Prepared for Chicago Chapter of Appraisal Institute CHICAGO RETAIL MARKET OVERVIEW Presenters: Keely Polczynski, CB Richard Ellis Eteri Zaslavsky, Next Realty, LLC May 28, 2014 Table of Contents • Brief Introductions • Chicago Urban Retail Investment Sales Activity • Retail Submarkets and Demographic Trends • Investment Sales Activity by Submarket Michigan Avenue & Gold Coast Armitage & Halstead Southport Bucktown Fulton Market • Chicago Grocery Industry Trends • Chicago Grocery Investment Sales Activity • Dominick’s Update • Investor’s Perspective and Closing Remarks 2 Chicago Urban Retail Investment Sales Activity Investment Activity is Robust # of Total Value Average Average Cap Period Transactions (Million) Price PSF Rate 1Q2013 29 $170 $472 6.28% 2Q2013 42 $143 $725 5.98% 3Q2013 46 $110 $338 6.75% 4Q2013 47 $822 $519 5.69% 1Q2014 29 $211 $449 5.45% 3 Retail Submarkets 4 Income and Population Trends 5 Employment Trends 6 Housing Trends 7 FDIC Growth 8 Investment Sales Activity: Michigan Avenue 9 Investment Sales Activity: Gold Coast 10 Investment Sales Activity: Armitage & Halstead 11 Investment Sales Activity: Southport 12 Investment Sales Activity: Bucktown 13 Investment Sales Activity: Fulton Market 14 Chicago Grocery Industry Trends • Urban Markets are Stronger and Low Density Markets are Struggling • Upscale/Specialty/Organic Grocers are Expanding in Urban and In-Fill Markets Whole Foods, Trader Joe’s, Mariano’s, The Fresh Market, Plum Market, Heinen’s, Fresh Thyme, Spouts, Earth Fare • Fewer National Chains in Traditional Grocery Category (Jewel-Osco) • Other Retailers Filling Former Grocery Stores Home Furnishings: Art Van, HomeGoods, American Sale, Ashley Furniture Fashion Retailers: Ross, TJ Maxx, DSW, Nordstrom Rack 15 Chicago Grocery Investment Sales Activity 48 Transactions Completed Over the Last 6 Quarters # of Total Value Average Average Period Notable Transactions Transactions (Million) Price PSF Cap Rate 4Q2012 5 $66 $205 7.68% Mariano’s, West Loop, 6.4% cap rate, $521 psf 1Q2013 6 $64 $265 6.42% 2Q2013 7 $115 $152 7.81% 3Q2013 9 $85 $100 8.86% 4Q2013 9 $92 $159 6.13% Trader Joe’s, Evanston, 5.0% cap rate, $846 psf 1Q2014 12 $178 $210 7.42% Mariano’s, South Loop, 5.8% cap rate, $618 psf Grocer # of Transactions Aldi 14 Users (Pete’s, Tony’s, etc.) 10 Mariano’s 8 Jewel 5 Trader Joes 2 Dominick’s 2 Wal-Mart, Target, Whole Foods, Meijer’s, 1 (Each) Kroger, Food for Less, Cub Foods, 16 Dominick’s Update • 72 Stores Closed 4Q2013 Mariano’s 11 Jewel 9 • 4 Stores Previously on the Market Whole Foods 7 • 76 Total Joe Caputo & Sons 4 Tony’s 2 42 Committed by Other Grocers Cermak Fresh Market 2 34 Remain on the Market Heinen’s 2 Pete’s 1 Garden Fresh 1 Butera/Piggly Wiggly 1 Shop & Save 1 Angelo Caputo 1 Total 42 17 Investor’s Perspective and Closing Remarks • General Outlook is Positive • Investment Environment is Active • Plenty of Capital to Deploy • Search for Yield • Strong Capital Markets • Aggressive Valuations • What does the Future Hold? 18.