Raiford Road Site Residential and Hotel Market Analyses Carrollton, TX

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Raiford Road: City of Carrollton

Raiford Road Site Residential and Hotel Market Analyses

Carrollton, TX

July 2008

Prepared for

City of Carrollton, TX 1945 E. Jackson Rd. Carrollton, TX 75006

Prepared by

333 W. Trade Street 920 N. Franklin Suite 350 Suite 303 Charlotte, NC 28202 Chicago, IL 60610 704.371.4402 312.643.2500

Raiford Road: City of Carrollton

Table of Contents

Executive Summary ...... 6 1. Introduction and Site Description ...... 1 2. Area Description ...... 3 2.1 DART Green Line ...... 3 2.2 Greenbelt Extension ...... 3 2.3 Highway 121 Tollway ...... 4 3. Employment ...... 5 3.1 Trends ...... 5 3.2 Employment Centers ...... 9 4. Market Rate Apartments ...... 13 4.1 CMA ...... 13 4.2 Demographic Trends and Forecast ...... 13 4.3 Market Trends ...... 23 5. Comparable Mixed-Use Apartment Communities ...... 27 5.1 Comparable Summary ...... 27 5.2 Studio/One-bedroom ...... 26 5.3 Two-bedroom ...... 27 5.4 Three-bedroom ...... 28 5.5 Community Profiles ...... 28 6. Development Activity ...... 40 6.1 Under Construction Apartments ...... 40 6.2 Proposed Apartments ...... 40 7. Apartment Inventory and Vacancy Rate Forecast ...... 42 7.1 Rental Unit Forecast ...... 42 7.2 Demand and Vacancy Rate Forecast ...... 42 8. Apartment Product and Rent Recommendations ...... 43 8.1 Target Market ...... 43 8.2 Product Recommendations ...... 43 8.3 Unit Mix ...... 44 8.4 Rent ...... 46 8.5 Absorption ...... 49 9. Single-Family ...... 50 9.1 CMA ...... 50 9.2 Demographic Trends ...... 50 9.3 Market Trends ...... 58 9.4 Comparable Projects ...... 62

Raiford Road: City of Carrollton

9.5 Future Development Activity ...... 65 9.6 Site Recommendations and Forecasts ...... 65 10. Townhouses ...... 69 10.1 Market Trends ...... 69 10.2 Active Listings ...... 70 10.3 Comparable Projects ...... 72 10.4 Development Activity ...... 76 10.5 Site Recommendations and Forecasts ...... 77 11. Senior Apartments ...... 82 11.1 Demographic Trends and Forecasts ...... 82 11.2 Comparable Communities ...... 86 11.3 Senior Apartment Development Activity ...... 89 11.4 Rental Site Recommendations and Forecasts ...... 89 12. Senior For-Sale Housing ...... 90 12.2 For-Sale Senior Site Recommendations and Forecasts ...... 95 13. Hotel Market Analysis ...... 96 13.1 General Market Area ...... 96 13.2 Hotel Market Supply and Demand Analysis ...... 105 13.3 Competitive Hotel Market ...... 110 13.4 Recommendations ...... 122 14. Site Recommendations and Forecasts ...... 126 Appendix ...... 127 Disclaimer ...... 130

List of Tables

Table 1: Private Industry Employment Trends, Dallas County, 2002-2007 ...... 5 Table 2: Private Industry Employment Trends, Dallas MSA, 2002-2007 ...... 6 Table 3: Private Industry Average Annual Wage Trends, Dallas County, 2002-2007 ...... 7 Table 4: Private Industry Average Annual Wage Trends, Dallas MSA, 2002-2007 ...... 8 Table 5: Total Inventory, Select Submarkets, 1Q 2008 ...... 9 Table 6: Office Trends, Addison/Carrollton/Farmers Branch Submarket, 2003-2007...... 9 Table 7: Office Trends, Plano/Allen Submarket, 2003-2007 ...... 11 Table 8: Office Trends, Las Colinas Submarket, 2003-2007 ...... 12 Table 9: Estimated Job Growth, Select Submarkets, 2003-2007 ...... 12 Table 10: Population Trends by Age Cohort, CMA, 2000-2008 ...... 13 Table 11: Population Forecast by Age Cohort, CMA, 2008-2013 ...... 15 Table 12: Population Trends by Age Cohort, Dallas Metro Area, 2000-2008 ...... 17 Table 13: Population Forecast by Age Cohort, Dallas Metro Area, 2008-2013 ...... 18 Table 14: Housing Unit Trends, CMA, 2000-2008 ...... 19 Table 15: Housing Unit Forecast, CMA, 2008-2013 ...... 19 Table 16: Housing Unit Trends, Dallas Metro Area, 2000-2008 ...... 20

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Raiford Road: City of Carrollton

Table 17: Housing Unit Forecast, Dallas Metro Area, 2008-2013 ...... 20 Table 18: Median Household Income Trends, CMA and Dallas Metro Area, 2000-2008 ...... 20 Table 19: Median Household Income Forecast, CMA and Dallas Metro Area, 2008-2013 ...... 21 Table 20: Household Trends by Income Cohort, CMA, 2000-2008 ...... 21 Table 21: Household Forecast by Income Cohort, CMA, 2008-2013 ...... 22 Table 22: Household Trends by Income Cohort, Dallas Metro Area, 2000-2008 ...... 22 Table 23: Household Forecast by Income Cohort, Dallas Metro Area, 2008-2013 ...... 23 Table 24: Net Change in Inventory and Absorption, CMA, 2003-2007 ...... 23 Table 25: Net Change in Inventory and Absorption, Dallas Metro Area, 2003-2007 ...... 24 Table 26: Net Absorption, CMA and Dallas Metro, 2003-2007 ...... 25 Table 27: Comparable Mixed-Use Apartment Communities, May 2008 ...... 27 Table 28: Comparable Studio/One-Bedroom Apartments, May 2008 ...... 26 Table 29: Age and Location Adjusted Comparable Per Square Foot Rents, Studio/One- Bedrooms, May 2008 ...... 26 Table 30: Comparable Two-Bedroom Apartments, May 2008 ...... 27 Table 31: Age and Location Adjusted Comparable Per Square Foot Rents, Two-Bedrooms, May 2008 ...... 27 Table 32: Comparable Three-Bedroom Apartments, May 2008 ...... 28 Table 33: Age and Location Adjusted Comparable Per Square Foot Rents, Three-Bedrooms, May 2008 ...... 28 Table 34: Kitchen Upgrades Prices, May 2008 ...... 33 Table 35: Apartment Communities Under Construction, CMA, June 2008 ...... 40 Table 36: Proposed Apartment Communities, CMA, June 2008 ...... 40 Table 37: Apartment Development Timeline, Competitive Market Area, 2008-2012 ...... 42 Table 38: Projected Vacancy Rate, Competitive Market Area, 2008-2012 ...... 42 Table 39: Recommended Unit Mix, Raiford Road Site, 2008 ...... 44 Table 40: Rent Recommendation, Raiford Road Site, 2008 ...... 46 Table 41: Population Trends by Age Cohort, CMA, 2000-2008 ...... 50 Table 42: Population Forecast by Age Cohort, CMA, 2008-2013 ...... 52 Table 43: Population Trends by Age Cohort, Dallas Metro Area, 2000-2008 ...... 53 Table 44: Population Forecast by Age Cohort, Dallas Metro Area, 2008-2013 ...... 53 Table 45: Housing Unit Trends, CMA, 2000-2008 ...... 54 Table 46: Housing Unit Forecast, CMA, 2008-2013 ...... 54 Table 47: Housing Unit Trends, Dallas Metro Area, 2000-2008 ...... 55 Table 48: Housing Unit Forecast, Dallas Metro Area, 2008-2013 ...... 55 Table 49: Median Household Income Trends, CMA and Dallas Metro Area, 2000-2008 ...... 55 Table 50: Median Household Income Forecast, CMA and Dallas Metro Area, 2008-2013 ...... 56 Table 51: Household Trends by Income Cohort, CMA, 2000-2008 ...... 56 Table 52: Household Forecast by Income Cohort, CMA, 2008-2013 ...... 57 Table 53: Household Trends by Income Cohort, Dallas Metro Area, 2000-2008 ...... 57 Table 54: Household Forecast by Income Cohort, Dallas Metro Area, 2008-2013 ...... 58 Table 55: Residential Building Permits, City of Carrollton, 2003-2007 ...... 58 Table 56: Residential Building Permits, Dallas County, 2003-2007 ...... 59 Table 57: Residential Building Permits, Carrollton and Dallas County, 2003-2007 ...... 59 Table 58: Single-Family Closing Trends, MLS Area 22, 2005-2008 YTD ...... 59 Table 59: Single-Family Closing Trends, MLS Area 10, 2005-2008 YTD ...... 60 Table 60: Comparable Single-Family Subdivisions, Inventory and Absorption, CMA, June 2008 ...... 62 Table 61: Comparable Single-Family Subdivisions, Current Inventory and Pricing, CMA, June 2008 ...... 64 Table 62: Proposed Single-Family Developments, CMA, June 2008 ...... 65 Table 63: Townhouse Closings, MLS Area 10, 2008 YTD ...... 69 Table 64: Townhouse Closings, MLS Area 22, 2008 YTD ...... 69

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Raiford Road: City of Carrollton

Table 65: Active Townhouse Listings, MLS Area 10, May 2008 ...... 70 Table 66: Active Townhouse Listings, MLS Area 22, May 2008 ...... 71 Table 67: Comparable Townhouse Developments, Inventory and Absorption, CMA, June 2008 ...... 72 Table 68: Comparable Townhouse Developments, Current Listings and Pricing, CMA, June 2008 ...... 74 Table 69: Proposed Townhouse Developments, CMA, June 2008 ...... 77 Table 70: Addison Circle Re-Sales, May 2008 ...... 79 Table 71: Senior Household Trends by Age Cohort, CMA, 2000-2008 ...... 82 Table 72: Senior Household Forecast by Age Cohort, CMA, 2008-2013 ...... 82 Table 73: Senior Household Trends by Age Cohort, Dallas Metro Area, 2000-2008 ...... 83 Table 74: Senior Household Forecast by Age Cohort, Dallas Metro Area, 2008-2013 ...... 83 Table 75: Senior Household Trends by Income Cohort, CMA, 2000-2008 ...... 84 Table 76: Senior Household Forecast by Income Cohort, CMA, 2008-2013 ...... 84 Table 77: Senior Household Trends by Income Cohort, Dallas Metro Area, 2000-2008 ...... 85 Table 78: Senior Household Forecast by Income Cohort, Dallas Metro Area, 2008-2013 ...... 85 Table 79: Comparable Market-Rate Senior Apartment Communities, June 2008 ...... 86 Table 80: Comparable Senior Apartment Community Rent Ranges, June 2008 ...... 86 Table 81: Comparable Senior Apartment Community Size Ranges, June 2008 ...... 88 Table 82: Comparable Senior Apartment Community Rents Per Square Foot Ranges, June 2008 ...... 88 Table 83: Comparable Senior Apartment Community Amenities Included in Rent, June 2008 . 88 Table 84: Comparable For-Sale Active Adult Communities, June, 2008 ...... 90 Table 85: Pricing at Comparable For-Sale Communities, Carrollton Site, June 2008 ...... 94 Table 86: Comparable For-Sale Community Features and Services, June 2008 ...... 94 Table 87: Comparable Recreational Amenities, June 2008 ...... 95 Table 88: Population Trends, 1990-2007 ...... 98 Table 89: Dallas-Fort Worth MSA Income and Employment, 1998-2006 ...... 100 Table 90: Effective Buying Income, 2007 ...... 101 Table 91: Largest Employers, Carrollton, 2007 ...... 102 Table 92: Meeting Facilities, Carrollton Area ...... 103 Table 93: Carrollton Area Attractions ...... 103 Table 94: Office Market, Carrollton, 2005-2008 ...... 104 Table 95: National Lodging Industry Annual Summary ...... 105 Table 96: Carrollton Hotel Market, 2008 ...... 107 Table 97: Competitive Set Hotels ...... 111 Table 98: Competitive Set Occupancy, Rate, and Market Segmentation, 2007 ...... 113 Table 99: Estimated Competitive Set Segmentation ...... 113 Table 100: Supply, Demand, Occupancy, ADR, and RevPar, Competitive Hotels, 2002-2008 ...... 114 Table 101: Summary of Recommendations ...... 124 Table 102: Residential Site Recommendations, Raiford Road Site, 2008 ...... 126

List of Graphs

Graph 1: Apartment Trends, CMA, 2003-2008 1Q ...... 24 Graph 2: Apartment Trends, Dallas Metro Area, 2003-2008 1Q ...... 25 Graph 3: Vacancy Rate Trend, CMA and Dallas Metro Area, 2004-2008 1Q...... 26 Graph 4: Rent Trends, CMA and Dallas Metro Area, 2004-2008 1Q ...... 26 Graph 5: Apartment Availability, Post Addison Circle, May 2008 ...... 29 Graph 6: Available Units by Per Square Foot Price and Size, Post Addison Circle, May 2008 .. 30

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Raiford Road: City of Carrollton

Graph 7: Estimated Floor Price Premiums, Post Addison Circle, May 2008 ...... 31 Graph 8: Apartment Availability, Post Legacy, May 2008 ...... 32 Graph 9: Available Units by Per Square Foot Price and Size, Post Legacy, May 2008 ...... 33 Graph 10: Estimated Floor Price Premiums, ...... 34 Graph 11: Apartment Availability, Amli at La Villita, May 2008 ...... 35 Graph 12: Available Units by Per Square Foot Price and Size, Amli at La Villita, May 2008 ..... 36 Graph 13: Estimated Floor Price Premiums, Post Addison Circle, May 2008 ...... 36 Graph 14: Apartment Availability, Legacy Village, May 2008 ...... 38 Graph 15: Available Units by Per Square Foot Price and Size, Legacy Village, May 2008 ...... 38 Graph 16: Histogram of Studio Unit Sizes, 2008 ...... 45 Graph 17: Histogram of One-Bedroom Unit Sizes, 2008 ...... 45 Graph 18: Histogram of Two-bedroom Unit Sizes, 2008 ...... 46 Graph 19: Studio per Square Foot Rents by Unit Size, Carrollton/Addison/Coppell Submarket, 2008 ...... 47 Graph 20: One-Bedroom per Square Foot Rents by Unit Size, Carrollton/Addison/Coppell Submarket, 2008 ...... 48 Graph 21: Two-Bedroom per Square Foot Rents by Unit Size, Carrollton/Addison/Coppell Submarket, 2008 ...... 48 Graph 22: Lease-Up Pace, AMLI at La Villita, Los Colinas, 2007-2008 ...... 49 Graph 23: Single-Family Closings, MLS Areas 22 and 10, 2005-2007 ...... 60 Graph 24: Days on Market, MLS Areas 22 and 10, 2005-2008 YTD ...... 61 Graph 25: Average Price Per Square Foot, MLS Areas 22 and 10, 2005-2008 YTD ...... 61 Graph 26: Average Price per Square Foot, Townhouse Closings, 2008 YTD ...... 70 Graph 27: Average Price per Square Foot, Townhouse Active Listings, May 2008 ...... 71 Graph 28: Average Price per Square Foot, Townhouse Closings and Active Listings, MLS Area 22, May 2008 ...... 72 Graph 29: Employment by Category, Dallas-Ft. Worth MSA and Texas ...... 99 Graph 30: Unemployment Rates, Dallas-Fort Worth MSA and US, 1990-2007 ...... 101 Graph 31: National Hotel Industry Performance Annual Change ...... 106 Graph 32: Percentage Supply Change, Carrollton Hotel Market, 1997-2008 ...... 110 Graph 33: Monthly Supply and Demand, Competitive Hotels, 2002-2008 ...... 115 Graph 34: Monthly Year-Over-Year Total Competitive Set Room Revenue Change ...... 116 Graph 35: Revenue Per Available Room ...... 116 Graph 36: Occupancy and Year-Over-Year Change117 Graph 37: Monthly Competitive Set Room Demand and Average Monthly Rate ...... 118 Graph 38: Seasonality of Occupancy, 2002-2007 ...... 118 Graph 39: Seasonality of Rate, 2002-2007 ...... 119 Graph 40: Seasonality of RevPar, 2002-2007 ...... 119 Graph 41: Occupancy by Day of Week, June 2007 – May 2008 ...... 120 Graph 42: Average Daily Rate by Day of Week, June 2007 to May 2008 ...... 120 Graph 43: Estimated Unaccommodated Room Nights ...... 121

List of Maps

Map 1: Professional Employment Centers, Raiford Road Site, 2008 ...... 10 Map 2: Competitive Market Area - Apartments, Raiford Road Site, 2008...... 14 Map 3: Dallas Metro Area, 2008 ...... 16 Map 4: Comparable Mixed-Use Apartment Communities ...... 28 Map 5: Apartment Development Activity, CMA, 2008 ...... 41 Map 6: Competitive Market Area – Single-Family, Raiford Road Site, 2008 ...... 51

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Raiford Road: City of Carrollton

Map 7: Comparable Single-Family Subdivisions, CMA, 2008 ...... 63 Map 8: Single-Family Subdivision Development Activity, CMA, 2008 ...... 66 Map 9: Comparable Townhouse Developments, CMA, 2008 ...... 73 Map 10: Townhouse Development Activity, CMA, 2008 ...... 78 Map 11: Comparable Market-Rate Age-Restricted Apartment Communities, 2000 ...... 87 Map 12: Comparable For-Sale Age-Restricted Communities, 2008 ...... 91

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Raiford Road: City of Carrollton

Executive Summary

1. Market-Rate Apartments

At a density of 22 units per acre, a total of 330 apartments could be constructed on the 15-acre site east of Raiford Road bordering the Forneaux Creek greenway. The 15-acre site is recommended for apartments because it will create a link with the neighboring 12.5-acre site that will likely be developed with retail and/or a hotel and provide a buffer between retail/hotel uses and for-sale housing. Higher density development will also support use of the adjacent greenway. The site’s topography will allow for sweeping views in all directions, with premiums achievable for greenway-facing units. The apartments could be constructed in a combination of single- and mixed-use buildings. The mixed-use buildings would contain units above professional office and/or retail space.

15.0 Ac

A total of 330 units are recommended for 15 acres of the Raiford Road site. Based on current and forecasted market opportunities, the following unit mix is recommended:

Heated % of Unit Type Sq. Ft. Units Total Studio 400-600 35 10.6% 1BR/1BA 600-850 215 65.2% 2BR/2BA 850-1,150 80 24.2% Total 330 100% Source: Warren & Associates

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Raiford Road: City of Carrollton

not reflect concessions that could be required during initial lease-up. These rents do include adjustments for a new development in the Carrollton submarket.

Heated Rent Per Monthly Unit Type Sq. Ft. Sq. Ft. Rent Studio 400-600 $1.25-$1.30 $520-$750 1BR/1BA 600-850 $1.20-$1.25 $750-$1,020 2BR/2BA 850-1,150 $1.10-$1.15 $980-$1,270 Average 768 $1.21 Source: Warren & Associates

Apartments at the Raiford Road site should be able to lease-up at a rate of 20-25 units per month, reaching a stable 92% occupancy rate within 16 months.

2. Single-Family

The opportunity for single-family development on the Raiford Road site is limited to the north side of Furneaux Creek and the planned greenway. A narrow 11-acre parcel could be allocated to single-family housing adjacent to two existing neighborhoods north and east of the site. Cemetery Hill Road could be extended into the site to provide access from Frankford Road.

11.0 Ac

15.0 Ac

Most of Carrollton is built-out, with all new single-family development occurring in the far northern portions of the city. The Raiford Road site is an in-fill property that is well-positioned to accommodate higher-density housing. As a result, single-family should be limited to the 11 acres that adjoin the existing single-family neighborhoods.

Lots should be approximately 50 feet in width, supporting houses from 2,200 to 2,800 square feet. At least one floor plan should have a first-floor master bedroom to accommodate the

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Raiford Road: City of Carrollton

empty-nester buyer. House prices would range from $290,000 to $400,000, or $132 to $143 per square foot (2008 dollars). Standard features should include the following:

• Stone or brick front elevations • Stainless steel appliances • Solid surface (granite) kitchen countertops • Hand-scraped hardwood or upgraded tile floors in all main level living areas • Oak, maple, or clear glass kitchen cabinets • Cultured marble bathroom vanity counters and shower pans • 2-car garages

While single family housing will provide an important buffer for adjacent neighborhoods, it should comprise only a portion of the Raiford Road site’s housing mix. Because housing diversity will accelerate absorption and create a higher land value for the City, a variety of for- sale product should be offered. Limiting the northern portion of the site to single family lots will diminish the value and brand of a vibrant community fronting a greenway within walking distance of the Trinity Mills DART light rail station.

Based on market and demographic research, the Raiford Road site would struggle to compete with new high-income single family product in the north Carrollton communities of Castle Hills and Austin Waters. These two master-planned developments, which are profiled in the single family section of this report, target families seeking large lots, country club-type amenities, new schools, and closer proximity to corporate jobs in the Dallas North Tollway corridor.

3. Townhouses

The Raiford Road site is well-positioned for townhouses, with nearby retail centers and the proposed Furneaux Creek greenway offering recreational amenities and pedestrian connections. A 21-acre portion of the site north of the greenway and adjacent to the potential single family component is the most competitive location for townhouses. Access would be from Old Denton Road.

21.0 Ac

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Raiford Road: City of Carrollton

In order to develop the entire 21 acres, the existing small lake would have to be filled. Because this lake offers a unique view corridor and amenity, it could be retained to generate premiums for units facing the lake. These premiums could potentially partially offset the loss of value from a smaller developable parcel.

The recommended product for the Raiford Road site is similar to Addison Circle and Austin Waters, with varying levels of density. An overall average of eight to nine units per gross acre should be achievable, resulting in 170 to 190 townhouses for the entire 21 acre parcel. If the lake remains, there would be potential for 110 to 125 units on approximately 14 acres.

Townhouses on the Raiford Road site should contain 1,700 to 2,200 square feet, with four to five floor plans offering three bedrooms and two and one-half baths. The largest floor plan should have a first-floor master bedroom to attract empty-nester buyers.

Townhouse prices should range from $190,000 to $275,000, or $105 to $119 per square foot (2008 dollars). An average of $112 per square foot reflects the following features:

• Brick front elevations, with some siding or stone accents • Stainless steel appliances • Solid surface (granite) kitchen countertops • Wood, tile, and carpeted flooring • Cultured marble bathroom vanity counters and shower pans • 2-car garages

4. Senior Apartments

Given the excessive overall vacancy rate at the existing market-rate senior apartment communities in the Carrollton/Addison market area, and the two communities either under construction or soon to be started in the Old Denton Road corridor, there is currently limited opportunity for new product on the Raiford Road site. The most appropriate location for senior product would be on a portion of the 21-acre parcel recommended for townhouses.

While demographic forecasts indicate an increase of 6,642 households over age 55 in the CMA over the next five years, it is important to note that a majority will be aging in place. Most of these households do not generate demand for new housing, as they prefer to stay in their existing residence. Broken down by age, 52% of the forecasted 2008-2013 growth will be under age 64, representing active seniors that gravitate to for-sale product. By income, 97% of the new senior households will earn over $100,000 per year. Again, these households will generally prefer to purchase a residence. Combined with the difficult market conditions at the comparable communities, these demographic indicators would discourage construction of age-restricted market-rate apartments on the Raiford Road site.

5. Senior For-Sale Housing

The 21-acre portion of the site along Old Denton Road north of the Furneaux Creek greenway could be designated for a for-sale senior product similar to the Village at Prestonwood. This type of design with four single-level units per building could be constructed at a density of approximately six to 6.5 units per gross acre. This would generally support 125 to 135 units. If

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Raiford Road: City of Carrollton

the small lake on the site is not filled in, a total of 85 to 90 units could be accommodated on 14 acres.

If the lake on the 21-acre parcel is filled in, the for-sale senior product could be developed adjacent to a non-age-restricted townhouse community. An achievable mix would be approximately 85-90 senior units on 14 acres and 55-65 townhouses on seven acres. These two projects would be sized consistently with the comparables identified in this report. Dividing the parcel into two products would maximize absorption potential and potentially generate higher land values.

For-Sale senior units would be very similar to Village at Prestonwood, ranging from approximately 1,600 to 1,800 square feet with two-car garages. Pricing would range from $200,000 to $220,000, or $125 per square foot (2008 dollars). This would be a 10% discount from Prestonwood, which averages $139 per square foot with a location adjacent to Prestonwood Country Club in Plano.

A small clubhouse and pool should be constructed for the senior community, but no other on-site amenities or services would be justified by the unit count or pricing. As a result, the amenity package would be similar to, or perhaps inferior to, a non-age-restricted townhouse community. With townhouses estimated to average $112 per square foot (2008 dollars), the $13 per square foot average price premium for senior housing is based on higher quality construction and interior finishes. Given the absorption pace at Village at Prestonwood, the site could expect to sell approximately 3.0 to 3.5 for-sale senior units per month.

6. Hotel Market

The table below summarizes the recommended hotel component of the Raiford Road site.

Summary of Recommendations

Proposed Hotel Components Assumed Opening Date January 1, 2011

Hotel I Upscale Limited Service Branded Property Guest Rooms 130 Pool Shared Fitness Center Shared Business Center Yes Parking Shared 200 spaces

Hotel II Midscale Limited Service Branded Guest Rooms 110 Pool Shared Fitness Center Shared Business Center Yes Parking Shared 200 spaces

Source: HSP

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Raiford Road: City of Carrollton

The above recommendations are based on study completed to date. If additional study is directed, a penetration model will be used to determine how the proposed products will perform. This will include a detailed financial projection, from which an investment analysis can be developed. Based upon a full study, a determination of hotel details can be provided. The concepts above are the best recommendations based on our existing study.

It is suggested that two limited service branded hotels be developed as the economy recovers and the hotel economy along with it. Due to the recent expansion of supply and declining occupancy, as well as the overall economic climate, it is believed that the hotel products should not open until 2011 at the earliest and should coincide with the opening of the other subject site elements. In addition, the market does not appear to support a full-service upper upscale product without outside support (such as public funds). This lack of feasibility includes meeting space. However, meeting space in the hotel, as well as a restaurant, would be beneficial for the overall project and developing a more balanced market mix for the hotel(s). This would require public assistance, however, and should be studied in more depth.

In terms of brands, we believe the hotels should be branded and potentially from the same brand family. There are many instances of this synergy, where a Courtyard and Springhill Suites or a Hyatt Place and Summerfield Suites are developed near each other. This would suit the development.

7. Summary

The potential residential build-out for the Raiford Road site is summarized below, totaling 495 to 545 units.

Unit Type Units Pricing Apartments 300 - 330 $520 - $1,270 Single-Family 55 - 60 $290,000 - $400,000 Townhouse 55 - 65 $190,000 - $275,000 Senior-For Sale 85 - 90 $200,000 - $220,000 Total 495 - 545 Source: Warren & Associates

The proposed Forneaux Creek greenway would be a prerequisite to all residential development. This amenity would drive demand and pricing on the site, and augment the project’s brand for promoting recreation and preserving the environment.

Phase 2 should consist of the single family housing on the 11-acre site north of the greenway. This small neighborhood would connect with existing streets, and attract existing Carrollton area residents seeking the privacy of detached units, combined with a low-maintenance, recreation- based lifestyle with greenway access.

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Raiford Road: City of Carrollton

The townhouses and/or for-sale senior product would be constructed in Phase 3, driven in part by site planning issues related to the small lake and the existing farmhouse on the 21-acre parcel. The combination of townhouses and senior housing assumes that the existing lake is filled in and graded for development. It also recognizes the future premiums that should be obtainable as the surrounding market area urbanizes, and the DART light rail station at Trinity Mills opens.

The form and density of for-sale housing on the 21-acre parcel could evolve into a greater mix of product offerings. Some flats, duplexes, and zero-lot-line houses could be added to recognize the preferences of an increasingly diverse market area.

The two recommended limited-service hotels would occupy a portion of the 12.5-acre parcel fronting the President George Bush Turnpike. It is recommended that these hotels open in early 2011, which would likely be concurrent with the delivery of the Phase 1 market-rate apartments. The balance of the parcel would likely contain retail and/or professional office space.

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Raiford Road: City of Carrollton

1. Introduction and Site Description

The City of Carrollton, TX hired Warren & Associates and Hunden Strategic Partners to provide a residential and hotel market analysis for a 110-acre site currently owned by the City. The site is located in the northeast quadrant of the President George Bush Turnpike/Old Denton Road interchange. With frontage on both Old Denton Road and the President George Bush Turnpike access road, the site is a pivotal infill property in the established Carrollton market. Raiford Road forms a portion of the site’s boundary to the south and west.

This report provides detailed market and demographic trends, and specific site, product, and pricing recommendations for market-rate apartments, single-family residences, townhouses, and for-sale and for-rent senior housing. It also provides an analysis of the hotel market.

The site is located in central Carrollton, surrounded by established single-family neighborhoods to the north, east, and west. A shopping center anchored by a Wal-Mart Supercenter and Lowe’s Home Improvement is located to the south across Raiford Road. A portion of the site extends south to the President George Bush Turnpike access road. Furneaux Creek flows east-west through the middle of the site. A greenbelt park that already exists along the creek on both sides of the site will be extended to provide uninterrupted pedestrian and bicycle connections to the future Trinity Mills DART light rail station.

Figure 1: Raiford Road Site

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Raiford Road: City of Carrollton

A significant portion of the site is encumbered by the Furneaux Creek floodplain. While this limits the amount of developable land, it allows for a mix of passive recreation opportunities and open space view corridors that could generate residential premiums. A small lake on the north side of the creek could be maintained as an amenity, or filled in to create a larger development parcel.

Approximately 25 acres remain vacant on the south side of Raiford Road, providing a buffer between the site and the Wal-Mart Supercenter and Lowe’s Home Improvement. A portion of this land will soon be developed as the Villas at Raiford, a for-rent senior housing community. Construction is scheduled to start in August 2008.

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Raiford Road: City of Carrollton

2. Area Description

This section details public and private investments that could impact the Raiford Road site.

2.1 DART Green Line The Green Line expansion of DART Rail will add 27.7 miles and 20 stations to DART’s current 45 miles and 35 stations. The first phase of the $1.8 billion project extends southeast of downtown Dallas to Fair Park and is scheduled to open in September 2009, along with daily service to Victory Park. The remainder of the Green Line will open by December 2010. When complete, the Green Line will serve Baylor University Medical Center, Victory Park, Love Field Airport, and Dallas Market Center, as well as Carrollton.

There will be three stops in Carrollton: North Carrollton/Frankford, Trinity Mills (which is closest to the Raiford Road site at approximately one mile), and Downtown Carrollton. Each station will provide parking for riders. The Trinity Mills station will connect to the Raiford Road site by greenway (see section 2.2).

2.2 Greenbelt Extension

In 2006, the City of Carrollton adopted the Carrollton Trails Master Plan, to create a common vision for pedestrian and bicyclist transportation, as well as recreation. Currently the greenbelt extends from Hebron Parkway in the north to Old Denton Road in the south, near the Raiford Road site. Plans are in place to extend the greenbelt through the Raiford Road site and connect the site to the Trinity Mills DART light rail station.

The corridor will connect pedestrians and bicyclists to the light rail line and eventually to other greenbelt systems in the Dallas metro area.

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Raiford Road: City of Carrollton

2.3 Highway 121 Tollway

In October 2007, the North Texas Tollway Authority (NTTA) and Texas Department of Transportation (TxDOT) finalized the State Highway 121 project agreement. The project will run approximately 26 miles through Collin, Dallas, and Denton counties, and cost $639 million. Segment 1 is currently open to traffic. Segment 2, from Old Denton Road to Hillcrest Road, is scheduled for completion in September 2008. Construction of all sections is scheduled to be complete by January 2012.

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Raiford Road: City of Carrollton

3. Employment

This section provides employment and wage trends for Dallas County and the Dallas MSA, both of which include the City of Carrollton. It also identifies three major employment centers near the Raiford Road site and analyzes completion and absorption trends for their respective submarkets.

3.1 Trends

3.1.1 Jobs

As shown in Table 1, there were 1.33 million jobs in Dallas County in 2007, a 0.8% increase from 2002. The largest industries in 2007 were Manufacturing (143,469 employees), Retail Trade (140,195 employees), and Administrative and Waste Services (137,940 employees). The Administrative and Waste Services industry had the largest absolute growth from 2002 to 2007 in Dallas County, increasing by 15,759 employees, or 12.9%. Management of Companies and Enterprises had the largest growth rate at 101.3%, or 8,777 employees. Educational Services also experienced significant employment growth at 28.9%. The Information industry had the largest absolute and percent decrease in employment, losing 21,138 jobs, or 30.4%, in five years. Mining, Quarrying, and Oil and Gas Extraction, Utilities, and Retail Trade also experienced significant employment losses.

Table 1: Private Industry Employment Trends, Dallas County, 2002-2007 2002-2007 Change Industry 2002 2007 # % Agriculture, Forestry, Fishing & Hunting 570 629 59 10.4% Mining, Quarrying, and Oil and Gas Extraction 8,384 6,759 -1,625 -19.4% Utilities 6,292 5,195 -1,097 -17.4% Construction 76,386 83,973 7,587 9.9% Manufacturing 153,238 143,469 -9,769 -6.4% Wholesale Trade 110,202 107,211 -2,991 -2.7% Retail Trade 158,527 140,195 -18,332 -11.6% Transportation and Warehousing 61,021 58,430 -2,591 -4.2% Information 69,595 48,457 -21,138 -30.4% Finance and Insurance 101,534 107,151 5,617 5.5% Real Estate and Rental and Leasing 38,908 37,409 -1,499 -3.9% Professional and Technical Services 107,639 122,783 15,144 14.1% Management of Companies and Enterprises 8,662 17,439 8,777 101.3% Administrative and Waste Services 122,181 137,940 15,759 12.9% Educational Services 15,969 20,579 4,610 28.9% Health Care and Social Assistance 112,363 126,674 14,311 12.7% Arts, Entertainment, and Recreation 14,665 14,161 -504 -3.4% Accommodation and Food Services 114,005 115,804 1,799 1.6% Other Services, Ex. Public Admin 42,477 39,273 -3,204 -7.5% Unclassified 1,199 1,052 -147 -12.3% Total 1,323,817 1,334,583 10,766 0.8% Source: Texas Labor Market Information

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Raiford Road: City of Carrollton

There were 2.56 million jobs in the Dallas-Fort Worth-Arlington MSA in 2007, a 10.8% increase from 2002 (Table 2). The largest industries in 2007 were Retail Trade (323,699 employees), Manufacturing (297,745 employees), and Health Care and Social Assistance (258,476 employees). Like Dallas County, the Administrative and Waste Services industry had the largest absolute growth in employment from 2002 to 2007 in the Dallas MSA, increasing by 47,044 jobs, or 25.0%. Management of Companies and Enterprises had the highest growth rate at 120.5%, or 15,331 employees. Mining, Quarrying, and Oil and Gas Extraction, Educational Services, and Professional and Technical Services also had significant employment growth in the five-year period. Like Dallas County, the Information industry had the largest absolute and percent decrease in employment, losing 14,842 jobs, or 14.2%. Utilities, Real Estate/Rental/Leasing, Manufacturing, and Unclassified industries also experienced employment losses in the Dallas MSA.

Table 2: Private Industry Employment Trends, Dallas MSA, 2002-2007 2002-2007 Change Industry 2002 2007 # % Agriculture, Forestry, Fishing & Hunting 2,565 2,885 320 12.5% Mining, Quarrying, and Oil and Gas Extraction 14,003 20,759 6,756 48.2% Utilities 9,633 8,331 -1,302 -13.5% Construction 142,082 169,743 27,661 19.5% Manufacturing 304,451 297,745 -6,706 -2.2% Wholesale Trade 161,871 173,193 11,322 7.0% Retail Trade 322,810 323,699 889 0.3% Transportation and Warehousing 122,005 132,329 10,324 8.5% Information 104,517 89,675 -14,842 -14.2% Finance and Insurance 152,570 175,318 22,748 14.9% Real Estate and Rental and Leasing 61,517 59,184 -2,333 -3.8% Professional and Technical Services 150,819 188,933 38,114 25.3% Management of Companies and Enterprises 12,719 28,050 15,331 120.5% Administrative and Waste Services 188,380 235,424 47,044 25.0% Educational Services 26,448 35,966 9,518 36.0% Health Care and Social Assistance 215,125 258,476 43,351 20.2% Arts, Entertainment, and Recreation 28,271 34,702 6,431 22.7% Accommodation and Food Services 215,089 246,764 31,675 14.7% Other Services, Ex. Public Admin 75,311 78,108 2,797 3.7% Unclassified 2,035 1,926 -109 -5.4% Total 2,312,221 2,561,210 248,989 10.8% Source: Texas Labor Market Information

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3.1.2 Wages

As shown in Table 3, the average annual wage in Dallas County in 2007 was $71,313, representing a 37.2% increase from 2002. The highest paying industries were Utilities ($201,864) and Mining, Quarrying, and Oil and Gas Extraction ($190,320). The lowest paying industries were Accommodation and Food Services ($21,632) and Retail Trade ($32,708). Despite experiencing a 17.4% decrease in employment, the Utilities industry had the highest absolute and percent increase in annual wages at $125,112, or 163%. Similarly, Mining, Quarrying, and Oil and Gas Extraction had significant growth in annual wages despite decreases in overall employment. None of the industries experienced a decrease in annual wages over the five-year period; however, Agriculture, Forestry, Fishing & Hunting and Retail Trade saw the smallest growth in wages at 2% and 4.3%, respectively.

Table 3: Private Industry Average Annual Wage Trends, Dallas County, 2002-2007 2002-2007 Change Industry 2002 2007 # % Agriculture, Forestry, Fishing & Hunting $38,116 $38,896 $780 2.0% Mining, Quarrying, and Oil and Gas Extraction $116,428 $190,320 $73,892 63.5% Utilities $76,752 $201,864 $125,112 163.0% Construction $44,824 $55,016 $10,192 22.7% Manufacturing $52,676 $63,076 $10,400 19.7% Wholesale Trade $64,116 $77,792 $13,676 21.3% Retail Trade $31,356 $32,708 $1,352 4.3% Transportation and Warehousing $39,364 $49,504 $10,140 25.8% Information $60,320 $78,156 $17,836 29.6% Finance and Insurance $65,052 $79,924 $14,872 22.9% Real Estate and Rental and Leasing $51,532 $64,012 $12,480 24.2% Professional and Technical Services $86,008 $98,904 $12,896 15.0% Management of Companies and Enterprises $74,360 $93,340 $18,980 25.5% Administrative and Waste Services $30,524 $40,092 $9,568 31.3% Educational Services $33,696 $40,144 $6,448 19.1% Health Care and Social Assistance $46,592 $55,276 $8,684 18.6% Arts, Entertainment, and Recreation $40,040 $60,164 $20,124 50.3% Accommodation and Food Services $19,136 $21,632 $2,496 13.0% Other Services, Ex. Public Admin $29,692 $34,216 $4,524 15.2% Unclassified $38,896 $51,220 $12,324 31.7% Average $51,974 $71,313 $19,339 37.2% Source: Texas Labor Market Information

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The average annual wage in the Dallas-Fort Worth-Arlington MSA in 2007 was $62,010, a 27.7% increase from 2002 (Table 4). The highest paying industries were Utilities ($151,528) and Mining, Quarrying, and Oil and Gas Extraction ($141,336). The lowest paying industries were Accommodation and Food Services ($18,512) and Retail Trade ($30,056). Like Dallas County, the Utilities industry in the Dallas MSA experienced the largest absolute and percent increase in annual wages, increasing by $83,148, or 121.6%, during the five-year period. Management of Companies and Enterprises and Mining, Quarrying, and Oil and Gas Extraction also experienced significant growth in annual wages. While none of the industries in the Dallas MSA experienced a decrease in annual wages, Retail Trade, Art, Entertainment, and Recreation, and Transportation and Warehousing each experienced an annual wage growth of less than ten percent.

Table 4: Private Industry Average Annual Wage Trends, Dallas MSA, 2002-2007 2002-2007 Change Industry 2002 2007 # % Agriculture, Forestry, Fishing & Hunting $26,832 $30,784 $3,952 14.7% Mining, Quarrying, and Oil and Gas Extraction $108,160 $141,336 $33,176 30.7% Utilities $68,380 $151,528 $83,148 121.6% Construction $43,836 $53,248 $9,412 21.5% Manufacturing $51,896 $63,544 $11,648 22.4% Wholesale Trade $60,996 $73,008 $12,012 19.7% Retail Trade $28,652 $30,056 $1,404 4.9% Transportation and Warehousing $44,980 $48,516 $3,536 7.9% Information $59,384 $75,140 $15,756 26.5% Finance and Insurance $60,424 $73,736 $13,312 22.0% Real Estate and Rental and Leasing $45,396 $56,628 $11,232 24.7% Professional and Technical Services $78,676 $90,272 $11,596 14.7% Management of Companies and Enterprises $68,380 $90,844 $22,464 32.9% Administrative and Waste Services $30,524 $37,908 $7,384 24.2% Educational Services $31,564 $36,504 $4,940 15.7% Health Care and Social Assistance $43,524 $50,440 $6,916 15.9% Arts, Entertainment, and Recreation $34,528 $36,452 $1,924 5.6% Accommodation and Food Services $16,588 $18,512 $1,924 11.6% Other Services, Ex. Public Admin $26,832 $31,668 $4,836 18.0% Unclassified $41,288 $50,076 $8,788 21.3% Average $48,542 $62,010 $13,468 27.7% Source: Texas Labor Market Information

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Raiford Road: City of Carrollton

3.2 Employment Centers

The three closest professional employment centers to the Raiford Road site include the Galleria area, the Legacy Business Center area, and the Las Colinas area, which are located in the Addison/Carrollton/Farmers Branch, Plano/Allen, and Las Colinas submarkets, respectively (Map 1). As shown in Table 5, there is over 53 million square feet of office space in the selected submarkets, representing 35.3% of the total inventory in the Dallas market.

Table 5: Total Inventory, Select Submarkets, 1Q 2008 Total Inventory Submarket (Sq. Ft.) Addison/Carrollton/Farmers Branch 28,755,000 Las Colinas 7,627,000 Plano/Allen 16,627,000 Total 53,009,000 % of Dallas Market 35.3%

3.2.1 Galleria Area

The Galleria area is in the Addison/Carrollton/Farmers Branch office submarket and is generally found on the Dallas North Tollway between the President George Bush Turnpike to the north and Interstate 635 to the south. The Galleria area, located between six and 12 miles from the Raiford Road site, is an upscale retail shopping destination, as well as home to several corporate headquarters, including MBNA Information Systems, Inc., Mary Kay Cosmetics, CompUSA, and Pizza Hut.

According to Reis, there was a five-year under supply of 691,000 square feet of office space in the Addison/Carrollton/Farmers Branch submarket, between 2003 and 2007 (Table 6). Completions of office space have been steady during the past five years, with the exception of 2005, when only 11,000 square feet were completed. Net absorption has been strong since 2004, peaking at 934,000 square feet in 2005.

Table 6: Office Trends, Addison/Carrollton/Farmers Branch Submarket, 2003-2007 Net (Over)/ Year Completions Absorption Under 2003 382,000 -696,000 (1,078,000) 2004 617,000 565,000 (52,000) 2005 11,000 934,000 923,000 2006 220,000 714,000 494,000 2007 408,000 812,000 404,000 Total 1,638,000 2,329,000 691,000 Source: Reis

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Raiford Road: City of Carrollton

Map 1: Professional Employment Centers, Raiford Road Site, 2008

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Raiford Road: City of Carrollton

3.2.2 Legacy Business Center

The Legacy Business Center is located in the Plano/Allen submarket and is generally bounded by Spring Creek Parkway to the south and west, State Highway 121 to the north, and Preston Road to the east. The Legacy area is located approximately 10 miles from the Raiford Road site. The Dallas North Tollway bisects the Legacy Business Center area.

The Legacy Business Center is a master-planned business, retail, and residential community consisting of 2,665 acres and approximately 45,000 employees. Major employers located within the Legacy Business Center include EDS, The Frito-Lay Company, JC Penney, Cadbury Schweppes Americas Beverages, Countrywide Home Loans, and Pepsico.

There was a five-year over supply of 233,000 square feet of office space in the Plano/Allen submarket, which encompasses the area around the Legacy Business Center (Table 7). Office space completions have increased significantly since 2003, ranging from 120,000 square feet in 2003 to 1,467,000 square feet in 2006. Net absorption has been erratic, ranging from negative 46,000 square feet in 2003 to 1,176,000 square feet in 2006.

Table 7: Office Trends, Plano/Allen Submarket, 2003-2007 Net (Over)/ Year Completions Absorption Under 2003 120,000 -46,000 (166,000) 2004 254,000 763,000 509,000 2005 371,000 363,000 (8,000) 2006 1,467,000 1,176,000 (291,000) 2007 1,006,000 729,000 (277,000) Total 3,218,000 2,985,000 (233,000) Source: Reis

3.2.3 Las Colinas Area

The Las Colinas submarket is generally bounded by Interstate 635 to the north, the Trinity River to the east, Northgate Boulevard to the south, and Belt Line Road to the west. The John W. Carpenter Freeway (State Highway 114) bisects the Las Colinas area. The Las Colinas employment center is located approximately 12 miles from the Raiford Road site.

Las Colinas is a 12,000-acre master-planned community combining commercial, residential, educational, recreational, and retail uses. Major employers include four Fortune 500 headquarters: Commercial Metals, Exxon-Mobil, Fluor Corp., and Kimberly Clark. Citigroup, Oracle, Verizon, and Nokia are also large employers within Las Colinas.

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Raiford Road: City of Carrollton

There was a five-year under supply of 315,000 square feet of office space in the Las Colinas submarket from 2003 to 2007 (Table 8). There were no new completions of office space within the Las Colinas area during the five-year period, while net absorption ranged from negative 668,000 square feet in 2004 to 492,000 square feet in 2005.

Table 8: Office Trends, Las Colinas Submarket, 2003-2007 Net (Over)/ Year Completions Absorption Under 2003 0 -330,000 (330,000) 2004 0 -668,000 (668,000) 2005 0 492,000 492,000 2006 0 483,000 483,000 2007 0 338,000 338,000 Total 0 315,000 315,000 Source: Reis

3.2.4 Estimated Job Growth

The five-year net absorption for the Addison/Carrollton/Farmers Branch, Las Colinas, and Plano/Allen submarkets, encompassing the three major employment centers near the Raiford Road site, was more than 5.6 million square feet (Table 9). Based on a ratio of 250 square feet per employee, it is estimated that the three submarkets experienced growth of roughly 22,516 jobs between 2003 and 2007. The Plano/Allen submarket comprised 53.0% of the total job growth, followed by the Addison/Carrollton/Farmers Branch submarket at 41.4%. The Las Colinas submarket represented only 5.6% of the total job growth. While net absorption of office space has been strong in the Addison/Carrollton/Farmers Branch submarket, it is important to note that demand is likely not evenly distributed within the submarket; office demand has been strongest in the Addison area along the Dallas North Tollway.

Table 9: Estimated Job Growth, Select Submarkets, 2003-2007 Net Absorption Sq. Ft./ Estimated % of Submarket (2003-2007) Employee Job Growth Total Addison/Carrollton/Farmers Branch 2,329,000 250 9,316 41.4% Las Colinas 315,000 250 1,260 5.6% Plano/Allen 2,985,000 250 11,940 53.0% Total 5,629,000 22,516 Source: REIS and Warren & Associates

Strong job growth and close proximity to major employment centers is a positive indicator of residential demand for the Carrollton area, including the Raiford Road site. Most employees prefer to live within a 30-minute commute. The Raiford Road site is located less than 15 miles from each of the major employment centers, well positioned for residential development.

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Raiford Road: City of Carrollton

4. Market Rate Apartments

This section defines the Competitive Market Area (CMA) and outlines demographic trends and forecasts for the CMA and the overall Dallas market. It also describes apartment inventory, absorption, vacancy, and rent trends for both the CMA and the Dallas metro area. As defined by Reis, the CMA encompasses the Carrollton/Addison/Coppell submarket.

4.1 CMA

As shown on Map 2, the CMA for the Raiford Road site includes Carrollton, Coppell, and Addison. It is generally bounded by the Dallas County line, Old Denton Road, and E. Hebron Parkway to the north; the Denton and Dallas County lines and the North Dallas Tollway to the east; and Spring Valley and Brookhaven roads, Valwood Parkway, Luna and Beltline roads, and I-635 to the south; and the Dallas County line to the west.

4.2 Demographic Trends and Forecast

4.2.1 Population

CMA

There were 176,245 residents in the CMA in 2008, 9.9%, more than in 2000 (Table 10). Residents between the ages of 35 and 44 represented the largest age cohort, at 31,195 people, but experienced a population decrease of 2.2% between 2000 and 2008. The CMA also observed population declines in the five- to nine-year-old cohort and the 25- to 34-year-old cohort. The largest population increases occurred in the 55 to 64 year-olds (57.2%) and those 85 and older (83.2%).

Table 10: Population Trends by Age Cohort, CMA, 2000-2008 Age Change Cohort 2000 2008 Number Percent 0 - 4 12,669 13,395 726 5.7% 5 - 9 12,829 12,690 -139 -1.1% 10 - 14 11,706 12,337 631 5.4% 15 - 19 9,942 11,280 1,337 13.4% 20 - 24 10,744 12,161 1,417 13.2% 25 - 34 30,950 29,962 -988 -3.2% 35 - 44 31,912 31,195 -717 -2.2% 45 - 54 21,809 26,613 4,804 22.0% 55 - 64 10,424 16,391 5,967 57.2% 65 - 74 4,650 6,521 1,871 40.2% 75 - 84 2,245 2,820 575 25.6% 85+ 481 881 400 83.2% Total 160,362 176,245 15,883 9.9% Source: ESRI

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Raiford Road: City of Carrollton

Map 2: Competitive Market Area - Apartments, Raiford Road Site, 2008

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Raiford Road: City of Carrollton

Population growth within the CMA is expected to slow slightly to 9.1% between 2008 and 2013, with a projected population of 192,342 people by 2013 (Table 11). The only age cohort predicted to decrease is the 35- to 44-year-old age group, while the balance is expected to grow between 2.9% (10- to 14-year-olds) and 32.7% (64- to 74-year-olds). The strong growth seen in the 85+ age cohort between 2000 and 2008 is expected to moderate to a 31% rate between 2008 and 2013.

Table 11: Population Forecast by Age Cohort, CMA, 2008-2013 Age Change Cohort 2008 2013 Number Percent 0 - 4 13,395 14,810 1,416 10.6% 5 - 9 12,690 13,272 582 4.6% 10 - 14 12,337 12,695 357 2.9% 15 - 19 11,280 11,733 453 4.0% 20 - 24 12,161 14,618 2,457 20.2% 25 - 34 29,962 32,121 2,159 7.2% 35 - 44 31,195 30,775 -421 -1.3% 45 - 54 26,613 29,236 2,623 9.9% 55 - 64 16,391 19,811 3,420 20.9% 65 - 74 6,521 8,655 2,134 32.7% 75 - 84 2,820 3,462 642 22.8% 85+ 881 1,154 273 31.0% Total 176,245 192,342 16,097 9.1% Source: ESRI

Dallas Metro Area

The Dallas metro area is defined by Reis as 24 different submarkets, extending from northwest Denton County to the southern boundary of Dallas County (Map 3). For the purposes of the demographic analysis, however, the Northwest Denton County submarket is excluded; the demographics for 23 of the 24 Dallas submarkets were analyzed to describe the demographic trends and forecasts for the Dallas metro area.

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Raiford Road: City of Carrollton

Map 3: Dallas Metro Area, 2008

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Raiford Road: City of Carrollton

There were 3.3 million residents in the Dallas metro area in 2008, 17.4% more than in 2000 when the population was just over 2.8 million (Table 12). Although residents between the ages of 25 and 34 years old represented the largest age cohort at 530,386 people, this cohort experienced the smallest population increase at only 2.0% between 2000 and 2008. Like the CMA, the largest population increases were in the 55- to 64-year-old age cohort and the 85+ age cohort, at 55.3% and 46.7% growth, respectively.

Table 12: Population Trends by Age Cohort, Dallas Metro Area, 2000-2008 Age Change Cohort 2000 2008 Number Percent 0 - 4 235,900 276,868 40,968 17.4% 5 - 9 227,374 253,518 26,144 11.5% 10 - 14 210,321 243,510 33,190 15.8% 15 - 19 198,952 236,839 37,887 19.0% 20 - 24 210,321 243,510 33,190 15.8% 25 - 34 520,117 530,386 10,268 2.0% 35 - 44 488,854 527,050 38,196 7.8% 45 - 54 349,587 463,671 114,083 32.6% 55 - 64 193,268 300,218 106,951 55.3% 65 - 74 116,529 143,438 26,909 23.1% 75 - 84 68,212 83,394 15,182 22.3% 85+ 22,737 33,358 10,620 46.7% Total 2,842,172 3,335,759 493,587 17.4% Source: ESRI

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Raiford Road: City of Carrollton

The population of the Dallas metro area is expected to grow by 348,281 residents, or 10.4%, between 2008 and 2012 (Table 13). Like the CMA, the only age cohort expected to decrease in population is the 35- to 44-year-old age cohort, although at a lesser rate than the CMA. The remaining age groups are expected to increase in population from 6.0% (75- to 84-year-olds) to 25.9% (65- to 74-year-olds). Although the CMA and the Dallas metro area are predicted to experience similar growth among most age cohorts, there is a substantial difference in the growth expected among the 75- to 84-year-olds. While the Dallas metro area anticipates a 6.0% growth in this age group, the CMA is expected to see a 22.8% growth.

Table 13: Population Forecast by Age Cohort, Dallas Metro Area, 2008-2013 Age Change Cohort 2008 2013 Number Percent 0 - 4 276,868 305,775 28,907 10.4% 5 - 9 253,518 272,619 19,101 7.5% 10 - 14 243,510 257,883 14,372 5.9% 15 - 19 236,839 254,199 17,360 7.3% 20 - 24 243,510 283,671 40,161 16.5% 25 - 34 530,386 571,026 40,641 7.7% 35 - 44 527,050 523,134 -3,916 -0.7% 45 - 54 463,671 530,502 66,831 14.4% 55 - 64 300,218 375,772 75,554 25.2% 65 - 74 143,438 180,518 37,080 25.9% 75 - 84 83,394 88,417 5,023 6.0% 85+ 33,358 40,524 7,167 21.5% Total 3,335,759 3,684,040 348,281 10.4% Source: ESRI

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Raiford Road: City of Carrollton

4.2.2 Housing Units

CMA

There were an estimated 72,686 housing units in the CMA in 2008, an 11.3% increase from 2000 (Table 14). The number of vacant housing units increased dramatically between 2000 and 2008. In 2000, there were 2,612 vacant units. In 2008, there were 4,725, representing an 80.9% increase. Owner-occupied housing units increased by 6.3% and renter-occupied housing units increased by 10.8%.

Table 14: Housing Unit Trends, CMA, 2000-2008 2000 2008 2000 - 2008 Change Tenure Number % Share Number % Share Number Percent Owner Occupied 33,629 51.5% 35,762 49.2% 2,133 6.3% Renter Occupied 29,058 44.5% 32,200 44.3% 3,142 10.8% Vacant 2,612 4.0% 4,725 6.5% 2,113 80.9% Total 65,299 100% 72,686 100% 7,387 11.3% Source: ESRI

Of the 4,725 vacant housing units in the CMA in 2008, 1,365 are estimated as apartments, based on first quarter data from Reis. This would result in 3,360 vacant single-family and townhouse units. The overall apartment vacancy rate for the CMA is 4.2% (Graph 1 in Section 4.3.1). The single-family and townhouse vacancy rate would be considerably higher at 8.4%, reflecting the impact of a slowing real estate market and excess new and resale product inventory. In an affluent market such as the CMA, it could also indicate the increasing trend toward maintaining two or three residences. Households can select the location of their primary residence based on duration of occupancy and other factors.

The number of housing units in the CMA is expected to grow by nearly 7,500 units, or 10.2%, between 2008 and 2013 (Table 15). The growth of vacant housing units will continue to outpace owner-occupied and renter-occupied housing unit growth. The share of owner-occupied housing units will continue to decrease, while the share of renter-occupied housing units will increase.

Table 15: Housing Unit Forecast, CMA, 2008-2013 2008 2013 2008 - 2013 Change Tenure Number % Share Number % Share Number Percent Owner Occupied 35,762 49.2% 37,331 46.6% 1,569 4.4% Renter Occupied 32,200 44.3% 36,930 46.1% 4,730 14.7% Vacant 4,725 6.5% 5,848 7.3% 1,123 23.8% Total 72,686 100% 80,109 100% 7,423 10.2% Source: ESRI

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Raiford Road: City of Carrollton

Dallas Metro Area

There were an estimated 1.3 million housing units in the Dallas metro area in 2008, an 18.7% increase from 2000 (Table 16). Following the CMA trend, the number of vacant housing units has increased 84.3% to 206,081 in 2008 since 2000. The number of owner-occupied housing units increased by 21.2% and the share of owner-occupied housing units increased from 52.0% to 53.1%. The number of renter-occupied housing units only increased 6.9% from 2000 to 2008.

Table 16: Housing Unit Trends, Dallas Metro Area, 2000-2008 2000 2008 2000 - 2008 Change Tenure Number % Share Number % Share Number Percent Owner Occupied 574,567 52.0% 696,150 53.1% 121,583 21.2% Renter Occupied 468,493 42.4% 500,808 38.2% 32,316 6.9% Vacant 61,876 5.6% 114,058 8.7% 52,182 84.3% Total 1,104,936 100% 1,311,017 100% 206,081 18.7% Source: ESRI

The number of housing units is expected to increase by 148,289 units, or 11.3%, from 2008 to 2013 (Table 17). The number of vacant housing units will continue to increase at a faster rate than both owner-occupied and renter-occupied housing units. The share of owner-occupied units will decrease slightly from 53.1% in 2008 to 52.1% in 2013, while the share of renter-occupied housing units will remain steady. The share of vacant units will increase to 9.7%.

Table 17: Housing Unit Forecast, Dallas Metro Area, 2008-2013 2008 2013 2008 - 2013 Change Tenure Number % Share Number % Share Number Percent Owner Occupied 696,150 53.1% 760,298 52.1% 64,148 9.2% Renter Occupied 500,808 38.2% 557,455 38.2% 56,646 11.3% Vacant 114,058 8.7% 141,553 9.7% 27,494 24.1% Total 1,311,017 100% 1,459,306 100% 148,289 11.3% Source: ESRI

4.2.3 Households by Income

The median household income grew from $59,579 to $76,140, or 27.8%, in the CMA from 2000 to 2008 (Table 18). While the median household income is higher in the CMA than the metro area, income grew at a faster rate of 36.8% in the overall Dallas metro area.

Table 18: Median Household Income Trends, CMA and Dallas Metro Area, 2000-2008 2000 - 2008 Change Geography 2000 2008 Number Percent CMA $59,579 $76,140 $16,561 27.8% Dallas Metro Area $48,351 $66,160 $17,809 36.8% Source: ESRI

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Raiford Road: City of Carrollton

The median household income in both the CMA and the Dallas metro area is projected to increase at a rate just over 15% from 2008 to 2013 (Table 19). Annual incomes in the CMA remain approximately $10,000 more than median household income for the overall Dallas market.

Table 19: Median Household Income Forecast, CMA and Dallas Metro Area, 2008-2013 2008 - 2013 Change Geography 2008 2013 Number Percent CMA $76,140 $87,674 $11,534 15.1% Dallas Metro Area $66,160 $76,457 $10,297 15.6% Source: ESRI CMA

There were an estimated 67,930 households in the CMA in 2008, an increase of 8.3% since 2000 (Table 20). Households earning more than $200,000 annually comprised the fastest growing income cohort in the CMA between 2000 and 2008, growing by nearly 3,500 households, or 129.1% in eight years. There was also substantial growth in those households with incomes between $75,000 and $99,999 and those who earned more than $150,000. The number of households earning less than $50,000 decreased across all income cohorts in the CMA.

Table 20: Household Trends by Income Cohort, CMA, 2000-2008 2000 - 2008 Change Household Income 2000 2008 Number Percent <$15,000 3,639 2,581 -1,058 -29.1% $15,000 - $24,999 4,769 2,785 -1,984 -41.6% $25,000 - $34,999 6,651 4,280 -2,372 -35.7% $35,000 - $49,999 10,542 8,491 -2,050 -19.5% $50,000 - $74,999 14,056 15,080 1,025 7.3% $75,000 - $99,999 8,220 12,024 3,804 46.3% $100,000 - $149,999 8,910 11,616 2,706 30.4% $150,000 - $199,999 3,263 4,891 1,628 49.9% $200,000+ 2,698 6,182 3,483 129.1% Total 62,748 67,930 5,182 8.3% Source: ESRI

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It is estimated that there will be approximately 74,245 households in the CMA by 2013, representing a growth of 9.3% since 2008 (Table 21). The growth in higher income households will continue over the next five years, with households earning more than $200,000 growing by 58.5%, followed by those making between $100,000 and $149,999 at 41.3%. The number of households earning less than $50,000 will continue to decrease across all income cohorts.

Table 21: Household Forecast by Income Cohort, CMA, 2008-2013 2008 - 2013 Change Household Income 2008 2013 Number Percent <$15,000 2,581 2,227 -354 -13.7% $15,000 - $24,999 2,785 1,930 -855 -30.7% $25,000 - $34,999 4,280 2,821 -1,458 -34.1% $35,000 - $49,999 8,491 6,459 -2,032 -23.9% $50,000 - $74,999 15,080 16,557 1,476 9.8% $75,000 - $99,999 12,024 12,176 153 1.3% $100,000 - $149,999 11,616 16,408 4,792 41.3% $150,000 - $199,999 4,891 5,865 974 19.9% $200,000+ 6,182 9,800 3,619 58.5% Total 67,930 74,245 6,315 9.3% Source: ESRI

Dallas Metro Area

There were an estimated 1,196,188 households in the Dallas metro area in 2008, up 14.6% since 2000 (Table 22). Like the CMA, households earning more than $200,000 increased at the fastest rate across income cohorts, at 126.1% growth from 2000 to 2008. The largest income cohort, those making between $50,000 and $74,999, grew only 15.2% in eight years. The number of households earning less than $50,000 decreased across all income cohorts in the Dallas metro area.

Table 22: Household Trends by Income Cohort, Dallas Metro Area, 2000-2008 2000 - 2008 Change Household Income 2000 2008 Number Percent <$15,000 119,010 90,910 -28,100 -23.6% $15,000 - $24,999 113,790 81,341 -32,449 -28.5% $25,000 - $34,999 132,581 99,284 -33,298 -25.1% $35,000 - $49,999 172,251 165,074 -7,177 -4.2% $50,000 - $74,999 207,745 239,238 31,492 15.2% $75,000 - $99,999 121,098 185,409 64,311 53.1% $100,000 - $149,999 104,395 181,821 77,426 74.2% $150,000 - $199,999 34,450 65,790 31,340 91.0% $200,000+ 38,626 87,322 48,696 126.1% Total 1,043,947 1,196,188 152,241 14.6% Source: ESRI

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There will be more than 1.3 million households in the Dallas metro area by 2013, a 10.1% increase since 2008 (Table 23). Households earning more than $200,000 will continue to experience strong growth at 70.5% from 2008 to 2013. Households making less than $50,000 a year will also continue to decrease in the overall Dallas metro area.

Table 23: Household Forecast by Income Cohort, Dallas Metro Area, 2008-2013 2008 - 2013 Change Household Income 2008 2013 Number Percent <$15,000 90,910 81,676 -9,235 -10.2% $15,000 - $24,999 81,341 61,915 -19,425 -23.9% $25,000 - $34,999 99,284 76,406 -22,877 -23.0% $35,000 - $49,999 165,074 144,908 -20,166 -12.2% $50,000 - $74,999 239,238 279,278 40,040 16.7% $75,000 - $99,999 185,409 187,064 1,654 0.9% $100,000 - $149,999 181,821 242,392 60,572 33.3% $150,000 - $199,999 65,790 94,849 29,059 44.2% $200,000+ 87,322 148,860 61,539 70.5% Total 1,196,188 1,317,349 121,161 10.1%

4.3 Market Trends

4.3.1 Net Absorption

CMA

Since 2003, the CMA’s inventory has increased by 620 units, while net absorption has been 1,839 units. Annually, the CMA increased its inventory by an average of 124 units, while net absorption was 368 units. This resulted in an under supply of 1,219 units, or 244 units on average per year (Table 24). For the first quarter of 2008, the CMA has not added any new apartment inventory, while net absorption dropped to negative 65 units.

Table 24: Net Change in Inventory and Absorption, CMA, 2003-2007 Net (Over)/ Change in Net Under Year Inventory Absorption Supply 2003 284 (221) (505) 2004 0 (161) (161) 2005 0 740 740 2006 4 519 515 2007 332 962 630 Total 620 1,839 1,219 Annual Avg. 124 368 244 Source: Reis

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As shown in Graph 1, the under supply caused the CMA’s vacancy rate to improve from a period high of 9.9% in 2004 to a low of 4% in 2007 before increasing slightly to 4.2% in the first quarter of 2008.

Graph 1: Apartment Trends, CMA, 2003-2008 1Q 1,600 9.9% Net Change in Inventory 11.0% 1,400 9.4% Net Absorption Vacancy Rate 1,200 7.6% 9.0%

1,000 6.0% 7.0% 4.0% 800 4.2% 5.0% 600 Units

400 3.0% Rate Vacancy

200 1.0% 0 -1.0% -200

-400 -3.0% 2003 2004 2005 2006 2007 2008 1Q

Dallas Metro Area

The Dallas metro area contains 24 submarkets. As shown on Map 3, the area stretches from north Denton County northwest of downtown Dallas to the southern boundary of Dallas County. The Dallas metro area does not include Keller, Grapevine, and Colleyville.

As shown in Table 25, the Dallas metro area’s total apartment inventory increased by 18,952 units between 2003 and 2007. Net absorption during the period reached 22,985 units. This resulted in an under supply of 4,033 units, or approximately 807 units per year. The Dallas metro area added 1,392 units in the first quarter of 2008, while net absorption dropped to 772 units.

Table 25: Net Change in Inventory and Absorption, Dallas Metro Area, 2003-2007 Net (Over)/ Change in Net Under Year Inventory Absorption Supply 2003 4,520 (508) (5,028) 2004 4,105 1,164 (2,941) 2005 2,919 10,887 7,968 2006 3,856 3,235 (621) 2007 3,552 8,207 4,655 Total 18,952 22,985 4,033 Annual Avg. 3,790 4,597 807 Source: Reis

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As shown in Graph 2, the five-year under supply decreased the metro area’s vacancy rate from a high of 10.4% in 2004 to a low of 7% in 2007. In the first quarter of 2008, the vacancy rate increased slightly to 7.1%. Absorption fluctuated significantly during the period and was particularly strong in 2005 and 2007.

Graph 2: Apartment Trends, Dallas Metro Area, 2003-2008 1Q 14.0% 18,000 Net Change in Inventory 16,000 Net Absorption 12.0% 10.4% 9.7% Vacancy Rate 14,000 10.0% 8.2% 8.3% 12,000 7.0% 7.1% 8.0% 10,000

Units 8,000 6.0% 6,000 4.0% 4,000 2.0% 2,000 0 0.0%

2003 2004 2005 2006 2007 2008 1Q

The CMA captured 8% of the net absorption within the Dallas metro area in the past five years (Table 26). In 2003, when both the CMA and the Dallas metro experienced negative net absorption, the CMA accounted for 43.5% of the overall negative absorption seen in the Dallas market. The CMA’s market share of net absorption appears to support the argument that the CMA is a relatively built-out area in comparison to the overall Dallas market.

Table 26: Net Absorption, CMA and Dallas Metro, 2003-2007 Dallas CMA % Year CMA Metro of Dallas 2003 -221 -508 43.5% 2004 -161 1,164 -13.8% 2005 740 10,887 6.8% 2006 519 3,235 16.0% 2007 962 8,207 11.7% Total 1,839 22,985 8.0% Annual Avg. 368 4,597 8.0% Source: Reis

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4.3.2 Vacancy

As shown in Graph 3, both the CMA and the Dallas metro area have experienced improving vacancy rates since 2004. Both reached period lows in 2007, and experienced slight increases in vacancy in the first quarter of 2008. The CMA’s vacancy rate improved more dramatically than the Dallas metro area’s reaching a period low of 4% compared to 7% for the metro area.

Graph 3: Vacancy Rate Trend, CMA and Dallas Metro Area, 2004- 2008 1Q 12% 10.4% CMA 10% Dallas Metro Area 9.9% 8.2% 8.3% 8% 7.0% 7.1% 7.6% 6%

Vacancy Rate 6.0% 4% 4.0% 4.2% 2%

2004 2005 2006 2007 2008 1Q

4.3.3 Monthly Rent

Both the Dallas metro area and the CMA have experienced increasing aggregate asking rents since 2004, with the CMA consistently averaging about $25 more per month than the Dallas metro area (Graph 4). The Dallas metro area’s aggregate asking rent increased 7% from $742 to $794. This equates to a Compound Annual Growth Rate (CAGR) of 1.7%. The CMA’s monthly rent increased 6.9% since 2004 from $767 to $820. This equates to a CAGR of 1.49%, which is slightly below that of the Dallas metro area.

Graph 4: Rent Trends, CMA and Dallas Metro Area, 2004-2008 1Q

$900 Carrollton/Addison/Coppell

$850 Dallas Metro Area $820 $807 $786 $800 $777 $767 $788 $794 $750 $759 $742 $747 $700 2004 2005 2006 2007 2008 1Q

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5. Comparable Mixed-Use Apartment Communities

This section analyzes the unit mix, current vacancy rates, and rents for five comparable mixed- use communities (Map 4). The comparables shown in Table 27 were selected on the basis of quality, age, and size.

5.1 Comparable Summary

The five comparable communities contain a total of 1,918 units completed between 1997 and 2007. Individual communities range from 229 units in the second phase of Eastside Village to 1,334 units at Post Addison Circle. The aggregate unit mix is 76.5% studios/one-bedrooms, 23.1% two-bedrooms, and 0.4% three-bedrooms. The overall vacancy rate is 5.8%, ranging from 4.6% at Amli at La Villita to 6.6% at Eastside Village.

Table 27: Comparable Mixed-Use Apartment Communities, May 2008 Avg. Map Owner/ Year Unit Mix Vac. Avg. Avg. Rent/ Parking Key Community Location Manager Open 1BR 2BR 3BR Total Rate Rent Sq. Ft. Sq. Ft. Ratio1. 1 Post Addison Circle 5009 Addison Circle, Addison Post Properties 1997 1,041 282 11 1,334 5.8% $1,571 1,191 $1.32 1.33 2 Post Legacy 5741 Martin Rd, Plano Post Properties 2000 293 91 0 384 6.0% $900 858 $1.05 1.11 3 Amli at La Villita 6419 Tranquilo, Irving AMLI 2007 210 96 0 306 4.6% $1,099 918 $1.20 1.77 4 Legacy Village Residences-Ph 2 7001 Parkwood Blvd, Plano UDR 2004 199 56 0 255 6.3% $961 798 $1.20 1.29 5 Eastside Village-Ph 2 1404 Vontress, Plano Pinnacle 2001 175 54 0 229 6.6% $923 776 $1.19 1.98 Total/Avg. 1,918 579 11 2,508 5.8% $1,260 1,008 $1.25 1.50 Share 76.5% 23.1% 0.4% Sources: REIS and Warren & Associates. 1. Parking spaces include garages

The average 1,008-square-foot unit rents for $1,260, or $1.25 per square foot. Community averages range from $1.05 per square foot at Post Legacy, in Plano, to $1.32 per square foot at Post Addison Circle in Addison. The number of parking spaces per unit ranges from 1.11 at Post Legacy to 1.98 at Eastside Village. Post Addison Circle, Eastside Village, and Post Legacy have structured parking for residents and guests.

Post Properties and Amli now use demand-based computer pricing models that adjust rent on a daily basis. The pricing program attempts to balance turnover by setting rental rates. All rates are available on the internet and are the same as those quoted by leasing agents. Rates are provided for specific units and are dependent upon move-in date. Prospective tenants can apply for and lease specific apartments directly from the community’s website. The website is updated immediately for availability, and prospective tenants can apply for and hold units on the website.

As shown on Map 4, all of the mixed-use comparables except Post Addison Circle are located outside the CMA. Amli at La Villita is the only comparable that does not have retail located in the mixed-use development.

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Map 4: Comparable Mixed-Use Apartment Communities

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5.2 Studio/One-bedroom

Studio/one-bedrooms are the most prevalent unit type, representing 76.5% of the comparable inventory. The 1,918 units are currently 5.6% vacant (Table 28). Vacancy rates range from 4.8% at Amli at La Villita to 6.3% at Eastside Village. The average 766-square-foot unit rents for $971, or $1.27 per square foot. Rents range from $1.07 per square foot at Post Legacy to $1.37 per square foot at Post Addison Circle.

Table 28: Comparable Studio/One-Bedroom Apartments, May 2008

1-BR 1-BR Vac. Avg. Avg. Avg. Rent Community Units Vac. Rate Rent SF per SF Post Addison Circle 1,041 58 5.6% $1,039 758 $1.37 Post Legacy 293 16 5.5% $775 726 $1.07 AMLI at La Villita 210 10 4.8% $937 806 $1.16 Legacy Village Residences-Ph. 2 199 12 6.0% $1,103 932 $1.18 Eastside Village-Ph. 2 175 11 6.3% $788 648 $1.22 Total/Avg. 1,918 107 5.6% $971 766 $1.27 Source: REIS and Warren & Associates

As shown in Table 29, adjusting the studio/one-bedroom per square foot rents for submarket location and community age using a multi-variate regression analysis (Appendix Table I), the average adjusted per square foot rent is $1.39.

Table 29: Age and Location Adjusted Comparable Per Square Foot Rents, Studio/One- Bedrooms, May 2008 Submarket Age Avg Avg. Rent Year Adjustment Adjustment Adj. Rent 1. Community per SF Open x1-x2 x3 per SF Post Addison Circle $1.37 1997 $0.00 $0.18 $1.55 Post Legacy $1.07 2000 $0.00 $0.14 $1.21 AMLI at La Villita $1.16 2007 ($0.19) $0.02 $1.00 Legacy Village Residences-Ph. 2 $1.18 2004 $0.00 $0.08 $1.26 Eastside Village-Ph. 2 $1.22 2001 $0.00 $0.13 $1.34 Total/Avg. $1.27 $1.39 Source: REIS and Warren & Associates 1. Adjusted using multi-variate regression analysis for community age and submarket location

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5.3 Two-bedroom

Two-bedrooms represent more than 23.1% of the total comparable inventory. As shown in Table 30, the overall vacancy rate is 6.7%, ranging from 4.2% at Amli at La Villita to 7.7% at Post Legacy. The average 1,229-square-foot unit rents for $1,482, or $1.21 per square foot. Post Addision Circle has the highest rent per square foot at $1.33, and Post Legacy has the lowest rent per square foot at $1.01.

Table 30: Comparable Two-Bedroom Apartments, May 2008

2-BR 2-BR Vac. Avg. Avg. Avg. Rent Community Units Vac. Rate Rent SF per SF Post Addison Circle 282 20 7.1% $1,706 1,285 $1.33 Post Legacy 91 7 7.7% $1,299 1,284 $1.01 AMLI at La Villita 96 4 4.2% $1,275 1,200 $1.06 Legacy Village Residences-Ph. 2 56 4 7.1% $1,233 1,089 $1.13 Eastside Village-Ph. 2 54 4 7.4% $1,251 1,041 $1.20 Total/Avg. 579 39 6.7% $1,482 1,229 $1.21 Source: REIS and Warren & Associates

As shown in Table 31, adjusting the studio/one-bedroom per square foot rents for submarket location and community age using a multi-variate regression analysis (Appendix Table II), the average adjusted per square foot rent is $1.31.

Table 31: Age and Location Adjusted Comparable Per Square Foot Rents, Two- Bedrooms, May 2008 Submarket Age Avg Avg. Rent Year Adjustment Adjustment Adj. Rent 1. Community per SF Open x1-x2 x3 per SF Post Addison Circle $1.33 1997 $0.00 $0.18 $1.51 Post Legacy $1.01 2000 $0.00 $0.14 $1.15 AMLI at La Villita $1.06 2007 ($0.14) $0.02 $0.95 Legacy Village Residences-Ph. 2 $1.13 2004 $0.00 $0.08 $1.21 Eastside Village-Ph. 2 $1.20 2001 $0.00 $0.13 $1.33 Total/Avg. $1.21 $1.31 Source: REIS and Warren & Associates 1. Adjusted using multi-variate regression analysis for community age and submarket location

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5.4 Three-bedroom

One of the five comparables has a total of 11 three-bedroom units, comprising less than 1% of the inventory. Post Addison Circle has one vacant three-bedroom (Table 32). The average 2,239-square-foot unit rents for $2,239, or $1.00 per square foot. Adjusting the comparable per square foot rents for age and submarket location (Appendix Table III) resulted in an adjusted average per square foot rent of $1.33.

Table 32: Comparable Three-Bedroom Apartments, May 2008 Avg 3-BR 3-BR Vac. Avg. Avg. Avg. Rent Adj. Rent Community Units Vac. Rate Rent SF per SF per SF1. Post Addison Circle 11 1 9.1% $2,239 2,239 $1.00 $1.33 Total/Avg. 11 1 9.1% $2,239 2,239 $1.00 $1.33 Source: REIS and Warren & Associates 1. Adjusted using multi-variate regression analysis for community age and submarket location

As shown in Table 33, adjusting the studio/one-bedroom per square foot rents for submarket location and community age using a multi-variate regression analysis (Appendix Table IV), the average adjusted per square foot rent is $1.36.

Table 33: Age and Location Adjusted Comparable Per Square Foot Rents, Three- Bedrooms, May 2008 Submarket Age Avg Avg. Rent Year Adjustment Adjustment Adj. Rent 1. Community per SF Open x1-x2 x3 per SF Post Addison Circle $1.00 1997 $0.00 $0.36 $1.36 Total/Avg. $1.00 $1.36 Source: REIS and Warren & Associates 1. Adjusted using multi-variate regression analysis for community age and submarket location

5.5 Community Profiles

5.5.1 Post Addison Circle

Completed in 1997, Post Addison Circle was part of Phase 1 of the sustainable project called Addison Circle. Addison Circle is an infill mixed-use development located north of Beltline Road along the western edge of the Dallas North Tollway in Addison. Overall, Addison Circle contains 124 acres, and is entitled for 6 million square feet of commercial space, 4.7 million square feet of residential space, and 28 acres for public use.

Post Addison Circle contains 1,334 apartments, 41,000 square feet of office, 108,725 square feet of retail and a 234-unit self-storage facility. The community was built Post Addison Circle

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in three phases. The apartments are located above ground-level retail. The buildings each surround an internal courtyard with a pool.

Among the 13 floorplans, seven are one-bedrooms, four are two-bedrooms, and two are three bedroom plans. The mix is 78% one bedrooms, 21% two bedrooms, and 0.8% three-bedrooms. One-bedrooms range from 428 to 1,446 square feet. Two-bedroom plans range from 1,024 to 2,360 square feet, and the three bedroom plans range from 1,275 to 1,615 square feet. On the day of our site visit in May, there were several leasing agents on duty with no wait for assistance. The leasing agent offered various units with lease terms ranging from four to 15 months. The leasing agent offered to waive the application fee and offered one month free rent to sign a lease.

Features & Amenities

Post Addison Circle offers nine- to ten-foot vaulted ceilings, washer/dryer connections, track lighting, high speed internet access, patios/balconies, and scored concrete floors. Kitchens feature Formica counter tops, wood veneer cabinets, and hardwood floors. Concrete flooring is standard, but select units have hardwoods.

Community amenities include ground-level retail, an on-site fitness club, business center, storage facilities, gated structured parking, trash chutes, controlled access and guest apartments. One free parking space is provided in the parking decks per occupant.

Availability

As shown in Graph 5, 79 units are coming available through August 2008, including 58 one- bedrooms and 20 two-bedrooms, and one three-bedroom. On average, about 1% of the one- and two-bedrooms become available each month.

Graph 5: Apartment Availability, Post Addison Circle, May 2008

25 One-Bedrooms 20 Two-Bedrooms

Three-Bedrooms 15

10 Available Units 5

0 May June July August

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Rents

Available one-bedroom per square foot rents range from a low of $1.09 per square foot for 919 square feet to a high of $1.46 per square foot for 786 square feet. Two-bedrooms range from a low of $1.07 for 1,584 square feet to a high of $1.27 per square foot for 1,228 square feet. The three-bedroom is available for $1.22 per square foot for 1,615 square feet (Graph 6).

Graph 6: Available Units by Per Square Foot Price and Size, Post Addison Circle, May 2008 $1.60 One-Bedrooms $1.50 Two-Bedrooms $1.40 Three-Bedrooms $1.30 $1.20

per Sq Price ft $1.10 $1.00

$0.90 200 700 1,200 1,700 2,200 Unit Size (Sq ft)

Floor Premiums

Floor premiums are calculated by comparing the average per square foot price of available units on each floor to the average per square foot price of all available units. Except when available, no price adjustments have been made to units for premiums or upgrades. As shown in Graph 7, the highest per square foot rent premiums occur on the first floor. One-bedrooms are offered at a $0.03 per square foot premium compared to the overall average per square foot price. Two- bedrooms have an even larger first floor premium of $0.08 per square foot. There is also a premium for the top floor one bed-rooms. Top floor one-bedrooms are offered at a $0.02 per square foot premium.

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Graph 7: Estimated Floor Price Premiums, Post Addison Circle, May 2008

$0.09 One-Bedrooms

$0.07 Two-Bedrooms

$0.05

$0.03 $0.01

Premium Price ft Sq Per $(0.01)

$(0.03) 12346 Floor

Additional Fees

There are three additional fees at Post Addison Circle: a $150 administrative fee, a $100 application fee, and a $100 security deposit. Full-grown dogs and cats weighing up to 35 pounds are accepted. The pet deposit is $500 for cats and small dogs (under 30 pounds), of which $150 is refundable. For large dogs, the deposit is $1,000, of which $250 is refundable. Certain pet breeds are not accepted. Use of the on-site fitness facility is $44 per month and an additional $39 per month for a spouse.

5.5.2 Post Legacy

Built in 2000, Post Legacy is located in Legacy Town Center off the North Dallas Tollway in Plano. Legacy Town Center is the first development in the country to build a town center in an existing office park. The 150 acre project includes retail, office, lodging, and apartments. Urban amenities include five acres of public parks and a four-acre lake. Many of the buildings are integrated with different uses. For example, many of the apartment buildings in the town center have first-floor shops. Post Legacy contains 384 apartments, 5,699 square feet of retail, and 1,112 square feet of restaurant space. The buildings each surround an internal courtyard with a pool.

Among the ten floorplans, six are one-bedrooms, and four are two-bedrooms. The mix is 76.3% one bedrooms, and 23.7% two bedrooms. One- bedrooms range from 493 to 910 square feet. Two-bedroom plans range from 1,017 to 1,650 square feet. On the day of our site visit in May, there were several leasing agents on duty with no Post Legacy

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wait for assistance. The leasing agent offered three-, six-, and 12-month lease terms, and did not offer any concessions.

Features & Amenities

Post offers nine- to ten-foot vaulted ceilings, washer/dryer connections, fireplaces, high-speed internet connections, patios/balconies, and hardwood floors. Most kitchens feature Formica counter tops, built-in microwaves, and wood veneer cabinets, but some have been upgraded with granite countertops and stainless steel appliances.

Community amenities include on-site retail, pool(s), laundry facility, business center, storage facilities, controlled structured parking, and controlled access. One free parking space is provided in the parking deck per occupant.

Availability

As shown in Graph 8, 23 units are coming available through August, including 16 one-bedrooms and seven two-bedrooms. On average, about 1% of the one- and two-bedrooms become available each month.

Graph 8: Apartment Availability, Post Legacy, May 2008

9 8 One-Bedrooms 7 Two-Bedrooms 6 5

3 Units Available 2 1 0 May June July August

Rents

Available one-bedroom per square foot rents range from a low of $1.04 per square foot for 746 square feet to a high of $1.29 per square foot for 761 square feet. Two-bedrooms range from a low of $1.09 for 1,047 square feet to a high of $1.46 per square foot for 1,650 square feet (Graph 9). Per square foot rents have been somewhat skewed due to kitchen upgrades in a number of units. According to the leasing agent, approximately 20% of the units have had the kitchens upgraded with features such as slate countertops, stainless steel appliances, and hardwood or tile flooring.

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Graph 9: Available Units by Per Square Foot Price and Size, Post Legacy, May 2008 $1.60 One-Bedrooms $1.50 Two-Bedrooms $1.40 $1.30

$1.20

Price per per Sq Price ft $1.10

$1.00

$0.90 200 700 1,200 1,700 2,200 Unit Size (Sq ft)

Kitchens in the units are upgraded at a tenant’s request. A tenant can choose what they would like upgraded, including the countertops, appliances, and flooring. As shown in Table 34, an upgrade can add from $50 to $150 to the monthly rent. In addition to kitchen upgrades, smaller upgrades including built-in bookshelves and accent walls can be added.

Table 34: Kitchen Upgrades Prices, May 2008 Kitchen Add'l Upgrade Rent Slate countertops $150 Stainless appliances $50 Tile flooring $50 Hardwood floors $100 Source: Post Properties

Floor Premiums

As shown in Graph 10, one- and two-bedrooms have different floor premium pricing structures. Top floor one-bedrooms are offered at a $0.03 per square foot premium, while first-floor one- bedrooms are offered at a $0.05 per square foot discount compared to the overall average per square foot price. Two-bedrooms have first floor units commanding about a $0.04 per square foot premium, second-floor units have a $0.06 per square foot discount.

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Graph 10: Estimated Floor Price Premiums, Post Legacy, May 2008 $0.08 One-Bedrooms $0.06 Two-Bedrooms $0.04

$0.02 $0.00 ($0.02)

($0.04) Premium Price ft Sq Per ($0.06) ($0.08) 1234 Floor Note: As available, added rent from unit upgrades netted from unit prices

Additional Fees

There are two additional fees at Post Legacy: an $85 application fee, and a $250 deposit for a one-bedroom, of which $100 is refundable. A two-bedroom requires a $300 deposit, of which $150 is refundable. Full-grown dogs and cats weighing up to 80 pounds are accepted. The pet deposit is $500 for animals under 30 pounds, and $1,000 for animals over 30 pounds. For small animals, $150 of the deposit is refundable, and $250 for larger animals. Certain pet breeds are not accepted. Unconditioned storage can be rented for $35 to $100 per month based on the storage unit’s size.

5.5.3 AMLI at La Villita Phase 2

Amli at La Villita was completed in 2007, and is part of the master-planned community of La Villita in Las Colinas, located at the northeast corner of Royal Lane and Riverside, south of Interstate 635 and the Bush Turnpike. The 200-acre mixed-use residential development features 1,375 apartment units by Amli Residential and Lincoln Properties, 260 townhomes by Portrait Homes and CityHomes, and 300 single- family homes by K. Hovnanian Homes and Darling Homes. Amenities include a two-acre lake, two AMLI at La Villita canals, ten miles of trails, pocket parks, and greenbelt areas. The development began construction in 2005, and completion is expected in 2008.

Amli at La Villita Phase 2 contains 306 apartments with four one-bedroom and three two- bedroom floorplans. The mix is 68.6% one bedrooms, and 31.4% two bedrooms. One- bedrooms range from 706 to 954 square feet. Two-bedroom plans range from 1,070 to 1,258 square feet. On the day of our site visit in May, there were two leasing agents on duty with a

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five- minute wait for assistance. The leasing agent offered various units with lease terms ranging from three to 14 months, and did not offer any concessions.

Features & Amenities

Amli at La Villita offers nine-foot ceilings, patios/balconies, hardwood or concrete floors, and high speed internet access. Some units have full sized washers and dryers patios/balconies, and scored concrete floors. Bathrooms have oversized garden tubs. Kitchens feature black Whirlpool appliances, Cherry or Expresso cabinets with brushed chrome pulls, and ceramic tile backsplashes. Some units have private fenced yards.

Community amenities include a resort style swimming pool, 24-hour fitness center, Cyber café and business center detached garages, carports, and on-site clothes care center.

Availability

As shown in Graph 11, ten units are coming available through August, including eight one- bedrooms and two two-bedrooms. On average, about 1% of the one-bedrooms and 0.5% of two- bedrooms become available each month.

Graph 11: Apartment Availability, Amli at La Villita, May 2008 7

6 One-Bedrooms 5 Two-Bedrooms

4 3

Available Units Available 2

1 0

May June July August

Rents

Available one-bedroom per square foot rents range from a low of $1.14 per square foot for 868 square feet to a high of $1.42 per square foot for 775 square feet (includes a special view upgrade). Two-bedrooms range from a low of $1.13 for 1,170 square feet to a high of $1.21 per square foot for 954 square feet (Graph 12).

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Raiford Road: City of Carrollton

Graph 12: Available Units by Per Square Foot Price and Size, Amli at La Villita, May 2008 $1.50 $1.45 One-Bedrooms $1.40 Two-Bedrooms $1.35 $1.30 $1.25 $1.20

per Sq ft Price $1.15 $1.10 $1.05 $1.00 600 800 1,000 1,200 Unit Size (Sq ft)

Floor Premiums

As shown in Graph 13, per square foot rent premiums occur on the first floor. One-bedrooms are offered at approximately a $0.06 per square foot premium compared to the overall average per square foot price. Two-bedrooms have a $0.05 per square foot premium. Second floor one- bedrooms have a $0.03 per square foot discount. There were no second floor two-bedrooms available for comparison. Top floor one-bedrooms are offered at a $0.09 per square foot discount, and two-bedrooms have a $0.02 per square foot discount.

Graph 13: Estimated Floor Price Premiums, Post Addison Circle, May 2008 $0.08 One-Bedrooms $0.06 $0.04 Two -Bedroo ms $0.02 $0.00

($0.02)

($0.04) ($0.06)

Sq ft Per Premium Price ($0.08) ($0.10) 123 Floor

Additional Fees

There are three additional fees at Amli La Villita: a $125 administrative fee, a $50 application fee, and a $200 security deposit. Up to two pets are allowed. For one pet, there is a $200 refundable deposit and a $300 non-refundable pet fee. For two-pets, there is a $200 refundable

July 2008 36

Raiford Road: City of Carrollton deposit, and a $600 non-refundable pet fee. Units with washers & dryers are given a $35 rent premium. Detached garages are offered at $115 per month, and carport parking is offered at $45 per month.

5.5.4 Legacy Village

Built in 2004, Legacy Village is located within the Shops at Legacy and the Legacy Business Park, east of the North Dallas Tollway in Plano. Legacy Village includes three and four-story buildings fronting on Parkwood Boulevard. The three main buildings have 199 one- and two- bedroom units.

Among the 11 floorplans, one is a studio, six are one-bedrooms, and four are two-bedrooms. The mix is 63.6% studios and one-bedrooms and Legacy Village 36.3% two bedrooms. Studios range from 560 to 588 square feet. One-bedrooms range from 623 to 1,240 square feet. Two-bedroom plans range from 937 to 1,265 square feet.

Features & Amenities

Legacy Village offers nine-foot ceilings, washer/dryer connections, covered parking and detached garages, and private patios/balconies. Kitchens feature a breakfast bar and energy efficient appliances, including a built-in microwave. Bathrooms have oversized garden tubs. Carpeting is standard, but select units have hardwood flooring.

Community amenities include a clubhouse, fitness club, business center, storage facilities, gated structured parking, trash chutes, controlled access and guest apartments. One space per occupant can be purchased in the parking deck for $85.00.

Availability

As shown in Graph 14, 82 units are coming available through August, including 59 one- bedrooms and 23 two-bedrooms, and one three-bedroom. Approximately 20 of the one- bedrooms were available in May. On average, about 7% of the one- and two-bedrooms are available each month. Approximately 37 of the two-bedrooms were available in May, but only 2 are coming available through August.

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Raiford Road: City of Carrollton

Graph 14: Apartment Availability, Legacy Village, May 2008 45

40 One-Bedrooms 35 Two-Bedrooms 30 25

15 Units Available 10

May June July August

Rents

Available one-bedroom per square foot rents range from a low of $1.13 per square foot for 830 square feet to a high of $1.39 per square foot for 950 square feet. Two-bedrooms range from a low of $1.04 for 1,053 square feet to a high of $1.47 per square foot for 1,483 square feet (Graph 15).

Graph 15: Available Units by Per Square Foot Price and Size, Legacy Village, May 2008

Additional Fees

There are three additional fees at Legacy Village: a $75 administrative fee, a $50 application fee, and a $150 to $350 security deposit depending on unit size. Full-grown dogs and cats are accepted with no weight limit. The pet deposit is $500 for cats and dogs, of which $250 is refundable. Certain pet breeds are not accepted. Storage units can be rented for $40 to $160 per month, depending on size. A parking space in a breezeway garage is $55.00 per month, while a detached, covered garage is $85.00 per month.

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Raiford Road: City of Carrollton

5.5.5 Eastside Village

Located in historic downtown Plano, Eastside Village is part of Plano’s vision to create a transit village to stimulate revitalization. Eastside Village is a mixed-use development that contains apartments over ground-level retail.

The two phase project has a total of 470 apartments, and over 37,000 square feet of retail, restaurant, and office/flex space. Phase 1, completed in 2001, is located along the Dallas Area Rapid Transit (DART) red line at the Downtown Plano Station, and contains two buildings. Phase 2, completed in Eastside Village 2003, is located one block southwest of Phase 1 and contains three buildings. All the buildings have interior courtyards.

The community has several floorplans for its 341 one-bedrooms and 129 two-bedrooms. Studios and one-bedrooms range from 466 to 993 square feet. Two-bedroom plans range from 912 to 1,329 square feet, and live/work units range from 809 to 1,114 square feet. On the day of our site visit in May, there were two leasing agents on duty with no wait for assistance. There were very few units available, but the leasing agent offered a couple units with lease terms ranging from seven to 12 months. There were no concessions offered.

Features & Amenities

Eastside Village offers nine- to 12-foot ceilings, antique hardwood floors, washer and dryers in selected units, high speed internet access, patios/balconies. Most kitchens feature Formica counter tops, GE appliances, and built-in microwaves, but some have stone kitchen countertops. Bathrooms include ceramic tile floors and oversized tubs.

Community amenities include ground-level retail, a coffee house, central courtyard with pool, 24-hour fitness facility, business center, on-site storage, and trash chutes. Unassigned parking spaces are provided in a controlled access parking deck.

Additional Fees

There are two additional fees at Eastside Village: a $300 deposit, of which $200 is refundable, and a $50 application fee. Up to two pets are allowed, but there are breed restrictions. The pet deposit is a non-refundable $400 for one pet, or $600 for two, of which $300 is refundable.

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Raiford Road: City of Carrollton

6. Development Activity

This section identifies apartment communities that are either under construction or proposed in the apartment CMA (Map 5). The total number of units, estimated construction timeframe, and quoted rents are provided, as available.

6.1 Under Construction Apartments

There are five apartment communities currently under construction in the Carrollton and Addison areas, with 1,918 units scheduled for delivery by 2010 (Table 35). None are Transit Oriented Development (TOD) projects. Fairfield Residential’s 15777 Quorum Drive in Addison Circle will deliver 414 apartment units by the end of 2008, while the remaining units will be completed in 2009 or 2010. The Mansions at Sunset Ridge will provide the greatest number of units at 539; Vitruvian Park, however, is part of a greater redevelopment effort undertaken by UDR (formerly United Dominion Realty) that will ultimately deliver approximately 5,500 units to the west side of Addison. While three communities have already advertised monthly rents ranging between $802 and $1,555, Lincoln at Mustang Park and Allegro Addison have not yet reported rents.

Table 35: Apartment Communities Under Construction, CMA, June 2008 Map Est. Key Community Location City Developer Units Comp. Quoted Rents 1 Mansions at Sunset Ridge Carrollton Pkwy/Hwy 121 Carrollton Carrollton Properties 539 2010 $802 - $1,453 2 15777 Quorum Quorum Drive Addison Fairfield Residential 414 2008 $945 - $1,555 3 Vitruvian Park - Phase I Brookhaven Club Drive Addison UDR 393 2010 $875 - $1,500 4 Lincoln at Mustang Park Plano Pkwy/KCS Railroad Carrollton Lincoln Properties 300 2009 Not set yet 5 Allegro Addision Addison Circle/Spectrum Dr. Addison SNK Group, Inc. 272 2009 Not set yet Total 1,918 Sources: Warren & Associates

6.2 Proposed Apartments

There are three proposed apartment developments totaling 6,969 units in Carrollton and Addison (Table 36). None are TOD projects. Construction is expected to begin this year on the 1,500- unit Groves at Mustang Park. Keller Springs Lofts anticipates beginning construction of 362 units next year. The first phase of Vitruvian Park is currently under construction with 393 units expected to be delivered by 2010; the remaining 5,107 units should be completed by 2017. UDR purchased and will demolish nine old apartment complexes to make way for the $1 billion Vitruvian Park project.

Table 36: Proposed Apartment Communities, CMA, June 2008 Map Total Est. Key Community Location City Developer Units Start 1 Vitruvian Park Brookhaven Club Drive Addison UDR 5,107 2010 2 The Groves at Mustang Park Plano Pkwy/KCS Railroad Carrollton Sterling Development 1,500 2008 3 Keller Springs Lofts Keller Springs Rd./Addison Rd. Addison Icon Partners 362 2009 Total 6,969 Sources: Warren & Associates

July 2008 40

Map 5: Apartment Development Activity, CMA, 2008

September 2007 41

Raiford Road: City of Carrollton 7. Apartment Inventory and Vacancy Rate Forecast

7.1 Rental Unit Forecast

If all of the proposed apartment developments are constructed, including 330 units at the Raiford Road site, the rental community inventory within the CMA could grow by 4,435 units by the end of 2012 (Table 37). Given current developer plans, deliveries would escalate rapidly from 414 completions in 2008 to 1,999 units in 2010. Completions would decline to 725 units in 2012. Although primary research was conducted to identify all existing and proposed development activity in the area, additional unannounced projects could emerge by the time the Raiford Road site is developed.

Table 37: Apartment Development Timeline, Competitive Market Area, 2008-2012 2008 2009 2010 2011 2012 Total Beginning Inventory 32,503 32,917 33,489 35,488 36,213 15777 Quorum 414 414 Lincoln at Mustang Park 300 300 Allegro Addision 272 272 Vitruvian Park - Phase I 393 393 Mansions at Sunset Ridge 539 539 The Groves at Mustang Park 375 375 375 1,125 Keller Springs Lofts 362 362 Vitruvian Park 350 350 700 Raiford Road Site 330 330 Apartment Completions 414 572 1,999 725 725 4,435 Ending Inventory 32,917 33,489 35,488 36,213 36,938 Sources: Real Data and Warren & Associates.

7.2 Demand and Vacancy Rate Forecast

Since 2003, net absorption in the CMA has averaged 368 units per year, ranging from negative 221 to 962 units. Based on the completion and net absorption forecasts in Table 38, the CMA vacancy rate could peak at 6.9% in 2010 before recovering to 6.4% in 2012. Delivery of the 330 units at the Raiford Road site in 2010 would contribute to the vacancy rate peak.

Table 38: Projected Vacancy Rate, Competitive Market Area, 2008-2012 2008 2009 2010 2011 2012 Beginning Vacant Inventory 1,547 1,611 1,733 2,632 2,557 Plus Apartment Completions 414 572 1,999 725 725 Less Net Absorption 350 450 1,100 800 750 Ending Vacant Inventory 1,611 1,733 2,632 2,557 2,532 Total Ending Inventory 34,528 35,222 38,120 38,770 39,470 Vacancy Rate 4.7% 4.9% 6.9% 6.6% 6.4% Sources: Real Data and Warren & Associates.

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Raiford Road: City of Carrollton

8. Apartment Product and Rent Recommendations

Apartment demand is highly correlated to job growth. In the last five years, the office submarket surrounding Carrollton has added approximately 9,300 office-occupying jobs. This trend should continue for the next five years.

The apartment market is very strong with a CMA vacancy rate of 4.2%. Over the last five years, the CMA vacancy rate has consistently outperformed the Dallas Metro area’s vacancy rate, which is currently 7.1%. The mixed-use comparable vacancy rate is only 5.8%, which is also below that of the Dallas Metro Area’s.

Rental rates in the CMA have been consistently higher than those in the Dallas Metro area, and the mixed-use comparables currently have an aggregate average per square foot rental rate of $1.50. Given the strong demand and rent performance, a market-rate apartment community is recommended for the initial phase of development on the Raiford Road site.

8.1 Target Market

The primary target market for apartments on the Raiford Road site is young professionals 20- to 35-years old. Although the greatest absolute change in CMA population is forecasted in the 45- 54 and 55-64 age cohorts, the majority of these persons will pursue ownership over renting. Generally, these cohorts are in their peak wage earning years and will have the financial capability to purchase a home.

Approximately 50%-60% of the initial residents will be moving from within the Dallas metro area, with the balance relocating to the region for employment. With the greatest absolute job growth in Dallas coming from office using and service sectors such as Professional and Technical Services, Administrative and Waste Services, Health Care and Social Assistance, and Management of Companies and Enterprises, these households will most likely have incomes exceeding $50,000 annually.

8.2 Product Recommendations

At a density of 22 units per acre, a total of 330 apartments could be constructed on the 15-acre site east of Raiford Road bordering the Forneaux Creek greenway (highlighted in Figure 2). The 15-acre site is recommended for apartments because it will create a link with the neighboring 12.5-acre site that will likely be developed with retail and/or a hotel and provide a buffer between retail/hotel uses and for-sale housing. Higher density development will also support use of the adjacent greenway. The site’s topography will allow for sweeping views in all directions, with premiums achievable for greenway-facing units. The apartments could be constructed in a combination of single- and mixed-use buildings. The mixed-use buildings would contain units above professional office and/or retail space.

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Raiford Road: City of Carrollton

15.0 Ac

Figure 2: Riford Road Site Rendering With Recommended Apartment Tract Highlighted

8.3 Unit Mix

A total of 330 units are recommended for 15 acres of the Raiford Road site. Based on current and forecasted market opportunities, the following unit mix is recommended (Table 38):

Table 39: Recommended Unit Mix, Raiford Road Site, 2008 Heated % of Unit Type Sq. Ft. Units Total Studio 400-600 35 10.6% 1BR/1BA 600-850 215 65.2% 2BR/2BA 850-1,150 80 24.2% Total 330 100% Source: Warren & Associates

The unit mix among the mixed-use comparables is approximately 76% studio/one-bedrooms, 23% two-bedrooms, and 0.5% three-bedrooms. The Raiford Road site should have a similar mix of units, with the exception of no three-bedrooms.

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Raiford Road: City of Carrollton

8.3.1 Studios

Among communities in the Carrollton/Addison/Coppell submarket, studios from 400 to 500 square feet are the most prevalent (Graph 16). There are no studios greater than 700 square feet.

Graph 16: Histogram of Studio Unit Sizes, 2008 4.5 4

3.5

3 2.5 2 1.5 1

Communities of Number 0.5

<300 300-400 400-500 500-600 600-700 >700 Unit Sizes (Sq ft)

8.3.2 One-bedrooms

Units ranging from 550-700 square feet and 700-850 square feet are by far the most prevalent unit size for one-bedrooms (Graph 17). No one-bedrooms contain more than 1,000 square feet.

Graph 17: Histogram of One-Bedroom Unit Sizes, 2008 40

35 30

20 15

Communities of Number 5

0 <400 400 - 550 550 - 700 700 - 850 850 - 1,000 >1,000 Unit Sizes (Sq ft)

July 2008 45

Raiford Road: City of Carrollton

8.3.3 Two-bedrooms

As shown in Graph 18, two-bedrooms ranging from 850 to 1,150 square feet are by far the most prevalent. However, a larger unit ranging from 1,150-1,300 square feet could also be considered.

Graph 18: Histogram of Two-bedroom Unit Sizes, 2008 35

15 10

Communities of Number 5

<700 700-850 850 - 1,000 - 1,150 - 1,300 - 1,450 - >1,600 1,000 1,150 1,300 1,450 1,600

Unit Sizes (Sq ft)

8.4 Rent

Based on an analysis of the Carrollton/Addison/Coppell submarket, the mixed-use comparable community performance, and the proposed amenities of the Raiford Road site, the following base rents and rents per square foot should be achievable in 2008 dollars (Table 40). These rents are net of premiums that could be generated for specific views, floors and interior features. They also do not reflect concessions that could be required during initial lease-up. These rents do include adjustments for a new development in the Carrollton submarket.

Table 40: Rent Recommendation, Raiford Road Site, 2008 Heated Rent Per Monthly Unit Type Sq. Ft. Sq. Ft. Rent Studio 400-600 $1.25-$1.30 $520-$750 1BR/1BA 600-850 $1.20-$1.25 $750-$1,020 2BR/2BA 850-1,150 $1.10-$1.15 $980-$1,270 Average 768 $1.21 Source: Warren & Associates

Based on CMA trends, the Raiford Road site should expect to attain annual rental increases of approximately 1.5-2.0% following lease-up. Of the comparables, only Eastside Village and Legacy Village are offering specials for tenants. In July, Eastside Village was offering a 4%

July 2008 46

Raiford Road: City of Carrollton discount, which is most likely due to its location in downtown Plano. Legacy Village was offering $600 off on the first month’s rent, which is most likely due to competitive pressure from a other communities in the development. AMLI at La Villita, which remains in lease-up, is not offering any rent concessions. If the Forneaux Creek greenway is in place, there are no significant changes in the Dallas economy, and there are no additional new apartment community developments, the Raiford Road site should require minimal lease-up concessions.

8.4.1 Studios

Given the potential to generate premiums for a mixed-use product, the Raiford Road site’s 400- to 600-square foot studios should generate $1.25 to $1.30 per square foot (Graph 19). Studios show a strong correlation between price per square foot and size. Smaller studios of approximately 300 square feet have been able to generate rents of almost $1.70 per square foot. Studios ranging from 400-500 square feet are currently commanding rents up to $1.32 per square foot.

Graph 19: Studio per Square Foot Rents by Unit Size, Carrollton/Addison/Coppell Submarket, 2008

$1.70 Studio

Raiford Road Site $1.50

$1.30

$1.10 per Sq Price ft $0.90

$0.70 200 300 400 500 600 700 Size (sq. ft)

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Raiford Road: City of Carrollton

8.4.2 One-bedrooms

Given the potential to generate premiums for a mixed-use product, the Raiford Road site’s 600- to 850-square foot one-bedrooms should generate $1.20 to $1.25 per square foot (Graph 20). One-bedrooms show a weaker correlation between per square foot price and size.

Graph 20: One-Bedroom per Square Foot Rents by Unit Size, Carrollton/Addison/Coppell Submarket, 2008

$1.50 One-bedroom

Raiford Road Site $1.30

$1.10

$0.90 per Sq ft Price $0.70

$0.50 400 500 600 700 800 900 1000 1100 Size (sq. ft)

8.4.3 Two-bedrooms

As shown in Graph 21, the Raiford Road site should be able to generate two-bedroom rents ranging from $1.10 to $1.15 per square foot. Among the mixed-use comparables, two-bedroom per square foot rents range widely and do not show a strong correlation between price and size. As a new mixed-use product, the Raiford Road site should command rents in the higher end of the range.

Graph 21: Two-Bedroom per Square Foot Rents by Unit Size, Carrollton/Addison/Coppell Submarket, 2008 $1.50 $1.40 Two-bedroom $1.30 Raiford Road Site $1.20 $1.10 $1.00

$0.90

per Sq ft Price $0.80 $0.70 $0.60 $0.50 600 800 1000 1200 1400 1600 1800 Size (sq. ft)

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Raiford Road: City of Carrollton

8.5 Absorption

Apartments at the Raiford Road site should be able to lease-up at a rate of 20-25 units per month, reaching a stable 92% occupancy rate within 16 months. Most recently, the mixed-use comparable AMLI at La Villita was able to achieve a lease-up period of ten months averaging approximately 30 units per month. As shown in Graph 22, AMLI at La Villita was able to lease up to 24% of its units in the first two months, with another 16% to 23% in successive two-month periods until it achieved stabilized occupancy.

Graph 22: Lease-Up Pace, AMLI at La Villita, Los Colinas, 2007-2008 30%

25%

20% 15%

10%

of Units% Absorbed 5% 0% 0-2 2-4 4-6 6-8 8-10 Months in Market

Other recently opened communities in the Carrollton/Addison/Coppell submarket include Spicewood Crossing and Estates of Coppell. Spicewood Crossing achieved lease-up in less than a year and Estates of Coppell in just over one year.

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Raiford Road: City of Carrollton

9. Single-Family

This section defines the single-family Competitive Market Area (CMA), which differs from the CMA used for the apartment market, and outlines demographic trends and forecasts for the CMA and the overall Dallas market. It also describes single-family market conditions including building permits and closings for both the CMA and Dallas County.

9.1 CMA

As shown on Map 6, the single-family CMA for the Raiford Road site includes MLS Areas 10 and 22. It is generally bounded by Parker Road, Charles Street, and the Santa Fe Railroad to the north; Coit Road to the east; Interstate 635 to the south; and the Trinity River to the west.

9.2 Demographic Trends

9.2.1 Population

CMA

There were 317,304 residents in the CMA in 2008, 10.3% more than in 2000 (Table 41). While residents between the ages of 25 and 34 represented the largest age cohort, at 59,336 people, this cohort was the only one to experience a population decrease between 2000 and 2008. There were significant population increases in those age cohorts over the age of 55. The 55 to 64 cohort grew by 43.7%; 65- to 74-year-olds grew by 30.1%; 75- to 84-year olds grew by 47.1%; and those over the age of 85 grew by 54.5%.

Table 41: Population Trends by Age Cohort, CMA, 2000-2008 Age Change Cohort 2000 2008 Number Percent 0 - 4 19,845 20,942 1,097 5.5% 5 - 9 18,695 19,038 344 1.8% 10 - 14 17,257 19,038 1,782 10.3% 15 - 19 16,106 19,038 2,932 18.2% 20 - 24 22,434 24,750 2,316 10.3% 25 - 34 62,699 59,336 -3,363 -5.4% 35 - 44 52,345 52,672 328 0.6% 45 - 54 38,540 46,644 8,104 21.0% 55 - 64 21,858 31,413 9,555 43.7% 65 - 74 11,217 14,596 3,379 30.1% 75 - 84 5,177 7,615 2,438 47.1% 85+ 1,438 2,221 783 54.5% Total 287,609 317,304 29,695 10.3% Source: ESRI

July 2008 50

Raiford Road: City of Carrollton

Map 6: Competitive Market Area – Single-Family, Raiford Road Site, 2008

July 2008 51

Raiford Road: City of Carrollton Population growth within the CMA is expected to increase slightly to 10.8% between 2008 and 2013, with a projected population of 351,519 people within the CMA by 2013 (Table 42). The only age group predicted to decrease is the 35- to 44-year-old cohort, while the balance is expected to grow between 3.4% (10- to 14-year-olds) and 42.4% (85+).

Table 42: Population Forecast by Age Cohort, CMA, 2008-2013 Age Change Cohort 2008 2013 Number Percent 0 - 4 20,942 23,552 2,610 12.5% 5 - 9 19,038 20,037 998 5.2% 10 - 14 19,038 19,685 647 3.4% 15 - 19 19,038 20,037 998 5.2% 20 - 24 24,750 31,637 6,887 27.8% 25 - 34 59,336 64,328 4,992 8.4% 35 - 44 52,672 51,673 -999 -1.9% 45 - 54 46,644 53,079 6,436 13.8% 55 - 64 31,413 37,964 6,551 20.9% 65 - 74 14,596 18,279 3,683 25.2% 75 - 84 7,615 8,085 470 6.2% 85+ 2,221 3,164 943 42.4% Total 317,304 351,519 34,215 10.8% Source: ESRI

Dallas Metro Area

The definition of the Dallas metro area used for this demographic analysis can be found in the Market-Rate Apartment section of this report.

There were 3,335,759 residents in the Dallas metro area in 2008, 17.4% more than in 2000 when the population was just over 2.8 million (Table 43). Residents between the ages of 25- and 34- years old represented the largest age cohort at 530,386 people. This cohort, however, experienced the smallest population increase at only 2.0% between 2000 and 2008. The largest population increases were in the 55- to 64-year-old age cohort and the 85+ age cohort, at 55.3% and 46.7% growth, respectively.

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Raiford Road: City of Carrollton

Table 43: Population Trends by Age Cohort, Dallas Metro Area, 2000-2008 Age Change Cohort 2000 2008 Number Percent 0 - 4 235,900 276,868 40,968 17.4% 5 - 9 227,374 253,518 26,144 11.5% 10 - 14 210,321 243,510 33,190 15.8% 15 - 19 198,952 236,839 37,887 19.0% 20 - 24 210,321 243,510 33,190 15.8% 25 - 34 520,117 530,386 10,268 2.0% 35 - 44 488,854 527,050 38,196 7.8% 45 - 54 349,587 463,671 114,083 32.6% 55 - 64 193,268 300,218 106,951 55.3% 65 - 74 116,529 143,438 26,909 23.1% 75 - 84 68,212 83,394 15,182 22.3% 85+ 22,737 33,358 10,620 46.7% Total 2,842,172 3,335,759 493,587 17.4% Source: ESRI

The population of the Dallas metro area is expected to increase by 348,281 residents, or 10.4%, between 2008 and 2013 (Table 44). Like the CMA, the only age cohort expected to decrease in population is the 35- to 44-year-old age cohort, although at a lesser rate than the CMA. The remaining age groups are expected to increase in population from 6.0% (75- to 84-year-olds) to 25.9% (65- to 74-year-olds).

Table 44: Population Forecast by Age Cohort, Dallas Metro Area, 2008-2013 Age Change Cohort 2008 2013 Number Percent 0 - 4 276,868 305,775 28,907 10.4% 5 - 9 253,518 272,619 19,101 7.5% 10 - 14 243,510 257,883 14,372 5.9% 15 - 19 236,839 254,199 17,360 7.3% 20 - 24 243,510 283,671 40,161 16.5% 25 - 34 530,386 571,026 40,641 7.7% 35 - 44 527,050 523,134 -3,916 -0.7% 45 - 54 463,671 530,502 66,831 14.4% 55 - 64 300,218 375,772 75,554 25.2% 65 - 74 143,438 180,518 37,080 25.9% 75 - 84 83,394 88,417 5,023 6.0% 85+ 33,358 40,524 7,167 21.5% Total 3,335,759 3,684,040 348,281 10.4% Source: ESRI

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Raiford Road: City of Carrollton

9.2.2 Housing Units

CMA

There were an estimated 146,694 housing units in the CMA in 2008, an 11.2% increase from 2000 (Table 45). Vacancy increased 63.6% from 6,994 units in 2000 to 11,442 units in 2008. As mentioned in the Market-Rate Apartment section, the higher vacancy is likely a product of several trends, including a slower for-sale housing market, excess inventory, and the increasing propensity toward multiple-home ownership among affluent households. Owner-occupied housing units increased 8.6% between 2000 and 2008, and renter-occupied housing units increased 7.9%.

Table 45: Housing Unit Trends, CMA, 2000-2008 2000 2008 2000 - 2008 Change Tenure Number % Share Number % Share Number Percent Owner Occupied 56,874 43.1% 61,758 42.1% 4,884 8.6% Renter Occupied 68,090 51.6% 73,494 50.1% 5,403 7.9% Vacant 6,994 5.3% 11,442 7.8% 4,448 63.6% Total 131,958 100% 146,694 100% 14,736 11.2% Source: ESRI

Housing units are expected to grow at a comparable 11.1% rate between 2008 and 2013 (Table 46). The number of vacant units will also increase, but at a much lower 18.2% rate between 2008 and 2013. The relative share of owner-occupied, renter-occupied, and vacant housing units should remain steady.

Table 46: Housing Unit Forecast, CMA, 2008-2013 2008 2013 2008 - 2013 Change Tenure Number % Share Number % Share Number Percent Owner Occupied 61,758 42.1% 65,978 40.5% 4,220 6.8% Renter Occupied 73,494 50.1% 83,409 51.2% 9,915 13.5% Vacant 11,442 7.8% 13,521 8.3% 2,079 18.2% Total 146,694 100% 162,908 100% 16,214 11.1% Source: ESRI

Dallas Metro Area

There were an estimated 1,311,017 housing units in the Dallas metro area in 2008, an 18.7% increase from 2000 (Table 47). Following the CMA trend, the number of vacant housing units increased 84.3% to 206,081 in 2008. The number of owner-occupied housing units increased by 21.2% and the share of owner-occupied housing units increased from 52.0% to 53.1%. The number of renter-occupied housing units only increased 6.9% from 2000 to 2008.

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Raiford Road: City of Carrollton

Table 47: Housing Unit Trends, Dallas Metro Area, 2000-2008 2000 2008 2000 - 2008 Change Tenure Number % Share Number % Share Number Percent Owner Occupied 574,567 52.0% 696,150 53.1% 121,583 21.2% Renter Occupied 468,493 42.4% 500,808 38.2% 32,316 6.9% Vacant 61,876 5.6% 114,058 8.7% 52,182 84.3% Total 1,104,936 100% 1,311,017 100% 206,081 18.7% Source: ESRI

Housing units are expected to increase by 148,289, or 11.3%, from 2008 to 2013 (Table 48). The number of vacant housing units will continue to grow at a faster rate than both owner- occupied and renter-occupied housing units. The share of owner-occupied units will decrease slightly from 53.1% in 2008 to 52.1% in 2013, while the share of renter-occupied housing units will remain steady. The share of vacant units will increase to 9.7%.

Table 48: Housing Unit Forecast, Dallas Metro Area, 2008-2013 2008 2013 2008 - 2013 Change Tenure Number % Share Number % Share Number Percent Owner Occupied 696,150 53.1% 760,298 52.1% 64,148 9.2% Renter Occupied 500,808 38.2% 557,455 38.2% 56,646 11.3% Vacant 114,058 8.7% 141,553 9.7% 27,494 24.1% Total 1,311,017 100% 1,459,306 100% 148,289 11.3% Source: ESRI

9.2.3 Households by Income

The CMA median household income grew 32.8% from $55,171 in 2000 to $73,247 in 2008 (Table 49). While the median household income is higher in the CMA than the Dallas metro area, income grew at a faster rate of 36.8% in the metro area.

Table 49: Median Household Income Trends, CMA and Dallas Metro Area, 2000-2008 2000 - 2008 Change Geography 2000 2008 Number Percent CMA $55,171 $73,247 $18,076 32.8% Dallas Metro Area $48,351 $66,160 $17,809 36.8% Source: ESRI

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The median household income in both the CMA and the Dallas metro area is projected to grow at a rate just over 15% from 2008 to 2013 (Table 50). The median incomes in the CMA should remain approximately $8,000 more than the corresponding measure for the Dallas metro area.

Table 50: Median Household Income Forecast, CMA and Dallas Metro Area, 2008-2013 2008 - 2013 Change Geography 2008 2013 Number Percent CMA $73,247 $84,723 $11,476 15.7% Dallas Metro Area $66,160 $76,457 $10,297 15.6% Source: ESRI

CMA

There were an estimated 135,269 households in the CMA in 2008, up 8.2% since 2000 (Table 51). Households earning more than $200,000 annually comprised the fastest growing income cohort in the CMA between 2000 and 2008, up by 5,359 households or 89.3% in eight years. There was also significant growth in the number of households earning between $100,000 and $149,999 per year. The number of households earning less than $50,000 decreased in the CMA.

Table 51: Household Trends by Income Cohort, CMA, 2000-2008 2000 - 2008 Change Household Income 2000 2008 Number Percent <$15,000 8,380 5,681 -2,698 -32.2% $15,000 - $24,999 10,381 6,087 -4,294 -41.4% $25,000 - $34,999 15,133 9,063 -6,070 -40.1% $35,000 - $49,999 21,887 18,532 -3,355 -15.3% $50,000 - $74,999 26,640 30,030 3,390 12.7% $75,000 - $99,999 15,509 22,996 7,487 48.3% $100,000 - $149,999 15,133 22,860 7,727 51.1% $150,000 - $199,999 6,003 8,657 2,654 44.2% $200,000+ 6,003 11,363 5,359 89.3% Total 125,070 135,269 10,199 8.2% Source: ESRI

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It is estimated that there will be approximately 149,403 households in the CMA by 2013, representing a 10.4% growth rate since 2008 (Table 52). Higher income households will continue to increase over the next five years, with those earning more than $200,000 growing 53.8%, followed by those earning between $100,000 and $149,999 at 42.5%. The number of households earning less than $50,000 will continue to decrease across all income cohorts.

Table 52: Household Forecast by Income Cohort, CMA, 2008-2013 2008 - 2013 Change Household Income 2008 2013 Number Percent <$15,000 5,681 4,930 -751 -13.2% $15,000 - $24,999 6,087 4,333 -1,754 -28.8% $25,000 - $34,999 9,063 5,827 -3,236 -35.7% $35,000 - $49,999 18,532 14,193 -4,339 -23.4% $50,000 - $74,999 30,030 34,363 4,333 14.4% $75,000 - $99,999 22,996 23,755 759 3.3% $100,000 - $149,999 22,860 32,570 9,709 42.5% $150,000 - $199,999 8,657 11,952 3,295 38.1% $200,000+ 11,363 17,480 6,118 53.8% Total 135,269 149,403 14,134 10.4% Source: ESRI

Dallas Metro Area

There were an estimated 1,196,188 households in the Dallas metro area in 2008, up 14.6% since 2000 (Table 53). Like the CMA, households earning more than $200,000 increased at the fastest rate across income cohorts, at 126.1% growth from 2000 to 2008. The largest income cohort, those making between $50,000 and $74,999, only grew 15.2% in eight years. The number of households earning less than $50,000 decreased across all income cohorts in the Dallas metro area.

Table 53: Household Trends by Income Cohort, Dallas Metro Area, 2000-2008 2000 - 2008 Change Household Income 2000 2008 Number Percent <$15,000 119,010 90,910 -28,100 -23.6% $15,000 - $24,999 113,790 81,341 -32,449 -28.5% $25,000 - $34,999 132,581 99,284 -33,298 -25.1% $35,000 - $49,999 172,251 165,074 -7,177 -4.2% $50,000 - $74,999 207,745 239,238 31,492 15.2% $75,000 - $99,999 121,098 185,409 64,311 53.1% $100,000 - $149,999 104,395 181,821 77,426 74.2% $150,000 - $199,999 34,450 65,790 31,340 91.0% $200,000+ 38,626 87,322 48,696 126.1% Total 1,043,947 1,196,188 152,241 14.6% Source: ESRI

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There will be over 1.3 million households in the Dallas metro area by 2013, up 10.1% since 2008 (Table 54). Households earning more than $200,000 will continue to experience strong growth at 70.5% from 2008 to 2013. Households making less than $50,000 a year will also continue to decrease in the overall Dallas metro area.

Table 54: Household Forecast by Income Cohort, Dallas Metro Area, 2008-2013 2008 - 2013 Change Household Income 2008 2013 Number Percent <$15,000 90,910 81,676 -9,235 -10.2% $15,000 - $24,999 81,341 61,915 -19,425 -23.9% $25,000 - $34,999 99,284 76,406 -22,877 -23.0% $35,000 - $49,999 165,074 144,908 -20,166 -12.2% $50,000 - $74,999 239,238 279,278 40,040 16.7% $75,000 - $99,999 185,409 187,064 1,654 0.9% $100,000 - $149,999 181,821 242,392 60,572 33.3% $150,000 - $199,999 65,790 94,849 29,059 44.2% $200,000+ 87,322 148,860 61,539 70.5% Total 1,196,188 1,317,349 121,161 10.1%

9.3 Market Trends

9.3.1 Building Permits

As shown in Table 55, the number of new residential building permits issued in the City of Carrollton ranged from a high of 547 in 2003 to a low of 218 in 2006. Overall, single-family houses accounted for 66% of building permits, compared with 34% for multi-family. No multi- family permits were issued in 2004 or 2006.

Table 55: Residential Building Permits, City of Carrollton, 2003-2007 Single- Multi- Total Year Family Family Units 2003 249 298 547 2004 503 0 503 2005 242 129 371 2006 218 0 218 2007 199 289 488 Total 1,411 716 2,127 % of Total 66% 34% Source: US Census

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Table 56 shows residential building permits issued in Dallas County from 2003 to 2007. Similar to the City of Carrollton, of the 70,466 total permits issued, 64% were for single-family units. Total permits ranged from a high of 15,448 in 2003 to a low of 12,264 in 2004.

Table 56: Residential Building Permits, Dallas County, 2003-2007 Single- Multi- Total Year Family Family Units 2003 9,293 6,155 15,448 2004 9,398 2,866 12,264 2005 10,289 3,884 14,173 2006 9,730 5,615 15,345 2007 6,368 6,868 13,236 Total 45,078 25,388 70,466 % of Total 64% 36% Source: US Census

Table 57 shows Carrollton’s percentage of total Dallas County residential building permits between 2003 and 2007. The City accounted for only 3% of the county’s permits over the five- year period. Annual shares ranged from a high of 4.1% in 2004 to a low of 1.4% in 2006, indicative of an established market approaching build-out.

Table 57: Residential Building Permits, Carrollton and Dallas County, 2003-2007 Dallas Carrollton % Year Carrollton County of Dallas Cty. 2003 547 15,448 3.5% 2004 503 12,264 4.1% 2005 371 14,173 2.6% 2006 218 15,345 1.4% 2007 488 13,236 3.7% Total 2,127 70,466 3.0% Source: US Census

9.3.2 Closings

The CMA for single-family development includes Multiple Listing Service (MLS) Areas 22 and 10. The City of Carrollton is located within MLS Area 22. As shown in Table 58, single-family closings in Area 22 have ranged from a high of 2,385 in 2005 to a low of 2,031 in 2007. There were 585 closings in the first four months of 2008. Annualizing the year-to-date closings would result in 1,755 closings in 2008. However, this estimate does not account for the fact that there is typically slower sales activity at the beginning of the calendar year.

Table 58: Single-Family Closing Trends, MLS Area 22, 2005-2008 YTD Avg. Avg. Sq. Avg. Price/ Year Sales Price Ft. Sq. Ft. 2005 2,388 $168,337 2,009 $83.79 2006 2,387 $174,702 2,050 $85.22 2007 2,031 $176,988 2,050 $86.35 2008 YTD 585 $181,067 2,097 $86.35 Note: 2008 through April 30.

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The average sales price for single-family homes in Area 22 consistently increased over the period, averaging $181,067 in the first four months of 2008. The average square footage of single-family homes has also increased since 2005, topping out at 2,097 square feet in 2008. The average price per square foot was fairly static, ranging from $83.79 in 2005 to $86.35 in 2007 and 2008.

Single-family closings in Area 10 have ranged from 1,841 in 2007 to 1,975 in 2006 (Table 59). There were 414 closings in the first four months of 2008. Annualizing the year-to-date activity would result in 1,242 closings in 2008, which could be a low estimate.

Table 59: Single-Family Closing Trends, MLS Area 10, 2005-2008 YTD Avg. Avg. Sq. Avg. Price/ Year Sales Price Ft. Sq. Ft. 2005 1,861 $265,404 2,754 $96.36 2006 1,975 $278,794 2,915 $95.63 2007 1,841 $276,304 2,814 $98.20 2008 YTD 414 $274,530 2,894 $94.87 Note: 2008 through April 30.

The average sales price for single-family homes in Area 10 fluctuated, ranging from a high of $278,794 in 2006 to a low of $265,404 in 2005. The average square footage followed a similar trend, fluctuating between 2,754 square feet in 2005 and 2,915 square feet in 2006. The average price per square foot was relatively unchanged, ranging from $94.87 in the first four months of 2008 and $98.20 in 2007.

As shown in Graph 23, Area 22 has a consistently higher volume of sales activity than Area 10, although the gap narrowed between the two areas in 2007. While both areas showed minimal decreases in number of closings from 2005 to 2007, Area 22 decreased more than Area 10.

Graph 23: Single-Family Closings, MLS Areas 22 and 10, 2005-2007 3,000 MLS Area 22 2,500 2,388 2,387 MLS Area 10

1,975 2,031 2,000 1,861 1,841 Closings

1,500

1,000 Number

500

- 2005 2006 2007

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In the first four months of 2008, single-family homes in the CMA (Areas 22 and 10) have been staying on the market for approximately 75 days, up from 61 days in 2007 (Graph 24).

Graph 24: Days on Market, MLS Areas 22 and 10, 2005-2008 YTD 80 75 70 66 59 61 60

30 Days on Market on Days 20

0 2005 2006 2007 2008 YTD

Single-family homes in Area 10 have a higher average price per square foot than homes in Area 22 (Graph 25). However, the average price per square foot for Area 10 decreased by 1.5% from 2005 to 2008, while the average price per square foot for Area 22 increased by 3.1% during the period.

Graph 25: Average Price Per Square Foot, MLS Areas 22 and 10, 2005-2008 YTD

$110.00 MLS Area 22 $105.00 MLS Area 10

$100.00 $98.20 $96.36 $95.63 $94.87 $95.00

$90.00 $86.35 $86.35 $85.22 $85.00 $83.79

$80.00 Average Price Per Square Foot Square Per Price Average

$75.00 2005 2006 2007 2008 YTD

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9.4 Comparable Projects

There are eight comparable single-family subdivisions in the CMA, all of them located in either the Austin Waters or Castle Hills master planned communities (Map 7). There are a total of 861 lots in the eight comparables, 20.6% of which have been sold (Table 60). Average monthly absorption has ranged from four lots at Sotherby’s Castle Hills – Phase V to 1.5 lots for both of the Reserve at Castle Hills builders. Absorption has been averaging 2.1 units per month. At this rate, there will be approximately 41 months of lot inventory in the eight comparable communities.

Table 60: Comparable Single-Family Subdivisions, Inventory and Absorption, CMA, June 2008 Estimated Months Map Total Sold Monthly Lot Key Subdivision Lots Houses Absorption Inventory 1 Castle Hills Phase V - Sotherby 135 2 4.0 33 2 Austin Waters - Darling Homes 92 12 2.4 33 3 Castle Hills - David Weekley 60's 134 85 2.0 24 4 Castle Hills Phase V - American Legend 137 2 2.0 68 5 Castle Hills - David Weekley 70's and 80s 44 30 1.7 8 6 Austin Waters - Highland Homes 44 13 1.6 19 7 Reserve at Castle Hills (Phase IV) - American Legend 138 21 1.5 78 8 Reserve at Castle Hills (Phase IV) - David Weekley Homes 137 12 1.5 83 Total/Average 861 177 2.1 41 Source: Warren & Associates

9.4.1 Castle Hills

Sotherby, American Legend, and David Weekley Homes are semi-custom home builders in the 2,500-acre master-planned Castle Hills community. Castle Hills features retail development, more than 20 neighborhood parks, hiking and biking trails, an 18-hole golf course, multiple swimming pools, and community-wide celebrations.

Sotherby Homes is developing 135 lots in Castle Hill – Phase V, which is adjacent to the Highway 121 Bypass. Along with 13 base floor plans, The Reserve at Castle Hills custom options include multiple living spaces, game and media rooms, and wine grottoes.

American Legend Homes is building on the remaining 137 lots in Phase V, as well as 138 lots with golf course and lake views at the Reserve at Castle Hills; six base floor plans are available. Luxury features include stone fireplaces, gourmet kitchens with granite countertops and tumbled tile backsplashes, jetted garden tubs, and an optional pre-wired game room. Fifty-foot home sites at The Reserve at Castle Hills are also being developed by David Weekley Homes; 16 floor plans are available for the 137 lots. Custom options include game rooms with built-in wet bars, outdoor courtyard fireplaces, and flat screen television niches.

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Map 7: Comparable Single-Family Subdivisions, CMA, 2008

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Raiford Road: City of Carrollton David Weekley Homes is also developing 134 sixty-foot lots and 44 seventy- and eighty-foot lots in Castle Hills. Along with 11 base floor plans available for the 60-foot lots and 11 different floor plans available for the 70- and 80-foot lots, David Weekley’s custom options include pre- wired media rooms, three-car tandem garages, flat-screen television niches, and outdoor living areas with built-in fireplaces and gas grills.

9.4.2 Austin Waters

Darling Homes and Highland Homes are developing a combined 136 lots on 24 acres at Austin Waters, a subdivision located in the master-planned Austin Ranch community. Darling Homes is offering 92 fifty- and seventy-foot lots at Austin Waters; five floor plans are available for the 50-foot lots and five floor plans are available at the 70-foot lots. Optional custom details include kitchens with stainless steel appliances and granite countertops, jetted garden tubs, designer staircases with iron balusters, and stone fireplaces.

Highland Homes is developing 44 home sites at Austin Waters Austin Waters; six floor plans are available. Luxury options include libraries with built-in bookshelves, game and media rooms, outdoor living areas with built-in fireplaces and gas grills, and three-car garages.

9.4.3 Pricing Summary

There are currently 36 houses either completed or under construction being marketed in the eight comparable single-family subdivisions (Table 61). American Legend’s Reserve at Castle Hills has the most homes on the market at 14, while neither homebuilder in Castle Hills – Phase V has any current listings or available inventory. The average price of a house in the comparable communities is $491,107 and the average square footage is 3,610, resulting in an average price per square foot of $136.05.

Table 61: Comparable Single-Family Subdivisions, Current Inventory and Pricing, CMA, June 2008 Current Price Average Sq. Ft. Avg. Avg. Price/ Subdivision Inventory Range Price Range Sq. Ft. Sq. Ft. Castle Hills - David Weekley 70's and 80s 6 $499,990 - $829,990 $631,657 3,800 - 4,800 4,333 $145.78 Austin Waters - Highland Homes 5 $614,990 - $716,990 $652,790 4,224 - 5,042 4,556 $143.28 Austin Waters - Darling Homes 4 $402,990 - $625,990 $508,090 2,732 - 4,265 3,616 $140.51 Reserve at Castle Hills (Phase IV) - David Weekley Homes 4 $371,375 - $471,990 $402,086 2,365 - 3,098 2,894 $138.94 Reserve at Castle Hills (Phase IV) - American Legend 14 $279,990 - $372,990 $333,990 2,000 - 3,238 2,746 $121.63 Castle Hills - David Weekley 60's 3 $399,990 - $436,064 $418,027 3,412 - 3,614 3,513 $118.99 Total/Average 36 $491,107 3,610 $136.05 Source: Warren & Associates

The Austin Waters – Highland Homes development has the most expensive average house price at $652,790 and offers the largest homes at an average of 4,556 square feet. American Legend’s Reserve at Castle Hills has the least expensive and smallest home of the comparables. David Weekley’s Castle Hills 70’s and 80’s subdivision has the highest average price per square foot at $145.78 and their Castle Hills 60’s development has the lowest average price per square foot at $118.99.

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9.5 Future Development Activity

There are four proposed single-family communities in the CMA, containing a total of 201 units (Map 8). Austin Woods and Diamond Creek are expected to begin construction later in 2008 and Austin Waters – Phase 1B and Phase 2 are expected to begin construction in 2009 (Table 62). Austin Woods and both phase of Austin Waters are part of the master-planned community of Austin Ranch.

Table 62: Proposed Single-Family Developments, CMA, June 2008 Map Est. Key Development Location Developer Units Start 1 Austin Woods Plano Pkwy/Parker Rd. Hensly Lamkin Rachel Architects, Inc. 49 2008 2 Diamond Creek Plano Pkwy Platinum Series by Mark Mothan 6 2008 3 Austin Waters - Phase 1B Plano Pkwy/Windhaven Rd. Billingsley Company 16 2009 4 Austin Waters - Phase 2 Plano Pkwy/Windhaven Rd. Billingsley Company 130 2009 Total/Average 201 Source: Warren & Associates 9.6 Site Recommendations and Forecasts

The opportunity for single-family development on the Raiford Road site is limited to the north side of Furneaux Creek and the planned greenway. A narrow 11-acre parcel could be allocated to single-family housing adjacent to two existing neighborhoods north and east of the site (shown and highlighted in Figure 3). Cemetery Hill Road could be extended into the site to provide access from Frankford Road.

11.0 Ac

15.0 Ac

Figure 3: Raiford Road Site Rendering With Recommended Single-Family Tract Highlighted

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Map 8: Single-Family Subdivision Development Activity, CMA, 2008

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Raiford Road: City of Carrollton While single family housing will provide an important buffer for adjacent neighborhoods, it should comprise only a portion of the Raiford Road site’s housing mix. Because housing diversity will accelerate absorption and create a higher land value for the City, a variety of for- sale product should be offered. Limiting the northern portion of the site to single family lots will diminish the value and brand of a vibrant community fronting a greenway within walking distance of the Trinity Mills DART light rail station.

The Raiford Road site is an in-fill property that is well-positioned to accommodate higher- density housing. As a result, single-family should be limited to the 11 acres that adjoin existing neighborhoods.

9.6.1 Target Market

Because the site is not part of a master-planned community with family-focused recreational amenity packages, the target market is primarily singles, young couples, and empty nesters seeking detached product. This is also consistent with CMA and Dallas Metro Area demographic forecasts that show a decline in population from ages 35 to 44 between 2008 and 2013. This age cohort, which represents the prime child-rearing years, is the only one expected to decline.

The most rapid population growth, in both absolute and percentage terms, is expected in 20- to 34-year olds, and 45- to 64-year olds. These young adults and baby boomers/empty nesters are both seeking locations and residences with urban amenities and connectivity.

Based on market and demographic research, the Raiford Road site would struggle to compete with new high-income single family product in the north Carrollton communities of Castle Hills and Austin Waters. These two master-planned developments, as profiled in this report, target families seeking large lots, country club-type amenities, new schools, and closer proximity to corporate jobs in Legacy.

9.6.2 Product and Pricing

Lots should be approximately 50 feet in width, supporting houses from 2,200 to 2,800 square feet. At least one floor plan should have a first-floor master bedroom to accommodate the empty-nester buyer. House prices would range from $290,000 to $400,000, or $132 to $143 per square foot. Standard features should include the following:

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9.6.3 Demand Forecast

CMA Household Growth

The CMA owner-occupied housing share is expected to decline from 42% in 2008 to 40.5% in 2013. These shares are well below the Dallas metro area shares of 53.1% and 52.1% for the two time periods, reflecting the established neighborhoods and higher-density housing corridors in the CMA.

Based on the forecasted net increase of 14,134 households in the CMA over the next five years, and a 38% homeownership rate, there would be approximately 5,370 prospective new homebuyers. Given the recommended sales prices, the target market households will earn between $75,000 and $150,000 annually (2008 dollars), representing 74% of the 2008-2013 increase in the CMA. This results in 3,974 income-qualified new homebuyer households. If the single-family target market is ages 25 to 34, and 45 to 64, the 52% share of growth produces a pool of 2,066 prospective homebuyers. In 2008, single-family houses represented an estimated 80% of all CMA for-sale closings, corresponding to demand for 1,652 units by 2013. Given the lack of land available for new single-family development in the CMA, the current 80% single family share is likely to decline to 50% to 60% for new product over the next five years. This will result in demand for 1,033 to 1,239 new single family units.

With 50-foot lot widths, the 11-acre site could contain a total of approximately 55 to 60 houses, with 10% of the gross acreage dedicated to streets and utilities. This project would require a capture rate of only 4.4% to 5.8% of the age, income, and tenure qualified target market of 1,033 to 1,239 units between 2008 and 2013.

Comparable Subdivisions

The eight comparable single-family subdivisions currently being marketed in the CMA are collectively selling 200 houses per year. This would result in aggregate absorption potential of 1,000 houses over the next five years. This is less than the forecast of 1,033 to 1,239 units due to the existence of subdivisions other than the identified comparables, particularly in MLS area 10, and the current slowdown in the national and local housing markets.

At the 200-unit annual pace, the eight comparable subdivisions should be sold out in 3.4 years. Although timing for four additional proposed projects is somewhat uncertain, the 201 houses represent another year of inventory. The combined 885 unsold houses in these projects is less than the 1,000 units that would be supportable at the current absorption pace, and well below the 1,033 to 1,239-unit forecast based on 2008-2013 household growth.

The average sales pace of 2.1 houses per month in the comparable subdivisions currently being marketed in the CMA would equate to a 26- to 29-month absorption period for the Raiford Road site. However, if the Furneaux Creek greenway is constructed as planned, and houses are priced under $400,000, the sales pace should exceed the current average pace. Based on continued economic expansion in the Dallas market, 2.5 to 3.0 houses per month should be sustainable, resulting in an 18- to 22-month marketing period.

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10. Townhouses

This section describes townhouse market conditions, including average pricing for closings and active listings in the for-sale CMA. It also identifies comparable townhouse developments currently being marketed in the CMA, providing total units, pricing, size ranges, and estimated monthly absorption. Future townhouse development activity is also described.

10.1 Market Trends

As shown in Table 63, there have been 37 townhouse closings in MLS Area 10 in 2008 YTD. The average price of all sales was $227,625 and the average size was 1,885 square feet, for an average price per square foot of $120. Units built between 2000 and 2008 had the highest average sales price, $344,486, and the highest average price per square foot, $120. Units built before 1980 had the lowest average price per square foot of $81, but due to their relatively larger unit size, had a higher average sales price than units completed between 1980 and 1989.

Table 63: Townhouse Closings, MLS Area 10, 2008 YTD Year Average Average Average CompletedListings Price Sq. Ft. Price/Sq. Ft. <1980 6 $188,413 2,348 $81 1980-1989 15 $128,103 1,292 $99 1990-1999 6 $249,500 1,827 $136 2000-2008 10 $344,486 2,076 $163 Total/Avg. 37 $227,625 1,885 $120 Source: Ebby Halliday

Of the 39 townhouse closings in MLS Area 22 in 2008 YTD, more than half were built between 2000 and 2008 (Table 64). The average 1,659-square foot unit sold for $156,749, or $92 per square foot. No units built between 1990 and 1999 closed during the first five months of 2008. Similar to Area 10, units built prior to 1980 were larger than units built between 1980 and 1989, but in Area 22, the average sales price was lower as well.

Table 64: Townhouse Closings, MLS Area 22, 2008 YTD Year Average Average Average Completed Listings Price Sq. Ft. Price/Sq. Ft. <1980 13 $103,508 1,615 $63 1980-1989 4 $111,125 1,221 $91 1990-1999 0 N/A N/A N/A 2000-2008 22 $255,614 2,142 $121 Total/Avg. 39 $156,749 1,659 $92 Source: Ebby Halliday

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Graph 26 compares average sales prices per square foot for townhouse closings in the two Carrollton MLS submarkets. Prices per square foot have been consistently higher in Area 10 than Area 22. Disregarding units built between 1990 and 1999, for which Area 22 had no closings, price differentials range from $8 per square foot for units built between 1980 and 1989, to $42 for units built between 2000 and 2008.

Graph 26: Average Price per Square Foot, Townhouse Closings, 2008 YTD $180 $163 Area 10 $160 Area 22 $136 $140 $121 $120 $99 $100 $91 $81 $80 $63 $60

Price PerSquare Foot $40

$20 $0 $0 <1980 1980-1989 1990-1999 2000-2008 Year Constructed

10.2 Active Listings

Table 65 shows active townhouse listings in MLS Area 10 as of May 2008. There are 68 listings, with an average listing price of $239,503, and an average size of 1,856 square feet, which equates to $128 per square foot. Units built between 2000 and 2008 account for 63% of the listings. Prices per square foot range from a low of $93 for the oldest units to $177 for newer units.

Table 65: Active Townhouse Listings, MLS Area 10, May 2008 Year Average Average Average CompletedListings Price Sq. Ft. Price/Sq. Ft. <1980 9 $202,022 2,154 $93 1980-1989 11 $148,614 1,476 $101 1990-1999 5 $243,118 1,747 $139 2000-2008 43 $364,257 2,046 $177 Total/Avg. 68 $239,503 1,856 $128 Source: Ebby Halliday

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Similar to closings for Area 10, no units currently listed in Area 22 were built between 1990 and 1999. Of the 93 total units, 72% were built between 2000 and 2008. The average 1,839-square foot unit is listed for $198,315, or $104 per square foot. Older units have the lowest average list price ($129,295), while newer units have the highest ($307,766).

Table 66: Active Townhouse Listings, MLS Area 22, May 2008 Year Average Average Average Completed Listings Price Sq. Ft. Price/Sq. Ft. <1980 20 $129,295 1,630 $79 1980-1989 6 $157,883 1,686 $95 1990-1999 0 N/A N/A N/A 2000-2008 67 $307,766 2,201 $139 Total/Avg. 93 $198,315 1,839 $104 Source: Ebby Halliday

Similar to closings, average prices per square foot for the townhouse active listings are consistently higher for Area 10, ranging from a $6 per square foot premium for units built between 1980 and 1989, to a $38 difference for units built between 2000 and 2008.

Graph 27: Average Price per Square Foot, Townhouse Active Listings, May 2008 $200 $177 $180 Area 10 $160 Area 22 $139 $139 $140 $120 $101 $95 $100 $93 $79 $80 $60

Price Per Square Foot $40 $20 $0 $0 <1980 1980-1989 1990-1999 2000-2008 Year Constructed

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As shown in Graph 28, the average price per square foot for active listings in Area 22 (Carrollton) is higher than the average price per square foot for 2008 year-to-date closings for townhouses in all age categories. For townhouses built between 2000 and 2008, the average price per square foot for 2008 year-to-date closings represented 87.1% of the average price per square foot for active listings in Area 22.

Graph 28: Average Price per Square Foot, Townhouse Closings and Active Listings, MLS Area 22, May 2008 $160 2008 YTD Closings $139 $140 Active Listings $121 $120 $95 $100 $91 $79 $80 $63 $60

$40 Price Per Square Foot $20 $0 $0 $0 <1980 1980-1989 1990-1999 2000-2008 Year Constructed

10.3 Comparable Projects

There are six comparable townhouse developments in the CMA (Map 9); the single-family CMA was also used for the townhouse CMA. There are a total of 339 units in the six comparables, 15.0% of which have been sold (Table 67). Average monthly absorption has ranged from 2.8 units at Quail Creek North to 0.5 units at the Shops at Prestonwood, Phase 1 – Vistas, and Billingsley at Austin Waters. Aggregate absorption has been averaging an estimated 1.3 units per month. At this rate, there will be approximately 30.9 months of inventory in the six comparable communities.

Table 67: Comparable Townhouse Developments, Inventory and Absorption, CMA, June 2008 Estimated Map Total Sold Monthly Months Key Project Builder Units Units Absorption Inventory 1 Quail Creek North Ryland Homes 66 28 2.8 14 2 Paige Place North Haven 10 4 2.0 3 3 Parkview Ryland Homes 48 14 1.2 28 4 Shops at Prestonwood, Phase 1 - Manors Parkway Builders 46 2 1.0 44 5 Shops at Prestonwood, Phase 1 - Vistas Parkway Builders 75 1 0.5 148 6 Billingsley at Austin Waters Billingsley 94 2 0.5 184 Total/Average 339 51 1.3 30.9 Source: Warren & Associates

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Map 9: Comparable Townhouse Developments, CMA, 2008

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Raiford Road: City of Carrollton There are currently 51 townhouses either completed or under construction being marketed in the six comparable developments (Table 68). The Manors at the Shops at Prestonwood have the most homes on the market at 18, while Paige Place has the fewest on the market at two. The average price of a unit in one of the comparable communities is $317,128 and the average size is 2,301 square feet, resulting in an average price per square foot of $137.84.

Table 68: Comparable Townhouse Developments, Current Listings and Pricing, CMA, June 2008 Current Unit Price Average Sq. Ft. Avg. Avg. Price/ Project Listings Range Price Range Sq. Ft. Sq. Ft. Shops at Prestonwood - Manors 18 $399,990 - $499,990 $450,990 2,307 - 3,312 2,817 $160.10 Shops at Prestonwood - Vistas 5 $279,990 - $339,990 $309,790 1,708 - 2,317 1,983 $156.22 Billingsley at Austin Waters 10 $279,900 - $339,900 $309,900 2,055 - 2,513 2,284 $135.68 Quail Creek North 8 $176,990 - $211,622 $194,306 1,571 - 2,065 1,904 $102.05 Parkview 8 $188,176 - $196,861 $182,926 1,673 - 1,996 1,804 $101.40 Paige Place 2 $189,950 - $199,950 $194,950 2,010 - 2,200 2,105 $92.61 Total/Average 51 $317,128 2,301 $137.84 Source: Warren & Associates

The Manors at the Shops at Prestonwood has the highest average unit price at $450,990 and offers the largest homes at an average of 2,817 square feet. Parkview has the least expensive and smallest unit of the comparables. The Manors at the Shops at Prestonwood have the highest average price per square foot at $160.10 and Paige Place has the lowest average price per square foot at $92.61.

10.3.1 Shops at Prestonwood – Manors

The Shops at Prestonwood is located at Hebron Parkway and Charles Road in northeast Carrollton. A total of 380 townhouses are proposed, with the site divided east-to-west by a greenway and extensive amenity center.

There are two different product types being constructed in this project: Manors and Vistas. A total of 46 Manors are planned in Phase 1, of which 18 are currently being marketed. Units range in size from 2,307 to 3,312 square feet, targeting the move-down buyer from Carrollton or Plano. Prices range from $400,000 to $500,000, with the average of $160 per square foot the highest among the comparables. All floor plans include elevators, with only one plan containing a first-level master bedroom. All other master bedrooms are on the second level.

At the time this community was shopped in late May, Parkway Builders was offering a $20,000 buyer incentive discount, and 50% off all upgrades. A sales trailer was open seven days a week, prior to completion of two model homes. Standard features include all-brick and stone exteriors, stainless steel appliances, 3-centimeter granite kitchen countertops, wood-stair steps, 7.25-inch baseboards, and eight-foot interior doors. Two units were under contract in late May. Homeowner’s dues are estimated at $233 per month.

10.3.2 Shops at Prestonwood – Vistas

The Vistas at Shops at Prestonwood are targeted to a younger market than the Manors, with units ranging from 1,708 to 2,317 square feet. Prices are $279,990 to $339,990, averaging $156 per square foot. Units have the same interior features as the Manors, except there are no elevators or

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Raiford Road: City of Carrollton garages. As of late May, one of the 75 Phase 1 units was under contract. Homeowner’s dues are estimated at $191 per month.

10.3.3 Billingsley at Austin Waters

These 94 townhouses are part of the Austin Waters development off Plano Parkway in far northeast Carrollton. The development also includes single- family houses by Darling Homes and Highland Homes marketed for $400,000 to $725,000. The townhouse builder is Billingsley, the developer of Austin Waters.

Units feature stucco and brick exteriors with contemporary elevations. All units have two-car rear-loaded garages. As of late May, two units were sold. Another ten units were on the market and completed or under construction. Prices range from Billingsley at Austin Waters $279,900 to $339,900 for 2,055 to 2,513 square feet. The average 2,284-square-foot unit is priced at $309,900, or $136 per square foot.

10.3.4 Quail Creek North

Ryland Homes is developing a total of 66 townhouses on the north side of Hebron Parkway west of Josey Lane. Adjacent to the Trinity Medical Center, Quail Creek North is the fastest-selling comparable community, averaging 2.8 units per month. At the time the project was shopped in late May, the sales office/model home was also the busiest, with three sets of prospective buyers touring the property. All of the visitors were move-down buyers in their 50s and early 60s.

Eight units were either in inventory or under Quail Creek North construction in late May, ranging from 1,571 to 2,065 square feet. Prices ranged from $176,990 to $211,622. The average 1,904-square foot unit was being marketed at $102 per square foot, almost exactly the same as at Parkview, Ryland’s other townhouse community in Carrollton (see section 10.3.5 below). However, five floor plans are being offered at Quail Creek North, two more than at Parkview.

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10.3.5 Parkview

Parkview is an in-fill community of 48 townhouses at East Jackson Road and Josey Lane across from the Carrollton City Hall. The builder is Ryland Homes. All three floor plans are three stories, with rear-loaded two-car garages and small studies or bedrooms. The main living area is on the second level, with two bedrooms and two full baths on the third level. Standard interior specifications include carpet, vinyl, and ceramic flooring, pre-wiring for surround sound, laminate kitchen counters, and recessed lighting. Parkview As of late May, 14 units were sold, equating to 1.2 units per month. Another eight units were completed or under construction and being marketed. The three floor plans range from 1,673 to 1,996 square feet, with prices from $188,176 to $195,861. The average unit is priced at $101 per square foot. It should be noted that this community has three model homes, all of which were open when shopped, but with no on-site staff present.

10.3.6 Paige Place

This ten-unit in-fill duplex project is located on Keller Springs Road near Kelly Boulevard in central Carrollton. Local builder North Haven was completing the first two units in late May. Finishes and interior features are average, with carpet and vinyl flooring, black appliances, and standard cabinetry. All units have brick exteriors and front- loaded two-car garages.

A total of four units were under contract in late May. The two units under construction contain 2,010 and 2,200 square Paige Place feet for $189,950 to $199,950. The average price is $93 per square foot. These units are close to heavily-traveled, six- lane Keller Springs Road, with no visual or sound buffering.

10.4 Development Activity

There are five proposed townhouse communities in the CMA (Map 10), totaling 873 units (Table 69). Villas of Indian Creek and Asbury Circle were being graded in late May, but with no vertical construction and no on-site sales offices. Villas Borghese will begin construction in 2009. It is uncertain when the Lakes at Mustang Park and Rosemeade Villas will begin construction.

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Table 69: Proposed Townhouse Developments, CMA, June 2008 Map Est. Key Development Location Developer Units Price Range Start 1 The Lakes at Mustang Park Plano Pkwy/KCS Railroad, Carrollton Mustang Carrollton Properties 488 $175,000 - $270,000 N/A 2 Villas Borghese Old Denton Rd/Carrollton Pkwy, Carrollton ALS Development 63 $200,000 - $250,000 2009 3 Rosemeade Villas Rosemeade Pkwy/Old Denton Rd, Carrollton Hobart Development 43 N/A N/A 4 Villas of Indian Creek Creek Valley Blvd/Indian Run Dr, Carrollton DR Horton 207 $180,000+ 2008 5 Asbury Circle Belt Line Road, Addision Ashton Woods Homes 72 $278,900 - $288,900 2008 Total 873 Source: Warren & Associates

10.5 Site Recommendations and Forecasts

21.0 Ac

Figure 4: Raiford Road Site Rendering With Recommended Townhouse Tract Highlighted

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Map 10: Townhouse Development Activity, CMA, 2008

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10.5.1 Target Market

The in-fill characteristics of the Raiford Road site, along with its adjacency to the future greenway, make it a strong candidate for townhouse development. It will attract buyers seeking connectivity to retail, recreation, and eventually light rail transit at the future Trinity Mills station. An emphasis will be first-time homebuyers ages 25 to 34, but the site’s proximity to established neighborhoods also makes it competitive for empty nester and/or early retirement buyers. As a result, a first-floor master bedroom floor plan should be included. National housing surveys indicate that empty nesters increasingly prefer to remain close to their current home, and many want to reside in neighborhoods with a diversity of ages and household types.

10.5.2 Product and Pricing

Addison Circle is essentially built-out, but Austin Waters is still in preliminary stages of construction. Both projects have rear-loaded, alley-fed two-car garages. They also feature predominantly brick and stucco exteriors. Addison Circle re-sales on the market at the end of May are summarized in Table 70. Units two to three years old range from 1,667 to 2,244 square feet, with an average price of $171 per square foot. The only new townhouse comparable currently being marketed that approximates this pricing is Shops at Prestonwood at $156 to $160 per square foot. Austin Waters is averaging $135 per square foot.

Table 70: Addison Circle Re-Sales, May 2008 Year Price/ Address Built Price Sq. Ft. Sq. Ft. 15807 Spectrum Drive 2006 $399,900 2,244 $178.21 5011 Morris Avenue 2005 $289,900 1,682 $172.35 15735 Seabolt Place 2005 $269,000 1,667 $161.37 Average $319,600 1,864 $171.43

Townhouse prices should range from $190,000 to $275,000, or $105 to $119 per square foot. An average of $112 per square foot reflects a discount of 35% from Addison Circle’s re-sale listings. Addison Circle offers an urban streetscape and pedestrian connections to office towers along the Dallas North Tollway. The recommended pricing is also 15%-20% lower than Billingsley at Austin Waters, which is part of an affluent master planned community with superior access to jobs and regional shopping at Legacy and along the Tollway. However, the site can command a premium over projects such as Parkview, Paige Place, and Quail Creek North.

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Standard townhouse features should include the following:

10.5.3 Demand Forecast

CMA Household Growth

The CMA owner-occupied housing share is expected to decline from 42% in 2008 to 40.5% in 2013. These shares are well below the Dallas Metro Area shares of 53.1% and 52.1% for the two time periods, reflecting the established neighborhoods and higher-density housing corridors in the CMA.

In 2008, townhouses represented an estimated 15% of all CMA closings, corresponding to demand for 167 units by 2013. The 15% share is likely to increase 25% to 30% over the next five years with a diminishing supply of land available. This would increase demand to 279 to 335 units.

Comparable Developments

The five comparable townhouse developments currently being marketed in the CMA are collectively selling 96 townhouses per year. Including other projects not profiled in this report, particularly in MLS Area 10 in Plano, the aggregate absorption pace is probably 150-200 units annually. This would result in aggregate absorption potential of 750 to 1,000 units over the next five years. This is far more than the demographic forecast method due to the recent transition toward, and greater acceptance of, higher density housing close to jobs, retail services and recreation. Aging of baby boomers and the entry of the baby boom-let generation into the workforce will accelerate demand for attached for-sale housing.

The average sales pace of 1.3 townhouses per month in the comparable projects currently being marketed in the greater Carrollton area would be inadequate for a townhouse development on the Raiford Road site. However, if the Furneaux Creek greenway is constructed as planned, and units are priced under $275,000, the Raiford Road sales pace should significantly exceed the current average. Based on continued economic expansion in the Dallas market, growth among

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Raiford Road: City of Carrollton major employers in the Carrollton area, and recovery in the national and regional housing market, 2.5 to 3.0 units per month should be achievable.

Although townhouse demand is lower than single-family based on trends, the rising price of gasoline and demographic changes are causing a shift in housing demand toward attached product in more urban settings close to employment centers. This trend will benefit the Raiford Road site, and make attached townhouse product more marketable than current data could indicate.

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11. Senior Apartments

This section analyzes senior housing. It includes a demographic analysis of senior (over age 55) household and income trends using the for-sale CMA. It also looks at comparable market-rate apartment and market-rate for-sale senior communities near the site.

11.1 Demographic Trends and Forecasts

11.1.1 Households by Age

CMA

There were approximately 32,341 senior (over the age of 55) households in the for-sale housing CMA in 2008, representing a 34.5% increase from 2000 (Table 71). Households over the age of 75 experienced the strongest period growth at 43.4%m while households between the ages of 65 and 74 experienced the slowest growth at 22.6%.

Table 71: Senior Household Trends by Age Cohort, CMA, 2000-2008 2000 - 2008 Change Cohort 2000 2008 Number Percent 55 - 64 13,468 18,623 5,155 38.3% 65 - 74 6,922 8,485 1,563 22.6% 75+ 3,650 5,233 1,583 43.4% Total 24,040 32,341 8,301 34.5% Source: ESRI

The growth in senior households is forecasted to slow between 2008 and 2013, although growth still remains strong at 20.5% (Table 72). Households over the age of 75 will continue to experience the highest growth rate of 24.8% among the senior cohorts.

Table 72: Senior Household Forecast by Age Cohort, CMA, 2008-2013 2008 - 2013 Change Cohort 2008 2013 Number Percent 55 - 64 18,623 22,106 3,483 18.7% 65 - 74 8,485 10,348 1,863 22.0% 75+ 5,233 6,529 1,296 24.8% Total 32,341 38,983 6,642 20.5% Source: ESRI

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Dallas Metro Area

The Dallas metro area had nearly 325,000 senior households in 2008, up 33.8% from 2000. This is slightly lower than the growth rate seen by the CMA ( Table 73). Unlike the CMA, households between the ages 55 and 64 in the Dallas metro area experienced the highest growth rate in the eight-year span at 49.6%.

Table 73: Senior Household Trends by Age Cohort, Dallas Metro Area, 2000-2008 2000 - 2008 Change Cohort 2000 2008 Number Percent 55 - 64 115,067 172,168 57,101 49.6% 65 - 74 71,416 84,608 13,192 18.5% 75+ 56,340 68,208 11,868 21.1% Total 242,823 324,984 82,161 33.8% Source: ESRI

There will be approximately 391,252 senior households in the Dallas metro area by 2013, an increase of 20.4% from 2008 (Table 74). Households over the age of 75 will experience the slowest growth rate between 2008 and 2013 at 12.9%.

Table 74: Senior Household Forecast by Age Cohort, Dallas Metro Area, 2008-2013 2008 - 2013 Change Cohort 2008 2013 Number Percent 55 - 64 172,168 210,591 38,423 22.3% 65 - 74 84,608 103,642 19,034 22.5% 75+ 68,208 77,019 8,811 12.9% Total 324,984 391,252 66,268 20.4% Source: ESRI

11.1.2 Households by Income

CMA

Senior households earning more than $200,000 annually had the strongest growth between 2000 and 2008 at 141.4% (Table 75). In fact, all income cohorts earning more than $75,000 saw significant growth during the period. Senior households earning less than $35,000 per year decreased in all income cohorts.

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Table 75: Senior Household Trends by Income Cohort, CMA, 2000-2008 2000 - 2008 Change Household Income 2000 2008 Number Percent <$15,000 2,205 1,668 -537 -24.4% $15,000 - $24,999 2,254 1,712 -542 -24.0% $25,000 - $34,999 2,526 1,812 -714 -28.3% $35,000 - $49,999 3,675 3,739 64 1.7% $50,000 - $74,999 4,508 6,150 1,642 36.4% $75,000 - $99,999 2,661 5,001 2,340 87.9% $100,000 - $149,999 3,097 5,753 2,656 85.8% $150,000 - $199,999 1,419 2,415 996 70.2% $200,000+ 1,695 4,091 2,396 141.4% Total 24,040 32,341 8,301 34.5% Source: ESRI

Senior households in the higher income cohorts ($100,000+) will continue to see strong growth in the next five years (Table 76). Households earning more than $200,000 will experience the strongest growth at 63.3% and households earning between $25,000 and $34,999 will experience the most significant decline of 27.8%.

Table 76: Senior Household Forecast by Income Cohort, CMA, 2008-2013 2008 - 2013 Change Household Income 2008 2013 Number Percent <$15,000 1,668 1,537 -131 -7.9% $15,000 - $24,999 1,712 1,293 -419 -24.5% $25,000 - $34,999 1,812 1,309 -503 -27.8% $35,000 - $49,999 3,739 3,184 -555 -14.8% $50,000 - $74,999 6,150 7,367 1,217 19.8% $75,000 - $99,999 5,001 5,621 620 12.4% $100,000 - $149,999 5,753 8,602 2,849 49.5% $150,000 - $199,999 2,415 3,391 976 40.4% $200,000+ 4,091 6,679 2,588 63.3% Total 32,341 38,983 6,642 20.5% Source: ESRI

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Dallas Metro Area

Higher income senior households, particularly those earning more than $100,000 per year, experienced significant growth since 2000, ranging from 118.1% for those earning between $100,000 and $149,999 to 168.5% for those earning more than $200,000 per year (Table 77). Households making less than $35,000 decreased during the period.

Table 77: Senior Household Trends by Income Cohort, Dallas Metro Area, 2000-2008 2000 - 2008 Change Household Income 2000 2008 Number Percent <$15,000 42,751 35,879 -6,872 -16.1% $15,000 - $24,999 31,144 26,278 -4,866 -15.6% $25,000 - $34,999 30,150 26,577 -3,573 -11.9% $35,000 - $49,999 36,732 41,926 5,194 14.1% $50,000 - $74,999 40,206 57,324 17,118 42.6% $75,000 - $99,999 22,743 45,300 22,557 99.2% $100,000 - $149,999 21,151 46,127 24,976 118.1% $150,000 - $199,999 7,640 17,906 10,266 134.4% $200,000+ 10,306 27,667 17,361 168.5% Total 242,823 324,984 82,161 33.8% Source: ESRI

The strong growth experienced by higher income senior households between 2000 and 2008 will continue through 2013 (Table 78). The number of senior households earning more than $200,000 annually could increase by 21,100, or 76.3%. Senior households earning between $15,000 and $24,999 could decrease by 16.0% in the five year period.

Table 78: Senior Household Forecast by Income Cohort, Dallas Metro Area, 2008-2013 2008 - 2013 Change Household Income 2008 2013 Number Percent <$15,000 35,879 34,926 -953 -2.7% $15,000 - $24,999 26,278 22,065 -4,213 -16.0% $25,000 - $34,999 26,577 23,024 -3,553 -13.4% $35,000 - $49,999 41,926 40,870 -1,056 -2.5% $50,000 - $74,999 57,324 73,725 16,401 28.6% $75,000 - $99,999 45,300 50,869 5,569 12.3% $100,000 - $149,999 46,127 69,793 23,666 51.3% $150,000 - $199,999 17,906 27,213 9,307 52.0% $200,000+ 27,667 48,767 21,100 76.3% Total 324,984 391,252 66,268 20.4% Source: ESRI

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11.2 Comparable Communities

Four comparable market-rate senior apartment communities were selected for this project based on age, location, and quality: Conservatory at Plano, Corinthians Retirement, Franklin Park, and The Remington in Valley Ranch (Map 11). Atria Carrollton was researched, but it is primarily a medical facility, not an independent living community. Evergreen at Plano was also visited, but it is not market-rate.

The four communities were built between 1998 and 2008 and have a total of 691 units. Franklin Park will open in August 2008 and has just begun leasing. The current vacancy rate is 58.3%, but if Franklin Park is omitted, the vacancy rate drops to 39.7%. Conservatory at Plano opened in March 2008 and according to the leasing agent, has experienced a slow lease-up period. Of the total comparable unit inventory, 6% are efficiencies/studios, 48% are one-bedroom, 43% are two-bedrooms, and 3% are three-bedrooms. Franklin Park is the only community offering three- bedroom units.

Table 79: Comparable Market-Rate Senior Apartment Communities, June 2008 Map Owner/ YearUnit Mix Total Vac. Vac. Key Community Developer Address Built Eff. 1BR 2BR 3BR Units Units Rate 1 Conservatory at Plano Conservatory Senior Living 6401 Ohio Drive 2008 0 111 111 0 222 140 63.1% 2 Corinthians Retirement Corinthians 3500 Old Denton Rd. 1998 40 73 15 0 128 44 34.4% 3 Franklin Park United Senior Living 2561 SW Grapevine Pkwy 2008 0 54 139 20 213 213 100.0% 4 The Remington Twelve Oaks 8707 Valley Ranch Pkwy. 2000 4 94 30 0 128 6 4.7% Total 44 332 295 20 691 403 58.3% % of Total 6% 48% 43% 3% Source: Warren & Associates

11.2.1 Community Rent Ranges

As shown in Table 80, monthly rents at the comparable communities range from $1,825 for the smallest efficiency at Corinthians Retirement to $4,545 for a two-bedroom at Corinthians. One- bedrooms range from $2,295 at Conservatory at Plano to $3,285 at Corinthians.

Table 80: Comparable Senior Apartment Community Rent Ranges, June 2008 Studio/ Community Effic. 1BR 2BR 3BR Conservatory at Plano N/A - N/A $2,295 - $3,195 $3,595 - $4,195 N/A - N/A Corinthians Retirement $1,825 - $1,875 $2,385 - $2,435 $3,115 - $4,545 N/A - N/A Franklin Park N/A - N/A $2,695 - $3,285 $3,425 - $4,055 $4,310 - $4,310 The Remington $1,900 $1,900 $2,765 - $2,765 $3,100 $3,100 N/A -N/A Source: Warren & Associates

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Map 11: Comparable Market-Rate Age-Restricted Apartment Communities, 2000

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11.2.2 Size Ranges

The comparable communities’ units range in size from the smallest 375-square-foot efficiency at Corinthians to a 1,784-square-foot two-bedroom at Franklin Park. Overall, Corinthians has the smallest unit sizes.

Table 81: Comparable Senior Apartment Community Size Ranges, June 2008 Studio/ Community Effic.1BR 2BR 3 Bdrm Conservatory at Plano N/A - N/A 561 - 862 973 - 1,086 N/A - N/A Corinthians Retirement 375 - 428 470 - 470 650 - 1,000 N/A - N/A Franklin Park N/A - N/A 785 - 1,016 1,180 - 1,784 1,664 -1,664 The Remington 600 - 600 840 - 840 1,040 - 1,040 N/A -N/A Source: Warren & Associates

11.2.3 Rents Per Square Foot

Rents per square foot tend to be higher for studio and efficiency apartments, and lower for the larger two- and three-bedroom units. For example, Corinthians, which has the smallest unit sizes, also has the highest rents per square foot. One-bedroom units at Corinthians reach $5.18 per square foot. Franklin Park has one-bedroom units for $3.23 per square foot.

Table 82: Comparable Senior Apartment Community Rents Per Square Foot Ranges, June 2008 Studio/ Community Effic.1BR 2BR 3BR Conservatory at Plano N/A - N/A $3.71 - $4.09 $3.69 - $3.86 N/A - N/A Corinthians Retirement $4.38 - $4.87 $5.07 - $5.18 $4.55 - $4.79 N/A - N/A Franklin Park N/A - N/A $3.23 - $3.43 $2.27 - $2.90 $2.59 - $2.59 The Remington $3.17 $3.17 $3.29 $3.29 $2.98 $2.98 N/A - N/A Source: Warren & Associates

11.2.4 Amenities Included in Rent

Rents at senior communities also reflect the amenities included in the monthly rent. As shown in Table 83, all communities provide utilities, cable, housekeeping, planned activities, and some level of transportation. Corinthians is the only community to provide three meals a day. The other communities provide one.

Table 83: Comparable Senior Apartment Community Amenities Included in Rent, June 2008 House- Planned Barber/ Fitness Meals Community Utilities Phone Cable keeping Activities Beauty Svcs Center Transport 1 2 3 Conservatory at Plano X X X X X XXX Corinthians Retirement X X X X X X Franklin Park X X X X X XXX The Remington X X X X XXX Source: Warren & Associates

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11.3 Senior Apartment Development Activity

11.3.1 Under Construction Amarantha is a senior apartment community under construction in the southeast quadrant of Highway 121 and Old Denton Road in Lewisville. A total of 151 market-rate units will be delivered by fall 2008.

11.3.2 Proposed

Local developer Chan Pak is planning to start construction in August on the Villas at Raiford, a 180-unit senior apartment community on the south side of Raiford Road across from the site. The mix will include 50% tax-credit and 50% market rate units. Two meals per day will be included in the rent, which will start at $800 per month for a one-bedroom unit. The mix will also include some two-bedrooms.

11.4 Rental Site Recommendations and Forecasts

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12. Senior For-Sale Housing

Five comparable for-sale active adult communities were chosen based on proximity to the Raiford Road site, as well as age and quality of product (Map 12). The comparables will contain a total of 4,088 units (Table 84), of which 1,468 units, or 35.9%, are completed.

Table 84: Comparable For-Sale Active Adult Communities, June, 2008 Map Year Total Comp. Proposed Percent Key Community Open Units Units Units Complete 1 Village at Prestonwood 2004 144 144 0 100.0% 2 Del Webb's Frisco Lakes 2006 2,400 605 1,795 25.2% 3 Greens of Oakmont 2005 99 96 3 97.0% 4 Watermere at Southlake 2007 245 25 220 10.2% 5 Robson Ranch 2000 1,200 598 602 49.8% Total 4,088 1,468 2,620 35.9% Source: Warren & Associates.

12.1.1 Village at Prestonwood

Located in the northwest quadrant of Plano Parkway and Marsh Lane three miles west of the Dallas North Tollway, Village at Prestonwood is the closest comparable to the Raiford Road site and the only active-adult community in Plano.

When built-out, the community will contain 144 units. The final 11 units are currently under construction, and another eight units are ready for immediate occupancy. Prices range from $219,500 for a 1,570-square-foot two-bedroom, two-bath unit to $237,500 for a 1,710- square-foot three-bedroom, two-bath unit. Both unit types include a sunroom and two-car garage. Village at Prestonwood is one of only two comparables that offers on-site assisted living. It is the second-most expensive community and has the second-highest monthly fees.

The community is constructed in a “pinwheel” design of four units per building, with minimal landscaping. The community is gated, with card-controlled access. It has no golf privileges.

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Map 12: Comparable For-Sale Age-Restricted Communities, 2008

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12.1.2 Del Webb’s Frisco Lakes

Del Webb’s Frisco Lakes is located in the southwest quadrant of FM-420 and Stonebrook Parkway in Frisco, approximately 13 miles northeast of the Raiford Road site. Traffic on FM-420 is congested and slow-moving. Of the 2,400 planned units, 605 are completed. It is the least expensive housing option of the comparables and has the lowest home owner dues, which includes golf privileges.

The community is attractively landscaped and well- maintained, although the architecture is nondescript. There are nine floor plans; all are “snout houses” with protruding garages facing the street. The community offers expansive Lake Lewisville frontage with a marina, and a large 38,000- square-foot community center with restaurant. The community is 35 miles from downtown Dallas.

Unit prices range from $159,000 for 1,301 square feet, to $376,000 for 2,681 square feet, with a $56,000 premium for lakefront lots, and a $27,000 premium for golf-front lots.

12.1.3 Greens of Oakmont

Greens of Oakmont is located one mile west of I-35E, in the northwest quadrant of Post Oak and Robinson roads, 16 miles northwest of the Raiford Road site. This Pulte Homes community is contained within two municipal jurisdictions: Denton and Corinth. Although 40 miles from Dallas and 37 miles from Fort Worth, Denton offers an amenity-rich location with two large public universities and an historic downtown. The community is easily accessible from both I-35E and I-35W.

Of the four available floor plans, two are also available at Del Webb’s Frisco Lakes, which is another Pulte community. The 99 units are contained within the existing Oakmont single-family subdivision, and share all rights and privileges of the Oakmont Country Club, including pool, tennis, and a restaurant. The relatively low homeowner fee of $120 per month does not include golf privileges.

The community is attractive and well-maintained, with nine homes available for immediate occupancy, and an additional three lots remaining for sale. One of the remaining lots is on the golf course and is listed for a $40,000 premium. The moderately priced homes range from $161,990 for a 1,397-square-foot three-bedroom, two-bath unit to $219,000 for a 2,026-square-

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12.1.4 Watermere at Southlake

Watermere at Southlake is 16 miles west of the Raiford Road site, on the south side of Southlake Boulevard at Davis Boulevard. Ingress and egress are difficult since there is no traffic light at the intersection. Of the 220 units, 65 are stacked-flat condominiums and 155 are townhouses. All buildings feature post-tension concrete and steel construction.

The most architecturally unique of the five comparables, Watermere is built to suggest an English village. The two five-story condominium buildings are under construction, and the townhouses are in 16 buildings. The local buildeer is amenable to floor-plan changes. The units have 12- to 14-foot ceilings. Standard interior finishes include granite countertops, GE Profile appliances, hardwood floors, and custom cabinets. A raised dishwasher and lowered, built-in microwave reduce mobility injuries.

Watermere is the most expensive of the five comparables. Prices range from $245,000 for a 1,005-square-foot one-bedroom, one-bath condo, to $624,000 for a 3,016-square-foot two- bedroom, three-and-a-half-bath townhouse. Although Watermere also has the most expensive monthly fees, it is the only comparable that includes a full meal plan for residents. Also included in the fees are maid service, water and cable, and golf privileges at a nearby country club. It is only one of two of the comparables to provide on-site assisted living. The community also contains a 30,000-square-foot clubhouse and three on-site restaurants.

12.1.5 Robson Ranch

Robson Ranch is the furthest comparable from the Raiford Road site. It is located one mile west of I-35W on Robson Ranch Road (Exit 79), 26 miles northwest of the site.

The 1,200-unit community is nearly 50% complete; 602 units remain unbuilt. The community has 19 different floor plans. Prices range from $212,000 for a 1,430- square-foot two-beedroom unit to $355,900 for a 3,408- square-foot five-beedroom unit, which includes a standard home site with landscaping. Premiums for golf course lots range from $45,000 to $200,000.

Homeowner fees are $156 per month and include 24-hour gated security and patrols, home security systems, and access to all community amenities except golf, which is an additional $75 per month. The community has an on-site restaurant, and separate clubhouse, fitness center, and arts center.

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Homes are attractively maintained, but all designs have two-car garages facing the street. Robson offers prospective buyers a weekend in the community for $50. The weekend includes overnight accommodations, tour, golf course and recreation facility privileges, and dinner at the on-site restaurant with a Robson Ranch resident.

12.1.6 Comparable Pricing

As shown in Table 85, the comparable community pricing ranges from $159,000 at Frisco Lakes to $624,000 at Watermere at Southlake. Prices per square foot range from a low of $104 at Robson Ranch to $244 per square foot at Watermere at Southlake.

Table 85: Pricing at Comparable For-Sale Communities, Carrollton Site, June 2008 Price Square Foot Price/Sq. Ft. Monthly Community Range Range Range Fees Village at Prestonwood $219,000 - $237,000 1,570 - 1,710 $139 - $139 $175 Del Webb's Frisco Lakes $159,000 - $376,000 1,301 - 2,681 $122 - $140 $100 Greens of Oakmont $169,000 - $219,000 1,397 - 2,026 $108 - $121 $120 Watermere at Southlake $245,000 - $624,000 1,005 - 3,016 $207 - $244 $1,800* Robson Ranch $212,000 - $355,000 1,430 - 3,408 $104 - $148 $156 Source: Warren & Associates. * full meal plan included in dues; $250 per month per additional adult

Monthly fees (without meals) range from a low of $100 per month at Frisco Lakes to $175 per month at Village at Prestonwood. Watermere at Southlake is the only comparable which provides meal service as part of the fees, so it is considerably higher at $1,800 per month.

12.1.7 Comparable For-Sale Community Features and Services

Table 86 indicates the features and services available at the comparable for-sale communities. Watermere at Southlake provides the most services, including maid service. Watermere and Village at Prestonwood are the only two offering on-site assisted living. All comparables offer attached garage parking. Three of the five offer on-site restaurants and gated access. Only Robson Ranch offers a security patrol. Greens at Oakmont provides the fewest services.

Table 86: Comparable For-Sale Community Features and Services, June 2008 On-site Garage Assisted Security On-site Maid Gated Community Parking Living Patrol Restaurants Service Access Total Village at Prestonwood X X X 3 Del Webb's Frisco Lakes X X 2 Greens of Oakmont X 1 Watermere at Southlake X X X X X 5 Robson Ranch X X X X 4 Source: Warren & Associates.

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12.1.8 Comparable For-Sale Community Recreational Amenities, June 2008

The comparable for-sale communities offer a variety of recreational amenities (Table 87). All five of the communities provide a swimming pool and an exercise room. Village at Prestonwood offers the fewest recreational options. It is the only community without tennis courts, and like Watermere at Southlake, it has no golf course.

Table 87: Comparable Recreational Amenities, June 2008 Golf Swimming Tennis Exercise Community Course Pool Court Room Total Village at Prestonwood X X 2 Del Webb's Frisco Lakes X X X X 4 Greens of Oakmont X X X X 4 Watermere at Southlake X X X 3 Robson Ranch X X X X 4 Source: Warren & Associates. 12.2 For-Sale Senior Site Recommendations and Forecasts

For-Sale senior units would be very similar to Village at Prestonwood, ranging from approximately 1,600 to 1,800 square feet with two-car garages. Pricing would range from $200,000 to $220,000, or $125 per square foot. This would be a 10% discount from Prestonwood, which averages $139 per square foot with a location adjacent to Prestonwood Country Club in Plano.

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13. Hotel Market Analysis

Hunden Strategic Partners (HSP) completed this section of the report on the hotel market. It provides an overview of hotel market trends and conditions, and specific site recommendations.

13.1 General Market Area

Local market area characteristics influence the demand potential for hotels. This section profiles Carrollton and the Dallas-Fort Worth Metroplex (metropolitan area), and characteristics of the area that affect the hotel industry. It also provides a brief overview of the economic characteristics of the market.

13.1.1 Overview

The City of Carrollton, TX is part of Dallas-Fort Worth-Arlington Metropolitan Statistical Area (MSA), located just north of Dallas. The Dallas MSA includes 12 counties, and Carrollton is part of three of those counties: Collin, Dallas and Denton. The Dallas MSA ranks eighth in U.S. population with approximately 6.6 million residents.

13.1.2 Brief History

Settlers came to the area that would become Carrollton in the 1840s. Trinity Mills was the first community in the area, and by 1878 Trinity Mills became a cattle-shipping center with the building of the Dallas Wichita Railroad. Settlers were drawn to Carrollton because of the rich soil for farming, while the growth of Carrollton resulted from the St. Louis Southwestern Railway, built through Carrollton in 1888, creating a natural shipping center for livestock, cotton, and grain. Carrollton was officially incorporated in 1913, and the gravel industry assisted in its continued success through the first decades of the 20th century. In the past few decades the population of the city has exploded, as Carrollton became a popular residential location for people working in the Dallas area.

Dallas, the ninth largest city in the United States, was first settled in the early 1840s and was incorporated in 1856. Long before Dallas was a city, the area was heavily used as a trading post between the Spanish and the Native Americans. Dallas continued to grow, doubling in population every year until the early 1900s. By 1911, Dallas had one of twelve Federal Reserve Banks, cementing itself a financial center. Today, the Dallas area’s economy is primarily based on the petroleum industry, telecommunications, and transportation.

13.1.3 Regional Access

Because of Carrollton’s location on the northern edge of Dallas, it is easily accessible via car from Dallas, Fort Worth, Houston, and Oklahoma City. It is also relatively easy to access Carrollton from the Dallas/Fort Worth International Airport, just west of Carrollton. The city is within 600 miles of 40 million people.

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Figure 5: Carrollton Area

The main highway through the Carrollton-Dallas area is I-35E, which continues north to Canada and south to Mexico. Other interstates in the Dallas/Fort Worth area include the north-south interstates I-356E, I-35W, and I-45, the east-west interstates I-20 and I-30. The President George Bush Turnpike bisects Carrollton and provides an additional east-west thoroughfare through north Dallas. The proposed hotel site is located on the north side of the President George Bush Turnpike in the center of Carrollton.

13.1.4 Airport Access

Three airports serve Carrollton. Addison Airport is the closest airport. Located adjacent to Carrollton in the Town of Addison, Addison Airport is the nation’s third largest general aviation airport, with no commercial scheduled flights.

Dallas/Fort Worth International Airport (DFW) is less than ten miles west of Carrollton. DFW is the third busiest airport in the U.S. and has 2,300 flights daily to more than 170 destinations worldwide. There are 21 airlines that serve DFW, with American Airlines using DFW as a major hub. The airport had nearly 60 million passengers in 2007. Currently DFW is undergoing a $45 million renovation of terminals A, B, C, and E that is expected to be completed in 2009.

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Dallas Love Field is located five miles northwest of the center of Dallas and 15 miles south of Carrollton. Opened in 1917 as a military base and opened to civilian use in 1927, Love Field was the major airport serving the Dallas area until DFW opened in 1974. Southwest Airlines has continued to use Love Field as a base of operations and has made Love Field a viable airport for travelers to and from the Dallas area.

13.1.5 Population

A strong population base is important to the success of a full-service hotel because a share of its users will be local businesses and people visiting residents. Table 88 shows the population characteristics of the region, state, MSA, Counties and City.

Table 88: Population Trends, 1990-2007 Percent Population Change Area 1990 2000 2007 2000-2007 United States 248,709,873 281,421,906 299,389,484 6.0% Texas 16,986,510 20,851,820 23,904,380 12.8% Dallas-Ft. Worth MSA 4,014,341 5,197,130 5,982,787 13.1% Collin County, TX 264,036 491,675 730,690 32.7% Dallas County, TX 1,852,810 2,218,899 2,366,511 6.2% Denton County, TX 273,525 432,976 612,357 29.3% City of Dallas 1,006,877 1,188,580 1,232,940 3.6% City of Carrollton 82,169 109,576 121,604 9.9% City at a Percentage of MSA 2.0% 2.1% 2.0% Source: U.S. Census Bureau Texas has seen a large increase in residents from 1990 to 2007, more than the moderate population growth of the country as a whole. The Dallas-Fort Worth MSA population increased 13.1% in the past seven years, which can likely be attributed to the relatively strong economic conditions in Texas. Two of the three counties that contain parts of Carrollton increased by approximately 30%, far outpacing the rest of the MSA. Dallas’ population increased by 3.6 percent from 2000 through 2007, while the City of Carrollton increased by nearly ten percent. The city has increased its population from 82,000 in 1990 to nearly 122,000 in 2007.

13.1.6 Diversified Economy

A healthy and diversified economy provides not only employment and disposable income for a market’s residents, but also helps to insulate an area from economic downturns. Markets that have historically relied on one sector, such as manufacturing, have often had difficulty recovering from market shifts to other sectors, which lead to an overall loss of local income and employment. This situation can lead to declining population, as residents move to other areas with better opportunities. This is not the case for the Dallas region. It has a very balanced economy and one that has grown continuously for many years. Carrollton has been part of the employment success of the Dallas region. Carrollton also benefits from being North Dallas’ only Foreign Trade Zone.

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The figure below shows how Dallas MSA and State of Texas employment totals are diversified.

Graph 29: Employment by Category, Dallas-Ft. Worth MSA and Texas

100%

Government 90% Other Services 80% Leisure and Hospitality

70% Educational and Health Services

Professional and Business Services 60%

Financial Activities 50% Inf ormation 40% Transportation and Utilities

30% Retail Trade

Wholesale Trade 20% Manuf acturing 10% Natural Resources, Mining & Construction

0% Dallas-Ft. Worth MSA State of Texas

Source: Bureau of Economic Analysis

Dallas MSA employment has several major components: Government, Professional and Business Services, Financial Activities, and Retail Trade. The MSA is relatively consistent with Texas in terms of type and diversity of employment.

13.1.7 Income and Employment

The depth and strength of a market’s employment base and income levels is a strong indicator of its potential ability to support a full-service hotel. In general, higher income levels indicate a high quality base of employers, which create demand for meeting space and hotel room nights via corporate-transient and group visitors. Markets with more wealth also tend to be attractive regionally and nationally for tourism such as conventions and trade shows. Quality facilities are directly tied to the capacity of the public sector to provide amenities to support quality of life locally and economic growth regionally. Less wealthy markets will have less disposable income available to spend on special events, for example, and would generally be expected to provide a lower level of attendee demand for such a facility. Indicators of a market’s overall wealth and growth can include trends in its income and employment.

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Table 89 summarizes the historical growth in income and employment in the Dallas-Forth Worth MSA from 1998 through 2006, based on the latest data provided by the Bureau of Economic Analysis.

Table 89: Dallas-Fort Worth MSA Income and Employment, 1998-2006 Non-Farm Income Non-Farm Employment Year Income/ % $ (000s) % Change Employed % Change Employed Change 1998 $147,545,095 -- 3,206,197 -- $46,019 -- 1999 $157,966,123 7.1% 3,322,405 3.5% $47,546 3.3% 2000 $176,473,058 11.7% 3,447,866 3.6% $51,183 7.7% 2001 $183,421,193 3.9% 3,469,393 0.6% $52,868 3.3% 2002 $185,776,626 1.3% 3,434,778 -1.0% $54,087 2.3% 2003 $190,494,099 2.5% 3,436,887 0.1% $55,426 2.5% 2004 $203,556,107 6.9% 3,502,532 1.9% $58,117 4.9% 2005 $221,139,256 8.6% 3,606,686 2.9% $61,314 5.5% 2006 $238,822,552 8.0% 3,750,610 3.8% $63,676 3.9% Source: Bureau of Economic Analysis, HSP

While the rate of growth has varied, income has increased each year since 1998. Non-farm employment increased at a slower rate from 2001 through 2003, with a decrease in 2002. The last two years of reporting have shown an increase in all three measures.

Employment in the city of Carrollton has grown over the last few years. The 2008 forecast of the total number of employees within the Carrollton city limits is 56,680.

13.1.8 Unemployment The figure below shows the unemployment rate in Dallas in comparison to the national rate for 1990 to 2007. The unemployment rate remained consistent with and somewhat below the United States as a whole from 1990 to 2001. From 2002 through the present, the unemployment rate has either been above the national average or consistent with it. Much of the negative relative shift was due to the telecom industry meltdown in 2001 and 2002.

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Graph 30: Unemployment Rates, Dallas-Fort Worth MSA and US, 1990-2007

8.5

7.5

6.5

5.5

4.5

3.5

2.5

1.5 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07

U.S. Dallas-Ft. Worth MSA

13.1.9 Income Residents’ effective buying income also helps to demonstrate the amount of disposable income that is available locally, and this data is shown in Table 90.

Table 90: Effective Buying Income, 2007 Carrollton, TX Dallas MSA State of Texas United States Total EBI (000) $2,864,593 $127,109,118 $416,199,154 $5,692,909,567 Median Household EBI $56,919 $45,468 $38,804 $39,324

EBI Group Under $20,000 7.2% 16.2% 22.6% 21.5% $20,000-$34,999 14.1% 20.3% 22.4% 22.5% $35,000-$49,999 19.4% 19.0% 18.6% 19.3% $50,000+ 59.3% 44.5% 36.4% 36.7% Source: Sales and Marketing Management

As the table shows, the Dallas-Fort Worth MSA had a total effective buying income (EBI) of $127.1 billion and a median household EBI of $45,468 in 2005. This is higher than the state as a whole, as well as the U.S. average. The City of Carrollton has a significantly higher median household EBI with $56,919 and more than half of its population has a median household EBI of more than $50,000. This amount of disposable income is positive for restaurants, retail and functions held at hotels.

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13.1.10 Corporate Presence

In general, a market’s corporations will provide demand for hotels via individual corporate transient travel, group training, new product launches, meetings, banquets, and other events. Table 91 shows the largest employers in Carrollton, by number of full-time employees.

Table 91: Largest Employers, Carrollton, 2007 # of Company Industry Employees Carrollton/Farmers Branch Indep. School District Education 3,400 ST Microelectronics Semiconductors Manufacturing 1,225 Halliburton Energy Services Utilities 1,200 McKesson Corp. Health Care 980 Hilton Reservations Worldwide Hospitality 900 City of Carrollton Municipal Government Government 830 Trinity Medical Center Health Care 750 Real Page Technology 700 ACCOR North America Real Estate 600 RIA Computer Software Technology 600 Western Extrusions Corp. Manufacturing 501 Source: City of Carrollton The Carrollton/Farmers Branch Independent School District is the largest employer in Carrollton with approximately 3,400 employees. The major employers are varied and represent a balanced family of companies. Carrollton does not appear to be overexposed in any one industry. In addition to the large employers in Carrollton, there are many smaller firms, which also generate demand for hotel rooms.

13.1.11 Higher Education The presence of colleges, universities, and educational institutions can serve not only as a demand base for hotels, but also a source of event demand for hotel function space. Carrollton does not have any colleges or universities, but does have several schools nearby.

The largest school in the area is Collin County Community College in Plano, with 13,000 students. Other large academic institutions in the area include the University of Texas at Dallas, in Richardson, Texas, with 10,945 students; Southern Methodist University in Dallas, with 10,064 students; and Richland College in Dallas with 12,537 students. Thirty-two percent of Carrollton’s population holds a Bachelor’s degree or higher.

13.1.12 Carrollton Area Meeting Facilities Carrollton lacks meeting facilities within its borders, which hampers its ability to generate room nights. Likewise, the lack of hotels hampers the city’s ability to support meeting facilities. The greater Carrollton area has 12 meeting facilities ranging from 49,000 square feet to 1,400 square feet of meeting space. Of these, the Hilton DFW Lakes Executive Conference Center is the largest, with approximately 49,400 square feet of function space. The table below displays the meeting facilities in the area.

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Table 92: Meeting Facilities, Carrollton Area Total Total Guest Exhibit Ballroom Meeting Space Function Facility Location Rooms Space SF SF SF Space SF* Hilton DFW Lakes Executive Conference Center Grapevine 393 14,400 9,380 25,636 49,416 Embassy Suites Dallas Frisco Convention Center & Spa Frisco 330 -- 41,760 4,599 46,359 Plano Centre Plano -- 21,600 9,609 2,878 34,087 Marriott Dallas/Plano at Legacy Town Center Plano 404 -- 13,858 10,943 24,801 Crowne Plaza Dallas Near the Galleria Addison 429 -- 7,680 13,340 21,020 The Westin Stonebriar Resort The Colony 301 -- 9,169 10,799 19,968 Southfork Hotel Plano 280 -- 7,016 8,023 15,039 Hilton Garden Inn Dallas Lewisville Lewisville 171 -- 12,084 2,316 14,400 Holiday Inn Express Plano East Plano 137 -- 5,250 5,250 10,500 Holiday Inn Dallas North-Addison Addison 101 -- 1,800 852 2,652 Summerfield Suites Addison 132 -- 1,012 828 1,840 Holiday Inn Express Hotel & Suites North Dallas/Addison Addison 102 -- 1,400 -- 1,400 Total 36,000 120,018 85,464 241,482 Average 253 18,000 10,002 7,769 20,124 *Does Not include foyers or pre-function space Source: Respective Facilities, Mpoint.com The Embassy Suites Dallas Convention Center in Frisco has the largest meeting space of the hotels in the area with 46,359 square feet. The meeting facilities in the table above averaged approximately 20,100 square feet with and average hotel room size of 253.

13.1.13 Carrollton as a Destination

Carrollton is part of a metropolitan market with numerous leisure attractions and group visitor generators. The northern Dallas area is experiencing a high level of development and redevelopment activity related to downtown assets, attractions, and other tourism and hospitality related assets. Some of the attractions are listed in the table below.

Table 93: Carrollton Area Attractions Attraction City Homestead Museum Carrollton Carrollton Wind Symphony Carrollton ArtCentre of Plano Plano Heard Natural Science Museum & Wildlife Sanctuary Plano Southfork Ranch Parker Cavanaugh Flight Museum Addison Source: Respective Cities

Homestead Museum: The A.W. Perry Homestead Museum illustrates life in north-central Texas at the turn of the 20th Century. A.W. and Sarah (Huffman) Perry were pioneer homesteaders of Peters Colony who came to Carrollton in the year 1844 from Carrollton, Illinois. In 1909, their son Dewitt Perry and his wife tore down the first house and used some of the lumber to build the present-day residence. This structure is now the museum, restored in 1976 for the bicentennial.

ArtCentre of Plano: This renovated historic downtown building offers plays, and vocal and other musical performances in the ArtCentre Theatre. The facility also has art galleries displaying works of local artists as well as national shows.

Heard Natural Science Museum & Wildlife Sanctuary: The Heard Natural Science Museum and Wildlife Sanctuary is a 289-acre outdoor preserve and nature museum. Exhibits

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include species of birds, insects, and animals that have found refuge within the rapidly developing Collin County area. The museum features The Living Lab, an interactive hands-on science laboratory; the Venomous Snakes of Texas exhibit; and rotating nature art exhibits.

Southfork Ranch: Known as the "world's most famous ranch," Southfork Ranch attracts millions of visitors ever year since it became the homestead of the fictional Ewing clan of the television show “Dallas.” Visitors experience television history at the ranch.

Cavanaugh Flight Museum: Texas’ newest aviation museum in Addison, located at the Addison Airport, features 50,000 square feet of space that house aircraft used by the military from World War I, World War II, as well as more recent craft, all restored to their original condition.

Carrollton Wind Symphony: Formed in 1995, the ensemble has grown to over 50 members and hosts performances throughout the year. The group also hosts clinics for area residents and also performs at community events in Carrollton.

13.1.14 Office Market

The Carrollton office market has a total of 2.5 million square feet of office space. The following table displays the office market characteristics from 2005 to 2008.

Table 94: Office Market, Carrollton, 2005-2008 # of Total Occ. Vacancy Average Quarter Buildings Total SF SF Rate Rate/SF 2005 3Q 87 2,414,333 2,002,377 17.1% $15.17 2005 4Q 87 2,414,333 2,014,157 16.6% $15.48 2006 1Q 90 2,431,328 1,961,693 19.3% $15.38 2006 2Q 90 2,431,328 2,029,709 16.5% $16.67 2006 3Q 93 2,466,013 2,028,077 17.8% $16.94 2006 4Q 94 2,473,023 2,051,852 17.0% $16.31 2007 1Q 95 2,476,027 2,016,994 18.5% $18.00 2007 2Q 95 2,476,027 2,027,335 18.1% $18.45 2007 3Q 96 2,485,527 2,070,797 16.7% $18.88 2007 4Q 97 2,490,677 2,026,289 18.6% $19.14 2008 1Q 97 2,490,677 2,061,580 17.2% $18.57 2008 2Q 98 2,494,484 2,098,887 15.9% $18.84 Source: Staubach

The Carrollton office market in the second quarter of 2008 had a total of 98 buildings with a vacancy rate of 15.9 percent with an average lease rate of $18.84 per square foot. The vacancy rate is currently at the lowest level in the past three years, with average leasing rate per square foot decreasing the past four months.

13.1.15 Market Area Conclusion

The Carrollton market has seen expansion of both local and area population and employment. The median effective buying income of the city of Carrollton is much higher than the Dallas-Fort Worth MSA and of Texas as a whole. The growth of Carrollton as a Dallas “bedroom community” has created a relatively affluent populace and a large labor force for the city.

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However, Carrollton is overshadowed by the larger, urban center of Dallas as well as the commercial surrounding areas of Addison and others. Lack of investment in hotels and restaurants, as well as little office building critical mass, has resulted in the development of these assets in Addison and surrounding areas. As a result, Carrollton has little hotel development and a limited commercial core to support a critical mass of hotel product. However, the sheer size of the city and surrounding area population, combined with the existing local office presence suggests that hotels could be supported here if well-located and of the appropriate brands.

13.2 Hotel Market Supply and Demand Analysis

This section presents an overview of the nation’s broader hotel market and then analyzes the Carrollton hotel market in greater detail, including supply and demand growth as well as the changing quality level of hotel supply.

13.2.1 U.S. Lodging Industry

With the growth of the travel industry, the U.S. lodging industry has also experienced strong expansion. Table 95 shows selected characteristics of the U.S. lodging industry from 1992 through 2007.

Table 95: National Lodging Industry Annual Summary Revenue Average per Daily Available Year Occupancy Change Rate Change Room Change 1992 61.9% -- $59.62 -- $36.90 -- 1993 63.1% 1.9% $61.30 2.8% $38.68 4.8% 1994 64.7% 2.5% $64.24 4.8% $41.56 7.5% 1995 65.1% 0.6% $67.17 4.6% $43.73 5.2% 1996 65.0% -0.2% $70.81 5.4% $46.03 5.3% 1997 64.5% -0.8% $75.31 6.4% $48.57 5.5% 1998 63.8% -1.1% $78.15 3.8% $49.86 2.6% 1999 63.1% -1.1% $81.29 4.0% $51.29 2.9% 2000 63.5% 0.6% $85.24 4.9% $54.13 5.5% 2001 59.8% -5.8% $84.45 -0.9% $50.50 -6.7% 2002 59.0% -1.3% $83.20 -1.5% $49.09 -2.8% 2003 59.2% 0.3% $83.28 0.1% $49.30 0.4% 2004 61.3% 3.5% $86.70 4.1% $53.15 7.8% 2005 63.1% 2.9% $91.29 5.3% $57.61 8.4% 2006 64.2% 1.7% $96.77 6.0% $62.13 7.8% 2007 64.1% -0.2% $102.38 5.8% $65.63 5.6% Compound Annual Growth 0.2% 3.7% 3.9% Source: Smith Travel Research, HSP

Occupancy peaked at 65.1% in 1995 and recently was as high as 64.2 percent in 2006. After 9/11 and the recession, occupancy decreased to 59.%, before increasing to the 64% range. The Hunden Strategic Partners (HSP) outlook for 2008 is a decrease in occupancy by up to 1.5 percentage points. Average daily rate (ADR) has increased at an average annual rate of 3.7 percent during the period, outpacing inflation (when food and energy are not counted). The last

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four years have exhibited strong ADR growth from four to six percent. Rate growth is expected to be low in 2008, according to HSP projections. Revenue per available room (RevPar) increased at record levels in 2004, 2005 and 2006 and was strong in 2007. RevPAR is expected to be flat or negative in 2008 based on overall economic conditions (as it is the product of occupancy and rate).

The figure below shows the above data graphically for the annual change.

Graph 31: National Hotel Industry Performance Annual Change

10%

-2%

-4%

-6%

-8% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: STR Occupancy Average Daily Rate Revenue per Available Room

As shown, even when occupancy declines, average daily rates can increase. There appears to be a breakpoint at 60% national occupancy, above which pricing power exists and below which ADR declines.

13.2.2 Carrollton Hotel Lodging Market

The focus of this study is the potential for a hotel in Carrollton, and HSP has reviewed the existing hotel market in greater Carrollton. However, without any quality hotels immediately surrounding the proposed site, the analysis focuses on the performance of the Carrollton hotel market as determined by HSP, especially the higher-quality hotels (Courtyard quality and better) in the surrounding area. Properties from each level of quality were included in this analysis to better understand the decentralized market as a whole.

The Carrollton hotel market is experiencing a great deal of growth. A good number of the hotels in the area are along major transportation corridors, as stated previously, in this case the

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interstates and toll roads. This trend is common in rapidly developing areas due to their accessibility, especially if the areas are a part of major metropolitan region, as is the case here with the Dallas MSA.

Table 96 shows the hotel quality divisions in the Carrollton hotel market, which includes other nearby cities.

Table 96: Carrollton Hotel Market, 2008 Percent of Percent of Avg. Rooms Type Number Total Rooms Total per Hotel Luxury 1 1% 528 4% 528 Upper Upscale 10 11% 3,219 24% 322 Upscale 22 25% 3,228 24% 147 Mid w/Food & Bev. 5 6% 820 6% 164 Midscale no F&B 24 27% 2,411 18% 100 Economy 21 24% 2,087 16% 99 Independent Upper 0 0% 0 0% -- Independent Midscale 1 1% 342 3% 342 Independent Lower 5 6% 790 6% 158 Total 89 100% 13,425 100% 151 Source: STR, HSP Of the 89 lodging facilities in the Carrollton area, consisting of more than 13,400 rooms, one- quarter of all the rooms are mid-scale quality, most of which (24 of the 29) are limited service with no food & beverage offerings. Currently there is only one luxury hotel in the area and 33 properties that are considered upscale or higher. Roughly 93% of the hotels in the Carrollton area are national chains, leaving less than ten percent of the hotels classified as independent.

From a big picture perspective, the area’s many hotels are generally new but are of limited quality and size, except for a few larger, upper upscale hotels. The following figure shows all of the hotels in the Carrollton area, labeled by color by quality scale. A complete list of the properties is provided in the Appendix.

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Figure 6: Hotels, Carrollton Area, 2008

The majority of hotels are located southwest of Carrollton in Addison, clustered around the interchange with The Dallas North Tollway and Belt Line Road near the Addison Airport. Most of the other properties are clustered around other highway interchanges and near attractions such as malls. Currently there are no hotels other than those of the lowest quality scale in the vicinity of the proposed site. There have been other hotels proposed in the Carrollton area, but none that would influence the performance of a hotel at the proposed site.

In terms of the limited service hotels in Carrollton, they are generally lower quality and many have a significant holdover population residing there from Hurrican Katrina. The resulting crime has led to concerns about safety and viability of the existing hotels.

13.2.3 Segmentation

Given the above assessment of supply, it is important to understand the drivers of demand. The Carrollton area hotel market is highly reliant upon the commercial business traveler. A vast majority of the room nights in the market are sold Monday through Thursday. The leisure segment does not perform consistently to fill weekend room nights on a regular basis. Retail

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attractions and a close proximity to Dallas help to attract leisure visitors, but overall there is a significant decline in room occupancy from Friday to Sunday.

The following briefly describes the market segments.

Corporate Transient: The corporate transient market consists of those who are traveling for business purposes, except for large meetings, conventions, and tradeshows. Sales visits, research, small training sessions, and executive education are all considered to be in the corporate transient segment. Most commercial travelers will fly to a market and rent a car. It is estimated this market accounts for 70% of business in the area.

Group Market: The group segment consists of those visiting the Carrollton area for meetings of all sizes, either as part of an association, SMERF group (social, military, educational, religious, fraternal), corporate conventions or industry tradeshows. It also includes other corporate group functions, although these are sometimes counted as individual commercial travelers. It is estimated this market accounts for 18% of business in the area.

Leisure Segment: The leisure segment consists of those individuals, couples, families, or small groups that travel for pleasure or to visit friends or family. It is estimated this market accounts for 12% of business in the area.

If a hotel can pull transient business during the week (Monday through Thursday), it appears likely that one or more hotels at the proposed site could be feasible based on a balance of business and leisure visitors. However, if the hotel(s) is/are not able to cross-market and pull area visitors, it will not fare as well and the feasibility is limited to weekday guests. However, we do note a lack of leisure hotels of quality within the immediate area and there is an existing need for quality rooms nearby.

13.2.4 Changes to Supply

In most of the last ten years there have been increases to the overall room supply in the Carrollton hotel market.

The table below shows the supply change trend for the Carrollton hotel market since 1997, according to Smith Travel Research.

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Graph 32: Percentage Supply Change, Carrollton Hotel Market, 1997-2008

20.0%

18.0% 16.7% 16.0%

14.0% 10.8% 12.0% 11.5%

10.0% 8.2% 7.8% 8.0%

6.0%

4.0% 2.6% 2.7% 1.3% 1.9% 2.0% 0.0% 0.3% 0.0% 0.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

The years 1997 through 2001 saw the most noticeable changes in room supply, with increases ranging from eight to 17%. Two years (2002 and 2006) saw no additions to the room supply in the Carrollton area, while the remaining years since 2001 have shown small growth rates. These trends indicate that in recent years the development of new hotel rooms has slowed and there are few signs that the supply will grow substantially in the immediate future, as only 255 rooms have been or will be added in 2008, resulting in a two percent growth rate, as shown.

13.2.5 Conclusion

The Carrollton area hotel market has seen supply growth range from zero percent to 16% within each of the last ten years. Most of the growth took place before 2002 and the addition of hotel rooms into the market has slowed dramatically over the past seven years, which has helped improve hotel performance. Some segments of the market perform much stronger than others, with the corporate transient segment accounting for a majority of the room nights sold. There are significant opportunities, especially in the leisure segment, for improved performance.

Amenities, attractions and creative marketing strategies are necessary to fill this weekend room night gap. In terms of location, there are no quality hotels in the immediate site area and in fact most area hotels are several miles in any direction from the site. This has both positive and negative connotations for new hotel development on the site.

A greater explanation of specific hotel properties and their performance in the market will be discussed in the next section.

13.3 Competitive Hotel Market

Reflecting on the larger context of the Carrollton hotel supply presented earlier, HSP chose a set of primary competitive hotels to analyze for proposed hotel(s) to be developed at the subject site.

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Some of the factors considered were market orientation, quality, size, location, age, brand, and market demand mix.

13.3.1 Competitive Hotel Overview The table below shows a summary of the hotels in the competitive set.

Table 97: Competitive Set Hotels

Name Location Rooms Courtyard Dallas Addison Quorum Addison, TX 176 NYLO Hotel Plano Plano, TX 176 Hilton Garden Inn Dallas Lewisville Lewisville, TX 165 Doubletree Club Dallas Farmers Branch Dallas, TX 160 Springhill Suites Dallas Addison Quorum Addison, TX 159 Courtyard Dallas Plano In Legacy Park Plano, TX 153 Embassy Suites Dallas Near The Galleria Addison, TX 150 Hampton Inn North Dallas Plano Plano, TX 131 Staybridge Suites Dallas Addison Addison, TX 131 Hyatt Place Dallas Plano Plano, TX 127 Hyatt Place Dallas Near The Galleria Addison, TX 123 Courtyard Dallas Lewisville Lewisville, TX 122 Sheraton Hotel Stonebriar The Colony, TX 119 TownePlace Suites Dallas Plano Plano, TX 106 Fairfield Inn & Suites Dallas North Addison, TX 106 Holiday Inn Express Hotel & Suites Dallas Addison Addison, TX 102 Holiday Inn Dallas North Addison Addison, TX 101 Hilton Garden Inn Addison Addison, TX 96 Holiday Inn Express Hotel & Suites Dallas LewisvilleLewisville, TX 90 Holiday Inn Express Hotel & Suites Dallas North Tol Plano, TX 79 Fairfield Inn Lewisville Lewisville, TX 71 Total 2,643 Average 126 Source: HSP, STR

The competitive set consists of 21 hotels, ranging in size from the 71-room Fairfield Inn Lewisville to the 176-room Courtyard Dallas in Addison. Each has a number of attributes that would be competitive with any new hotels on the proposed site. In all cases, the physical attributes are considered mid/upscale or better. The competitive set is a mix of limited and full- service properties and includes some hotels in neighboring cities due to their close proximity to Carrollton and the fact that Carrollton currently has a noticeably small supply of quality hotel rooms.

For this analysis, it was a combination of quality, location and market orientation that were the primary factors for selection in the competitive set. All primarily service the business traveler, mostly short-term, due to the many corporate demand generators in the greater area discussed in previous chapters. There are a variety of extended stay properties in the area, but these were not chosen because Carrollton lacks a strong corporate campus, which would tend to support such products. This is not to imply that a suite-style product cannot work on this site. However, it recognizes the limited demand for true extended-stay product.

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Location is often one of the most significant competitive attributes to hotels as visitors from all segments desire to be close the primary demand generators that generated their stay. However, some competitive properties are located farther away from the proposed subject site as other characteristics such as target market segmentation and amenities help to make them competitive, as is the case with some of the properties in The Colony and Northern Plano.

The figure below shows the competitive properties on a map of Carrollton and the surrounding area. The non-competitive hotels in the market were excluded to highlight the competitive set.

Figure 7: Competitive Set Hotels

As shown, the competitive hotels are located several miles from the subject site. There are no comparable or competitive hotels within the proximate area. The table below shows HSP’s estimate of performance for each hotel in 2007, as well as estimates of market segmentation based on interviews with individual properties and other sources.

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Table 98: Competitive Set Occupancy, Rate, and Market Segmentation, 2007 Market Segmentation Avg. Daily RevPA RevPAR Corp. Contract/ Hotel Rooms Occupancy Rate R Yield Transient Group Leisure Other Courtyard Dallas Addison Quorum 176 64% $111 $71 107% 77% 5% 18% 0% NYLO Hotel Plano 176 63% $107 $67 101% 73% 7% 20% 0% Hilton Garden Inn Dallas Lewisville 165 58% $108 $63 94% 78% 5% 17% 0% Doubletree Club Dallas Farmers Branch 160 60% $105 $63 94% 78% 5% 17% 0% Springhill Suites Dallas Addison Quorum 159 64% $105 $67 101% 84% 2% 14% 0% Courtyard Dallas Plano In Legacy Park 153 67% $105 $70 106% 78% 4% 18% 0% Embassy Suites Dallas Near The Galleria 150 65% $111 $72 108% 83% 2% 15% 0% Hampton Inn North Dallas Plano 131 62% $110 $68 102% 79% 6% 15% 0% Staybridge Suites Dallas Addison 131 71% $105 $75 112% 83% 5% 12% 0% Hyatt Place Dallas Plano 127 64% $108 $69 104% 77% 2% 21% 0% Hyatt Place Dallas Near The Galleria 123 65% $110 $72 107% 78% 3% 19% 0% Courtyard Dallas Lewisville 122 69% $109 $75 113% 77% 7% 16% 0% Sheraton Hotel Stonebriar 119 67% $114 $76 115% 73% 7% 20% 0% TownePlace Suites Dallas Plano 106 68% $103 $70 105% 86% 6% 8% 0% Fairfield Inn & Suites Dallas North 106 63% $91 $57 86% 75% 5% 20% 0% Holiday Inn Express Hotel & Suites Dallas Addison 102 60% $90 $54 81% 79% 2% 19% 0% Holiday Inn Dallas North Addison 101 61% $95 $58 87% 77% 3% 20% 0% Hilton Garden Inn Addison 96 62% $99 $61 92% 76% 6% 18% 0% Holiday Inn Express Hotel & Suites Dallas Lewisville 90 63% $93 $59 88% 74% 5% 21% 0% Holiday Inn Express Hotel & Suites Dallas North Tollwa 79 58% $94 $55 82% 70% 7% 23% 0% Fairfield Inn Lewisville 71 66% $92 $61 91% 80% 3% 17% 0% Total/Weighted Averages 2,643 63.8% $104 $67 100% 78% 5% 17% 0% Source: HSP

As shown, occupancy was estimated to range from 58% at the Holiday Inn Express in Lewisville to 71% at the Staybridge Suites in Addison and averaged 64% for the set. Average daily rate was lowest at the Holiday Inn Express in Addison ($90) and highest at the Sheraton Stonebriar ($114). Market segmentation averaged 78 percent corporate transient, 5% group, and 17% leisure. The Townplace Suites had the highest rate of business travelers, at 86%, while no hotels were particularly strong in the group or leisure segments as the amount of demand generators for this type of business in the area is limited.

The following table shows the estimated market segmentation for the competitive set.

Table 99: Estimated Competitive Set Segmentation Estimated Competitive Set Segmentation

Corporate Transient 78% Group 5% Leisure 17% Contract/Other 0% Total 100%

Source: HSP

Corporate transient room nights are estimated to make up over three-quarters of all demand, while group, leisure and contract demands combined account for 22%.

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13.3.2 New Competitive Hotels

There is currently one hotel under construction in the Carrollton area that the proposed hotel(s) will be competitive with. The Aloft Hotel in Frisco is slated to open at the end of 2008 and will add 136 new upscale-quality rooms to the competitive market.

There are several other hotels under consideration in the area. These include a Holiday Inn at Frankford & I-35E and a proposed hotel on the southwest quadrant of the same intersection as the subject site. There has also been interest by hotel developers in constructing a cluster of three full service hotels of varying product type.

13.3.3 Primary Competitive Set Performance

HSP used Smith Travel Research data to analyze the competitive set. The table below displays historical room supply, demand, occupancy, rate, and RevPAR for the selected primary competitive supply of hotels.

Table 100: Supply, Demand, Occupancy, ADR, and RevPar, Competitive Hotels, 2002-2008 Historical Supply, Demand, Occupancy, ADR, and RevPar for Competitive Hotels Annual Available Room Avg. % % % % Year Room % Change Nights Occ. ADR RevPar Available Change Change Change Change Nights Sold Rooms

2002 2,024 738,760 -- 415,446 -- 56.2% -- $79.85 -- $44.90 -- 2003 2,183 796,795 7.9% 459,135 10.5% 57.6% 2.5% $74.05 -7.3% $42.67 -5.0% 2004 2,183 796,795 0.0% 490,928 6.9% 61.6% 6.9% $74.41 0.5% $45.85 7.4% 2005 2,183 796,795 0.0% 539,743 9.9% 67.7% 9.9% $80.32 7.9% $54.41 18.7% 2006 2,183 796,795 0.0% 522,600 -3.2% 65.6% -3.2% $93.66 16.6% $61.43 12.9% 2007 2,267 827,496 3.9% 529,716 1.4% 64.0% -2.4% $104.31 11.4% $66.77 8.7% 2008 YTD (May) 2,579 392,072 18.9% 251,067 14.3% 64.0% -3.9% $110.97 5.9% $71.06 1.7% Projected 2008 2,624 957,674 15.7% 593,282 12.0% 62.0% -3.2% $107.44 3.0% $66.56 -0.3% CAGR (2002-2008) 4.9% 4.9% -- 7.1% -- 1.7% -- 5.8% -- 8.0% --

*Compound Annual Growth Rate Sources: Smith Travel Research, HSP

Demand for room nights in the set increased noticeably from 2002 to 2005. However, demand and occupancy declined in 2006 (while the balance of the U.S. increased). Supply increased in 2007 and 2008, which led to a decrease in occupancy. Average daily rate growth has been positive since 2004, with increases fluctuating from roughly one-half of a percent to 17% each year. Revenue per available room has increased consistently over the period, although it is projected to decline in 2008 by 0.3 percent.

The figure below shows supply and demand for rooms within the set over the period.

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Graph 33: Monthly Supply and Demand, Competitive Hotels, 2002-2008

Monthly Supply & Demand

90,000 85,000 80,000 75,000 70,000 65,000 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

2 2 3 5 5 6 7 02 0 0 04 05 0 0 06 06 06 07 07 08 p r p n 0 p c n 0 p 07 c un 04 ar e Mar Jun 02Se Dec 0 Mar 03Jun 03Sep 03Dec Ma J Sep 04Dec 04M Jun 05Se Dec Mar Ju Se De Mar Ju S De Mar

Supply Demand 12 per. Mov. Avg. (Supply) 12 per. Mov. Avg. (Demand)

As shown, both supply and demand have followed somewhat similar trends, however supply has outpaced demand since the second quarter of 2007. On average, neither has seen a large decline, but demand flattened and began to drop from the second half of 2006 before slowly climbing again in mid-2007. Struggling demand coupled with the additions to supply in 2008 will likely face a flatter demand curve, leading potentially to decreases in occupancy.

The figure below shows room revenue changes by month (year over year), based on information from Smith Travel Research.

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Graph 34: Monthly Year-Over-Year Total Competitive Set Room Revenue Change

Monthly Year-Over-Year Total Competitive Set Room Revenue Change

40.0%

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

03 03 04 05 06 07 08 l 03 t 03 l 04 l 05 t 05 06 l t 06 t 08 u u c u c Jan Apr J Oc Jan Apr 04 Ju Oct 04 Jan Apr 05 J O Jan Apr 06 J Oc Jan 07 Apr 07 Jul 07 O Jan Apr

In most months, there has been revenue growth, however there have also been two distinct period of revenue growth, first from spring 2004 through September 2006 (peaking at the end of 2005), and then from fall 2006 through May 2008.

The next figure shows Revenue Per Available Room, RevPAR, which is the product of occupancy and rate.

Graph 35: Revenue Per Available Room

$100.00

$90.00

$80.00

$70.00

$60.00

$50.00

$40.00

$30.00

$20.00 r 02 r 03 r 04 r 05 r 06 r 07 r 08 p p p p p p p Jul 02 Jul 03 Jul 04 Jul 05 Jul 06 Jul 07 Jul Jan 02 Jan Oct 02 03 Jan Oct 03 04 Jan Oct 04 05 Jan Oct 05 06 Jan Oct 06 07 Jan Oct 07 08 Jan A A A A A A A Source: STR

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The smooth line above shows the 12-month moving average. RevPAR has generally increased since a low in January 2004; however it appears to have peaked due to decreases in occupancy. The figure below shows monthly year-over-year change in occupancy. On average, RevPAR has increased from $45 to nearly $70.

Graph 36: Occupancy and Year-Over-Year Change

100.0

80.0

60.0

40.0 % 20.0

0.0

-20.0

-40.0 03 y Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Sep 03 Sep 04 Sep 05 Sep 06 Sep 07 Ma May 04 May 05 May 06 May 07 May 08

Source: STR, HSP Occupancy Year-Over-Year Change

Occupancy had increased almost every month until May of 2006 when the opposite trend began to occur. Since then, occupancy rates were lower nearly every month. Monthly demand and average daily rate for the set is shown below.

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Graph 37: Monthly Competitive Set Room Demand and Average Monthly Rate

Monthly Competitive Set Room Demand & Avg. Monthly Rate

$150 60,000

$140

50,000 $130

$120 40,000

$110

$100 30,000

$90

Average Daily Rate 20,000 $80 Monthly Room Night Demand

$70 10,000

$60

$50 0 Jan 02 Jul 02 Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Average Daily Rate Demand 12 per. Mov. Avg. (Demand) 12 per. Mov. Avg. (Average Daily Rate)

The pattern exhibited in the figure above shows that, on average, monthly room demand increased from 2001 before it began to fall in the second half of 2006; however it has increased recently due to increased supply.

Average monthly rates have risen roughly $25 since July 2004. In the beginning of the period rates were more than $80 but fell to approximately $70 during 2003 and the first half of 2004. The rate curve trend appears to be peaking and should do so by the end of 2008, however rates are now approaching $110 on average.

The figure below displays the seasonality of occupancy during the last seven years.

Graph 38: Seasonality of Occupancy, 2002-2007

Seasonality of Occupancy 2002 - 2007

90%

80%

70%

60%

50% Max 40% Average Min 30% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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The competitive set’s seasonality averages show that the strongest months for room demand are June and October, with October as the highest month averaging 70 percent. December is the weakest month, as is typical for many cities. August and January are also weak months.

The figure below shows the seasonality of rate.

Graph 39: Seasonality of Rate, 2002-2007

$140

$130 Max Average $120 Min $110

$100

$90

$80

$70

$60

$50

$40

Source: STRJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

The following figure shows the seasonality of RevPAR.

Graph 40: Seasonality of RevPar, 2002-2007 $100

$90 Max Average $80 Min

$70

$60

$50

$40

$30

$20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: STR

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As would be expected from the prior graphs, RevPAR is highest in June and October, when the combination of rate and occupancy is highest. December is the lowest month for RevPAR. July, August and September are also relatively low months for RevPAR.

The figure below shows occupancy by day of week in the last 12 months of data.

Graph 41: Occupancy by Day of Week, June 2007 – May 2008

100%

90%

80%

70%

60%

50%

40% Max 30% Average 20% Min

10%

0% SUN MON TUES WED THURS FRI SAT Source: STR

Sunday is typically the slowest night in the hotel business and this holds true in the Carrollton area. Most corporate meetings typically occur on Tuesday and Wednesday, so these nights average 80% occupancy for the competitive set. Monday and Thursday are relatively weak compared to most weekday transient patterns. After Wednesday, occupancy drops until the beginning of the next work week. The weekend nights of Friday and Saturday exhibit low occupancy, approximately 25 percent lower than during the weekdays. The figure below shows average daily rate by day of week.

Graph 42: Average Daily Rate by Day of Week, June 2007 to May 2008

$140

$130

$120

$110

Max $100 Average $90 Min

$80

$70

$60 Sun Mon Tues Wed Thurs Fri Sat Source: STR

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Due to leisure travelers generally paying lower rates and the lack of overall weekend demand, the weekend nights of Friday and Saturday typically represent the lowest rates of the week, especially Saturdays. Sunday nights, while lower than during the week, are often occupied by group and corporate transient guests, who pay more on average than leisure guests who have traveled home by Sunday evening. The marked decline in weekend rates is instructive for those wishing to build a hotel in the area. Any opportunity to capture weekend demand via family amenities, such as a pool, or meeting or banquet facilities, would be beneficial, although at an additional capital cost.

13.3.4 Unaccommodated Demand

Unaccommodated demand is defined as demand that would have been captured by the market, but for a lack of available rooms. This demand is therefore deferred to later dates, accepts lesser accommodations, moves just outside the competitive set, moves its business to another area, or cancels plans altogether. As new properties are added to the market, it is expected that this demand will be accommodated in the new supply. In most markets, average monthly demand in excess of 70% indicates unaccommodated demand.

For every month that occupancy was greater than 70%, it is assumed that a portion over that amount was unaccommodated.

The figure below shows the estimated number of unaccommodated room nights in the competitive set historically in the Carrollton area.

Graph 43: Estimated Unaccommodated Room Nights

12,000

10,000

8,000

6,000

Nights 4,000

2,000

- Unaccommodated Room 2002 2003 2004 2005 2006 2007 Source: HSP Year

For the competitive set, it is estimated that there were 11,000 unaccommodated room nights in 2005. However, the figure declined to approximately 1,400 room nights in 2006 as demand softened. In 2007 it is estimated that 700 rooms were unaccommodated in the Carrollton area. This is a relatively low number of room nights.

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13.3.5 Conclusion

The competitive hotel market has improved dramatically in the past few years in terms of occupancy and rate. However, it appears to be peaking and has already shown signs of some weakness in the face of expanding supply. Given the general economic climate and new supply, it is expected the market will not support substantial supply increases for the next two years. However, when planning, given the timeline for construction and pre-development, the general market would likely support more hotels, if well-located, in two to three years.

13.4 Recommendations This section discusses the salient points discovered in the analysis and the implications for hotel development on the site.

13.4.1 Discussion of Strengths, Weaknesses, Opportunities and Threats

When considering the idea to develop a hotel, one must consider the strengths, weaknesses, opportunities, and threats of and to the subject site Carrollton for such a development.

Strengths Strong Corporate Climate and Existing Hotel Demand. The growth of Carrollton and the Dallas area have been quite strong for many years, generally tied to a strong corporate business climate. This includes incredible air lift and access from two major airports on either side of Carrollton. As such, hotel activity during the week is noticeably stronger on Tuesdays and Wednesdays and moderately stronger on Mondays and Thursdays. However, Friday through Sunday are very weak, due to the lack of group, leisure, and corporate activity on those days. A new hotel, as a result, would likely be able to tap into the strong weekday demand and if positioned correctly as an upper scale property could leverage that strong corporate demand into higher rates, as well as generate additional leisure room nights. Increasing Population and Improving Demographics. The increasing population of the area is a supporting factor in the increasing demand for hotel room nights in the area, especially on weekends. The strong income statistics play in the favor of Carrollton’s attractiveness for high quality amenities and leisure activities to be developed. The increasing population and its improving demographics provide a strong base of support for events and activity at a new hotel. The need for special event locations increases as the population and earnings grow. Accessibility. The development site is along the north side of the President George Bush Turnpike. Access points on and off the turnpike are available on each side of the development at McCoy Road and Old Denton Road. Easy access is important for hotel properties, as convenience will often become a deciding factor for transient guests. Visibility. The south end of the site is very visible from traffic using the George Bush turnpike, although it is more visible to traffic traveling east due to the topography (the site sits at the top of a hill and so it not as visible for those traveling westbound). Lack of Hotels in Immediate Area. The existing supply of hotels is primarily located in clusters along major thoroughfares outside of Carrollton and represents a heavily

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branded array of products in the market. Currently there are very few properties in close proximity that would serve the demand generators proposed in the development plan or the local business community. Local demand will gravitate toward new supply due to its convenient location. Commitment of the City and other Civic Leaders. There are many positive forces coming together to improve Carrollton and create a sense of place for the city in a booming metro area. Underutilized parcels are being purchased and improved both privately and publicly.

Weaknesses Visibility. As discussed, not all travelers along the George Bush Turnpike will have visibility of the development site. Although signage will improve this situation, westbound travelers on the turnpike will have no view of the hotel(s) due to the gradient of the land and sound barrier walls that line the roadside. Lack of Destination Appeal. Carrollton currently does not have a strong leisure profile. It is busy during the week due to corporate activity, but leisure and group activity is weak. This situation hurts local hotels as they have little ability to support occupancy and rate on weekends. Without public support it will be hard for the private sector to justify more than a limited-service product due to high construction costs versus low occupancy levels. Lack of Existing Product. Like retail, offices and restaurants, hotels generally are developed in areas with existing hotels, as an intersection or area becomes known as a hotel hub. This creates awareness and visibility. The lack of existing product can have both positive and negative impacts on new supply. The downside is lack of critical mass and awareness for the location. Lack of Corporate and Restaurant Mass. Carrollton is primarily characterized by residential and retail development, with few office cores (or restaurants). By comparison, there are numerous office and restaurant developments in nearby Addison and other areas. These support factors (offices create demand, restaurants support it) do not exist in such a way that supports major hotel development.

Opportunities Surrounding Area Development. The plan for the mixed-use development of the Raiford Road Tract envisions the development of retail, restaurants and other leisure options as well as housing and office. If developed, these will provide more of a destination feel to the area. Without these developments, the hotel could struggle due to lack of an active economic pocket. Lack of Quality Competition. Opening hotel(s) at the proposed development site with the proper elements will make it somewhat unique in the market among the similar branded properties and provide it a competitive advantage.

Threats U.S. Economy and Declining Demand. The current economic situation is unclear, but growth has slowed and this could have an impact on the demand side of the equation. Leisure travel slows during economic downturns, as does business travel. The

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performance of area businesses will determine to a large degree the continued hotel demand for the area. Continued growth of new supply. New hotels are projected to come into the market and this will exacerbate slow periods (weekends) as well as already softening corporate demand. Any pause in the construction of new hotels for the next 18 months will considerably assist the feasibility of the proposed hotel(s) in Carrollton.

13.4.2 Recommendations

HSP reviewed numerous conditions to determine the product that would be most feasible for a hotel(s) at the proposed development site in Carrollton. Although the development of a unique property is desired for the development, the market conditions and other attributes of the development limit the feasibility of this type of concept with public financial support.

The table below shows a summary of the recommended hotel component of the Raiford Road Tract.

Table 101: Summary of Recommendations Summary of Recommendations

Proposed Hotel Components Assumed Opening Date January 1, 2011

Hotel I Upscale Limited Service Branded Property Guest Rooms 130 Pool Shared Fitness Center Shared Business Center Yes Parking Shared 200 spaces

Hotel II Midscale Limited Service Branded Guest Rooms 110 Pool Shared Fitness Center Shared Business Center Yes Parking Shared 200 spaces

Source: HSP

Note: The above recommendations are based on study completed to date. If additional study is directed, a penetration model will be used to determine how the proposed products will perform. This will include a detailed financial projection, from which an investment analysis can be developed. Based upon a full study, a determination of hotel details can be provided. The concepts above are the best recommendations based on our existing study.

It is suggested that two limited service branded hotels be developed as the economy recovers and the hotel economy along with it. Due to the recent expansion of supply and declining

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occupancy, as well as the overall economic climate, it is believed that the hotel products should not open until 2011 at the earliest and should coincide with the opening of the other subject site elements. In addition, the market does not appear to support a full-service upper upscale product without outside support (such as public funds). This lack of feasibility includes meeting space. However, meeting space in the hotel, as well as a restaurant, would be beneficial for the overall project and developing a more balanced market mix for the hotel(s). This would require public assistance, however, and should be studied in more depth.

13.4.3 Conclusion

The long-term goal for the Raiford Tract Development is an active live/work/play area of development with an urban, but small-town feel. Although a unique hotel product may not be the most feasible option for this project, the immediate area is lacking quality hotel rooms. The synergy from the other components of the development should act as a catalyst to position the hotel(s) properly in the market as long as the correct combinations of amenities or demand generator components are added to the development. If the City desires to participate, a hotel with full service amenities and function space would be welcomed locally, but would require additional financial support beyond what the private sector will be willing to bear.

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14. Site Recommendations and Forecasts

Table 102 summarizes the residential build-out for the Raiford Road site, totaling 495 to 545 units. Between 300 and 330 apartments would be located on the 15-acre site off Raiford Road. A total of 55 to 60 single-family detached units could be built on the 11-acre site. The 21-acre site directly south and west of the single-family units would support a mix of 55 to 65 townhouses and 85 to 90 units of senior for-sale units. The remaining 12.5-acre site, fronting President George Bush Turnpike, would be available for a hotel and/or retail.

Table 102: Residential Site Recommendations, Raiford Road Site, 2008 Unit Type Units Pricing Apartments 300 - 330 $520 - $1,270 Single-Family 55 - 60 $290,000 - $400,000 Townhouse 55 - 65 $190,000 - $275,000 Senior-For Sale 85 - 90 $200,000 - $220,000 Total 495 - 545 Source: Warren & Associates

Residential product on the Raiford Road project should be implemented in phases, commencing with the market-rate apartments on the 15-acre site south of the proposed greenway. Market demand is currently strongest for this product type, and this trend should continue for the next two to three years. Phase 2 should consist of the single family housing on the 11-acre site north of the greenway. This small neighborhood would connect with existing streets, and attract existing Carrollton area residents seeking the privacy of detached units with a low-maintenance, recreation-based lifestyle.

The townhouses and/or for-sale senior product would be constructed in Phase 3, driven in part by site planning issues related to the small lake and the existing farmhouse on the 21-acre parcel. The combination of townhouses and senior housing assumes that the existing lake is filled in and graded for development. Delaying Phase 3 would allow the townhouse market to recover from its current slowdown. It also recognizes the future premiums and higher densities that could be obtainable as the surrounding market area urbanizes, and the DART light rail station at Trinity Mills opens.

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Appendix

Since the mixed-use comparables are located in different submarkets and are of different ages, a statistical analysis was performed to determine the rent premium or discount for each submarket and for a community’s age. These premiums or discounts were then used to adjust the comparable per square foot rents accordingly for the Raiford Road site.

A sample of 227 communities in the four submarkets was used to determine the submarket location and age adjustments. Rents per unit in the communities were analyzed using a multi- variate regression analysis using three variables (Appendix Table I). All the variables showed statistical significance except for the location adjustment for the Plano/Allen/McKinney submarket. With R2s ranging from .209 to .313 the three variable regression explain between approximately 21% - 31% of the rent differences between the communities. The age of the property showed a nonlinear relationship with price, and was optimized by an exponential decay transformation.

As shown in Appendix Table I, per square foot rent adjustment for location (m2) was $0.19 for North Irving where Amli at La Villita is located. The $0.19 per square foot rent per unit premium for North Irving means that the rent per unit at Amli La Villita must be adjusted downward by $0.19 per square foot to adjust for its superior location when compared to the Raiford Road site in the Carrollton/Addison/Coppell submarket. Since age exhibited a nonlinear relationship with rent per unit, determining the age adjustment requires multiplying the age -0.0710*Age coefficient m3 ($0.32) by the exponential decay function (e ) and subtracting that from $0.32 to determine the age discount when compared to a new community. For example, a community built in 2007 will have an age adjustment of $0.02 = $0.32- $0.32*e -0.0710*(1 year old).

Appendix Table I: Regression Statistics for Submarket Location and Age Adjustments, Comparable One- Bedrooms, May 2008 x1 x2 x3 Plano/Allen/ Statistic McKinney North Irving e-0.0710*Age

Coefficient (mn) $0.02 $0.19 $0.32 t-statistic 0.56 3.58 5.34 R2, F, df 0.214 15.19103241 223 Constant (b) $0.82 Rent/Sq ft/Unit = b + m *x + m *x + m *x Equation 1 1 2 2 3 3

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Appendix Table II: Regression Statistics for Submarket Location and Age Adjustments, Comparable Two- Bedrooms, May 2008 x1 x2 x3 Plano/Allen/ Statistic McKinney North Irving e-0.0602*Age

Coefficient (mn) $0.01 $0.14 $0.34 t-statistic 0.50 3.40 - R2, F, df 0.313 25.41724448 223 Constant (b) $0.75 Equation Rent/Sq ft/Unit = b + m1*x1 + m2*x2 + m3*x3

Appendix Table III: Regression Statistics for Submarket Location and Age Adjustments, Comparable Three- Bedrooms, May 2008 x1 x2 x3 Plano/Allen/ Statistic McKinney North Irving e-0.0580*Age

Coefficient (mn) $0.09 ($0.28) $0.70 t-statistic 1.23 (2.85) 5.92 R2, F, df 0.209 14.70091337 223 Constant (b) $0.11 Rent/Sq ft/Unit = b + m *x + m *x + m *x Equation 1 1 2 2 3 3

As shown in Appendix Table IV through Appendix Table VI, the adjustments from the regressions were then applied to the comparables by bedroom type in order to account for their ages and locations. All the comparable rents were adjusted upward for age to represent a new community completed in 2008, and adjusted accordingly by submarket to match the Carrollton/Addison/Coppell submarket.

Appendix Table IV: Adjustment of Per Square Foot Rent from Regression, One- Bedrooms, 2008 Submarket Age Avg Avg. Rent Year Adjustment Adjustment Adj. Rent 1. Community per SF Open x1-x2 x3 per SF Post Addison Circle $1.37 1997 $0.00 $0.18 $1.55 Post Legacy $1.07 2000 $0.00 $0.14 $1.21 AMLI at La Villita $1.16 2007 ($0.19) $0.02 $1.00 Legacy Village Residences-Ph. 2 $1.18 2004 $0.00 $0.08 $1.26 Eastside Village-Ph. 2 $1.22 2001 $0.00 $0.13 $1.34 Total/Avg. $1.27 $1.39 Source: REIS and Warren & Associates

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Appendix Table V: Adjustment of Per Square Foot Rent from Regression, Two- Bedrooms, 2008 Submarket Age Avg Avg. Rent Year Adjustment Adjustment Adj. Rent 1. Community per SF Open x1-x2 x3 per SF Post Addison Circle $1.33 1997 $0.00 $0.17 $1.49 Post Legacy $1.01 2000 $0.00 $0.13 $1.14 AMLI at La Villita $1.06 2007 ($0.14) $0.02 $0.94 Legacy Village Residences-Ph. 2 $1.13 2004 $0.00 $0.07 $1.21 Eastside Village-Ph. 2 $1.20 2001 $0.00 $0.12 $1.32 Total/Avg. $1.21 $1.30 Source: REIS and Warren & Associates 1. Adjusted using multi-variate regression analysis for community age and submarket location

Appendix Table VI: Adjustment of Per Square Foot Rent from Regression, Two-Bedrooms, 2008 Submarket Age Avg Avg. Rent Year Adjustment Adjustment Adj. Rent 1. Community per SF Open x1-x2 x3 per SF Post Addison Circle $1.00 1997 $0.00 $0.33 $1.33 Total/Avg. $1.00 $1.33 Source: REIS and Warren & Associates 1. Adjusted using multi-variate regression analysis for community age and submarket location

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Disclaimer

Warren & Associates and Hunden Strategic Partners conducted extensive due diligence to verify data obtained for this report. Every reasonable effort was made to provide the most current and accurate information, but Warren & Associates and Hunden Strategic Partners are not responsible for inaccuracies provided by our clients or any other data sources.

Recommendations and forecasts contained in this report are opinions based on interpretation of economic and market data. Warren & Associates and Hunden Strategic Partners make no warranty or representation that any prospective results reported in this analysis will be realized, including demand and financial estimates and forecasts. There is no guarantee of income or profit associated with this report.

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