sound technology. Digital sound
technology is used to create movies that have a sound quality akin to that produced by compact discs. There are
three major competitors in the digital sound market: Sony Dynamic Digital Sound (SDDS), Digital Theater
Systems (DTS), and Dolby. Exhibitors have quickly begun to adopt the digital sound format, realizing that the
enhanced sound quality adds immeasurably to the movie experience.
Movie theaters are also introducing many concession-related improvements. Concession stands provide a
significant portion of a movie theater's revenue, in the neighborhood of 30.0 percent. Movie theaters have been
branching out from the traditional popcorn and soda to embrace ideas like bulk candy stations, where patrons
serve themselves from a variety of candy, which they pay for by weight. The self-service concept has been
adapted to popcorn and soda in some theaters, and even to hot dogs and nachos. Self-service eliminates labor
costs and moves patrons quickly through the concession area.
IMAX
Viewed by many in the movie industry as the movie technology of the future, the IMAX (or "Image Maximum") film
was developed by the Canadian company, IMAX Systems Corporation in 1967. IMAX movies are shot with
special cameras and equipment that utilize 70 millimeter film, which creates an image that is ten times larger than
that shot with standard 35 millimeter film. IMAX films are shown on giant screens, several stories tall and over 80
feet wide, and also on a domed version of the oversize screen, known as Omnimax. A 3-D version of IMAX is
also available, which is based on the same concept as the glasses used to watch the 3-D movies of the 1950s.
The IMAX Theater Network currently consists of more than 837 IMAX affiliated theaters in 57 countries.
Approximately 60.0 percent of the theaters are located in North America, while the remaining 40.0 percent are
spread internationally. Roughly 50.0 percent of the theaters are located in institutional venues, such as museums,
planetariums, and maritime centers, while the other half are part of commercial theater complexes. More than 100
of these theaters are equipped with IMAX 3D technology.
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The main obstacle to more widespread development of IMAX theaters is their high construction cost relative to
multiplex movie theaters and the high cost of producing commercial films in the IMAX format. The latter problem
has led, up until now, to a “lack of product” for commercial IMAX viewers. Although the commercial IMAX format
has generated interest among moviegoers in the major cities, the likelihood of its widespread development
nationally remains less certain.
3D
After decades of stagnation, 3D films have exploded in popularity. The format has existed in many forms since
the 1950s, but was relegated to a niche within the motion picture industry due to capital intensive production and
distribution, and the lack of a standardized format. Renewed interest was beginning in the early 2000s as
filmmakers began to utilize digital 3D filming techniques.
In November 2004, The Polar Express was released as IMAX's first full-length, animated 3D feature. The film was
released in 3,584 theaters in 2D, and only 66 IMAX locations. However, ticket sales from 3D screens accounted
for approximately 25.0 percent of the film’s total box office gross. The 3D version of The Polar Express reportedly
earned 14 times as much per screen as the 2D version due to higher ticket prices and increased attendance. This
pattern caused the industry to take notice, prompting a wave of investment in 3D filming and exhibition.
In June 2005, the Mann's Chinese 6 theater in Hollywood became the first commercial movie theater to be
equipped with the digital 3D format. By 2007, digital 3D screens accounted for 2.5 percent of all U.S. indoor
screens according to the IHS Screen Digest. As of 2014, digital 3D screens represent approximately 35.0 percent
of all domestic screens, and nearly 50.0 percent of digital screens. Nearly two-thirds of all digital cinema
installations utilized 3D technology.
In 2014, 27.0 percent of the U.S./Canada population viewed at least one movie in 3D. Consistent with the general
movie going population, 3D viewing is highly correlated to age. According to statistics from the Motion Picture
Association of America, nearly half of all young people (defined as ages 2-17) saw a 3D movie in 2014.
OUTLOOK
On balance, we conclude that the outlook remains optimistic for the movie theater industry. In 2014, movie
theater revenues and average ticket prices remain near all-time highs. Revenue and attendance appear poised to
remain fairly stable for the balance of the year due to a strong pipeline of new releases.
Alternative entertainment is unlikely to cause a precipitous decline in the industry, but it will inescapably hamper
growth. The industry will maintain its position because it is the only way to tap the large funding to bring top-flight
talent together, and its marketing is the basis for the marketing of cable and video. Exhibitors will need to make
continual investments to ensure high-quality projection, sound, and concessions, and in general a quality movie
experience that will encourage people to leave the home.
SITE DESCRIPTION
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P r o pe r t y A n a l y s is
SITE DESCRIPTION
Location:
The subject site is located on the entire city block bounded by Union Square South to
the north, Fourth Avenue to the east, East 13th Street to the south and Broadway to
the west in the Union Square neighborhood of Manhattan.
Shape:
Irregular
Topography:
Level at street grade
Land Area:
48,223 square feet
Frontage:
The subject has 208 feet of frontage along the south side of side of Union Square
South, 219 feet along the east side of Broadway, 252 feet along the north side of 13th
Street and 238 feet long the west side Fourth Avenue.
Visibility:
The subject property has excellent visibility.
Access:
The subject property has excellent access.
Street Improvements:
Curbing, sidewalks and street lights.
Soil Conditions:
We did not receive nor review a soil report. However, we assume that the soil's loadbearing capacity is sufficient to support existing structure. We did not observe any
evidence to the contrary during our physical inspection of the property. Drainage
appears to be adequate.
Utilities:
Utility providers for the subject property are as follows:
Water
Sewer
Electricity
Gas
Telephone
City of New York
City of New York
Consolidated Edison
Keyspan
Verizon and Others
Site Improvements:
The site is improved with a 22-story luxury residential apartment building with multilevel retail space.
Land Use Restrictions:
We have not reviewed a title report. Therefore, we do not know of any easements,
encroachments, or restrictions that would adversely affect the site's use. However, we
recommend a title search to determine whether any adverse conditions exist.
Flood Zone Description:
The subject property is located in flood zone X (Areas determined to be outside the
500 year flood plain.) as indicated by FEMA Map 360497-0054 B, dated September 5,
2007.
SITE DESCRIPTION
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Wetlands:
We were not given a wetlands survey to review. If subsequent engineering data reveal
the presence of regulated wetlands, it could materially affect property value. We
recommend a wetlands survey by a professional engineer with expertise in this field.
Hazardous Substances:
We observed no evidence of toxic or hazardous substances during our inspection of
the site. However, we are not trained to perform technical environmental inspections
and recommend the hiring of a professional engineer with expertise in this field.
Overall Site Utility:
The subject site is functional for its current use.
Location Rating:
Good
SAN BORN MA P
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The following description of improvements is based upon our physical inspection of the improvements along with
our discussions with the building ownership.
GENERAL DESCRIPTION
Year Built:
1996
Number of Stories:
Entire Project:
Subject Unit:
Gross Building Area- Subject:
236,215 square feet (Per Tax Assessor)
Net Rentable Area- Subject:
236,215 square feet (Per Rent Roll)
CONSTRUCTION DETAIL
Basic Construction:
Steel and masonry
Foundation:
Structural steel and concrete
Framing:
A combination of structural steel and reinforced cast in place
concrete flat plate construction.
Roof Cover:
Insulated Roof Membrane Assembly (IRMA) roof comprised of fluid
applied water proofing installed below extruded polystyrene board
insulation, installed below precast concrete pavers or roofing
aggregate.
Windows:
The subject contains large glass storefront windows.
Pedestrian Doors:
Storefronts and entrances contain stainless steel clad aluminum
and glass entrances.
MECHANICAL DETAIL
HVAC & Heating:
Package HVAC units provide heating and cooling.
Plumbing:
The plumbing system is assumed to be adequate for existing use
and in compliance with local law and building codes. The plumbing
system is typical of other commercial properties in the area with a
combination of steel, copper and cast iron piping throughout the
building.
Electrical Service:
Electricity for the building is obtained through low voltage power
lines.
Fire Protection:
The subject property is fully sprinklered.
Elevator Service
There is two escalators and one elevator in each of the Best Buy
and Nordstrom’s retail suites. There are 6 escalators and 4
elevators within the Regal Cinemas suite. There is one elevator
within the medical office space and one within the wine store.
INTERIOR DETAIL
Layout:
The subject property is a multi-level retail condominium unit at the
base of 22-story luxury residential apartment building. The subject
contains a total of 236,215 square feet of net rentable area on 4
levels, plus one below grade level. The ground floor comprises an
entrance for each of the seven tenants along with the lobby for the
residential component of the building. The ground floor comprises
two retail suites along Union Square South which are occupied by
Citibank, Duane Reade and one retail suite along Fourth Avenue
which is occupied by Union Square Wine. The second floor is
occupied by Best Buy, and the lower level is occupied by
Nordstrom Rack and Park South Imaging. The Regal Cinemas
multi-plex space is accessed along the northeast corner of
Broadway and East 13th Street and contains a box office area on
the ground floor and the majority of the space on the third and
fourth floors.
Floor Covering:
Ceramic tile, carpet or resilient tile.
Walls:
Painted or wallpapered sheetrock
Ceilings:
Floor to floor ceiling heights are 18 feet on the lower level, 16 feet
on the ground floor and ranges from 20 to 35 feet on the upper
floors.
Lighting:
A mixture of suspended fluorescent and incandescent light fixtures.
Restrooms:
The property features adequate restrooms for men and women.
SITE IMPROVEMENTS
Other:
Curb cuts and walkways
PERSONAL PROPERTY
Personal property was excluded from our valuation.
SUMMARY
Quality:
Excellent
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Condition
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The subject property consists of a Class A retail condominium in
excellent condition.
We did not inspect the roof of the building or make a detailed
inspection of the mechanical systems. The appraisers, however,
are not qualified to render an opinion as to the adequacy or
condition of these components. The client is urged to retain an
expert in this field if detailed information is needed about the
adequacy and condition of mechanical systems.
Property Rating:
After considering all of the physical characteristics of the subject,
we have concluded that this property has an overall rating that is
excellent when measured against other properties in this
marketplace.
Actual Age:
19 years
Effective Age:
5 years
Expected Economic Life:
50 years
Remaining Economic Life:
45 years
AMERICANS WITH DISABILITIES ACT
The Americans With Disabilities Act (ADA) became effective January 26, 1992. We have not made, nor are we
qualified by training to make, a specific compliance survey and analysis of this property to determine whether or
not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey
and a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with
one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the
property. Since we have not been provided with the results of a survey, we did not analyze the results of possible
non-compliance.
HAZARDOUS SUBSTANCES
We are not aware of any potentially hazardous materials (such as formaldehyde foam insulation, radon-emitting
materials, or other potentially hazardous materials) that may have been used in the construction of the
improvements. However, we are not qualified to detect such materials and urge the client to employ an expert in
the field to determine if such hazardous materials are thought to exist.
L O W ER L E V E L
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GR OUND FL OOR
75
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REAL PROPETY TAXES AND ASSESSMENTS
The subject property is located in the taxing jurisdiction of the City Of New York. The assessor’s parcel
identification number is Block 565, Lot 21. Assessments for the current and prior years are as follows:
Block 565; Lot 21
Actual
Assessed Value
Land:
Improvements:
Total:
Tax Rate
Calendar Year Taxes:
$9,720,000
68,580,000
$78,300,000
2014/15
Transitional
$9,720,000
47,693,340
$57,413,340
10.684%
$6,134,041
Actual
$9,720,000
68,976,450
$78,696,450
2015/16
Transitional
$9,720,000
56,043,630
$65,763,630
10.791%
$7,096,448
TAX LIABILITY
FY 2014/15: $57,413,340 x 10.684% @ 50%
FY 2015/16: $65,763,630 x 10.791% @ 50%
BID Taxes
CY 2015 Real Estate Taxes
Property Taxes per Square Foot:
$3,067,021
$3,548,224
$107,830
$6,723,074
222,716
$30.19
Real estate taxes in New York City are normally the product of the transitional assessed value times the tax rate,
for the fiscal year July 1 through June 30 (payable July 1 and January 1). The transitional assessed value is
based on a five-year phase-in of actual assessed value. If the actual assessed value is lower than the transitional
assessed value for that year, the actual assessed value is multiplied by the tax rate to determine the tax.
The 2014/2015 Class 4 tax rate is 10.648 percent per $100 of assessed valuation. The 2014/2015 Class 4 tax
rate reflects a 3.50 percent increase from the 2013/2014 Class 4 tax rate of 10.323 percent per $100 of assessed
valuation. We have projected the 2015/16 tax rate to increase 1.00 percent to 10.791 percent per $100.
The subject’s transitional 2015/16 assessment represents a 14.54 percent increase from the 2014/15 transitional
assessment. The transitional assessed values are less than the actual assessed values for the 2014/2015 and
2015/2016. Therefore, our tax projection for the subject property is based upon the 2014/15 and 2015/16
transitional assessments for calendar year 2015 as illustrated above.
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TAX COMPARISONS
Listed below is a summary chart of the 2014/15 assessments for six properties considered to have varying
degrees of comparability to the subject property.
REAL ESTATE TAX COMPARABLES
Property Name &
No. Location
Parcel
No.
Building Year
Area (SF) Built
Assessment
Assess/SF Total Taxes
Taxes/SF
1
731 Lexington Avenue 1313-1001
207,000
2001
$100,853,044
$487.21
$10,883,052
$52.58
2
955 Madison Avenue
1392-1001
54,449
1958
$16,504,080
$303.11
$1,780,955
$32.71
3
1-5 East 55th Street
1291-1
310,000
1927
$77,902,955
$251.30
$8,406,508
$27.12
4
10 Columbus Circle
1049-1002
547,024
1998
$125,930,928
$230.21
$13,589,206
$24.84
5
660 Madison Avenue
1375-1101
275,971
1958
$56,495,070
$204.71
$6,096,383
$22.09
6
1992 Broadway
1139-1205
133,820
1996
$24,741,810
$184.89
$2,669,889
$19.95
54,449
1927
$16,504,080
$184.89
$1,780,955
$19.95
STATISTICS
Low:
High:
547,024
2001
$125,930,928
$487.21
$13,589,206
$52.58
Average:
254,711
1973
$67,071,315
$276.91
$7,237,666
$29.88
The comparable properties reflect assessment’s ranging from $184.89 to $487.89 per square foot with an
average of $276.91 per square foot of gross building area. The comparables also reflect real estate taxes that
range from a low of $19.75 to $52.05 per square foot and develop an overall average of $29.58 per square foot of
gross building area. This compares with the subject's 2015 calendar tax liability of $6,723,074 or $30.19 per
square foot of the assessor’s gross building area of 236,215 square feet.
NEW YORK CITY ASSESSMENT PRACTICE
Based upon our discussions with officials at the New York City Department of Finance, the following guidelines
serve to summarize New York City's assessment policy.
1.
New York City is guided by the basic principles of ad valorem assessment. Consequently, within the
same property classes, properties of similar value should experience approximately equal
assessments and pay similar property taxes.
2.
Assessments are primarily made for Class IV property by capitalizing net operating income at market
level capitalization rates. When a property is sold, the sales price is recorded and the Assessor notes
the sales price.
3.
Upon sale, the Assessor will likely use the sale, along with other sales data, as indications of general
price levels. If the recently sold property has an assessment that is comparable to other similar
properties, the sale price is unlikely to cause a substantial reassessment.
As will be discussed later within this report, we have concluded at a market value estimate of $380,000,000 for
the subject property. The total 2015/16 actual assessed value of $78,696,450 is equivalent 20.71 percent of
market value. This assessment/market value ratio is within the range of acceptable ratios found for similar
buildings in this marketplace.
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CONCLUSION OF CURRENT AND FUTURE REAL ESTATE TAXES
The total subject property calendar year 2015 real estate taxes are $6,723,074, or $30.19 per square foot of the
assessor’s gross building area of 222,716 square feet, which is within the range of comparable properties and
market parameters. Therefore, we have assumed a 3.0 percent per annum growth over our analysis period.
ZONING
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ZONING
Map 12c of the Zoning Resolution of the City of New York indicates that the subject property is zoned C6-4 and
C6-1; Restricted Central Commercial District by the City of New York. In addition, the subject property is located
within the “Special Union Square District.” The New York City Planning Commission defines the subject zoning
district as follows:
Z ON IN G
D ESIGNATION
C6- 4 AND C6- 1; R ESTR IC T ED C ENTRA L COMMERCIAL D ISTRICT
Definition
C6 districts are zoned for a wide range of high bulk commercial uses requiring a central
location. Most C6 districts are in Manhattan and provide for corporate headquarters, large
hotels, entertainment facilities, retail stores and some residential development in mixed
buildings. The C6-4 district is classified as a medium bulk office district with a maximum
FAR for residential and commercial districts of 10.0. The C6-1 district is classified as a
medium bulk office district with a maximum FAR for commercial districts of 6.0 and 3.44
for residential districts.
ZONING COMPLIANCE
Property value is affected by whether or not an existing or proposed improvement complies to zoning regulations,
as discussed below.
Complying Uses
An existing or proposed use that complies to zoning regulations implies that there is no legal risk and that
the existing improvements could be replaced “as-of-right.”
Pre-Existing, Non-Complying Uses
In many areas, existing buildings pre-date the current zoning regulations. When this is the case, it is
possible for an existing building that represents a non-complying use to still be considered a legal use of
the property. Whether or not the rights of continued use of the building exist depends on local laws. Local
laws will also determine if the existing building may be replicated in the event of loss or damage.
Non-Complying Uses
A proposed non-complying use to an existing building might remain legal via variance or special use
permit. When appraising a property that has such a non-complying use, it is important to understand the
local laws governing this use.
SPECIAL UNION SQUARE DISTRICT
The “Special Union Square District” was established to revitalize the area around Union Square by encouraging
mixed use development. These general goals include, among others, the following specific purposes:
(a) Its urban design provisions are designed to provide compatibility between new development, existing
buildings and Union Square Park. to preserve apparel production and showroom space in designated
areas of the Garment Center;
(b) The district mandates ground floor retail uses, off-street relocation of subway stairs and the continuity
of street walls;
(c) Special streetscape and signage controls enhance the physical appearance of the district within this
district a floor area ratio bonus for subway improvements is available by special permit of the City
Planning Commission.
ZONING
80
(d) to promote the most desirable use of land within the district, to conserve the value of land and
buildings, and thereby protect the City's tax revenues.
SUBJECT PROPERTY CONFORMANCE
The subject lies within the C6-4 and C6-1 zoning designations. The C6-4 zoning designation permits a maximum
as-of-right floor area ratio (FAR) of 10.0 times the lot area for commercial, residential and community facility uses.
The C6-4 zoning designation permits a maximum as-of-right floor area ratio (FAR) of 6.0 times the lot area for
commercial and community facility use, and 3.44 times the lot area for residential use.
The subject site contains 24,112 square feet within the C6-4 zoning designation, and 24,111 square feet in the
C6-1 zoning designation for a total area of 48,223 square feet. Therefore, the maximum permitted zoning floor
area (ZFA) as-of-right that could be constructed on the site is 385,786 square feet (24,112 SF x 10.0 FAR =
241,120 + 24,111 SF x 6.0 FAR = 144,666). The existing improvements contain an above grade gross building
area of 431,677 square feet. The subject property was constructed in 1996, after the 1961 overhaul of the NYC
zoning regulations. We have not been provided with a zoning analysis but assume that the subject property has
received all the appropriate approvals for the current improvements.
CONCLUSION
Detailed zoning studies are typically performed by a zoning or land use expert, including attorneys, land use
planners, or architects. The depth of our study correlates directly with the scope of this assignment, and it
considers all pertinent issues that have been discovered through our due diligence.
We are not experts in the interpretation of complex zoning ordinances but we have analyzed the zoning
requirements in relation to the subject property, and considered the compliance of the existing use. We are not
experts in the interpretation of complex zoning ordinances but based on our review of public information, the
subject property is a legal non-conforming use.
We note that this appraisal is not intended to be a detailed determination of compliance, as that determination is
beyond the scope of this real estate appraisal assignment.
ZONING
Z ON IN G MA P
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HIGHEST AND BEST USE CRITERIA
The Dictionary of Real Estate Appraisal, Fifth Edition (2010), a publication of the Appraisal Institute, defines the
highest and best use as:
The reasonably probable and legal use of vacant land or an improved property, which is
physically possible, appropriately supported, financially feasible, and that results in the
highest value. The four criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability.
To determine the highest and best use we have evaluated the subject site under two scenarios: as if vacant land
and as presently improved. In both cases, the property’s highest and best use must meet the four criteria
described above.
HIGHEST AND BEST USE OF SITE AS IF VACANT
LEGALLY PERMISSIBLE
The first test concerns permitted uses. According to our understanding of the zoning ordinance, noted earlier in
this report, the site may legally be improved with structures that accommodate office, retail, residential, and
general commercial uses. We are not aware of any legal restrictions that limit the potential uses of the subject.
PHYSICALLY POSSIBLE
The second test is what is physically possible. As discussed in the "Property Description," the site's size, soil,
topography, etc. do not physically limit its use. The subject site is of adequate shape and size to accommodate
almost all urban uses.
FINANCIALLY FEASIBLE AND MAXIMALLY PRODUCTIVE
The third and fourth tests are, respectively, what is feasible and what will produce the highest net return. After
analyzing the physically possible and legally permissible uses of the property, the highest and best use must be
considered in light of financial feasibility and maximum productivity. For a potential use to be seriously
considered, it must have the potential to provide a sufficient return to attract investment capital over alternative
forms of investment. A positive net income or acceptable rate of return would indicate that a use is financially
feasible.
CONCLUSION
We have considered the legal issues related to zoning and legal restrictions. We have analyzed the physical
characteristics of the site to determine what legal uses would be possible and have considered the financial
feasibility of these uses to determine the use that is maximally productive.
The subject site is located on an entire, irregular block bounded by Union Square South to the north, Fourth
Avenue to the east, East 13th Street to the south and Broadway to the west in the Union Square neighborhood of
Manhattan. The subject has 208 feet of frontage along the south side of side of Union Square South, 219 feet
along the east side of Broadway, 252 feet along the north side of East 13th Street and 238 feet long the west side
Fourth Avenue which provides excellent visibility and exposure.
83
Several features of the subject property indicate that a residential building with retail space is the highest and best
use of the site. First, skyline exposure of the subject is one that offers good natural lighting and ventilation.
Furthermore, the market rents or sale prices achievable for residential use exceed that of current or projected
rents or sale prices for office use, in the immediate area. A mixed-use residential building with multi-level retail
space is the highest and best use of any development of the subject property. Multi-level retail uses are
consistent with other uses in the local market area.
Considering the subject site’s physical characteristics and location, as well as the state of the local market, it is
our opinion that the Highest and Best Use of the subject site as if vacant is a mixed-use development comprising
of residential units on the upper floors, and multi-level retail space on the lower floors.
HIGHEST AND BEST USE OF PROPERTY AS IMPROVED
The Dictionary of Real Estate Appraisal defines highest and best use of the property as improved as:
The use that should be made of a property as it exists. An existing improvement should be
renovated or retained “as is” so long as it continues to contribute to the total market value of
the property, or until the return from a new improvement would more than offset the cost of
demolishing the existing building and constructing a new one.
In analyzing the Highest and Best Use of a property as improved, it is recognized that the improvements should
continue to be used until it is financially advantageous to alter physical elements of the structure or to demolish it
and build a new one.
LEGALLY PERMISSIBLE
As described in the Zoning Analysis section of this report, the subject site is zoned C6-4 and C6-1; Restricted
Central Commercial District. The site is improved with a 22-story luxury residential building with multi-level retail
space containing 431,677 square feet of gross building area. In the Zoning section of this appraisal, we
determined that the existing improvements represent a legal, non-conforming use.
PHYSICALLY POSSIBLE
The existing improvements were constructed in 1996 and are in excellent condition. We know of no current or
pending municipal actions or covenants that would require a change to the current improvements.
FINANCIALLY FEASIBLE AND MAXIMALLY PRODUCTIVE
In our opinion, the existing improvements, including the subject condominium unit, contribute significantly to the
value of the site. It is likely that no alternate use would result in a higher return.
CONCLUSION
It is our opinion, the existing building adds value to the site as if vacant, therefore dictating a continuation of its
current use. In conclusion, it is our opinion that the Highest and Best Use of the subject property as improved is
as currently improved.
VALUATION PROCESS
84
VALUATION PROCESS
METHODOLOGY
There are three generally accepted approaches to developing an opinion of value: Cost, Sales Comparison and
Income Capitalization. We have considered each in this appraisal to develop an opinion of the market value of the
subject property. In appraisal practice, an approach to value is included or eliminated based on its applicability to
the property type being valued and the quality of information available. The reliability of each approach depends
on the availability and comparability of market data as well as the motivation and thinking of purchasers.
The valuation process is concluded by analyzing each approach to value used in the appraisal. When more than
one approach is used, each approach is judged based on its applicability, reliability, and the quantity and quality
of its data. A final value opinion is chosen that either corresponds to one of the approaches to value, or is a
correlation of all the approaches used in the appraisal.
We have considered each approach in developing our opinion of the market value of the subject property. We
discuss each approach below and conclude with a summary of their applicability to the subject property.
COST APPROACH
The Cost Approach is based on the proposition that an informed purchaser would pay no more for the subject
than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when
the property being appraised involves relatively new improvements which represent the Highest and Best Use of
the land; or when relatively unique or specialized improvements are located on the site for which there are few
improved sales or leases of comparable properties.
In the Cost Approach, the appraiser forms an opinion of the cost of all improvements, depreciating them to reflect
any value loss from physical, functional and external causes. Land value, entrepreneurial profit and depreciated
improvement costs are then added, resulting in an opinion of value for the subject property.
The Sales Comparison Approach uses sales of comparable properties, adjusted for differences, to estimate a
value for the subject property. This approach typically uses a unit of comparison such as price per square foot of
building area or effective gross income multiplier. When developing an opinion of land value the analysis is based
on recent sales of sites of comparable zoning and utility, and the typical units of comparison are price per square
foot of land, price per acre, price per unit, or price per square foot of potential building area. In both cases,
adjustments are applied to the unit of comparison from an analysis of comparable sales, and the adjusted unit of
comparison is then used to derive an opinion of value for the subject property.
The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification
of the sales data; (c) the degree of comparability; (d) the absence of non-typical conditions affecting the sales
price.
The Income Capitalization Approach first determines the income-producing capacity of a property by using
contract rents on existing leases and by estimating market rent from rental activity at competing properties for the
vacant space. Deductions are then made for vacancy and collection loss and operating expenses. The resulting
net operating income is divided by an overall capitalization rate to derive an opinion of value for the subject
property. The capitalization rate represents the relationship between net operating income and value. This
method is referred to as Direct Capitalization.
VALUATION PROCESS
85
Related to the Direct Capitalization Method is the Discounted Cash Flow Method. In this method periodic cash
flows (which consist of net operating income less capital costs) and a reversionary value are developed and
discounted to a present value using an internal rate of return that is determined by analyzing current investor yield
requirements for similar investments.
The reliability of the Income Capitalization Approach depends upon whether investors actively purchase the
subject property type for income potential, as well as the quality and quantity of available income and expense
data from comparable investments.
SUMMARY
analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these
approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not
generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we
have not utilized the Cost Approach to develop an opinion of market value.
Analyzing each approach to value used in the appraisal concludes the valuation process. When more than one
approach is used, each approach is judged based on its applicability, reliability, and the quantity and quality of its
data. A final value opinion is chosen that either corresponds to one of the approaches to value, or is a correlation
of all the approaches used in the appraisal.
86
METHODOLOGY
Using the Sales Comparison Approach, we developed an opinion of value by comparing the subject property to
substitution.
1. By analyzing sales that qualify as arm’s-length transactions between willing and knowledgeable buyers and
2. Research recent, relevant property sales and current offerings in the competitive area;
3. Select and analyze properties that are similar to the subject property, analyzing changes in economic
4. Identify sales that include favorable financing and calculate the cash equivalent price;
5. Reduce the sale prices to a common unit of comparison such as price per square foot of Net Rentable Area,
effective gross income multiplier, or net income per square foot;
6. Make appropriate comparative adjustments to the prices of the comparable properties to relate them to the
subject property and
7. Interpret the adjusted sales data and draw a logical value conclusion.
The subject property comprises a 5-level, inclusive of lower level, retail condominium unit totaling 236,215 square
feet of net rentable area within a 22 story luxury residential condominium building located at One Union Square
South within the Union Square neighborhood of Manhattan. Due to the subject’s unique size and configuration,
we have compiled the most recent sale transactions of retail properties throughout Manhattan. As of the date of
value, these sales provide the best indication of market transactions, albeit smaller in size, and some located in
superior locations.
The most widely used and market-oriented unit of comparison for properties such as the subject is the sales price
per square foot of net rentable area. All comparable sales were analyzed on this basis. The following pages
contain a summary of the improved properties that we compared to the subject property, a map showing their
locations, and the adjustment process.
Due to the nature of the subject property and the level of detail available for the comparable data, we have
elected to analyze the comparables through the application of:

A traditional adjustment grid using percentage adjustments
COMPARABLE SALES MAP
IMPR OVED SALES COMPARABLE MA P
87
88
SUMMARY OF COMPARABLE RETAIL SALES
Physical Data
Property Name
No. Location
1
B/w Sixth and Seventh Avenues
Herald Square, Manhattan
Comments:
2
503 Broadway
B/w Broome & Spring Streets
SoHo, Manhattan
Comments:
3
N/E/C Tenth Avenue
Chelsea, Manhattan
Comments:
4
170 Broadway
S/E/C Maiden Lane
Downtown, Manhattan
Comments:
5
697-699 Fifth Avenue
B/w 56th & 57th Streets
Plaza District, Manhattan
Comments:
6
432 Park Avenue
B/w 56th & 57th Streets
Plaza District, Manhattan
Comments:
Sale Data
Net Rentable
Year
Sale
Grantor/
Area (SF)
Built
Date
77,760
1998
Grantee
SOF-IX U.S. Acquisitions, L.L.C. c/o
Starwood Capital Group /
Confidential
May-15
Contract
Financial Data
Occupancy
Price
Price/NRA
NOI/SF
OAR
at Sale
$355,500,000
$4,571.76
$46.61
1.02%
100%
Contract of sale of a 4-story, plus lower level, single tenant retail building that contains a total net rentable area of 77,760 square feet (inclusive of 19,922 SF lower level). The entire property is leased by Old
Navy until May 31, 2019 at significantly below current market levels. The tenant also has two 5-year renewal options at 100.0 percent of fair market value which could extend the lease term to May 31, 2029.
The subject is Old Navy’s flagship store, and represents its highest grossing store in the country. The subject is located along the prime 34th Street retail corridor across the street from Macy’s flagship
department store, and just east of Penn Station and Madison Square Garden. The property was purchased a year ago for $252,000,000 which represents a 41 percent increase in value. The implied
capitalization rate in year 7, upon the expiration of the lease is projected to be 6.87. The subject is under contract for an overall capitalization rate of 1.02 percent. The sale is inclusive of excess develompent
rights. According to the buyer, there was no separate allocation of the excess develompent rights.
41,215
1900
Jan-15
FCF SoHo, LLC /
503 Broadway LLC
$280,000,000
$6,793.64
N/A
N/A
0%
This is the sale of a 3-level retail condominium unit totaling 41,215 square feet of net rentable area within a newly renovated 5-story office condominium building located at 503-511 Broadway between Broome
and Spring Streets within the SoHo neighborhood of Manhattan. The property comprises 13,000 square feet on the ground floor (32%), 10,000 square feet within the basement (24%) and 18,215 square feet
on the second floor (44%). The buyer, Inditex, is a parent company of Zara. Zara will occupy the entire space as an owner-user. The previous tenant, Old Navy, was bought out of there lease.
24,682
2015
Jan-15
Mulnick Realty LLC/
461 West 14th Street Property
$86,000,000
$3,484.32
N/A
N/A
0%
This is the sale of a 1-story retail building totaling 24,684 square feet of net rentable area within a recently completed, glass-facade LEED certified building at the northeast corner of Tenth Avenue in the
Chelsea neighborhood of Manhattan. The property is adjacent to the High-Line and was purchased vacant.
19,204
1920
2014
Feb-14
170 Broadway Retail, LLC/
170 Broadway NYC LP
$70,100,000
$3,650.28
N/A
N/A
0%
This is the sale of a 4-level retail condominium unit totaling 19,204 square feet of net rentable area inclusive of 5,846 square feet on the ground floor (30%), 7,213 on the second floor (38%), 4,281 square feet
on the mezzanine level (22%), and 1,864 square feet on the lower level (10%) within 170 Broadway, a 18-story former Class B office building has been converted into a 243-room Marriott Residence Inn hotel.
and features a new 2-story glass façade along the entire façade fronting Broadway and Maiden Lane. At the time of sale, the property was vacant and in raw condition. Subsequently, the buyer leased the
space to the Gap for a 15-year term through May 2029.
24,700
1904
1990
Jul-14
Richemont /
Vornado & Crown Acquisitions
$700,000,000
$28,340.08
$252.95
0.89%
100%
This is the sale of the 3-level retail condominium unit within the St. Regis Hotel and the adjoining 5-story single tenant retail building located at 697 Fifth Avenue in the Plaza District of Manhattan. The property
has 100 feet of frontage on east side of Fifth Avenue and 249.50 feet of frontage along south side of 55th Street. The St. Regis retail condominium contains 7,646 square feet and is leased to DeBeers.
DeBeers subleased part of its space to Tag Hauer. The retail building at 697 Fifth Avenue contains 17,091 square feet and is net leased to Bottega Veneta. The seller acquired the property in October 2012
from GFC Fifth Avenue LLC, an joint venture group. The existing leases are approximately 80 percent below current market rent levels. The retail tenants, De Beers and Bottega Veneta, are scheduled to
expire in January 2019 and January 2016, respectively. The property was purchased based on an overall capitalization rate of 0.89 percent and and increases to 3.39 percent in year 3.
81,579
2013
Jun-14
56th and Park (NY) Owner, LLC
57th Development Acquisition LLC
$425,000,000
$5,209.67
N/A
N/A
0%
This is the sale of the multi-level retail/commercial condominium unit within 432 Park Avenue, a proposed 83-story luxury residential condominium tower currently under construction located on an “L” shaped
block through site along the south side of East 57th Street, the north side of East 56th Street, and the west side of Park Avenue in Midtown Manhattan. The property will consist of a 5-level, plus two lower
levels, retail/commercial condominium unit that totals 81,579 square feet of retail space, and a 9,200 square foot below grade parking garage. The parking garage reportedly will have 46 licensed spaces,
excluding legal stackers that will provide an additional 45 spaces for a total of 91 spaces. The property was sold vacant.
89
SUMMARY OF COMPARABLE RETAIL SALES
Physical Data
Property Name
No. Location
7
865 Lexington Avenue
S/E/C East 65th Street
Upper East Side, Manhattan
Comments:
8
1107 Broadway
N/W/C West 24th Street
Madison Square, Manhattan
Comments:
9
202-204 Canal Street
S/E/C Mulberry Street
Chinatown, Manhattan
Comments:
10
112 Greene Street
B/w Prince & Spring Streets
SoHo, Manhattan
Comments:
11
465 Broadway (40 Mercer Street)
N/W/C Grand Street
SoHo, Manhattan
Comments:
Sale Data
Net Rentable
Year
Sale
Grantor/
Area (SF)
Built
Date
Grantee
5,124
2013
Feb-14
20,609
1915
2013
Feb-14
16,797
1991
Jan-14
Financial Data
Occupancy
Price
Price/NRA
NOI/SF
OAR
at Sale
865 Lex Inc.
$12,000,000
$2,341.92
$105.57
4.51%
100%
180 E. 88th St. Associates, LLC
(c/o Muss Development)
This is the sale of a 2-level retail condominium unit totaling 5,124 square feet of net rentable area within a newly constructed 15-story luxury residential condominium building known as The Touraine. The
property comprises of 1,991 square feet on the ground floor (39%) and 3,133 square feet of retail space on the lower level (61%). The property was leased for a base term of 15 years to Le Pain Quotidian
through January 31, 2029. In addition, the tenant has two 5-year renewal options which could extend the lease term to January 31, 2039. The property was purchased based on an overall capitalization rate of
1.64 percent which is reflective of the free rent period. The overall going-in capitalization rate increases to 4.51 percent in Year 2 when the rent abatement expires.
MS/WG 1007 Broadway Owner LLC/
$56,500,000
$2,741.52
$160.75
5.86%
21%
1101 Broadway Property Investors IIA, LLC
(c/o Savanna)
This is the sale of a 2-level retail condominium unit totaling 16,341 square feet on the ground floor and 4,268 square feet on the lower level within 1107 Broadway, a 16-story former Class B office building that
is currently being converted into a luxury residential condominium building with retail space that will be named 10 Madison Park West. The unit was 21.2 percent net leased to Citibank through August, 2043.
The remaining retail space (16,250 SF) will be utilized as a staging area for the renovation of the condominium units until 3rd quarter 2015 at which point it will be available for lease. The property is being
purchased 21 percent leased. The overall capitalization rate is projected to increase to 5.86 percent by year 3 when he property is projected to be stabilized.
202 Canal Owner LLC/
202 CPAM LLC
$46,000,000
$2,738.58
$108.45
5.06%
100%
This is the sale of a 4-level retail condominium unit located within 202 Canal Street, a 9-story office condominium building located at the southeast corner of Mulberry and Canal Streets. The retail unit
comprises 3,593 square feet on the ground floor (22%), 4,030 square feet in the sub-cellar (25%), 4,161 square feet in the cellar (26%) and 4,354 square feet on the second floor (28%), for a total of 16,138
square feet. The retail condominium unit was 100 percent leased at the time of sale to the Industrial and Commercial Bank of China USA, N.A. (ICBC USA) November 2028. The property was purchased
based on an overall capitalization rate of 5.06 percent. As of the date of this report, the property was subsequently placed on the market at an asking price of $46 million ($2,739/SF).
5,400
1900
Jul-13
Leasehold
112 Greene Street Partners LLC /
112 Greene Street LLC
$22,000,000
$4,074.07
$103.44
2.54%
100%
This is the sale of a 2-level retail cooperative unit located within 112 Greene Street, a 6-story mixed use residential building between Prince and Spring Streets. The cooperative unit contains 2,800 square feet
on the ground floor and 2,600 square feet on the lower level. The entire building is master leased through December 2050, with an additional 70 years of option periods. The property is subleased to a fashion
retailer, Stella McCartney, at significantly below current market rent levels. The sublease expires in January 2022 and contains no renewal option periods. The property was purchased based on an overall
capitalization rate of 2.54 percent.
14,002
2006
Jul-13
Savanna /
V ASB Capital Management, Imperium Ca
$80,000,000
$5,713.47
$188.49
3.30%
67%
This is the sale of a 2-level retail condominium unit within a modern 14-story mixed-use condominium building located at 465 Broadway (40 Mercer Street) at the northwest corner of Grand Street within the
SoHo neighborhood of Manhattan. At the time of sale the property was leased to four retail tenants: Wachovia Bank, Vivienne Tam, Dermalogica and Bose. There was one vacant retail space on the lower level
totaling 4,663 square feet available for lease. All of the property's leases are projected to expire by 2018. The property previously sold in June 2012 to Savanna from GLL Real Estate Partners for $57 million.
Originally, GLL Real Estate Partners acquired the retail condo in March 2010 from Hines Interest Limited Partnership for $41.9 million. The property was purchased based on an overall capitalization rate of
3.30 percent.
STATISTICS
LOW
HIGH
MEAN
MEDIAN
5,124
81,579
30,097
20,609
1900
2015
1971
1995
$2,341.92
$28,340.08
$6,332.67
$4,074.07
$46.61
$252.95
$138.04
$108.45
0.89%
5.86%
3.31%
3.30%
0%
100%
53%
67%
90
IMPROVED SALE ADJUSTMENT GRID
ECONOMIC ADJUSTMENTS (CUMULATIVE)
PROPERTY CHARACTERISTIC ADJUSTMENTS (ADDITIVE)
No.
Price NRA &
Date
Property
Rights
Conveyed
Conditions
of Sale
Market
Conditions (1)
Subtotal
Location
1
$4,571.76
Leased Fee
Arm's-Length
Inferior
$3,675.69
Superior
5/15
-20.0%
0.0%
0.5%
-19.6%
2
$6,793.64
Leased Fee
Arm's-Length
Inferior
$5,554.48
1/15
-20.0%
0.0%
2.2%
-18.2%
3
$3,484.32
Leased Fee
Arm's-Length
Inferior
$2,848.78
1/15
-20.0%
0.0%
2.2%
-18.2%
-15.0%
-30.0%
5.0%
-5.0%
0.0%
0.0%
-45.0%
4
$3,650.28
Leased Fee
Arm's-Length
Inferior
$3,118.80
Superior
Smaller
Similar
Similar
Similar
Similar
$1,559.40
2/14
-20.0%
0.0%
6.8%
-14.6%
-20.0%
-30.0%
0.0%
0.0%
0.0%
0.0%
-50.0%
5
$28,340.08
Leased Fee
Arm's-Length
Inferior
$23,737.65
Superior
Smaller
Superior
Similar
Superior
Similar
$4,747.53
7/14
-20.0%
0.0%
4.7%
-16.2%
-30.0%
-30.0%
-10.0%
0.0%
-10.0%
0.0%
-80.0%
6
$5,209.67
Leased Fee
Arm's-Length
Inferior
$4,380.29
Superior
Smaller
Superior
Similar
Superior
Similar
$1,971.13
6/14
-20.0%
0.0%
5.1%
-15.9%
-25.0%
-20.0%
-5.0%
0.0%
-5.0%
0.0%
-55.0%
7
$2,341.92
Leased Fee
Arm's-Length
Inferior
$2,000.94
Inferior
Smaller
Inferior
Similar
Inferior
Similar
$1,700.80
2/14
-20.0%
0.0%
6.8%
-14.6%
5.0%
-35.0%
10.0%
0.0%
5.0%
0.0%
-15.0%
8
$2,741.52
Leased Fee
Arm's-Length
Inferior
$2,337.97
Similar
Smaller
Similar
Similar
Similar
Similar
$1,753.48
2/14
-20.0%
0.0%
6.6%
-14.7%
0.0%
-25.0%
0.0%
0.0%
0.0%
0.0%
-25.0%
9
$2,738.58
Leased Fee
Arm's-Length
Inferior
$2,350.80
Inferior
Smaller
Superior
Similar
Similar
Similar
$1,645.56
1/14
-20.0%
0.0%
7.3%
-14.2%
5.0%
-30.0%
-5.0%
0.0%
0.0%
0.0%
-30.0%
10
$4,074.07
Leasehold
Arm's-Length
Inferior
$4,477.41
Superior
Smaller
Superior
Similar
Similar
Similar
$1,790.96
7/13
0.0%
0.0%
9.9%
9.9%
-20.0%
-30.0%
-10.0%
0.0%
0.0%
0.0%
-60.0%
11
$5,713.47
Leased Fee
Arm's-Length
Inferior
$5,023.28
Superior
Smaller
Superior
Similar
Similar
Similar
$2,009.31
7/13
-20.0%
0.0%
9.9%
-12.1%
-20.0%
-30.0%
-10.0%
0.0%
0.0%
0.0%
-60.0%
Size
Age, Quality
& Condition
Utility
Economics
Other
Adj.
Price
NRA
Smaller
Similar
Superior
Similar
Similar
$1,654.06
-10.0%
-20.0%
0.0%
-25.0%
0.0%
0.0%
-55.0%
Superior
Smaller
Superior
Superior
Superior
Similar
$1,666.34
-25.0%
-20.0%
-15.0%
-5.0%
-5.0%
0.0%
-70.0%
Superior
Smaller
Inferior
Superior
Similar
Similar
$1,566.83
STATISTICS
$2,341.92
- Low
Low -
$1,559.40
$28,340.08
- High
High -
$4,747.53
$6,332.67
- Average
Average -
$2,005.61
Compiled by Cushman and Wakefield, Inc.
(1) Market Conditions Adjustment
As Is Market Value
Indicated Value Per Square Foot of NRA
Net Rentable Area (SF)
Indicated Value
Rounded
Per Square Foot
$1,600
236,215
$377,944,000
$380,000,000
$1,608.70
91
PERCENTAGE ADJUSTMENT METHOD
ADJUSTMENT PROCESS
subject property.
The property rights conveyed in a transaction typically have an impact on the price that is paid. Acquiring the fee
simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest typically
means that the property being acquired is encumbered by at least one lease, which is a binding agreement
transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of a lease,
which conveys the rights to use and occupy the property to the buyer for a finite period of time. At the end of the
lease term, there is typically no reversionary value to the leasehold interest. The subject property is ground
leased through December 31, 2095, with no renewal options. Based on the leasehold interest we have adjusted
each of the downward 20 percent.
FINANCIAL TERMS
lower equity returns after debt service. We have analyzed all of the transactions to account for atypical financing
terms. To the best of our knowledge, all of the sales used in this analysis were accomplished with cash or marketoriented financing. Therefore, no adjustments were required.
CONDITIONS OF SALE
considered to be "arm’s-length" market transactions between both knowledgeable buyers and sellers on the open
market. Upward adjustments were required to Sale Nos. 9 and 10, which were simultaneously marketed by
Vornado Realty Trust consisting of a 5-property Manhattan commercial portfolio in SoHo, The Upper East Side
and Union Square.
MARKET CONDITIONS
The sales that are included in this analysis occurred between July 2013 and May 2015. Beginning in September
2010, we have made a positive adjustment for the improving market conditions at a rate of 5.0 percent per
annum.
92
LOCATION
those of the subject property. Each comparable was adjusted accordingly.
PHYSICAL TRAITS
Each property has various physical traits that determine its appeal. These traits include size, age, condition,
quality, parking ratio and utility. Each comparable was adjusted accordingly.
ECONOMIC CHARACTERISTICS
The economic characteristics of a property include its occupancy levels, operating expense ratios, tenant quality,
and other items not covered under prior adjustments that would have an economic impact on the transaction.
Each comparable was adjusted accordingly.
OTHER
This category accounts for any other adjustments not previously discussed. Based on our analysis of these sales,
none required any additional adjustment.
DISCUSSION OF COMPARABLE RETAIL SALES
This is the contract of sale for a 4-level retail building located at 150 West 34th Street between Sixth and Seventh
Avenues within the Herald Square neighborhood of Manhattan. A confidential buyer is under contract to purchase
the property from SOF-IX U.S. Acquisitions, L.L.C. in care of Starwood Capital Group as of May 2015 for
$355,500,000. The property contains four levels of retail space for a total net rentable area of 77,760 square feet
(inclusive of 19,922 SF lower level). The entire property is leased by Old Navy until May 31, 2019 at significantly
below current market levels. The tenant also has two 5-year renewal options at 100.0 percent of fair market value
which could extend the lease term to May 31, 2029. The subject is Old Navy’s flagship store, and represents its
highest grossing store in the country. The subject is located along the prime 34th Street retail corridor across the
street from Macy’s flagship department store, and just east of Penn Station and Madison Square Garden. The
property was purchased a year ago for $252,000,000 which represents a 41 percent increase in value. The
implied capitalization rate in year 7, upon the expiration of the lease is projected to be 6.87. The subject is under
contract for an overall capitalization rate of 1.02 percent. The sale is inclusive of excess development rights.
According to the buyer, there was no separate allocation of the excess development rights. The contract price
equates to a unit price of $4,571.76 per square foot. After all adjustments, this comparable indicated an adjusted
unit price of $1,654.06 per square foot.
This is the of sale for a 3-level retail condominium unit located at 503 Broadway between Broome and Spring
Streets within the SoHo neighborhood of Manhattan. FCF Soho, LLC purchased the property from 503 Broadway
LLC in January 2015 for a sale price of $280,000,000. This is the sale of a 3-level retail condominium unit totaling
41,215 square feet of net rentable area within a newly renovated 5-story office condominium building located at
503-511 Broadway between Broome and Spring Streets within the SoHo neighborhood of Manhattan. The
property comprises 13,000 square feet on the ground floor (32%), 10,000 square feet within the basement (24%)
and 18,215 square feet on the second floor (44%). The buyer, Inditex, is a parent company of Zara. Zara will
occupy the entire space as an owner-user. The previous tenant, Old Navy, was bought out of their lease. The
purchase price equates to a unit price of $6,793.64 per square foot. After all adjustments, this comparable
indicated an adjusted unit price of $1,666.34 per square foot.
93
Sale for a 1-story retail building within a recently completed, glass-facade LED certified building located at 461
West 14th Street on the northeast corner of the Tenth Avenue within the Chelsea neighborhood of Manhattan.
FCF Mulnick Realty LLC purchased the property from 461 West 14th Street Property in January 2015 for a sale
price of $86,000,000. This is the sale of a 1-story retail building totaling 24,684 square feet of net rentable area
within a recently completed, glass-facade LEED certified building at the northeast corner of Tenth Avenue in the
Chelsea neighborhood of Manhattan. The property is adjacent to the High-Line and was purchased vacant. The
sale price equates to $3,484.32 per square foot. After all adjustments, this comparable indicated an adjusted unit
price of $1,566.83 per square foot.
Sale of a 4-level retail condominium unit within a 18-story former Class B office building, located at 170
Broadway, South East corner of Maiden Lane170 Broadway Retail, LLC purchased the property from 170
Broadway NYC LP in February 2014 for a sale price of $ 70,100,000. This is the sale of a 4-level retail
condominium unit totaling 19,204 square feet of net rentable area inclusive of 5,846 square feet on the ground
floor (30%), 7,213 on the second floor (38%), 4,281 square feet on the mezzanine level (22%), and 1,864 square
feet on the lower level (10%) within 170 Broadway, a 18-story former Class B office building has been converted
into a 243-room Marriott Residence Inn hotel. and features a new 2-story glass façade along the entire façade
fronting Broadway and Maiden Lane. At the time of sale, the property was vacant and in raw condition.
Subsequently, the buyer leased the space to the Gap for a 15-year term through May 2029. The sale price
unit price $1,559.40 per square foot.
Sale of the 3-level retail condominium unit within the St. Regis Hotel (699 Fifth Avenue) and the 5-story single
tenant retail building at 697 Fifth Avenue located on the southeast corner of East 55th Street within the
Madison/Fifth Avenue neighborhood in Midtown Manhattan. The property sold to Vornado & Crown Acquisitions
from Richemont in July 2014 for $700,000,000. The property has 100 feet of frontage on east side of Fifth
Avenue and 249.50 feet of frontage along south side of 55th Street. The St. Regis retail condominium contains
7,646 square feet and is leased to DeBeers. DeBeers subleased part of its space to Tag Hauer. The retail
building at 697 Fifth Avenue contains 17,091 square feet and is net leased to Bottega Veneta. The seller acquired
the property in October 2012 from GFC Fifth Avenue LLC, an joint venture group. The existing leases are
approximately 80 percent below current market rent levels. The retail tenants, De Beers and Bottega Veneta, are
scheduled to expire in January 2019 and January 2016, respectively. The property was purchased based on an
overall capitalization rate of 0.89 percent and increases to 3.39 percent in year 3. The seller acquired the property
in October 2012 from GFC Fifth Avenue LLC, an investment group comprised of Crown Acquisitions, Goldman
Properties and The Feil Organization. The sale price equates to a unit price of $28,340.08 per square foot. After
all adjustments, this comparable indicated an adjusted unit price of $4,747.53 per square foot.
94
This is the sale of a multi-level retail/commercial condominium unit within 432 Park Avenue, a proposed 83-story
luxury residential condominium tower currently under construction located on an “L” shaped block through site
along the south side of East 57th Street, the north side of East 56th Street, and the west side of Park Avenue in
Midtown Manhattan. The property sold from 56th and Park (NY) Owner, LLC to 57th Development Acquisition LLC
in August 2014 for $425,000,000. The property will consist of a 5-level, plus two lower levels, retail/commercial
condominium unit that totals 81,579 square feet of retail space, and a 9,200 square foot below grade parking
garage. The parking garage reportedly will have 46 licensed spaces, excluding legal stackers that will provide an
additional 45 spaces for a total of 91 spaces. The property was sold vacant. The sale price equates to a unit price
of $5,209.67 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $1,971.13
per square foot.
This is the sale of a 2- level retail condominium unit located at 865 Lexington Avenue on the southeast corner of
East 65th Street within the Upper East Side neighborhood of Manhattan. 180 E. 88th St. Associates, LLC in care
of Muss Development purchased the property from 865 Lex Inc. as of January 2014 for $12,000,000. The unit is
located within a newly constructed 15-story luxury residential condominium building known as The Touraine. The
unit comprises 5,124 square feet of net rentable area (inclusive of 3,133 SF of lower level retail space). The
property was leased for a base term of 15 years to Le Pain Quotidien through January 31, 2029. At the time the
contract was signed, the property was vacant and projected to be delivered to the tenant by February 1, 2014.
The property was purchased based on an overall capitalization rate of 1.64 percent, which is attributable to the
free rent period. The overall going-in capitalization rate increases to 4.51 percent in Year 2. The sales price
This is the sale of a 2-level retail condominium unit located at 1107 Broadway at the northeast corner of West
24th Street within the Madison Square neighborhood of Manhattan. MS/WG 1107 Broadway Owner LLC in care
of Savanna purchased the property from 1107 Broadway Property Investors IIA, LLC in February 2014 for
$68,000,000. This retail condominium unit is located at the base of a 16-story former Class B office building that
is being converted into a luxury residential condominium building with retail space that will be named 10 Madison
Park West. The retail unit comprises 16,341 square feet on the ground floor and 4,268 square feet on the lower
level within 1107 Broadway totaling 20,609 square feet. The unit was 21 percent leased to Citibank at the time of
sale. Citibank’s lease is through August 31, 2023. In addition, the tenant possesses two 10-year options through
August 31, 2043. The remaining retail space (16,250 SF) will be utilized as a staging area for the renovation of
the upper floor condominium units until January 31, 2015, at which point it will be available for lease. At the time
of sale, the property was 21 percent leased. The overall capitalization was 2.89 percent in year 2 and was
projected to increase to 6.99 percent in year 3 when the property is projected to be stabilized. The sale price
95
This is the sale of a 4-level retail condominium unit located at 202 Canal Street, a 9-story condominium building
located at the southeast corner of Mulberry Street within the Chinatown neighborhood of Manhattan. 202 Canal
Owner LLC purchased the property from 202 CPAM LLC in January 2014 for $36,000,000. The property
condominium unit was 100 percent leased to 100 percent leased to the Industrial and Commercial Bank of China
USA, N.A. (ICBC USA) on a through November 2028. This location serves as the flagship bank branch for the US
banking operations of the world’s largest bank by assets, ICBC. The property was purchased based on an overall
capitalization rate of 5.06 percent. The sale price equates to a unit price of $2,143.24 per square foot. After all
adjustments, this comparable indicated an adjusted unit price of $1,645.56 per square foot.
This is the sale of a 2-level, inclusive of lower level, retail cooperative unit located at 112 Greene Street between
Prince and Spring Streets within the SoHo neighborhood of Manhattan. 112 Greene Street LLC purchased the
property from 112 Greene Street Partners LLC in July 2013 for $22,000,000. The 5,400 square foot retail unit is
located within a 6-story mixed use residential cooperative building. The cooperative unit contains 2,800 square
feet on the ground floor and 2,600 square feet on the lower level. The site is ground leased through December
2050 with an additional 70 years of option periods. The property is subleased to a fashion retailer, Stella
McCartney, at significantly below current market rent levels. The sublease expires in January 2022 and contains
no renewal options. The property was purchased based on an overall capitalization rate of 2.50 percent. The sale
price equates to a unit price of $4,074.07 per square foot. After all adjustments, this comparable indicated an
adjusted unit price of $1,790.96 per square foot.
This is the sale of a 2-level retail condominium unit located within 465 Broadway on the northwest corner of
Grand Street within the SoHo neighborhood of Manhattan. JV ASB Capital Management purchased the property
from Savanna in July 2013 for $80,000,000. The property consists of the multi-tenant retail condominium unit
located on the ground floor and basement of 465 Broadway (aka 40 Mercer Street), a modern 14-story mixed-use
condominium building containing retail and residential space. At the time of sale, the property was leased to four
retail tenants: Wachovia Bank, Vivienne Tam, Dermalogica and Bose. There was one vacant retail space on the
lower level totaling 4,663 square feet available for lease. All of the property's leases are due to expire by 2018.
The property previously sold in June 2012 to Savanna from GLL Real Estate Partners for $57 million. Originally,
GLL Real Estate Partners acquired the retail condominium in March 2010 from Hines Interest Limited Partnership
for $41.9 million. The sale price equates to a unit price of $5,713.47 per square foot. The property was purchased
based on an overall capitalization rate of 3.30 percent. After all adjustments, this comparable indicated an
adjusted unit price of $2,009.31 per square foot.
SUMMARY OF PERCENTAGE ADJUSTMENT METHOD
area within five levels (inclusive of one below grade level) of the luxury mixed-use development located at One
Union Square South. The subject is 100.0 percent leased to 7 retail tenants. The subject is anchored by Regal
Cinemas, Best Buy, and Nordstrom Rack, which occupy 83.7 percent of the subject. We have also considered the
subject’s above and below grade retail space in our analysis. We have also considered the subject’s ground
lease.
96
Prior to adjustments, the comparable sales exhibited a range from $2,341.92 to $28,340.08 per square foot with
an average unadjusted price of $6,332.67 per square foot. After adjustments the comparable improved sales
reflect unit prices ranging from $1,559.40 to $4,747.53 per square foot with an average adjusted price of
$2,005.61 per square foot. We have placed greatest reliance on Sale Nos. 1, 2, 3, and 4 as they are the most
similar to the subject with respect to sales date, location and physical characteristics. These sales reflect retail
condominiums located along prime retail corridors or in and around the Union Square West neighborhood. The
range in adjusted prices from $1,566.83 to $1,666.34 per square foot, with an average of $1,611.66 per square
foot. Therefore, based on the subject’s location, layout, condition, tenancy, contract rents and the underground
parking component we conclude that the indicated value of the subject property by the Percentage Adjustment
Method is:
PERCEN T ADJU STMENT METHOD
SUMMARY
MARKET VALUE AS IS:
Net Rentable Area:
236,215
Concluded Price Per Square Foot:
x $1,600
Indicated Value:
Rounded:
Per Square Foot:
$377,944,000
$380,000,000
$1,608.70
METHODOLOGY
The Income Capitalization Approach is a method of converting the anticipated economic benefits of
owning property into a value through the capitalization process. The principle of "anticipation" underlies
this approach in that investors recognize the relationship between an asset's income and its value. In
order to value the anticipated economic benefits of a particular property, potential income and expenses
must be projected, and the most appropriate capitalization method must be selected.
The two most common methods of converting net income into value are Direct Capitalization and
Discounted Cash Flow. In direct capitalization, net operating income is divided by an overall capitalization
rate to indicate an opinion of market value. In the discounted cash flow method, anticipated future cash
flows and a reversionary value are discounted to an opinion of net present value at a chosen yield rate
(internal rate of return).
Based on the subject’s characteristics, we have considered both the Direct Capitalization and Discounted
Cash Flow methods in this assignment.
POTENTIAL GROSS INCOME
The total potential gross revenues generated by a retail property are composed of a number of distinct
elements: minimum rent determined by lease agreement; additional overage rent based upon a
percentage of retail sales; reimbursement of certain expenses incurred in the ownership and operation of
the real estate; and other miscellaneous revenues. Minimum base rent represents a legal contract
establishing a return to investors in the real estate, while the passing-on of certain expenses to tenants
serves to maintain this return in an era of continually rising costs of operation. Additional rent based upon
a percentage of retail sales experienced at the subject serves to preserve the purchasing power of the
residual income to an equity investor over time.
OCCUPANCY STATUS
The subject property is currently 100.0 percent leased by 7 tenants. The following chart summarizes the
subject net rentable area (NRA) by tenant.
SPACE SUMMARY & OCCUPANCY STATUS
SPACE SUMMARY
Tenant Category
Park Avenue Imaging
US Wines
Duane Reade
CitiBank
Nordstrom Rack
Best Buy
Regal Cinemas
Total
Occ. SF
9,091
6,419
13,947
9,755
32,136
46,088
118,779
236,215
Vct. SF
-
TENANT COUNT
Total SF Occupancy Occupied
9,091
100.0%
1
6,419
100.0%
1
13,947
100.0%
1
9,755
100.0%
1
32,136
100.0%
1
46,088
100.0%
1
118,779
100.0%
1
236,215
100.0%
7
Vacant
0
0
0
0
0
0
0
0
Total
1
1
1
1
1
1
1
7
97
The following chart summarizes the attained rent level within the subject property as at the date of
valuation.
As Of Value Date:
Jun-15
Start
Date
MARKET RENT
Market Rent
End
Date
Area
( SF )
Contract
Rent/Year
Contract
Rent/SF
Rent/SF Annualized
COMPARISON
Comparison
Contract Rent
Versus Market Rent
$400.00 $5,578,800
$550.00 $5,365,250
$461.74 $10,944,050
40.40% below market
0.00% below market
20.59% below market
Tenant Name
Suite
Ground Floor- 14th Street
Duane Reade
Citibank
Subtotal
110
100
Mar-10
Mar-10
Sep-30
Feb-20
13,947
9,755
23,702
$3,324,996
$5,365,248
$8,690,244
$238.40
$550.00
$366.65
Lower Level- Office
Park South Imaging
Subtotal
001
Sep-02
Jan-17
9,091
9,091
$468,012
$468,012
$51.48
$51.48
$55.00
$55.00
$500,005
$500,005
6.40% below market
6.40% below market
Ground- Fourth Avenue
Union Square Wines
Subtotal
120
Feb-06
Jan-20
6,419
6,419
$544,500
$544,500
$84.83
$84.83
$400.00
$400.00
$2,567,600
$2,567,600
78.79% below market
78.79% below market
Un Sq Wines
Best Buy
Subtotal
G&2
Jul-09
Jan-25
46,088
46,088
$3,751,560
$3,751,560
$81.40
$81.40
$125.00
$125.00
$5,761,000
$5,761,000
34.88% below market
34.88% below market
Lower Level- Retail
Nordstrom
Subtotal
G&2
Dec-09
Jun-20
32,136
32,136
$4,320,000
$4,320,000
$134.43
$134.43
$175.00
$175.00
$5,623,800
$5,623,800
23.18% below market
23.18% below market
Movie Theater
Regal Cinemas
Subtotal
4&5
Apr-98
Apr-23
118,779
118,779
$5,619,708
$5,619,708
$47.31
$47.31
$50.00
$50.00
$5,938,950
$5,938,950
5.38% below market
5.38% below market
236,215
$23,394,024
$99.04
$132.66 $31,335,405
25.34% below market
GRAND-TOTALS
7 tenants in occupancy
Note: Attained rent equals current rent annualized for twelve months, and it excludes contractual rent increases
The contract rents for the ground floor retail space along 14th Street exhibit a range of $238.40 to $550.00
per square foot, with an average $366.65 per square foot, which is considered below current market rent
levels. The Fourth Avenue retail space exhibits a contract rent of $84.83 per square foot, which is
considered below market. The lower level retail space exhibits a contract rent of $134.43 per square foot,
which is considered below market. The lower level office space exhibits an average of $51.48 per square
foot, which is considered within market levels. The second floor retail space exhibits a contract rent of
$81.40 per square foot, which is considered below market rent levels. Lastly, the multi-level movie theater
space exhibits a contract averaging of $47.31 per square foot, which is considered slightly below current
market levels. Overall, the subject property is leased at an average of $99.04 per square foot, which is
considered below market rent levels.
LEASE STRUCTURE
The majority of the subject’s tenants are gross leases whereby, the tenants are responsible for their prorata share of CAM charges and a pro-rata share of real estate taxes above their base year. However,
Best Buy and Regal Cinemas, are net leases whereby, the tenants are responsible for a pro-rata share of
condominium charges and real estate taxes.
98
MARKET RENTAL RATE – RETAIL SPACE
The subject property comprises of a multi-level retail condominium unit that contains 236,215 square feet
of retail space on the five levels, inclusive of one below grade level. Based on the property’s size,
configuration, and location, we have researched the Union Square market and other comparable prime
retail corridors along with large multi-level retail leases in Manhattan, which have a varying degree of
comparability to the subject’s location. It should be noted that the above and below grade spaces
associated with the retail space other than ground floor are generally leased at a discount to the ground
floor space.
We have identified several leases and two offerings within Union Square and surrounding corridors which
occurred between January 2014 and June 2015. We have also identified several large multi-level retail
spaces throughout Manhattan and three offerings which occurred between August 2012 and May 2015.
The retail comparables are exhibited on the summary charts and adjustment grids on the following pages.
Our adjustment for rent concessions considers the difference in the comparables for market standard free
rent of six months and no tenant work letters. The adjustment for rent concessions attempts to quantify ($
per square foot) the differences between market free rent and work letter between the subject and the
comparables. The differences between free rent and work letter (+/-) is divided by the comparable’s lease
term, and applied to the beginning “face” rent of the comparable lease. Although this methodology does
not take into account amortization of rental increases over the lease term, we believe this is a simplistic
approach to understanding the affect of concessions on beginning base rent.
99
COMPARABLE MULTI-LEVEL RETAIL RENTS AND ADJUSTMENTS
SUBJECT
ADDRESS
One Union Square
CROSS STREET
B/w University Pl. & 4th Ave
RENTAL 1
RENTAL 2
95 Fifth Avenue
114 Fifth Avenue
S/E/C E. 17th St.
S/W/C W. 17th St.
Bonobos
Lululemon
RENTAL 3
RENTAL 4
RENTAL 5
168 Fifth Avenue
33 Union Square West
B/w E. 19th & E.20th Sts
B/w E. 21st & E. 22nd Sts
B/w E. 16th & E. 17th Sts
Tory Burch Sport
Sweaty Betty
Dylan's Candy Bar
129 Fifth Avenue
LEASE INFO
TENANT NAME
FRONTAGE
Broadway
Fifth Avenue
Fifth Avenue
Fifth Avenue
Fifth Avenue
Union Square West
BEGINNING DATE
June 2015
March 2015
March 2015
February 2015
February 2015
December 2014
10
10
10
10
10
Gross
Gross
Gross
Gross
Gross
TERM
LEASE TYPE
Gross
TENANT SIZE
1,900
Grade
5,468
Grade
4,047
Grade
3,000
LL
5,795
LL
4,940
LL
8,987
Total
2,000
Total
FREE RENT(MONTHS)
WORKLETTER (PSF)
400
Grade
Mezz
3,157
Mezz
2nd
14,420
Total
7,600
Total
$300
Grade
$461
Grade
$435
Grade
$350
Grade
$25
LL
$75
LL
$30
LL
$30
LL
$211
Avg.
$288
Avg.
$65
Mezz
$30
Mezz
$65
2nd
$212
Avg.
$108
Avg.
3,300
Grade
$545
Grade
LL
2,400
300
RENT PER SF
1,600
6
6
4
6
6
6
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0
$8
$0
$0
$0
$545
ADJUSTMENTS
RENT CONCESSIONS
EFFECTIVE ADJUSTED
$300
$469
$435
$350
MONTHS FROM VALUE DATE
3
3
4
4
6
TIME (MARKET CONDITIONS)
1.3%
1.3%
1.7%
1.7%
2.5%
RENT PER SF/GRADE LEVEL
TIME ADJUSTED
$304
$475
$442
$356
$559
LOCATION
10%
10%
10%
15%
-5%
QUALITY
15%
10%
5%
0%
0%
SIZE
5%
0%
0%
-5%
0%
UTILITY
10%
5%
5%
10%
10%
CORNER INFLUENCE
0%
0%
5%
5%
5%
WINDOW FRONTAGE
10%
0%
0%
0%
0%
TOTAL ADJUSTMENT
50%
25%
25%
25%
10%
INDICATED RENT PER SF
$456
$593
$553
$445
$615
RENT PER SF
100
COMPARABLE MULTI-LEVEL RETAIL RENTS AND ADJUSTMENTS
SUBJECT
RENTAL 6
RENTAL 7
RENTAL 8
RENTAL 9
RENTAL 10
RENTAL 11
87 Fifth Avenue
100 Fifth Avenue
105 Fifth Avenue
872 Broadway
22 East 14th Street
N/W/C W. 15th St.
B/w E. 17th & E. 18th Sts
N/W/C E. 18th Street
B/w University & 5th Avenue
B/w W. 14th & 15th Sts
ADDRESS
One Union Square
CROSS STREET
B/w University Pl. & 4thwA E. 16th & E. 17th Sts
LEASE INFO
Aritzia
Eddie Bauer
Banana Republic
Fresh
Offering
Offering
FRONTAGE
Broadway
Fifth Avenue
Fifth Avenue
Fifth Avenue
Broadway
East 14th Street
Union Sq. West
BEGINNING DATE
June 2015
December 2014
November 2014
February 2014
January 2014
June 2015
June 2015
10
10
10
5
10
10
Gross
Gross
Gross
Gross
Gross
Gross
TENANT NAME
TERM
LEASE TYPE
Gross
5,200
TENANT SIZE
$380
RENT PER SF
FREE RENT(MONTHS)
WORKLETTER (PSF)
Grade
Grade
4,400
Grade
8,900
Grade
3,000
LL
11,000
LL
7,400
Total
8,900
2nd
28,800
Total
$250
Grade
$295
Grade
$30
LL
$30
LL
$162
Avg.
$50
2nd
$118
Avg.
800
Grade
8,000
Grade
3,368
Grade
$600
Grade
$200
Grade
$500
Grade
6
6
0
6
6
6
6
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0
$13
$0
$0
$0
$0
$500
ADJUSTMENTS
RENT CONCESSIONS
EFFECTIVE ADJUSTED
$380
$263
$295
$600
$200
6
7
16
17
0
0
2.5%
2.9%
6.7%
7.2%
-10.0%
-10.0%
RENT PER SF/GRADE LEVEL
TIME ADJUSTED
$390
$270
$315
$643
$180
$450
LOCATION
10%
10%
10%
10%
-10%
5%
QUALITY
0%
0%
0%
0%
0%
5%
SIZE
0%
0%
0%
0%
0%
5%
UTILITY
10%
5%
0%
-15%
-5%
0%
CORNER INFLUENCE
5%
0%
5%
0%
5%
5%
WINDOW FRONTAGE
5%
10%
0%
0%
-5%
0%
TOTAL ADJUSTMENT
30%
25%
15%
-5%
-15%
20%
INDICATED RENT PER SF
$506
$338
$362
$611
$153
$540
RENT PER SF
101
SUMMARY OF COMPARABLE RETAIL RENTS AND ADJUSTMENTS
SUBJECT
RENTAL 1
RENTAL 2
RENTAL 3
RENTAL 4
1 Union Square South
1460 Broadway
Downtown
546 Broadway
9 Ninth Avenue
B/w University Pl. & 4th
Ave
S/W/C W 41st Street
Confidential
B/w Spring & Prince
Sts
N/W/C W. 12th
Street
Footlocker
Confidential
ADDRESS
CROSS STREETS
LEASE INFORMATION
TENANT NAME
FRONTAGE
BEGINNING DATE
June 2015
TERM
LEASE TYPE
TENANT SIZE
STARTING BASE ANNUAL RENT
Restoration Hardware
Ninth Avenue
August 2014
May 2015
September 2014
September 2014
10
10
10
10
Gross
Gross
Gross
Gross
9,000
Grd
17,500
Grd
15,000
Grd
6,000
LL
17,500
LL
15,000
LL
10,000
2nd
17,500
2nd
15,000
2nd
10,000
3rd
52,500
Total
10,000
3rd
35,000
Total
$9,100,000
RENT PER SF
Uniqlo
Broadway
55,000
Multi-level
$5,500,000
$100
$12,000,000
Avg.
10,000
4th
65,000
Total
$8,600,000
$800
Grd
$600
Grd
$300
Grd
$65
LL
$43
LL
$35
LL
$85
2nd
$100
2nd
$125
2nd
$65
3rd
$229
Avg
$100
3rd
$260
Avg
$70
4th
$136
Avg
6
6
6
6
6
$0.00
$0.00
$0.00
$0.00
$0.00
ADJUSTMENTS
RENT CONCESSIONS
$0.00
$0.00
$0.00
$0.00
AVERAGE RENT PER SF
$260
$100
$229
$136
1
9
9
10
0.5%
3.9%
3.9%
4.3%
$141.59
FREE RENT(MONTHS)
WORKLETTER (PSF)
TIME ADJUSTED
AVERAGE RENT PER SF
$261.42
$103.86
$237.40
LOCATION
-20%
-10%
-30%
-5%
QUALITY
-10%
0%
-15%
-10%
SIZE
-15%
-10%
-10%
-10%
CORNER INFLUENCE
-10%
-10%
0%
-10%
WINDOW FRONTAGE
-15%
-15%
-15%
-15%
5%
5%
5%
5%
-65%
-40%
-65%
-45%
$91
$62
$83
$78
UTILITY
TOTAL ADJUSTMENT
INDICATED AVG FLOOR RENT PER SF
102
103
SUMMARY OF COMPARABLE RETAIL RENTS AND ADJUSTMENTS
SUBJECT
RENTAL 5
RENTAL 6
RENTAL 7
RENTAL 8
ADDRESS
1 Union Square South
837 Washington Street
Herald Center
4 Times Square
CROSS STREETS
B/w University Pl. & 4th
Ave
S/E/C W. 13th Street
B/w 42nd & 43rd
Sts.
S/W/C W. 17th
Street
LEASE INFORMATION
Samsing Electronics
H&M
H&M
Offering
Washington Street
West 34th Street
West 42nd Street
Un. Sq West & W. 17th
July 2014
February 2014
August 2012
June 2015
10
10
10
10
LEASE TYPE
Gross
Gross
Gross
Gross
TENANT SIZE
10,500
Grd
8,000
Grd
9,700
Grd
2,800
Grd
7,000
LL
12,377
LL
13,298
LL
11,024
2nd
10,000
2nd
21,219
2nd
18,439
2nd
11,024
3rd
10,000
3rd
21,327
3rd
2,800
3rd
1,500
LL
7,230
4th
62,923
Total
44,237
Total
26,348
Total
44,730
Total
TENANT NAME
FRONTAGE
BEGINNING DATE
June 2015
TERM
STARTING BASE ANNUAL RENT
$10,000,000
RENT PER SF
$14,000,000
$13,000,000
$1,820,000
$225
Grd
$735
Grd
$900
Grd
$410
$35
LL
$100
LL
$250
LL
$35
2nd
$100
2nd
$175
2nd
$45
2nd
$25
3rd
$90
3rd
$150
3rd
$43
Mezz
$10
LL
$75
4th
$223
Avg
$294
Avg
$69
Avg
$113
Avg
3
6
6
6
6
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$113
$223
$294
$69
11
16
35
0
4.7%
6.8%
14.3%
-10.0%
FREE RENT(MONTHS)
WORKLETTER (PSF)
ADJUSTMENTS
RENT CONCESSIONS
TIME ADJUSTED
$118.21
$238.09
$336.00
$62.17
LOCATION
-15%
-25%
-40%
0%
QUALITY
-15%
-15%
-15%
0%
SIZE
-10%
-10%
-10%
-15%
CORNER INFLUENCE
-10%
0%
0%
-10%
WINDOW FRONTAGE
-15%
-15%
-15%
-5%
5%
5%
5%
5%
-60%
-60%
-75%
-25%
$47
$95
$84
$47
UTILITY
TOTAL ADJUSTMENT
INDICATED AVG FLOOR RENT PER SF
Grd
RETAIL RENT MAP
COMPARABLE SMALL R ETA IL MA P
104
105
MULTI-LEVEL RETAIL RENT MAP
COMPARABLE MULTI- LEVEL RETA IL MAP
RETAIL MARKET RENTAL RATE CONCLUSION
We have analyzed the Union Square area leases negotiated in competitive buildings in the marketplace, along
with other leases within comparable prime retail corridors, which range from $200 to $545 per square foot of
ground floor area. After adjustments, these leases range from $153 to $615 per square foot. It should be noted
the high end of the range reflects the premium bank branches will pay for prime retail corners. The multi-level
comparables reflected unadjusted blended rents ranging from $69 and $260 per square foot, with an average of
$113 per square foot. After adjustments, the multi-level spaces range in average rental rates between $47 and
$95 per square foot, with an average of $73 per square foot. The comparables generally have rent increases
during the term. The upper level rents ranged between $25.00 to $175 per square foot. The lower level selling
retail rents ranged between $35 to $250 per square foot.
There is a dearth of quality available space located within the prime Union Square market. Asking rents have
increased over the last several quarters as vacancy has continued to diminish. Based on the subject’s prime
location along Union Square South and its unique size, layout, and overall utility, it is our opinion that the recent
leases within the subject are good indicators of market rents for the subject multi-level retail spaces.
106
Based upon recent market leasing activity in the area, the subject’s size, layout, construction, location, and
condition along with our analysis of the comparables, it is our opinion that the market rent for the corner ground
floor space (Citibank) is $550 per square foot, while the Union Square South ground floor retail space is $400 per
square foot. Furthermore, the market rent for the ground floor space along East 13th Street (Union Square Wine)
is estimated at $110 per square foot. We have estimated the second floor retail space (Best Buy) is at $125 per
square foot. Furthermore, the market rent for the lower level retail space (Nordstrom Rack) is estimated at $175
per square foot. Finally, we have assumed the lower level office space will have a market rent of $55 per square
foot. A summary of the market rent estimates for the various spaces are summarized below:
ONE UNION SQUARE SOUTH RETAIL
FAIR MARKET RENT ESTIMATE
SPACE
Citibank
Duane Reade
Union Square Wines
Best Buy
Regal Cinemas
Park South Imaging
Nordstrom Rack
TOTAL/AVG.
Rounded:
FLOOR
NET RENTABLE
AREA (SF)
NET
RENT/SF
Ground-Corner
Ground-Union Square So
Ground-13th St.
2nd Floor
3rd & 4th Floors
Lower Level Office
Lower Level Retail
9,755
13,947
6,419
46,088
118,779
9,091
32,136
$550
$400
$110
$125
$50
$55
$175
236,215
$124.78
$124.89
TOTAL RENT
$5,365,250
$5,578,800
$706,090
$5,761,000
$5,938,950
$500,005
$5,623,800
$29,473,895
$29,500,000
Overall, the subject’s total market rent is projected at $29,500,000 or $124.89 per square foot for the entire
subject property (236,215 NRA-SF). The subject’s fiscal year 2015/16 contract base rent is $23,394,024 or
$99.04 per square foot. Considering the subject’s construction, location, size, and condition, we are of the opinion
that the total contract rent is below current market rents as exhibited by comparable retail spaces and market
parameters.
MARKET RENTAL RATE- MOVIE THEATRE SPACE
The subject property includes a multi-level multi-plex lease by Regal Cinemas. The cinema space is currently
leased at an average rent of $47.31 per square foot. Furthermore, the subject multiplex movie theatre is one of
the highest grossing movie theatres in the nation with total annual box office and concession sales of over $25.0
million according to the ownership.
There has been a dearth of movie theater leases within the New York City region over the past few years.
Therefore, we have expanded our search to include the entire metropolitan New York region and the surrounding
areas. In addition, we have utilized historical movie theater leases within the New York metropolitan area. The
most recent cinema leases that we surveyed range in size from 20,690 to 105,000 square feet and were
negotiated between January 2000 and January 2013. The rent range exhibited by the comparables is from
$16.43 to $54.00 per square foot. However, many of these comparables require significant location adjustments
as they are in suburban locations within the New York region.
The following table summarizes the most recent rental activity for movie theaters within the surrounding New York
metropolitan region, albeit many at inferior locations as compared to the subject.
MOVIE THEATER RENT COMPARABLES
TERM (yrs.)
NUMBER OF
SCREENS
ANNUAL RENT
RENT PER
SQUARE FOOT
RENT PER
SCREEN
RENT
STEPS
LEASE TYPE
CityPoint
Brooklyn, NY
Parkchester Retail Mall
Bronx, NY
Tanger Outlet at The Arches
Deer Park, NY
Alamo Draft House
1/13
39,818
20
7
$1,274,176
$32.00
$182,025
Increases every 5 years
Net
American Theater
6/08
20,690
10
7
$339,937
$16.43
$48,562
N/A
Net
Regal Cinema
5/08
63,000
20
16
$2,016,000
$32.00
$126,000
Net
3
Gateway Cinemas
301 Mount Hope Avenue
Rockaway, NJ
Gateway Cinemas
5/07
68,000
17
12
$2,251,480
$33.11
$187,623
4
Shops at Atlas Park
Queens, NY
Pavilion Theater
Brooklyn, NY
City Center
White Plains, NY
Waterfront at Port Chester
Port Chester, NY
One Jamaica Center
Queens, NY
AMC Loews Orpheum 7
New York, NY
Regal Cinema
5/06
32,549
15
8
$812,500
$24.96
$101,563
Yrs 6-10: $35.20/sf
Yrs 11-15: $38.72/sf
Yrs 16-20: $42.59/sf
Yrs 6-10: $36.42/sf
Yrs 11-15: $40.06/sf
Yrs 16-20: $44.07/sf
10% every 5 years
Net
Pavilion
2/05
33,120
10
10
$1,127,736
$34.05
$112,774
N/A
Net
National Amusements
5/04
80,000
20
15
$2,508,000
$31.35
$167,200
N/A
Net
Loews Theater
1/02
70,000
25
25
$2,000,000
$28.57
$80,000
$20,000/yr increase
Net
National Amusements
5/02
83,000
20
20
$2,200,330
$26.51
$110,017
N/A
Net
10/01
100,000
20
7
$5,400,000
$54.00
$771,429
N/A
Net
AMC Cinema
6/00
68,087
30
9
$1,925,004
$28.27
$213,889
10% every 5 years
Net
Regal Cinema
1/00
105,000
20
11
$3,465,000
$33.00
$315,000
N/A
Net
Low
1/00
20,690
10
7
$339,937
$16.43
$48,562
High
1/13
105,000
30
25
$5,400,000
$54.00
$771,429
Average
8/96
63,605
19
12
$2,110,014
$31.19
$201,340
NO.
1
2
2
5
6
7
8
9
TENANT
NAME
SIZE (NRA)
LEASE INFORMATION
LEASE
DATE
Property Name
10 Harlem USA
Loews Theater
Net
New York, NY
11 Regal Battery Park Stadium
102 North End Avenue
New York, NY
STATISTICS
107
108
We analyzed recent leases for movie theaters negotiated in competitive properties within the New York region.
The comparables range in size from 20,690 square feet to 105,000 square feet. The comparable leases have
terms ranging from 10 to 30 years, averaging 19 years. Rent escalation clauses vary, with most having
percentage increases of about 10 percent every 5 years. All of these are net leases in which the tenant is
required to pay a pro-rata share of real estate taxes and insurance, and CAM expenses.
The comparables exhibit a range of rents from $16.43 to $54.00 per square foot, with an average of $31.19 per
square foot. In addition, the annual rent per screen ranges from $48,562 to $771,429 per screen, with an average
of $201,340 per screen. The high end of this range is formed by the AMC Loews Orpheum 7 located on West
34th Street in Manhattan, which commands $771,429 per screen, more than double the next highest rent per
screen. However, these comparables require significant location adjustments as the majority are located in
suburban locations within the New York region. Furthermore, the subject multiplex movie theatre is one of the
highest grossing movie theatres in the nation with total annual box office and concession sales of approximately
$25.0 million according to the ownership.
Considering the subject’s layout, construction, size, condition, and excellent location along Union Square South
within Union Square, and the large multi-level retail leases throughout Manhattan exhibited earlier, it is our
opinion the market rent for the multiplex movie theatre space is $50.00 per square foot.
MOVIE THEATRE MARKET RENT
TYPE SPACE
RENT/SF
Multiplex Movie Theatre
$50.00/SF
ASSUMPTIONS REGARDING EXISTING AND PROPOSED
LEASES
OVERVIEW
We have modeled the lease in accordance with the lease terms provided by ownership. We assume that they will
fulfill the obligations of their lease.
LEASE TERMS
Lease term, work letter and free rent vary based upon size. Typical retail leases are ten to fifteen years in
duration. We have assumed ten year terms for the small retail tenants (< 9,000 SF) tenants and fifteen year terms
for the large retail tenants (>9,000 SF).
RENEWAL PROBABILITY
Regarding lease expirations, we have assumed a 65 percent probability of rollover (signing new lease) and 35
percent probability of turnover (allow the lease to expire and vacate the property) upon expiration of each primary
lease term. These assumptions are based on retention rates quoted by owners and managers of competitive
buildings.
DOWNTIME
Vacancy between leases includes the period of actual downtime and the construction period to build out tenant
spaces. Consistent with the current market, we have assumed 8 months downtime. Our downtime of 8 months is
supported through discussions with leasing brokers as well as surveying actual downtime of vacant space in
building comparable with the subject property. Vacancy between leases is weighted for a renewal probability of
65 percent for retail and office tenants, resulting in an effective downtime of 3 months.
109
REIMBURSABLE EXPENSES (ESCALATIONS)
The majority of the subject’s leases are gross, whereby the tenants are responsible for their pro-rata share of
CAM charges. In addition, the tenants are responsible for their pro-rata share of real estate taxes above their
base year amounts. Two of the subject’s tenants, Best buy and the Regal Cinemas are net, whereby the tenants
are responsible for their pro-rata share of CAM charges and real estate taxes. We have assumed that future
leases in the subject property will be on a gross basis, whereby the tenants will be responsible for their pro-rata
share of real estate taxes over a base year and a pro-rata of CAM charges.
LEASE EXPIRATIONS
LEASE EXPIRATION SCHEDULE
Year
1
2
3
4
5
6
7
8
9
10
11
Square
Feet
Expiring
0
9,091
0
0
16,174
32,136
0
118,779
0
55,843
32,136
Percent of
Property
0.00%
3.85%
0.00%
0.00%
6.85%
13.60%
0.00%
50.28%
0.00%
23.64%
13.60%
Cumulative
Sq Ft
0
9,091
9,091
9,091
25,265
57,401
57,401
176,180
176,180
232,023
264,159
Cumulative
Percent
0.00%
3.85%
3.85%
3.85%
10.70%
24.30%
24.30%
74.58%
74.58%
98.23%
111.83%
Lease Expiration Schedule
S
Q
U
A
R
E
F
E
E
T
300,000
250,000
200,000
150,000
100,000
50,000
0
1
2
3
4
5
6
7
8
9
10
11
ANALYSIS YEAR
Cumulative Square Feet
Square Feet Per Year
LEASE EXPIRATION ANALYSIS
Total GLA of Subject Property (SF)
Year of Peak Expiration
SF Expiring in Peak Year
Five Year Cumulative Expirations (SF)
Ten Year Cumulative Expirations (SF)
236,215
8
118,779
25,265
232,023
100.00%
50.28%
10.70%
98.23%
Based on the significant lease expirations during Years 10 and 11 of our analysis, we have extended our
projection 12-years to reflect a stabilized reversion.
110
VACANCY AND COLLECTION LOSS
Our cash flow projection assumes a tenant vacancy of 8 months upon lease expiration set against our probability
of renewal estimated at 65.00 percent, in addition to a vacancy/global credit loss provision applied to the gross
rental income. Based upon the current vacancy in the market, and our perception of future market vacancy, and
the creditworthiness of the tenants in the subject building, we have also projected a total vacancy and credit loss
of 1.0 percent, except for the credit tenants (Duane Reade, Chase, Nordstrom’s and Best Buy) which we have
applied a 0.0 percent credit loss factor only.
OPERATING EXPENSES
We have developed an opinion of the property’s annual operating expenses after reviewing the ownership’s
historical and budgeted statements along with reviewing the operating performance of comparable properties. We
analyzed each item of expense and developed an opinion as to what a typical informed investor would consider
normal. A historical operating history for the property and our opinion of year one operating expenses are
presented below:
111
SUMMARY OF INCOME & EXPENSE ANALYSIS
Actual 2012
Total
POTENTIAL GROSS REVENUE
Rental Income
CAM Income
Miscellaneous / Overage Rent
Real Estate Tax Income
TOTAL POTENTIAL GROSS REVENUE
Vacancy and Collection Loss
Actual 2013
Per SF
Total
Actual 2014
Per SF
Total
2015 Budget
Per SF
2015 C&W Forecast
Total
Per SF
Total
Per SF
$21,564,978
$1,004,190
$3,384
$3,238,243
$25,810,795
$0.00
$25,810,795
$91.29
$4.25
$0.01
$13.71
$109.27
$0.00
$109.27
$22,053,824
$792,599
-$5,538
$3,663,834
$26,504,719
$0.00
$26,504,719
$93.36
$3.36
-$0.02
$15.51
$112.21
$0.00
$112.21
$22,370,639
$939,221
$4,838
$4,515,464
$27,830,162
$0.00
$27,830,162
$94.70
$3.98
$0.02
$19.12
$117.82
$0.00
$117.82
$23,334,368
$1,142,985
$0
$6,077,135
$30,554,488
$0
$30,554,488
$98.78
$4.84
$0.00
$25.73
$129.35
$0.00
$129.35
$23,662,250
$1,266,815
$40,000
$5,413,866
$30,382,931
($466,213)
$29,916,718
$100.17
$5.36
$0.17
$22.92
$128.62
-$1.97
$126.65
OPERATING EXPENSES
Common Area Maintenance
Management Fees
Subtotal
$1,479,954
$431,300
$1,911,254
$6.27
$1.83
$8.09
$1,866,202
$441,076
$2,307,278
$7.90
$1.87
$9.77
$1,358,749
$447,385
$1,806,134
$5.75
$1.89
$7.65
$1,371,266
$467,467
$1,838,733
$5.81
$1.98
$7.78
$1,430,000
$473,245
$1,903,245
$6.05
$2.00
$8.06
Ground Rent
Real Estate Taxes*
$3,136,000
$4,364,563
$13.28
$18.48
$3,324,160
$4,940,527
$14.07
$20.92
$3,512,320
$5,643,432
$14.87
$23.89
$3,512,320
$7,390,221
$14.87
$31.29
$3,512,316
$6,723,074
$14.87
$28.46
TOTAL EXPENSES
$9,411,817
$39.84
$10,571,965
$44.76
$10,961,886
$46.41
$12,741,274
$53.94
$12,138,635
$51.39
$75.41
$17,778,083
$75.26
$16,398,978
$69.42
$15,932,754
$67.45
$16,868,276
$71.41
$17,813,214
* The historical and budget Real Estate Taxes provided by ownership are reflective of the ICIP abated taxes. The C&W projection is reflective of unabated taxes. Moreover, the ICIP has subsequently expired.
112
ANALYSIS OF EXPENSES
We analyzed each item of expense and developed an opinion of a level of expense we believe a typical investor
in a property like this would consider reasonable. The forecast income and expenses are for fiscal year 2011.
OPERATING EXPENSE ANALYSIS
Common Area Maintenance:
The common charges reflect expenses that are related to the
subject retail condominium unit and certain allocated
expenses from the residential building such as payroll, repairs
and maintenance. The historical expense ranged between
$1,358,749 ($6.10/SF) and $1,866,202 ($8.38/SF). The 2015
budget reflected an expense of $1,371,266, or $6.16 per
square foot. Our forecast is $1,430,000 or $6.05 per square
foot, which is within the range of historical expenses, the
budget, comparable properties and market parameters.
Management Fees:
Management fees for comparable retail/commercial
properties typically range from 2.0 to 3.0 percent. Based on
the size of the subject, and number of tenants, we have
utilized a management fee of 2.0 percent, or $473,245, which
we consider to be market oriented.
Ground Rent:
The current ground rent is $3,512,316, or $14.87 per square
foot through June 30, 2018. During the analysis period the
ground rent reset to $3,933,804, (12% increase from the prior
5 year periods ground rent) on July 1, 2019 and to $8,343,360
on July 1, 2024. This represents our current forecast of the
ground rent reset, which has been discussed in detail under
the Ground Rent Summary detailed on the following page.
Real Estate Taxes:
The fiscal year 2015/16 real estate taxes are projected to be
$6,723,074 or $28.46 per square foot of net rentable area.
($28.46 per square foot of the gross building area of 236,215
square feet). This represents our current forecast of real
estate taxes, which have been discussed in detail under the
Real Property Taxes and Assessments section of this report.
113
GROUND LEASE SUMMARY
The subject site is encumbered by a 99-year ground lease, which terminates on December 31, 2095. The ground
lease is summarized on the following chart:
GR OUND LEA SE ANALYSIS
Lessor (landlord):
First Sterling Corporation and West Realty Co.
Lessee (tenant):
Union Square Retail Trust, in care of The Related
Companies, L.P.
Lease Commencement Date:
December 13, 1996
Rent Commencement:
July 1, 1998
Lease Expiration Date:
December 31, 2095
Base Lease Term:
99 years
Renewal Options:
No renewal options
Base Rent:
The ground lease has an initial ground rent of $2,500,000 per
annum. The ground rent increases 12% every 5 years. In the
6th, 11th and 16th rental periods the ground rent is reset based
on a “Revaluation Rent” formula indicated below. Following
the respective “Revaluation Periods” the ground rent
increases 12 percent every 5 years.
First Period:
$2,500,000
Two Period:
$2,800,000
Third Period:
$3,136,000
Fourth Period:
$3,512,320 (Current Ground Rent)
Fifth Period:
$3,933,798
Sixth Period:
As mentioned above, the 6th rental period represents the first
“Revaluation Period”. We have projected the ground rent to
be reset to $8,343,356 as of July 1, 2023 based on the
following ground rent reset formula:
For the period commencing on the day following the
expiration of the Fifth Period (such day being sometimes
herein referred to as the “First Revaluation Date”) and
continuing for a period of five (5) Lease Years (the “Sixth
Period”), Base Rent shall be payable at an annual rate equal
to the greater of (I) Revaluation Base Rate as of the First
Revaluation Date, and (II) an annual rate equal to the sum of
“(x) the annual Lease Base Rental Rate as of the day
immediately prior to the First Revaluation Date, plus (y) the
Percentage Rent Payments attributable to the Lease Year
114
ending immediately prior to the First Revaluation Date. For
purposes of determining the Percentage Rent Payments
attributable to such Lease Year, the portion(s) of any
Percentage Rent Payments which consist of Alternative
Amounts (as opposed to actual payments of Sublease
Percentage Rent) shall be deemed to attributable to the
periods for which the underlying Sublease Percentage Rent
(i.e., the Sublease Percentage Rent in lieu of which the
Alternative Amounts are in effect received) would be deemed
attributable (determined on a pro-rated basis in the case of
Alternative Amounts which are less than the underlying
Sublease Percentage Rent which would — otherwise have
been payable).
*It should be noted that the subrent rental rate equates to the
product of (i) the subrent rental rate multiplied by the subrent
percentage. The subrent percentage rent shall mean a
percentage equal to the sum of (i) three percent plus, (ii) a
fraction (expressed as a percentage), (A) the numerator is
equal to the sum of $2,500,000 and any percentage rent
payments and (B) the denominator of which is an amount
equal to $9,027,000.
Based on our calculations of the market rent as of the 1st
“Revaluation Period” the market rent for the subject retail
space is $27,181,753. Therefore, the reset ground rent
reflects $8,343,356. We have exhibited the ground rent reset
calculation in the Addenda.
Seventh through Tenth Rental Periods:
12% increase every 5 years
Eleventh Rental Period:
Second Revaluation Period
Twelfth through Fifteenth Rental Periods:
Sixteenth Rental Period:
Third Revaluation Period
Seventeenth through ground lease expiration:
Operating Expenses:
The lease is triple net, whereby the tenant is responsible for
all operating expenses and real estate taxes.
EXPENSE GROWTH RATE
Our cash flow projections assume that operating expenses, real estate taxes and tenant improvement costs will
grow at the rate of 3.00 percent per year during the holding period.
115
RESERVES FOR REPLACEMENTS
It is customary and prudent to deduct an annual sum from effective gross income to establish a reserve for
replacing short-lived items throughout the building. These costs may include roof repair, HVAC upgrades and
ADA compliance. Our projection of $0.15 per square foot of net rentable area is a reasonable amount to cover the
cost of capital expenditures over the course of the investment-holding period.
DISCOUNTED CASH FLOW ANALYSIS
In the Discounted Cash Flow Method, we employed Argus for Windows software to model the income
characteristics of the property and to make a variety of cash flow assumptions. We attempted to reflect the most
likely investment assumptions of typical buyers and sellers in this particular market segment. The following table
illustrates the assumptions used in the discounted cash flow analysis.
LEASING ASSUMPTIONS
TENANT CATEGORY
WEIGHTED ITEMS
Renewal Probability
Market Rent
Months Vacant
Tenant Improvements
New Leases
Renewal Leases
Leasing Commissions
New Leases
Renewal Leases
Free Rent
New Leases
Renewal Leases
NON-WEIGHTED ITEMS
Lease Term (years)
Lease Type (reimbursements)
Contract Rent Increase Projection
GroundCorner
Ground- Union Multi-LevelSquare South Theater
Second Floor
Lower LevelRetail
Un Sq Wines
MRI Center
65.00%
$550.00
8.00
65.00%
$400.00
8.00
65.00%
$50.00
8.00
65.00%
$125.00
8.00
65.00%
$175.00
8.00
65.00%
$110.00
8.00
65.00%
$55.00
8.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
3.50%
1.75%
3.50%
1.75%
3.50%
1.75%
3.50%
1.75%
3.50%
1.75%
4.00%
2.00%
4.00%
2.00%
3
1
3
1
6
3
3
1
3
1
3
1
3
1
15
Gross
3% Annual
15
Gross
3% Annual
15
Gross
10% Every 5
Yrs
15
Gross
3% Annual
15
Gross
3% Annual
10
Gross
3% Annual
10
Gross
3% Annual
OVERVIEW
The U.S. economic expansion hit a soft spot in the fourth quarter of 2014, a spot that carried over into first quarter
2015. The U.S. gross domestic product (GDP) slowed to a growth rate between 1.0-1.5 percent annual rate in the
first quarter, down from 2.2 percent in the fourth quarter 2014. The main reason for the slowdown was a
slowdown in consumer spending caused by a second consecutive year of severe winter weather. Although the
economy grew at a slower pace in first quarter, we expect stronger growth for the balance of the year to boost full
year GDP growth to about 3.0 percent to 3.5 percent.
116
The economy also benefitted from the steep drop in oil prices that began in mid-2014 but accelerated in the fourth
quarter. The price of a barrel of oil remained between $40 and $50 per barrel for most of the first quarter. This is
less than half the $98.57 per barrel price recorded in first quarter 2014. The Bureau of Economic Analysis
estimates that the proportion of household’s after-tax income that consumers spent on energy in the first two
months of 2015 was the lowest since 2002. As a result, consumers are becoming more optimistic about the
economy. Through March 2015, U.S. payroll employment increased by a weaker than expected 126,000 jobs,
according to the latest payroll report from the Bureau of Labor Statistics. March was the first month since
February 2014 that employment growth dropped below 200,000 jobs. Although total job growth was slower than
recent months, employment in key office-using sectors increased by a total of 50,000 jobs. In addition, average
hourly earnings increased by 0.3 percent, the third time in the past five months that earnings have risen by 0.3
percent or more.
Interest rates remained low in the fourth quarter, with the yield on the 10-year Treasury note falling to 30 basis
points during the past month. The decline is still somewhat of a surprise due to the Federal Reserve’s ending of
its quantitative easing policy, which should have reduced demand for U.S. Treasury securities. But a combination
of lower inflation and concerns about global growth and stability caused investors to look to the safety of U.S.
Treasury securities and pushed down yields. We expect that as the U.S. economy grows in 2015, interest rates
will increase in anticipation that the Federal Reserve will begin to tighten monetary policy.
CURRENT ECONOMIC CONDITIONS
The evidence of a stronger economy prompted the Federal Reserve’s Open Market Committee (FOMC) to
announce that the Central Bank would gradually reduce its purchases of long-term Treasury securities and
mortgage backed securities widely referred to as quantitative easing. During 2014, the FOMC continued to
reduce the amount of bonds purchased each month, indicating the Central Bank’s confidence that the economy
does not require the additional stimulation that this policy has been providing. A statement released after the
FOMC meeting in December was the clearest indication that the Central Bank will begin to raise interest rates in
2015. Strong economic growth will be the main factor pushing rates higher, and although wages are lagging many
feel the jobs numbers are good enough to allow the Central Bank to stay on course in terms of adjusting policy as
the economy grows.
The biggest surprise of 2014 and early 2015 has been the nearly 50.0 percent decline in oil prices, which caught
many by surprise and the ramifications are just starting to be debated. The lower oil prices set the economy up for
stronger growth in 2015 as it will stimulate consumer spending, cut costs in manufacturing and transportation and
lower the trade deficit, all of which are likely to boost GDP even more than is currently anticipated. The U.S. will
be the global growth leader in 2015.
117
The following graph displays historical and projected U.S. Real GDP percent change (annualized on a quarterly
basis) from first quarter 2009 through first quarter 2019 (red bar highlights the most recent quarter-14Q4):
Historical and Projected U.S. Real GDP
2009Q1 - 2019Q1
Real GDP, % Change
7.5
5.0
2.5
0.0
-2.5
-5.0
-7.5
Forecast
Source: Historical Data Courtesy of the Bureau of Economic Analysis; Forecast Data Courtesy of Moody's Economy.com
Notable concerns regarding current economic conditions are as follows:

The U.S. Continues to outperform most other markets. The missing piece in the current, nearly six-yearold economic expansion has been higher wages. Conditions in labor markets suggest that this is about
to change. If so, it will help to propel growth for the rest of 2015 and into 2016.

The latest numbers from the BEA show that the U.S. GDP increased 2.2 percent annual rate during
fourth quarter 2014. Much of the economic data for the U.S. in the first quarter of 2015 has been
released. The data suggest that the economy remained sluggish in the first quarter of the year, and the
U.S. GDP grew somewhere between 1.0-1.5 percent. The biggest reason for the slowdown is weaker
consumer spending caused by a second consecutive year of severe winter weather.

Based on data from Commercial Real Estate Direct, CMBS issuance was strong during 1Q2015 at $25.2
billion. Total issuance was up 47.0 percent from $17.2 billion during 1Q2014. Multi-borrower pool
decreased a modest 4.0 percent year-over-year to $13.2 billion while several large deals helped
increased single borrower securitizations by 248.0 percent year-over-year to $12.1 billion. Current
consensus is for CMBS issuance to close the year at ~$124.0 billion.

As employment continues to rise, the odds that the Federal Reserve will start to raise short term interest
rates increases as well. The timing and extent of the interest rate increases will depend on how the
economy performs over the next several months, but there seems to be a consensus that the Fed will
start to test rate increases in the first half of 2015.

Morgan Stanley estimates $125.0 billion of private-label CMBS issuance for 2015 comprised of $80.0
billion conduit and $45.0 billion SASB (Sustainability Accounting Standards Board) and floaters. A bear
case scenario where insurance companies are more competitive for larger loans is estimated to be
$100.0 billion and a bull case scenario where M&A activity drives SASB and floaters is estimated to be
$140.0 billion.
US REAL ESTATE MARKET IMPLICATIONS
The commercial real estate market started to pick up in 2012 and continued to progress in 2013 and 2014.
According to Real Capital Analytics, 23,015 properties traded hands in 2013 for a total transaction volume of
approximately $338.9 billion. Commercial real estate sales volume remained strong throughout 2014, as
transaction volume totaled $401.9 billion. Property prices at an aggregate level surpassed the 2007 peak and cap
rates in many sectors are at all-time lows. As volume and price levels head into uncharted territory, investors are
reassessing risk and took their foot off of the gas towards the end of 2014. Through first quarter 2015, 6,795
properties changed hands as volume reached $124.3 billion in the first three months of 2015. Portfolio and entitylevel transactions were big components of transaction activity in first quarter, this trend will likely continue into
second quarter as there were a number of deals in the works at the close of first quarter. Commercial property
118
prices as measured by the CPPI are up for the year across all property types. Not all property types have
recovered to the peak levels set prior to the Global Financial Crisis (GFC). The combination of growing volume
and prices across all property sectors suggests that investors have an appetite for commercial real estate, though
how they are placing capital is evolving. The big story of this quarter was the heavy activity in the portfolio and
entity-level transactions. These sorts of transactions played an important role in the run-up of asset process that
proceeded the calamitous fall into the GFC. Combine this activity with cap rates now at or below the precious lowwater marks seen before the GFC and some investors are worried that we will face a similar downturn in the near
future given the same signals.
Cap rates continued to fall in first quarter across all property types. Suburban office assets posted some of the
biggest year-over-year declines with cap rates down 60 basis points from a year earlier to hit 6.8 percent. The
current equity and debt spreads appear to be wide enough to absorb a fairly large near-term spike in interest
rates without cap rates changing too much. Although the longer interest rates remain low, this spread will begin to
erode and so will the market’s ability to absorb an interest rate increase.
The following graph compares national transaction volume by property between 2003 and first quarter 2015:
National Transaction Volume By Property Type
600.0
Volume, billions $
500.0
400.0
Retail
Office
Industrial
Hotel
Apartment
300.0
200.0
100.0
0.0
Source: Real Capital Analytics, Inc. Note: Hotel data not avail. until 2005,
CONCLUSIONS
Despite the slower economic growth in the early part of 2014, the commercial real estate investment market did
not skip a beat, an event many expect to repeat itself in 2015. Transaction volume totaled $401.9 billion in 2014,
up from the same time last year, as the access to capital continues to be relatively easy for most investors.
What’s more, transaction volume might have been higher, if not for the lack of quality offerings in the marketplace.
Real estate markets are now in a sweet spot in the cycle. Demand is rising. Supply is beginning to increase, but is
still contained. As a result, when vacancy rates continue to decline across markets and property types, it will tend
to put upward pressure on rents. The next year should continue to see steady improvement in real estate markets
across the U.S.
Going forward, prices for prime assets are expected to stay high, as the competition among buyers remains
fierce, especially in core markets. Investors expect positive trends to continue through 2015. Even though many
foresee rising interest rates, it is widely believed that the commercial real estate industry can handle the
anticipated increases in rates without serious disruption to its performance, according to PricewaterhouseCoopers
119
First Quarter 2105 Investment Survey. As a result, competition among buyers is likely to remain strong and keep
prices elevated for the best properties offered.
The factors listed below have been key to our valuation of this property and will have an impact on our selection
of all investor rates.
Attained Rents Versus Market:
The subject's attained rents (exclusive of expense contributions) are significantly
below current market rent levels. Given this comparison, the investment rates
selected will be more aggressive than market indicators.
NOI Growth:
The subject's NOI is expected to grow 1.86 percent per annum from the first year of
the analysis through the analysis period. This rate of growth is considered
acceptable.
Lease Expiration Exposure:
Within the first five years of the analysis a total of 10.69 percent of the total net
rentable area is scheduled to rollover. Extending to a ten-year period, a total of
98.22 percent of the space is scheduled to expire. The peak expiration occurs in
year 8, when a total of 118,779 square feet is scheduled to expire. This is
considered a moderate rollover exposure within this market.
Real Estate Market Trends:
Real estate market trends have a significant bearing on the value of real property.
The real estate market in which the subject property is located is currently
improving.
Tenant Quality:
The quality of a property's tenant base is an important factor that is scrutinized by
investors prior to acquiring real property. The quality of the subject's tenant roster is
considered to be good.
Property Rating:
concluded that this property has an overall rating that is average, when measured
against other properties in this marketplace.
Location Rating:
After considering all of the locational aspects of the subject, including regional and
local accessibility as well as overall visibility, we have concluded that the location of
this property is good.
Overall Investment Appeal:
There are many factors that are considered prior to investing in this type of property.
After considering all of these factors, we conclude that this property has good
overall investment appeal.
INVESTOR SURVEY TRENDS
Historic trends in real estate investment help us understand the current and future direction of the market.
Investors’ return requirements are a benchmark by which real estate assets are bought and sold.
The investment criteria derived from the improved property sales within the Sales Comparison Approach section
of this report also lend support to national investor surveys of investment parameters. Following is a brief review
of effective gross income multipliers, overall rates, forecasted holding periods, internal rates of return and terminal
overall rates from several Manhattan retail condominium sales.
120
SUMMARY OF COMPARABLE SALES ECONOMIC INDICATORS
No.
1
2
3
4
5
6
7
8
9
10
11
Low
High
Average
Sales
Date
May-15
Jan-15
Jan-15
Feb-14
Jul-14
Jun-14
Feb-14
Feb-14
Jan-14
Jul-13
Jul-13
Property Name
503 Broadway
170 Broadway
432 Park Avenue
1107 Broadway
112 Greene Street
Price
Price/
NRA
OAR
Forecast
IRR
Terminal
OAR
$355,500,000
$280,000,000
$86,000,000
$70,100,000
$700,000,000
$425,000,000
$12,000,000
$56,500,000
$46,000,000
$22,000,000
$80,000,000
$12,000,000
$700,000,000
$193,918,182
$4,572
$6,794
$3,484
$3,650
$28,340
$5,210
$2,342
$2,742
$2,739
$4,074
$5,713
$2,342
$28,340
$6,333
1.02%
N/A
N/A
N/A
0.89%
N/A
4.51%
5.86%
5.06%
2.54%
3.30%
0.89%
5.86%
3.31%
10
N/A
N/A
N/A
10
N/A
N/A
10
N/A
10
10
10
10
10
7.25%
N/A
N/A
N/A
5.75%
N/A
N/A
6.25%
N/A
6.75%
6.00%
5.75%
7.25%
6.40%
5.00%
N/A
N/A
N/A
4.50%
N/A
N/A
5.50%
N/A
5.25%
5.00%
4.50%
5.50%
5.05%
Compiled by Cushman & Wakefield Valuation & Advisory
It should be noted that the internal rate of return and terminal overall capitalization rate information reflected in the
above chart was extracted from cash flows prepared by Cushman & Wakefield, Inc. from appraisals they
prepared of these properties. This information is not provided in publications, but is a technique which only
Cushman & Wakefield, Inc. employs in their analysis of New York City retail condominium and building sales from
an appraisal standpoint. The Cushman & Wakefield, Inc. internal rate of return and terminal overall capitalization
rate information are confirmed directly from the owners of the respective properties when the properties were
appraised.
In addition, the following graph shows the historic trends for the subject’s asset class spanning a period of four
years as reported in the PricewaterhouseCoopers Real Estate Investor Survey.
121
PwC
Survey:
NATIONAL STRIP SHOPPING CENTER
Property Type:
Quarter
End Quarter:
2Q 11
3Q 11
4Q 11
1Q 12
2Q 12
3Q 12
4Q 12
1Q 13
2Q 13
3Q 13
1Q 15
4Q 13
1Q 14
2Q 14
3Q 14
4Q 14
1Q 15
OAR (average)
7.33%
7.20%
7.16%
7.18%
7.18%
7.06%
7.06%
7.04%
6.95%
6.91%
6.98%
6.97%
7.09%
7.05%
7.05%
7.00%
7.97%
7.93%
7.93%
7.80%
7.77%
7.69%
7.66%
7.61%
7.53%
7.44%
7.39%
7.33%
7.44%
7.34%
7.22%
7.19%
IRR (average)
8.85%
8.61%
8.44%
8.41%
8.41%
8.43%
8.43%
8.42%
8.19%
8.06%
8.05%
8.06%
8.31%
8.23%
8.11%
8.09%
OAR (average)
IRR (average)
9.00%
8.75%
8.50%
8.25%
RATES
8.00%
7.75%
7.50%
7.25%
7.00%
6.75%
6.50%
2Q 11
3Q 11
4Q 11
1Q 12
2Q 12
3Q 12
4Q 12
1Q 13
2Q 13
3Q 13
4Q 13
1Q 14
2Q 14
3Q 14
4Q 14
1Q 15
ANALYSIS PERIOD
TERMINAL CAPITALIZATION RATE SELECTION
We based the estimate of property value at reversion on assumed resale at the end of Year 11, using our forecast
of Year 12 net operating income. The reversion value was calculated by applying a capitalization rate of 5.00
percent to the fiscal year 2026/27 NOI and subtracting sales expenses of 4.00 percent. The net cash flows and
the net reversion were discounted to net present value using a discount rate of 6.00 percent, the derivation of
which is discussed below.
A terminal capitalization rate was used to develop an opinion of the market value of the property at the end of the
assumed investment holding period. The rate is applied to the net operating income following year 11 before
making deductions for leasing commissions, tenant improvement allowances and reserves for replacement. We
have developed an opinion of an appropriate terminal capitalization rate based on indicated rates in current
investor surveys.
122
TERMINAL CAPITALIZATION RATES (OARout)
Survey
PwC
Date
First Quarter 2015
Range
5.00% - 10.00%
Average
7.19%
PwC - Refers to National Strip Shopping Center market regardless of class or occupancy
In addition, we examined the discount capitalization rates derived from the improved property sales:
MANHATTAN RETAIL SALES
TERMINAL CAPITALIZATION RATE SUMMARY
No.
Property
1 150 West 34th Street
2 503 Broadway
4 170 Broadway
5 697-699 Fifth Avenue
6 432 Park Avenue
7 865 Lexington Avenue
8 1107 Broadway
9 202-204 Canal Street
10 112 Greene Street
11 465 Broadway (40 Mercer Street)
STATISTICS
Low
High
Median
Average
Capitalization
Rate
5.00%
N/A
N/A
N/A
4.50%
N/A
N/A
5.50%
N/A
5.25%
5.00%
4.50%
5.50%
5.00%
5.05%
The overall capitalization rates derived from the improved property sales are between 5.00 and 6.00 percent, with
an average of 5.50 percent. A premium was added to today’s rate to allow for the risk of unforeseen events or
trends which might affect our estimate of net operating income during the holding period, including a possible
deterioration in market conditions for the property. Investors typically add 25 to 150 basis points to the “going-in”
rate to arrive at a terminal capitalization rate, according to Cushman & Wakefield’s periodic investor surveys. The
difference between going-in capitalization rates and terminal capitalization rates is typically risk related due to
time (market conditions).
Based on the overall characteristics of the subject property, we have applied a 5.00 percent terminal capitalization
rate in our analysis, which is supported by terminal capitalization rates (terminal OAR’s) extracted from recent
retail sales and the investor surveys previously cited. In addition, our selection of the terminal capitalization rate is
considers the subject ground lease.
DISCOUNT RATE ANALYSIS
We estimated future cash flows, including property value at reversion, and discounted that income stream at an
internal rate of return (yield rates) currently required by investors for similar-quality real property. The yield rate
(internal rate of return or IRR) is the single rate that discounts all future equity benefits (cash flows and equity
reversion) to an estimate of net present value.
PriceWaterhouseCoopers, Inc. periodically surveys national real estate investors to determine internal rates of
return and overall rates considered acceptable by respondents. The most recent national market indicators
published by Pwc, is summarized as follows:
123
DISCOUNT RATES (IRR)
Survey
PwC
Date
Range
Average
First Quarter 2015
6.00% - 11.00%
8.09%
The above table summarizes the investment parameters of some of the most prominent investors currently
acquiring similar investment properties in the United States. We realize that this type of survey reflects target
rather than transactional rates. Transactional rates are usually difficult to obtain in the verification process and are
actually only target rates of the buyer at the time of sale. The property’s performance will ultimately determine the
actual yield at the time of sale after a specific holding period.
In addition, we examined the discount capitalization rates derived from the improved property sales:
DISCOUNT RATE (IRR) SUMMARY
No.
Property
1
2
503 Broadway
3
4
170 Broadway
5
6
432 Park Avenue
7
8
1107 Broadway
9
10
112 Greene Street
11
STATISTICS
Low
High
Median
Average
Discount Rate
7.25%
N/A
N/A
N/A
5.75%
N/A
N/A
6.25%
N/A
6.75%
6.00%
5.75%
7.25%
6.25%
6.40%
The discount capitalization rates derived from the Sales Comparison Approach ranged from 5.75 percent to 7.25
percent, with an average of 6.40 percent.
The subject property is a 5-level (inclusive of lower level) retail condominium unit within a luxury mixed use
residential building located in the Union Square neighborhood of Manhattan. The property is 100.0 percent leased
on a long-term basis at significantly below market rents to good quality tenants and is anchored by national retail
tenants such as Regal Cinemas, Best Buy, and Nordstrom Rack. Furthermore, 42.9 percent of the subject is
leased to credit tenants. The subject’s Net Operating Income (NOI) is expected to increase 1.86 percent per
annum from year one through the analysis period. Therefore, taking into consideration the subject’s location, size,
condition, long-term ground lease, below market contract rents, construction, tenant quality, and returns expected
by investors in the current market in relation to other comparable properties, we discounted the cash flows at
6.00 percent. Our selection of discount rate is considered reasonable given the projected cash flow of the
property and the subject ground lease.
124
DISCOUNTED CASH FLOW ANALYSIS AND DCF SUMMARY TABLE
Based on the discount rate selected above, market value would be $360,000,000, rounded. The reversionary sale
contributes 61.64 percent to this value estimate. The 12-year discounted cash flow summary table is presented
on the following page.
ANNUAL CASH FLOW REPORT
One Union Square
1
Jun-15
May-16
For the Years Beginning
2
Jun-16
May-17
3
Jun-17
May-18
4
Jun-18
May-19
6
Jun-20
May-21
7
Jun-21
May-22
9
Jun-23
May-24
$ 26,508,903
0
0
$ 26,508,903
$ 27,160,697
0
0
$ 27,160,697
6,585,739
1,476,784
8,062,523
6,828,281
1,406,402
8,234,683
10
Jun-24
May-25
11
Jun-25
May-26
12
Jun-26
May-27
Real Estate Tax Reimbursement
CAM Reimbursement
Total Reimbursement Revenue
$
5,413,866
1,266,815
6,680,681
Miscellneous Income
TOTAL GROSS REVENUE
40,000
$ 30,382,931
General Vacancy
Collection Loss
(303,829)
(177,732)
(309,072)
(318,258)
(126,054)
(337,432)
(342,554)
(346,206)
(354,461)
0
0
(369,275)
(162,384)
(162,014)
(165,267)
(173,810)
(176,562)
(181,782)
(184,671)
(187,600)
(195,109)
(199,712)
(204,368)
(208,729)
$ 29,916,718 $ 30,179,811 $ 30,432,883 $ 31,333,723 $ 31,971,895 $ 33,223,993 $ 33,728,198 $ 34,086,815 $ 34,896,481 $ 34,253,130 $ 36,832,255 $ 42,059,543
1.79%
2.31%
3.15%
Real Estate Taxes
CAM
Management Fee
Ground Rent
6,723,074
1,430,000
473,245
3,512,316
$ 12,138,635
6,924,766
1,472,900
476,120
3,512,320
$ 12,386,106
7,132,509
1,517,087
478,833
3,512,320
$ 12,640,749
7,346,484
1,562,600
491,381
3,898,680
$ 13,299,145
7,566,879
1,609,478
501,740
3,933,804
$ 13,611,901
7,793,885
1,657,762
524,431
3,933,804
$ 13,909,882
8,027,702
1,707,495
528,262
3,933,804
$ 14,197,263
8,268,533
1,758,720
530,178
3,933,804
$ 14,491,235
8,516,589
1,811,481
543,214
7,975,897
$ 18,847,181
8,772,087
1,865,826
553,773
8,343,360
$ 19,535,046
9,035,249
1,921,800
638,062
8,343,360
$ 19,938,471
9,306,307
1,979,454
658,288
8,343,360
$ 20,287,409
3.00%
3.00%
3.05%
8.18%
4.78%
$ 17,778,083
$ 17,793,705
$ 17,792,134
$ 18,034,578
$ 18,359,994
$ 19,314,111
$ 19,530,935
$ 19,595,580
$ 16,049,300
$ 14,718,084
$ 16,893,784
$ 21,772,134
1.86%
35,432
0
35,432
36,495
157,437
193,932
37,590
0
37,590
38,718
0
38,718
39,879
242,943
282,822
41,076
0
41,076
42,308
0
42,308
43,577
0
43,577
44,885
0
44,885
46,231
0
46,231
47,618
6,439,781
6,487,399
49,047
0
49,047
3.00%
$ 21,723,087
1.86%
$
CASH FLOW BEFORE DEBT SERVICE $ 17,742,651
Implied Overall Rate
Cash on Cash Return
4.94%
4.93%
$
41,200
$ 30,519,557
$
$ 17,599,773
4.94%
4.89%
$
5,590,580
1,362,586
6,953,166
42,436
$ 30,907,222
$
$ 17,754,544
4.94%
4.93%
$
5,800,653
1,412,395
7,213,048
43,709
$ 31,825,791
$
$ 17,995,860
5.01%
5.00%
$
5,977,915
1,429,458
7,407,373
45,020
$ 32,274,511
$
$ 18,077,172
5.10%
5.02%
$
6,121,649
1,399,976
7,521,625
46,371
$ 33,743,207
$
$ 19,273,035
5.37%
5.35%
$
6,350,266
1,444,283
7,794,549
47,762
$ 34,255,423
$
$ 19,488,627
5.43%
5.41%
$
49,195
$ 34,620,621
$
$ 19,552,003
5.44%
5.43%
$
50,671
$ 35,446,051
$
$ 16,004,415
4.46%
4.45%
$ 27,688,663 $ 31,903,076 $ 32,914,410
(1,750,109)
(1,889,479)
(57,677)
0
(2,092,185)
0
$ 25,938,554 $ 27,921,412 $ 32,856,733
Year 11
$ 23,662,250
0
0
$ 23,662,250
5,537,554
1,306,459
6,844,013
$ 25,087,022 $ 26,221,569 $ 26,413,112
(198,678)
0
0
(66,226)
(46,358)
0
$ 24,822,118 $ 26,175,211 $ 26,413,112
8
Jun-22
May-23
Annual
Growth
Year 1 -
Base Rental Revenue
Absorption & Turnover Vacancy
Base Rent Abatements
Scheduled Base Rental Revenue
Capital Reserves
Leasing Commissions
TOTAL LEASING & CAPITAL COSTS
$ 23,806,012 $ 23,941,662 $ 24,569,034
(128,751)
0
0
(42,917)
(30,042)
0
$ 23,634,344 $ 23,911,620 $ 24,569,034
5
Jun-19
May-20
125
$
7,028,869
1,433,228
8,462,097
52,191
$ 34,452,842
$
$ 14,671,853
4.09%
4.08%
$
7,616,967
1,444,487
9,061,454
53,757
$ 37,036,623
$
$ 10,406,385
4.69%
2.89%
3.05%
3.03%
8,215,266
1,510,179
9,725,445
3.86%
1.61%
3.47%
55,369
$ 42,637,547
3.00%
3.13%
$
$
3.00%
126
DISCOUNTED CASH FLOW MODELING ASSUMPTIONS
VALUATION SCENARIO:
Market Value As-Is
GENERAL CASH FLOW ASSUMPTIONS
GROWTH RATES
ARGUS - Version 15
Cash Flow Software:
Cash Flow Start Date:
Calendar or Fiscal Analysis:
Investment Holding Period:
Analysis Projection Period:
Market Rent-Retail:
Consumer Price Index (CPI):
Expenses:
Tenant Improvements:
Real Estate Taxes:
6/1/2015
Fiscal
11 Years
12 Years
VACANCY & COLLECTION LOSS
Global Vacancy:
Credit Tenants
Global Vacancy:
Reserves for Replacement ($/SF):
3.00%
3.00%
3.00%
3.00%
3.00% After Reassessment
RATES OF RETURN
Internal Rate of Return: (Cash Flow)
Internal Rate of Return: (Reversion)
Reversionary Sales Cost:
1.00%
1.00%
2.00%
0.00%
1.00%
1.00%
6.00%
6.00%
5.00%
4.00%
VALUATION
Market Value As-Is
LESS Curable Depreciation
Adjusted Value
Rounded:
Value $/SF
$0.15
$357,244,781
$0
$357,244,781
$360,000,000
$1,524.04
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$1
2
3
4
5
6
Net Operating Income
7
8
9
10
11
12
Cash Flow Before Debt Service
PRICING MATRIX - Market Value As-Is
Terminal
Cap Rates
Discount Rate (IRR) for Cash Flow
5.75%
6.00%
5.50%
6.25%
6.50%
4.50%
$
398,212,481
$
389,853,810
$
381,712,597
$
373,782,504
$
366,057,394
4.75%
$
384,647,192
$
376,637,142
$
368,834,799
$
361,234,120
$
353,829,253
5.00%
$
372,438,431
$
364,742,141
$
357,244,781
$
349,940,575
$
342,823,926
5.25%
$
361,392,410
$
353,979,997
$
346,758,575
$
339,722,605
$
332,866,726
5.50%
$
351,350,573
$
344,196,230
$
337,225,659
$
330,433,542
$
323,814,726
IRR Reversion
Cost of Sale at Reversion:
Percent Residual:
Rounded:
5.50%
5.75%
6.00%
6.25%
6.50%
4.00%
61.64%
$360,000,000
$1,524.04
Based on the rates selected, the value via the Discounted Cash Flow (DCF) method analysis is estimated at
$360,000,000, rounded. The reversionary sale contributes 61.64 percent to this value estimate.
127
DIRECT CAPITALIZATION VALUATION METHOD
In the direct capitalization method, we estimated market value by dividing stabilized net operating income by an
overall rate derived from our analyses of market sales and computed by dividing the net operating income from a
sold property by its sale price. We have utilized the sales exhibited in the Sales Comparison Approach. These
sales are the most recent market transactions and are the best indicators of current investment parameters in the
market for retail/commercial properties in Manhattan. The overall capitalization rates derived from the most
applicable improved property sales are shown below:
OVERALL CAPITALIZATION RATE SUMMARY
No.
Property
2 503 Broadway
4 170 Broadway
5 697-699 Fifth Avenue
6 432 Park Avenue
7 865 Lexington Avenue
8 1107 Broadway
9 202-204 Canal Street
10 112 Greene Street
11 465 Broadway (40 Mercer Street)
STATISTICS
Low
High
Median
Average
Capitalization
Rate
1.02%
N/A
N/A
N/A
0.89%
N/A
4.51%
5.86%
5.06%
2.54%
3.30%
0.89%
5.86%
3.30%
3.31%
CAPITALIZATION RATES
Survey
PwC
Date
First Quarter 2015
Range
5.00% - 10.00%
Average
7.00%
The overall rates derived from the improved property sales are between 0.89 and 5.86 percent, with an average
of 3.31 percent. These retail sales vary in location but are generally located along prime and secondary retail
corridors. In addition, the location and tenancy adds to the diverging economic profiles. The Pwc investor survey
for National Strip Centers ranged between 5.00 and 10.00 percent, with an average of 7.00 percent. Additionally,
two of the comparable sales reflected overall going in capitalization rates that 1.02 percent or below. These
comparables are located along West 34th Street and Upper Fifth Avenue, two of the strongest retail corridors
within Manhattan. Excluding these comparables the remaining sales reflect overall going in capitalization rates
ranging between 2.54 and 5.86 percent, with an average of 4.25 percent. These sales are located along good
secondary commercial corridors within Manhattan. Based on the credit and strong tenants within the subject, the
quality and condition of the condominium unit, the subject ground lease, the below market rent levels and the
location within Union Square we believe the property would likely trade at 4.50 percent.
128
In addition, the investor survey is reflective of national and regional strip and community shopping centers, not a
prime Manhattan retail property within the Union Square neighborhood of Manhattan. The capitalization rates
exhibited by the comparable sales are given the most weight in our analysis, since they reflect current local
market data, and are more relevant than national investor surveys. These rates are well below the average rates
reflected in the exhibited investor surveys for retail properties outside of Manhattan, and indicate the premium
paid by investors for well located irreplaceable retail/commercial properties in major urban markets like
Manhattan.
area within five levels (inclusive of one below grade level) of the luxury mixed-use development located within the
Union Square neighborhood. The subject is 100.0 percent leased to 7 retail tenants and is anchored by Regal
Cinemas, Best Buy, and Nordstrom Rack, which occupy 83.7 percent of the subject. The subject site is ground
leased through December 31, 2095, with no renewal options. The subject is leased long term to quality tenants
and the cash flow reflects rent increases throughout the lease term. In addition, the retail space is leased long
term at significantly below current market rent levels in an area with strong demand for this tenant type. The
subject’s NOI is projected to increase 1.86 percent from the first year of the analysis through the analysis period.
As such, the tenant quality and potential rental income increase provide for a secure cash flow. Based on the
specific characteristics of the subject property, along with our observations and analysis suggest that a going-in
capitalization rate of 4.50 percent represents reasonable investor criteria under current market conditions. Our
selected capitalization rate is considered reasonable, compensating the typical buyer for the risk inherent in
investing in this property. A summary of the direct capitalization method is shown below:
I ND ICAT ED VALU E BA S ED ON D IR ECT CA PITA LIZATION OF
DIRECT CAPITALIZATION METHOD
Market Value As-Is
$17,778,083
Value
Sensitivity Analysis (0.25% OAR Spread)
Based on Low-Range of 4.25%
$418,307,835
Based on Most Probable Range of 4.50%
$395,068,511
Based on High-Range of 4.75%
$374,275,432
Indicated Value
$395,068,511
$395,000,000
NOI
$75.26
$/SF GLA
$1,770.88
$1,672.50
$1,584.47
$1,672.50
$1,672.21
RECONCILIATION WITHIN INCOME CAPITALIZATION APPROACH
SUMMAR Y OF INCOME CA PITALIZATION METHODS
Value Indicated by the Discounted Cash Flow Method:
$360,000,000
Value Indicated by the Direct Capitalization Method:
$395,000,000
We have placed equal reliance on the Discounted Cash Flow Analysis Method and the Direct Capitalization
Method. Therefore, our opinion of market value via the Income Capitalization Approach is as follows.
INCOME CA PITA LIZATION CONCLU SION
Conclusion:
$380,000,000
129
VALUATION METHODOLOGY REVIEW AND RECONCILIATION
analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these
approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not
generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we
have not utilized the Cost Approach to develop an opinion of market value.
The approach indicated the following:
METHODOL OG Y
Sales Comparison Approach:
$380,000,000
Income Capitalization Approach:
$380,000,000
It is the Income Capitalization Approach, however, that is logically considered the most appropriate technique for
estimating the value of income-producing property. Not only does this approach represent the most direct and
accurate simulation of market behavior, it is the method explicitly employed by buyers and sellers in acquisition
and disposition decisions. We have, therefore primarily used the Income Capitalization Approach based primarily
on projected income and expense as the foundation for our valuation of the subject property. Furthermore, we
utilized the Sales Comparison Approach to support our estimated value of the subject from sales of comparable
properties in the marketplace.
MARKET VALUE
Based on the agreed to Scope of Work, and as outlined in the report, we have developed an opinion that the
market value of the leasehold estate of the above property, subject to the assumptions and limiting conditions,
certifications, extraordinary and hypothetical conditions, if any, and definitions on June 10, 2015, was:
THREE HUNDRED EIGHTY MILLION DOLLARS
$380,000,000
EXPOSURE TIME
within this report would have been approximately nine (9) months. This assumes an active and professional
MARKETING TIME
We believe, based on the assumptions employed in our analysis, as well as our selection of investment
parameters for the subject, that our value conclusion represents a price achievable within nine (9) months.
130
"Report" means the appraisal or consulting report and conclusions stated therein, to which these Assumptions and Limiting
Conditions are annexed.
"Property" means the subject of the Report.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary that issued the Report.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the Report.
The Report has been made subject to the following assumptions and limiting conditions:

No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters that
are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title to the
Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens unless
otherwise stated. No survey of the Property was undertaken.

The information contained in the Report or upon which the Report is based has been gathered from sources the Appraiser
assumes to be reliable and accurate. The owner of the Property may have provided some of such information. Neither the
Appraiser nor C&W shall be responsible for the accuracy or completeness of such information, including the correctness
of estimates, opinions, dimensions, sketches, exhibits and factual matters. Any authorized user of the Report is obligated
to bring to the attention of C&W any inaccuracies or errors that it believes are contained in the Report.

The opinions are only as of the date stated in the Report. Changes since that date in external and market factors or in the
Property itself can significantly affect the conclusions in the Report.

The Report is to be used in whole and not in part. No part of the Report shall be used in conjunction with any other
analyses. Publication of the Report or any portion thereof without the prior written consent of C&W is prohibited.
Reference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the
letter of engagement, the Report may not be used by any person(s) other than the party(ies) to whom it is addressed or
for purposes other than that for which it was prepared. No part of the Report shall be conveyed to the public through
advertising, or used in any sales, promotion, offering or SEC material without C&W's prior written consent. Any authorized
user(s) of this Report who provides a copy to, or permits reliance thereon by, any person or entity not authorized by C&W
in writing to use or rely thereon, hereby agrees to indemnify and hold C&W, its affiliates and their respective shareholders,
directors, officers and employees, harmless from and against all damages, expenses, claims and costs, including
attorneys' fees, incurred in investigating and defending any claim arising from or in any way connected to the use of, or
reliance upon, the Report by any such unauthorized person(s) or entity(ies).

Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in
any court or administrative proceeding relating to the Property or the Appraisal.

The Report assumes (a) responsible ownership and competent management of the Property; (b) there are no hidden or
unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no
responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover
them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws,
unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of
occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value
opinion contained in the Report is based.

The physical condition of the improvements considered by the Report is based on visual inspection by the Appraiser or
other person identified in the Report. C&W assumes no responsibility for the soundness of structural components or for
the condition of mechanical equipment, plumbing or electrical components.

The forecasted potential gross income referred to in the Report may be based on lease summaries provided by the owner
or third parties. The Report assumes no responsibility for the authenticity or completeness of lease information provided
by others. C&W recommends that legal advice be obtained regarding the interpretation of lease provisions and the
contractual rights of parties.
131

The forecasts of income and expenses are not predictions of the future. Rather, they are the Appraiser's best opinions of
current market thinking on future income and expenses. The Appraiser and C&W make no warranty or representation that
these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is not the Appraiser's task
to predict or in any way warrant the conditions of a future real estate market; the Appraiser can only reflect what the
investment community, as of the date of the Report, envisages for the future in terms of rental rates, expenses, and
supply and demand.

Unless otherwise stated in the Report, the existence of potentially hazardous or toxic materials that may have been used
in the construction or maintenance of the improvements or may be located at or about the Property was not considered in
arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other
potentially hazardous materials) may adversely affect the value of the Property. The Appraisers are not qualified to detect
such substances. C&W recommends that an environmental expert be employed to determine the impact of these matters
on the opinion of value.

Unless otherwise stated in the Report, compliance with the requirements of the Americans with Disabilities Act of 1990
(ADA) has not been considered in arriving at the opinion of value. Failure to comply with the requirements of the ADA may
adversely affect the value of the Property. C&W recommends that an expert in this field be employed to determine the
compliance of the Property with the requirements of the ADA and the impact of these matters on the opinion of value.

If the Report is submitted to a lender or investor with the prior approval of C&W, such party should consider this Report as
only one factor, together with its independent investment considerations and underwriting criteria, in its overall investment
decision. Such lender or investor is specifically cautioned to understand all Extraordinary Assumptions and Hypothetical
Conditions and the Assumptions and Limiting Conditions incorporated in this Report.

In the event of a claim against C&W or its affiliates or their respective officers or employees or the Appraisers in
connection with or in any way relating to this Report or this engagement, the maximum damages recoverable shall be the
amount of the monies actually collected by C&W or its affiliates for this Report and under no circumstances shall any
claim for consequential damages be made.

If the Report is referred to or included in any offering material or prospectus, the Report shall be deemed referred to or
included for informational purposes only and C&W, its employees and the Appraiser have no liability to such recipients.
C&W disclaims any and all liability to any party other than the party that retained C&W to prepare the Report.

Any estimate of insurable value, if included within the agreed upon scope of work and presented within this report, is
based upon figures derived from a national cost estimating service and is developed consistent with industry practices.
However, actual local and regional construction costs may vary significantly from our estimate and individual insurance
policies and underwriters have varied specifications, exclusions, and non-insurable items. As such, we strongly
recommend that the Client obtain estimates from professionals experienced in establishing insurance coverage for
replacing any structure. This analysis should not be relied upon to determine insurance coverage. Furthermore, we make
no warranties regarding the accuracy of this estimate.

By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting
Conditions, Hypothetical Conditions and Extraordinary Assumptions stated herein.
132
We certify that, to the best of our knowledge and belief:

The statements of fact contained in this report are true and correct.

The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions,
and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions.

We have no present or prospective interest in the property that is the subject of this report, and no personal interest with
respect to the parties involved.

We have no bias with respect to the property that is the subject of this report or to the parties involved with this
assignment.

Our engagement in this assignment was not contingent upon developing or reporting predetermined results.

Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined
value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a
stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with
the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal
Institute, which include the Uniform Standards of Professional Appraisal Practice.

The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized
representatives.

John A. Katinos, MAI, Charles R. Looney and James P. Stuckey, Jr. did make a personal inspection of the property that is
the subject of this report.

The signatories have performed a previous appraisal of the subject property once within the three years prior to this
assignment.

Charles R. Looney provided significant real property appraisal assistance to the persons signing this report.

As of the date of this report, John A. Katinos, MAI and has completed the continuing education program of the Appraisal
Institute.

As of the date of this report, James P. Stuckey Jr. has completed the Standards and Ethics Education Requirement of the
Appraisal Institute for Associate Members.
Senior Director
New York Certified General Appraiser
License No. 46000028780
john.a.katinos@cushwake.com
(212) 479-1820 Fax
Associate Director
New York Certified Appraiser Assistant
License No. 48000049048
(212) 479-8325 Fax
133
AS IS MARKET VALUE
BAND OF INVESTMENT
CASH EQUIVALENCY
DEPRECIATION
a specified method.
ELLWOOD FORMULA
where
J = J Factor
EXPOSURE TIME
FEE SIMPLE ESTATE
A hypothetical condition is “that which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to
known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or
trends; or about the integrity of data used in an analysis.”
INSURABLE VALUE
LEASED FEE INTEREST
lease).
134
LEASEHOLD INTEREST
MARKET RENT
MARKET VALUE





MARKETING TIME
OPERATING EXPENSES
1
135
between tenancies.
categories.
categories.
uniforms.
have been incurred.
ADDENDA CONTENTS
ADDENDUM A:
ADDENDUM B:
ADDENDUM C:
ADDENDUM D:
GLOSSARY OF TERMS AND DEFINITNONS
CLIENT SATISFACTION SURVEY
GROUND RENT RESET CALCULATION
QUALIFICATIONS OF THE APPRAISERS
ADDENDA CONTENTS
ADDENDA CONTENTS
ADDENDUM A: GLOSSARY OF TERMS & DEFINITIONS
AS IS MARKET VALUE
BAND OF INVESTMENT
CASH EQUIVALENCY
DEPRECIATION
a specified method.
ELLWOOD FORMULA
where
J = J Factor
EXPOSURE TIME
FEE SIMPLE ESTATE
A hypothetical condition is “that which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to
known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or
trends; or about the integrity of data used in an analysis.”
INSURABLE VALUE
ADDENDA CONTENTS
LEASED FEE INTEREST
lease).
LEASEHOLD INTEREST
MARKET RENT
MARKET VALUE





MARKETING TIME
OPERATING EXPENSES
2
ADDENDA CONTENTS
between tenancies.
categories.
categories.
uniforms.
have been incurred.
ADDENDA CONTENTS
ADDENDA CONTENTS
ADDENDUM B: CLIENT SATISFACTION SURVEY
Survey Link:
12002-9471
http://www.surveymonkey.com/s.aspx?sm=_2bZUxc1p1j1DWj6n_2fswh1KQ_3d_3d&c=09-
C&W File ID:
15-12002-901504
Fax Option:
(716) 852-0890
1. Given the scope and complexity of the assignment, please rate the development of the appraisal relative to the
adequacy and relevance of the data, the appropriateness of the techniques used, and the reasonableness of the
analyses, opinions, and conclusions:
__ Excellent
__ Good
__ Average
__ Below Average
__ Poor
Comments:_____________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
2. Please rate the appraisal report on clarity, attention to detail, and the extent to which it was presentable to your
internal/external users without revisions:
__ Excellent
__ Good
__ Average
__ Below Average
__ Poor
Comments:_____________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
ADDENDA CONTENTS
3. The appraiser communicated effectively by listening to your concerns, showed a sense of urgency in
responding, and provided convincing support of his/her conclusions:
__ Not Applicable
__ Excellent
__ Good
__ Average
__ Below Average
__ Poor
Comments:_____________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
4. The report was on time as agreed, or was received within an acceptable time frame if unforeseen factors
occurred after the engagement:
__ Yes
__ No
5. Please rate your overall satisfaction relative to cost, timing, and quality:
__ Excellent
__ Good
__ Average
__ Below Average
__ Poor
Comments:_____________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
6. Any additional comments or suggestions?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
ADDENDA CONTENTS
7. Would you like a representative of Cushman & Wakefield’s National Quality Control Committee to contact you?
__ Yes
__ No
Your Name:
___________________________________________
Your Telephone Number: _________________________________________
Contact Information:
Scott Schafer
Managing Director, National Quality Control
(716) 852-7500, ext. 121
ADDENDA CONTENTS
ADDENDUM C: GROUND RENT RESET CALCULATION
Ground Rent Reset Analysis
Supporting Schedule -- Scheduled Base Rental Revenue
Contract Rent as of July 2023
Tenant
Best Buy
Best Buy
Citibank
Citibank
Duane Reade
Nordstrom
Nordstrom
Park South Imaging
Regal Cinemas
Regal Cinemas
Union Square Wines
Suite
G&2
G&2
100
100
110
G&2
G&2
1
4&5
4&5
120
Total Amount Per Year
Occupied Area
46,088
Jun-2024
4,126,720
9,755
13,947
32,136
9,091
118,779
6,419
___________
236,215
Weighted Average Per SqFt
5,901,775
4,023,250
4,665,600
618,018
6,973,646
872,744
___________
27,181,753
===========
115.07
===========
Ground Rent as of July 2013 (12% Increase over Previous):
$3,512,316
Ground Rent as of July 2018 (12% Increase over Previous):
$3,933,794
Ground Rent as of July 2023 (30.69% of Base SubRent As of July 2023)*:
$8,343,356
*It should be noted that the subrent rental rate equates to the product of (i) the subrent rental rate multiplied by the subrent percentage. The subrent
percentage rent shall mean a percentage equal to the sum of (i) three percent plus, (ii) a fraction (expressed as a percentage), (A) the numerator is equal to
the sum of $2,500,000 and any percentage rent payments and (B) the denominator of which is an amount equal to $9,027,000.
SubRent Percentage Calculation
3% PLUS
= $2,500,000 / $9,027,000, OR (27.69%)
SubRent Percentage Calculation Conclusion:
$2,500,000
$9,027,000
27.69%
3.00%
27.69%
30.69%
ADDENDA CONTENTS
ADDENDUM D: QUALIFICATIONS OF THE APPRAISERS
A PROPOSAL FOR
C&W BIOGRAPHY
PROFESSIONAL
QUALIFICATIONS
JOHN A. KATINOS
SENIOR DIRECTOR | VALUATION & ADVISORY
John A. Katinos is a Senior Director with Cushman & Wakefield, Inc. Valuation & Advisory. He joined
Cushman & Wakefield, Inc. in August, 1989.
EXPERIENCE
and proposed investment properties throughout the United States. Served as an arbitrator for numerous real
estate maters including ground rent redetermination, office and retail space rent renewal determinations.
EDUCATION
 New York University (New York, NY)
− Degree: Master of Science in Real Estate – Real Estate Valuation and Analysis
 Drexel University (Philadelphia, PA)
− Degree: Bachelor of Science in Business Administration – Finance
 Designated Member, Appraisal Institute (MAI #12185)
− As of the current date, John Katinos, MAI has completed the requirements of the continuing education
program of the Appraisal Institute.
 Member, Board of Directors, Metropolitan NY Chapter of the Appraisal Institute
 Certified General Real Estate Appraiser in the following state:
− New York – 46000028780
CUSHMAN & WAKEFIELD
1
A PROPOSAL FOR
C&W BIOGRAPHY
PROFESSIONAL
QUALIFICATIONS
NEW YORK
CUSHMAN & WAKEFIELD
2
A PROPOSAL FOR
C&W BIOGRAPHY
PROFESSIONAL
QUALIFICATIONS
JAMES P. STUCKEY JR.
ASSOCIATE DIRECTOR | VALUATION & ADVISORY
BACKGROUND
James Stuckey is an appraiser with Cushman & Wakefield, Inc. Valuation & Advisory Group. He joined
Cushman and Wakefield, Inc. in August 2007.
and proposed investment properties throughout New York State.
EDUCATION
 University of Scranton, Pennsylvania
− Degree: Bachelors of Science in Political Science
APPRAISAL EDUCATION
 Metropolitan New York Chapter of the Appraisal Institute
− Basic Appraisal Principles (R1)
− Fair Housing, Fair Lending and Environmental Issues (AQ1)
− 15-Hour National Uniform Standards of Professional Appraisal Practice (USPAP)
− Basic Appraisal Procedures (R2)
 Practicing Affiliate, Appraisal Institute – Metropolitan New York Chapter
 State of New York Certified Appraiser Assistant, License No. 48000049048
CUSHMAN & WAKEFIELD
1
A PROPOSAL FOR
C&W BIOGRAPHY
PROFESSIONAL
QUALIFICATIONS
CHARLES R. LOONEY
APPRAISER | VALUATION & ADVISORY
Charles R. Looney is an Associate Appraiser of Valuation & Advisory for Cushman & Wakefield. He joined
Cushman and Wakefield, Inc. in July, 2014.
Mr. Looney has contributed to appraisal and consulting assignments involving the valuation of multiple
property types, including office buildings, retail centers, cooperative, condominium and Rental apartment
buildings, retail centers, regional malls, vacant land, transferable development rights (TDRs), historic and
preservation easements, and existing and proposed investment properties throughout New York State. Mr.
Looney works as an associate to John A. Katinos, MAI, who specializes in the valuation of various property
types in all five boroughs.
EDUCATION
 Marist College– Graduated 2014
− Degree: Bachelor of Science – School of Biological Sciences
CUSHMAN & WAKEFIELD
1

November 18, 2015 To: Related Commercial Portfolio Ltd. RE

Transcription

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