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Cincinnati, Ohio 2010

Mid-YearMarket Report

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2 | Cassidy Turley

Contents

Letter 2

Ofce Market 3

Industrial Market 8

Retail Market 14

Investment 21

Dear Colleagues,

We are Cassidy Turley.we are Cincinnati. As residents and business people, we

are dedicated to our region. We dont just work in our community; we actively belongto the community. Our associates are actively involved in many charitable and civic

organizations including The FreeStore Foodbank, United Cerebral Palsy o Cincinnati,

United Way and the Cincinnati Museum Center at Union Terminal. We meet regularly with

key business and community leaders and are involved in many proessional organizations

just a ew o them include the Urban Land Institute (ULI),The Society or Industrial and

Ofce Realtors (SIOR), NAIOP Commercial Real Estate Development Association, CCIM

Institute, Building and Owners Management Association (BOMA) and the University o

Cincinnati Real Estate Roundtable. We look or meaningul ways to promote Cincinnati as

a region o opportunity and growth.

Our commitment to the community is the oundation or how we conduct business. We

believe in ace-to-ace relationships and hands-on problem solving. Whether you are a

frm seeking space or an owner looking to fll space, we have the strategies and skills to

assist you. You can also rely on Cassidy Turley to help manage your properties according

to your individual goals and priorities.

You dont simply have to take our word or it. Midwest Real Estate News in its annual

Best o the Best rankings recently rated Cassidy Turley the #1 Property Management

frm and the #3 Brokerage frm in the Midwest.

These rankings reect our deep commitment to providing best in class services.

We recognize the importance o ocusing on the long-term success o our clients by

consistently being their advocate. Our combination o market intelligence and experiencehoned over many years enables us to deliver the integrated, tailored solutions our clients

are seeking. Beyond Cincinnati, Cassidy Turley can be ound in 57 other U.S. locations

and globally through our partnership with GVA Grimley.

We look orward to talking with you about our ull-range o services spanning Capital

Markets to Corporate Services to Project & Development Services, as well as, Leasing &

Tenant Representation.

In the ollowing pages, we share our independent research and fndings about the

Cincinnati market and a orecast o what we believe the uture holds.

Sincerely,

James A. Donlin

Managing Principal, Cincinnati/Dayton

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www.cassidyturley.com | 3

Cincinnati Ofce Market Vacancy By

Submarket Second Quarter 2010

Market Indicators

(Available or Lease)

Q2 2010 Q3 2010Forecast

Treading Water at Midpoint o 2010A sense o uncertainty about the speed

and depth o the economic recovery

process pervades the midpoint o 2010.

The Dow Jones Industrial Average

rollercoasted rom 10,857 at the end

o Q1 to a high in April o 11,205

and ended Q2 at 9,774. The national

unemployment rate dipped to 9.5% in

June rom a high o 10.1% in October

2009 according to the Bureau o Labor

Statistics. However, the June rate is thesame seen in June 2009 and more than

twice the 4.6% in June 2007. Over 8

million (non-arm) jobs were lost in this

period o recession with only about 10%

regained since the beginning o the year.

For the local Cincinnati MSA there

is some good news. The preliminary

unemployment rate or May is estimated

at 9.7%, a noticeable decrease

rom the high o 10.9% recorded in

February. Private sector payrolls are

the permanent jobs driving demand or

commercial real estate. They increased

approximately 21,000 since January.

However, 70,000 more jobs would

need to be regained to reach the high

employment levels seen in 2007. The

Education and Health Services sector

had a preliminary employment fgure

in May o 149,200, the highest yet

seen. The ongoing expansion o health

acilities are positively contributing to

the local economy. The 45,000 SF Good

Samaritan Medical Center-Western Ridge

is opening in all 2010 and a 67,000 SF

medical ofce building is planned or

the Good Samaritan Hospital Campus

on Dixmyth Avenue. Christ Hospital

is seeking to expand its number o

outpatient sites and its acilities on theMount Auburn campus.

At the end o the second quarter

2010, the overall vacancy rate or the

Cincinnati market is 21.3%, a slight

increase rom the previous quarters

21.0% and above the 19.4% seen a

year ago. The overall net absorption

or the quarter is negative 122,000 SF

and year-to-date is negative 304,700

SF. Available sublease space remains

high at 611,000 SF. Taken together with

direct vacancy the availability rate is

23.2%. There are 31 existing buildings

in the market oering 50,000 SF and

more o contiguous space or a large

user. A signifcant portion o these large

blocks o space, 1.5 million SF, is in the

CBD market. That will increase by over

400,000 SF in 2011 when the Great

American Tower at Queen City Square is

completed and begins to draw tenants

out o other CBD buildings. Add to that

the 170,000 SF that remains to be flled

in the new building i no other preleasing

takes place.

Renewals and small leases

predominated this quarters ofce

transactions. Tenants are gaining

concessions on ree rent and tenant

improvements rom landlords struggling

to maintain occupancy. With no major

business closings oreseen, the vacancy

rate should remain airly stable. The

challenge or the Greater Cincinnati

market is attracting out-o-the-area

users needing large spaces. The low

cost o living, the vibrant arts scene and

excellent universities and hospitals are

positive inducements. The decline in the

number o domestic and international

Ofce Market

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ights in and out o Cincinnati/Northern

Kentucky International Airport and the

loss o major hub status is considered

a negative actor by large businesses.

However, in the ace o a struggling

national economy many companies are

putting large real estate decisions onthe back burner until a clearer picture

emerges.

CBD Market

The overall midyear vacancy rate or

the CBD market is 16.4%, up rom

the 15.8% seen at the end o the frst

quarter and 15.9% a year ago. The

vacancy rate or Class A properties is

13.6% relatively unchanged rom the

previous quarter but above the 12.9% o

a year ago. The vacancy rate or Class B

properties jumped to 18.9% rom 17.9%

at the end o the frst quarter and is

above 18.4% seen a year ago.

Porter Wright Morris & Arthur LLP

expanded to 20,000 SF rom 16,700 SF

and renewed its lease on space on the

22nd oor in the Chiquita Center at 250

East Fith Street. Northcreek Mezzanine

Fund I LP subleased 3,700 SF on the

30th oor in the 528,000 SF Chemed

Center at 255 East Fith Street.

The CBD market, and particularly theClass A submarket will experience a

major shit when the 825,000 SF Great

American Tower at Queen City Square

on Sycamore and East Fourth Street is

completed in 2011. This will become

the newest and tallest building in the

downtown Cincinnati skyline. Great

American Insurance will vacate its ofces

in the 525 Vine and 580 Buildings into

540,000 SF, leaving over 400,000 SF o

vacant space in the CBD market. FrostBrown Todd preleased 100,000 SF and

will add signifcant availability to the

PNC Center building when it relocates in

2011.

The amount o available Class B

downtown product may be shrinking.

Plans to sell the 232,000 SF Bartlett

Building ell through. Then it wentdark when Duke Energy unplugged

the electrical supply orcing the ew

remaining tenants to relocate. Fith Third

Bank is deciding whether to proceed

with oreclosure. The lack o upkeep

and aging mechanics o the physical

structure are viewed as detriments to a

quick turn-around or tenant occupancy.

The 122,000 SF 14-story Fourth &

Race Tower, ormer home o the Federal

Reserve, won $2.5 million in OhioHistoric Preservation Tax Credits to oset

part o the $20.2 million cost to convert

the nine upper oors to 88 residential

apartments. Ashley Development is

negotiating with the owner to purchase

the building.Taken together this may

bring some relie to other Class B

property owners and tighten the market

or this subset o properties.

Burke, Inc. relocated out o 52,000 SF

in the 183,000 SF Centennial Plaza II

at 805-813 Central Avenue to its new

headquarters at 500 West Seventh

Street. The City o Cincinnati Fire

Department plans to move into 24,000

SF o that space. Veterans Aairs-The

Ofces o Quality & Saety took 7,000

SF in the 235,000 SF Textile Building at

205-209 West Fourth Street.

Renovations were fnally completed

on the 36,000 SF ormer ST Media

building at 700 Broadway. KZF

Design purchased the building in

November 2008 and moved into its new

headquarters in June.

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Total Class A Class B

Suburban Market

Currently the overall vacancy rate or the

Suburban ofce market is 24.5%, close

to the 24.2% in the previous quarter but

signifcantly higher than the 21.7% a

year ago. The vacancy rate or Class A

buildings remained at at 22.9% while

Class B buildings edged higher to 27.2%

rom the previous quarters 26.5%. The

second quarter contributed a negative

48,000 SF to the total year-to-date net

absorption o negative 189,000 SF.

The Midtown market vacancy rate went

to 24.9% rom 22.0% in the previous

quarter. Both Class A and Class B

vacancy rates trended upward to 26.2%

and 23.3% respectively.

Administar moved out o 46,000 SF and

now the 72,800 SF Holiday Ofce Park

801-A building is completely vacant. The

departure o KZF Design rom 30,000 SF

contributed to the 63% vacancy rate orthe 241,000 SF Grand Baldwin on Eden

Park Drive. Renaissance Investment

Management let 14,500 SF in the

216,000 SF Baldwin 200 or 9,700

SF in the 280,000 SF RiverCenter I in

Covington.

On a positive note Strayer University

leased 16,000 SF in the 66,000 SF

Keystone Parke building built two

years ago on Dana Avenue and thebuilding has reached 50% occupancy.

Burke, Inc. moved into its 100,000 SF

corporate headquarters on a seven-acre

campus at 500 West Seventh Street

in June. The company had acquired

the original 78,000 SF ormer ADP

building at the end o 2008 or $6.25

million and expanded and renovated it.

Grand opening celebrations were held

or the newly completed 50,000 SF

Headquarters and Disaster Operations

Center or the Cincinnati Region o the

American Red Cross constructed in the

Keystone Parke ofce complex.

Construction on the 132,000 SF

headquarters or Medpace, Inc.

at Red Bank and Madison Roads

in Madisonville is on schedule or

completion in October. The company

will be vacating approximately 160,000

SF on Wesley Avenue in Norwood at

that time. Renovation o the ormer

Vernon Manor Hotel at 400 Oak Street

into 156,000 SF or research and

back ofce operations or CincinnatiChildrens Hospital Medical Center is

another signifcant development project

in the submarket. To relieve its space

situation on its main campus on Vine

Street, Veterans Aairs is building a

25,000 SF medical center on Highland

Avenue between Rochelle and Donahue

Streets in Corryville. The Urology Group

is working on the fnancing needed to

build a new 45,000 SF headquarters in

Norwood. It has already been approved

or $14 million in tax-exempt bonds

or the $15 million project. 4.2 acres

on Section Avenue in Norwood were

acquired in March or $1.5 million.

When completed, the group would be

vacating 40,000 SF on Smith Road in

the Central Parke complex. A 67,000 SF

medical ofce building is in the planning

stages or the Good Samaritan Hospital

campus on Dixmyth Avenue in Cliton.

The Kenwood market continues to be

the strongest suburban market with an

overall vacancy rate o 8.2% a signifcant

decrease rom the 9.6% in the previousquarter and 12.6% a year ago.

It remains unclear when the nine-story

270,000 SF ofce tower portion o

Kenwood Towne Place, a mixed-use

project o 600,000 SF with 300,000 SF

o retail on two oors will be completed.

It is currently in receivership and Kroger

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Kenwood Market

The 46,400 SF Kenwood

Commons II building on

Montgomery Road added

CarePoint Partners to its

tenant roster.

recently shuttered its supermarket on theground oor. Plans or the FBI campus

on the southeast side o I-71 and

Montgomery Road took a step orward

with the naming o a new developer,

The Molasky Group o Companies, and

its purchase o the 6.3 acres in June

or $4.7 million. The $50 million project

includes a our-story ofce building,

a two-story garage and a one-story

maintenance building and should be

fnished in the latter part o 2011. Thismay give impetus to Neyer Properties

Kenwood Towers planned or the

adjacent acreage. The mixed-use project

would include a seven-story 160-room

hotel, a nine-story 266,000 SF ofce

tower and fve-story parking garage.

The 46,150 SF Kenwood Commons I on

Montgomery Road saw Atos Origin renew

its lease on 14,000 SF on the frst oor.

CarePoint Partners took 7,300 SF in the

Kenwood Commons II building.

The Blue Ash market saw vacancy

decrease rom 21.2 % in the frst quarter

to the current 19.7%. A year ago it

was 16.5%. Known or its landscaped

campuses o ofce buildings with easily

accessible parking and location near

prime residential areas, it remains one o

the prime suburban submarkets.

Full Service Networking leased 6,700SF in The Landings o Blue Ash II, a

175,000 SF fve-story building, on Carver

Road. In September Sunny Delight will

relocate rom 22,500 SF in the 42,000

SF Lake Forest Pointe I to 36,146 SF

in the 162,000 SF Peier Place. The

100,000 SF Kemper Pointe building saw

Sorenson Communications, Inc. renew

and expand into 4,900 SF. Fountain

Pointe I, a 95,300 SF ofce building, had

Mutual o Omaha Insurance recommit

to its space and Financial Management

Group take 4,900 SF.

At 30.3% vacancy the Tri-County

submarket is holding steady rom the

previous quarter. A year ago the vacancy

rate was 21.0% and the area is still

reeling rom the departure o GE Aviation

rom 305,000 SF on Merchant Street or

its 413,000 SF campus in West Chester.

Devicor Medical Products Inc. recently

acquired the breast care business o

Ethicon Endo-Surgery Inc. and ound

a home or its new company that will

operate under the name o Mammotome

in Sharonville. It leased 29,900 SF on

the top oor o the 5-story 150,000

SF Summit Woods II on E-Business

Way. Staples Commercial & Contract,

Inc. leased 5,400 SF in the 52,800

SF Century Ofce Center on Century

Boulevard in Springdale.

Dynamic Sight dba Kinetic Vision

acquired an acre in the Evendale

Commons Development on Glendale-

Milord Road or a 10,000 SF build-to-

suit ofce/lab building. It should be

completed by second quarter 2011.

The East submarket vacancy rate rose

to 25.0% rom the previous quarters

24.0%. The 475,000 SF o Class A

properties had a vacancy rate o 15.4%

as compared to 32.0% or the 644,000

SF o Class B properties.

Kellogg Sales Co. recommitted to its

14,700 SF in the 120,000 SF Woodside

Center on Tri-Ridge Boulevard in

Loveland. Wellington Orthopaedic &

Sports Medicine renewed and expanded

rom 10,900 SF to 18,800 SF in the

54,900 SF Eastgate Commerce Center

on GlenEste-Withamsville Road in

Eastgate. Visiting Physicians Association

opened its third ofce in the Greater

Cincinnati region in 3,500 SF in the

51,800 SF Eastgate Proessional

Ofce Park on Aicholtz Drive in Union

Township.

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Greater Cincinnati Ofce Market Summary Second Quarter 2010

Submarket Inventory (SF) Vacancy Net Absorption YTD (SF) New Deliveries YTD (SF) Under Construction (SF)

CBD 12,584,000 16.4% (116,000) 0 825,000

Blue Ash 4,019,000 19.7% 14,000 0 0

Kenwood 986,000 8.2% 16,000 0 270,000

Mason 2,641,000 28.3% (190,000) 0 0

Midtown 3,527,000 24.9% (74,000) 0 0

NKY 3,057,000 29.0% (63,000) 0 83,000

Tri-County 2,667,000 30.3% 93,000 0 0

West Chester 1,349,000 12.3% 23,000 0 0

East 1,119,000 25.0% (4,000) 0 0

West 466,000 46.0% (4,000) 0 0

Total 32,415,000 21.3% (305,000) 0 1,178,000

Outlook

A lack o large user deals on the

positive side and urther closures on

the negative side will keep the market

in neutral this year. Commercial real

estate is considered a lagging indicator

in an economic recovery. Shadow space

underutilized by companies must be

flled frst with rehires beore expansion

is considered. It is expected that without

much momentum in the economy

in 2010, the market will ace greater

challenges in 2011 as signifcant ofce

constructions are completed and large

blocks o space become vacant as leases

come due.

The growth taking place in the Cincinnati

market is in the specialized subsectoro medical use properties. As noted,

hospitals and medical groups are

actively expanding and building and are

a positive actor in regional employment.

How this will impact the general ofce

market on a broader and deeper basis is

unknown.

The appeal o lower rent rates, ree rent

and increased tenant improvement

dollars are ueling what leasing is

done. Building values continue to be

depressed as a result.

How the new Financial Accounting

Standards Board (FASB) accountingrules to be enacted in 2013 concerning

the recording o leases on company

balance sheets may aect uture leasing

and renewal options and choices

whether to lease or buy is a conundrum

waiting to be sorted out.

Nevertheless the image o the Cincinnati

MSA as a dynamic and attractive region

reects the diversity o its businesses,

presence o Fortune 500 companyheadquarters, cutting edge educational

institutions and lively arts scene. The city

o Cincinnati was recently designated a

Hub o Innovation and Opportunity by

the State o Ohio and will receive unding

to position itsel as a national leader

in consumer marketing. Leveraged

as opportunities or development by

compounding the synergy o the local

branding companies and universities,

this may be a growth path or the region.

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8 | Cassidy Turley

2 3

Greater Cincinnati Industrial Market Summary Q2 2010

Quadrant Inventory (SF) Vacancy Net Absorption YTD (SF) New Deliveries YTD (SF) Projected Construction or 2010 (SF)

CENTRAL 78,483,000 10.5% 534,000 33,000 58,000

NORTHEAST 29,280,000 8.4% 120,000 58,000 57,000

NORTHWEST 104,587,000 11.2% (24,000) 31,000 137,000

NORTHERN KY 60,824,000 7.5% 704,000 0 282,000

TOTAL 273,174,000 9.9% 1,334,000 122,000 534,000

Market Indicators

Maintaining the Progress Made

A slow healing rather than a vigorous

recovery seems to be the ate o

the national economy. The national

unemployment rate dipped to 9.5% in

June rom a high o 10.1% in October

2009 according to the Bureau o Labor

Statistics. Yet the rate is the same as a

year ago and more than twice the 4.6%

in June 2007. Layos are occurring but

not to the extent seen in 2009. Losing

hope about ever fnding a job has ledmany to quit searching or go the route

o early retirement. The GDP increased

at an annual rate o 2.7% in the frst

quarter o 2010 sustaining positive

growth since the third quarter o 2009.

It has, however, slowed rom the 5.6%

seen in the ourth quarter o 2009. The

Federal Reserve noted that industrial

production advanced 1.2% in May ater

an increase o 0.7% in April. There

have been three months o consistentgrowth. In the June 2010 Manuacturing

ISM Report on Business, the national

Purchasing Managers Index (PMI) stood

at 56.2, lower than the high o 60.4 in

April. Although the index has been over

50 or the past eleven months indicating

expansion, the uctuation may warn o a

slowing or uneven rate o growth.

For the local Cincinnati MSA there

is good news. The preliminary

unemployment rate or May is estimatedat 9.7%, a noticeable decrease rom the

high o 10.9% recorded in February.The

latest preliminary fgures or employment

in manuacturing were at 108,700 in

May, the highest numbers in 13 months.

The Cincinnati PMI or June retreated

to 59.5 rom 62.6 in May as reported

by the Applied Research Institute,

Department o Economics, University o

Cincinnati and NAPM-Cincinnati. This

parallels the national trend o continuedbut slowing growth o the economy. The

local index has been above 50 or the

sixth consecutive month.

The Cincinnati industrial market

experienced modest improvement in Q2

2010 when it saw its frst dip in vacancy

to 9.9% rom 10.3% in the previous

quarter. This is still above the 9.5% o

a year ago, but shows movement in the

right direction. Another encouraging

sign was net absorption or the second

quarter at a positive 1.09 million SF

bringing the year-to-date total to 1.33

million SF. Only the Northeast quadrant

saw a slight increase in its vacancy rate

rom 7.9% in the frst quarter to 8.4%.

Gross absorption or Q2 was 2.2 million

SF.

Closures are still occurring but with

less requency. At the end o this year

Industrial Market

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Greater Cincinnati Industrial Market

Zumbiel Packaging will begin moving

out o its 198,000 SF acility on Harris

Avenue in Norwood to a 180,000 SF

newly constructed plant on its 30-acre

campus in Hebrons Gateway Industrial

Park. The doors are closing or Overhead

Door Corporations 128,000 SF plant onWest 43rd Street in Covington later this

year.

State and local fnancial incentives

have contributed to job retention and

creation and enticements to locate

within the Greater Cincinnati region.

General Electric Company in Evendale

was the recipient o a $1 million Rapid

Outreach Grant or the purchase o new

equipment insuring retention o 5,000jobs. E-BEAM Services, Inc. received a

45 percent job creation tax credit and

plans to double the size o its plant on

Henkle Drive in Lebanon. Pennsylvania-

based Keystone Foods is searching or a

200,000 SF processing and distribution

site to lease in Northern Kentucky or

Cincinnati. The state o Ohio awarded

the company a $760,149 job creation

tax credit to lure it to the Cincinnati area

since it would create 239 new jobs.

Sugar Creek Packing Co. on Muhlhauser

Road in West Chester is receiving a

$20,000 Rapid Outreach Grant or the

acquisition o new equipment. This willretain 75 jobs and create 50 new ones.

Improvement in transportation

inrastructure is ongoing. Superstreet

intersections along the State Route 4Bypass corridor will be constructed

at Tylersville Road, Hamilton Mason

Road and Symmes Road. These are the

frst to be built in Ohio and will reduce

travel time up to 90 percent through

the intersections. Norolk Southern will

extend its Heartland Corridor line rom

Columbus to Cincinnati. The Ohio Rail

Development Commission recently

granted permission or improvements

needed or double stack clearance.

The amount o construction has

dwindled tremendously. In 2009 about

1.3 million SF o build-to-suit, spec and

expansions were built. To date in 2010

only 122,000 SF has been completed.

There is approximately 300,000 SF

scheduled or the latter hal o the

year. Fiscally strong companies are

taking advantage o lower construction

costs to add more square ootage to

already existing acilities or erecting new

buildings that accommodate updated

equipment, procedures and expanding

customer markets. Work on Graeters

new 24,600 SF plant in Bond Hill should

Northeast Quadrant

E-BEAM Services wants

to double its size to

approximately 128,000

SF on Henkle Drive in

Lebanon.

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10 | Cassidy Turley

Signifcant Bulk Transactions in Q2 2010

Quadrant Name o Building SF o Building Tenant Type o Transaction SF o Transaction

NKY Hebron II 598,000 HK Systems Lease 598,000

NW ProLogis Park Fairfeld 400,200 Cornerstone Brands Renewal 400,200

NW Sharonville Distribution Center #2 380,000 Palmer-Donavin Manuacturing Co. Lease 234,400

NKY Airpark International Distribution Center 5 396,000 Innotrac Corporation Renewal 198,000

NW Northpark Business Center V 180,000 Intelligrated Lease 81,000

NKY Park West International P 159,440 Exel Logistics Expansion 80,090

NKY Park West International P 159,440 Exel Logistics Renewal 79,350

NW West Chester Commerce Park #3 148,800 Dedicated Logistics Renewal 70,700

NW Williams Transport Logistics 120,000 Diversapack, Inc. Lease 60,400

NE Distribution Center II 176,800 Power & Telephone Supply Renewal 40,000

Greater Cincinnati Bulk Warehouse Marketbe completed next quarter. It will allowthe company to compete on a national

basis and boost ice cream production

to one million gallons annually. A 9,000

SF addition is under construction on

Dickerson Distributing Co.s 35,000

SF building in Monroe. Also due to be

completed is the 56,000 SF expansion

o the 150,000 SF Skidmore Sales

& Distributing Company building in

West Chester. The project includes the

construction o 10 additional docks.Parkway Products Inc. plans to expand

its 55,700 SF acility in Erlanger on

Jamike Avenue to 110,200 SF. U.S.

Worldwide Logistics, Inc. is adding

42,000 SF to its 85,000 SF building in

Hebrons Airpark International Business

Park. Southern Graphic Systems Inc. will

expand its 61,500 SF acility in Florence

by 5,000 SF.

Bulk WarehouseBulk vacancy in Q2 2010 was 16.5%

as compared to 17.6% last quarter and

16.8% a year ago. There was positive

net absorption o 629,000 SF, a positive

trend that started in the previous quarter.

The growth in manuacturing production

and retail spending is giving momentum

to bulk space absorption.

Most o the major transactions in the

second quarter were concentrated in

the Northwest and Northern Kentucky

quadrants. They lie on the major north-

south transportation corridor o I-75

making them attractive distribution

hubs. The Northwest quadrant saw

vacancy drop to 21.4% rom 22.4% in

the previous quarter. A year ago it was

20.6%. The vacancy rate in the Northern

Kentucky quadrant ell to 10.8% rom

12.3% last quarter and 13.6% a year

ago. The lowest vacancy rate in recent

history was 7.2% seen in the frst quarter

o 2007.

Expect new bulk construction only ater

signifcant absorption o the current 2.8

million SF vacant in the 7.2 million SF

built in 2007 and later has occurred.

Net eective rates or modern Class A

product in the bulk sector at $2.70/SF/

NNN continue to be at. Class B and

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Greater Cincinnati Ofce/Warehouse Market

Signifcant Ofce/Warehouse Transactions in Q2 2010

Quadrant Name o Building SF o Building Tenant Type o Transaction SF o Transaction

NKY Airpark Business Center B 146,000 Leslie's Poolmart, Inc. Renewal 146,000

NW The Pointe at Union Centre B 76,800 Ellison Technologies, Inc. Lease 10,800

NKY Airport Business Center-B 57,647 American Power Services Renewal 10,500

NW Capital Center I, Industrial Ctr 10 22,600 Automatic Equipment Corporation Renewal 10,000

NKY Donaldson Rd Center I-B 66,300 Jackson MSC Lease 7,800

NW Capital Center I, Industrial Ctr 7 22,325 Camp Hill Industries Renewal 5,700

Class C bulk warehouse are around$2.25/SF/NNN*.

Several bulk acilities ound new investor

owners in the second quarter. The 1.2

million SF Gateway 75 originally built

as a distribution acility or Montgomery

Ward was acquired by Neyer Properties

or $7.8 million. The building was 84%

vacant at the time o purchase. The

new owner will install solar panels,

new loading docks on the west side as

well as ood control eatures to attract

new tenants. Two Prologis buildings

on Fairfeld Business Drive totaling

196,800 SF were acquired by Road

Bay Investments LLC or $5.2 million.

Duke Realty sold its 400,000 SF acility

on Hamilton-Lebanon Road to The

Hollingsworth Companies or $7.0

million. Xerox has a long-term lease on

the entire building.

Ofce/Warehouse

The vacancy rate or ofce/warehouse

buildings in Q2 2010 continued to rise

to 18.4% rom 17.1% last quarter and is

above the 17.7% o a year ago. The net

absorption or the second quarter was

(188,000) SF. The vacancy rates range

rom 12.3% in the Central quadrant

to 21.5% in the Northern Kentucky

quadrant.

With vacancy rates trending upward

or this property type, new construction

starts are not anticipated in the near

uture.

Net eective lease rates or the ofce/

warehouse sector were around $4.25/

SF/NNN*.

Freestanding

The vacancy rate o 7.1% in Q2 2010 or

reestanding buildings is the lowest or

all property types. This was a slight dip

rom 7.4% in the previous quarter but

above the 6.6% vacancy rate o a year

ago. There was a positive net absorption

o 648,000 SF in the second quarter and

a total o 776,000 SF or the frst hal

o 2010. The vacancy rates range rom

2.4% in the Northern Kentucky quadran

to 9.8% in the Central quadrant.

This quarter saw the completion o about

24,500 SF o new construction. Dynamic

Controls building on Symmes Road in

Hamilton doubled in size to 25,400 SFwith its addition. A 12,500 SF build-to-

suit was completed or Tramonte and

Sons on Welden Drive in Mason.

Several properties are acing

redevelopment. XTRA Lease acquired

the Keidel complex o three buildings

totaling about 128,000 SF situated on

18.63 acres or $1.7 million. The new

owners intend to demolish the

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12 | Cassidy Turley

Greater Cincinnati Freestanding Market

Signifcant Freestanding Transactions in Q2 2010

Quadrant Name o Building SF o Building Tenant/Buyer Type o Transaction SF o Transaction

NW Clark Steel Framing 232,000 McGraw/Kokosing, Inc. Sale 232,000

NW Former Anderson Logistics 140,000 Spartan Logistics Lease 140,000

CEN Former Husman Factory 129,000 Christian Moerlein Brewing Co. Lease 129,000

NW 10121 Princeton-Glendale Road 91,800 Tropicana Renewal 91,800

CEN 4057 Clough Woods Drive 57,351 QC Industries Sale 57,351

NW Weyerhaeuser Co. 48,049 Rudd Equipment Sale 48,049

CEN Hill Floral Products 37,706 Nehemiah Manuacturing Sale 37,706

NW Worthy Cartage Co. 22,618 TNT Trucking Sale 22,618

CEN 500 Kent Road 20,870 Plumb Properties o Clermont County Sale 20,870

CEN 8686 Southwest Parkway 20,250 3S Incorporated Sale 20,250

buildings and use the site or tractor-

trailer parking. An 8,500 SF building

will also be erected. A $3 million Clean

Ohio Revitalization grant will acilitate the

brownfeld cleanup o the ormer Kahns

pork processing plant at 3241 Spring

Grove Avenue in Camp Washington. The

568,000 SF plant will be demolished

and the 17-acres site remediated. Micro

Metal Finishing LLC plans to purchase

three acres to construct a $3 million

80,000 SF plant. The company has a

64,742 SF acility at 3448 Spring Grove

Avenue. Hamilton County, the current

owners o the site, will sell the rest o the

acreage to Vestige Development Group

or industrial/ofce redevelopment.

Land

The volume o land sales geared

to industrial construction has been

minimal since the economic downturn

began. It is expected that once there is

sustainable growth, development will

begin anew. Those sites near improved

inrastructures will be most attractive.

In Monroe, Corridor 75, a 429-acredevelopment, is positioned midway

between Dayton and Cincinnati. The

site can accommodate 6.2 million SF

o industrial buildings. A nearby single-

point urban interchange (SPUI) provides

easy access to I-75, a major truck route.

The 48-acre Sharonville Commerce

Center at Partnership Way in Sharonville

will be home to Kutol Product Company

150,000 SF headquarters. There is room

or six additional reestanding or ofce/

warehouse buildings.

MetroWest is an 18-acre site at Gest and

West 8th Street in Lower Price Hill that

can support 250,000 SF o space. The

14 acres at 601 Reading Road are ready

or development into the Reading Lie

Sciences Campus.

Florence has 28 acres available at

Vulcan Drive while Erlanger has 54 acresin its Circleport Park near the Dolwick

Connector Road zoned or industrial

use. IDIs Park South in Richwood

and Prologis Park 275 in Hebron can

accommodate bulk warehouse projects

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Outlook

The weakness or strength o the

economy is reected in commercial real

estate activity. The industrial market

may be starting on the upward portion

o the recovery cycle, mirroring that o

economy. However, there is a realization

that the recovery will be slow and ftul

at best.

As more positive signs arise in the

economy, tenants will be pressed to

negotiate the best deals possible beore

there is a shit in their bargaining

position.

The amount o tenant incentives will

decrease as the market tightens and

vacancy decreases. Shorter terms are

preerred by landlords hoping to capture

upside growth in the recovery.

Investment groups that have raised

money are entering the market buyingup properties with good potential

or fnancially strong long term lease

tenants. Cash needy owners may be

orced to sell properties in order to hold

on to their more lucrative holdings.

Speculative construction will occuronly when a sizeable amount o vacant

space has been backflled and a vibrant

dynamic economy is reestablished.

*(Note: Rates are based on a sample o

comparable data gathered by Cassidy

Turley. Renewals are not included in the

analysis.)

INDUSTRIAL TERMS AND DEFINITIONS

Inventory:Industrial inventory includes all

multi-tenant, single tenant and owner occupied

buildings.

Industrial Buildings Classifcations: Industrial

buildings are categorized as bulk warehouse,

ofce/warehouse and reestanding based on

their physical characteristics including percent

ofce build-out, clear height, typical bay depth,

typical suite size, type o loading and typical

uses.

Vacancy and Availability: The vacancy rate is

the amount o physically vacant space divided

by the inventory. The availability rate is the

amount o space available or lease divided by

the inventory.

Net Absorption: The net change in physically

occupied space over a period o time.

Asking Rent: The dollar amount asked by

landlords or available space expressed in

dollars per square oot per year in most parts

o the country, and dollars per square oot per

month in areas o Caliornia and selected other

markets. Industrial rents are expressed as triple

net where all costs including but not limited to,

real estate taxes, insurance and common area

maintenance are borne by the tenant on a pro

rata basis. The asking rent or each building

in the market is weighed by the amount o

available space in the building.

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14 | Cassidy Turley

Highlights

Changes in the

Supermarket Sector

Struggling Malls

CBD Dynamics

Fast Food Popularity

Investment Sales Rise

Retail Outlook

OHIO

KENTUCKY

INDIANA

Cincinnati

1. Kenwood2. Tri-County

3. Eastgate/Milord4. Colerain

5. Western Hills6. Hyde Park

7. CBD/Cliton

8. Fairfeld/Forest Park9. Anderson

10. Mason/Deerfeld Twp.11. Hamilton/West Chester

12. Lebanon13. Middletown/Springboro14. Florence

15. Hebron/Burlington16. Independence

17. Crestview Hills18. Newport/Bellevue

19. Covington/Ft. Wright20. Campbell County21. Southeast Indiana

Signifcant Submarkets in the Cincinnati Retail Region

11

13

12

10

2

4

8

1

6

3

9

7

1819

5

1517

2014

21

16

I-75

I-71

I-74

I-71I-75

I-275

I-275

I-75

The Cincinnati retail market is

comprised o Boone, Campbell andKenton counties in northern Kentucky,

Hamilton, Butler, Clermont and Warren

counties in southwestern Ohio and

Dearborn and Franklin counties in

southeastern Indiana. Within this area

are 13 signifcant submarkets in Ohio, 7

in northern Kentucky and 1 in southeast

Indiana.

Greater Cincinnati is a growth area with a

total population o over 2 million peopleand is the 24th largest MSA in the

nation. It is the headquarters location or

the Fortune 500 retail giants, Procter &

Gamble, Kroger and Macys.

Supermarkets

The supermarket sector in greater

Cincinnati saw signifcant changes

Retail Market

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biggs

The 157,600 SF anchor o

Governors Point South on

Mason-Montgomery Road

in Mason was acquired by

Remke Markets.

in the frst hal o 2010. The leadingsupermarket company in the region,

Kroger, has embarked on an ambitious

expansion and renovation program. In

Harrison, construction was completed

in March on a 116,432 SF Marketplace

replacing a 56,000 SF building. A

61,000 SF ormer Thritway store Kroger

acquired when Winn-Dixie let the

market at The Shops at Harpers Point

in Symmes Township was expanded to

106,000 SF to include specialty areasor Murrays Cheese, a restaurant and

an olive and antipasto bar. The 56,000

SF store anchoring Fort Mitchells

Expressway Plaza on Dixie Highway will

be expanded to 104,000 SF and will

reopen with gas pumps in the latter part

o this year. In the planning stages is

a 70,000 SF store, to replace one hal

the size, in the Short Vine district o

Corryville.

SUPERVALU, aced with declining

profts with the entry o Meijer and

Wal-Marts grocery departments to

the region, opted to close fve biggs

in Harrison, Colerain Township, West

Chester, Florence and the original store

in Union Township. The remaining

stores in Columbia Township, Westwood,

Anderson Township, Oakley, Mason

and Delhi Township were acquired by

Erlanger-based Remke Markets which is

supplied by SUPERVALU. The purchase

boosted the number o locations or the

local supermarket chain to thirteen. The

Mason store may be scaled back rom

157,600 SF to 65,000 SF to match the

size o its sister stores.

As part o its expanding ootprint across

the U.S. without merger or acquisition,

ALDI plans to open 80 stores in 2010.

Deerfeld Townships Montgomery

Crossing shopping center at Fields Ertel

and Montgomery Roads is now anchored

by a 19,200 SF ALDI that opened in

April.

Movie Theatres

In its bid to become the fth-largest

movie theatre chain in the US by box

ofce sales and number o screens,

Rave Cinemas LLC acquired 29 locations

rom National Amusements. Locally the

purchase included ormer Showcase

theatres in Kings Island, Milord and

Western Hills.

Malls

Older malls have allen victim to the

tightened fnancial atmosphere and have

seen their share join the distressed

asset list o properties. The 1.1 million

SF Northgate Mall built in 1972 in

Colerain Township is in deault o its $82

million loan. The closure o its anchor,

Dillards, at the end o 2009, earlier

relocation o JC Penney to another

nearby location, a 40% vacancy rate

and contingency clauses in the other

retailers leases requiring the presence

o three anchors have actored into

the owners inability to meet its loan

payments.

The Bear Creek developments at

Kenwood Towne Place and NewportPavilion are at a standstill. Deault

judgments are being sought and liens

surround these projects. Kenwood

Towne Place, a mixed-use development

with 336,885 SF o retail space has

been in limbo since late 2008. Kroger

Fresh Fare shuttered its doors in May.

Although Kroger did open at Newport

Pavilion, incomplete site preparation

and non-payment to contractors delayed

the construction o a Target store. It iscurrently scheduled to break ground in

July.

The recent closure o Krazy City, a

50,000 SF amusement park that

replaced JC Penney a little over two

years ago as an anchor or the 1.29

million SF Tri-County Mall at the I-275

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16 | Cassidy Turley

Broadway Commons

A 400,00-500,000 SF

casino and entertainment

center will be developed on

23 acres currently used as a

downtown parking lot.*

*Image courtesy of

Downtown Cincinnati, Inc.

and I-75 intersection only added to the

woes o Coventry Real Estate Advisors,

the owners. They are currently in deault

on a $153 million CMBS loan on Tri-

County Mall and are in litigation with the

lender and DDR, ormer managers o

the property. Coventry is in litigation with

DDR on eleven additional properties.

Together with co-tenancy concerns and

a 19% vacancy rate, difculties are

mounting or the troubled mall.

Built in 2001 and sold in 2005 or $20

million, the 145,800 SF Union Centre

Pavilion in West Chester is acing

oreclosure because the current owner

has deaulted on its $16 million note.

Leasing activity has ailed to materialize

at the 1.5 million SF Cincinnati Mall inForest Park. It was acquired in March by

Cincinnati Holding Co., LLC at a fre sale

price o $5.9 million. The Guess Factory

Store and Showcase Cinemas were the

latest tenants to close shop. Bass Pro

Shops lease is coming up or renewal

and its potential departure would put

the malls retail uture in jeopardy. Other

commercial uses may be explored to fll

the dark space.

Kenwood

The premiere retail submarket in the

region, Kenwood, continues to be a

hub or suburban activity at I-71 and

Montgomery Road. New additions to

the tenant roster o the 1.2 million SF

Kenwood Towne Centre are Aroma

Sushi and Spencer Gits. Anthropologie

leased the 11,000 SF ormer west elm

spot near Nordstrom. Although the

Showcase Cinema closed at Kenwood

Town Centre and the space backflled

by H&M, a replacement or movie goers

has landed right next door. Opening in

the all is an eight-screen theatre flling

the 28,000 SF vacated by Henredon and

Drexel Heritage Furniture in the 74,000

SF Kenwood Place on Kenwood Road.

In the 391,000 SF Sycamore Crossing

and Sycamore Plaza, Ulta, a salon and

beauty shop, took the 9,862 SF ormer

Rack Room space. While Cincinnati

Bell doubled its size to 5,000 SF in

the JoS. A. Bank Center on Kenwood

Road, Verizon Wireless moved into the7,000 SF reestanding building at 7790

Montgomery Road in ront o Trader

Joes. Mattress Firm plans to relocate

rom Kenwood Place into 4,000 SF

in a strip center anchored by Urban

Active on Montgomery Road. Willies

Sports Ca moved across the street

into 7,500 SF in the 26,500 SF ormer

Gentry building on East Galbraith and

the Great American Restaurant opened

in the 5,346 SF space it vacated at 8740Montgomery Road.

CBD/Uptown

The dynamics o the central business

district retail market will be signifcantly

enhanced by several major projects

underway.

Michigan-based Rock Ventures LLC

acquired 23 acres in the downtown

area bordered by Reading Road,

Broadway, Court Street and Gilbert

Avenue. The site, Broadway Commons,

will be developed as a casino and

entertainment area. Ground will break on

the $300 to $400 million project in the

all and should be fnished in the latter

part o 2012. Including a 4,000-space

parking garage, the development will

span 400,000 to 500,000 SF. A ring o

restaurants and boutiques around the

perimeter o the casino is part o the

vision or the area which will become a

hot spot or both tourists and locals.

Down by the Ohio River, The Banks

project is taking shape on the 18 acres

between Paul Brown Stadium and the

Great American Ball Park reaching

its frst milestone with the opening o

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Bartini

A specialty martini bar is

scheduled to open in the

580 building at East Sixth

and Walnut Streets, a

prominent downtown artsand restaurant intersection.

the east side o the Intermodal TransitFacility, a 1,400 space parking garage.

The next phase will include 300

apartments and 80,000 SF o retail

space that are scheduled or completion

in spring 2011. Design and construction

plans are being fnalized on the Christian

Moerlein Lager House, a two-story

15,000 SF restaurant with seating or

500 indoors and 600 in its outdoor beer

garden, in the 45-acre adjacent park.

The 825,000 SF Great American Tower

at Queen City Square on Sycamore and

Fourth Streets will add 20,000 SF o

new retail space to the market when

completed in 2011.

Adding to the downtown residential

population will be the conversion o

the top eleven oors o the 122,000 SF

16-story Fourth & Race Tower ofce

building to apartments. The ormer home

o the Federal Reserve recently received$2.5 million in Ohio Historic Preservation

Tax Credits towards the $20.2 million

renovation.

Entertainment and dining choicescontinue to multiply in the area

surrounding Fountain Square, the citys

gathering place or un. Mynt Martini

debuted on New Years Eve in the Fith

Third Center on the plaza and eatures

a 1,200 SF outside patio and a 3,800

SF interior with three bars and live

entertainment. Its Just Crepes opened

its second downtown location in 2,500

SF on the ground oor o the Fourth &

Elm building. Taqueria Mercado openedin the 6,000 SF ormerly occupied by

Javiers on Eighth Street. Soho Sushi is a

two-level 5,000 SF restaurant addition in

the Tower Place Mall at Fourth and Race

Streets. Scheduled to open later this

year is Bartini, a specialty martini bar, in

the 8,900 SF ormer Oceanaire Seaood

Room space in the 580 Building on

Walnut Street. A Restaurant Row or

outside dining is envisioned or this area

complementing the Backstage Districtanchored by the Arono Center or the

Arts.

Bootsys, a contemporary restaurant

located across rom the theatre, will

reopen in the all with a new design andbranding. At the corner o Seventh and

Walnut, renovations are taking place on

a two-story 2,000 SF site that will be a

coee and sandwich shop by day and a

sports bar at night. The lower level will

have a lounge with a DJ. Also set to open

later this year is Jean-Roberts Table,

an 8,448 SF restaurant on Vine Street.

Fat Cats replaced Game Day Ca on

East Pete Rose Way and introduced

the dueling pianos entertainmentconcept to Cincinnati. On the west side

o downtown The Penguin, a dueling

piano bar chain, is opening its frst area

location in the 5,150 SF ormer Havana

Martini space in the Carew Tower on

Vine Street.

New hotel options are coming or

overnight accommodations in the

downtown area. Renovations have

begun on the 137-unit 12-story Phelps

Apartment building in the Lytle Park

Historic District. It is being converted into

a 134-unit Residence Inn by Marriott.

When it opens in spring o 2011, it will

be the newest downtown hotel stock

since the $25 million renovation o The

Cincinnatian in 1987. The 225-unit

210,700 SF Metropole Apartments on

Walnut Street across rom the Arono

Center or the Arts was sold to 3CDC. It

will be redeveloped into the 160-suite

21c Hotel eaturing a restaurant and

8,000 SF contemporary art museum.

Relocation o the residentsas well as

Trattoria Roma, an Italian restaurant, and

Subway Lounge, a bar, will take about

a year beore work on the project can

begin. Further north in the Uptown area

the frst phase o the $24 million

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18 | Cassidy Turley

Corryville Crossings is underway atMartin Luther King Boulevard and Short

Vine. Construction o the fve-story 132-

room Hampton Inn and 219-car public

parking garage has reached the midpoint

and should be completed by all.

Mason/Deerfeld Township/Symmes

Township

In the northeast region o Greater

Cincinnati, most o the retail

development has been along the FieldsErtel Road and Mason-Montgomery

Road corridors radiating rom their

intersection with I-71.

Most o the dark space that accumulated

with the departure last year o big box

retailers Soa Express, Circuit City and

Linens n Things in Governors Plaza

on Fields Ertel Road has been flled.

Louisville-based Merridian, a home

urnishings store, is preparing or the

grand opening o its third location in the

32,000 SF ormer Circuit City building.

The 22,900 SF ormer Linens n Things

space is now home to Big Lots. Keep

It Tight holds exercise classes in the

6,000 SF ormer Soa Express site.

Asian Paradise replaced G Bailey in the

6,750 SF restaurant endcap o McCabe

Crossing. Tonys, an upscale Italian

restaurant, flled the 7,700 SF adjacent

reestanding building Bravo let when it

relocated to Deerfeld Towne Center on

Mason-Montgomery Road.

On the north side o Fields Ertel Road,

Salon Concepts took 4,600 SF in Kings

Mall. ALDI opened in the 19,200 SF

ormer hhgregg space in Montgomery

Crossing.

Faade upgrades were completed atThe Shops at Harpers Point on Kemper

Road and the newly expanded Kroger

supermarket opened in March.

Along Mason-Montgomery Road, Remke

Markets expanded its ootprint across

the Ohio River with its purchase o the

biggs supermarket in Governors Pointe.

Five Guys Burgers and Fries, ranked

the astest growing restaurant chain in

the U.S. in 2009 by Technomic, opened

its fth location in the region in 2,776

SF in an outlot building. Dao Modern

Asian Cuisine took over the 7,560 SF

site ormerly occupied by Macaroni

Grill in Deerfeld Towne Center. A newly

constructed 110-unit Hilton Garden Inn

opened on Natorp Boulevard while the

92-room Ramada Inn on South Mason-

Montgomery Road was rebranded Best

Western Mason Inn.

Further north the 410,000 SF PrimeOutlets in Jeersonville gained two new

retailers, Levis and Catherines Plus

Sizes.

West Chester/Liberty Township/Monroe

The astest growing population area

o the Cincinnati market lies in the

northwest area along the I-75 corridor

north o I-275.

West Chester has three new restaurants.Sultans Mediterranean Cuisine is on

Tylers Corner Drive and Grand Ole Pub

is on Princeton-Glendale Road. Stone

Creek Dining Company opened its

second location in the Cincinnati market

in the 8,810 SF ormer Mesh restaurant

space on Muhlhauser Drive.

The 94-acre site at I-75, Cox Road andLiberty Way in Liberty Township could

be the site o the largest uture retail

development in the area. Liberty Towne

Place is in the planning stages and could

include close to 1 million SF o retail

space. Preliminary site plans include

room or three department stores,

an outdoor sports business, movie

theatre, supermarket, specialty shops

as well as restaurants. Frischs recently

acquired two acres at Yankee andCincinnati-Dayton Roads in anticipation

o building a smaller prototype 5,000 SF

restaurant. A ormer 55,000 SF Kroger

on Cincinnati-Dayton Road is now home

to Web Extreme Entertainment eaturing

a go-cart track and laser tag arena.

The 400,000 SF Cincinnati Premium

Outlets at I-75 and SR 63 in Monroe

continues to grow its tenant roster. Joes

Jeans, New York & Company, Claires

Accessories and Under Armour have

already opened their doors or business.

LensCraters, Lacoste, Ann Taylor Lot

Outlet and True Religion are on the

schedule or later this year and early

2011.

Fairfeld/Forest Park

The 66,200 SF once occupied by

AutoNation on Omniplex Court in Forest

Park is now a CarMax Auto Superstore,

the frst in the region. Party City leased

an 11,250 SF portion o the ormer Cost

Plus World Market space in the 74,000

SF Tri-County Marketplace on Princeton

Pike. The 12,700 SF ormer Just

Saab dealership on Dixie Highway has

become the fth area location and new

headquarters or USA Collison Centers.

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Newport on the Levee

Located on the Ohio River

in Kentucky, its unique mix

o restaurants, shops and

entertainment venues draws

visitors rom both sides o

the river.

Newport

At 340,000 SF Newport on the Levee

is the largest entertainment venue in

Northern Kentucky. Caliornia-based

Lucky Strike opened a 24,000 SF center,

Star Lanes, on the plaza level. It eatures

12 public bowling lanes, a party room

with our lanes, billiards and a restaurant

aptly named Toro or its hydraulic bull.

The frst area Brothers Bar & Grill, a

Midwest chain known or its special

events, is now located on the exterior

riverwalk level. One can even learn some

circus tricks at the ying trapeze classes

given by the Amazing Portable Circus

on the concourse. The latest new stores

include The Dragons Hoard, a antasy

clothing and accessories boutique, and

Saxbys Coee.

Crestview Hills/Florence

The largest retail malls in Northern

Kentucky lie in these two communities.

The 500,000 SF Crestview Hills Town

Center at I-275 and Dixie Highway will

be the frst area location o Charming

Charlie, dubbed a Hot Retailer by

ICSC. It will open by the end o the year

in 14,000 SF ormerly occupied by

Entertainment Solutions and Learning

Express. The Learning Express will

reopen in its original 2,945 SF location

ater a move to a larger space and

subsequent closing. The 147,000 SF

JC Penney in the 890,000 SF Florence

Mall at I-75 and KY 18 is undergoing

remodeling that includes new ooring,

lighting and wider aisles. A 1,500 SF

portion will be dedicated to Sephora, the

beauty products boutique. The upgrades

are scheduled or completion in July.

Ollies Bargain Outlet is expanding into

Kentucky. The surplus retailer leased

33,639 SF and will anchor the 170,270

SF Florence Plaza on Connector Drive.

The Factory Card Outlet in the FlorenceSquare Shopping Center on Mall Road

is moving into 18,100 SF in the Village

at the Mall across the street. The

additional space at its new location will

accommodate conversion to the Party

City concept.

Several casual ood chains ound great

locations in the area. A new 6,000 SFRed Robin that seats 200 opened on

Houston Road. Chilis plans to construct

a 5,700 SF restaurant at Houston Road

and Spiral Boulevard. This will be the

frst location in northern Kentucky or the

chain. Dayton-based Hot Head Burritos

is expanding into the Greater Cincinnati

area with its 1,700 SF eatery on Mount

Zion Road. Future sites include Erlanger

and Fort Wright. City Barbeque will have

its frst site in Kentucky on BurlingtonPike ready this all. The Florence Square

Shopping Center will be the second area

location or J. Gumbos.

Investment Sales

The frst hal o 2010 saw an upswing

in the dollar amount and number o

signifcant retail sales in the Greater

Cincinnati area.

The largest sale at $35.0 million

($1,521,739/Acre) involved the

acquisition by Rock Ventures o 23 acres

in the downtown area or building a

casino.

Duke Realty sold its portolio o the

161,100 SF Governors Point North

anchored by Lowes and the 199,000

SF Governors Point South anchored

by Remke Market biggs on Mason-

Montgomery Road in Deerfeld Township

or $27.5 million ($76/SF) to Dallas-

based Encore Enterprises.

Fairfelds 1.75 million SF Cincinnati Mal

was sold by NorthStar to New York-

based Cincinnati Holding Co. LLC or

$5.9 million ($3/SF).

AEI Property Corporation made a

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20 | Cassidy Turley

$5.2 million ($191/SF) NNN leasedinvestment in the 27,140 SF PetSmart at

245 Rivers Edge Drive in Milord.

SUPERVALU sold the 156,150 SF

building housing its biggs supermarket

on New Haven Road in Harrison to

Toebben Cos. or $4.5 million ($29/SF).

The new owner is leasing the building to

Remke Markets which now operates the

grocery. It plans to reduce the ootprint

to 71,000 SF within the building.

Louisville-based Merridian Furniture,

looking to expand into the Cincinnati

market, purchased the 33,400 SF ormer

Circuit City building along the Fields Ertel

Road corridor or $2.2 million ($64/SF).

The 88-room EconoLodge at 11620

Chester Road in Sharonville was sold

to Ambelal or $1.5 million ($17,045/

Room).

The 103,000 SF Cambridge Plaza at

3111 Dixie Highway in Hamilton was

sold by Cambridge Plaza o Ohio LLC to

Cambridge Real Estate Partners LLC or

$1.5 million ($14/SF).

The Itis Group acquired the 20,500 SF

Cornell Crossing strip mall or $1.24

million ($60/SF) with plans to convert it

to medical ofce space. The only retail

entity remaining is The Melting Pot.

The 18,087 SF retail strip center at 6417

Branch Hill Guinea Road in Loveland

was acquired at a sheris sale by Fith

Third Bank or $1.2 million ($66/SF).

Outlook

Positive consumer spending trends

resumed in May with a 0.2% increase

over the previous month ater a atApril reading according to the Bureau

o Economic Analysis. Coupled with the

positive trending or personal income

and disposable personal income,

retailers can see some light at the end

o the tunnel o the current recession.

However, high unemployment continues

to impede a speedy return to previous

high levels o consumer spending.

Locally, the laundry list o ast ood and

casual ood restaurants opening in the

Greater Cincinnati market continues to

grow. Banking on the consumer need

to get out o the home kitchen without

breaking the bank, this sector has seen

success. Chains like Five Guys Burgers

and Fries, Red Robin, Frischs and

Chipotle Mexican Grill added several

new sites in the market in the frst hal o

2010.

The evolution o the downtown retailmarket will take a giant leap with the

presence o an urban casino and

the ensuing synergies developed in

the surrounding neighborhoods. The

reinorcing ripple eect o The Banks

Project along the Ohio River, the

Fountain Square renaissance radiating

to the Backstage District and Restaurant

Row and the Broadway Commons casino

project cannot be underestimated.

Retail success depends not only on the

local populace but also on the traveling

segment that spends time in the

area. According to the Cincinnati USA

Convention and Visitors Bureau 2009

was the fth year it has increased uture

bookings. Cincinnati, in act, is a ull 11

percentage points ahead o other cities

in the Eastern time zone when it comesto bookings through 2013, according to

Je Eastman, CEO o Kansas City-based

Trends, Analysis and Projections, which

tracks convention booking data or 50

cities across the U.S. and Canada.

However, distressed asset status is

throwing a monkey wrench into leasing

at local malls. Who has the authority

to transact deals when an owner is in

deault and co-tenancy clauses are just

some o the actors that may inhibit the

continued health o some malls.

Uncertainty about the new accounting

rules under consideration by the

Financial Accounting Standards Board

(FASB), is causing consternation in the

commercial real estate world. Buy or

lease, renewal options, estimating uture

sales over the term o an entire lease

are issues that will aect how deals are

transacted in the uture.

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US Capital Trends Sales o Signifcant Multiamily and Commercial Properties

Source: Real Capital Analytics US Capital Trends-6/2010

Overview

In keeping with the overall economys

unsteady recovery, the investment

property sector o commercial real

estate is showing signs o incremental

improvement, albeit uneven and

somewhat unpredictable. In this mid-

year report a summary o current

observations about the investment

property market rom a variety o sources

is provided. A consistent thread running

throughout our fndings: Things continueto change.

The ollowing is an accumulation

o summary comments, opinions,

observations and predictions about the

current state o the commercial real

estate investment market, grouped into

our main topics:

Economy

It appears to some that we are on the

path to a new normal which will

be a market that suers rom several

cyclical economic obstacles.

There are many who predict an

economic recovery. However, that

recovery may not beneft everyone

as there will be a dramatic shit in

consumer spending habits that will

negatively impact the upscale sectors

o the economy.

Historical data shows ongoing up and

down cycles. Indications are that the

US economy is entering a new cycle

o expansion which should be longer

than the previous recessionary cycle.

Values/Deal Flow

The number o overall transactions

is still limited. The majority o the

deal ow activity is ocused on trophy

assets. This is creating widespread

rustration among both investors and

owners over the lack o transaction

traction.

The Second Quarter 2010 Korpacz

Investor Survey cites a decline in the

average overall cap rate in 17 o the

surveys 30 markets. This indicates

investors perceive less risk in the

industry now, especially or prime

properties in healthier markets.

Investors who are able to aggressively

pursue opportunities on an all-cash

basis while waiting to secure debt

post-closing will compete more

avorably in the market.

Values appear to be near the bottom,provided there isnt a second dip in

the economy that would negatively

aect demand actors.

Investment Market Recovery

A broad based recovery hasnt yet

taken hold in the market, although

there are signs that it is on a positive

path.

More capital is coming back to the

market every month, especially to

certain sectors o the market that

are considered sae. These sectors

include long term, single tenant, net

leased properties, and well occupied

Class A assets in top tier markets.

Lenders are seeing their portolios o

owned property grow substantially.

They are taking a longer term

approach to ownership due to

current low values and are resisting

dispositions until the economic

recovery allows or some lease-up and

increases in cash ows. As pressure

increases on lenders to dispose o

assets, these assets will eventuallybe redeployed back to either private

investors or opportunistic unds.

Investment Market

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22 | Cassidy Turley

T

otalSales(in$100Million)

Greater Cincinnati Total Non-Residential Property Sales(Greater than $1 Million)

First Hal 2010 Investment Sale Activity - Some Greater Cincinnati Major Ofce Transactions

Property Name Location SF Price $/SF

Terrace Plaza Downtown Cincinnati 300,000 $7,000,000 $23

5900 Building West Chester 28,800 $3,500,000 $122

Corporate Circle Center West Chester 60,000 $1,900,000 $32

308 East 8th Street Downtown Cincinnati 26,919 $1,230,000* $46

7862 Kingland Drive West Chester 11,510 $1,050,000 $91

* Sale price included 6 adjacent parking spaces and 29-space parking lot

First Hal 2010 Investment Sale Activity - Some Greater Cincinnati Major Industrial Transactions

Property Name Location SF Price $/SF

Gateway 75 Sharonville 1,150,000 $7,800,000 $7

6500 Hamilton-Lebanon Road Middletown 399,600 $7,000,000 $18

4600 East Tech Drive Union Township 44,439 $4,000,000 $90

Former Ford Plant Batavia 1,860,000 $3,500,000 $2

7150 Paddock Road Roselawn 1,860,000 $1,650,000 $37

There are signs fnancing has become

more available or the right borrower

seeking quality assets in better

markets. There is steady competition

among well capitalized investors which

is helping to elevate sale prices and

lower cap rates or prime properties.

Opportunity

There are opportunities in the

marketplace or the patient investor

who can provide capital and liquidity

over the long-term recovery.

The mainstream investment market

has two primary camps:

The Core investors looking or

long-term credit leases in either prime

locations or secondary locations with

deendable utures. This sector is

currently the most active and highly

competitive with target yields in the

8-12% range.

The Value Add investors, who are

plentiul but ar less active (not by

choice) due to the current gap inopinions o value between sellers and

buyers. This sectors target yields are

in the 13-20+% range, depending on

the assets amount o risk.

For those willing to buck the current

trends and who are ready and able

to be creative, there are numerous

opportunities to selectively acquire

assets that can provide good returns

over the long term.

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First Hal 2010 Investment Sale Activity - Some Greater Cincinnati Major Retail Transactions

Property Name Location SF or # o Rooms Price $/SF or $/Room

Governors Pointe N & S Deerfeld Township 360,100 $27,500,000 $76

Cincinnati Mall Fairfeld 1,750,000 $5,900,000 $3

PetSmart Milord 27,140 $5,180,000 $191

Former biggs Harrison 156,152 $4,500,000 $29

Cambridge Plaza Hamilton 103,048 $1,500,000 $14

EconoLodge Sharonville 88 $1,500,000 $17,045/room

6417 Branch Hill Guinea Rd Loveland 18,087 $1,200,000 $66

Goddard School Anderson 6,314 $1,040,000 $164

ConclusionAt midpoint 2010, the third year o this

most recent downturn in the commercial

real estate investment market was

completed. Whether it is the amount

o time this correction has taken or the

distance allen in terms o values and

market activity, by any measure, the last

three years will be an epic milestone in

the world o investment real estate.

Although there appear to be a numbero indicators pointing toward a bottom

in the commercial real estate investment

markets, including continued increases

in capital commitments to the sector,

increased numbers o bidders or

properties and increased sales activity,

along with a slowing o the increase in

CMBS delinquencies, only a ew o the

major markets around the country seem

to be benefting rom this, and then,

only or Class A properties. The rest othe country and the majority o the non

Class A product are still struggling to fnd

a point o equilibrium between sellers,

buyers and lenders. I the cycle ollows

its normal course, investors will tire o

competing or core assets in primary

markets and will begin to move towards

more value-add properties in primary

markets and core assets in secondarymarkets. As this movement progresses,

pricing and competition will increase as

well.

There seems to be little doubt that we

are on a positive road to recovery, but

the length o that road and where it leads

are yet to be determined.

(Sources: Cassidy Turley Commercial Real Estate

Services U.S. Forecast Report-6/2010; PIMCO

U.S. Commercial Real Estate Project-6/2010;

Real Capital Analytics US Capital Trends-6/2010;

PriceWaterhouseCoopers Korpacz Real Estate

Survey-6/2010)

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