Route 59 Corridor Market Analysis Aurora, Kane County, Illinois May 2018

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City of Aurora Route 59 Corridor Market Analysis Aurora, Kane County, Illinois May 2018

www.housingtrendsllc.com 210 Cedar Ave. | St. Charles, Illinois 60174 | (630) 544-7826 Table of Contents

BACKGROUND, OBJECTIVE, AND KEY ASSUMPTIONS 3

EXECUTIVE SUMMARY 5

LOCATION ANALYSIS 10

RESIDENTIAL ANALYSIS 25

RETAIL ANALYSIS 31

HOTEL ANALYSIS 44

ECONOMIC AND DEMOGRAPHIC ANALYSIS 60

APPENDIX 68

www.housingtrendsllc.com Background, Objective, and Key Assumptions

3 www.housingtrendsllc.com Background, Objective and Key Assumptions

Background Housing Trends, LLC was retained by the City of Aurora to assess the viability of the Study Area and make residential, retail/restaurant and hotel/event space recommendations that will maximize the attractiveness and value of the Study Area. The Study Area is located on the far east side of Aurora and is generally bounded by Liberty St. to the north, State Highway 59 to the east, N. Commons Dr. to the west and 79th St. to the south.

Objective The objective of this assignment is to work closely with the Schoppe Design Associates (SDA) and the City of Aurora staff to produce a market analysis which will become part of the report produced by SDA for consideration by the Aurora City Council for the Comprehensive Plan Revision for the Route 59 Corridor.

Contact Information For questions and/or comments regarding this report, please contact:

Lance Ramella, President Housing Trends, LLC 210 Cedar Avenue St. Charles, IL 60174 [email protected] 630.544.7826

4 www.housingtrendsllc.com Executive Summary

5 www.housingtrendsllc.com Executive Summary – General Observations and Recommendations

• The Study Area Competitive Market Area (CMA) (5.0 Mile Radius) contains a population of nearly 273,000, with the 7.5 mile radius containing 500,000 people and the 10.0 mile radius containing a population of 807,000. This is a very densely populated suburban area with a relatively high median income level. The Study Area has an opportunity to serve this large, fairly wealthy population base with a re-invented Fox Valley Mall and surrounding area. • Regional shopping malls are either closing or being re-developed in record numbers across the country. Those that have successfully been re-developed typically have a mix of outdoor space (regardless of climate), fine and casual dining and entertainment options (movie theaters, live music venues, entertainment oriented restaurants, etc.). We have included several examples of these redeveloped malls on pages 40-43 of this report. • In our opinion, the Fox Valley Mall must be redeveloped prior to developing other areas within the Study Area as a redeveloped Fox Valley Mall will increase the property values and desirability of the rest of the study area. • One of the primary advantages of the Study Area is the Route 59 Metra Station. While the station is located outside of the Study Area, it is a primary factor in the attractiveness of the Study Area, especially for future residential development. The Route 59 Metra Station is the busiest station in the entire system, with an average of 5,700 passengers per day boarding trains. We highly recommend creating a cohesive walking/biking trail system leading to the station from all points within the Study Area. Additionally, we recommend a Pace Bus or other shuttle system to transport passengers to and from the train station.

www.housingtrendsllc.com 6 Executive Summary – Residential Recommendations

• Based on our For-Sale Residential Demand Analysis, there is demand for approximately 729 units per year in the CMA (5-mile radius). Currently, this demand is being filled by two- and three-story townhome product priced from the high- $200,000’s to mid-$300,000’s. • We recommend planning for high-density, for-sale housing in the Study Area with the highest density housing (condos and townhomes) located in Areas 1, 2 and 3 and lower density townhomes or even small-lot, single-family homes located in Areas 4 and 5. • There is demand for approximately 234 for-sale units targeted toward active adult (55+) buyers. This demand could be satisfied by condos, townhomes or small-lot, single-family product. • There is enough demand for a moderately sized continuing care facility within the Study Area. These facilities generally draw from a larger geographic area than other residential uses and benefit from proximity to shopping and restaurants. • The Rental Residential Demand Analysis indicates that there is demand for approximately 378 rental units per year priced above $1,900 per month. Currently, this demand is being met by Metro 59 and 500 Station Blvd. Additional rental communities similar to these two are recommended, especially in Areas 1, 2 and 3. We believe that this type of apartment community would fit well on the underutilized parking lots at the Fox Valley Mall. • There is enough demand in the CMA for approximately 254 affordable rental units (under $1,300/month). The affordable rental units could be new construction and/or existing rehabbed buildings.

www.housingtrendsllc.com 7 Executive Summary – Retail and Restaurant Recommendations

• Overall, the Study Area is significantly over-supplied with retail uses. As is typical with aging, large, indoor regional malls, much of the shopping activity is being satisfied online and fewer people are travelling to malls. Those malls that have been successfully redeveloped are creating shopping “experiences” that usually include a combination of outdoor space, restaurants, entertainment options and boutique retail uses. The successfully redeveloped malls also include a mix of residential, office and hotel uses. • Much of the over-supply in the CMA is due to large department stores that are struggling. These stores (Sears, Carson’s, JC Penny and Toys “R” Us) will either be closing or reducing their size in the near future. This downsizing of these retailers will bring the retail gap more in balance in the coming months and years • We highly recommend redeveloping the Fox Valley Mall prior to developing the other areas of the Study Area. With the mall as the catalyst, the rest of the Study Area will be redeveloped at higher property values. • The City of Aurora should assist the mall developer to the best of their ability with streamlined zoning and approval procedures, TIF’s if appropriate, improved infrastructure, transportation plans, cohesive signage and landscaping and public relations. • The redeveloped Fox Valley Mall should include a mix of restaurants and entertainment uses as well as open space. Based on our Retail Demand Analysis, there is enough demand for approximately 17,000 to 26,000 square feet of new restaurant demand in the Study Area. However, this demand could be much greater depending on the types of restaurants that are attracted to a redeveloped mall area. Restaurants such as Cooper’s Hawk, Maggiano’s and Rock Bottom Brewery draw customers from far distances and are typically much larger than typical neighborhood restaurants. • The Study Area is undersupplied in the Food and Beverage Store category. There is a good opportunity for a standard or boutique grocery store within the Study Area, especially since the area is likely to include a large number of new residential units.

www.housingtrendsllc.com 8 Executive Summary – Hotel/Event Observations and Recommendations

• In order to gauge the hotel market, we reviewed the +/- 50 nearest hotels to the Subject. The Competitive Market Area included all hotels generally west of I-355, east of Randall Road, north of State Route 34 (Ogden Ave.) and south of State Route 64 (North Ave./Main St.).

• For this analysis, we used STR, Inc’s hotel categories of Economy, Midscale, Upper Midscale, Upscale and Upper Upscale. According to this research, there are 11 upscale and 8 upper upscale hotels in the CMA.

• According to our research, Occupancy, ADR, RevPar and Demand have all been increasing steadily in the past six years, indicating a relatively strong and growing hotel market.

• Based on this research, we believe that there is demand for more hotel rooms in the CMA. We recommend an Upscale hotel that will attract those attending events within the Study Area, business travelers and weekend travelers visiting friends and family. The average size of an Upscale hotel in the CMA is 156 rooms, with a median size of 130 rooms. We recommend an upscale hotel containing approximately 125 to 150 rooms.

www.housingtrendsllc.com 9 Location Analysis

10 www.housingtrendsllc.com Location Analysis – Subject Site Location The Study Area is well located within minutes of the on/off ramp to I-88 and adjacent to the Route 59 Metra Station (which is the busiest Metra Station in the system). Additionally, the Study Area is located only 3.5 miles west of downtown Naperville.

Topgolf (4.4 Miles from Study Area) I-88 On/Off Ramp (4.4 Chicago Premium Outlet Mall Miles from Study Area) (7.5 Miles from Study Area)

Route 59 Metra Station (43 Min. Express to Chicago) Downtown Naperville (3.5 Miles from Study Area)

Downtown Aurora (5.8 Miles from Study Area) Study Area

Source: Google, Housing Trends, LLC 11 www.housingtrendsllc.com Location Analysis – City of Aurora Map

The Study Area is located on the far east side of the City of Aurora, adjacent to its border with Naperville. The City of Aurora is the second largest city in the State, with a population just over 200,000 and has a diverse population in terms of demographics and economics.

Source: City of Aurora, Housing Trends, LLC 12 www.housingtrendsllc.com Location Analysis – Traffic Count Map According to IDOT’s Average Daily Total Traffic Count Map, the intersection of State Route 59 and State Route 34 (Ogden Ave.) is one of the busiest intersections DuPage County with approximately 55,000 vehicles per day travelling past the Study Area on Route 59 and 26,400 vehicles per day travelling on Ogden Ave.

Source: City of Aurora, Housing Trends, LLC 13 www.housingtrendsllc.com Location Analysis – Study Area Map

The Study Area consists of five separate “sub-areas” ranging from Liberty St. to the north to 79th St. to the south. We have identified each of the sub-areas by number, beginning to the north and working south. Each of these sub-areas has different characteristics and challenges. 1

14 www.housingtrendsllc.com Source: Google Earth Pro, Housing Trends, LLC Location Analysis – Area 1 Map Area 1 is located at the northern end of the study area and closest to the Route 59 Metra Station. This area consists of retail fronting Route 59 and a large Meijer store with parking. The west side of the area consists of three-story, rear-loaded townhomes. This area contains two large vacant parcels that could possibly be developed.

Meijer

Townhomes

U.S. Post Office Miller’s Ale House

Source: Google Earth Pro, Housing Trends, LLC 15 www.housingtrendsllc.com Location Analysis – Area 1 Photos

Three Store Townhomes Three Store Townhomes

Meijer Store and Parking Lot Retail Fronting Route 59

Source: Google Earth Pro, Housing Trends, LLC 16 www.housingtrendsllc.com Location Analysis – Area 2 Map Area 2 consists primarily of the Yorkshire Shopping Center. Yorkshire contains a Best Buy, Fox & Hound Pub, Planet Fitness and a new Asian oriented grocery store called “Park to Shop”, which is scheduled to open this summer. The west portion of Area 2 consists of three-story, rear-loaded townhomes and a portion of 500 Station Blvd. apartments.

Best Buy Park and Shop

Fox & 500 Station Hound Blvd. Apts.

Townhomes

Source: Google Earth Pro, Housing Trends, LLC 17 www.housingtrendsllc.com Location Analysis – Area 2 Photos

Best Buy and Value City Park to Shop

Fox & Hound Pub 500 Station Blvd. Apartments

Source: Google Earth Pro, Housing Trends, LLC 18 www.housingtrendsllc.com Location Analysis – Area 3 Map Area 3 consists of the Fox Valley Mall property and surrounding parking lots as well as underperforming retail and office sites south of McCoy Drive. This area contains a lot of vacant and/or under utilized property that can be re-developed. The Fox Valley Mall property is the most critical property in the entire Study Area as the future value of surrounding properties will be directly impacted by the redevelopment of this mall.

Kohl’s

Toys R Us

Carson’s

Macy’s Mall Sears Interior

JC Penny

The Foundry Sky Zone

ALDI

Max Masden’s Mitsubishi

19 www.housingtrendsllc.com Source: Google Earth Pro, Housing Trends, LLC Location Analysis – Area 3 Photos

Macy’s and Parking Lot Carnival on Empty Fox Valley Mall Parking Lot

Toys R Us – Going out of Business Sale Sears and Parking Lot

Source: Google Earth Pro, Housing Trends, LLC 20 www.housingtrendsllc.com Location Analysis – Area 4 Map The east side of Area 4 consists of the Aurora Marketplace Shopping Center and the middle section of Area 4 includes Valley Honda, Valley Hyundai and TGM Springbrook Apartments. The western portion of Area 4 is vacant, undeveloped land.

Source: Google Earth Pro, Housing Trends, LLC

21 www.housingtrendsllc.com Location Analysis – Area 4 Photos

Aurora Marketplace Aurora Marketplace

Vacant Land at 75th St. and Ogden Ave. Vacant Land at 75th St. and Ogden Ave.

Source: Google Earth Pro, Housing Trends, LLC 22 www.housingtrendsllc.com Location Analysis – Area 5 Map Area 5 Consists of vacant undeveloped land at the southwest corner of 75th St. and Route 59. At this time, M/I Homes is planning to build approximately 171 townhomes units on the southwest corner of Area 5.

Source: Google Earth Pro, Housing Trends, LLC 23 www.housingtrendsllc.com Location Analysis – Area 5 Photos

Southwest Corner of Vacant Land Looking West Southwest Corner of Vacant Land Looking North

South side of Vacant Land Looking North

Source: Google Earth Pro, Housing Trends, LLC 24 www.housingtrendsllc.com Residential Analysis

25 www.housingtrendsllc.com Residential Analysis – Executive Summary

To gauge the viability of retail at the Subject site, we took both a quantitative and qualitative approach. The following summarizes our observations and recommendations.

• Approximately 30% of the For-Sale Demand is for 55+ buyers. Accordingly, approximately 1/3 of all units in the Study Area should be targeted toward active adults.

• High density product (even multi-floor condos) should be located in Areas 1, 2 and 3, as they are walkable to the Route 59 Metra Station.

• The Rental Residential Demand Analysis indicates that there is demand for approximately 378 rental units per year priced above $1,900 per month. Currently, this demand is being met by Metro 59 and 500 Station Blvd. Additional rental communities similar to these two are recommended, especially in Areas 1, 2 and 3. We believe that this type of apartment community would fit well on the underutilized parking lots at the Fox Valley Mall.

• It should be noted that there is demand for approximately 254 affordable (under $1,300/month) rental units. The Study Area would be a good location for at least one affordable apartment community.

26 www.housingtrendsllc.com Residential Analysis – For-Sale Residential Demand Model

Our For-Sale Residential Demand Model indicates that there is demand for approximately 729 newly built, for-sale residential units per year within a 5-mile radius of the Study Area. Approximately 32% of this demand is geared toward 55+ buyers. The Study Area should benefit from this demand over the next several years, assuming that much of the open space and underutilized parking lots are developed as residential uses.

Existing Households - Turnover

Income Cohort Income to Mort. (1) Home Value (2) Existing Households (3) % Home Owners (4) Home Owners Turnover (5) Home Owners - Annual Turnover 25-34 35-44 45-54 55+ Total <35 35-44 45-54 55+ Total <35 35-44 45-54 55+ Total <35 35-44 45-54 55+ <35 35-44 45-54 55+ Total $0 - $50,000 35% $0 - $155,000 4,408 4,224 3,649 10,216 22,497 20% 30% 30% 30% 28% 882 1,267 1,095 3,065 6,308 12% 10% 9% 6% 106 127 99 184 515 $50,000 - $75,000 33% $155,000 - $253,000 3,069 3,033 2,620 4,708 13,430 30% 40% 40% 45% 39% 921 1,213 1,048 2,119 5,301 12% 10% 9% 6% 110 121 94 127 453 $75,000 - $100,000 31% $253,000 - $295,000 2,625 3,074 2,557 3,855 12,111 35% 50% 50% 60% 49% 919 1,537 1,279 2,313 6,047 12% 10% 9% 6% 110 154 115 139 518 $100,000 - $150,000 30% $295,000 - $452,000 2,940 4,586 4,750 5,747 18,023 55% 65% 70% 85% 69% 1,617 2,981 3,325 4,885 12,808 12% 10% 9% 6% 194 298 299 293 1,084 $150,000 - $200,000 28% $452,000 - $575,000 1,274 2,754 3,501 3,688 11,217 75% 80% 85% 90% 83% 956 2,203 2,976 3,319 9,454 12% 10% 9% 6% 115 220 268 199 802 $200,000 + 25% $575,000 - 1,014 2,941 4,446 4,733 13,134 80% 85% 90% 90% 86% 811 2,500 4,001 4,260 11,572 12% 10% 9% 6% 97 250 360 256 963 Total 15,330 20,612 21,523 32,947 90,412 49% 58% 61% 67% 59% 6105 11701 13723 19960 51490 12% 10% 9% 6% 733 1,170 1,235 1,198 4,335

New Households

Income Cohort Income to Mort. Home Value New Households - Annual (3) % Home Owners (4) New Home Owners Turnover New Home Owners - Annual Turnover <35 35-44 45-54 55+ Total <35 35-44 45-54 55+ Total <35 35-44 45-54 55+ Total <35 35-44 45-54 55+ <35 35-44 45-54 55+ Total $0 - $50,000 35% $0 - $155,000 (375) (428) (369) (117) (1,289) 20% 30% 30% 30% 28% (75) (128) (111) (35) (349) 100% 100% 100% 100% (75) (128) (111) (35) (349) $50,000 - $75,000 33% $155,000 - $253,000 (426) (647) (525) (327) (1,925) 30% 40% 40% 45% 39% (128) (259) (210) (147) (744) 100% 100% 100% 100% (128) (259) (210) (147) (744) $75,000 - $100,000 31% $253,000 - $295,000 (116) 87 127 186 284 35% 50% 50% 60% 49% (41) 44 64 112 178 100% 100% 100% 100% (41) 44 64 112 178 $100,000 - $150,000 30% $295,000 - $452,000 176 406 515 598 1,695 55% 65% 70% 85% 69% 97 264 361 508 1,230 100% 100% 100% 100% 97 264 361 508 1,230 $150,000 - $200,000 28% $452,000 - $575,000 127 356 372 436 1,291 75% 80% 85% 90% 83% 95 285 316 392 1,089 100% 100% 100% 100% 95 285 316 392 1,089 $200,000 + 25% $575,000 - 156 518 737 797 2,208 80% 85% 90% 90% 86% 125 440 663 717 1,946 100% 100% 100% 100% 125 440 663 717 1,946 Total (458) 292 857 1,573 2,264 49% 58% 61% 67% 59% 73 645 1,083 1,547 3,349 100% 100% 100% 100% 73 645 1,083 1,547 3,349

New Home Demand - Annual Income Cohort Income to Mort. Home Value Turnover Demand % Buy New (6) Annual New Home Demand <35 35-44 45-54 55+ Total <35 35-44 45-54 55+ Total <35 35-44 45-54 55+ Total Share $0 - $50,000 35% $0 - $155,000 31 (2) (12) 149 166 0% 0% 0% 0% 0% - - - - - 0% $50,000 - $75,000 33% $155,000 - $253,000 (17) (137) (116) (20) (291) 10% 10% 10% 10% 10% (2) (14) (12) (2) (29) -4% $75,000 - $100,000 31% $253,000 - $295,000 70 197 179 250 696 10% 12% 12% 10% 11% 7 24 21 25 77 11% $100,000 - $150,000 30% $295,000 - $452,000 291 562 660 801 2,314 10% 12% 12% 10% 11% 29 67 79 80 256 35% $150,000 - $200,000 28% $452,000 - $575,000 210 505 584 592 1,891 9% 11% 11% 9% 10% 19 56 64 53 192 26% $200,000 + 25% $575,000 - 222 690 1,023 973 2,909 8% 8% 8% 8% 8% 18 55 82 78 233 32% Total 806 1,815 2,318 2,745 7,684 71 188 235 234 729 100% Share Sources: (1) US Census - American Factfinder (2) Assumes 10% Down Payment, 30-Year Mortgage at 5.0% Fixed Annual Rate, 2.5% Property Taxes (3) ESRI (4) ESRI (5) Us Census - American Factfinder (6) DataQuick - precentage of overall home sales that are new - long term average

27 www.housingtrendsllc.com Residential Analysis – Rental Residential Demand Model According to our Rental Demand Analysis, there is demand for approximately 633 rental units annually in the Study Area. Approximately 378 of these rental units are in the rental rate ranges that would be appropriate for the Study Area (above $1,900/month).

DEMAND FROM HH GROWTH TOTAL HOUSEHOLDS RENTAL HOUSEHOLDS % Rental % Rental Annual Household Monthly Total Households - Total Households - 2016 Calculated 2022 Calculated Annual New % that Rent Total Rental Demand Households 2017 Households 2022 Income Rental Rate (1) 2017 (2) 2022 (P) (2) Renter HH Renter HH (P) Rental HH (A) (4) Apartment Homes (5) (3) (3) $0 to $25,000 $0 - $600 9,023 9,077 68% 6,136 79% 7,160 205 80% 164 $25,000 to $35,000 $600 - $900 5,557 5,140 70% 3,890 81% 4,174 57 78% 44 $35,000 to $50,000 $900-$1,300 9,271 8,399 65% 6,026 75% 6,333 61 75% 46 $50,000 to $75,000 $1,300-$1,900 13,969 12,044 55% 7,683 64% 7,684 0 70% 0 $75,000 to $100,000 $1,900-$2,600 12,435 12,151 48% 5,969 56% 6,766 159 70% 112 $100,000 to $150,000 $2,600-$3,800 18,210 19,905 33% 6,009 38% 7,620 322 55% 177 $150,000 to $200,000 $3,800-$4,500 11,032 12,323 14% 1,544 16% 2,001 91 55% 50 $200,000+ $4,500 13,186 15,394 14% 1,846 16% 2,500 131 30% 39 Total Total 92,683 94,433 42% 39,103 47% 44,237 1,027 62% 633

Monthly Rental Rate Total Demand $0 - $600 164 $600 - $900 44 $900-$1,300 46 $1,300-$1,900 0 $1,900-$2,600 112 $2,600-$3,800 177 $3,800-$4,500 50 $4,500 39 Total 633 MR - Relevant: 46

1/ Assumes that in the MSA, households pay 31% of the annual income toward rent per American Community Survey 2014. While percentage paid by income may vary, the calculation is intended to establish reasonable rent ranges as perspective. Some households will spend more and some will spend less. 2/ Estimated total existing households and annual household growth between 2017 and 2022. Total HH for 2017 per ESRI data is adjusted based on ACS distribution. 2022 growth per ESRI 3/ Percentage of area households that are renter occupied by income level per US Census American Community Survey 2014. For 2022 we adjusted the overall renter rate upward by 4.4% given our expectation of higher renter ratio trend in coming years. Percentages by income increase given the adjusted household income distribution. 4/ Calculated gain in renter households 2017 to 2022. Those income categories that show a decrease in households will not show household growth demand. 5/ Percentage of renters by income level that are likely to rent apartments. Data per US Census Bureau. Census reports 62% of all households in the MSA who rent, rent in structures that are 5+ units. For purposes of this analysis, Housing Trends, LLC defined these as apartments. Housing Trends model vaires by income level assuming that lower income households are more likely to rent apartments than higher income households (which tend toward single-family homes).

28 www.housingtrendsllc.com Residential Analysis – For-Sale New Home Communities At the present time, there are several new townhome communities in the vicinity of the Subject site. This activity demonstrates the demand for new homes in this region for townhomes in the $300,000 to $360,000 price range.

Community Name Builder Name Product Type Base Price Range Unit Size Range $/Sq. Ft. Range Metro West M/I Homes Townhomes $313,990-$323,990 1,813-1,910 $169-$173 Sedgewick M/I Homes Townhomes $302,990-$359,990 1,780-2,287 $157-$170 Gramercy Square M/I Homes Townhomes Coming Soon NeuDearborn Station DR Horton Townhomes Coming Soon Union Square Next Generation Dev. Townhomes $287,900-$309,900 1,632-1,817 $170-$176

Metro West NeuDearborn Station

Union Square

Sedgewick

Gramercy Square

29 www.housingtrendsllc.com Residential Analysis – Apartment Communities At the present time, there are several apartment communities near the Study Area. Two of these communities, Metro 59 and 500 Station Blvd., are in their initial lease-up phase and are achieving the highest rental rates in the region, primarily due to their walkability to the Route 59 Metra Station. Community Name Total Units Product Type Rental Rate Range Unit Size Range $/Sq. Ft. Range Metro 59 232 Flats, 5-Stories $1,365-$2,644 590-1,451 $1.82-$2.31 500 Station Blvd. 417 Flats, 5-Stories $1,450-$2,725 770-1,350 $1.62-$2.02 TGM Springbrook 600 Garden-Style $1,060-$1,495 503-1,074 $1.39-$2.10 Legacy at Fox Valley 281 Garden-Style $1,125-$2,265 685-1,388 $163-$175 Raiway Plaza 418 Garden-Style $1,400-$1,965 840-1,325 $148-$167 Brittany Springs 336 Garden-Style $1,330-$2,150 846-1,339 $157-$177

Metro 59

Railway Station

500 Station Blvd. Brittany Springs

Legacy Fox Valley

TGM Springbrook. www.housingtrendsllc.com Retail Analysis

31 www.housingtrendsllc.com Retail Analysis – Executive Summary

To gauge the viability of retail at the Subject site, we took both a quantitative and qualitative approach. The following summarizes our observations and recommendations.

• The key to activating the Study Area into a vibrant district is how the Fox Valley Mall is reinvented from a challenged indoor mall to a vibrant shopping/dining/entertainment destination. The Fox Valley Mall should be redeveloped prior to developing the surrounding areas as it will increase the property values tremendously in the Study Area after it is redeveloped.

• The Retail Demand Analysis shows that the CMA is oversupplied with retail in the primary categories (Furniture and Home Furnishings Stores, Electronics and Appliance Stores, Clothing and Clothing Accessory Stores). In order for the retail market to return to a healthy level, these retail categories need to be “right sized”. This “right sizing” will, most likely, happen organically as large department stores (Sears, Carson’s, JC Penny) either close or reduce their footprint.

• The Retail Demand Analysis shows that the CMA is undersupplied in the Restaurant and Drinking Places category. The analysis does not determine the type or restaurant that is either over- or under-supplied. It appears as though there is sufficient supply of fast food and fast-casual (Olive Garden, Hooter’s, Pizza Hut, etc.) restaurants and less supply of specialty restaurants (Smashburger, Gordon Biersch Brewery, Granite City).

• The Retail Demand Analysis shows that the CMA is significantly undersupplied in terms of Drug, Health and Personal Care stores. These types of small, boutique retailers should thrive in a redeveloped Fox Valley Mall. Additionally, the CMA is undersupplied in the Food and Beverage Store category. This is an opportunity for the Study Area, especially since there will likely be a large number of new residential units in this region.

32 www.housingtrendsllc.com Retail Analysis – Summary

In order to determine future demand at the Subject for all retail uses, we used four primary qualification methods, detailed below. No one qualification method will accurately predict the demand for new retail, but taken together, we believe that the methods can reliably predict retail demand.

Traffic

• State Highway 59 is the primary north-south arterial roadway in this region and carries approximately 55,000 vehicles per weekday. An additional 26,400 cars per day travel on State Route 34 (Ogden Ave.)

Radius Population

• The number of people living within 5.0, 7.5 and 10.0 miles of the Subject site warrants both large and small sized retail centers, restaurants, hotels and entertainment venues.

Drive-Time Population

• Regional retailers will also analyze drive-time population (ranging from 15 to 45 minutes). Due to the highly accessible location of the site, the Subject qualifies for a large retail center.

Demand/Supply Model

• Our retail gap analysis shows that most retail categories are currently over-supplied in this market, which indicates that shoppers from outside of the Primary and Secondary Market Areas need to travel into the trade area in order to support these retailers. This is fairly typical for an area containing a regional mall.

33 www.housingtrendsllc.com Retail Analysis – Radius Population Qualifications Retail tenants typically qualify a site by population statistics surrounding the site. Housing Trends, LLC reviewed population figures within the 5.0-, 7.5- and 10.0-mile radii of the Subject to determine if the Subject would warrant any of these uses. Given the nature of this site, the proximity to major transportation corridors and the large population within 10 miles of the site, the Subject qualifies for a regional or super regional shopping destination. However, due to the heavy concentration of retail activity in the trade area, the Subject region is currently oversupplied with retail uses. However, there is a gap in the restaurant supply and demand which indicates a need for additional restaurants at the Subject location.

5 Miles

7.5 Miles

10 Miles

34 www.housingtrendsllc.com Retail Analysis – Retail Gap Analysis by Category - PMA Our Retail Gap Analysis compares total retail expenditures by residents living in the Primary Market Area (PMA, which is a 5.0 mile radius from the Subject property) with the amount of retail spending in the PMA. A positive “gap” indicates the potential for more retail in the PMA, while a negative (red) figure indicates an oversupply of a certain category. As the chart below indicates, the demand for most retail types is currently being met by existing supply. However, there is a gap in the demand for Auto Parts, Building Materials, Food and Beverage Stores, Drug Stores and Food Service and Drinking Places. Due to the nature of this site and the recommended uses, we believe that Food Services and Drinking Places (including entertainment venues) would be the most desirable type of business to pursue. Retail Potential GAP Spending Retail Sales Potential potential by Actual residents in Spending in Retail PMA PMA Opportunity in PMA

DEMAND SUPPLY LEAKAGE Retail Expenditures Retail Spending Retail Categories by Area Residents Within the Area Difference $ Difference % Auto Parts, Accessories, and Tire Stores $85,501,003 $50,295,342 $35,205,661 41.2% Furniture and Home Furnishings Stores $156,350,883 $626,059,801 ($469,708,918) -300.4% Electronics and Appliance Stores $178,797,664 $438,941,244 ($260,143,580) -145.5% Building Material, Garden Equip Stores $323,016,811 $233,119,711 $89,897,100 27.8% Food and Beverage Stores $742,306,653 $688,902,478 $53,404,175 7.2% Drug, Health and Personal Care Stores $291,333,989 $166,513,839 $124,820,150 42.8% Clothing and Clothing Accessories Stores $259,855,056 $387,305,317 ($127,450,261) -49.0% Sporting Goods, Hobby, Book, Music Stores $124,172,730 $128,321,954 ($4,149,224) -3.3% General Merchandise Stores $794,713,591 $817,346,095 ($22,632,504) -2.8% Miscellaneous Store Retailers $161,918,141 $202,524,988 ($40,606,847) -25.1% Food Service and Drinking Places $526,843,130 $463,327,541 $63,515,589 12.1% Total $3,644,809,651 $4,202,658,310 ($557,848,659) -15.3%

Source: ESRI, Housing Trends, LLC

Data Note (per ESRI): Retail Potential estimates the expected amount spent by consumers at retail establishments. Retail Sales estimates sales to consumers by establishments. Sales to businesses are excluded. 35 www.housingtrendsllc.com Retail Analysis – Retail Expenditures by Category - PMA We highlight retail expenditures by category and the percentage of household income attributed to each category. We determined the percentages based on the retail expenditures in the PMA (per ESRI) divided by the total per capita income in the PMA.

RETAIL EXPENDITURES BY RETAIL CATEGORY Primary Market Area 2017 % of Expenditure Household Expenditure Category Expenditures ($) Per Capita Income Automotive Parts/Accsrs, Tire Stores-4413 $85,501,003 $315 0.76%

Furniture and Home Furnishings Stores-442 $156,350,883 $575 1.38% Furniture Stores-4421 $90,535,884 $333 0.80% Home Furnishing Stores-4422 $65,814,999 $242 0.58%

Electronics and Appliance Stores-443 $178,797,664 $658 1.58%

Building Material, Garden Equip Stores -444 $323,016,811 $1,188 2.86% Building Material and Supply Dealers-4441 $293,575,952 $1,080 2.60% Lawn, Garden Equipment, Supplies Stores-4442 $29,440,859 $108 0.26%

Food and Beverage Stores-445 $742,306,653 $2,731 6.57% Grocery Stores-4451 $649,773,762 $2,391 5.76% Specialty Food Stores-4452 $38,276,912 $141 0.34% Beer, Wine and Liquor Stores-4453 $54,255,979 $200 0.48%

Health and Personal Care Stores-446 $291,333,989 $1,072 2.58%

Clothing and Clothing Accessories Stores-448 $259,855,056 $956 2.30% Clothing Stores-4481 $173,702,247 $639 1.54% Shoe Stores-4482 $37,530,739 $138 0.33% Jewelry, Luggage, Leather Goods Stores-4483 $48,622,069 $179 0.43%

Sporting Goods, Hobby, Book, Music Stores-451 $124,172,730 $457 1.10% Sporting Goods, Hobby, Musical Inst Stores-4511 $103,000,486 $379 0.91% Book, Periodical, Music Stores-4512 $21,172,244 $78 0.19%

General Merchandise Stores-452 $794,713,591 $2,924 7.04% Department Stores Excl Leased Depts-4521 $572,511,048 $2,106 5.07% Other General Merch Stores-4529 $222,202,544 $818 1.97%

Miscellaneous Store Retailers-453 $161,918,141 $596 1.43% Florists-4531 $11,722,772 $43 0.10% Office Supplies and Stationery Stores-4532 $30,149,785 $111 0.27% Used Merchandise Stores-4533 $16,436,606 $60 0.15% Other Miscellaneous Store Retailers-4539 $103,608,977 $381 0.92%

Foodservice and Drinking Places-722 $526,843,130 $1,938 4.67% Full-Service Restaurants-7221 $0 $0 0.00% Limited-Service Eating Places-7222 $12,741,906 $47 0.11% Special Foodservices-7223 $17,102,207 $63 0.15% Drinking Places -Alcoholic Beverages-7224 $496,999,017 $1,829 4.40%

Total Retail Trade $3,644,809,651 32.28%

Note: This accounting excludes automotive dealers, gas stations and non-store retailers (e.g., internet). 36 www.housingtrendsllc.com Retail Analysis – Retail Gap Analysis by Category - SMA We highlight the retail gap analysis in the Secondary Market Area (SMA), which contains a larger number of retail stores. We calculate the Secondary Market Area (SMA) as a 7.5-mile radius from the Subject site. We use the SMA Gap Analysis only to calculate the potential inflow of spending from the SMA to the PMA, which in this case, is relatively significant.

Retail GAP Potential Retail Sales Actual Potential Spending Retail potential by Spending in residents in PMA Opportunity PMA in PMA

DEMAND SUPPLY LEAKAGE Retail Expenditures Retail Spending Retail Categories by Area Residents Within the Area Difference $ Difference % Motor Vehicle and Parts Dealers $147,633,774 $92,033,119 $55,600,655 37.7% Furniture and Home Furnishings Stores $269,452,089 $696,552,208 ($427,100,119) -158.5% Electronics and Appliance Stores $308,336,147 $553,130,286 ($244,794,139) -79.4% Building Material, Garden Equip Stores $557,160,318 $460,948,533 $96,211,785 17.3% Food and Beverage Stores $1,282,287,864 $1,369,680,176 ($87,392,312) -6.8% Drug, Health and Personal Care Stores $503,182,150 $290,080,225 $213,101,925 42.4% Clothing and Clothing Accessories Stores $447,615,967 $483,259,572 ($35,643,605) -8.0% Sporting Goods, Hobby, Book, Music Stores $214,122,295 $180,858,696 $33,263,599 15.5% General Merchandise Stores $1,371,725,228 $1,336,161,598 $35,563,630 2.6% Miscellaneous Store Retailers $279,337,104 $317,616,865 ($38,279,761) -13.7% Food Service and Drinking Places $907,803,500 $778,635,230 $129,168,270 14.2% Total $6,288,656,436 $6,558,956,508 ($270,300,072) -4.3% Source: ESRI, Housing Trends, LLC

Data Note (per ESRI): Retail Potential estimates the expected amount spent by consumers at retail establishments. Retail Sales estimates sales to consumers by establishments. Sales to businesses are excluded. 37 www.housingtrendsllc.com Retail Analysis – Retail Expenditures by Category - SMA We highlight retail expenditures by category for the SMA and the percentage of household income attributed to each category. The SMA has slightly lower income characteristics to the PMA.

RETAIL EXPENDITURES BY RETAIL CATEGORY Secondary Market Area 2017 % of Expenditure Household Expenditure Category Expenditures ($) Per Capita Income Automotive Parts/Accsrs, Tire Stores-4413 $147,633,774 $285 0.88%

Furniture and Home Furnishings Stores-442 $269,452,089 $520 1.61% Furniture Stores-4421 $156,011,834 $301 0.93% Home Furnishing Stores-4422 $113,440,255 $219 0.68%

Electronics and Appliance Stores-443 $308,336,147 $595 1.84%

Building Material, Garden Equip Stores -444 $557,160,318 $1,075 3.32% Building Material and Supply Dealers-4441 $506,424,744 $977 3.02% Lawn, Garden Equipment, Supplies Stores-4442 $50,735,574 $98 0.30%

Food and Beverage Stores-445 $1,282,287,864 $2,474 7.65% Grocery Stores-4451 $1,122,792,542 $2,166 6.69% Specialty Food Stores-4452 $66,157,555 $128 0.39% Beer, Wine and Liquor Stores-4453 $93,337,767 $180 0.56%

Health and Personal Care Stores-446 $503,182,150 $971 3.00%

Clothing and Clothing Accessories Stores-448 $447,615,967 $864 2.67% Clothing Stores-4481 $299,400,191 $578 1.79% Shoe Stores-4482 $64,741,253 $125 0.39% Jewelry, Luggage, Leather Goods Stores-4483 $83,474,523 $161 0.50%

Sporting Goods, Hobby, Book, Music Stores-451 $214,122,295 $413 1.28% Sporting Goods, Hobby, Musical Inst Stores-4511 $177,613,032 $343 1.06% Book, Periodical, Music Stores-4512 $36,509,263 $70 0.22%

General Merchandise Stores-452 $1,371,725,228 $2,647 8.18% Department Stores Excl Leased Depts-4521 $987,798,937 $1,906 5.89% Other General Merch Stores-4529 $383,926,292 $741 2.29%

Miscellaneous Store Retailers-453 $279,337,104 $539 1.67% Florists-4531 $20,100,588 $39 0.12% Office Supplies and Stationery Stores-4532 $51,991,416 $100 0.31% Used Merchandise Stores-4533 $28,336,687 $55 0.17% Other Miscellaneous Store Retailers-4539 $178,908,412 $345 1.07%

Foodservice and Drinking Places-722 $907,803,500 $1,751 5.41% Full-Service Restaurants-7221 $466,265,330 $900 2.78% Limited-Service Eating Places-7222 $21,945,448 $42 0.13% Special Foodservices-7223 $29,444,300 $57 0.18% Drinking Places -Alcoholic Beverages-7224 $856,413,752 $1,652 5.11%

Total Retail Trade $6,288,656,436 37.49%

Note: This accounting excludes automotive dealers, gas stations and non-store retailers (e.g., internet). 38 www.housingtrendsllc.com Retail Analysis – Retail Gap Analysis - 2017 Our gap analysis indicates demand for approximately 17,000-26,000 square feet of new restaurant space in the Study Area today, depending on the estimated 10.0% to 15.0% capture rate. HOUSING TRENDS, LLC GAP ANALYSIS (2017) PMA Shopping Center PMA Outflow Leakage SMA SMA Spending PMA Reconciliation Retail Performance Outflow (% of PMA Inflow Propensity SMA (Inflow + Outflow) Expenditure Categories Demand (Supply) Leakage Expenditures) Factor by Use Inflow ($) (Demand - Supply) Food Service/Eating and Drinking Places $526,843,130 $463,327,541 $63,515,589 12.1% 12.0% $0 $63,515,589 Food and Beverage Stores $742,306,653 $688,902,478 $53,404,175 7.2% 7.0% 20.4% $37,736,532 $91,140,707 Clothing and Accessories Stores $259,855,056 $387,305,317 ($127,450,261) -49.0% 20.0% 7.1% $37,636,912 ($89,813,349) Auto Parts/ Accessories/ Tire Stores $85,501,003 $50,295,342 $35,205,661 41.2% 8.0% 2.3% $4,965,399 $40,171,060 Health and Personal Care Stores $291,333,989 $166,513,839 $124,820,150 42.8% 10.0% 8.0% $21,154,543 $145,974,693 Furniture and Home Furnishings Stores $156,350,883 $626,059,801 ($469,708,918) -300.4% 16.0% 4.3% $18,125,081 ($451,583,837) Bldg Materials, Garden Equip. & Supply Stores $323,016,811 $233,119,711 $89,897,100 27.8% 6.0% 8.9% $14,054,320 $103,951,420 Entertainment/Electronics/Appliances $178,797,664 $438,941,244 ($260,143,580) -145.5% 19.0% 4.9% $24,629,549 ($235,514,031) Sporting Goods/Hobby/Book/Music $124,172,730 $128,321,954 ($4,149,224) -3.3% 18.0% 3.4% $16,203,648 $12,054,424 Department Store $794,713,591 $817,346,095 ($22,632,504) -2.8% 20.0% 21.8% $115,338,829 $92,706,325 Office Supplies/Gifts/Used Merchandise/Other $161,918,141 $202,524,988 ($40,606,847) -25.1% 10.0% 4.4% $11,743,757 ($28,863,090) Total $3,644,809,651 $4,202,658,310 ($557,848,659) -15.3% 13.27% 86% $301,588,568 ($256,260,091) Sources: ESRI, ULI Dollars & Cents

The SMA Inflow is a calculation of the total population of the The PMA Retail Demand is a calculation of the total Secondary Market Area (per ESRI), multiplied by the per capita population of the Primary Market Area, multiplied by the per The gap is negative, which indicates the PMA is income (per ESRI), to equal total income for the SMA. After capita income (per ESRI), multiplied by the spending adequately serving residents in many retail categories. subtracting PMA total income (to isolate only the SMA), we propensity for various retail uses (per ESRI). multiply the SMA total income by spending propensity for various retail uses (per ESRI).

OPPORTUNITY FOR ADDITIONAL RETAIL SPACE AT SUBJECT SITE (PER JBREC INLFOW - OUTFLOW ANALYSIS) SUBJECT PROJECT CAPTURE Low High PMA Reconciliation PMA (Inflow + Outflow) Revenue Reconciliation Subject Site Subject Site Expenditure Categories (Demand - Supply) Per SF Avg Opportunity (SF) Capture Demand (SF) Capture Demand (SF) Food Service/Eating and Drinking Places $63,515,589 $367 173,242 10.0% 17,324 15.0% 25,986 Food and Beverage Stores $91,140,707 $543 167,967 10.0% 16,797 15.0% 25,195 Clothing and Accessories Stores ($89,813,349) $403 -222,701 10.0% -22,270 15.0% -33,405 Motor Vehicle Parts $40,171,060 $262 153,396 10.0% 15,340 15.0% 23,009 Health and Personal Care Stores $145,974,693 $542 269,543 10.0% 26,954 15.0% 40,432 Furniture and Home Furnishings Stores ($451,583,837) $471 -958,005 10.0% -95,800 15.0% -143,701 Bldg Materials, Garden Equip. & Supply Stores $103,951,420 $471 220,526 10.0% 22,053 15.0% 33,079 Entertainment/Electronics/Appliances ($235,514,031) $367 -642,378 10.0% -64,238 15.0% -96,357 Sporting Goods/Hobby/Book/Music $12,054,424 $230 52,308 10.0% 5,231 15.0% 7,846 Department Store $92,706,325 $417 222,366 10.0% 22,237 15.0% 33,355 Office Supplies/Gifts/Used Merchandise/Other ($28,863,090) $262 -110,216 10.0% -11,022 15.0% -16,532 Total ($256,260,091) $394 -673,951 -- -67,395 -- -101,093 AVERAGE SUPPORTABLE SIZE FOR THE SUBJECT SITE (SF): -84,244 Sources: ESRI, ULI Dollars & Cents 39 www.housingtrendsllc.com Retail Analysis – Mall Redevelopment Projects – Brookfield Square – Brookfield, WI

The Brookfield Mall is an underperforming mall located in Brookfield, Wisconsin. The western portion of the mall (the former Sears site) is currently being redeveloped into an entertainment, dining and hotel destination with the key tenants including Hilton Garden Inn, WhirlyBall, BistroPlex Movie Theater and numerous restaurants. The City of Brookfield is investing $8.75 million which will help with demolition, rebuilding the mall’s ring road, new parking lots and sewer and water line improvements. The owner of the mall is investing $50 to $60 million to upgrade the center.

40 www.housingtrendsllc.com Retail Analysis – Mall Redevelopment Projects – The Quad – St. Charles, IL

The Quad will be located on the old Charlestown Mall site on the east side of St. Charles. This project will demolish most of the existing interior mall structure, with the exception of the Von Maur department store, the existing movie theater and some of the interior portion. Approximately 400 apartment units and 300 townhome units will be built on the northern and eastern parking lots. The concept is to transform the remainder of the site into a restaurant and entertainment hub.

41 www.housingtrendsllc.com Retail Analysis – Mall Redevelopment Projects – Bayshore Town Centers– Glendale, WI

Bayshore Town Center is an indoor/outdoor mall located in the northern suburbs of Milwaukee, WI. This mall has found success by providing a good mix of restaurant and entertainment with smaller retail stores in a “Main Street” configuration. The outdoor plazas are used for events and music during warm weather months. This mall also includes a mix of office and residential uses. Bayshore Town Center has recently had some financial issues primarily due to large boxes (primarily Sears) closing their stores. The mall was recently acquired by AIG Global Real Estate.

42 www.housingtrendsllc.com Retail Analysis – Potential Entertainment Uses

In order for shopping malls to thrive in the current retail environment, they need to offer more than an indoor shopping experience. Most malls that have successfully re-invented themselves have included a mix of outdoor space, unique dining and entertainment options. Entertainment options range from movie theaters to small amphitheaters to bowling and shuffleboard themed restaurants.

43 www.housingtrendsllc.com Hotel Analysis

44 www.housingtrendsllc.com Hotel Analysis – Glossary

The hotel industry uses unique measurements and terminology throughout the industry. The glossary below is intended to help the reader understand the terms and calculations used throughout this report.

 ADR (Average Daily Rate) – Room revenue divided by rooms sold is displayed as the average rental rate for a single room.

 Demand (Rooms Sold) – The number of rooms sold (excludes complimentary rooms).

 Occupancy – Rooms sold divided by rooms available. Occupancy is always displayed as a percentage of rooms occupied.

 Open Date – Date the property opened as a lodging establishment.

 RevPar (Revenue Per Available) – Room revenue divided by rooms available.

 Supply (Rooms Available) – The number of rooms times the number of days in a period (usually a month or year).

45 www.housingtrendsllc.com Hotel Analysis – Executive Summary

To gauge the viability of hotel demand in the Study Area, we took both a quantitative and qualitative approach. The following summarizes our observations and recommendations.

• In order to gauge the hotel market, we reviewed the +/- 50 nearest hotels to the Subject. The Competitive Market Area (CMA) included all hotels generally west if I-355, east of Randall Road, north of State Route 34 (Ogden Ave.) and south of State Route 64 (North Ave./Main St.).

• According to our research, Occupancy, ADR, RevPar and Demand have all been increasing steadily in the past six years, indicating a relatively strong and growing hotel market.

• Hotel guests will be attracted to the site due to its location near the I-88 employment corridor and walkability to several restaurants, entertainment and shopping options.

• Based on this research, we believe that there is demand for more hotel rooms in the CMA. We recommend an upscale hotel containing approximately 125 to 150 rooms.

46 www.housingtrendsllc.com Hotel Analysis – Hotel Inventory

In order to gauge the depth of the local hotel market, we identified all hotels with the Competitive Market Area (CMA), which we defined generally as west of I-355, north of Route 34 (Ogden Ave.), south of Route 64 (North Ave./Main St.) and east of Randall Road. Within the CMA, there are a total of 59 hotels with a total of 7,306 rooms. The hotels were separated into five separate “scales” based on typical daily room rates. These scales are industry standards and used by most branded hotels across the country. Below is a complete list of hotels by scale. The color coding coincides with the location map.

Economy Number of Hotel Name Address City Scale Open Date Event Space Sq. Ft. Event Space Capcity Rooms Budgetel Inn 675 Roosevelt Rd. Glen Ellyn 68 Economy Jun-64 DuWayne Motel 27W641 North Ave. West Chicago 32 Economy Jun-52 Extended Stay America 1575 Bond St. Naperville 125 Economy Nov-96 Extended Stay America 1827 Centre Point Cir. Naperville 137 Economy Dec-97 Extended Stay America 445 Warrenville Rd. Lisle 98 Economy Jun-00 Fox Valley Inn 2450 N. Farnsworth Aurora 114 Economy Jun-69 Geneva Motel 100 S. Tyler Rd St. Charles 26 Economy Jun-62 Intown Suites 2540 Ogden Ave. Downers Grove 134 Economy Apr-98 Motel 6 1585 Naperville Wheaton Rd. Naperville 118 Economy Jun-85 Motel 6 2380 N. Farnsworth Ave. Aurora 119 Economy Jan-74 Ramada Glendale Heights 780 E. North Ave. Glendale Heights 82 Economy Feb-99 Red Roof Inn 1698 W. Diehl Rd. Naperville 119 Economy Mar-89 Rodeway Inn 201 Smoketree Business Plaza North Aurora 120 Economy Jun-70 Stardust Motel 890 E. Ogden Ave. Naperville 70 Economy Jun-69 Super 8 1520 E. Main St. St. Charles 65 Economy Aug-98 AVER AG E: 95 Nov-81

47 www.housingtrendsllc.com Hotel Analysis – Hotel Inventory (Cont’d)

Midscale Number of Hotel Name Address City Scale Open Date Event Space Sq. Ft. Event Space Capcity Rooms AmericInn Lodge & Suites 1050 Douglas Rd. Oswego 59 Midscale Jun-04 1,150 50 Best Western 1617 Naperville Warrenville Rd. Naperville 102 Midscale Jun-81 Best Western 1635 E. Main St. St. Charles 52 Midscale Jun-63 Candlewood Suites 2625 W. Sullivan Rd Aurora 83 Midscale Feb-09 Candlewood Suites 25W300 Warrenville Rd. Warrenville 130 Midscale Feb-99 Comfort Inn & Suites 308 S. Lincolnway St. North Aurora 71 Midscale Jun-01 Quality Inn 4005 Gabrielle Ln. Aurora 49 Midscale Jan-90 Quality Inn 1600 E. Main St. St. Charles 123 Midscale Jun-72 Regency Inn 1350 East Ogden Ave. Naperville 121 Midscale Mar-99 Sleep Inn 1831 W. Diehl Rd. Naperville 67 Midscale Oct-96 AVERAGE: 86 Sep-91

Upper Midscale Number of Hotel Name Address City Scale Open Date Event Space Sq. Ft. Event Space Capcity Rooms Comfort Inn & Suites 1555 E. Fabyan Pkwy. Geneva 90 Upper Midscale Jun-01 1,092 60 Country Inn & Suites 1837 Centre Point Cir. Naperville 143 Upper Midscale Jun-86 50 Embassy Suites 1823 Abriter Ct. Naperville 168 Upper Midscale Jul-15 13,000 1,000 Fairfield Inn & Suites 1847 W. Diehl Rd. Naperville 61 Upper Midscale Sep-97 Fairfield Inn & Suites 1820 Abriter Ct. Naperville 105 Upper Midscale Jun-97 263 10 Hampton Inn 1087 E. Diehl Rd. Naperville 129 Upper Midscale Nov-87 600 129 Hampton Inn 2875 Foxfield Rd. St. Charles 92 Upper Midscale Dec-08 1,176 150 Hampton Inn 205 W. North Ave. Carol Stream 121 Upper Midscale Aug-00 969 80 Hampton Inn & Suites 2423 Bushwood Dr. Aurora 127 Upper Midscale Nov-01 90 Holiday Inn 2424 W. Sullivan Rd. Aurora 82 Upper Midscale Mar-08 1,05850 Holiday Inn & Suites 150 S. Gary Ave. Carol Stream 187 Upper Midscale Jun-85 3,840 312 Holiday Inn Express & Suites 111 N. Broadway Aurora 83 Upper Midscale Mar-08 828 48 Holiday Inn Express & Suites 2055 Westbrook Dr Oswego 64 Upper Midscale Mar-08 900 30 Holiday Inn Express & Suites 155 38th Ave. St. Charles 83 Upper Midscale Nov-98 900 30 TownPlace Suites 1843 W. Diehl Rd. Naperville 63 Upper Midscale Sep-97 AVERAGE: 107 Apr-00 2,239 157

48 www.housingtrendsllc.com Hotel Analysis – Hotel Inventory (Cont’d)

Upscale Number of Hotel Name Address City Scale Open Date Event Space Sq. Ft. Event Space Capcity Rooms Courtyard by Marriott 1155 E. Diehl Rd Naperville 147 Upscale Dec-86 1.274 400 DoubleTree Hotel 2111 Butterfield Rd. Downers Grove 250 Upscale Sep-86 9,500 600 Hilton Garden Inn 28351 Dodge Dr. Warrenville 135 Upscale Sep-08 2,10075 Hilton Garden Inn 4070 E. Main St. St. Charles 120 Upscale Mar-00 4,400 350 Homewood Suites 4320 Meridian Pkwy. Aurora 146 Upscale Jun-04 146 Hyatt House 27544 Maecliff Dr. Warrenville 123 Upscale May-10 900 75 Hyatt Place 27576 Maecliff Dr. Warrenville 123 Upscale May-10 1,200 100 Marriott Courtyard 700 Courtyard Dr. St. Charles 121 Upscale Apr-00 1,047 65 Pheasant Run Resort 4051 E. Main St. St. Charles 293 Upscale Jun-63 12,320 1,800 Residence Inn 28500 Bella Vista Pkwy Warrenville 130 Upscale Sep-03 935 45 SpringHill Suites 4205 Weaver Pkwy. Warrenville 128 Upscale Dec-97 92445 AVER AG E: 156 Jul-97 3,333 336

Upper Upscale Number of Hotel Name Address City Scale Open Date Event Space Sq. Ft. Event Space Capcity Rooms Herrington Inn & Spa 15 S. River Ln. Geneva 61 Upper Upscale Jun-93 3,095 200 Hilton Lisle 3003 Corporate West Dr. Naperville 309 Upper Upscale Apr-81 5,280 500 Hotel Arista 2139 City Gate Lane Naperville 144 Upper Upscale Sep-08 6,000 500 Hotel Baker 100 W. Main St. St. Charles 53 Upper Upscale Mar-98 200 Hotel Indigo 120 Water St. Naperville 158 Upper Upscale Nov-16 7,000 400 Hyatt Regency Lisle 1400 Corporetum Dr. Lisle 317 Upper Upscale Feb-88 4,140 300 Marriott Naperville 1801 North Naper Blvd. Naperville 424 Upper Upscale Apr-12 12,000 800 Sheraton Lisle 3000 Warrenville Rd. Lisle 242 Upper Upscale Aug-87 11,000 750 AVER AG E: 214 Apr-98 6,931 456

49 www.housingtrendsllc.com Hotel Analysis – Hotel Inventory Location Map As the map below shows, most of the upscale and upper upscale hotels are located on the I-88 corridor near its intersection with Naperville Road. These are typically large, branded hotels catering to business travelers.

Economy

Midscale

Upper Midscale

Upscale

Upper Upscale

50 www.housingtrendsllc.com Hotel Analysis – Possible Hotel Prototypes

In order to gauge the space needed for a 125-150 room hotel, we reviewed similar sized hotels in the CMA. The best prototype is Hyatt Place in Warrenville. This hotel contains 123 guest rooms and a 1,200 square foot meeting space. Another good prototype is the Hilton Garden Inn located in Warrenville. This property has 135 guest rooms and a 2,100 square foot event space.

Hotel Name: Hyatt Place Hotel Name: Hilton Garden Inn Address: 27576 Maecliff Dr., Warrenville Address: 28351 Dodge Dr., Warrenville Number of Guest Rooms: 123 Number of Guest Rooms: 135 Event Space Sq. Ft. 1,200 Event Space Sq. Ft. 2,100 Event Space Capacity: 100 Event Space Capacity: 75

51 www.housingtrendsllc.com Hotel Analysis – Study Area CMA – Occupancy Trends – Past 6 Years Occupancy trends in the Study Area CMA have held steady at approximately 71.1 over the past three years. Overall, the Subject CMA averaged 63.9 occupancy in 2016, which is approximately the same as the national average.

90.0

80.0

74.5 72.3 71.3 71.2 70.0 71.1

67.4

60.0

50.0

40.0

30.0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul 12 12 12 12 12 12 13 13 13 13 13 13 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 16 17 17 17 17

Source: STR, Inc., Housing Trends, LLC 52 www.housingtrendsllc.com Hotel Analysis – Study Area CMA – Occupancy Trends by Month – Past 2 Years

Hotel occupancy in the Study Area CMA is cyclical, with the highest occupancy occurring in the summer months and the lowest in December and January. The trend for the past two years has been steady in the Subject CMA.

80.0 78.4 78.0 76.6

75.0 73.7 71.9 71.2 71.2 71.3 71.1 69.8 69.9 70.0 68.9 68.3

66.2

65.0

61.8 60.9 60.0 59.4

56.7 56.8

55.0 52.7

50.5 50.0 48.8

46.8 46.7 45.4 45.0

40.0 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 16 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 17 Aug 15 15 15 15 15 16 16 16 16 16 16 16 16 16 16 16 17 17 17 17 17 17 17

Source: STR, Inc., Housing Trends, LLC 53 www.housingtrendsllc.com Hotel Analysis – Study Area CMA – Average Daily Rate (ADR) – Past 6 Years

The Average Daily Rate (ADR) has increased each year since 2012 and has increased by 14.5% overall since this time. The ADR exceeded $100 for the first time ever in June 2017 and has since fallen below this threshold level due to the cyclical nature of ADR in this market.

105.00

100.00

95.00 96.54 95.50 94.06

90.00

87.53

85.00 86.85

84.34

80.00

75.00

70.00 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul 12 12 12 12 12 12 13 13 13 13 13 13 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 16 17 17 17 17

Source: STR, Inc., Housing Trends, LLC 54 www.housingtrendsllc.com Hotel Analysis – Study Area CMA – Average Daily Rate (ADR) by Month – Past 2 Years

The ADR has increased by 1.1% from the same month last year and is up by 2.6% over the past 24 months.

105.00

101.23

100.00 99.30 99.51

98.00 97.45 97.49 96.54 96.23 95.50 95.50 95.06 95.32 95.00 94.06 93.11 92.25 91.81 91.59 90.91 90.33 90.00 88.61 88.64 88.85

86.51 86.46

85.12 85.00

80.00 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 16 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 17 Aug 15 15 15 15 15 16 16 16 16 16 16 16 16 16 16 16 17 17 17 17 17 17 17

Source: STR, Inc., Housing Trends, LLC 55 www.housingtrendsllc.com Hotel Analysis – Study Area CMA – Revenue Per Available Room (RevPar) – Past 6 Years

Revenue Per Available Room (RevPar) is a standard hotel measurement that determines the success of a hotel. RevPar has increased steadily over the past six years.

80.00

75.00

70.00

65.00

60.00

55.00

50.00

45.00

40.00

35.00

30.00 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul 12 12 12 12 12 12 13 13 13 13 13 13 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 16 17 17 17 17

Source: STR, Inc., Housing Trends, LLC 56 www.housingtrendsllc.com Hotel Analysis – Study Area CMA – RevPar by Month – Past 2 Years RevPar has remained relatively flat in the Study Area CMA over the past 24 months.

80.00 78.97

75.46 74.67 75.00 72.19 71.36 69.38 69.61 70.00 68.63 68.05 67.00 66.52 65.82 64.93 65.00

60.79 60.00 57.55 56.19

55.00 54.03 52.03 50.30 50.00 46.71 45.63 45.00

41.51 40.44 40.40 40.31 40.00

35.00

30.00 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 16 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 17 Aug 15 15 15 15 15 16 16 16 16 16 16 16 16 16 16 16 17 17 17 17 17 17 17

Source: STR, Inc., Housing Trends, LLC 57 www.housingtrendsllc.com Hotel Analysis – Study Area CMA – Demand – Past 6 Years

Demand in the hotel industry is calculated by the number of rooms sold during the reporting period, excluding complimentary rooms. Demand in the Study Area CMA has been steadily increasing over the past six years and is now nearly 127,000 rooms on average.

170,000

160,000

150,000

140,000

130,000

120,000

110,000

100,000

90,000

80,000

70,000 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul 12 12 12 12 12 12 13 13 13 13 13 13 14 14 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 16 17 17 17 17

Source: STR, Inc., Housing Trends, LLC 58 www.housingtrendsllc.com Hotel Analysis – Study Area CMA – Demand by Month – Past 2 Years Demand has increased by 2.2% from the same month last year.

170,000

160,000 158,086 155,898 152,077 149,427 150,000 146,763 143,574 143,649 144,458 140,687 140,200 138,869 138,938 140,000 137,673

129,164 130,000

123,519 121,718

120,000 117,323 115,933 114,396

110,000

100,000 98,297 95,977 96,521 94,235 93,735 94,266

90,000

80,000 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 16 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 17 Aug 15 15 15 15 15 16 16 16 16 16 16 16 16 16 16 16 17 17 17 17 17 17 17

Source: STR, Inc., Housing Trends, LLC 59 www.housingtrendsllc.com Economic and Demographic Analysis

60 www.housingtrendsllc.com Economic Summary – Chicago MSA Employment Growth The Chicago Consolidated Statistical Area (CSA) consists of four Metropolitan Statistical Areas (MSA’s); Chicago-Joliet-Naperville MSA, Elgin MSA, Lake-Kenosha MSA and Gary MSA (Lake County, IN). As shown below, annual employment growth in the Chicago CSA is 57,000. Annual employment growth has been trending up since last year and is now at its highest level since early 2017.

150,000

100,000 74,000 57,000 50,000

17,800 - Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 (50,000)

(100,000)

(150,000)

(200,000)

(250,000)

(300,000)

(350,000)

Source: BLS, Housing Trends, LLC 61 www.housingtrendsllc.com Economic Summary – Chicago MSA Employment Growth Rate One year ago, employment growth was an anemic 0.4%. Since that time, the employment growth rate has increased to 1.2%.

3.0%

2.0% 1.6% 1.2% 1.0%

0.4% 0.0% Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Jan-07 Apr-07 Jan-08 Apr-08 Jan-09 Apr-09 Jan-10 Apr-10 Jan-11 Apr-11 Jan-12 Apr-12 Jan-13 Apr-13 Jan-14 Apr-14 Jan-15 Apr-15 Jan-16 Apr-16 Jan-17 Apr-17 -1.0% Jan-18 Apr-18

-2.0%

-3.0%

-4.0%

-5.0%

-6.0%

-7.0%

-8.0%

Source: BLS, Housing Trends, LLC 62 www.housingtrendsllc.com Economic Summary – Chicago MSA Employment Growth by Month The past three months have seen a month-over-month increase in employment growth. We believe that this trend will continue into the fall.

90,000

80,000 74,000

70,000

60,000 57,000

50,000

40,000

30,000

20,000 17,800

10,000

Source: BLS, Housing Trends, LLC 63 www.housingtrendsllc.com Economic Summary – Chicago MSA Employment Growth Rate by Month The employment growth rate is now the highest since January 2017 and has been trending up for the past three months.

2.0%

1.8% 1.6%

1.5%

1.3% 1.2%

1.0%

0.8%

0.5% 0.4%

0.3%

0.0%

Source: BLS, Housing Trends, LLC 64 www.housingtrendsllc.com Economic Summary – Chicago MSA Building Permit Trends Building permit trends are trending 14.9% above the total permits from 2017. This is primarily driven by strong multi-family permit activity. Single-family permits are ahead of last year’s pace by 2.1%.

55,000

50,000

45,000 16,237 40,000 14,691 11,582 12,720

35,000 13,009 15,950

30,000

MF 25,000

15,708 SF

20,000 34,743 33,414 15,000 33,105 32,221 12,000 14,539 29,997 12,750 13,500 12,427 11,800 27,013 7,710 8,249

10,000 7,792 4,264 3,581 1,641 17,078 3,533 2,931 5,000 9,200 8,500 8,255 7,900 7,796 7,633 7,408 7,186 7,071 6,804 5,227 4,022 3,835 - 3,795 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20162017Past2018P 2019P 2020P 12 Mos.

Source: BLS, Housing Trends, LLC 65 www.housingtrendsllc.com Economic Summary – Chicago MSA Existing Home Sales

Existing home sales activity continues to trend down slightly. This is primarily due to the lack of new existing home inventory entering the market.

120,000

110,000

100,000

90,000

80,000 113,926 112,750 112,000 111,536 110,500 110,382 110,025 70,000 109,845 102,800 92,363 89,112 60,000 70,216 69,329 69,022 50,000 68,153

40,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Past 12 2018P 2019P 2020P Mos.

Source: Illinois Realtors, Housing Trends, LLC 66 www.housingtrendsllc.com Economic Summary – Chicago MSA Existing Home Average Sales Price

The existing home median sales price is up 3.3% over the same month last year. We expect this price increase to accelerate due to the limited inventory in the marketplace.

$260,000

$250,000

$240,000

$230,000

$220,000

$210,000

$200,000 $252,500 $250,000 $248,000 $246,900 $242,500 $242,000 $241,000 $190,000 $239,900 $238,000 $234,500 $232,500 $231,000 $230,000 $230,000 $230,000 $227,500 $226,700 $225,000 $225,000 $222,500 $222,000 $220,900 $180,000 $220,000 $218,000 $216,250 $215,000 $215,000 $210,000 $210,000 $210,000 $210,000 $207,570 $204,000 $200,000 $170,000 $199,222 $196,000 $191,000 $187,500 $160,000 $176,000 $175,000

$150,000 Jul-17 Jul-16 Jul-15 Apr-18 Oct-17 Apr-17 Oct-16 Oct-15 Apr-16 Apr-15 Jan-18 Jun-17 Jan-17 Jun-16 Jun-15 Jan-16 Jan-15 Feb-18 Mar-18 Feb-17 Mar-17 Feb-16 Mar-16 Feb-15 Mar-15 Nov-17 Dec-17 Aug-17 Sep-17 Nov-16 Dec-16 Aug-16 Sep-16 Aug-15 Sep-15 Nov-15 Dec-15 May-17 May-16 May-15

Source: Illinois Realtors, Housing Trends, LLC 67 www.housingtrendsllc.com Appendix

68 www.housingtrendsllc.com Limiting Conditions

The conclusions and recommendations presented in this report are based on our analysis of the information available to us from our own research and from the client as of the date of this report. We assume that the information is correct and reliable and that we have been informed about any issues that would affect project marketability or success potential.

Our conclusions and recommendations are based on current and expected performance of the national, and/or local economy and real estate market. Given that economic conditions can change and real estate markets are cyclical, it is critical to monitor the economy and real estate market continuously and to revisit key project assumptions periodically to ensure that they are still justified.

The future is difficult to predict, particularly given that the economy and housing markets can be cyclical, as well as subject to changing consumer and market psychology. There will usually be differences between projected and actual results because events and circumstances frequently do not occur as expected, and the differences may be material. We do not express any form of assurance on the achievability of any pricing or absorption estimates or reasonableness of the underlying assumptions.

In general, for projects out in the future, we are assuming “normal” real estate market conditions and not a condition of either prolonged “boom” or “bust” market conditions. We do assume that economic, employment, and household growth will occur more or less in accordance with current expectations. We are not taking into account major shifts in the level of consumer confidence; in the ability of developers to secure needed project entitlements; in the cost of development or construction; in tax laws that favor or disfavor real estate markets; or in the availability and/or cost of capital and mortgage financing for real estate developers, owners and buyers. Should there be such major shifts affecting real estate markets, this analysis should be updated, with the conclusions and recommendations summarized herein reviewed and reevaluated under a potential range of build-out scenarios reflecting changed market conditions.

We have no responsibility to update our analysis for events and circumstances occurring after the date of our report.

69 www.housingtrendsllc.com