Item 26 - Public Hearing Regarding Bristol Project

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ta www.FinanceDTA.com SECTION VI RETAIL MARKET RESEARCH According to Costar, there is 5,965,139 SF of retail space within the 2-Mile Zone with only 131,000 vacant SF, a vacancy rate of 2.0%. DTA also observed that the asking rent in the 2-Mile Zone is currently $33.46 per SF pr year. Based upon this information, we are estimating that the rent for the ground -floor retail space will start at $36.00 per SF per year. Costar is estimating net operating costs in the selected sample at about 8.1% ($2.91/$36.00), as shown in Table 10. For our analysis, DTA rounded this to 10.0% since many older buildings have deferred maintenance. In accordance with current operators, we have estimated that an owner will allocate 3.0% to capital reserves that are used to improve space as it ages and also to provide funds to upgrade space to remain competitive in the marketplace. Finally, DTA reviewed current cap rates, as shown in Figure 13. This schedule summarizes cap rates by a product star system in which five stars is best and one star is the poorest. The below items in italics are quotes from a Costar document titled CoStar Building Rating System. "The Costar Building Rating SystemSM is a national rating for commercial buildings on a universally recognized S Star scale. Historically the industry has lacked a centralized system for evaluating buildings using specific standards developed for each property type. The extensive, standardized property information collected by Costar Research makes such a national building rating system possible. Figure 13: Market Cap Rate by Star Rating Market Cap Rate By Star Rating 6.4% 6.2% 6.0% 5.8% 5.6 /u 5.4% 5.2°/6 5.0% 4.8% The rating system considers the building separately from its immediate 4.6% I I I 1 I 1 1 I I I 1 I I I I ,a ,s ,s �o az � 24 26 vicinity, with the exception of retail properties. This distinction enables ■ 1-2 Star ■ 3 Star 4-5 Star the rating system to address the intrinsic quality of a specific building, with the understanding that a range of building quality may exist in any given location. A building considered to be Class A quality in one market may not qualify as Class A in another. However, because ratings are based on specific standards developed for each property type and consistently applied across different markets, a 4 Star building, for example, is expected to be comparable with all other 4 Star buildings across all markets. Related Bristol at 3600 South Bristol Street Draft Market Study Report Exhibit 10 September 2023 26