Mid-Year Market Report Cincinnati, Ohio 2010

Dear Colleagues,

We are Cassidy Turley….we are Cincinnati. As residents and business people, we are dedicated to our region. We don’t just work in our community; we actively belong to the community. Our associates are actively involved in many charitable and civic organizations including The FreeStore Foodbank, United Cerebral Palsy of Cincinnati, United Way and the Cincinnati Museum Center at Union Terminal. We meet regularly with key business and community leaders and are involved in many professional organizations, just a few of them include the Urban Land Institute (ULI),The Society for Industrial and Ofﬁce Realtors (SIOR), NAIOP Commercial Real Estate Development Association, CCIM Institute, Building and Owners Management Association (BOMA) and the University of Cincinnati Real Estate Roundtable. We look for meaningful ways to promote Cincinnati as a region of opportunity and growth.

Our commitment to the community is the foundation for how we conduct business. We believe in face-to-face relationships and hands-on problem solving. Whether you are a Contents ﬁrm seeking space or an owner looking to ﬁll space, we have the strategies and skills to assist you. You can also rely on Cassidy Turley to help manage your properties according Letter 2 to your individual goals and priorities.

Office Market 3 You don’t simply have to take our word for it. Midwest Real Estate News in its annual “Best of the Best” rankings recently rated Cassidy Turley the #1 Property Management Industrial Market 8 firm and the #3 Brokerage firm in the Midwest. Retail Market 14 These rankings reflect our deep commitment to providing best in class services. Investment 21 We recognize the importance of focusing on the long-term success of our clients by consistently being their advocate. Our combination of market intelligence and experience honed over many years enables us to deliver the integrated, tailored solutions our clients are seeking. Beyond Cincinnati, Cassidy Turley can be found in 57 other U.S. locations and globally through our partnership with GVA Grimley.

We look forward to talking with you about our full-range of services spanning Capital Markets to Corporate Services to Project & Development Services, as well as, Leasing & Tenant Representation.

In the following pages, we share our independent research and ﬁndings about the Cincinnati market and a forecast of what we believe the future holds.

Sincerely,

James A. DonlDonlinin

Managing Principal, Cincinnati/Dayton

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Ofﬁce Market

TTreadingreading Water at Midpoint of 2010 outpatient sites and its facilities on the A sense of uncertainty about the speed Mount Auburn campus. and depth of the economic recovery At the end of the second quarter process pervades the midpoint of 2010. 2010, the overall vacancy rate for the The Dow Jones Industrial Average Cincinnati market is 21.3%, a slight rollercoasted from 10,857 at the end increase from the previous quarter’s of Q1 to a high in April of 11,205 21.0% and above the 19.4% seen a and ended Q2 at 9,774. The national year ago. The overall net absorption unemployment rate dipped to 9.5% in for the quarter is negative 122,000 SF June from a high of 10.1% in October and year-to-date is negative 304,700 2009 according to the Bureau of Labor SF. Available sublease space remains Statistics. However, the June rate is the high at 611,000 SF. Taken together with same seen in June 2009 and more than direct vacancy the availability rate is twice the 4.6% in June 2007. Over 8 23.2%. There are 31 existing buildings million (non-farm) jobs were lost in this period of recession with only about 10% in the market offering 50,000 SF and more of contiguous space for a large Market Indicators regained since the beginning of the year. user. A signiﬁcant portion of these large Q2 2010 Q3 2010 Forecast For the local Cincinnati MSA there blocks of space, 1.5 million SF, is in the is some good news. The preliminary CBD market. That will increase by over unemployment rate for May is estimated 400,000 SF in 2011 when the Great at 9.7%, a noticeable decrease American Tower at Queen City Square is from the high of 10.9% recorded in completed and begins to draw tenants February. Private sector payrolls are out of other CBD buildings. Add to that

(Available for Lease) the permanent jobs driving demand for the 170,000 SF that remains to be ﬁlled commercial real estate. They increased in the new building if no other preleasing approximately 21,000 since January. takes place.

However, 70,000 more jobs would Renewals and small leases need to be regained to reach the high predominated this quarter’s office employment levels seen in 2007. The transactions. Tenants are gaining Cincinnati Office Market Vacancy By Education and Health Services sector concessions on free rent and tenant Submarket Second Quarter 2010 had a preliminary employment figure improvements from landlords struggling in May of 149,200, the highest yet to maintain occupancy. With no major seen. The ongoing expansion of health business closings foreseen, the vacancy facilities are positively contributing to rate should remain fairly stable. The the local economy. The 45,000 SF Good challenge for the Greater Cincinnati Samaritan Medical Center-Western Ridge market is attracting out-of-the-area is opening in fall 2010 and a 67,000 SF users needing large spaces. The low medical office building is planned for cost of living, the vibrant arts scene and the Good Samaritan Hospital Campus on Dixmyth Avenue. Christ Hospital excellent universities and hospitals are positive inducements. The decline in the is seeking to expand its number of number of domestic and international

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Building fell through. Then it went dark when Duke Energy unplugged the electrical supply forcing the few remaining tenants to relocate. Fifth Third Bank is deciding whether to proceed with foreclosure. The lack of upkeep and aging mechanics of the physical structure are viewed as detriments to a quick turn-around for tenant occupancy. The 122,000 SF 14-story Fourth & Race Tower, former home of the Federal Reserve, won $2.5 million in Ohio Historic Preservation Tax Credits to offset part of the $20.2 million cost to convert the nine upper floors to 88 residential apartments. Ashley Development is negotiating with the owner to purchase flights in and out of Cincinnati/Northern 22nd floor in the Chiquita Center at 250 Kentucky International Airport and the East Fifth Street. Northcreek Mezzanine the building.Taken together this may loss of major hub status is considered Fund I LP subleased 3,700 SF on the bring some relief to other Class B a negative factor by large businesses. 30th floor in the 528,000 SF Chemed property owners and tighten the market for this subset of properties. However, in the face of a struggling Center at 255 East Fifth Street. national economy many companies are The CBD market, and particularly the Burke, Inc. relocated out of 52,000 SF putting large real estate decisions on Class A submarket will experience a in the 183,000 SF Centennial Plaza II the back burner until a clearer picture major shift when the 825,000 SF Great at 805-813 Central Avenue to its new emerges. headquarters at 500 West Seventh American Tower at Queen City Square on Sycamore and East Fourth Street is Street. The City of Cincinnati Fire CBD Market The overall midyear vacancy rate for completed in 2011. This will become Department plans to move into 24,000 the newest and tallest building in the SF of that space. Veterans Affairs-The the CBD market is 16.4%, up from downtown Cincinnati skyline. Great Offices of Quality & Safety took 7,000 the 15.8% seen at the end of the first SF in the 235,000 SF Textile Building at American Insurance will vacate its offices quarter and 15.9% a year ago. The 205-209 West Fourth Street. in the 525 Vine and 580 Buildings into vacancy rate for Class A properties is 540,000 SF, leaving over 400,000 SF of 13.6% relatively unchanged from the Renovations were finally completed vacant space in the CBD market. Frost previous quarter but above the 12.9% of on the 36,000 SF former ST Media Brown Todd preleased 100,000 SF and a year ago. The vacancy rate for Class B building at 700 Broadway. KZF will add significant availability to the properties jumped to 18.9% from 17.9% Design purchased the building in PNC Center building when it relocates in at the end of the first quarter and is November 2008 and moved into its new 2011. above 18.4% seen a year ago. headquarters in June. The amount of available Class B Porter Wright Morris & Arthur LLP expanded to 20,000 SF from 16,700 SF downtown product may be shrinking. Plans to sell the 232,000 SF Bartlett and renewed its lease on space on the

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Suburban Market Currently the overall vacancy rate for the Total ClassA ClassB Suburban office market is 24.5%, close to the 24.2% in the previous quarter but significantly higher than the 21.7% a year ago. The vacancy rate for Class A buildings remained flat at 22.9% while Class B buildings edged higher to 27.2% from the previous quarter’s 26.5%. The second quarter contributed a negative 48,000 SF to the total year-to-date net absorption of negative 189,000 SF.

The Midtown market vacancy rate went to 24.9% from 22.0% in the previous quarter. Both Class A and Class B vacancy rates trended upward to 26.2% and 23.3% respectively. Grand opening celebrations were held is working on the financing needed to for the newly completed 50,000 SF build a new 45,000 SF headquarters in Administar moved out of 46,000 SF and Headquarters and Disaster Operations Norwood. It has already been approved now the 72,800 SF Holiday Office Park Center for the Cincinnati Region of the for $14 million in tax-exempt bonds 801-A building is completely vacant. The American Red Cross constructed in the for the $15 million project. 4.2 acres departure of KZF Design from 30,000 SF Keystone Parke office complex. on Section Avenue in Norwood were contributed to the 63% vacancy rate for acquired in March for $1.5 million. Construction on the 132,000 SF the 241,000 SF Grand Baldwin on Eden When completed, the group would be headquarters for Medpace, Inc. Park Drive. Renaissance Investment vacating 40,000 SF on Smith Road in at Red Bank and Madison Roads Management left 14,500 SF in the the Central Parke complex. A 67,000 SF in Madisonville is on schedule for 216,000 SF Baldwin 200 for 9,700 medical office building is in the planning SF in the 280,000 SF RiverCenter I in completion in October. The company stages for the Good Samaritan Hospital will be vacating approximately 160,000 Covington. campus on Dixmyth Avenue in Clifton. SF on Wesley Avenue in Norwood at On a positive note Strayer University that time. Renovation of the former The Kenwood market continues to be leased 16,000 SF in the 66,000 SF Vernon Manor Hotel at 400 Oak Street the strongest suburban market with an Keystone Parke building built two into 156,000 SF for research and overall vacancy rate of 8.2% a significant years ago on Dana Avenue and the back office operations for Cincinnati decrease from the 9.6% in the previous building has reached 50% occupancy. Children’s Hospital Medical Center is quarter and 12.6% a year ago. Burke, Inc. moved into its 100,000 SF another significant development project It remains unclear when the nine-story corporate headquarters on a seven-acre in the submarket. To relieve its space 270,000 SF office tower portion of campus at 500 West Seventh Street situation on its main campus on Vine Kenwood Towne Place, a mixed-use in June. The company had acquired Street, Veterans Affairs is building a project of 600,000 SF with 300,000 SF the original 78,000 SF former ADP 25,000 SF medical center on Highland building at the end of 2008 for $6.25 Avenue between Rochelle and Donahue of retail on two floors will be completed. It is currently in receivership and Kroger million and expanded and renovated it. Streets in Corryville. The Urology Group

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recently shuttered its supermarket on the ground floor. Plans for the FBI campus Kenwood Market The 46,400 SF Kenwood on the southeast side of I-71 and Commons II building on Montgomery Road took a step forward Montgomery Road added with the naming of a new developer, CarePoint Partners to its The Molasky Group of Companies, and tenant roster. its purchase of the 6.3 acres in June for $4.7 million. The $50 million project includes a four-story office building, a two-story garage and a one-story maintenance building and should be finished in the latter part of 2011. This may give impetus to Neyer Properties’ Kenwood Towers planned for the adjacent acreage. The mixed-use project would include a seven-story 160-room and expand into 4,900 SF. Fountain acquired an acre in the Evendale hotel, a nine-story 266,000 SF office Pointe I, a 95,300 SF office building, had Commons Development on Glendale- tower and five-story parking garage. Mutual of Omaha Insurance recommit Milford Road for a 10,000 SF build-to- to its space and Financial Management suit office/lab building. It should be The 46,150 SF Kenwood Commons I on Group take 4,900 SF. completed by second quarter 2011. Montgomery Road saw Atos Origin renew its lease on 14,000 SF on the first floor. At 30.3% vacancy the Tri-County The East submarket vacancy rate rose CarePoint Partners took 7,300 SF in the submarket is holding steady from the to 25.0% from the previous quarter’s Kenwood Commons II building. previous quarter. A year ago the vacancy 24.0%. The 475,000 SF of Class A rate was 21.0% and the area is still properties had a vacancy rate of 15.4% The Blue Ash market saw vacancy reeling from the departure of GE Aviation as compared to 32.0% for the 644,000 decrease from 21.2 % in the first quarter from 305,000 SF on Merchant Street for SF of Class B properties. to the current 19.7%. A year ago it was 16.5%. Known for its landscaped its 413,000 SF campus in West Chester. Kellogg Sales Co. recommitted to its campuses of office buildings with easily Devicor Medical Products Inc. recently 14,700 SF in the 120,000 SF Woodside accessible parking and location near acquired the breast care business of Center on Tri-Ridge Boulevard in prime residential areas, it remains one of Ethicon Endo-Surgery Inc. and found Loveland. Wellington Orthopaedic & the prime suburban submarkets. a home for its new company that will Sports Medicine renewed and expanded operate under the name of Mammotome from 10,900 SF to 18,800 SF in the Full Service Networking leased 6,700 in Sharonville. It leased 29,900 SF on 54,900 SF Eastgate Commerce Center SF in The Landings of Blue Ash II, a the top floor of the 5-story 150,000 on GlenEste-Withamsville Road in 175,000 SF five-story building, on Carver SF Summit Woods II on E-Business Eastgate. Visiting Physicians Association Road. In September Sunny Delight will Way. Staples Commercial & Contract, opened its third office in the Greater relocate from 22,500 SF in the 42,000 Inc. leased 5,400 SF in the 52,800 Cincinnati region in 3,500 SF in the SF Lake Forest Pointe I to 36,146 SF SF Century Office Center on Century 51,800 SF Eastgate Professional in the 162,000 SF Pfeiffer Place. The 100,000 SF Kemper Pointe building saw Boulevard in Springdale. Office Park on Aicholtz Drive in Union Township. Sorenson Communications, Inc. renew Dynamic Sight dba Kinetic Vision

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Greater Cincinnati Ofﬁce Market Summary Second Quarter 2010

Submarket Inventory (SF) Vacancy Net Absorption YTD (SF) New Deliveries YTD (SF) Under Construction (SF) CCBBDD 1122,,558844,,000000 1166..44%% ((111166,,000000)) 00 882255,,000000

BBlluueeAAsshh 44,,001199,,000000 1199..77%% 1144,,000000 000

KKeennwwoooodd 998866,,000000 88..22%% 1166,,000000 00 227700,,000000

MMaassoonn 22,,664411,,000000 2288..33%% ((119900,,000000)) 00 00

MMiiddttoowwnn 33,,552277,,000000 2244..99%% ((7744,,000000)) 00 00

NNKKYY 33,,005577,,000000 2299..00%% ((6633,,000000)) 0 8833,,000000

TTrrii--CCoouunnttyy 22,,666677,,000000 3300..33%% 9933,,000000 00 00

WWeessttCChheesstteerr 11,,334499,,000000 1122..33%% 2233,,000000 00 00

EEaasstt 11,,111199,,000000 2255..00%% ((44,,000000)) 0 00

WWeesstt 446666,,000000 4466..00%% ((44,,000000)) 00 00

TToottaall 3322,,441155,,000000 2211..33%% ((330055,,000000)) 00 11,,117788,,000000

Outlook The appeal of lower rent rates, free rent compounding the synergy of the local A lack of large user deals on the and increased tenant improvement branding companies and universities, positive side and further closures on dollars are fueling what leasing is this may be a growth path for the region. the negative side will keep the market done. Building values continue to be in neutral this year. Commercial real depressed as a result. estate is considered a lagging indicator How the new Financial Accounting in an economic recovery. Shadow space Standards Board (FASB) accounting underutilized by companies must be rules to be enacted in 2013 concerning filled first with rehires before expansion the recording of leases on company is considered. It is expected that without balance sheets may affect future leasing much momentum in the economy and renewal options and choices in 2010, the market will face greater challenges in 2011 as significant office whether to lease or buy is a conundrum waiting to be sorted out. constructions are completed and large blocks of space become vacant as leases Nevertheless the image of the Cincinnati come due. MSA as a dynamic and attractive region reflects the diversity of its businesses, The growth taking place in the Cincinnati presence of Fortune 500 company market is in the specialized subsector headquarters, cutting edge educational of medical use properties. As noted, institutions and lively arts scene. The city hospitals and medical groups are of Cincinnati was recently designated a actively expanding and building and are “Hub of Innovation and Opportunity” by a positive factor in regional employment. the State of Ohio and will receive funding How this will impact the general office to position itself as a national leader market on a broader and deeper basis is in consumer marketing. Leveraged unknown. as opportunities for development by

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Industrial Market

Maintaining the Progress Made unemployment rate for May is estimated A slow healing rather than a vigorous at 9.7%, a noticeable decrease from the recovery seems to be the fate of high of 10.9% recorded in February.The the national economy. The national latest preliminary figures for employment unemployment rate dipped to 9.5% in in manufacturing were at 108,700 in June from a high of 10.1% in October May, the highest numbers in 13 months. 2009 according to the Bureau of Labor The Cincinnati PMI for June retreated Statistics. Yet the rate is the same as a to 59.5 from 62.6 in May as reported year ago and more than twice the 4.6% by the Applied Research Institute, in June 2007. Layoffs are occurring but Department of Economics, University of not to the extent seen in 2009. Losing Cincinnati and NAPM-Cincinnati. This hope about ever finding a job has led parallels the national trend of continued many to quit searching or go the route but slowing growth of the economy. The of early retirement. The GDP increased local index has been above 50 for the at an annual rate of 2.7% in the first sixth consecutive month. quarter of 2010 sustaining positive The Cincinnati industrial market growth since the third quarter of 2009. experienced modest improvement in Q2 Market Indicators It has, however, slowed from the 5.6% 2010 when it saw its first dip in vacancy seen in the fourth quarter of 2009. The 22 33 to 9.9% from 10.3% in the previous Federal Reserve noted that industrial quarter. This is still above the 9.5% of production advanced 1.2% in May after a year ago, but shows movement in the an increase of 0.7% in April. There right direction. Another encouraging have been three months of consistent sign was net absorption for the second growth. In the June 2010 Manufacturing quarter at a positive 1.09 million SF ISM Report on Business, the national bringing the year-to-date total to 1.33 Purchasing Managers Index (PMI) stood million SF. Only the Northeast quadrant at 56.2, lower than the high of 60.4 in April. Although the index has been over saw a slight increase in its vacancy rate from 7.9% in the first quarter to 8.4%. 50 for the past eleven months indicating Gross absorption for Q2 was 2.2 million expansion, the fluctuation may warn of a SF. slowing or uneven rate of growth. Closures are still occurring but with For the local Cincinnati MSA there less frequency. At the end of this year is good news. The preliminary

Greater Cincinnati Industrial Market Summary Q2 2010

Quadrant Inventory (SF) Vacancy Net Absorption YTD (SF) New Deliveries YTD (SF) Projected Construction for 2010 (SF) CCEENNTTRRAALL 7788,,448833,,000000 1100..55%% 553344,,000000 3333,,000000 5588,,000000 NNOORRTTHHEEAASSTT 2299,,228800,,000000 88..44%% 112200,,000000 5588,,000000 5577,,000000 NNOORRTTHHWWEESSTT 110044,,558877,,000000 1111..22%%(2244,,000000)) ( 3311,,000000 113377,,000000 NNOORRTTHHEERRNNKKYY 6600,,882244,,000000 77..55%% 770044,,000000 0 228822,,000000 TTOOTTAALL 227733,,117744,,000000 99..99%% 11,,333344,,000000 112222,,000000 553344,,000000

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Greater Cincinnati Industrial Market intersections along the State Route 4 Bypass corridor will be constructed at Tylersville Road, Hamilton Mason Road and Symmes Road. These are the ﬁrst to be built in Ohio and will reduce travel time up to 90 percent through the intersections. Norfolk Southern will extend its Heartland Corridor line from Columbus to Cincinnati. The Ohio Rail Development Commission recently granted permission for improvements needed for double stack clearance.

The amount of construction has dwindled tremendously. In 2009 about 1.3 million SF of build-to-suit, spec and expansions were built. To date in 2010 Zumbiel Packaging will begin moving the company a $760,149 job creation only 122,000 SF has been completed. out of its 198,000 SF facility on Harris tax credit to lure it to the Cincinnati area There is approximately 300,000 SF Avenue in Norwood to a 180,000 SF since it would create 239 new jobs. scheduled for the latter half of the newly constructed plant on its 30-acre Sugar Creek Packing Co. on Muhlhauser year. Fiscally strong companies are campus in Hebron’s Gateway Industrial Road in West Chester is receiving a taking advantage of lower construction Park. The doors are closing for Overhead $20,000 Rapid Outreach Grant for the costs to add more square footage to Door Corporation’s 128,000 SF plant on acquisition of new equipment. This will already existing facilities or erecting new West 43rd Street in Covington later this retain 75 jobs and create 50 new ones. buildings that accommodate updated year. Improvement in transportation equipment, procedures and expanding State and local ﬁnancial incentives infrastructure is ongoing. Superstreet customer markets. Work on Graeter’s

have contributed to job retention and new 24,600 SF plant in Bond Hill should creation and enticements to locate within the Greater Cincinnati region. Northeast Quadrant General Electric Company in Evendale E-BEAM Services wants was the recipient of a $1 million Rapid to double its size to approximately 128,000 Outreach Grant for the purchase of new SF on Henkle Drive in equipment insuring retention of 5,000 Lebanon. jobs. E-BEAM Services, Inc. received a 45 percent job creation tax credit and plans to double the size of its plant on Henkle Drive in Lebanon. Pennsylvania- based Keystone Foods is searching for a 200,000 SF processing and distribution site to lease in Northern Kentucky or Cincinnati. The state of Ohio awarded

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be completed next quarter. It will allow Greater Cincinnati Bulk Warehouse Market the company to compete on a national basis and boost ice cream production to one million gallons annually. A 9,000 SF addition is under construction on Dickerson Distributing Co.’s 35,000 SF building in Monroe. Also due to be completed is the 56,000 SF expansion of the 150,000 SF Skidmore Sales & Distributing Company building in West Chester. The project includes the construction of 10 additional docks. Parkway Products Inc. plans to expand its 55,700 SF facility in Erlanger on Jamike Avenue to 110,200 SF. U.S. Worldwide Logistics, Inc. is adding 42,000 SF to its 85,000 SF building in and retail spending is giving momentum Kentucky quadrant fell to 10.8% from Hebron’s Airpark International Business to bulk space absorption. 12.3% last quarter and 13.6% a year Park. Southern Graphic Systems Inc. will ago. The lowest vacancy rate in recent Most of the major transactions in the expand its 61,500 SF facility in Florence history was 7.2% seen in the first quarter second quarter were concentrated in by 5,000 SF. of 2007. the Northwest and Northern Kentucky Bulk Warehouse quadrants. They lie on the major north- Expect new bulk construction only after Bulk vacancy in Q2 2010 was 16.5% south transportation corridor of I-75 significant absorption of the current 2.8 as compared to 17.6% last quarter and making them attractive distribution million SF vacant in the 7.2 million SF 16.8% a year ago. There was positive hubs. The Northwest quadrant saw built in 2007 and later has occurred. vacancy drop to 21.4% from 22.4% in net absorption of 629,000 SF, a positive Net effective rates for modern Class A trend that started in the previous quarter. the previous quarter. A year ago it was product in the bulk sector at $2.70/SF/ 20.6%. The vacancy rate in the Northern The growth in manufacturing production NNN continue to be flat. Class B and

Signiﬁcant Bulk Transactions in Q2 2010

Quadrant Nameo fB uilding SFo fB uilding Tenant Typeo fT ransaction SFo fT ransaction NNKKYY HHeebbrroonnIIII 559988,,000000 HHKKSSyysstteemmss LLeeaassee 559988,,000000 NNWW PPrrooLLooggiissPPaarrk kFFaaiirrﬁﬁeelldd 440000,,220000 CCoorrnneerrssttoonneeBBrraannddss RReenneewwaall 440000,,220000 NNWW SShhaarroonnvviilllleeDDiissttrriibbuuttiioon nCCeenntteer r##22 338800,,000000 PPaallmmeerr--DDoonnaavviinnMMaannuuffaaccttuurriinng gCCoo.. LLeeaassee 223344,,440000 NNKKYY AAiirrppaarrkkIInntteerrnnaattiioonnaal lDDiissttrriibbuuttiioon nCCeenntteer r55 339966,,000000 IInnnnoottrraaccCCoorrppoorraattiioonn RReenneewwaall 119988,,000000 NNWW NNoorrtthhppaarrkkBBuussiinneesss sCCeenntte errVV 118800,,000000 IInntteelllliiggrraatteedd LLeeaassee 8811,,000000 NNKKYY PPaarrkkWWeesst tIInntteerrnnaattiioonnaal lPP 115599,,444400 EExxeellLLooggiissttiiccss EExxppaannssiioonn 8800,,009900 NNKKYY PPaarrkkWWeesst tIInntteerrnnaattiioonnaal lPP 115599,,444400 EExxeellLLooggiissttiiccss RReenneewwaall 7799,,335500 NNWW WWeessttCChheesstteer rCCoommmmeerrcce ePPa arrkk##33 114488,,880000 DDeeddiiccaatteeddLLoogg iissttiiccss RReenneewwaall 7700,,770000 NNWW WWiilllliiaammssTTrraannssppoorrt tLLooggiis sttiiccss 112200,,000000 DDiivveerrssaappaacckk,,IInncc.. LLeeaassee 6600,,440000 NNEE DDiissttrriibbuuttiioonnCCeenntteer rIIII 117766,,880000 PPoowweerr& TTeelleepphhoonne eSSuu ppppllyy RReenneewwaall 4400,,000000

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Class C bulk warehouse are around Greater Cincinnati Ofﬁce/Warehouse Market $2.25/SF/NNN*.

Several bulk facilities found new investor owners in the second quarter. The 1.2 million SF Gateway 75 originally built as a distribution facility for Montgomery Ward was acquired by Neyer Properties for $7.8 million. The building was 84% vacant at the time of purchase. The new owner will install solar panels, new loading docks on the west side as well as flood control features to attract new tenants. Two Prologis buildings on Fairfield Business Drive totaling 196,800 SF were acquired by Road Bay Investments LLC for $5.2 million. With vacancy rates trending upward of 2010. The vacancy rates range from Duke Realty sold its 400,000 SF facility for this property type, new construction 2.4% in the Northern Kentucky quadrant on Hamilton-Lebanon Road to The starts are not anticipated in the near to 9.8% in the Central quadrant. Hollingsworth Companies for $7.0 future. This quarter saw the completion of about million. Xerox has a long-term lease on Net effective lease rates for the office/ 24,500 SF of new construction. Dynamic the entire building. warehouse sector were around $4.25/ Control’s building on Symmes Road in SF/NNN*. Hamilton doubled in size to 25,400 SF Office/Warehouse with its addition. A 12,500 SF build-to- The vacancy rate for office/warehouse Freestanding suit was completed for Tramonte and buildings in Q2 2010 continued to rise The vacancy rate of 7.1% in Q2 2010 for Sons on Welden Drive in Mason. to 18.4% from 17.1% last quarter and is freestanding buildings is the lowest for above the 17.7% of a year ago. The net all property types. This was a slight dip Several properties are facing absorption for the second quarter was redevelopment. XTRA Lease acquired from 7.4% in the previous quarter but (188,000) SF. The vacancy rates range the Keidel complex of three buildings above the 6.6% vacancy rate of a year from 12.3% in the Central quadrant totaling about 128,000 SF situated on ago. There was a positive net absorption to 21.5% in the Northern Kentucky 18.63 acres for $1.7 million. The new of 648,000 SF in the second quarter and quadrant. owners intend to demolish the a total of 776,000 SF for the first half

Signiﬁcant Ofﬁce/Warehouse Transactions in Q2 2010

Quadrant Nameo fB uilding SFo fB uilding Tenant Typeo fT ransaction SF of Transaction NNKKYY AAiirrppaarrkkBBuussiinneesss sCCeenntteer rBB 114466,,000000 LLeesslliiee''ssPPoooollmmaarr tt,,IInncc.. RReenneewwaall 114466,,000000 NNWW TThheePPooiinntte eaat tUUnniioon nCCeennt trreeBB 7766,,880000 EElllliissoonnTTeecchhnnooll ooggiieess,,IInncc.. LLeeaassee 1100,,880000 NNKKYY AAiirrppoorrttBBuussiinneesss sCCeenntteer r--BB 5577,,664477 AAmmeerriiccaannPPoowweer rSSee rrvviicceess RReenneewwaall 1100,,550000 NNWW CCaappiittaallCCeenntteer rII, ,IInndduusst trriiaallCCttr r1100 2222,,660000 AAuuttoommaattiicEEqquuiippmmeennt tCCoorrppoorraattiioonn RReenneewwaall 1100,,000000 NNKKYY DDoonnaallddssoonnRRd dCCeenntteer rII--BB 6666,,330000 JJaacckkssoonnMMSSCC LLeeaassee 77,,880000 NNWW CCaappiittaallCCeenntteer rII, ,IInndduusst trriiaallCCttr r77 2222,,332255 CCaammppHHiilll lIInndduussttrriieess RReenneewwaall 55,,770000

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Greater Cincinnati Freestanding Market In Monroe, Corridor 75, a 429-acre development, is positioned midway between Dayton and Cincinnati. The site can accommodate 6.2 million SF of industrial buildings. A nearby single- point urban interchange (SPUI) provides easy access to I-75, a major truck route.

The 48-acre Sharonville Commerce Center at Partnership Way in Sharonville will be home to Kutol Product Company’s 150,000 SF headquarters. There is room for six additional freestanding or ofﬁce/ warehouse buildings.

MetroWest is an 18-acre site at Gest and West 8th Street in Lower Price Hill that buildings and use the site for tractor- Avenue. Hamilton County, the current can support 250,000 SF of space. The trailer parking. An 8,500 SF building owners of the site, will sell the rest of the 14 acres at 601 Reading Road are ready will also be erected. A $3 million Clean acreage to Vestige Development Group for development into the Reading Life Ohio Revitalization grant will facilitate the for industrial/ofﬁce redevelopment. Sciences Campus. brownﬁeld cleanup of the former Kahn’s pork processing plant at 3241 Spring Land Florence has 28 acres available at Grove Avenue in Camp Washington. The The volume of land sales geared Vulcan Drive while Erlanger has 54 acres 568,000 SF plant will be demolished to industrial construction has been in its Circleport Park near the Dolwick and the 17-acres site remediated. Micro minimal since the economic downturn Connector Road zoned for industrial Metal Finishing LLC plans to purchase began. It is expected that once there is use. IDI’s Park South in Richwood three acres to construct a $3 million sustainable growth, development will and Prologis’ Park 275 in Hebron can 80,000 SF plant. The company has a begin anew. Those sites near improved accommodate bulk warehouse projects. 64,742 SF facility at 3448 Spring Grove infrastructures will be most attractive.

Signiﬁcant Freestanding Transactions in Q2 2010

Quadrant Nameo fB uilding SFo fB uilding Tenant/Buyer Typeo fT ransaction SF of Transaction NNWW CCllaarrkkSStteeeel lFFrraammiinngg 223322,,000000 MMccGGrraaww//KKookkoossiinngg,,IInncc.. SSaallee 223322,,000000 NNWW FFoorrmmeerrAAnnddeerrssoon nLLooggiissttiic css 114400,,000000 SSppaarrttaannLLooggiissttiiccss LLeeaassee 114400,,000000 CCEENN FFoorrmmeerrHHuussmmaan nFFaaccttoorryy 112299,,000000 CChhrriissttiiaannMMooeerrlleeiin nBB rreewwiinnggCCoo.. LLeeaassee 112299,,000000 NNWW 1100112211PPrriinncceettoonn--GGlleennddaalle eRRooaadd 9911,,880000 TTrrooppiiccaannaa RReenneewwaall 9911,,880000 CCEENN 44005577CClloouuggh hWWoooodds sDDrriivve e 5577,,335511 QQCCIInndduussttrriieess SSaallee 5577,,335511 NNWW WWeeyyeerrhhaaeeuusseerrCCoo.. 4488,,004499 RRuuddddEEqquuiippmmeenntt SSaallee 4488,,004499 CCEENN HHiillllFFlloorraal lPPrroodduuccttss 3377,,770066 NNeehheemmiiaahhMMaannuuffaaccttuurriinngg SSaallee 3377,,770066 NNWW WWoorrtthhyyCCaarrttaagge eCCoo.. 2222,,661188 TTNNTTTTrruucckkiinngg SSaallee 2222,,661188 CCEENN 550000KKeennt tRRooaadd 2200,,887700 PPlluummbbPPrrooppeerrttiiees soof fCClleerrmmoonnt tCCoouunnttyy SSaallee 2200,,887700 CCEENN 88668866SSoouutthhwweesst tPPaarrkkwwaayy 200,,225500 2 33SSIInnccoorrppoorraatteedd SSaallee 2200,,225500

12 | Cassidy Turley

Outlook Speculative construction will occur The weakness or strength of the only when a sizeable amount of vacant economy is reflected in commercial real space has been backfilled and a vibrant estate activity. The industrial market dynamic economy is reestablished. may be starting on the upward portion *(Note: Rates are based on a sample of of the recovery cycle, mirroring that of comparable data gathered by Cassidy economy. However, there is a realization Turley. Renewals are not included in the that the recovery will be slow and fitful analysis.) at best.

As more positive signs arise in the economy, tenants will be pressed to negotiate the best deals possible before there is a shift in their bargaining position.

The amount of tenant incentives will decrease as the market tightens and vacancy decreases. Shorter terms are preferred by landlords hoping to capture upside growth in the recovery.

Investment groups that have raised money are entering the market buying up properties with good potential or ﬁnancially strong long term lease tenants. Cash needy owners may be forced to sell properties in order to hold on to their more lucrative holdings.

INDUSTRIAL TERMS AND DEFINITIONS

Inventory: IndustrialIndustrial inventory includes all Vacancy and Availability: The vacancy rate is dollars per square foot per year in most parts multi-tenant, single tenant and owner occupied the amount of physically vacant space divided of the country, and dollars per square foot per buildings. by the inventory. The availability rate is the month in areas of California and selected other amount of space available for lease divided by markets. Industrial rents are expressed as triple Industrial Buildings Classifications: Industrial the inventory. net where all costs including but not limited to, buildings are categorized as bulk warehouse, real estate taxes, insurance and common area office/warehouse and freestanding based on Net Absorption: The net change in physically maintenance are borne by the tenant on a pro their physical characteristics including percent occupied space over a period of time. rata basis. The asking rent for each building office build-out, clear height, typical bay depth, typical suite size, type of loading and typical Asking Rent: The dollar amount asked by in the market is weighed by the amount of landlords for available space expressed in available space in the building. uses.

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Retail Market

I-75 12 11 I-71 INDIANA 10 8 2 I-74 OHIO I-75 4 I-71 1 I-275

I-275 5 6 Cincinnati 7 3 21 19 Highlights 18 9

15 • Changes in the 17 Supermarket Sector I-75 14 20

• Struggling Malls 16 KENTUCKY

Significant Submarkets in the Cincinnati Retail Region • CBD Dynamics 1. Kenwood 8. Fairfield/Forest Park 15. Hebron/Burlington 2. Tri-County 9. Anderson 16. Independence • Fast Food Popularity 3. Eastgate/Milford 10. Mason/Deerfield Twp. 17. Crestview Hills 4. Colerain 11. Hamilton/West Chester 18. Newport/Bellevue • Investment Sales Rise 5. Western Hills 12. Lebanon 19. Covington/Ft. Wright 6. Hyde Park 13. Middletown/Springboro 20. Campbell County • Retail Outlook 7. CBD/Clifton 14. Florence 21. Southeast Indiana

The Cincinnati retail market is Greater Cincinnati is a growth area with a comprised of Boone, Campbell and total population of over 2 million people Kenton counties in northern Kentucky, and is the 24th largest MSA in the Hamilton, Butler, Clermont and Warren nation. It is the headquarters location for counties in southwestern Ohio and the Fortune 500 retail giants, Procter & Dearborn and Franklin counties in Gamble, Kroger and Macy’s. southeastern Indiana. Within this area

are 13 signiﬁcant submarkets in Ohio, 7 Supermarkets in northern Kentucky and 1 in southeast The supermarket sector in greater Indiana. Cincinnati saw signiﬁcant changes

14 | Cassidy Turley

in the ﬁrst half of 2010. The leading supermarket company in the region, bigg’s The 157,600 SF anchor of Kroger, has embarked on an ambitious Governor’s Point South on expansion and renovation program. In Mason-Montgomery Road Harrison, construction was completed in Mason was acquired by in March on a 116,432 SF Marketplace Remke Markets. replacing a 56,000 SF building. A 61,000 SF former Thriftway store Kroger acquired when Winn-Dixie left the market at The Shops at Harper’s Point in Symmes Township was expanded to 106,000 SF to include specialty areas for Murray’s Cheese, a restaurant and an olive and antipasto bar. The 56,000

ExpresswaySF store anchoring Plaza on Fort Dixie Mitchell’ Highways will ALDI plans to open 80 stores in 2010. nearby location, a 40% vacancy rate Deerfield Township’s Montgomery and contingency clauses in the other be expanded to 104,000 SF and will Crossing shopping center at Fields Ertel retailers’ leases requiring the presence reopen with gas pumps in the latter part and Montgomery Roads is now anchored of three anchors have factored into of this year. In the planning stages is by a 19,200 SF ALDI that opened in the owner’s inability to meet its loan a 70,000 SF store, to replace one half April. payments. the size, in the Short Vine district of Corryville. The Bear Creek developments at Movie Theatres Kenwood Towne Place and Newport SUPERVALU, faced with declining In its bid to become the fifth-largest Pavilion are at a standstill. Default profits with the entry of Meijer and movie theatre chain in the US by box judgments are being sought and liens Wal-Mart’s grocery departments to office sales and number of screens, surround these projects. Kenwood the region, opted to close five bigg’s Rave Cinemas LLC acquired 29 locations Towne Place, a mixed-use development in Harrison, Colerain Township, West from National Amusements. Locally the with 336,885 SF of retail space has Chester, Florence and the original store purchase included former Showcase been in limbo since late 2008. Kroger in Union Township. The remaining theatres in Kings Island, Milford and Fresh Fare shuttered its doors in May. stores in Columbia Township, Westwood, Western Hills. Although Kroger did open at Newport Anderson Township, Oakley, Mason Pavilion, incomplete site preparation and Delhi Township were acquired by Malls and non-payment to contractors delayed Erlanger-based Remke Markets which is Older malls have fallen victim to the the construction of a Target store. It is supplied by SUPERVALU. The purchase tightened financial atmosphere and have currently scheduled to break ground in boosted the number of locations for the seen their share join the “distressed July. local supermarket chain to thirteen. The asset” list of properties. The 1.1 million Mason store may be scaled back from SF Northgate Mall built in 1972 in The recent closure of Krazy City, a 157,600 SF to 65,000 SF to match the Colerain Township is in default of its $82 50,000 SF amusement park that size of its sister stores. million loan. The closure of its anchor, replaced JC Penney a little over two Dillard’s, at the end of 2009, earlier years ago as an anchor for the 1.29 As part of its expanding footprint across relocation of JC Penney to another million SF Tri-County Mall at the I-275 the U.S. without merger or acquisition,

www.cassidyturley.com | 15

Road, Verizon Wireless moved into the Broadway Commons 7,000 SF freestanding building at 7790 A 400,00-500,000 SF casino and entertainment Montgomery Road in front of Trader center will be developed on Joe’s. Mattress Firm plans to relocate 23 acres currently used as a from Kenwood Place into 4,000 SF downtown parking lot.* in a strip center anchored by Urban Active on Montgomery Road. Willie’s Sports Café moved across the street into 7,500 SF in the 26,500 SF former Gentry building on East Galbraith and the Great American Restaurant opened

*Image courtesy of in the 5,346 SF space it vacated at 8740 Downtown Cincinnati, Inc. Montgomery Road.

and I-75 intersection only added to the commercial uses may be explored to fill CBD/Uptown The dynamics of the central business woes of Coventry Real Estate Advisors, the dark space. district retail market will be significantly the owners. They are currently in default enhanced by several major projects on a $153 million CMBS loan on Tri- Kenwood underway. County Mall and are in litigation with the The premiere retail submarket in the lender and DDR, former managers of region, Kenwood, continues to be a Michigan-based Rock Ventures LLC the property. Coventry is in litigation with hub for suburban activity at I-71 and acquired 23 acres in the downtown DDR on eleven additional properties. Montgomery Road. New additions to area bordered by Reading Road, Together with co-tenancy concerns and the tenant roster of the 1.2 million SF Broadway, Court Street and Gilbert a 19% vacancy rate, difficulties are Kenwood Towne Centre are Aroma Avenue. The site, Broadway Commons, mounting for the troubled mall. Sushi and Spencer Gifts. Anthropologie will be developed as a casino and leased the 11,000 SF former west elm entertainment area. Ground will break on Built in 2001 and sold in 2005 for $20 million, the 145,800 SF Union Centre spot near Nordstrom. Although the the $300 to $400 million project in the Showcase Cinema closed at Kenwood fall and should be finished in the latter Pavilion in West Chester is facing Town Centre and the space backfilled part of 2012. Including a 4,000-space foreclosure because the current owner by H&M, a replacement for movie goers parking garage, the development will has defaulted on its $16 million note. has landed right next door. Opening in span 400,000 to 500,000 SF. A ring of Leasing activity has failed to materialize the fall is an eight-screen theatre filling restaurants and boutiques around the at the 1.5 million SF Cincinnati Mall in the 28,000 SF vacated by Henredon and perimeter of the casino is part of the Forest Park. It was acquired in March by Drexel Heritage Furniture in the 74,000 vision for the area which will become a Cincinnati Holding Co., LLC at a fire sale SF Kenwood Place on Kenwood Road. “hot spot” for both tourists and locals. price of $5.9 million. The Guess Factory In the 391,000 SF Sycamore Crossing Down by the Ohio River, The Banks Store and Showcase Cinemas were the and Sycamore Plaza, Ulta, a salon and project is taking shape on the 18 acres latest tenants to close shop. Bass Pro beauty shop, took the 9,862 SF former between Paul Brown Stadium and the Shop’s lease is coming up for renewal Rack Room space. While Cincinnati and its potential departure would put Bell doubled its size to 5,000 SF in Great American Ball Park reaching its first milestone with the opening of the mall’s retail future in jeopardy. Other the JoS. A. Bank Center on Kenwood

16 | Cassidy Turley

the east side of the Intermodal Transit Entertainment and dining choices reopen in the fall with a new design and Facility, a 1,400 space parking garage. continue to multiply in the area branding. At the corner of Seventh and The next phase will include 300 surrounding Fountain Square, the city’s Walnut, renovations are taking place on apartments and 80,000 SF of retail gathering place for fun. Mynt Martini a two-story 2,000 SF site that will be a space that are scheduled for completion debuted on New Year’s Eve in the Fifth coffee and sandwich shop by day and a in spring 2011. Design and construction Third Center on the plaza and features sports bar at night. The lower level will plans are being finalized on the Christian a 1,200 SF outside patio and a 3,800 have a lounge with a DJ. Also set to open Moerlein Lager House, a two-story SF interior with three bars and live later this year is Jean-Robert’s Table, 15,000 SF restaurant with seating for entertainment. It’s Just Crepes opened an 8,448 SF restaurant on Vine Street. 500 indoors and 600 in its outdoor beer its second downtown location in 2,500 Fat Cats replaced Game Day Café on garden, in the 45-acre adjacent park. SF on the ground floor of the Fourth & East Pete Rose Way and introduced Elm building. Taqueria Mercado opened the “dueling pianos” entertainment The 825,000 SF Great American Tower in the 6,000 SF formerly occupied by concept to Cincinnati. On the west side at Queen City Square on Sycamore and Javier’s on Eighth Street. Soho Sushi is a of downtown The Penguin, a dueling Fourth Streets will add 20,000 SF of new retail space to the market when two-level 5,000 SF restaurant addition in piano bar chain, is opening its first area the Tower Place Mall at Fourth and Race location in the 5,150 SF former Havana completed in 2011. Streets. Scheduled to open later this Martini space in the Carew Tower on Adding to the downtown residential year is Bartini, a specialty martini bar, in Vine Street. population will be the conversion of the 8,900 SF former Oceanaire Seafood New hotel options are coming for the top eleven floors of the 122,000 SF Room space in the 580 Building on overnight accommodations in the 16-story Fourth & Race Tower office Walnut Street. A “Restaurant Row” for downtown area. Renovations have building to apartments. The former home outside dining is envisioned for this area begun on the 137-unit 12-story Phelps of the Federal Reserve recently received complementing the Backstage District Apartment building in the Lytle Park $2.5 million in Ohio Historic Preservation anchored by the Aronoff Center for the Historic District. It is being converted into Tax Credits towards the $20.2 million Arts. a 134-unit Residence Inn by Marriott. renovation. Bootsy’s, a contemporary restaurant When it opens in spring of 2011, it will

located across from the theatre, will be the newest downtown hotel stock since the $25 million renovation of The Cincinnatian in 1987. The 225-unit Bartini A specialty martini bar is 210,700 SF Metropole Apartments on scheduled to open in the Walnut Street across from the Aronoff 580 building at East Sixth Center for the Arts was sold to 3CDC. It and Walnut Streets, a prominent downtown arts will be redeveloped into the 160-suite and restaurant intersection. 21c Hotel featuring a restaurant and 8,000 SF contemporary art museum. Relocation of the residents asas well as Trattoria Roma, an Italian restaurant, and Subway Lounge, a bar, will take about a year before work on the project can begin. Further north in the Uptown area the ﬁrst phase of the $24 million

www.cassidyturley.com | 17

Corryville Crossings is underway at Façade upgrades were completed at The 94-acre site at I-75, Cox Road and Martin Luther King Boulevard and Short The Shops at Harper’s Point on Kemper Liberty Way in Liberty Township could Vine. Construction of the five-story 132- Road and the newly expanded Kroger be the site of the largest future retail room Hampton Inn and 219-car public supermarket opened in March. development in the area. Liberty Towne parking garage has reached the midpoint Place is in the planning stages and could Along Mason-Montgomery Road, Remke and should be completed by fall. include close to 1 million SF of retail Markets expanded its footprint across space. Preliminary site plans include the Ohio River with its purchase of the Mason/Deerfield Township/Symmes room for three department stores, bigg’s supermarket in Governor’s Pointe. Township an outdoor sports business, movie Five Guys Burgers and Fries, ranked In the northeast region of Greater theatre, supermarket, specialty shops the fastest growing restaurant chain in Cincinnati, most of the retail as well as restaurants. Frisch’s recently the U.S. in 2009 by Technomic, opened development has been along the Fields acquired two acres at Yankee and its fifth location in the region in 2,776 Ertel Road and Mason-Montgomery Cincinnati-Dayton Roads in anticipation SF in an outlot building. Dao Modern Road corridors radiating from their of building a smaller prototype 5,000 SF Asian Cuisine took over the 7,560 SF intersection with I-71. site formerly occupied by Macaroni restaurant. A former 55,000 SF Kroger on Cincinnati-Dayton Road is now home Grill in Deerfield Towne Center. A newly Most of the dark space that accumulated to Web Extreme Entertainment featuring constructed 110-unit Hilton Garden Inn with the departure last year of big box a go-cart track and laser tag arena. retailers Sofa Express, Circuit City and opened on Natorp Boulevard while the Linens ’n Things in Governor’s Plaza 92-room Ramada Inn on South Mason- The 400,000 SF Cincinnati Premium on Fields Ertel Road has been filled. Montgomery Road was rebranded Best Outlets at I-75 and SR 63 in Monroe Louisville-based Merridian, a home Western Mason Inn. continues to grow its tenant roster. Joe’s furnishings store, is preparing for the Jeans, New York & Company, Claire’s Further north the 410,000 SF Prime grand opening of its third location in the Accessories and Under Armour have Outlets in Jeffersonville gained two new 32,000 SF former Circuit City building. already opened their doors for business. retailers, Levi’s and Catherines Plus The 22,900 SF former Linens ‘n Things LensCrafters, Lacoste, Ann Taylor Loft Sizes. space is now home to Big Lots. Keep Outlet and True Religion are on the

It Tight holds exercise classes in the West Chester/Liberty Township/Monroe schedule for later this year and early 6,000 SF former Sofa Express site. 2011. The fastest growing population area Asian Paradise replaced G Bailey in the of the Cincinnati market lies in the 6,750 SF restaurant endcap of McCabe Fairfield/Forest Park northwest area along the I-75 corridor Crossing. Tony’s, an upscale Italian The 66,200 SF once occupied by north of I-275. restaurant, filled the 7,700 SF adjacent AutoNation on Omniplex Court in Forest freestanding building Bravo left when it West Chester has three new restaurants. Park is now a CarMax Auto Superstore, relocated to Deerfield Towne Center on Sultan’s Mediterranean Cuisine is on the first in the region. Party City leased Mason-Montgomery Road. Tylers Corner Drive and Grand Ole Pub an 11,250 SF portion of the former Cost is on Princeton-Glendale Road. Stone Plus World Market space in the 74,000 On the north side of Fields Ertel Road, Creek Dining Company opened its SF Tri-County Marketplace on Princeton Salon Concepts took 4,600 SF in Kings second location in the Cincinnati market Pike. The 12,700 SF former Just Mall. ALDI opened in the 19,200 SF in the 8,810 SF former Mesh restaurant Saab dealership on Dixie Highway has former hhgregg space in Montgomery space on Muhlhauser Drive. become the fifth area location and new Crossing. headquarters for USA Collison Centers.

18 | Cassidy Turley

locations in the area. A new 6,000 SF Newport on the Levee Red Robin that seats 200 opened on Located on the Ohio River in Kentucky, its unique mix Houston Road. Chili’s plans to construct of restaurants, shops and a 5,700 SF restaurant at Houston Road entertainment venues draws and Spiral Boulevard. This will be the visitors from both sides of ﬁrst location in northern Kentucky for the the river. chain. Dayton-based Hot Head Burritos is expanding into the Greater Cincinnati area with its 1,700 SF eatery on Mount Zion Road. Future sites include Erlanger and Fort Wright. City Barbeque will have its ﬁrst site in Kentucky on Burlington Pike ready this fall. The Florence Square Shopping Center will be the second area

Newport ICSC. It will open by the end of the year location for J. Gumbo’s. At 340,000 SF Newport on the Levee in 14,000 SF formerly occupied by Investment Sales is the largest entertainment venue in Entertainment Solutions and Learning The first half of 2010 saw an upswing Northern Kentucky. California-based Express. The Learning Express will in the dollar amount and number of Lucky Strike opened a 24,000 SF center, reopen in its original 2,945 SF location significant retail sales in the Greater Star Lanes, on the plaza level. It features after a move to a larger space and Cincinnati area. 12 public bowling lanes, a party room subsequent closing. The 147,000 SF with four lanes, billiards and a restaurant JC Penney in the 890,000 SF Florence The largest sale at $35.0 million aptly named Toro for its hydraulic bull. Mall at I-75 and KY 18 is undergoing ($1,521,739/Acre) involved the The first area Brothers Bar & Grill, a remodeling that includes new flooring, acquisition by Rock Ventures of 23 acres Midwest chain known for its special lighting and wider aisles. A 1,500 SF in the downtown area for building a events, is now located on the exterior portion will be dedicated to Sephora, the casino.

circusriverwalk tricks level. at theOne flying can even trapeze learn classes some arebeauty scheduled products for boutique. completion The in upgrades July. Duke Realty sold its portfolio of the given by the Amazing Portable Circus 161,100 SF Governor’s Point North Ollie’s Bargain Outlet is expanding into on the concourse. The latest new stores anchored by Lowe’s and the 199,000 Kentucky. The surplus retailer leased include The Dragon’s Hoard, a fantasy SF Governor’s Point South anchored 33,639 SF and will anchor the 170,270 clothing and accessories boutique, and by Remke Market bigg’s on Mason- SF Florence Plaza on Connector Drive. Saxbys Coffee. Montgomery Road in Deerfield Township The Factory Card Outlet in the Florence for $27.5 million ($76/SF) to Dallas- Square Shopping Center on Mall Road based Encore Enterprises. Crestview Hills/Florence is moving into 18,100 SF in the Village The largest retail malls in Northern at the Mall across the street. The Fairfield’s 1.75 million SF Cincinnati Mall Kentucky lie in these two communities. additional space at its new location will was sold by NorthStar to New York- The 500,000 SF Crestview Hills Town accommodate conversion to the Party based Cincinnati Holding Co. LLC for Center at I-275 and Dixie Highway will $5.9 million ($3/SF). be the first area location of Charming City concept. Charlie, dubbed a “Hot Retailer” by Several casual food chains found great AEI Property Corporation made a

www.cassidyturley.com | 19

$5.2 million ($191/SF) NNN leased over the previous month after a flat in the Eastern time zone when it comes investment in the 27,140 SF PetSmart at April reading according to the Bureau to bookings through 2013, according to 245 Rivers Edge Drive in Milford. of Economic Analysis. Coupled with the Jeff Eastman, CEO of Kansas City-based positive trending for personal income Trends, Analysis and Projections, which SUPERVALU sold the 156,150 SF and disposable personal income, tracks convention booking data for 50 building housing its bigg’s supermarket retailers can see some light at the end cities across the U.S. and Canada. on New Haven Road in Harrison to of the tunnel of the current recession. Toebben Cos. for $4.5 million ($29/SF). However, “distressed asset” status is However, high unemployment continues The new owner is leasing the building to throwing a monkey wrench into leasing to impede a speedy return to previous Remke Markets which now operates the at local malls. Who has the authority high levels of consumer spending. grocery. It plans to reduce the footprint to transact deals when an owner is in to 71,000 SF within the building. Locally, the laundry list of fast food and default and co-tenancy clauses are just casual food restaurants opening in the some of the factors that may inhibit the Louisville-based Merridian Furniture, Greater Cincinnati market continues to continued health of some malls. looking to expand into the Cincinnati grow. Banking on the consumer need market, purchased the 33,400 SF former to get out of the home kitchen without Uncertainty about the new accounting Circuit City building along the Fields Ertel rules under consideration by the breaking the bank, this sector has seen Road corridor for $2.2 million ($64/SF). Financial Accounting Standards Board success. Chains like Five Guys Burgers (FASB), is causing consternation in the The 88-room EconoLodge at 11620 and Fries, Red Robin, Frisch’s and commercial real estate world. Buy or Chester Road in Sharonville was sold Chipotle Mexican Grill added several lease, renewal options, estimating future to Ambelal for $1.5 million ($17,045/ new sites in the market in the first half of sales over the term of an entire lease Room). 2010. are issues that will affect how deals are The 103,000 SF Cambridge Plaza at The evolution of the downtown retail transacted in the future. 3111 Dixie Highway in Hamilton was market will take a giant leap with the sold by Cambridge Plaza of Ohio LLC to presence of an urban casino and Cambridge Real Estate Partners LLC for the ensuing synergies developed in the surrounding neighborhoods. The $1.5 million ($14/SF). reinforcing ripple effect of The Banks The Itis Group acquired the 20,500 SF Project along the Ohio River, the Cornell Crossing strip mall for $1.24 Fountain Square renaissance radiating million ($60/SF) with plans to convert it to the Backstage District and Restaurant to medical office space. The only retail Row and the Broadway Commons casino entity remaining is The Melting Pot. project cannot be underestimated.

The 18,087 SF retail strip center at 6417 Retail success depends not only on the Branch Hill Guinea Road in Loveland local populace but also on the traveling was acquired at a sheriff’s sale by Fifth segment that spends time in the Third Bank for $1.2 million ($66/SF). area. According to the Cincinnati USA Convention and Visitors Bureau 2009 Outlook was the ﬁfth year it has increased future Positive consumer spending trends bookings. Cincinnati, in fact, is a full 11 resumed in May with a 0.2% increase percentage points ahead of other cities

20 | Cassidy Turley

Investment Market

Overview Values/Deal Flow Investment Market Recovery In keeping with the overall economy’s • The number of overall transactions • A broad based recovery hasn’t yet unsteady recovery, the investment is still limited. The majority of the taken hold in the market, although property sector of commercial real deal flow activity is focused on trophy there are signs that it is on a positive estate is showing signs of incremental assets. This is creating widespread path. improvement, albeit uneven and frustration among both investors and • More capital is coming back to the somewhat unpredictable. In this mid- owners over the lack of transaction market every month, especially to year report a summary of current traction. certain sectors of the market that observations about the investment • The Second Quarter 2010 Korpacz are considered “safe”. These sectors property market from a variety of sources Investor Survey cites a decline in the include long term, single tenant, net is provided. A consistent thread running average overall cap rate in 17 of the leased properties, and well occupied throughout our findings: Things continue survey’s 30 markets. This indicates Class A assets in top tier markets. to change. investors perceive less risk in the • Lenders are seeing their portfolios of The following is an accumulation industry now, especially for prime of summary comments, opinions, properties in healthier markets. owned property grow substantially. They are taking a longer term observations and predictions about the • Investors who are able to aggressively approach to ownership due to current state of the commercial real pursue opportunities on an all-cash current low values and are resisting estate investment market, grouped into basis while waiting to secure debt dispositions until the economic four main topics: post-closing will compete more recovery allows for some lease-up and favorably in the market. increases in cash flows. As pressure Economy increases on lenders to dispose of • It appears to some that we are on the • Values appear to be near the bottom, assets, these assets will eventually path to a “new normal” which will provided there isn’t a second dip in be redeployed back to either private be a market that suffers from several the economy that would negatively investors or opportunistic funds. cyclical economic obstacles. affect demand factors. • There are many who predict an economic recovery. However, that US Capital Trends – Sales of Significant Multifamily and Commercial Properties recovery may not benefit everyone as there will be a dramatic shift in consumer spending habits that will negatively impact the upscale sectors of the economy.

• Historical data shows ongoing up and down cycles. Indications are that the US economy is entering a new cycle of expansion which should be longer than the previous recessionary cycle.

Source: Real Capital Analytics US Capital Trends-6/2010

www.cassidyturley.com | 21

Greater Cincinnati – Total Non-Residential Property Sales has two primary camps: (Greater than $1 Million) The “Core” investors looking for long-term credit leases in either prime locations or secondary locations with ) n defendable futures. This sector is o l i i l currently the most active and highly M 0 0 competitive with target yields in the 1 $ 8-12% range. n ( i s l e a The “Value Add” investors, who are S l t a plentiful but far less active (not by o T choice) due to the current gap in opinions of value between sellers and buyers. This sector’s target yields are in the 13-20+% range, depending on the asset’s amount of risk. • There are signs ﬁnancing has become Opportunity more available for the right borrower • There are opportunities in the • For those willing to buck the current seeking quality assets in better marketplace for the patient investor trends and who are ready and able markets. There is steady competition who can provide capital and liquidity to be creative, there are numerous among well capitalized investors which over the long-term recovery. opportunities to selectively acquire is helping to elevate sale prices and assets that can provide good returns • The mainstream investment market lower cap rates for prime properties. over the long term.

First Half 2010 Investment Sale Activity - Some Greater Cincinnati Major Ofﬁce Transactions

PropertyNam e Location SF Price $/SF

TTeerrrraacceePPllaazzaa DDoowwnnttoowwnnCCiinnc ciinnnnaattii 330000,,000000 $$77,,000000,,000000 $$2233 55990000BBuuiillddiinngg WWeessttCChheesstteerr 2288,,880000 $$33,,550000,,000000 $$112222 CCoorrppoorraatteeCCiirrcclle eCCeenntteerr WWeessttCChheesstteerr 6600,,000000 $$11,,990000,,000000 $$3322 330088EEaasst t88tth hSSttrreeeet t DDoowwnnttoowwnnCCiinncciinnnnaattii 2266,,991199 $$11,,223300,,000000** $$4466 77886622KKiinnggllaannd dDDrriivvee WWeessttCCh heesstteerr 1111,,551100 $$11,,005500,,000000 $$9911

* Sale price included 6 adjacent parking spaces and 29-space parking lot

First Half 2010 Investment Sale Activity - Some Greater Cincinnati Major Industrial Transactions

PropertyNam e Location SF Price $/SF GGaatteewwaayy7755 SShhaarroonnvviillllee 11,,115500,,000000 $$77,,880000,,000000 $$77 66550000HHaammiillttoonn--LLeebbaannoon nRRooaad d MMiiddddlleettoowwnn 339999,,660000 $$77,,000000,,000000 $$1188 44660000EEaasst tTTeecch hDDrriivve e UUnniioonnTToowwnnsshhiipp 4444,,443399 $$44,,000000,,000000 $$9900 FFoorrmmeerrFFoorrd dPPllaanntt BBaattaavviiaa 11,,886600,,000000 $$33,,550000,,000000 $$22 77115500PPaaddddoocck kRRooaadd RRoosseellaawwnn1,,886600,,000000 1 $$11,,665500,,000000 $$3377

22 | Cassidy Turley

First Half 2010 Investment Sale Activity - Some Greater Cincinnati Major Retail Transactions

PropertyN ame Location SFor # of R ooms Price $/SFor $ /Room GGoovveerrnnoorr’’ssPPooiinntte eN & S DDeeeerrfifieellddTToowwnnsshhiipp 336600,,110000 $$2277,,550000,,000000 $$7766 CCiinncciinnnnaattiiMMaallll FFaaiirrfifieelldd 11,,775500,,000000 $$55,,990000,,000000 $$33 PPeettSSmmaarrtt MMiillffoorrdd 2277,,114400 $$55,,118800,,000000 $$119911 FFoorrmmeerrbbiigggg’’s s HHaarrrriissoonn 115566,,115522 $$44,,550000,,000000 $$2299 CCaammbbrriiddggeePPllaazza a HHaammiillttoonn 110033,,004488 $$11,,550000,,000000 $$1144 EEccoonnooLLooddggee SShhaarroonnvviillllee 8888 $$11,,550000,,000000 $$1177,,004455//rroooomm 66441177BBrraanncch hHHiilll lGGuuiinneea aRRd d LLoovveellaanndd 1188,,008877 $$11,,220000,,000000 $$6666 GGooddddaarrddSScchhooool l AAnnddeerrssoonn 66,,331144 $$11,,004400,,000000 $$116644

Conclusion markets and core assets in secondary At midpoint 2010, the third year of this markets. As this movement progresses, most recent downturn in the commercial pricing and competition will increase as

real estate investment market was well. completed. Whether it is the amount There seems to be little doubt that we of time this correction has taken or the are on a positive road to recovery, but distance fallen in terms of values and the length of that road and where it leads market activity, by any measure, the last are yet to be determined. three years will be an epic milestone in the world of investment real estate. (Sources: Cassidy Turley Commercial Real Estate Services U.S. Forecast Report-6/2010; PIMCO Although there appear to be a number U.S. Commercial Real Estate Project-6/2010; of indicators pointing toward a ‘bottom’ Real Capital Analytics US Capital Trends-6/2010; PriceWaterhouseCoopers’ Korpacz Real Estate in the commercial real estate investment Survey-6/2010) markets, including continued increases in capital commitments to the sector, increased numbers of bidders for properties and increased sales activity, along with a slowing of the increase in CMBS delinquencies, only a few of the major markets around the country seem to be beneﬁting from this, and then, only for Class A properties. The rest of the country and the majority of the non Class A product are still struggling to ﬁnd a point of equilibrium between sellers, buyers and lenders. If the cycle follows its normal course, investors will tire of competing for core assets in primary markets and will begin to move towards more value-add properties in primary

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