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THIF CONCORD GROUP <br />• The overall rental apartment market is performing strongly, evidenced by: <br />o Surveyed occupancy of 94% in stabilized projects (ie. not in lease -up), slightly below 95% stabilization, but high <br />relative the Covid-19 market environment (Exhibit8A). <br />o Elevated rent growth — rents in Santa Ana have increased an average of 4.0% per year since 2014 (Exhibit 713). <br />Commercial Market Performance <br />• Neither 4th Street nor Cabrillo Park Drive are established retail corridors in the project's neighborhood around 1-5 <br />( Exhibit 4D). <br />• The local 3-mile radius trade area is in general equilibrium, with 44 SF of retail per capital, a ratio on par with the <br />County average (also 44, per Exhibit 6). <br />• There has been limited demand for new retail in the site's 3-mile radius trade area. While the trade area has added <br />only 100,000 SF of new retail 10-years (current inventory of 12.2M SF), occupancy has not changed during the <br />timeframe (Exhibit 9 <br />• The mixed -use character of the multi -family driven projects is limiting to the overall scale of retail opportunity. <br />Successful, large-scale commercial retail projects require anchor tenancy (grocery, department store, etc), a <br />characteristic that cannot be met within the mixed -us context of the site. <br />o Two of the three analog mixed -use multi -family / commercial projects surveyed suffer from poor occupancy, <br />each below 50% (Exhibit 7 7). <br />o The two low occupancy analogs share both a similar walk score as the subject (60-69 range) and overall scale <br />(13,000 SF average) (Exhibit 77). <br />• Without a critical mass of retail near the site, the project will be challenged to attract a significant scale of retail tenancy. <br />• The 15,200 SF of commercial retail planned is at the upper end of the range supportable on site <br />o Target tenant types will require smaller unit footprints, ranging from 500 to 2,500 SF. <br />o Target tenant types include hairdressers, dry cleaners, craft food store, small professional service businesses, <br />etc. <br />ARNEL DEVELOPMENT CO. August 2020 <br />Santa Ana — 4'" & Cabrillo Park Dr 20233.00 <br />