2013 naiop real estate challenge

TELLARITER E A L E S T A T E A D V I S O R S

2013 REAL ESTATE CHALLENGENAIOP | WASHINGTON STATE CHAPTER

REPORTMARCH 2013

2 UNIVERSITY OF WASHINGTON

MEET OUR TEAM

UNIVERSITY OF WASHINGTONCOLLEGE OF BUILT ENVIRONMENTS

424 GOULD HALL, BOX 355740SEATTLE, WASHINGTON 98195-5740

T (206) 616.5335F (206) 685-9597

To: Runstad Center Advisory Board Fr: Stephen H. O’Connor, Ph.D. Dt: February 13, 2013 Admissions: As of today, we have a total of 28 applications on file. By comparison, this time last year we had roughly 35 applications. While the trend is disturbing and must be reversed, there is equal concern relative to the composition of the applicant pool, as currently there are only 4 applications from domestic candidates. This raises a number of important questions and challenges:

1. There are currently 56 graduate real estate programs in the United States. Do we follow the herd or look to differentiate?

2. We currently offer two “tracks” that are not very well defined. Finance/Investment and Development.

3. Do we need more areas of “specialization?” Housing, Corporate/Investment Services, Research/Methods, International.

4. Is our “core” curriculum too heavy? 5. Are we missing an opportunity that is currently being captured by the evening “certificate”

programs offered through the School of Continuing and Professional Education? 6. Do we need more professional adjuncts? What is the right ratio of adjuncts to full-time

academic faculty? 7. How do we make our program truly interdisciplinary by incorporating the Schools of Law,

Business, Public Policy and Built Environments? Academic Review: On May 2 and 3 a team of outside reviewers will be on campus to review our MSRE program. While the above questions are not exhaustive, they will form the basis of a discussion that will hopefully lead to a more critical thinking relative to our competitive position. Integral to this process will be the full engagement and contribution of the newly created Academic Advisory Committee. In addition, students, alumni, faculty, administration and staff will also play a major role in this effort. Website: We are well on our way towards developing a new website for both the Runstad Center and the MSRE program. While we fully anticipate that the final product will go a long way towards addressing our lack of visibility in the graduate real estate education marketplace, we also realize that this will be just one piece of an overall and comprehensive marketing effort. In addition, several recruiting videos are being developed to incorporate into the new site, while new collateral in the form of recruiting posters will be created to send to the multitude of undergraduate business, planning and design programs across the country.

“OUR MEASURE OF SUCCESS”Tellarite Real Estate Advisors has prepared this report at the request of Vulcan Real Estate regarding their interests in the Lakefront Blocks in Seattle’s South Lake Union Neighborhood. Specifically, our team is proposing a development strategy that will maximize value for Vulcan and the city by transforming what is currently Block 25 and Chandler’s Cove into Seattle’s Lakefront District, a vibrant neighborhood that is quite literally at the center of the city’s active, social, urban community.


Tellarite Real Estate Advisors is a multidisciplinary team of 10 students from the University of Washington’s College of Built Environments. Team members have diverse expertise in architecture, landscape architecture, planning, environmental advisory, brownfield development, corporate retail and more. Together we specialize in urban visioning, market analysis and financial strategies for the Seattle Urban Area.

Like our namesake, we Tellarites are committed to working with Vulcans to do great things for not only Seattle, but the world and our shared universe.

DAVE KNIGHTJEFF BERNARD

KELLY HOGGMARY FIALKO

ALEX MARTINEZZACHARY CLEMENTS

FRANCISCO TRAVERSOWANLU ZHU

YINYAN CHENJASON YAP

32013 NAIOP REAL ESTATE CHALLENGE

1 . 0 E X E C U T I V E S U M M A R Y 1.1 VISION1.2 LAKEFRONT PROMENADE SNAPSHOT1.3 LAKEFRONT EAST SNAPSHOT1.4 GOALS AND OBJECTIVES

2 . 0 E C O N O M I C G R O W T H 2.1 REGION2.2 SOUTH LAKE UNION2.3 INVESTMENT PERSPECTIVE2.4 DEMOGRAPHIC DATA

3 . 0 L O C A T I O N A L A N A L Y S I S 3.1 TRANSFORMATION3.2 LOCATIONAL ATTRIBUTES

4 . 0 L A K E F R O N T P R O M E N A D E 4.1 VISION4.2 DESIGN ELEMENTS4.3 DEVELOPMENT STRATEGIES4.4 MARKET SUPPORT

5 . 0 L A K E F R O N T E A S T 5.1 LAKEFRONT EAST VISION5.2 PRODUCT POSITIONING

6 . 0 H O T E L6.1 HOTEL VISION6.2 HOTEL DESIGN STRATEGY6.3 HOTEL MARKET SUPPORT

T A B L E O F C O N T E N T S

7 . 0 C O N D O M I N I U M S7.1 VISION7.2 MARKET SUPPORT

8 . 0 H E A L T H & F I T N E S S C L U B8.1 VISION8.2 STRATEGIES8.3 MARKET FORECAST

9 . 0 A M E N I T Y R E T A I L9.1 VISION9.2 STRATEGY9.3 MARKET SUPPORT

1 0 . 0 P H A S I N G S T R A T E G Y10.1 OVERVIEW

1 1 . 0 F I N A N C I A L S11.1 COSTS11.2 INCOME11.3 RETURN ON INVESTMENT11.4 EXIT STRATEGY

1 2 . 0 C O N C L U S I O N

1 3 . 0 A C K N O W L E D G E M E N T S

A P P E N D I C E SA FINANCIAL PROFORMA

“We believe the stewardship of capital and assets should improve the physical landscape we live in, as well as the financial position of our partners. We do well by doing good. This approach puts us on a sustainable path that leads to positive outcomes for all—tenants, residents, clients, and investors.“

-Vulcan Real Estate



Total Project Cost: NOI:Market Value: Profit: Profit Margin: Unleveraged IRR: Leveraged IRR:

TOTAL PROJECT FINANCIAL SNAPSHOT

$379,903,114$11,815,882

$451,425,114$71,522,000

19%3.5%16.9


L A K E F R O N TTHE

DISTRICT


1E X E C U T I V E S U M M A R Y

1.1 VISIONSouth Lake Union (SLU) is one of the fastest growing and developing neighborhoods in the entire country. Not only is this area anchored by well-known technology and bio-tech industry leaders, it also has major geographical amenities such as Lake Union, proximity to vibrant neighborhoods, and a recent influx of cultural institutions. All of this has made this one of the greatest waterfront development opportunities in the nation. At the center of all the potential are Vulcan’s properties which are the focus of this document.

The following proposal includes our vision for a vibrant Lakefront District that will become the central hub for active, social, urban living in Seattle. By leveraging existing assets and building on the unique locational attributes, Chandler’s Cove will transform into the Lakefront Promenade and Block 25 into Lakefront East. Each development will play an important role in creating a neighborhood that realizes Vulcan’s triple bottom line strategy of creating places that improve social, environmental and financial equity.

HOW CAN ALL THIS EXISTING VALUE BE CAPTURED IN A WAY TO MAXIMIZE RETURNS ON DEVELOPMENT?

LAKEFRONT PROMENADE

LAKEFRONT EAST


1.3 LAKEFRONT EASTBlock 25 will become Lakefront East, a premier, high density urban development that provides a synergistic mix of uses that further defines the Lakefront District as the Northwest’s most desirable location to live an active, healthy, social lifestyle.

Lakefront East fills a void for an upper-end hotel and fitness concept, while taking advantage of the upzone in South Lake Union to add a condominium tower. This location is the right location for Seattle’s best residential address. Limited, smart retail will be added to activate the street level. Street front retail will be occupied by popular local businesses that are not yet represented in the nearby neighborhood. The vibrant waterfront, breathtaking views and well through out amenities will make this the most desirable address in the city.

Lakefront East includes an open courtyard designed to provide a welcoming urban mixing zone that provides easy parking access as well as a space for residents and guests to mingle. The ground floor hotel restaurant will look through to the courtyard as well as Valley Street and the lake beyond. Another rooftop restaurant/bar will invite guests and locals alike to sit by the pool and look out over the amazing lake and city skylines.

1.2 LAKEFRONT PROMENADEThrough thoughtful design and programming strategies, Chandler’s Cove will be transformed into the Promenade, a civic amenity that will function as an extension of SLU Park as well as a retail destination.

With a seamless connection along the waterfront, the Promenade’s sweeping walk will make the most of its neighborhood connections, lake access and expansive views to provide opportunities for public gathering, recreation, and a variety of unique entertainment and dining experiences.

The new waterfront will feel similar to areas within Vancouver’s Coal Harbor, New York’s Battery Park City and Toronto’s Waterfront, but remain quintessentially Seattle by design.

Project Cost: NOI:Market Value: Profit: Profit Margin: Unleveraged IRR: Leveraged IRR:

SNAPSHOT

SNAPSHOT

$75,204,705$6,567,426

$92,790,430$17,585,725

23%10.9%

16%Project Cost: NOI:Avg Condo ($1,045/sf):Market Value: Profit: Profit Margin: Unleveraged IRR: Leveraged IRR:

$244,497,749$6,248,456$1,185,866

$259,507,392$15,009,643

6.1%-0.2%

26%


1.4 GOALS AND OBJECTIVESTellarite Real Estate Advisors and Vulcan share the same measures of success. Our main object is to create value for Vulcan’s owners through a smart, innovative and appropriate Seattle Waterfront District development plan. Our proposal tranforms one of the most spectacular waterfront sites in the world into the best place in Seattle to live, work and play.

The Tellarite team believes the key to unlocking the potential of the Waterfont District is a synergistic mix of retail, entertainment, lodging, condos and public space.

1E X E C U T I V E S U M M A R Y

HOW DO WE MAXIMIZE THE VALUE ON THIS SITE? A C T I V E , S O C I A L , H E A L T H Y L I F E S T Y L E

All of these elements are designed to work together to maximize the potential of the neighborhood. Creating a place that delights visitors and residents will ensure that Vulcan is providing incredible value to our city and excellent returns on invested capital.


D E S I G N T H E W A T E R F R O N T T O I N V I T E T H E P U B L I C

U S E R E T A I L A N D E N T E R T A I N M E N T T O C O N N E C T A N D A C T I V A T E T H E N E I G H B O R H O O D

C R E A T E A S Y N E R G I S T I C M I X O F 2 4 - 7 U S E S T H A T P R O V I D E A G R E A T R E T U R N O N I N V E S T M E N T

1

2

3

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2012 2013 2014 2015 2016 2017

SOUTH LAKE UNION

COMPETITIVE MARKET

PUGET SOUND

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2012 2013 2014 2015 2016 2017

SOUTH LAKE UNION

COMPETITIVE MARKET

PUGET SOUND

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020UNEMPLOYMENT RATE PERSONAL INCOME GROWTH RATE

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2012 2013 2014 2015 2016 2017

SOUTH LAKE UNION

COMPETITIVE MARKET

PUGET SOUND

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2012 2013 2014 2015 2016 2017

SOUTH LAKE UNION

COMPETITIVE MARKET

PUGET SOUND

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2012 2013 2014 2015 2016 2017

SOUTH LAKE UNION

COMPETITIVE MARKET

PUGET SOUND

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2012 2013 2014 2015 2016 2017

SOUTH LAKE UNION

COMPETITIVE MARKET

PUGET SOUND

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%


Seattle is considered Northwest’s leading import/export center for international trade.

Many high tech industries cluster in this region: software development, Internet commerce, medical research, telecommunications, medical device manufacturing, and aircraft design and production. These industries as well as leading educational institutions contribute to Seattle being the most educated city per capita, according to 2010 census data.

2E C O N O M I C C O N T E X T

2.1 REGIONThe Puget Sound Region is well-known as one of the strongest markets in the entire U.S. While the region has not recovered to the pre-Recession performance, it is on the way back with expectations for accelerated growth in 2013. The average annual employment in the region has been growing at twice the national rate. Based on the Puget Sound Regional Council “Economic Forecaster”, Puget Sound jobs will keep increasing at a rate above 2.0% through 2016. The PSRC predicts the unemployment rate will fall to 6.0% by the end of 2020 and personal income will increase more than 5% annually.

• BOEING• MICROSOFT• AMAZON.COM• COSTCO• REI

REGIONAL DRIVERS

WESTERN MOVEMENT

US POPULATION

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2012 2013 2014 2015 2016 2017

SOUTH LAKE UNION

COMPETITIVE MARKET

PUGET SOUND

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2012 2013 2014 2015 2016 2017

SOUTH LAKE UNION

COMPETITIVE MARKET

PUGET SOUND

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%


PUGET SOUND REGIONAL FORECAST

POPULATION GROWTH EMPLOYMENT GROWTH

Sources: The Puget Sound Economic Forecaster, Puget Sound Regional Council Revised DRAFT 2012 Land Use Forecasts, WA State Employment

Security Dept., Dupre + Scott, U.S. Census, REIS, DJC, DPD, and Tellarite Real Estate Advisors

Source:PSRC

• EXPEDIA• STARBUCKS• NORDSTROM• PACCAR

West Seattle 12%

Rainier Valley/Columbia City 11%

Central District 29%

Capitol Hill 15%

Eastlake/Madison Park 4%

Magnolia 11%

Queen Anne 16%

Downtown 72%

Ballard 16%

Fremont/ Wallingford

18%

University District

21%

SoDo 1%

Wedgewood/Laurelhurst

14%

Green Lake/Phinney Ridge 12%

0 to 5%

5 to 10%

10 to 15%

15 to 20%

20 to 30%

More than 50%

-5 to 0%

More than -5%

30 to 50%

Source: Analysis of 1990 and 2010 U.S. Census data

2Metropolitan Improvement District’s Business Development & Market Research www.DowntownSeattle.com

Growing Downtown

Seattle continues to attract new residents. In 1990, Seattle had approximately 516,200 residents. Over the past 20 years, the city’s population has grown by 17 percent to more than 608,600 residents. During this time period, Downtown, which represents 3 percent of Seattle’s landmass, accounted for nearly 25 percent of the growth. DowntownSeattle alone has grown by more than 72 percent since 1990. This represents an increase of more than 22,000 new residents.ii

Since 1990, Seattle’s population growth has occurred primarily in Downtown, Ballard and the Central and University Districts (see Figure 3). However, Downtown’s growth rate was nearly three times greater than the next fastest growing neighborhood. Comprised of 12 unique neigborhoods, Downtown Seattle has been the primary area of population growth in Seattle over the past two decades.

In particular, Downtown Seattle’s Uptown and South Lake Union/Denny Triangle neighborhoods grew 103 and 305 percent, respectively (see Figure 3 inset). These neighborhoods have experienced increasing resident populations, along with an increasingly diverse economic base, additional residential development projects, resident friendly amenities (i.e. parks and restaurants) and the arrival of major headquarters such as Amazon.com and the nearby Bill & Melinda Gates Foundation. Downtown Seattle’s Retail Core and Belltown neighborhoods have also experienced triple digit growth since 1990, showing the breadth of Downtown’s population gains.

Downtown Seattle has not only experienced significant growth in resident population compared to other Seattle neighborhoods, but also relative to its peer U.S. downtowns (Boston, Charlotte, Denver, Minneapolis, Philadelphia, Portland, San Diego and San Francisco). The 2011 Peer City Review found that Downtown Seattle had the 2nd highest downtown resident population of eight peer cities in the U.S. Downtown Seattle also experienced the largest growth among peer downtowns over the past 20 years (See Figure 2).

Figure 3. Percent Change in Population (1990-2010)

- 5,000

10,000 15,000 20,000 25,000 30,000

Source: The Nielsen Company, 2011; 2011 Peer City Review, DSA/MID, 2011Figure 2. Downtown Population Growth Since 1990 Among Peer Cities

West Seattle 12% West Seattle 12% West Seattle 12%

Downtown 72%

Belltown 183%

South Lake Union/Denny Triangle 305%

Capitol Hill 17%

Pioneer Square/Int’l District 63%

Uptown 103%

Retail Core, West Edge/Waterfront

109%

First Hill 8%

PEER CITY DOWNTOWN POPULATION GROWTH SINCE 1990

UNEMPLOYMENT RATE

PERSONAL INCOME GROWTH RATE


2.2 SOUTH LAKE UNIONAs mentioned, South Lake Union is one of the fastest growing and most dynamic neighborhoods in the City, in the region, and in the entire country. Bordered by I-5 on the East, Westlake Avenue on the West, Lake Union to the North, and Denny to the South, South Lake Union is a compact and densifying urban neighborhood. It is becoming a world class neighborhood with museums, top employers, parks, great views, and ease of connectivity. The population and economy are rapidly growing, and opportunities for development are rapidly increasing.

Seattle ranked No. 1 Best City For Tech Jobs – Forbes, November 2011

“. . . a wellspring of local brainpower drawn to the attractive Northwest gateway for high-paying tech jobs”

- ULI 2012 ET

“. . . ranked #1 as the most tech-friendly with the best internet access and top technology performance”

–Scientific American, August 2011

COMPETITIVE MARKET AREACapitol Hill, Queen Anne and Denny Regrade are included in our competitive market analysis. These neighborhoods are seeing rising housing prices as the economic recovery gains momentum in 2013.

POPULATION GROWTH

ADDITIONAL OFFICE SF

NEW JOBS12,250 33,000+

14%

2008-2012 2013-20175%

7M5.3 M

CO

MPE

TITIV

E M

ARK

ET G

ROW

TH S

TATS

DENNY WAY WESTLAKE AVEI-5

LAKE UNION

N

SLU’S FUTURE IS BRIGHT


E C O N O M I C C O N T E X T22.3 INVESTMENT PERSPECTIVE

In 2012 Seattle ranked third overall in real estate transactions, just behind San Francisco with New York taking the top spot. This is impressive considering Seattle is about half the size of San Francisco and a quarter the size of New York. Institutional investors see the region as a strong investment opportunity supported by a balance between tech, manufacturing and other industries. Seattle has become a diverse and stable market anchored by technology firms, research organizations, non-profits, universities and manufacturing.

Current South Lake Union leased space occupied by Amazon is 2,760,000 sq ft. Based on an occupancy of 225 per sq ft, this indicates Amazon has over 12,170 employees in the area. Based on new net leased space during the last 2 years, Amazon has been responsible for 11% of the net job growth in King County for 2011 and 2012, and over 8% of the total net gain for the region. Their three new leases of unoccupied space, and the plans to build three office towers, shows the company

South Lake Union

CBD

N

Lake UnionLAKEFRONT DISTRICT

R A P I D L Y R I S I N G S O U T H L A K E U N I O N E C O N O M Y . . . .

is confident in their continued expansion. The newly leased buildings are expected to house another 2,600 employees. Amazon three towers would bring in another 17,000 employees.”

(Source: Kidder Mathews; February 27th NAIOP Breakfast, Bruce Ganong, Senior Managing Director, Holliday Fenoglio Fowler, Debt and Equity Finance)


SOUTH LAKE UNION GROWTH SNAPSHOT

NEW JOBS

43,300 68,300APARTMENTS

4,600 7,100HOTEL BEDS

1,057 1,297

2012 2018- BEYOND55-64

Another notable trend is the growing percentage of people 55-64 years old living in Downtown Seattle. Their share of Downtown’s resident population has rebounded after a decline between 1990 and 2000. The past decade has seen a reversal of the trend with this population’s share now increasing at a faster rate than most other groups.

Historically, this age demographic has concentrated in the Uptown and South Lake Union neighborhoods, and in the Pioneer Square and International District. Figure 8 shows how the share of those between 55-64 years old has changed in Downtown neighborhoods over the past two decades. Most notable is a resurgence in Uptown, South Lake Union, Belltown and the Retail Core/West Edge/Waterfront.

Children in Downtown

Between 1990 and 2010, the number of children living Downtown grew significantly. In 1990, the total number of children (newborns to 14 years old) living Downtown totaled 1,021. By 2010, this population totaled 1,732, a nearly 70 percent increase. While the growth of this population is similar to the overall rate of population growth for Downtown, in absolute terms it is becoming a sizeable population and with the significant increase of 25-34 year olds currently living Downtown, the trend could continue.

Children, as they age, leave Downtown at a greater rate than all other Seattle neighborhoods. In 2000, there were 776 children under the age of 5 living in Downtown, however ten years later there were only 394 children 10-14 years of age living Downtown. This indicates that when many children reach their fifth birthday, they leave Downtown (Figures 9 an 10 on page 6 illustrate the change in the total population of children under five living in 2000 relative to children 10-14 years old living in Downtown in 2010).

Downtown has the highest attrition rate for children under five of all Seattle neighborhoods at 49 percent, however attrition of elementary school-aged children in Seattle is not unique to Downtown. Citywide, the attrition rate (children moving out of the city) between 2000 and 2010 for children under the age of five was 14 percent and a number of Seattle neighborhoods had attrition rates of more than 25 percent during the same period.

While Downtown’s attrition rate for elementary school-aged children was high in the previous decade, it’s clear more families with children across all age demographics are choosing to live Downtown and Downtown’s overall growth in the number of children is notable for a major urban center.

5 Metropolitan Improvement District’s Business Development & Market Research www.DowntownSeattle.com

Figure 8: Share of Downtown Population 55-64 (1990-2010)

0%2%4%6%8%

10%12%14%16%18%

Uptown Capitol Hill Belltown First Hill

2010 2000 1990

Source: Analysis of US Census data

Photo: Christopher Nelson

South Lake Union/Denny Triangle

Retail Core/West Edge/ Waterfront

PioneerSquare/Interational

District

DOWNTOWN POPULATION: AGES 55-840-24 25-44 45-64 65-84+

COMPARISON OF POPULATION BY AGE (2017)

0-2421%

23-4444%

45-6423%

65-84+12%

<$49K

$50K - $99K

$100K - $200K

$200K +

COMPETITIVE AREA HOUSEHOLD INCOME (AVG. $86K)

<$49K46%

$50 - $99K23%

$100 - $199K22%

$200K+9%

55-64

Another notable trend is the growing percentage of people 55-64 years old living in Downtown Seattle. Their share of Downtown’s resident population has rebounded after a decline between 1990 and 2000. The past decade has seen a reversal of the trend with this population’s share now increasing at a faster rate than most other groups.

Historically, this age demographic has concentrated in the Uptown and South Lake Union neighborhoods, and in the Pioneer Square and International District. Figure 8 shows how the share of those between 55-64 years old has changed in Downtown neighborhoods over the past two decades. Most notable is a resurgence in Uptown, South Lake Union, Belltown and the Retail Core/West Edge/Waterfront.

Children in Downtown

Between 1990 and 2010, the number of children living Downtown grew significantly. In 1990, the total number of children (newborns to 14 years old) living Downtown totaled 1,021. By 2010, this population totaled 1,732, a nearly 70 percent increase. While the growth of this population is similar to the overall rate of population growth for Downtown, in absolute terms it is becoming a sizeable population and with the significant increase of 25-34 year olds currently living Downtown, the trend could continue.

Children, as they age, leave Downtown at a greater rate than all other Seattle neighborhoods. In 2000, there were 776 children under the age of 5 living in Downtown, however ten years later there were only 394 children 10-14 years of age living Downtown. This indicates that when many children reach their fifth birthday, they leave Downtown (Figures 9 an 10 on page 6 illustrate the change in the total population of children under five living in 2000 relative to children 10-14 years old living in Downtown in 2010).

Downtown has the highest attrition rate for children under five of all Seattle neighborhoods at 49 percent, however attrition of elementary school-aged children in Seattle is not unique to Downtown. Citywide, the attrition rate (children moving out of the city) between 2000 and 2010 for children under the age of five was 14 percent and a number of Seattle neighborhoods had attrition rates of more than 25 percent during the same period.

While Downtown’s attrition rate for elementary school-aged children was high in the previous decade, it’s clear more families with children across all age demographics are choosing to live Downtown and Downtown’s overall growth in the number of children is notable for a major urban center.


Figure 8: Share of Downtown Population 55-64 (1990-2010)

0%2%4%6%8%

10%12%14%16%18%

Uptown Capitol Hill Belltown First Hill

2010 2000 1990

Source: Analysis of US Census data

Photo: Christopher Nelson

South Lake Union/Denny Triangle

Retail Core/West Edge/ Waterfront

PioneerSquare/Interational

District


0 to 10%

10 to 15%

15 to 20%

20 to 25%

25 to 30%

More than 30%

0 to 10%

10 to 15%

15 to 20%

20 to 25%

25 to 30%

More than 30%

Figure 5. Population & Density of 25-34 Year Olds by Neighborhood (2010)

6%

11%

32%

16%

13%

10%

5%

6%

7%

12%

30%

19%

13%

7%

5%

6%

6%

13%

27%

18%

10%

8%

9%

10%

0% 10% 20% 30% 40%

Under 20

20 to 24

25 to 34

35 to 44

45 to 54

55 to 64

65 to 74

75 and over

1990 2000 2010

Source: Analysis of US Census data Source: Analysis of US Census data


Age Demographic Breakdown

A demographic transformation has occurred along with the increase in Downtown’s resident population. Statistics show certain age groups live in Downtown at rates significantly different than nearby neighborhoods. In particular, Downtown has seen large growth in the share of two age groups: 25-34 and 55-64 years of age. There has also been significant growth of those under 15 years old.

25-34

Residents age 25-34 are a key demographic in any neighborhood. This population tends to have higher disposable income and fewer financial obligations than other age groups. Downtown Seattle has the highest share of 25-34 year olds in Seattle. Downtown neighborhoods with the highest densities of 25-34 year olds are Capitol Hill, Uptown, South Lake Union/Denny Triangle and First Hill (see Figures 6 and 7 on page 4). This age group comprises 21 percent of Seattle’s total population, yet makes up more than 32 percent of Downtown’s total population, more than any other age demographic (see Figure 4).

Neighborhoods appeal to different age demographics due to a host of factors, from affordable housing, to an active nightlife, to the proximity of quality elementary schools.Additional Seattle neighborhoods with a high density of this age group include Ballard, Green Lake, Eastlake, and Fremont, all of which are neighborhoods with a large amount of restaurants, bars and nightlife.

Figure 4. Downtown Age Demographics

Share of Total Neighborhood Population

Circle size represents neighborhoods’ share of Seattle’s 25-34 year old population

Downtown

Ballard

Green Lake/Phinney Ridge


Capitol Hill

Rainier Valley/Columbia City

Queen Anne

University District


Eastlake/Madison Park

West Seattle

Magnolia

Central District

SoDo

0 to 10%

10 to 15%

15 to 20%

20 to 25%

25 to 30%

More than 30%

0 to 10%

10 to 15%

15 to 20%

20 to 25%

25 to 30%

More than 30%


6%

11%

32%

16%

13%

10%

5%

6%

7%

12%

30%

19%

13%

7%

5%

6%

6%

13%

27%

18%

10%

8%

9%

10%

0% 10% 20% 30% 40%

Under 20

20 to 24

25 to 34

35 to 44

45 to 54

55 to 64

65 to 74

75 and over

1990 2000 2010





25-34






Downtown

Ballard



Capitol Hill


Queen Anne

University District



West Seattle

Magnolia

Central District

SoDo

E C O N O M I C C O N T E X T2

0 to 10%

10 to 15%

15 to 20%

20 to 25%

25 to 30%

More than 30%

0 to 10%

10 to 15%

15 to 20%

20 to 25%

25 to 30%

More than 30%


6%

11%

32%

16%

13%

10%

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hange in residents 10-14 years old in 2010 from those under five in 2000

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Figure 9. Neighborhood Demographic Changes of those Under Five Years Old (in 2000) and 10-14 (in 2010)Source: Analysis of 2000 and 2010 US Census data

Downtown

Ballard

Green Lake

Wallingford/ Fremont

-49%

-25%

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Sou

rce:

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Each figure ( ) represents approximately 100 children living Downtown under the age of five in 2000, with darker figures representing the 10-14 year old population remaining in 2010. Black indicates an increase in the 10-14 yr old population in 2010.

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Eastlake/Madison Park was the only neighborhood that had more 10-14 year olds in 2010 than children under five in 2000.

Downtown Seattle experienced the steepest decline with only half of the population under five in 2000 remaining in 2010.


West Seattle

Magnolia

Ballard


University District


Lowell ES

Queen Anne

John Hay ES

Bailey Gatzert ES

Downtown Capitol Hill

DOWNTOWN AGE SPREAD

Source: US CENSUS 2010

POPULATION AND DENSITY OF AGES 25-34

Source: US CENSUS 2010

% C

hange in residents 10-14 years old in 2010 from those under five in 2000

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Figure 9. Neighborhood Demographic Changes of those Under Five Years Old (in 2000) and 10-14 (in 2010)Source: Analysis of 2000 and 2010 US Census data

Downtown

Ballard

Green Lake

Wallingford/ Fremont

-49%

-25%

-25%

-21%

-22%

-14%

+4% -17%

-15%

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Eastlake/ Madison Park

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West Seattle

Sou

rce:

Ana

lysi

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ttle

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aUniversity District

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Magnolia -5%

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Capitol Hill

Each figure ( ) represents approximately 100 children living Downtown under the age of five in 2000, with darker figures representing the 10-14 year old population remaining in 2010. Black indicates an increase in the 10-14 yr old population in 2010.

Figu

re 1

0. %

Cha

nge

in P

op. U

nder

Fiv

e (2

000)

to 1

0-14

(201

0)

Eastlake/Madison Park was the only neighborhood that had more 10-14 year olds in 2010 than children under five in 2000.

Downtown Seattle experienced the steepest decline with only half of the population under five in 2000 remaining in 2010.


West Seattle

Magnolia

Ballard


University District


Lowell ES

Queen Anne

John Hay ES

Bailey Gatzert ES

Downtown Capitol Hill

PERCENT CHANGE IN POPULATION FOR DOWNTOWN NEIGHBORHOODS

2.4 DEMOGRAPHIC DATA

Source: US CENSUS 2010, via Downtown Report


USER PROFILES

Min-jun is a doctor and lead researcher at Group Health. His wife is a top executive at a downtown investment firm. They enjoy their Lakefront East luxury condo with their daughter because the neighborhood is so safe and convenient with access to health clubs, parks, and downtown.

Judy and Rick’s daughter moved to Seattle to work for Amazon a few months ago. They are looking to buy a condo in SLU because it is a safe, fun neighborhood with easy access to entertainment, dining, and most importantly their daughter who is expecting a baby boy this summer.

Jessica is trying to find a hotel that meets her needs in the area. A frequent traveler to South Lake Union as a consultant for Fred Hutchinson Center for Cancer Research, she is looking for convenience, and a place where she can unwind and have a glass of wine with colleagues.

Sarah is a young mom who lives in the Westlake neighborhood along Dexter Avenue. She works part-time from home while taking care of her daughter, Rachel. In her free time she enjoys attending pilates classes at the Lakefront Health Club and spending time at the Promenade Cafe.

Simon is a McKenzie consultant from San Francisco who travels to Seattle every other week to work at the Gates Foundation. His schedule is packed but the convenience of his accommodations at the Lakefront Hotel allows him to easily fit in workouts and enjoy entertainment and dining.

The following are snapshots of the people who will be enjoying the Lakefront District in the near future.

Michelle enjoys meeting her book club for monthly dinners at the Promenade wine bar. The central location is a great spot for the women who are coming from Ballard, Capital Hill, West Seattle, and Belltown.

JUDY AND RICK

SIMON

SARAH AND RACHEL

MIN-JUN

MICHELLE

JESSICA


L O C A T I O N A L A N A L Y S I S33.2 LOCATIONAL ATTRIBUTESLake Union has long been a working lake - it is home to an airport, the shipping industry, and was at one point the center of a vital local economy which included the local Ford Factory, Bill Boeing’s first airplane factory, ship building warehouses and more. The location on the lake was critical to these types of industries, allowing access to the Puget Sound and the Pacific Ocean. It provided a sheltered harbor for manufacturing and its proximity to the growing city of Seattle created a thriving industrial district. This tie to Seattle’s industrial roots is something Tellarite Real Estate Advisors holds in high esteem.

As previously mentioned, South Lake Union is a highly desirable area anchored by well-known technology, life science, and biotechnology industry leaders. The completion of South Lake Union Park in 2010, as well as the Center for Wooden Boats and recent opening of the MOHAI in 2012, have added culture and layers that have made this one of the greatest waterfront development opportunities in the nation.

3.1 TRANSFORMATIONTransformation is underway in Seattle’s fastest growing neighborhood. Vulcan, Touchstone, and other developers are working with the City of Seattle to make the area a vibrant, successful urban neighborhood. The recently completed streetcar, new bus lines, rapid urban redevelopment, and the relocation of cultural institutions is shaping the neighborhood, creating draws, and forging new economic opportunities and flexible lifestyles for the ever-changing tech industry. The neighborhood is unrecognizable from the South Lake Union of 1996. The new developments and landscaping are stitching the urban fabric together and make the Lakefront District more accessible and pedestrian friendly. Blocks 25, 26 and 27, along with Chandler’s Cove will be part of the last few parcels to be developed. Arguably, this is becoming Seattle’s greatest downtown urban neighborhood with expectations that South Lake Union will rival similar neighborhoods in Portland, San Francisco and Vancouver B.C.

H I S T O R Y

I N D U S T R Y

L O C A T I O N


PEDESTRIAN ACCESSLake Union has long been a working lake- it is home to an airport, shipping industry, and was at one point at the center of a vital local economy. The local Ford Factory, Bill Boeing’s first airplane factory, ship building warehouses and more. The location on the lake was critical to these types of industries- access out to the sound and the Pacific Ocean, with a sheltered place for testing, and proximity to a growing city created a thriving industrial district. This tie to Seattle’s industrial roots is something Tellarite Real Estate Advisors holds in high esteem. As previously mentioned, it is a highly desirable area anchored by well-known technology, life science, and biotechnology industry leaders. The completion of South Lake Union Park in 2010, as well as the Center for Wooden boats and recent opening of the MOHAI 2012, have added culture and layers that have made this one of the greatest waterfront development opportunities in the nation.

TRAFFICThis site has great visibility from I-5, from downtown, and from all sides of Lake Union. However, the site is adjacent to an important east-west traffic connection in the city. The Mercer connection adjacent to the site has been completed, funneling high traffic volumes through a highly engineered road. 60,000 vehicles pass this route daily. It will eventually extend to the highway 99 tunnel. Over 60,000 plus vehicles pass by each day. While there are improvements in the new urban streetscape, commuters are taking an extra 15-20 minutes during rush hour to get through South Lake Union on Mercer. Alternative methods of transit are increasingly necessary, although residents hope that congestion will ease when construction is done.

STREETS, SIDEWALK, PUBLIC SPACEThe four main streets impacting this development are Valley Street, Boren Avenue, Fairview Avenue, and Mercer Avenue. Valley Street is going to function as a lakefront boulevard- catering to the streetcar, cycling paths, and wide pedestrian sidewalks. With landscaping, retail priority, and waterfront views, Valley will be a welcoming gateway to the new promenade. South Lake Union Park, the most expensive park per SF of any in Seattle, is an extraordinary asset to the neighborhood. However, the area is not yet the pedestrian-oriented vibrant urban neighborhood that we believe it can be.

flickr.com

VIEWS

PEDESTRIAN CONNECTIVITY

VEHICULARCONNECTIVITY

TRANSITCONNECTIVITY


L A K E F R O N T P R O M E N A D E44.1 LAKEFRONT PROMENADE VISIONThrough thoughtful design and programming strategies, Chandler’s Cove will be transformed into the Promenade, a civic amenity that will function as an extension of SLU Park as well as a retail destination. With a seamless connection along the waterfront, the Promenade’s sweeping walk will make the most of its neighborhood connections, lake access and expansive views to provide opportunities for public gathering, recreation, and a variety of unique entertainment and dining experiences. The new waterfront will feel similar to areas within Vancouver’s Coal Harbor, New York’s Battery Park City and Toronto’s Waterfront, but remain quintessentially Seattle by design. Finally, this proposal considers these objectives in tandem with the creation of financial vitality by outlining a set of strategic decisions. This approach builds on and repositions many existing, well performing assets that will result in valued asset for both Vulcan and the community.


Lake Union is one of the City’s greatest assets. In its current state, Chandler’s Cove does little to capitalize on this asset by making it a central feature that maximizes benefits to visitors and businesses. Future designs should make the lake a focal point that is visible and accessible from nearly anywhere in the area.

The existing lack of visibility caused by docked yachts and a poor arrangement of buildings prevents many potential visitors from walking through the space. As a result, there is significant loss of public benefit and potential clientele for private businesses. By reorganizing many of the site elements and features, site lines to the variety of amenities at the water’s edge will be opened to encourage passersby from all directions to stop and enjoy all the Promenade will have to offer.

Abrupt elevation changes, expansive parking areas, and an ineffective cluster of buildings, create both real and perceived barriers between the public and private realm. Taking away abrupt grade changes, putting parking underground, creating lanes of walking space between South Lake Union Park and the Promenade will help create a magnetic destination that will draw patrons in to activate and enjoy the businesses and restaurant.

The Center for Wooden Boats, Seattle Public Parks and the MOHAI are valuable cultural resources for Seattle and have laid the foundation for making the Lakefront District a unique attraction within the City. In January 2013 alone, MOHAI drew more than 45,000 visitors. Providing attractions and making design decisions that are a draw for those visitors is an enormous opportunity. Maintaining a vernacular that compliments the surrounding resources will strengthen the entire waterfront identity and help make the whole greater than the sum of its parts.

The primary goal of this design is to create a more welcoming place that is irresistible for the public to visit and enjoy

any time of day in any season.

EMBRACE THE LAKE

MAKE IT VISIBLE

REMOVE PHYSICAL AND PSYCHOLOGICAL BARRIERS

ENGAGE AND EXPAND CULTURAL RESOURCES

The Promenade will be the perfect setting for waterfront outdoor movies, concerts and special events. The following are the key design principles and features of the Promenade:


PARKINGParking is critical to the success of the lakefront promenade. One of the biggest issues with the current area is the parking breaks up the flow of the area and hides the Promenade. Below ground parking at the current lowest level, will allow the promenade to be one big open space that flows from Valley down to the promenade. While transit, valet parking and foot traffic will bring many customers to the waterfront, we realize the majority of visitors still travel by car. The new development will exceed 2.3 parking spaces per 1,000 square feet of retail. The majority of this parking will be underground at the current parking lowest parking grade. Entry into the parking will be from the two existing culdesacs.

RESTAURANT STROLLMeandering through the upland portion of the Lakefront Promenade is the Restaurant Stroll. This is a series of spaces defined by the variety of restaurants and small amenity shops that draws in passersby from the park and streetfront. The stroll will offer an experience that is different, yet complimentary to the existing park and future Promenade Boardwalk by providing a more intimate sequence of interesting eddies of activity while maintaining framed views to the lake.

EAST PIERMany of the boats previously moored at the West Pier will be relocated to the the East Pier. While the maritime industry is an important appeal to the Lakefront, this area will become the designated yacht sales portion of the Promenade, consolidating dealers to make the core of the Promenade more welcoming and open to the general public.

4.2 DESIGN ELEMENTS

L A K E F R O N T P R O M E N A D E4

6.

3.

11.

THE COVETo resolve the issues of lake visibility and accessibility and create a magnetic feature that will draw visitors to the site, the waterfront will be improved to create the Cove. By relocating most of the larger yachts from the inner bay to the north pier, the waterfront will become more open and inviting, creating opportunities for improved public access from both land and water.

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5WEST PIERGreatly reduced from its current size and mooring capacity, the West Pier will become an amenity to the Promenade where short-term, active mooring occurs. This transformation will greatly improve views, accessibility and the overall character of the Lakefront as a place for everyone to enjoy.


CENTRAL STAGEThroughout the year, scheduled performances such as concerts and outdoor movies will take place along the Promenade. The Central Stage will be the focus of those big events providing a flexible space that supports a variety of civic events and activities.

PARK BRIDGEThe Lakefront District is the nexus of three neighborhoods: Westlake, Eastlake, and South Lake Union. The footbridge connection from Westlake to SLU Park located at the end of Aloha Street is a great draw for residents and daytime employees located along the west side of the lake. The connection, however, dead ends in front of MOHAI at the Center for Wooden Boats. By extending a bridge across the Center for Wooden Boats an irresistible, direct connection will be established, drawing thousands of additional patrons to the Promenade.

6.

PROMENADE BOARDWALKThe Promenade Boardwalk will be the central gathering feature of the Lakefront that will draw visitors and patrons to the site to sit, stroll and interact at the water’s edge. Drawing on the neighboring cultural resources, design elements that interpret the area’s industrious past and evolving future will be included throughout the site design.

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LAKEFRONT ACTIVITY CAFEActing as a multi-purpose gathering node, the Lakefront Cafe is hub for not only sipping coffee and grabbing a quick bite, but for renting kayaks, electric boats, paddle boards or scheduling a variety of other lake activities. The evening and daytime views from the restaurants will be a draw for customers who will want to walk the promenade before or after a meal, happy hour or movie. With heated covered outdoor spaces and a cozy indoor fireplace, the Cafe is a year-round draw for enjoying the lakefront.

EVENT HOUSELocated at the far point of the Promenade, the Event House will be THE spot in Seattle to host an event throughout the year. With an indoor-outdoor flow created by floor to ceiling roll up doors, this space will be flexible to make the most of the amazing views.

POCKET BEACHESThe pocket beaches will provide public access to the lake and improve ecological function along the shoreline. There will be a variety of typologies ranging from more natural beaches that recall the historic shoreline to more structured reveals within the Promenade Boardwalk. Each of the beaches, however, will provide opportunities for public recreation, ecological function, and mitigation to offset any potential shoreline impacts that may arise through the project.


L A K E F R O N T P R O M E N A D E4

4.3 DEVELOPMENT STRATEGIESCurrent tenant lease rates vary greatly. Our brokerage advisors estimate first floor tenant rents range between $10-$25/square foot, while the upper end restaurants range between $40-$50/square foot. One building is mostly vacant. Joey’s, Daniel’s Broiler and Chandler’s Crabhouse are the only bright spots in rent roll. This will change through redevelopment of the area.

The reconfiguration of the waterfront retail will lock in a solid mix of income producing tenants. Current Gross Income is estimated to be $3,000. Future Income is expected to be $10,000,000. Some of the new businesses, like the cafe, gelato stand, kayak rentals and boat brokers, will be expected to pay rents close to $20/square foot. The greater majority of restaurants and entertainment tenants will be in the $40-$60/sq ft range.

Both current and future leases will be triple net with the majority of expenses, including common area maintenance, being passed on to the tenants. Due to the large amount of common areas needing to be maintained we expect a large per month for non-reimbursable expenses covered by Vulcan and not passed through to tenants. Replacement reserves are included in the expense budget to keep up with needed repairs and maintenance.

KEEP EXISTING BUILDINGSJoey’s and Daniels Broiler are successful business contributing the majority of revenue from the waterfront. The top floors of these buildings are the most productive. These buildings will be kept in place with some remodeling to fit into the new surroundings

H O W D O W E I N C R E A S E D E S T I N A T I O N V A L U E ?

• VIEWS AND ENTERTAINMENT• DESIGN• RETAIL CENTER• PARKING AND TRANSIT

MOVE BOAT BROKERS AND SOME MOORAGEThe boat brokers will be moved to the eastern bay in a less public bay. Here they will a function direct connection between their offices and inventory. All attempts will be made to better utilize the eastern bay to put in more boats and moorage, but the income from marine uses is not the main driver for the success of the redevelopment. The key to this development is maximizing the higher paying restaurant and entertainment while still supporting marine uses in a more compact, efficient and less public area.

50,000

20,000

20,000 90,000

Now 2016

Rentable Area of High Performing - Low 10s

Rentable Area of Poor Performing Retail - 40+

TENANT STRATEGY

KEEPING THE INCOME ANCHORS

Upper End Retail Rents, Estimated Annual Rent Above $50 NNN

THE

DISTRICTLAKEFRONT


FAMILY RESTAURANT WITH ENTERTAINMENTFronting Valley Street, next to the park and trolley stop, will be a great location for a family friendly restaurant and entertainment concept. Similar to the Garage on Capitol Hill or Elemental Pizza in the U VIllage, this would be a higher volume restaurant that provides a great place for families to meet and refuel after spending time at the Waterfront Promenande. Von Trapp’s on capital hill is another example of a restaurant/entertainment concept filling a void in Seattle. In talking to the business owners of Elemental Pizza, they are very interested in this building and feel this is a great loaction.

NEW DEVELOPMENT STRATEGY

BIG PICTURE OR CINERAMAA smaller 200 seat, two theater movie would be another great addition. We cannot compete with the larger multi-screen corporate theaters, but we can offer a unique experience where you can eat and drink while watching. You can also rent out one of the movie theaters for


L A K E F R O N T P R O M E N A D E4BREWERYBetween Joey’s existing and the new Chandler’s Crab House, is a great place for a brewery. The Brave Horse is doing extremely well, indicating the growing market can easily support another neighborhood brewery. Adding the destination traffic will further guarantee success.

ACTIVITY CENTERThe key to this center is creating a café, electric boat rental and other activity rental center that pull customers into the center 12 months of the year. Indoor/outdoor space on the water can be active all year round.

EVENT SPACE WITH COVERED INDOOR/OUTDOOR SPACEThe space at the end of the Promenade has amazing 270 degree views of SouthLake Union and the Seattle Skyline. The view at night, with the well lit MOHAI building in the foreground, is spectacular. The restaurant and event space will be perfect for company parties, wedding anniversaries and weddings. The Palace Kitchen or the Garage on Capital Hill are concepts that do well here.

SPECIAL EVENTSNew Location for Chandler’s CrabhouseThe new building along Fariview Avenue, will have tremendous views of the promenade and lake. This reposition allows for the central stage, cove promenade and central cafe to be constructed. Chandler’s Crabhouse will have better visibility to traffic along Fairview, increasing their business. During warmer months, or with the aid of heat lamps, they will be able to provide outside seating along the restaurant stroll.


The synergy of strategies and market segments bring out the potential of the area. The waterfront is a Seattle treasure that can be improved into a vibrant active area that provides Vulcan with a reasonable payback on their investment. The improvements in the area and resulting value created are motivation enough to proceed with the development. The waterfront has an added advantage of being a key art of making South Lake Union a great urban neighborhood where office tenants, apartment dwellers and condo owners will be motivated to stay in the area. Overall the success of retailers depend on the overall success of South Lake Union.

DATA SUPPORTING DESTINATION RETAIL3,733,996

248,024

233,000

50%7,000

45,000

2017 Seattle MSA Population 2017 Population within 20 minute drive-timeSeattle MSA households with total household income over $75,000Household Income over $75,000Visiters to MOHAI on opening day [1]Visitors to MOHAI last month

[1] /www.visitseattle.org/News-Room/Welcome.aspx

STRONG DESTINATION RETAIL MARKETJoey’s, Chandler’s Crab House and Daniel’s are the three main revenue drivers. The majority of business income for these restaurants is considered destination retail, supported by customers visiting from throughout the greater Seattle area. For date nights, happy hour, business lunches, brunch and other special occasions, many customers choose to drive to the these three restaurants. The Museum of History and Industry (MOHAI), South Lake Union Park and the Center for Wooden Boats are bringing in customers from outside the neighborhood as well. Considering the potential for this area to become more of a draw, any development should focus on building on the existing destination retail customer base. Customers are mainly from the Seattle MSA, however tourists from outside the city and country present another untapped customer base (see Hotel Market Analysis for more information). Figure 1 (right) shows the strength of the Seattle MSA and some other solid demand indicators.

Estimated retail supply and demand is challenging in Seattle. Successful retail is concentrated in a few key spots. Overall levels of retail sales and space provide some relevant data. However, our advisors see the success of this area coming from stealing market share from competing areas. There are roughly ten areas in Seattle that support successful high rent paying restaurants and entertainment retail. Retailers will pay double, triple or more to be in the right area. A successful retail development will be more attractive to customers and provide a better experience.

THE NEW CENTER OF THE UNIVERSE!

(apologies to fremont)-Seattle Magazine, March 2013

WATERFRONT SITE STATISTICSExisting Retail

Existing Retail not Moving New RetailTotal Retail

Site Coverage TodayFuture Site Coverage

Parking RatioCurrent Marina Linear FootageFuture Marina Linear Footage

80,000 SF 30,000 SF110,000 SF140,000 SF22%25%2.34,200 LIN. FT2,384 LIN. FT

Over the last few months we have talked to a variety of potential customers from many demographics. Even with our limited sample size of 30, there is a general consensus of where customers go to eat, drink, be entertained. Figure 2 (right) shows their list of best destination spots for dining and entertainment in Seattle.

4.4 MARKET SUPPORT


5.2 LAKEFRONT EAST DESIGN

5.1 LAKEFRONT EAST VISIONThe building is organized and scaled appropriately to strengthen the public realm and provide maximum benefits to the various on-site uses. The hotel is u-shaped a double loaded corridor with primary frontage along Valley Street. This organization captures views to the lake and provides a direct relationship to the entertainment district. The condo tower tower is located on the southwest corner to provide ease of access for residents along Boren and maximize south, west and north views to the city and lake. Taking full advantage of the high visibility from I-5, the health club and urban market anchor the southwest corner on Fairview and Mercer.

L A K E F R O N T E A S T5


The construction on Lakefront East requires an alley vacation to make the most of the development potential. This process takes about a year through the City of Seattle’s Design Commission. The alley vacation allows the purchase of public right of way, and must be repaid through a public amenity and urban design program. This project proposes the allocation of public land on the Lakefront Promenade to be the public benefit of Lakefront East.

The design for the site includes parking for the condos, hotel, retail, fitness center, and retail, and spillover parking for the Lakefront promenade across the street. Parking is critical to ensuring that the site is accessible and functional for the many users on the site. Overall, 467 parking spots have been created including two levels of below grade with 397 stalls and four levels of above grade parking with 90 stalls.

The high- denstiy zoning on the site allows for mixed use. To maximize the site as well as the promenade, night time uses were seen as a way to keep the neighborhood active around the clock. Hotel and residential pieces were proposed, with Olive 8 as a comparative. Other uses on the site emphasize the healthy, active, and flexible lifestyle that professionals and aging boomers value so highly: fitness center, amenity retail, and complimentary uses.

The first floor of Lakefront east is filled with lobbies, parking access, and amenity retail uses that compliment the upper floor uses. A bar and restaurant on the ground floor cater to the hotel as well as creating a meeting spot for residents of the condo tower, and a place for visitors to drop in for some luxury. The varied uses combined with the courtyard create a butling ground level, secon only to the promenade.

ALLEY VACATION

PARKING

SYNERGISTIC MIX OF USES

CREATE AN ACTIVE GROUND FLOOR


5.2 PRODUCT POSITIONINGLakefront East will be a premier, mixed-use, high density urban development that will establish the Lakefront District as the Northwest’s most desirable location to live an active, healthy, social lifestyle. The four main components include an upscale hotel, luxury high-rise condos, a fitness club, and ground floor retail. These uses provide opportunities for shared operation efficiencies and amenities such as access to the premier fitness center, spa services, valet parking and food services. The synergies of Lakefront East’s uses and proximity to surrounding amenities such as the Lakefront Promenade fit a modern, active, urban lifestyle where convenience and flexibility are vital.

GROUND FLOOR RETAILGround floor retail is mandatory in Seattle’s Mixed-Use Zone, however the retail on Lakefront east is designed for maximum transparency, visibility, and flexibility. It is separated into two separate ground level blocks. Each can be broken into smaller spaces to The retail on Lakefront East is partially run by the hotel, an elegant and relaxing restaurant and bar cater events, and serve individual rooms. The rest of the retail is programmed and rented to entrepreneurs to fill needs of the new residents and guests. A local and fresh grab-and-go grocery can serve the needs of residents and the workforce in South Lake Union. A flower shop, bank, café, dry cleaner, or clothing store would also contribute to the active and busy ground floor that the vision of the site hinges on.

L A K E F R O N T E A S T5

HOTEL

CONDOMINIUMS

HEALTH & FITNESS

RETAIL

CondominiumsHealth & Fitness

HotelRetail

Below Grade ParkingAbove Grade Parking

144 Units60,000 SF225 Rooms14,500 SF397 Stalls90 Stalls


PREMIER HEALTH AND FITNESS The fitness center faces the southeast, with access in from the courtyard, and up from parking. The fitness center maximizes value through a square-ish floorplate, more so than the other uses on Lakefront east. Visibility from Mercer Avenue and Fairview Avenue will help with interest and accessibility. The floorplate of this component will maximize flexibility for various uses such as squash courts, a pool, classrooms, and a spa center.

LUXURY CONDOMINIUMSThe Luxury Condominiums are designed to maximize views. At 240' tall, and only 10,500 SF per floor, the condos are one of the economic drivers of the project. Eight condos a floor create luxury floorplans, excellent views on multiple sides, and a surprising efficient circulation. The tower is served exclusively by two elevators accessed from a ground floor lobby located off Mercer Avenue. The 5th floor has a residential lounge with a caterer's kitchen, a media room, an outdoor balcony, and flexible space can be reserved for events. The condos take advantage of a premier site, with exclusive views of Lake Union. These are the towers people have been waiting for, the prestige of the site, combined with the great neighborhood and convenience will create a high value.

4 STAR HOTELThe hotel is designed for luxury and views. In a funky, tech-centric, growing neighborhood, the hotel will stand out. It is a place for events, for weddings, unique small conferences, or travelers simply looking for a special place to stay. The hotel highly benefits from the views of the lake and accessibility to the lakefront promenade. Because of this, the hotel is oriented along Valley Street as much as possible. The hotel ultimately makes a U-shape which is dictated by the optimal 65' wide double-loaded corridor size. This shape creates an an interior courtyard that holds Rooms face both in and out, with major suites on the northeast and northwest corners of the block. The hotel entrance is in the center of the block on Valley Street, under a long overhang. Once inside the lobby, bell-hops, a concierge, and a front desk are ready to serve.


L A K E F R O N T E A S T H O T E L66.1 HOTEL VISIONFronting a newly improved Valley Street, this four-star hotel will have outstanding lake and city views as well as excellent accessibility to the Lakefront Promenade entertainment district as well as the heart of South Lake Union and downtown business district. The hotel will have 225 well-appointed rooms. The shell of the building will wrap the block in a ‘U’ shape, creating an interior courtyard. The double-loaded corridor layout maximizes light and views by providing each room with either an outward lake, city or courtyard view.

The design and image of the hotel will be similar to other boutique concepts, such as Inn at the Market and Hotel 1000, all of which are doing well in the current market. The low, six story hotel is fitting for the scale of the Lakefront District and compliments the pedestrian-oriented nature of the neighborhood.

OVERVIEW• 135,000 GSF

• 225 Upscale Rooms

• $240 Average Daily Rate

• $320 Construction/ GSF

• Occupancy Rate 80%

• Management Fee 3.5% Total Revenue

• Franchise/Sales & Marketing 5% Total Revenue

6.2 HOTEL DESIGN STRATEGYThe views and the unique amenities of South Lake Union will make this hotel stand out among its competition. Key hotel design details that will make this hotel successful include:

1) VIEW ROOMSThis hotel will have tremendous views of Lake Union and the Space Needle. Repeat customers paying the corporate rate of ~$225 will be rewarded by upgrades to lakefront view.

2) ROOFTOP POOL & BARA rooftop bar containing splash pool, will be a magnet for the after-work and weekend crowds. This bar would be a hotspot for nightlife in SLU.

3) HEALTH & FITNESS FACILITYGuests have access to a full service 60,000sf fitness center.

4) RANGE OF ROOM AMENITIES AND PRICINGSimilar to the Pan Pacific Hotel, rooms will range from low $200s to well above $1,000. Top floor, corner suites will have incredible views and with well designed luxury interiors catering to visiting diplomats and CEO’s.


EXPECTED GUESTS• 40% business, 20% group, 40% leisure

• Director and above business travelers working

at nearby businesses

• Luxury leisure travelers visiting Seattle

• Wedding, convention and special event group

bookings

• Romantic weekend getaways

6.3 HOTEL MARKET SUPPORTOur advisors believe this location, combined with the market void present a great opportunity for a 4 star hotel.

SUBMARKET COMPETITIONWe have undertaken a market analysis of all the hotel properties within 5 miles of the site to determine the competitive landscape. Our analysis shows that South Lake Union is currently undersupplied in terms of hotels; SLU has a total of 1057 rooms in 5 hotels or 8% of the total rooms compared to the downtown market. In comparison, the Seattle downtown area has 13,000 rooms in over 50 hotels.

Little direct competition for SLU exists in the 4 star space, and there are a low number of 3 star hotels in the area, these are:• Marriott Residence Inn (234 rooms) - 3 star• Silver Cloud Inn (184 rooms) - 3 star• Courtyard by Marriot (248 rooms) - 3 star• 2 Holiday Inns near the Seattle Center - total of 390

rooms.• The next notable competitor is the Pan Pacific - a

4 star property with 160 rooms within the 2200 Westlake development, the next closest hotels are located close to the Seattle Cente and within the Denny Triangle.

HOTEL


L A K E F R O N T E A S T H O T E L6UNDERSUPPLY AND STRONG PROJECTIONSThe undersupply of hotels is reflected in the rates and occupancy of the hotels in the area. Currently Kidder Matthews has figures for 2012 in SLU at: 76.0% occupancy and $141 ADR. Similarly, In 2012, the Residence Inn located right next to the site posted an ADR of $170+ and 85% occupancy. These figures are indicative of an area experiencing underaccomodated and latent demand.

By 2018 the South Lake Union area is forecast to reach an ADR at $190 (2016) and Occupancy rates of 77% (2016) - these figures are indicative of a strong future market.

Given a total number of beds at 1057 for the area (at present), the current 76% occupancy represents 803 beds occupied on average year round. However, we believe the market can in the future support at least 1200 beds occupied - based on 70% occupancy – this is approx 1700 beds. This is approximately a 60% increase in market size. After accounting for the incoming hotels with 420 rooms between them - we count 1 new hotel in SLU - 283 bed rooms on Amazons Block 101 and a proposed 133 room Hilton Garden Inn by Touchstone; we believe there is sufficient justification for another 280 rooms.

STRONG CURRENT & FUTURE DEMANDHotels typically segment their demand into business, leisure and group. We believe our demand will be driven by 40-50% business, 40% leisure and 10-20% group bookings. This is based on a rationale of consulting with hotel experts what is achievable for our site, based on what exists in the market. In the nearby Central Business District, demand for boutique hotels (Hotel 1000, Inn at the Market, Hotel Vintage Park, Hotel Monaco) in the downtown submarket area are booked at a split of 40% business, 20% group booking, 40% leisure.

In our hotel, we believe the 40% of business customers would be a split of weekday, corporate business travelers – director level and above - visiting the Gates Foundation, Fred Hutchinson, Amazon, and the host of other world class companies located in South Lake Union. The technology and biotech industries in SLU are rapidly expanding; within the next five years approximately 23,000 new jobs are forecast this massive explosion by over 50% new jobs will underlie the growing business traveler demand. The 10-20% of group travelers would be visitors to conferences/conventions and wedding groups using the Waterfront events center/restaurants.

Leisure travellers typically make up 40-50% of demand (including group bookings leisure groups). We expect these travelers to be visiting local attractions such as Lake Union, the MOHAI and Seattle Center. Additionally, with an influx of restaurants and nightlife through opening of our Lakefront Promenade in 2017 and increased accessibility with the finished trolley, we expect to

create even more of a draw for tourists. Underlying this is the strong growth in Incoming passenger numbers at Seatac Airport; an increase of 5% in passenger levels was reported from 2010-2012 (with per annum growth of 1-7%).


FLAGWe believe the choice of flag will be based on what is currently not present in the market and not tied to any interests. We believe the hotel would benefit from having an experienced operator; an unbranded hotel would suffer in terms of establishing presence in the market by not having the same marketing channels. Thus it would start with lower ADR and occupancy than if it were ‘branded’.

Market sources have advised us that existing sole franchisor rights exist for Hyatt, Hilton and Westin properties - hence the hotel cannot have any of these flags. However we are aware that Omni, Kimpton and Joie De Vivre are hotel operators currently looking at opening more properties in Seattle, and have expressed interest in our site when we discussed the proposal with them.

NUMBER OF ROOMSUsing the analytical approach above, and after consulting with local hotel experts at CBRE and Kidder Matthews, we determined that an achievable range for the number of rooms is from the high 100s to the low 200s. A hotel of 300 rooms or more would be too much for the area - impacting yields whilst below 150 rooms there is insufficient economies of scale.

Given the planning parameters of the site, and need for other uses on Block 25, we have allowed for a maximum size of 135,000 gsf located within the northern podium. To get to the final number of rooms we factored in standard 4 star hotel hotel room sizes (based on Kimptons and the Pan Pacific), and common/circulation spaces such as meeting rooms, lobby and corridors, and prepared preliminary floor plans to ensure our sizing reflected industry practice. The standard allowance for a boutique standard of 4 star hotel, is between 325 - 600 sf per room (net). This allowed us 600 gsf gross per room, and resulted in sufficient space for a 225 room hotel.

HOTEL DESIGN - PREMIUM OR 3 STAR?Our choice of a 4 star offering is based on a competitive analysis of the market. Market experts whom we consulted for this project believe there is insufficient demand for a 5 star property on the site. At the same time, 3 star properties are in oversupply and we believe whilst profitable they do not maximise the locational characteristics of the site - e.g. the lakeviews, excellent access/transit to/from the area. Finally: the fact that there is no 4 star product until the Denny triangle area speaks to a gap in luxury accommodations of the 4 star quality.


C O N D O M I N I U M S77.2 MARKET SUPPORTGiven the prime waterfront location with its With the lenders and the industry so focused on apartments in recent years, the demand for condos has finally caught up and passed by available supply. There are strong indicators that the condo market is turning around and support a successful sell out from preconstruction to the 12 months after completion of the project.

CURRENT MARKET INDICATORSFEW VACANCIES IN COMPETING PROJECTSOlive8 and 1521 Second Ave, both downtown luxury condo towers that came to market in 2008 are now approaching full occupancy (93% and 97% respectively).

FEW UNITS FOR SALE IN URBAN SEATTLEIn 2008 Seattle had 2,500 condos for sale. Today there are only 120, a historical low.Source: Realogic Sotheby’s International Realty

RISING PRICES IN DOWNTOWN SEATTLEDowntown home prices have reached pre-recession prices of $500,000 Source: Daily Journal of Commerce, March 04, 2013

NO EXPECTED INVENTORY UNTIL 2015 (Bosa’s project = 640 units) Source: Realogic Sotheby’s International Realty

As available inventory continues to go down prices are risings indicating that the Seattle market is once again poised for new condos.

7.1 CONDOMINUIM VISIONGiven the prime waterfront location with its unobstructed views, easy access to downtown, entertainment, recreation and shopping, Lakefront East is ideal for luxury condos. This is the place that so many potential condo owners have been looking for as they consider downsizing from their single family home, or holding out until financial markets gain some strength and momentum - as they are beginning to now. No other neighborhood in Seattle can deliver the dynamics and amenities that the Lakefront District will offer, and it our strategy to capitalize on the unique opportunity to create the most desirable living in the Northwest.

OVERVIEW• 190,000 GSF

• 150 Units

• 1,135 NSF / Unit (Avg.)

• $325 Construction / GSF

• $1,040 / SF (Avg. Sale Price)

• $1.2M / Unit (Avg. Sale Price)

• 1 Parking Stall per Unit

CONDOMINIUMS


FEATURES AND AMENITIES• · Expansive Lake Union and City views

• · 1,135 average square feet per unit

• · Community lounge with outdoor terrace and

caterer’s kitchen

• · Separate entrance lobby

• · Concierge

• · Parking Stall

• · Dog run

• · Storage

• · Direct access to premier fitness facility,

restaurants, entertainment, and recreation

FUTURE FORECASTThe target condominium buyers include:Wealthy individuals and families wanting to live near work; Migrating vice president and higher levels moving to Seattle from areas like New York and San Francisco; Empty Nesters looking to move back into the city for a more active livfestyle; Parents looking for second homes near their children. This target market is relatively small.

LOCATIONS AND VIEWSActive brokers believe the view from Lakefront East will drive demand and increase value by $200,000 to $300,000 per unit compared to condos without quality views. The primary benefit here is that these views looking North toward Lake Union will be completely unobstructed forever. In addition, with the City and Vulcan allocating significant investment to the surrounding amenities (including the waterfront) as well as the South Lake Union Trolley (with planned expansion of service), these condos will be in high demand.


H E A L T H A N D F I T N E S S C L U B88.1 VISIONContributing to the appeal of Lakefront East as an active, healthy place to live and play is a premier health and fitness facility. Located on the southeast corner of the block, this 60,000 square foot facility will include a range of services, exercise areas, and amenity offerings. The addition of a premier health club will fill a void in the market area and create an 18 hour flow of users to the Lakefront District that will complement the entertainment activities at the Promenade as well as the Lakefront East hotel, condos, and retail uses.

8.2 STRATEGIESMARKET DIFFERENTIATIONThe competitive market is currently missing a full-service urban athletic club of the size, quality and character proposed here. The closest competitors in Seattle include the Washington Athletic Club and Seattle Athletic Club. These facilities, however, have failed to keep up with evolving health and fitness trends, lack the visibility, accessibility and amenities of our prime lakefront location, and are located outside of the South Lake Union neighborhood.

The variety of uses that will further differential this operation include: • fitness and group areas• studio spaces (yoga, pilates, spinning)• racquetball and squash• spa• top-floor pool with views to the lake• childcare • spacious locker room facilities

DEVELOPMENT SUMMARY• 60,000 GSF

• CONST: $180 / GSF (+ TIs $71/GSF)

• Lease: $31/ GSF (NNN)

• PKG: 191 Stalls (3.33 per 1000 SF)

8.3 MARKET FORECAST Membership projects considered existing and future demographic data of professionals aged between 25 and 60 years earning over $75k annually within South Lake Union’s greater competitive area. Overall market penetration for health clubs includes capture rates of 22% for residents and 15% for daytime population. Current memberships for existing health clubs and gyms are estimated at 40,700 within the competitive market area. With the increase in residents and daytime population over the next four years as well as the draw from enhanced offerings of the new facility at such a desirable location, our projections show a membership potential of over 4,800 members by Lakefront East opening in 2018.

Based on our market analysis and application of industry standard operation models, we project that a 60,000 square foot facility with the quality and quantity of facilities proposed will garner monthly dues of $125 per month from (conservatively) 3,500 members. At triple net rent of $31 per square feet and additional operating expenses of 40% of gross revenue, a fitness facility will yield a 25% profit margin of $1.25 million annually in this location.

HEALTH & FITNESS


Through our market research, we identified one market player that would be the ideal tenant for Lakefront East. PRO Sports club currently operates a 30,000 sf facility in the Cascade neighborhood of South Lake Union with a membership base of approximately 3,000. The organization has a strong corporate membership relationship with Microsoft and various other companies that are increasing their presence in South Lake Union. During our conversations with PRO, interest has been expressed in expanding their Seattle facilities to better complement and serve members commuting from their Bellevue location (a 500,000 square feet facility and over 40,000 members). The advantages of relocating PRO (or similar) to Lakefront East include instant market recognition and membership activation that will spillover to surrounding businesses.

DEMOGRAPHIC SUMMARY• Tech/ Health & Science Professional

• Age 25-60

• $75k+ Income

• Dues: $125/Mo

HEALTH CLUB MEMBERSHIP FORECAST


A M E N I T Y R E T A I L99.1 VISIONGround floor retail is mandatory in Seattle’s Mixed-Use Zone, however the retail on Lakefront east is designed for maximum transparency, visibility, and flexibility. It is separated into two separate ground level blocks. Each can be broken into smaller spaces to The retail on Lakefront East is partially run by the hotel, an elegant and relaxing restaurant and bar cater events, and serve individual rooms. The rest of the retail is programmed and rented to entrepreneurs to fill needs of the new residents and guests. A local and fresh grab-and-go grocery can serve the needs of residents and the workforce in South Lake Union. A flower shop, bank, café, dry cleaner, or clothing store would also contribute to the active and busy ground floor that the vision of the site hinges on.

9.2 STRATEGIESMarket DifferentiationThere is also a great opportunity along Mercer Street. We believe an electric car dealership on Mercer would benefit from large volumes of traffics every day.

There are many levers Vulcan can pull to capitalize on both types of retail customers. Including:

• Discovery SLU Website tools• Promotions for residents• Sponsorship of waterfront events• Press releases and active marketing campaign• Shared promotions with retailers• Partnerships with wooden boat center, MOHAI, City

of Seattle and other who have aligned interest in making this development a success.

• Percentage rent to help local retail get started with profit sharing potential as business explodes.

9.3 MARKET SUPPORTLooking at the nearby office and residential space in the pipeline, making some assumptions about the composition of uses built along Mercer and looking at the number of apartment, hotel and condo units in the immediate area, there will be a big improvement in the foot traffic throughout the day and into the evening. We consider the reasonable walking area and activity zone for neighborhood retail to the zone shown in the map below.The nearby area two large hotels, Fred Hutch Cancer Center, Numerous Offices and apartments. All of these different uses increase an already healthy demand for services that cater to the needs of daytime inhabitants and evening residents. Gross block by block analysis shows retail in 2016 will be supported by the following population counts:

Both the destination customers and neighborhood customers in the area will support the limited amenity retail at street level and the Hotel restaurant.

RETAIL


SYNERGISTIC MIX• Hotel Restaurant – 5,000 square feet

• Fresh Foods Grab & Go Market – 8,000 square

feet

• Hotel Rooftop Bar – 3,000 square feet

• Spa - 2,300 square feet

• Hair & Beauty Salon 1,200 square feet

• Flower and Gifts – 1,500 square feet

• Coffee Lounge - 1,200 square feet


1010.1 OVERVIEWThe overall phasing strategy is to begin the transformation of Chandler‘s Cove into the Lakefront Promenade and deliver Lakefront East upon completion to capture the added value generated by the vibrant entertainment district.

P H A S I N G

STAGE 1LAKEFRONT PROMENADE PHASE 1This phase includes the development of a structured, below finished-grade parking garage with new retail/entertainment buildings at the southwest corner of the property (former Burger King site) as well as the lidding and construction of new retail fronting Fairview Avenue. Also taking place at this time will be the bridge and dock connection to the park as well as the existing dock removal /reconfiguration. This approach limits impacts on parking shortfalls and businesses by allowing either Block 25, 26, or 27 to accommodate any overflow parking needs while creating immediate public benefits and awareness of the evolving Lakefront District.

In addition, a sales center will either be established at the Lakefront Promenade or a model unit and sales force will be established at the existing Vulcan Lake Union Discovery Center to begin pre-selling condominium units that will be built on Block 25 (rebranded as Lakefront East).

Lakefront Promenade Phase 2: Complete the promenade, including the new waterfront retail spaces, piers, decking and docks.

2013 2014 2015 2016 2017Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Q2 Q3 Q4

PROMENADEDESIGN SHORELINE REVIEW

PERMIT PARKING CONST.PROMENADE

BUILDINGSTENANT LEASE-UP

GROUNDSWORK

LAKEFRONT EASTDESIGNALLEY VACATION

PERMITCONSTRUCTION

TENANT LEASE-UPFIT-OUT


Lakefront East (Block 25) construction will begin 6 months after the Lakefront Promenade transformation begins – breaking ground with the completion of the Lakefront Promenade Phase 1. This timing would allow for the site to be used as interim surface parking and/or construction staging. In addition, this phasing will allow project delivery approximately one year after the Lakefront Promenade transformation has been completed and Lakefront East will fully be able to capture the added value generated by the vibrant entertainment district.

STAGE 2


11.1 COSTSLANDHC Henry Pier and Chandler’s Cove aggregated land parcels are valued at $17,500,000, roughly $183/sq ft per square foot of upland property. Block 25 land parcels are valued $25,000,000, roughly $360/sq ft.

SOURCESIn order to develop our pre-construction budgets we cross referenced numerous sources. We compared RS Means and Marshall & Swift Square Foot Costs for similar buildings using the 2013 publications. During our interviews with developers, brokers and appraisers, we gained some general ranges of construction costs for different uses.

Ultimately our best resource for our costs came from the generous team at R & H Construction in Portland. Jake Sly from their preconstruction cost team spent a day walking the site, reviewing conceptual drawings and looking at our budget. Based on their guidance we reformatted our

cost breakouts. Over the last few weeks, R & H reviewed our numbers with their estimators to develop what we believe are conservative capital budgets.

RISKS AND OPPORTUNITIESVALUE ENGINEERINGThere are opportunities to reduce the construction costs through working with our contractor partners to modify our designs to return the most value. WE strongly believe the preconstruction phase is critical and recommend close coordination and value engineering the development designs.

CONSTRUCTION COST ESCALATIONWe escalated our construction costs by 6% to account for our 2017 start date.

11 F I N A N C I A L S

Waterfront Costs: Waterfront Costs

Construction Budget

Unit

Tenant Allowance/SF

Parking $27,000 Per Stall Site Improvements $55 Per SF of Land New Buildings $175 Per SF GSA $110 Demolition $2 Per SF Building Remodel Budgets $35 Per SF GSA Waterfront East Building Costs: Lakefront East Costs

Construction Budget

Unit

Tenant Allowance/SF

Underground $28,000 Per Stall

Above ground parking $33,500 Per Stall Condo Tower $325 Per SF GSA Hotel $290 Per SF GSA Club $180 Per SF GSA $500 for pool/complex

$30 for open space Retail $110 $90

Waterfront Costs: Waterfront Costs

Construction Budget

Unit

Tenant Allowance/SF

Parking $27,000 Per Stall Site Improvements $55 Per SF of Land New Buildings $175 Per SF GSA $110 Demolition $2 Per SF Building Remodel Budgets $35 Per SF GSA Waterfront East Building Costs: Lakefront East Costs

Construction Budget

Unit

Tenant Allowance/SF

Underground $28,000 Per Stall

Above ground parking $33,500 Per Stall Condo Tower $325 Per SF GSA Hotel $290 Per SF GSA Club $180 Per SF GSA $500 for pool/complex

$30 for open space Retail $110 $90


11.2 INCOMEThe development financial returns are split between two main sites, as these are financed separately using a different set of assumptions.

LAKEFRONT PROMENADE INCOMEThe promenade development will drastically change the rent roll for the waterfront properties. The better performing retail tenants will more than double the income compared to the current, pre-development, rent roll.

LAKEFRONT EAST INCOMELakefront East will be generating a small percentage of the income through a combination of leasing the retail and fitness space to experienced operators for between $24-40 psf. Additional revenue streams will be generated by operating the hotel, which will be at 80% occupancy by year 3 (yr 1 at 70% occupancy, yr 2 at 75% occupancy), ADR will be starting at 10% less than the market average for a hotel of its 4 star rating, and will be increasing to stabilized figures by year 3.

CONDO SALESThe income model for Lakefront East is based on the typical model for condo sales in the market. This assumes a large percentage of condos will be sold prior to construction and all the units will be sold within a year after completing the condos.

CONCLUSIONGross annual rental income from both properties is $28,525,000. The total sale income for the condos is $177,800,000. For Lakefront East, the hotel and the condominiums are driving the bulk of gross income and resale profits. The amenity retail and health club provide solid income, but are help support the overall value of the development through a cohesive, well balanced development strategy.

Source

Gross Annual Income

Income Per Unit

Unit

Parking $716,000 $200 Space/Month Marina $400,500 $15 Linear Foot/Month Retail Average $5,300,000 $46 Square Foot/Year Total $6,416,500 Lakefront East Rent Revenue

Gross Revenue

Revenue per Unit

Expense Percentage

Hotel $19,400,000 $148/SF 22% Retail $940,000 $34/SF 5% Health Club $1,780,000 $31/SF 5% Total $22,120,000 Lakefront East Condos Sale Price per Net Square Foot $1,045/SF Total Sales $177,880,000Presales Prior to Construction 42% Month to Sell Out After Construction 12

Source

Gross Annual Income

Income Per Unit

Unit

Parking $716,000 $200 Space/Month Marina $400,500 $15 Linear Foot/Month Retail Average $5,300,000 $46 Square Foot/Year Total $6,416,500 Lakefront East Rent Revenue

Gross Revenue

Revenue per Unit

Expense Percentage

Hotel $19,400,000 $148/SF 22% Retail $940,000 $34/SF 5% Health Club $1,780,000 $31/SF 5% Total $22,120,000 Lakefront East Condos Sale Price per Net Square Foot $1,045/SF Total Sales $177,880,000Presales Prior to Construction 42% Month to Sell Out After Construction 12



11.3 RETURN ON INVESTMENTAs indicated in the market analysis, both sites exhibit strong economic opportunities for investment. Each site was financially analyzed separately, then combined to derive a total project return. The affects of using and not using leverage were measured to analyze the most optimal investment strategy. Vulcan’s credit and capital allows it to act as the developer and owner of both projects. However, since the Lakefront East separates into condominiums for each use, Vulcan has the option to sell any use to a separate entity at anytime (which gives Vulcan more exiting options). All returns measured in this analysis are pre tax scenarios.

LAKEFRONT PROMENADEThe Lakefront Promenade presents an incredible opportunity for economic investment. Given the previously stated assumptions for costs and rents, the Lakefront Promenade is estimated to gain a profit of ~$17.5 Million (Profit Margin of 23%). The assumption of keeping the high paying rental structures (i.e. Joey’s, Daniels), while increasing the square footage of high paying retail allows the project to capture the most value.

Lakefront Promenade Project Performance

Total Project Costs $75,200,000 Market Value @ 6% CapRate $92,800,000 Profit $17,600,000 Profit Margin 23% Lakefront Promenade Construction and Take Out Loan Terms Loan to Cost 80% Interest Over LIBOR 250bp Loan to Value 80% Debt Service Cover Ratio 1.15 Terms 30 Interest Rate 5% Going in Cap Rate 6%

Lakefront Promenade Return Metrics Sale at Year 11

Unleveraged Leveraged

Equity $75,200,000 $17,650,000 Stabilized Cashflow $5,567,500 $785,500 Return on Equity 7.4% 4.45% Exit Cap Rate 6.25% 6.25% Net Sale Proceeds $64,320,000 $59,540,000 Internal Rate of Return 10.9% 16.1% Net Present Value @ 12% Discount Rate ($5,000,000) $6,040,400 Lakefront East Return Metrics

Total Project Costs $244,500,000 Market Value $259,500,000 Profit $15,000,000 Profit Margin 6.14% Lakefront East Construction Loan Terms Loan to Cost 70% Interest Over LIBOR 300bp Residential Pre Sales 40%



















The financing assumptions for the Lakefront Promenade were established through discussions with both Home Street Bank and Wells Fargo. Both lenders stressed the point that the credit quality of Vulcan allows for more lenient loan terms. Both construction and take out loans would be non recourse loans.

If Vulcan did not use leverage for the Lakefront Promenade, their equity contribution would be the total development cost of ($75,500,000). Even though they would be receiving a higher cash flow (due to no debt service payments) and have a high return on equity (7.4%), their internal rate of return (IRR) and net present value (NPV) are significantly less than a leveraged scenario. In a leveraged scenario, Vulcan, would only have to contribute the current land & improvements as equity. A significantly smaller equity contribution up front with favorable lending terms yields a favorable IRR and NPV. As Vulcan’s, real estate advisors, we strongly urge Vulcan to use leverage to develop the Lakefront Promenade.














Use Value per Use Pro-‐rata Share Residential Condos $178,559,152 54.2% Hotel $49,020,464 18.9% Health Club $18,688,747 7.2% Retail $13,239,029 5.1% Total $259,507,392 100.0%

Lakefront East Take Out Loan Terms Retail Hotel Health Club Loan to Value 80% 70% 75% Debt Service Cover Ratio 1.15 1.2 1.18 Terms 30 30 30 Interest Rate 5% 6% 6% Going in Cap Rate 6% 8% 8.2% Exit Cap Rate 6.25% 8.25% 8.45%







$

$

LAKEFRONT EASTAs indicated through our market analysis, we advise developing residential condominiums, a hotel, a health club, and retail used to maximize economic and synergistic value. Each use will be its own condominium but the entire building will be rolled into one master condominium association. The estimated market value of the project would be approximately $260,000,000. This would also result in a lucrative profit margin.

The financing for the entire Lakefront East will fall under one construction loan. Through discussions with lenders, the lending market still views the residential condominiums as a risky investment. Most developers must put down a lot of equity (60% loan to cost) AND have at least a 50% pre-sale to meet FHA qualifications (lenders will typically not lend if the building is not FHA approved). However, after multiple discussions, Vulcan’s credit quality will allow them to access more leverage (70% loan to cost) and will allow for a lower pre-sale amount (about 40%). Lenders still want to see a high pre-sale volume, but it does not need to hit the 50% FHA benchmark.

USE VALUE PER USE PRO-RATA SHARE







The take-out loan structure will be based off of the pro-rata share of value for each use in the completed building. The pro-rata share will be use to determine the appropriate amount of land allocated for each use. It will also determine the construction loan percentage repayment for each use. The residential condominiums do not require a take out loan. This means that 54.2% of the construction loan will be paid down as residential condominiums are sold and 45.8% of the construction loan will be closed out upon certificate of occupancy with take out loans from the income producing uses.

Once again, do to the credit quality and stabilization of Vulcan, different lenders estimated favorable take out loan conditions. Vulcan will develop and operate the three different income uses and pay a management fee based on the effective gross income for each use.

Like the Lakefront Promenade, Lakefront East will yield stronger financial returns when using leverage. Even with conservative exit cap rates, the Lakefront East will still yield an IRR of 23.7%. Not using leverage is strongly discouraged.



11.4 EXIT STRATEGYVulcan is in the business to improve the financial position of their investment portfolio and has been doing this while creating real value for Seattle’s residents. After a recent large divestment, we believe Vulcan’s real estate holdings are now down from 15% to about 10% of their portfolio. Because of the nature of the equity source (Mr. Allen), Vulcan can break out of the traditional

Lakefront East Return Metrics Sale at Year 10


Total Equity $244,500,000 $71,886,000 Equity in Land $25,000,000 $25,000,000 Additional Cash Equity $219,500,000 $46,886,000 Return on Equity 22% 15.7% Gross Sale Proceeds Residential $178,500,000 $178,500,000 Net Sale Proceeds Residential $74,500,000 $74,500,000 Net Sale Proceeds (not including residential) $143,772,700 $91,975,800 Internal Rate of Return -‐0.2% 26% Net Present Value @ 12% Discount Rate ($119,542,600) $45,007,000 Lakefront East Return Metrics Sale at Year 10


Total Equity $375,118,000 $91,003,000 Equity in Current Land $42,500,000 $42,500,000 Additional Cash Equity $332,618,000 $48,503,000 Return on Equity 5.5% 12.8% Internal Rate of Return 3.5% 16.9% Net Present Value @ 12% Discount Rate ($97,376,246) $20,281,161

Lakefront East Return Metrics Sale at Year 10


Total Equity $244,500,000 $71,886,000 Equity in Land $25,000,000 $25,000,000 Additional Cash Equity $219,500,000 $46,886,000 Return on Equity 22% 15.7% Gross Sale Proceeds Residential $178,500,000 $178,500,000 Net Sale Proceeds Residential $74,500,000 $74,500,000 Net Sale Proceeds (not including residential) $143,772,700 $91,975,800 Internal Rate of Return -‐0.2% 26% Net Present Value @ 12% Discount Rate ($119,542,600) $45,007,000 Lakefront East Return Metrics Sale at Year 10


Total Equity $375,118,000 $91,003,000 Equity in Current Land $42,500,000 $42,500,000 Additional Cash Equity $332,618,000 $48,503,000 Return on Equity 5.5% 12.8% Internal Rate of Return 3.5% 16.9% Net Present Value @ 12% Discount Rate ($97,376,246) $20,281,161







TOTAL PROJECTSince both sites will yield higher IRR in a leverage based scenario, it does not come as a surprise that the when both sites are combined, the leveraged scenario yields a higher return. By combing both sites into one proforma the total project will yield a 16.9% leveraged IRR.

Overall we wanted to test the development under accurate market and lending assumptions while keeping cap rates high. This would yield conservative returns. Even with the conservative returns, the total IRR of both projects yield a favorable 13.7%. We advise Vulcan to develop this project using leverage to fully capture the potential value.

hold and sell models and adjust exit strategies to meet their investment goals. Vulcan can look at the overall neighborhood, and other investment portfolio assets, to determine best strategy for these properties. Considering this, we believe a longer term hold strategy makes sense. At the same time, we know Vulcan is open to selling assets as good opportunities present themselves or internal investment strategies change.

HOLDING PERIODWaterfront Promenade will be completed almost a year before the Waterfront East development finishes. We recommend an eleven year hold on the Promenade and a ten year hold on the Lakefront East buildings. We believe Vulcan will most likely want to hold the property for a longer than normal period of time and modeled the financial returns holding until 2027. If market conditions turn overly positive, Vulcan may consider selling early. Lakefront East’s legal structure will allow the Hotel, Retail and Health Club to be sold separately in the event an attractive offer is made on one of the operating uses in the development.


EXIT STRATEGYAt the end of the holding period, Vulcan should reevaluate the stabilized value of the property and consider selling all or parts of the developed sites. If the market heats up during the holding period, Vulcan may consider selling some or all of the development assets.

MARKET CYCLESWhile hard to predict, some local developers believe we will have a 10-12 year cycle. If we have a downturn after the development is complete, it will make sense to hold the property long enough to stabilize the income and look to the next peak. This reinforces a 10 year target hold strategy with an option to adjust the sale date depending on how the market looks toward the end of the holding period.



C O N C L U S I O N12

DAVE KNIGHTJEFF BERNARD

KELLY HOGGMARY FIALKO

ALEX MARTINEZZACHARY CLEMENTS

FRANCISCO TRAVERSOWANLU ZHU

YINYAN CHENJASON YAP

Through thoughtful design and programming strategies, Tellarite Real Estate Advisors has identified the preceding plan for Seattle’s future Lakefront District. This document provides Vulcan with a variety of strategies and opportunities for achieving their mission of acting as stewards of capital and real estate assets that improve the physical and social landscape of the communities they invest in.

We thank you for taking the time to read and consider our development proposal. We are very proud and excited about this neighborhood and this particular project, and we look forward to its realization.


The students of the University of Washington would like to extend a very special thank you to the faculty and staff at who have assisted us in the development of this project, including: Al Levine, Chris Bitter, Stephen O’Connor, Glenn Crellin, Suzanne Cartwright, Nancy Tate, Melissa Best, Jim DeLisle and George Rolfe.

Additionally, our team would like to offer their sincere appreciation for the generous time and guidance received from the following individuals:

HAL FERRIS – Spectrum Development SolutionsJONAS SYLVESTER – Unico Properties LLCGABE GRANT – HAL Real Estate InvestmentsMARIA BARRIENTOS – barrientosVAL THOMAS – Val Thomas IncSCOTT SHAPIRO – Eagle Rock Ventures LLCDANA BEHAR – HAL Real Estate InvestmentsPJ SANTOS – Lorax PartnersGREG JOHNSON – Wright Runstad & CompanyJOHN HEMPELMAN – Cairncross & HempelmannBRUCE LORIG – Lorig AssociatesDOUGLAS HOWE – Touchstone JUDITH KALITZKI – UW Foster School of Business

DESIGN & CONSTRUCTIONJONATHAN MORLEY – The Berger PartnershipGUY MICHAELSEN – The Berger PartnershipTODD BRONK – The Berger Partnership

MARKET DATAMATT HOFFMAN – Heartland LLCANDY ROBINSON – Kidder Mathews RICHARD BRISCO – Kidder Mathews RANDY LEE – PCC Natural MarketsTOM BERNARD – WindermereJEFF SANFORD – Security PropertiesMARK HOYT – Security PropertiesED MCGOVERN – Security PropertiesMARCO KRONEN – Windermere and Seattle Condo BlogWENDY LEUNG – Windermere and Seattle Condo BlogJULIE MCAVOY – Realogics Sotheby’s Int. RealtyJAMES ALLARD – Elemental Pizza

HOTELJOHN GORDON – Kidder Mathews TED KENNEDY - Kennedy & Mohn, P.SMATTHEW BEHRENS – CBRE Hotels, Capital MarketsCHRIS BURDETTE – CBRE Hotels, Capital MarketsRICHARD NOEL – Marriott Residence Inn

FINANCEJEFF LEWISON – Security PropertiesBLAKE CARBONATTO – Wells FargoCARMEN ESTEBAN – HomeStreet Bank

PRICINGJAKE SLY – R&H Construction

DEVELOPMENTALAN CORNELL – Daniels DevelopmentKATLIN JACKSON – Heartland LLCJOSEPH POLITO – Touchstone JEFFREY REINSTEIN – Commune Hotels & Resorts JESSE STEIN – Kimpton Hotel Group

LAWGLENN AMSTER – Kantor Taylor Nelson Evatt & Decina PC

ENVIRONMENTAL / SHORELINEPETER HUMMEL – Anchor QEAJOHN SMALL – Anchor QEA

T H A N K Y O U

A C K N O W L E D G E M E N T S13

UNIVERSITY OF WASHINGTON


F I N A N C I A L P R O F O R M A

A P P E N D I XA

xl UNIVERSITY OF WASHINGTON

A P P E N D I XAPromenade

RETAIL RETAIL RESIDENTIAL HOSPITALITY HEALTH CLUB TOTAL

DESIGN ASSUMPTIONS GROSS SF 116,105 27,625 200,298 130,787 57,150 531,965

USABLE UNITS 116,105 27,625 150 225 57,150PARKING STALLS 299 55 166 75 191 786

PARKING RATIO PER UNIT 2.57 2.00 1.11 0.34 3.33

COST ASSUMPTIONS LAND VALUE PER DEVELOPMENT UNIT ($ / NSF) $183 $360 $360 $360 $360 $1,624

SITE - INFRASTRUCTURE ( $ / SF OF SITE ) $55 $3 $3 $3 $3 $68BUILDING SHELL ( $ / SF ) $175 $136 $325 $320 $180 $1,136

TENANT IMPROVEMENT ($ / SF ) $110 $143 $0 $0 $71 $324PARKING ( $ / STALL ) $25,578 $28,970 $28,970 $28,970 $28,970 $141,457SOFT COST ( $ / SF ) $145 $128 $128 $128 $128 $659

TOTAL ( $ / SF ) $648 $452 $840 $353 $308 $2,600BASE YR. OPERATING EXPENSES ( $ / SF / YR ) $5 $3 $0 $87 $16 $110

INCOME ASSUMPTIONSRENTAL INCOME ( $ / SF / MO ) $4.04 $2.83 $0.00 $14.67 $2.58 $6.03

SALE INCOME ( $ / USABLE SF ) $0 $0 $1,045 $0 $0 $1,044.80PARKING INCOME ( $ / SF / MO ) $0.7 $0.0 $0.0 $0.0 $0.0 $1

NOI $5,567,426 $794,342 $0 $3,921,637 $1,532,477 $11,815,882

VALUE ASSUMPTIONCAPITALIZATION RATE 6.00% 6.00% 0.00% 8.00% 8.20% 7.1%

VALUE ( $ / SF ) $783 $479 $1,045 $375 $327 $602VALUE TOTAL $ $92,790,430 $13,239,029 $177,879,926 $49,020,464 $18,688,747 $351,618,596

DEBT ASSUMPTIONSLOAN TO VALUE 80.00% 80.00% 70% 75% 70% 75.0%

DEBT SERVICE COVERAGE 1.15 1.18 0 1.18 1.2 1.18TOTAL DEBT (PRORATA FOR LAKEFRONT EAST) $60,163,764 $10,449,948 $117,762,031 $36,765,348 $13,082,123 $238,223,214

TOTAL EQUITY (PRORATA FOR LAKEFRONT EAST) $17,500,000 $2,647,806 $50,469,442 $12,255,116 $5,606,624 $88,478,988EQUITY ASSUMPTIONS

RETURN ON EQUITY 7.4% 4.6% 147.6% 25.3% 9.6% 38.9%LEVERAGED IRR 16.0% 18.8% 31.7% 31.7% 12.6% 22.2%

UNLEVERAGED IRR 10.9% 9.0% -1.6% 4.4% 8.9% 6.3%

NAIOP Real Estate Challenge Financial Underwriting Summary 2013Lakefront East

RE 571: Autumn 2012 CONSTRUCTION/MARKETING/DISPOSITION Sample Solution 12-7 (Purchase DIBS)

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028Gross Rent Roll

Grocery $208,000 $209,040 $211,130 $213,242 $215,374 $221,835 $230,709 $239,937 $247,135 $252,078 $257,119Café $48,000 $48,240 $48,722 $49,210 $49,702 $51,193 $53,240 $55,370 $57,031 $58,172 $59,335HOA $96,000 $96,480 $97,445 $98,419 $99,403 $102,386 $106,481 $110,740 $114,062 $116,344 $118,671Restaurant $585,000 $587,925 $593,804 $599,742 $605,740 $623,912 $648,868 $674,823 $695,068 $708,969 $723,149

Less Vacancy/Credit LossGrocery $0 $0 $0 $0 $0 $0 $0 $0 ($123,568) $0 $0Café ($24,000) $0 $0 $0 ($24,851) $0 $0 $0 $0 $0 $0HOA ($72,000) $0 $0 $0 $0 $0 $0 $0 ($95,052) $0 $0Restaurant ($219,375) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Less Operating ExpensesGrocery $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Café $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0HOA $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Restaurant $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

NET$OPERATING$INCOME $621,625 $941,685 $951,102 $960,613 $945,368 $999,326 $1,039,299 $1,080,871 $894,677 $1,135,563 $1,158,274Less$Debt$Service ($673,171) ($673,171) ($673,171) ($673,171) ($673,171) ($673,171) ($673,171) ($673,171) ($673,171) ($673,171) ($673,171)

CASHFLOW ($51,546) $268,514 $277,931 $287,442 $272,197 $326,155 $366,128 $407,700 $221,506 $462,392 $485,103 Principal Payments $154,175 $162,063 $170,354 $179,070 $188,231 $197,862 $207,985 $218,626 $229,811 $241,568 $253,928 Less Depreciation ($266,748) ($290,997) ($290,997) ($290,997) ($290,997) ($290,997) ($290,997) ($290,997) ($290,997) ($290,997) ($290,997) Taxable Income ($164,119) $139,579 $157,288 $175,514 $169,431 $233,019 $283,115 $335,328 $160,320 $412,963 $448,033Distribute Benefits to PartnersVulcan 35% Taxable Income 15% ($164,119) $139,579 $157,288 $175,514 $169,431 $233,019 $283,115 $335,328 $160,320 $412,963 $448,033 Less Taxes $57,442 ($48,853) ($55,051) ($61,430) ($59,301) ($81,557) ($99,090) ($117,365) ($56,112) ($144,537) ($67,205) Cash Flow AFTER TAX CASH FLOW ($106,677) $90,727 $102,237 $114,084 $110,130 $151,462 $184,025 $217,963 $104,208 $268,426 $380,828 Changes in Capital TOTAL BENEFITS ($106,677) $90,727 $102,237 $114,084 $110,130 $151,462 $184,025 $217,963 $104,208 $268,426 $380,828 CUM BENEFITS ($106,677) ($15,951) $86,287 $200,371 $310,501 $461,963 $645,988 $863,951 $968,159 $1,236,585 $1,617,413

xli2013 NAIOP REAL ESTATE CHALLENGE

Tellarite Real Estate Advisors Proforma Client | Vulcan

3/11/13 10:53 PM

OPERATING*PROFORMA Amount Unit Rent/Cost Subtotals TotalsGross%Rent%Roll $6,457,545

Daniels 15,462 GSF @ $58 $896,796Cinema 19,020 GSF @ $25 $475,500Elemental 10,127 GSF @ $35 $354,428Bottle%House 4,057 GSF @ $58 $235,306Chandler's 14,175 GSF @ $58 $822,150Georgetown%Brew 13,500 GSF @ $45 $607,500Coffe%House 3,199 GSF @ $30 $95,970Joeys 11,437 GSF @ $58 $663,323Hot%Tub%Boats 1,022 GSF @ $25 $25,550Electric%Co 1,022 GSF @ $25 $25,550Hampton%yacht 6,072 GSF @ $25 $151,793Palace%Ballroom 17,013 GSF @ $58 $986,754Underground%Parking 299 Stall @ $2,400 $716,414Marina%(Moorage) 2,384 Linear%ft @ $168 $400,512

Less%Vacancy/Credit%Loss ($347,047)Daniels $896,796 @ 0% $0Cinema $475,500 @ 5% $23,775Elemental $354,428 @ 5% $17,721Bottle%House $235,306 @ 5% $11,765Chandler's $822,150 @ 0% $0Georgetown%Brew $607,500 @ 5% $30,375Coffe%House $95,970 @ 5% $4,799Joeys $663,323 @ 0% $0Hot%Tub%Boats $25,550 @ 5% $1,278Electric%Co $25,550 @ 5% $1,278Hampton%yacht $151,793 @ 5% $7,590Palace%Ballroom $986,754 @ 5% $49,338Underground%Parking $716,414 @ 25% $179,103Marina%(Moorage) $400,512 @ 5% $20,026

Less%Operating%Expenses ($543,072)Retail $5,340,619 @ 2% $106,812Underground%Parking $716,414 @ 14% $100,298Marina%(Moorage) 400,512 @ 5% $20,026Management 3% of $6,457,545 $193,726Replacement%Reserve 2% of $6,110,498 $122,210

NET%OPERATING%INCOME %% $5,567,426Calculate%Tak_Out%Loan

Calculate%Debt%Svc%CapacityDebt%Service%Available $5,567,426 1.15 $4,841,240Trial%Loan%Amount $4,841,240 0.064418595 $75,152,832

Calculte%Loan%to%ValueCalculate%Project%Value $5,567,426 6.00% $92,790,430

Trial%Loan%Amount $92,790,430 80.00% $74,232,344TAKE_OUT%LOAN%AMOUNT $74,232,344CASH%FLOW $785,483

Calculate%Interim%Loan%AmountLoan/Cost%Check $75,204,705 80.00% $60,163,764

INTERIM%LOAN%AMOUNT $60,163,764COST*PROFORMALand $17,500,000Construction $40,799,456

Demolition 54,496 GSF @ $2 $108,993Cinema 19,020 GSF @ $175 $3,328,500Elemental 10,127 GSF @ $175 $1,772,138Bottle%House 4,057 GSF @ $175 $709,975Georgetown%Brew 13,500 GSF @ $175 $2,362,500Coffe%House 3,199 GSF @ $175 $559,825Hot%Tub%Boats 1,022 GSF @ $175 $178,850Electric%Co 1,022 GSF @ $175 $178,850Hampton%yacht 6,072 GSF @ $175 $1,062,548Palace%Ballroom 17,013 GSF @ $175 $2,977,275Underground%Parking 84,836 GSF @ $90 $7,635,209Other%Site%Imp 170,004 GSF @ $55 $9,350,220TI% 75,031 GSF @ $110 $8,253,432Remodel%of%Joeys%&%Daniels 26,899 GSF @ $35 $941,451Contractor%Fees $39,419,764 @ 3.5% $1,379,692

Services/Fees $10,915,917WSST $40,799,456 @ 9.50% $3,875,948A&E 40,799,456 @ 8.00% $3,263,956Developer's%G&A Allow $100,000Legal%and%Organization $40,799,456 @ 3.00% $1,223,984Permits Allow $1,500,000Other%Consultants Allow $500,000Leasing%Fees $6,457,545 @ 7.00% $452,028

Financing $3,676,462Interim%Fee $60,163,764 @ 1.00% $601,638Interim%Interest%Reserve $60,163,764 @ 3.26% $1,961,339Take_Out%Fee $74,232,344 @ 1.50% $1,113,485

Contingency $2,039,973 + $272,898 Allow $2,312,871TOTAL%PROJECT%COSTS% $75,204,705SOURCES*OF*FUNDS

Loan%Amount $60,163,764Equity%Required $15,040,941

Vulcan%Land%Contribution $17,500,000Vulcan%Cash%Contribution $153,529

!!!!TOTAL%FUNDS%AVAILABLE $75,204,705Feasibility*Metrics

Profit $92,790,430 $75,204,705 $17,585,725Profit%Margin $75,204,705 $17,585,725 23.38%Cash%on%Cash%(ROE) 4.4%

xlii UNIVERSITY OF WASHINGTON

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A P P E N D I XA

xliii2013 NAIOP REAL ESTATE CHALLENGE

Tella

rite

Real

Est

ate

Advi

sors

Sour

ces

and

Uses

Clie

nt |

Vulc

an

10:5

5 PM

3/1

1/13

Post%Con

st2%Qtr%13

3%Qtr%13

4%Qtr%13

1%Qtr%14

2%Qtr%14

3%Qtr%14

4%Qtr%14

1%Qtr%15

2%Qtr%15

3%Qtr%15

4%Qtr%15

1%Qtr%16

2%Qtr%16

3%Qtr%16

4%Qtr%16

1%Qtr%17

Totals

Summary'of'Sou

rces

'Take/Out'Loan'Proceeds

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$74,232,344

$74,232,344

'Interim

'Loan'Proceeds

$0$0

$0$0

$0$0

$0$0

$0$14,138,317

$6,797,206

$3,460,387

$6,797,206

$6,788,091

$11,933,991

$4,571,354

$54,486,553

'Chandler's'Cove'Rent'Roll

$597,613

$597,613

$597,613

$597,613

$597,613

$597,613

$597,613

$597,613

$597,613

$0$0

$0$0

$0$0

''Equity'Con

tributed

''''Vulcan'Cash

$587,512

$662,512

$662,512

$707,715

$646,516

$621,516

$621,516

$329,521

$692,722

$0$0

$0$0

$0$0

($19,745,791)

($14,213,750)

''''Vulcan'Land

$0$0

$0$0

$0$0

$0$0

$0$17,500,000

$0$0

$0$0

$0$0

$17,500,000

''''''Total'Sou

rces

$597,613

$597,613

$597,613

$597,613

$597,613

$597,613

$597,613

$597,613

$597,613

$31,638,317

$6,797,206

$3,460,387

$6,797,206

$6,788,091

$11,933,991

$59,057,907

$131,851,618

$132,005,147

Summary'of'Uses

''Land

$0$0

$0$0

$0$0

$0$0

$0$17,500,000

$0$0

$0$0

$0$0

$17,500,000

$17,500,000

''Con

struction

$40,799,456

''''Audite

d'Co

sts

$0$0

$0$0

$0$0

$0$0

$0$6,044,976

$6,044,976

$3,022,488

$6,044,976

$6,044,976

$1,511,244

$1,511,244

$30,224,881

''''Tenant'Improvem

ents

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$9,194,883

$0$9,194,883

''''Con

tractor'Fees

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$1,379,692

$1,379,692

''Services/Fees

$11,527,908

''''W

SST

$0$0

$0$0

$0$0

$0$0

$0$574,273

$574,273

$287,136

$574,273

$574,273

$1,017,082

$274,639

$3,875,948

''''A&E

$465,114

$465,114

$465,114

$465,114

$465,114

$465,114

$465,114

$155,038

$77,519

$38,759

$38,759

$38,759

$38,759

$38,759

$38,759

$155,038

$3,875,948

''''Develop

er's'G&

A$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$100,000

$100,000

''''Legal'and'Organiza

tion

$122,398

$122,398

$122,398

$122,398

$61,199

$61,199

$61,199

$61,199

$122,398

$61,199

$61,199

$61,199

$61,199

$61,199

$61,199

$0$1,223,984

''''Permits

$0$0

$0$0

$0$0

$0$0

$375,000

$1,125,000

$0$0

$0$0

$0$0

$1,500,000

''''Other'Con

sultants

$0$75,000

$75,000

$75,000

$75,000

$50,000

$50,000

$50,000

$50,000

$0$0

$0$0

$0$0

$0$500,000

''''Leasin

g'Fees

$0$0

$0$45,203

$45,203

$45,203

$45,203

$63,284

$67,804

$45,203

$22,601

$22,601

$22,601

$13,561

$13,561

$0$452,028

''Financing

$2,159,188

''''Interim

'Fee

$0$0

$0$0

$0$0

$0$0

$0$601,638

$0$0

$0$0

$0$0

$601,638

''''Interim

'Interest

$0$0

$0$0

$0$0

$0$0

$0$115,227

$55,397

$28,202

$55,397

$55,323

$97,262

$37,257

$444,065

''''Take/Out'Fee

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$1,113,485

$1,113,485

''Interim'Loan'Repay

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$54,486,553

$54,486,553

$54,486,553

''''''TotalUses

$587,512

$662,512

$662,512

$707,715

$646,516

$621,516

$621,516

$329,521

$692,722

$26,106,275

$6,797,206

$3,460,387

$6,797,206

$6,788,091

$11,933,991

$59,057,907

$126,473,106

$126,473,106

Land'Con

tribution

''Uses'Less'Land

$587,512

$662,512

$662,512

$707,715

$646,516

$621,516

$621,516

$329,521

$692,722

$8,606,275

$6,797,206

$3,460,387

$6,797,206

$6,788,091

$11,933,991

$4,571,354

''Vulcan'Equity'Test

$587,512

$662,512

$662,512

$707,715

$646,516

$621,516

$621,516

$329,521

$692,722

($5,532,041)

$0$0

$0$0

$0$0

Interim

'Loan'Ge

nerator

''Con

str

$0$0

$0$0

$0$0

$0$0

$0$26,106,275

$6,797,206

$3,460,387

$6,797,206

$6,788,091

$11,933,991

$4,571,354

''Land

$0$0

$0$0

$0$0

$0$0

$0$26,106,275

$6,797,206

$3,460,387

$6,797,206

$6,788,091

$11,933,991

$4,571,354

''Equity'Con

tr$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0

Equity'Returns

''Equity'Con

tr$10,100

($64,900)

($64,900)($110,102)

($48,903)

($23,903)

($23,903)

$268,091

($95,109)($17,500,000)

$0$0

$0$0

$0$19,745,791

Pre5Co

nstructio

n%(Design)

Pre5Co

nstructio

n%(Permitting)

Constructio

n

xliv UNIVERSITY OF WASHINGTONRE 5

71: A

utum

n 20

12CO

NSTR

UCTI

ON/M

ARKE

TING

/DIS

POSI

TION

Sam

ple

Solu

tion

12-7

(Pu

rcha

se D

IBS)

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

Gros

s Re

nt R

oll

Dani

els

$896

,796

$901

,280

$910

,293

$919

,396

$928

,590

$956

,447

$994

,705

$1,0

34,4

93$1

,065

,528

$1,0

86,8

39$1

,108

,576

Cine

ma

$475

,500

$477

,878

$482

,656

$487

,483

$492

,358

$507

,128

$527

,414

$548

,510

$564

,965

$576

,265

$587

,790

Elem

enta

l$3

54,4

28$3

56,2

00$3

59,7

62$3

63,3

59$3

66,9

93$3

78,0

03$3

93,1

23$4

08,8

48$4

21,1

13$4

29,5

35$4

38,1

26Bo

ttle

Hou

se$2

35,3

06$2

36,4

83$2

38,8

47$2

41,2

36$2

43,6

48$2

50,9

58$2

60,9

96$2

71,4

36$2

79,5

79$2

85,1

70$2

90,8

74Ch

andler's

$822

,150

$826

,261

$834

,523

$842

,869

$851

,297

$876

,836

$911

,910

$948

,386

$976

,838

$996

,374

$1,0

16,3

02Ge

orgetown0Brew

$607

,500

$610

,538

$616

,643

$622

,809

$629

,037

$647

,909

$673

,825

$700

,778

$721

,801

$736

,237

$750

,962

Coffe

0Hou

se$9

5,97

0$9

6,45

0$9

7,41

4$9

8,38

8$9

9,37

2$1

02,3

54$1

06,4

48$1

10,7

06$1

14,0

27$1

16,3

07$1

18,6

33Joeys

$663

,323

$666

,639

$673

,306

$680

,039

$686

,839

$707

,444

$735

,742

$765

,172

$788

,127

$803

,890

$819

,967

Hot0Tub0Boats

$25,

550

$25,

678

$25,

935

$26,

194

$26,

456

$27,

249

$28,

339

$29,

473

$30,

357

$30,

964

$31,

584

Electric0Co

$25,

550

$25,

678

$25,

935

$26,

194

$26,

456

$27,

249

$28,

339

$29,

473

$30,

357

$30,

964

$31,

584

Hampton

0yacht

$151

,793

$152

,551

$154

,077

$155

,618

$157

,174

$161

,889

$168

,365

$175

,099

$180

,352

$183

,959

$187

,639

Palace0Ballro

om$9

86,7

54$9

91,6

88$1

,001

,605

$1,0

11,6

21$1

,021

,737

$1,0

52,3

89$1

,094

,485

$1,1

38,2

64$1

,172

,412

$1,1

95,8

60$1

,219

,777

Unde

rgro

und

Park

ing

$716

,414

$719

,996

$727

,196

$734

,468

$741

,812

$764

,067

$794

,629

$826

,415

$851

,207

$868

,231

$885

,596

Mar

ina

Moo

rage

$400

,512

$401

,513

$402

,517

$406

,542

$410

,608

$418

,820

$427

,196

$440

,012

$448

,812

$453

,300

$457

,833

Less

Vac

ancy

/Cre

dit L

oss

Dani

els

$0$0

$0$0

$0$0

$0$0

$0$0

$0Ci

nem

a($

237,

750)

$0$0

$0$0

$0$0

$0$0

$0$0

Elem

enta

l($

265,

821)

$0$0

$0$0

$0$0

$0($

350,

928)

$0$0

Bott

le H

ouse

($88

,240

)$0

$0$0

$0$0

$0$0

($13

9,78

9)$0

$0Ch

andler's

$0$0

$0$0

$0$0

$0$0

$0$0

$0Ge

orgetown0Brew

($22

7,81

3)$0

$0$0

$0($

377,

947)

$0$0

$0$0

$0Co

ffe0Hou

se($

71,9

78)

$0$0

$0$0

($68

,236

)$0

$0$0

$0$0

Joeys

$0$0

$0$0

$0$0

$0$0

($39

4,06

4)$0

$0Ho

t0Tub0Boats

($10

,646

)$0

$0$0

$0($

13,6

25)

$0$0

$0$0

$0Electric0Co

($19

,163

)$0

$0$0

$0$0

$0$0

($15

,179

)$0

$0Ha

mpton

0yacht

($37

,948

)$0

$0$0

$0($

134,

908)

$0$0

$0$0

$0Palace0Ballro

om($

246,

689)

$0$0

$0$0

$0$0

$0$0

$0$0

Unde

rgro

und

Park

ing

($17

9,10

3)($

179,

999)

($18

1,79

9)($

183,

617)

($18

5,45

3)($

191,

017)

($19

8,65

7)($

206,

604)

($21

2,80

2)($

217,

058)

($22

1,39

9)M

arin

a M

oora

ge($

60,0

77)

($20

,076

)($

20,1

26)

($20

,327

)($

20,5

30)

($20

,941

)($

21,3

60)

($22

,001

)($

22,4

41)

($22

,665

)($

22,8

92)

Less

Ope

ratin

g Ex

pens

esDa

niel

s($

17,9

36)

($18

,295

)($

18,6

61)

($19

,034

)($

19,4

14)

($19

,803

)($

20,1

99)

($20

,603

)($

21,0

15)

($21

,435

)($

21,8

64)

Cine

ma

($9,

510)

($9,

700)

($9,

894)

($10

,092

)($

10,2

94)

($10

,500

)($

10,7

10)

($10

,924

)($

11,1

42)

($11

,365

)($

11,5

93)

Elem

enta

l($

7,08

9)($

7,23

0)($

7,37

5)($

7,52

2)($

7,67

3)($

7,82

6)($

7,98

3)($

8,14

3)($

8,30

5)($

8,47

1)($

8,64

1)Bo

ttle

Hou

se($

4,70

6)($

4,80

0)($

4,89

6)($

4,99

4)($

5,09

4)($

5,19

6)($

5,30

0)($

5,40

6)($

5,51

4)($

5,62

4)($

5,73

7)Ch

andler's

($16

,443

)($

16,7

72)

($17

,107

)($

17,4

49)

($17

,798

)($

18,1

54)

($18

,517

)($

18,8

88)

($19

,266

)($

19,6

51)

($20

,044

)Ge

orgetown0Brew

($12

,150

)($

12,3

93)

($12

,641

)($

12,8

94)

($13

,152

)($

13,4

15)

($13

,683

)($

13,9

57)

($14

,236

)($

14,5

20)

($14

,811

)Co

ffe0Hou

se($

1,91

9)($

1,95

8)($

1,99

7)($

2,03

7)($

2,07

8)($

2,11

9)($

2,16

2)($

2,20

5)($

2,24

9)($

2,29

4)($

2,34

0)Joeys

($13

,266

)($

13,5

32)

($13

,802

)($

14,0

78)

($14

,360

)($

14,6

47)

($14

,940

)($

15,2

39)

($15

,544

)($

15,8

55)

($16

,172

)Ho

t0Tub0Boats

($51

1)($

521)

($53

2)($

542)

($55

3)($

564)

($57

5)($

587)

($59

9)($

611)

($62

3)Electric0Co

($51

1)($

521)

($53

2)($

542)

($55

3)($

564)

($57

5)($

587)

($59

9)($

611)

($62

3)Ha

mpton

0yacht

($3,

036)

($3,

097)

($3,

158)

($3,

222)

($3,

286)

($3,

352)

($3,

419)

($3,

487)

($3,

557)

($3,

628)

($3,

701)

Palace0Ballro

om($

19,7

35)

($20

,130

)($

20,5

32)

($20

,943

)($

21,3

62)

($21

,789

)($

22,2

25)

($22

,669

)($

23,1

23)

($23

,585

)($

24,0

57)

Unde

rgro

und

Park

ing

($10

0,29

8)($

100,

298)

($10

0,29

8)($

100,

298)

($10

0,29

8)($

100,

298)

($10

0,29

8)($

100,

298)

($10

0,29

8)($

100,

298)

($10

0,29

8)M

arin

a M

oora

ge($

20,0

26)

($20

,026

)($

20,2

26)

($20

,428

)($

20,6

32)

($20

,839

)($

21,0

47)

($21

,258

)($

21,4

70)

($21

,685

)($

21,9

02)

NET0OPERA

TING0INCO

ME

$4,7

85,1

83$6

,059

,484

$6,1

17,1

32$6

,178

,195

$6,2

39,8

46$5

,833

,004

$6,6

83,8

65$6

,954

,211

$6,2

63,3

59$7

,304

,541

$7,4

48,5

49Less0Debt0Service

($4,

781,

943)

($4,

781,

943)

($4,

781,

943)

($4,

781,

943)

($4,

781,

943)

($4,

781,

943)

($4,

781,

943)

($4,

781,

943)

($4,

781,

943)

($4,

781,

943)

($4,

781,

943)

CASH

FLOW

$3,2

40$1

,277

,541

$1,3

35,1

88$1

,396

,251

$1,4

57,9

03$1

,051

,061

$1,9

01,9

22$2

,172

,267

$1,4

81,4

16$2

,522

,598

$2,6

66,6

05

Prin

cipal

Pay

men

ts$1

,095

,198

$1,1

51,2

31$1

,210

,130

$1,2

72,0

42$1

,337

,122

$1,4

05,5

32$1

,477

,442

$1,5

53,0

31$1

,632

,487

$1,7

16,0

08$1

,803

,802

L

ess

Depr

ecia

tion

($1,

280,

667)

($1,

397,

091)

($1,

397,

091)

($1,

397,

091)

($1,

397,

091)

($1,

397,

091)

($1,

397,

091)

($1,

397,

091)

($1,

397,

091)

($1,

397,

091)

($1,

397,

091)

Tax

able

Inco

me

($18

2,22

9)$1

,031

,681

$1,1

48,2

27$1

,271

,203

$1,3

97,9

34$1

,059

,502

$1,9

82,2

73$2

,328

,207

$1,7

16,8

11$2

,841

,515

$3,0

73,3

16Di

strib

ute

Bene

fits

to P

artn

er(s

) V

ULCA

N35

%

Taxa

ble

Inco

me

15%

($18

2,22

9)$1

,031

,681

$1,1

48,2

27$1

,271

,203

$1,3

97,9

34$1

,059

,502

$1,9

82,2

73$2

,328

,207

$1,7

16,8

11$2

,841

,515

$3,0

73,3

16

Less

Tax

es$6

3,78

0($

361,

088)

($40

1,88

0)($

444,

921)

($48

9,27

7)($

370,

826)

($69

3,79

6)($

814,

872)

($60

0,88

4)($

994,

530)

($46

0,99

7)

Cash

Flo

w

AFT

ER T

AX C

ASH

FLOW

($11

8,44

9)$6

70,5

92$7

46,3

48$8

26,2

82$9

08,6

57$6

88,6

76$1

,288

,477

$1,5

13,3

35$1

,115

,927

$1,8

46,9

85$2

,612

,319

Cha

nges

in C

apita

l

TOT

AL B

ENEF

ITS

($11

8,44

9)$6

70,5

92$7

46,3

48$8

26,2

82$9

08,6

57$6

88,6

76$1

,288

,477

$1,5

13,3

35$1

,115

,927

$1,8

46,9

85$2

,612

,319

C

UM B

ENEF

ITS

($11

8,44

9)$5

52,1

44$1

,298

,491

$2,1

24,7

73$3

,033

,430

$3,7

22,1

07$5

,010

,584

$6,5

23,9

19$7

,639

,846

$9,4

86,8

30$1

2,09

9,14

9

A P P E N D I XA

xlv2013 NAIOP REAL ESTATE CHALLENGE

Tellarite Real Estate Advisors Proforma Client | Vulcan

3/11/13 10:58 PM

OPERATING*PROFORMA Amount Unit Rent/Cost Subtotals Totals3(less3condos)Gross*Rent*Roll $25,727,466

Condominiums 150 Units $1,185,866 $177,879,926Extra9Residential9Parking 16 Stalls @ $43,000 $679,226Hotel 225 Rooms @ $102,306 $23,018,816Health9Club 57,150 GSF @ $31.00 $1,771,650Grocery 8,000 GSF @ $26.00 $208,000Café 2,000 GSF @ $24.00 $48,000HOA 3,000 GSF @ $32.00 $96,000Restaurant 14,625 GSF @ $40.00 $585,000

Less*Vacancy/Credit*Loss ($5,801,554)Hotel $23,018,816 @ 25% $5,754,704Health9Club $1,771,650 @ 0% $0Grocery $208,000 @ 5% $10,400Café $48,000 @ 5% $2,400HOA $96,000 @ 5% $4,800Restaurant $585,000 @ 5% $29,250

Less*Operating*Expenses ($13,677,456)Hotel $23,018,816 @ 49% $11,385,876Health9Club $1,771,650 @ 5% $88,583Grocery $208,000 @ 5% $10,400Café $48,000 @ 5% $2,400HOA $96,000 @ 5% $4,800Restaurant $585,000 @ 5% $29,250Management9Hotel $23,018,816 @ 3.5% $805,659Management9Health9Club $1,771,650 @ 3.5% $62,008Management9Retail $890,150 @ 3.5% $31,155Replacement9Reserve9Hotel9 $23,018,816 @ 5% $1,150,941Replacement9Reserve9Health $1,771,650 @ 5% $88,583Replacement9Reserve9Retail $890,150 @ 2% $17,803

NET*OPERATING*INCOME ** $6,248,456Calculate9TakUOut9Loans

Calculate9Debt9Svc9Capacity9HotelDebt9Service9Available $3,921,637 1.18 $3,323,421Trial9Loan9Amount $3,323,421 0.071946063 $46,193,233

Calculte9Loan9to9Value9HotelCalculate9Project9Value $3,921,637 8.00% $49,020,464Trial9Loan9Amount $49,020,464 75% $36,765,348

Calculate9Debt9Svc9Capacity9HealthDebt9Service9Available $1,532,477 1.2 $1,277,064Trial9Loan9Amount $1,277,064 0.075848163 $16,837,117

Calculte9Loan9to9Value9HealthCalculate9Project9Value $1,532,477 8.20% $18,688,747Trial9Loan9Amount $18,688,747 70% $13,082,123

Calculate9Debt9Svc9Capacity9RetailDebt9Service9Available $794,342 1.18 $673,171Trial9Loan9Amount $673,171 0.064418595 $10,449,948

Calculte9Loan9to9Value9RetailCalculate9Project9Value $794,342 6.00% $13,239,029Trial9Loan9Amount $13,239,029 80.00% $10,591,223

TAKENOUT*LOAN*AMOUNT $60,297,419CASH*FLOW $1,937,908

Calculate9Interim9Loan9AmountLoan/Cost9Check $244,497,749 70.00% $171,148,424

INTERIM*LOAN*AMOUNT $171,148,424COST*PROFORMALand $25,000,000Construction $147,941,969

Demolition @ Allow $20,000Site9Prep @ Allow $200,000Condominiums 200,298 GSF @ $325 $65,096,850Hotel 130,787 GSF @ $320 $41,851,840Fitness 57,150 GSF @ $180 $10,287,000Grocery 8,000 GSF @ $200 $1,600,000Café 2,000 GSF @ $110 $220,000HOA 3,000 GSF @ $110 $330,000Restaurant 14,625 GSF @ $110 $1,608,750Underground9Parking 138,792 GSF @ $80 $11,103,360Podium9Parking 31,440 GSF @ $95 $2,986,800TI 82,150 GSF @ $93 $7,634,500Contractor9Fees $142,939,100 @ 3.5% $5,002,869

Services/Fees $53,362,731WSST $147,941,969 @ 10.00% $14,794,197A&E $147,941,969 @ 8.00% $11,835,357Developer's9G&A $147,941,969 @ 2.50% $3,698,549Legal9and9Organization $147,941,969 @ 5.00% $7,397,098Permits Allow $716,460

Alley9Vacation Allow $1,623,560Affordablity9Fee 186,340 GSF @ $15.15 $2,823,051Condo9Marketing $65,096,850 @ 7.00% $4,556,780Leasing9Fees $147,941,969 @ 4.00% $5,917,679

Financing $9,461,882Interim9Fee $171,148,424 @ 1.00% $1,711,484Interim9Interest9Reserve $171,148,424 @ 4.00% $6,845,937TakeUOut9Fee $60,297,419 @ 1.50% $904,461

Contingency $7,397,098 5.00% + 2.50% $1,334,068 $8,731,167TOTAL*PROJECT*COSTS* $244,497,749SOURCES*OF*FUNDS

Loan9Amount $171,148,424Equity9Required $73,349,325

Vulcan9Equity $25,000,000Cash9Contribution $48,349,325

TOTAL9FUNDS9AVAILABLE $244,497,749Feasibility*Metrics

Income9Producing9Value $80,948,240Condominium9Value $177,879,926Residental9Extra9Parking9Total9Sales $679,226

99Profit $259,507,392 $244,497,749 $15,009,64399Profit9Margin $244,497,749 $15,009,643 6.14%

ROE9Leveraged 15.7%ROE9Unleveraged 22%

xlvi UNIVERSITY OF WASHINGTON

Tella

rite

Real

Est

ate

Advi

sors

Sour

ces

and

Uses

Clie

nt |

Vulc

an

11:0

1 PM

3/1

1/13

ERRO

RMarketin

g2"Qtr"13

3"Qtr"13

4"Qtr"13

1"Qtr"14

2"Qtr"14

3"Qtr"14

4"Qtr"14

1"Qtr"15

2"Qtr"15

3"Qtr"15

4"Qtr"15

1"Qtr"16

2"Qtr"16

3"Qtr"16

4"Qtr"16

1"Qtr"17

2"Qtr"17

3"Qtr"17

4"Qtr"17

1"Qtr"18

2"Qtr"18

3"Qtr"18

4"Qtr"18

Summary1of1Sources

1Take7Out1Loan1Proceeds

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$60,297,419

$0$0

$0$0

$60,297,419

1Interim

1Loan1Draw

s$0

$0$0

$0$0

$0$0

$0$0

$0$0

$8,506,957

$17,034,061

$16,988,033

$25,353,233

$25,353,233

$25,353,233

$21,229,422

$30,047,913

$138,084

$138,084

$138,084

$3,827,964

$174,108,304

1Condominium1Sales

$0$0

$0$0

$1,067,280

$1,067,280

$1,067,280

$1,067,280

$1,067,280

$1,067,280

$1,067,280

$747,096

$747,096

$747,096

$747,096

$747,096

$747,096

$747,096

$747,096

$132,650,990

$11,621,488

$11,621,488

$8,538,236

$177,879,926

11Equity1Contributed

1111Vulcan1Cash

$0$0

$3,994,433

$5,189,821

$5,189,821

$3,958,347

$2,109,072

$1,739,217

$910,742

$437,328

$2,097,951

$22,722,591

$0$0

$0$0

$0$0

$0$0

$0$0

($4,710,272)

$43,639,053

1111Vulcan1Land

$0$0

$0$0

$0$0

$0$0

$0$0

$0$25,000,000

$0$0

$0$0

$0$0

$0$0

$0$0

$0$25,000,000

111111Total1Sources

$0$0

$3,994,433

$5,189,821

$6,257,100

$5,025,627

$3,176,352

$2,806,497

$1,978,022

$1,504,608

$3,165,230

$56,976,644

$17,781,157

$17,735,129

$11,759,573

$7,655,929

$145,006,122

$480,924,701

Summary1of1Uses

11Land

$0$0

$0$0

$0$0

$0$0

$0$0

$0$25,000,000

$0$0

$0$0

$0$0

$0$0

$0$0

$0$25,000,000

$25,000,000

11Construction

$163,210,969

1111Audite

d1Co

sts

$0$0

$0$0

$0$0

$0$0

$0$0

$0$22,586,040

$15,057,360

$15,057,360

$22,586,040

$22,586,040

$22,586,040

$15,057,360

$15,057,360

$0$0

$0$0

$150,573,600

1111Tenant1Improvem

ents

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$3,817,250

$3,817,250

$0$0

$0$0

$7,634,500

1111Contractor1Fees

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$5,002,869

$0$0

$0$0

$5,002,869

11Services/Fees

$54,889,631

1111W

SST

$0$0

$0$0

$0$0

$0$0

$0$0

$0$2,258,604

$1,505,736

$1,505,736

$2,258,604

$2,258,604

$2,258,604

$1,887,461

$2,387,748

$0$0

$0$0

$16,321,097

1111A&E

$0$0

$1,775,304

$1,775,304

$1,775,304

$1,420,243

$1,420,243

$1,420,243

$591,768

$118,354

$118,354

$118,354

$118,354

$118,354

$118,354

$118,354

$118,354

$118,354

$591,768

$0$0

$0$0

$11,835,357

1111Developer's1G&

A$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$3,698,549

$3,698,549

1111Legal1and1Organiza

tion

$0$0

$2,219,130

$1,479,420

$1,479,420

$739,710

$369,855

$0$0

$0$369,855

$369,855

$0$0

$0$0

$0$0

$369,855

$0$0

$0$0

$7,397,098

1111Permits1(incl.1alley1vacatio

n)$0

$0$0

$0$0

$0$0

$0$0

$0$585,005

$1,755,015

$0$0

$0$0

$0$0

$0$0

$0$0

$0$2,340,020

1111Affo

rdability1Fee

$0$0

$0$0

$0$0

$0$0

$0$0

$705,763

$2,117,288

$0$0

$0$0

$0$0

$0$0

$0$0

$0$2,823,051

1111Condo1M

arketin

g$0

$0$0

$455,678

$455,678

$318,975

$318,975

$318,975

$318,975

$318,975

$318,975

$227,839

$182,271

$136,703

$136,703

$136,703

$136,703

$136,703

$136,703

$136,703

$136,703

$136,703

$91,136

$4,556,780

1111Leasin

g1Fees

$0$0

$0$1,479,420

$1,479,420

$1,479,420

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$1,479,420

$0$0

$0$0

$5,917,679

11Financing

$4,357,029

1111Interim

1Fee

$0$0

$0$0

$0$0

$0$0

$0$0

$0$1,711,484

$0$0

$0$0

$0$0

$0$0

$0$0

$0$1,711,484

1111Interim

1Interest

$0$0

$0$0

$0$0

$0$0

$0$0

$0$85,070

$170,341

$169,880

$253,532

$253,532

$253,532

$212,294

$300,479

$1,381

$1,381

$1,381

$38,280

$1,741,083

1111Take7Out1Fee

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$0$0

$904,461

$0$0

$0$0

$904,461

11Interim1Loan1Repay

$0$0

$0$0

$0$0

$0$0

$0$0

$0$8,218,053

$747,096

$747,096

$747,096

$747,096

$747,096

$747,096

$77,013,372

$81,572,510

$138,084

$138,084

$3,827,964

$175,390,641

$175,390,641

111111TotalUses

$0$0

$3,994,433

$5,189,821

$5,189,821

$3,958,347

$2,109,072

$1,739,217

$910,742

$437,328

$2,097,951

$64,447,601

$17,781,157

$17,735,129

$26,100,329

$26,100,329

$26,100,329

$21,976,518

$107,061,285

$81,710,594

$276,168

$276,168

$7,655,929

$422,848,270

$422,848,270

Design

Perm

itting

Constructio

n

RE 5

71: A

utum

n 20

12CO

NSTR

UCTI

ON/M

ARKE

TING

/DIS

POSI

TION

Sam

ple

Solu

tion

12-7

(Pu

rcha

se D

IBS)

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Gros

s Re

nt R

oll

Heal

th C

lub

$1,7

71,6

50$1

,771

,650

$1,7

71,6

50$1

,771

,650

$1,7

71,6

50$1

,842

,516

$1,8

42,5

16$1

,842

,516

$1,8

42,5

16$1

,842

,516

$1,8

42,5

16Le

ss V

acan

cy/C

redi

t Los

sHe

alth

Clu

b$0

$0$0

$0$0

$0$0

$0($

921,

258)

$0$0

Less

Ope

ratin

g Ex

pens

esHe

alth

Clu

b($

62,0

08)

($62

,008

)($

62,0

08)

($62

,008

)($

885,

825)

($64

,488

)($

64,4

88)

($64

,488

)($

64,4

88)

($64

,488

)($

64,4

88)

NET$OPERA

TING$INCO

ME

$1,7

09,6

42$1

,709

,642

$1,7

09,6

42$1

,709

,642

$885

,825

$1,7

78,0

28$1

,778

,028

$1,7

78,0

28$8

56,7

70$1

,778

,028

$1,7

78,0

28Less$Deb

t$Service

($99

2,25

5)($

992,

255)

($99

2,25

5)($

992,

255)

($99

2,25

5)($

992,

255)

($99

2,25

5)($

992,

255)

($99

2,25

5)($

992,

255)

($99

2,25

5)CA

SHFLOW

$717

,387

$717

,387

$717

,387

$717

,387

($10

6,43

0)$7

85,7

73$7

85,7

73$7

85,7

73($

135,

485)

$785

,773

$785

,773

P

rincip

al P

aym

ents

$146

,222

$156

,015

$166

,464

$177

,612

$189

,507

$202

,199

$215

,740

$230

,189

$245

,605

$262

,054

$279

,604

L

ess

Depr

ecia

tion

($37

6,55

2)($

410,

784)

($41

0,78

4)($

410,

784)

($41

0,78

4)($

410,

784)

($41

0,78

4)($

410,

784)

($41

0,78

4)($

410,

784)

($41

0,78

4) T

axab

le In

come

$487

,058

$462

,619

$473

,067

$484

,216

($32

7,70

7)$5

77,1

88$5

90,7

30$6

05,1

78($

300,

664)

$637

,043

$654

,593

Dist

ribut

e Be

nefit

s to

Par

tner

sVu

lcan

35%

Ta

xabl

e In

com

e15

%$4

87,0

58$4

62,6

19$4

73,0

67$4

84,2

16($

327,

707)

$577

,188

$590

,730

$605

,178

($30

0,66

4)$6

37,0

43$6

54,5

93

Less

Tax

es($

170,

470)

($16

1,91

7)($

165,

574)

($16

9,47

5)$1

14,6

97($

202,

016)

($20

6,75

5)($

211,

812)

$105

,232

($22

2,96

5)($

98,1

89)

Ca

sh F

low

A

FTER

TAX

CAS

H FL

OW$3

16,5

88$3

00,7

02$3

07,4

94$3

14,7

40($

213,

009)

$375

,172

$383

,974

$393

,366

($19

5,43

1)$4

14,0

78$5

56,4

04

C

hang

es in

Cap

ital

T

OTAL

BEN

EFIT

S $3

16,5

88$3

00,7

02$3

07,4

94$3

14,7

40($

213,

009)

$375

,172

$383

,974

$393

,366

($19

5,43

1)$4

14,0

78$5

56,4

04

CUM

BEN

EFIT

S$3

16,5

88$6

17,2

90$9

24,7

83$1

,239

,524

$1,0

26,5

14$1

,401

,686

$1,7

85,6

61$2

,179

,026

$1,9

83,5

95$2

,397

,673

$2,9

54,0

77

A P P E N D I XA

xlvii2013 NAIOP REAL ESTATE CHALLENGE

HOTEL&Re

venu

e!!R

oom

s$1

7,73

9,00

0$1

8,62

5,95

0$1

9,55

7,24

8$2

0,33

9,53

7$2

1,15

3,11

9$2

1,99

9,24

4$2

2,87

9,21

3$2

3,79

4,38

2$2

4,74

6,15

7$2

5,73

6,00

3!!O

ther

!Ope

rate

d!De

partm

ents

$1,9

71,0

00$2

,012

,391

$2,0

72,7

63$2

,134

,946

$2,1

98,9

94$2

,264

,964

$2,3

32,9

13$2

,402

,900

$2,4

74,9

87$2

,549

,237

!!Ren

tals!

and!

Oth

er!In

com

e$4

13,9

10$4

26,3

27$4

39,1

17$4

52,2

91$4

65,8

59$4

79,8

35$4

94,2

30$5

09,0

57$5

24,3

29$5

40,0

59Gu

est!P

arking

$923

,906

$942

,384

$980

,080

$1,0

09,4

82$1

,039

,767

$1,0

70,9

60$1

,103

,088

$1,1

36,1

81$1

,170

,266

$1,2

05,3

74Total&Revenue

$21,047,816

$22,007,053

$23,049,207

$23,936,256

$24,857,739

$25,815,002

$26,809,445

$27,842,520

$28,915,740

$30,030,673

Vaca

ncy!Cr

edit!

loss

($6,

314,

345)

($5,

501,

763)

($4,

609,

841)

($4,

787,

251)

($4,

971,

548)

($5,

163,

000)

($5,

361,

889)

($5,

568,

504)

($5,

783,

148)

($6,

006,

135)

Depa

rtmen

tal&Expen

ses

!!Roo

ms

($4,

927,

500)

($5,

075,

325)

($5,

227,

585)

($5,

384,

412)

($5,

545,

945)

($5,

712,

323)

($5,

883,

693)

($6,

060,

203)

($6,

242,

010)

($6,

429,

270)

!!Gue

st!P

arking

(Val

et)

($46

,195

)($

47,5

81)

($49

,009

)($

50,4

79)

($51

,993

)($

53,5

53)

($55

,160

)($

56,8

14)

($58

,519

)($

60,2

74)

!!Oth

er!O

pera

ted!

Depa

rtm

ents

($19

7,10

0)($

203,

013)

($20

9,10

3)($

215,

376)

($22

1,83

8)($

228,

493)

($23

5,34

8)($

242,

408)

($24

9,68

0)($

257,

171)

Total&D

epartm

ent&Expense

($5,

170,

795)

($5,

325,

919)

($5,

485,

697)

($5,

650,

268)

($5,

819,

776)

($5,

994,

369)

($6,

174,

200)

($6,

359,

426)

($6,

550,

209)

($6,

746,

715)

Total&D

eparment&Incom

e$9,562,676

$11,179,370

$12,953,669

$13,498,737

$14,066,415

$14,657,633

$15,273,356

$15,914,590

$16,582,383

$17,277,824

Und

istributed

&Ope

ratin

g&Expe

nses

!!Adm

inist

rativ

e!an

d!Ge

nera

l!($

1,61

1,31

7)($

1,65

9,65

7)($

1,70

9,44

6)($

1,76

0,73

0)($

1,81

3,55

2)($

1,86

7,95

8)($

1,92

3,99

7)($

1,98

1,71

7)($

2,04

1,16

8)($

2,10

2,40

3)!!S

ales

!and

!Mar

ketin

g($

2,07

1,69

3)($

2,11

3,12

7)($

2,15

5,39

0)($

2,19

8,49

8)($

2,24

2,46

8)($

2,28

7,31

7)($

2,33

3,06

3)($

2,37

9,72

5)($

2,42

7,31

9)($

2,47

5,86

5)!P

rope

rty!Ope

ratio

ns!a

nd!M

aint

enan

ce($

1,38

1,12

9)($

1,40

8,75

2)($

1,43

6,92

7)($

1,46

5,66

5)($

1,49

4,97

8)($

1,52

4,87

8)($

1,55

5,37

6)($

1,58

6,48

3)($

1,61

8,21

3)($

1,65

0,57

7)Util

ities

($1,

150,

941)

($1,

173,

960)

($1,

197,

439)

($1,

221,

388)

($1,

245,

815)

($1,

270,

732)

($1,

296,

146)

($1,

322,

069)

($1,

348,

511)

($1,

375,

481)

Total&U

ndistributed&Expenses

($6,

215,

080)

($6,

355,

495)

($6,

499,

202)

($6,

646,

280)

($6,

796,

813)

($6,

950,

885)

($7,

108,

582)

($7,

269,

994)

($7,

435,

211)

($7,

604,

327)

Gross&O

peratin

g&Profit

$3,347,596

$4,823,875

$6,454,467

$6,852,457

$7,269,602

$7,706,748

$8,164,774

$8,644,596

$9,147,172

$9,673,497

Man

agem

ent!F

ees

($80

5,65

9)($

821,

772)

($83

8,20

7)($

854,

971)

($87

2,07

1)($

889,

512)

($90

7,30

2)($

925,

448)

($94

3,95

7)($

962,

837)

Rese

rve!

for!c

apita

l!Rep

lace

men

t($

1,15

0,94

1)($

1,17

3,96

0)($

1,19

7,43

9)($

1,22

1,38

8)($

1,24

5,81

5)($

1,27

0,73

2)($

1,29

6,14

6)($

1,32

2,06

9)($

1,34

8,51

1)($

1,37

5,48

1)Income&Before&Fixed&Charges

$1,390,996

$2,828,144

$4,418,821

$4,776,098

$5,151,716

$5,546,504

$5,961,325

$6,397,079

$6,854,704

$7,335,180

!!Pro

perty!an

d!ot

her!T

axes

($92

0,75

3)($

920,

753)

($92

0,75

3)($

920,

753)

($92

0,75

3)($

920,

753)

($92

0,75

3)($

920,

753)

($92

0,75

3)($

920,

753)

!!Ins

uran

ce($

460,

376)

($46

0,37

6)($

460,

376)

($46

0,37

6)($

460,

376)

($46

0,37

6)($

460,

376)

($46

0,37

6)($

460,

376)

($46

0,37

6)Total&Fixed&Charges

($1,

381,

129)

($1,

381,

129)

($1,

381,

129)

($1,

381,

129)

($1,

381,

129)

($1,

381,

129)

($1,

381,

129)

($1,

381,

129)

($1,

381,

129)

($1,

381,

129)

Net&Operatin

g&Income

$2,772,125

$4,209,273

$5,799,950

$6,157,227

$6,532,845

$6,927,633

$7,342,454

$7,778,208

$8,235,833

$8,716,309

Less

!Deb

t!Ser

ice

($2,

645,

122)

($2,

645,

122)

($2,

645,

122)

($2,

645,

122)

($2,

645,

122)

($2,

645,

122)

($2,

645,

122)

($2,

645,

122)

($2,

645,

122)

($2,

645,

122)

Cash

!Flo

w$1

27,0

03$1

,564

,151

$3,1

54,8

28$3

,512

,105

$3,8

87,7

23$4

,282

,511

$4,6

97,3

32$5

,133

,086

$5,5

90,7

11$6

,071

,187

P

rincip

al P

aym

ents

$451

,483

$479

,329

$508

,893

$540

,281

$573

,604

$608

,983

$646

,543

$686

,421

$728

,758

$773

,706

L

ess

Depr

ecia

tion

($98

7,69

3)($

1,07

7,48

3)($

1,07

7,48

3)($

1,07

7,48

3)($

1,07

7,48

3)($

1,07

7,48

3)($

1,07

7,48

3)($

1,07

7,48

3)($

1,07

7,48

3)($

1,07

7,48

3) T

axab

le In

come

($40

9,20

7)$9

65,9

97$2

,586

,239

$2,9

74,9

03$3

,383

,844

$3,8

14,0

11$4

,266

,392

$4,7

42,0

24$5

,241

,986

$5,7

67,4

09Di

strib

ute

Bene

fits

to P

artn

ers

V ulc

an35

%

Taxa

ble

Inco

me

15%

($40

9,20

7)$9

65,9

97$2

,586

,239

$2,9

74,9

03$3

,383

,844

$3,8

14,0

11$4

,266

,392

$4,7

42,0

24$5

,241

,986

$5,7

67,4

09

Less

Tax

es$1

43,2

22($

338,

099)

($90

5,18

4)($

1,04

1,21

6)($

1,18

4,34

6)($

1,33

4,90

4)($

1,49

3,23

7)($

1,65

9,70

8)($

1,83

4,69

5)($

865,

111)

Ca

sh F

low

A

FTER

TAX

CAS

H FL

OW($

265,

984)

$627

,898

$1,6

81,0

55$1

,933

,687

$2,1

99,4

99$2

,479

,107

$2,7

73,1

55$3

,082

,315

$3,4

07,2

91$4

,902

,298

Cha

nges

in C

apita

l

TOT

AL B

ENEF

ITS

($26

5,98

4)$6

27,8

98$1

,681

,055

$1,9

33,6

87$2

,199

,499

$2,4

79,1

07$2

,773

,155

$3,0

82,3

15$3

,407

,291

$4,9

02,2

98

CUM

BEN

EFIT

S($

265,

984)

$361

,914

$2,0

42,9

69$3

,976

,656

$6,1

76,1

54$8

,655

,261

$11,

428,

416

$14,

510,

732

$17,

918,

023

$22,

820,

321

UNIVERSITY OF WASHINGTONCOLLEGE OF BUILT ENVIRONMENTS

424 GOULD HALL, BOX 355740SEATTLE, WASHINGTON 98195-5740

T (206) 616.5335F (206) 685-9597

To: Runstad Center Advisory Board Fr: Stephen H. O’Connor, Ph.D. Dt: February 13, 2013 Admissions: As of today, we have a total of 28 applications on file. By comparison, this time last year we had roughly 35 applications. While the trend is disturbing and must be reversed, there is equal concern relative to the composition of the applicant pool, as currently there are only 4 applications from domestic candidates. This raises a number of important questions and challenges:

1. There are currently 56 graduate real estate programs in the United States. Do we follow the herd or look to differentiate?

2. We currently offer two “tracks” that are not very well defined. Finance/Investment and Development.

3. Do we need more areas of “specialization?” Housing, Corporate/Investment Services, Research/Methods, International.

4. Is our “core” curriculum too heavy? 5. Are we missing an opportunity that is currently being captured by the evening “certificate”

programs offered through the School of Continuing and Professional Education? 6. Do we need more professional adjuncts? What is the right ratio of adjuncts to full-time

academic faculty? 7. How do we make our program truly interdisciplinary by incorporating the Schools of Law,

Business, Public Policy and Built Environments? Academic Review: On May 2 and 3 a team of outside reviewers will be on campus to review our MSRE program. While the above questions are not exhaustive, they will form the basis of a discussion that will hopefully lead to a more critical thinking relative to our competitive position. Integral to this process will be the full engagement and contribution of the newly created Academic Advisory Committee. In addition, students, alumni, faculty, administration and staff will also play a major role in this effort. Website: We are well on our way towards developing a new website for both the Runstad Center and the MSRE program. While we fully anticipate that the final product will go a long way towards addressing our lack of visibility in the graduate real estate education marketplace, we also realize that this will be just one piece of an overall and comprehensive marketing effort. In addition, several recruiting videos are being developed to incorporate into the new site, while new collateral in the form of recruiting posters will be created to send to the multitude of undergraduate business, planning and design programs across the country.


2013 naiop real estate challenge

Documents

graduate real estate

request of vulcan real

new website

msre program

academic review

tellariter e

new collateral

design programs