SKYRISE MIAMI MARKET and FINANCIAL ANALYSIS June 6, 2016 June 6, 2016
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SKYRISE MIAMI MARKET AND FINANCIAL ANALYSIS June 6, 2016 June 6, 2016 Mr. Jeff Berkowitz President and Founder Berkowitz Development Group, Inc. 2665 South Bayshore Drive, Suite 1200 Miami, FL 33133 Dear Mr. Berkowitz, Conventions, Sports & Leisure International (“CSL”) is pleased to present this market and financial analysis related to the development and operations of SkyRise Miami (“SkyRise”) in downtown Miami, Florida. The attached report summarizes our research and analyses and is intended to assist Berkowitz Development Group, Inc. (“BDG”) with making informed decisions regarding the development of SkyRise, including demand for general and VIP observation decks and attractions. The information contained in this report is based on estimates, assumptions and other information developed from research of the market, knowledge of the sports and entertainment industry and other factors, including certain information BDG has provided. All information provided to us by others was not audited or verified and was assumed to be correct. Because procedures were limited, we express no opinion or assurances of any kind on the achievability of any projected information contained herein and this report should not be relied upon for that purpose. Furthermore, there will be differences between projected and actual results. This is because events and circumstances frequently do not occur as expected, and those differences may be material. We have no responsibility to update this report for events and circumstances occurring after the date of this report. We sincerely appreciate the opportunity to assist you with this project, and would be pleased to be of further assistance in the interpretation and application of the study’s findings. Very truly yours, CSL International Conventions, Sports & Leisure International 7501 Lone Star Drive, Suite 200 • Plano, TX 75024 • Telephone 972.491.6901 • Facsimile 972.491.6903 TABLE OF CONTENTS INTRODUCTION .......................................................1 LOCAL MARKET .......................................................3 COMPETITIVE MARKET ANALYSIS ........................20 COMPARABLE FACILITIES ....................................52 INTERCEPT SURVEY RESULTS .............................82 FINANCIAL PROJECTIONS ..................................105 3 INTRODUCTION INTRODUCTION Conventions, Sports & Leisure International (“CSL”) was engaged by the Berkowitz Development Group, Inc. (“BDG”) to conduct a market and financial analysis related to the development and operations of SkyRise Miami (“SkyRise”) in downtown Miami, Florida. As a means of assessing demand, CSL conducted (1) an assessment of the local and regional market conditions; (2) an evaluation of the existing and planned sports and entertainment facilities/attractions in the local and regional market to determine their potential impact on the operations of SkyRise; (3) an analysis of the physical and operational characteristics of comparable attractions located throughout the world in order to provide a benchmark from which to assess the potential operations of SkyRise; and, (4) completed 381 intercept surveys at various locations within Miami-Dade and Broward Counties, including 97 residents and 284 visitors in order to understand participant’s interest in admission packages at the proposed SkyRise Miami development. Research results were used to determine demand for the planned observation decks admission bundles and attractions, and to estimate the revenues and expenses associated with the operations of the observation decks, attractions, and other events hosted at the facility. This report outlines the key findings of the feasibility analysis and is designed to assist project representatives in making informed decisions regarding the development of SkyRise. The report should be read in its entirety to obtain the background, methods, and assumptions underlying the findings. 2 LOCAL MARKET LOCAL MARKET It is anticipated that the majority of annual visitors to SkyRise Miami will consist of international and domestic tourists to South Florida. However, local residents will make up a portion of the target market for the various attractions. The ability for local residents to support the observation deck will be important for initial success in ticket sales, but more importantly, will serve as a base for free and impactful marketing. A local population familiar with and excited about SkyRise Miami will be a key component to the ongoing success of the observation deck. A key measure of success for any major attraction is the extent to which the attraction is well-known and popular within the local market. Additionally, corporate and private sector support for the envisioned music and event spaces may be primarily supported by local Miami companies and residents. Considering the likely importance of partnerships with area corporations, which often book spaces for events and purchase admissions, advertising and sponsorship at an attraction, it is critical to understand the community’s corporate base. The analysis will include an overview of the Miami market to assess the area’s ability to accommodate added event activity and support tourist interest in the observation deck. For purposes of this study, the Miami market is defined as the Miami-Fort Lauderdale-West Palm Beach, FL Core Based Statistical Area. A Core Based Statistical Area (CBSA) is a U.S. geographic area defined by the U.S. Office of Management and Budget based around an urban center of at least 10,000 people and adjacent areas that are socioeconomically tied to the urban center by commuting. Characteristics discussed in this section include: - Local & Regional Market Characteristics - Transportation Access - Tourism - Comparisons to North American Markets with Observation Decks & Towers - Summary The remainder of this section will summarize details specific to the Miami area, as well as South Florida as a whole, and also compare local demographic characteristics to peer markets with observation decks and towers. This comparison is conducted to illustrate potential opportunities and possible weaknesses of the Miami market relative to markets with existing observation decks and towers. 4 LOCAL & REGIONAL MARKET CHARACTERISTICS The anticipated local and regional market for the proposed SkyRise Miami development includes the Miami-Fort Lauderdale-West Palm Beach, FL CBSA and the South Florida region, which is presumed to include Miami-Dade, Broward, Martin, Monroe and Palm Beach Counties. The map to the right depicts the anticipated local and regional market areas. As shown, the Miami metropolitan area makes up the majority of the South Florida region, extending from Palm Beach County to Miami-Dade County. The inclusion MIAMI of Monroe and Martin Counties to the Miami metropolitan area makes up the METROPOLITAN region known as South Florida. AREA SOUTH FLORIDA Specific demographic and socioeconomic information that can provide an indication of a market’s ability to support an attraction such as the proposed SkyRise Miami structure includes population, age distribution, household income and corporate base, among other variables. SKYRISE The table on the following page summarizes the key demographic characteristics MIAMI for the Miami CBSA and South Florida as compared to the U.S. as a whole. 5 SOUTH DEMOGRAPHIC VARIABLE MIAMI CBSA U.S. TOTAL FLORIDA LOCAL MARKET 2010 Population 5,564,635 5,784,043 330,622,575 2015 Population 5,776,200 6,000,738 318,536,439 2020 Population 6,083,472 6,317,788 330,622,575 CHARACTERISTICS Historical Annual Growth Rate (2010 to 2015) 0.7% 0.7% 0.6% Population Projected Annual Growth Rate (2015 to 2020) 1.0% 1.0% 0.8% The 2015 population of the Miami metropolitan area and South Florida are approximately 5.8 million AGE: and 6.0 million, respectively. The Miami metropolitan area is the eighth most populous metro area Median Age 40.8 41.1 37.9 in the U.S. Age Distribution: Under 20: 22.9% 22.7% 25.6% At 1.04 percent, the projected annual population growth rate from 2015 to 2020 in the Miami 20 to 34 20.0% 19.8% 20.8% metropolitan area and South Florida are both higher than the U.S. population annualized growth 35 to 54 27.1% 27.0% 26.0% rate of 0.8 percent. 55 & Over 30.0% 30.5% 27.6% HOUSEHOLD INCOME: Age Adjusted Median Household Income1 $46,258 $46,517 $53,217 The median ages of the Miami metropolitan area (40.8 years) and South Florida (41.1 years) residents Income Distribution: are higher than that of U.S. residents (37.9 years) as a whole. $0 to $24,999 26.4% 26.2% 22.8% $25,000 to $49,999 24.3% 24.3% 23.1% Household Income $50,000 to $74,999 17.6% 17.6% 18.5% Median household income levels in the Miami metropolitan area and South Florida (approximately $75,000 to $ 99,999 10.8% 10.9% 12.4% $46,000) are approximately seven to eight percent lower than the national median of $53,217. $100,000 to $149,999 11.0% 11.1% 13.1% $150,000 and Over 9.9% 10.0% 10.1% Any discussion of household income should consider the cost of living characteristic of an area, CORPORATE INVENTORY: which indicates how expensive or inexpensive an area is relative to the nation as a whole. Compared Total Corporate Base 4,894 5,049 260,486 to the national average of 100, the cost of living index of the Miami metropolitan area is 106.0, By Sales: indicating that the Miami area is approximately six percent more expensive than the U.S. as a whole. $5.0MM to $9.9MM 1,928 2,014 95,829 $10.0 MM to $49.9MM 2,154 2,216 118,573 Corporate Base $50.0MM to $499.9MM 696 704 38,978 For purposes of this study, corporate base includes companies with at least $5 million in annual Over $500.0MM 116 115 7,106 sales and 25 employees. Source: Esri , Hoovers (1) Median Household Income is adjusted to factor in cost of living in the Miami CBSA or South Florida relative to the United States as a whole There are 4,894 companies in the Miami metropolitan area and 5,049 in South Florida, the majority of which reported annual sales of $50 million or less.