GATEWAY PARK 2018 NAIOP & ULI UNIVERSITY CHALLENGE: LAFAYETTE SQUARE MALL REDEVELOPMENT Ashley Bedell • Matthew Crouch • Jess Lawhead • Nathan Lowery • Chris McKinney Nirav Patel • Anthony Schneider • Justin Strinka • Darren Trimble • Kris Wright APRIL 6, 2018 Gateway Park Table of Contents Introduction ........................................................................................................................................ 4 Project Overview .......................................................................................................................................... 4 History of Area ............................................................................................................................................. 4 Market Analysis .................................................................................................................................. 5 Introduction ................................................................................................................................................. 5 Demographics .............................................................................................................................................. 5 Product Type Review (Highest and Best Use) ................................................................................................ 6 Multi-Family ................................................................................................................................................. 6 Office ........................................................................................................................................................... 6 Retail ............................................................................................................................................................ 6 Industrial ...................................................................................................................................................... 6 Future Development ..................................................................................................................................... 7 SWOT Analysis .................................................................................................................................... 7 Strengths ...................................................................................................................................................... 7 Weaknesses .................................................................................................................................................. 7 Opportunity .................................................................................................................................................. 8 Threats ......................................................................................................................................................... 8 Development Plan ............................................................................................................................... 8 Acquisition Phase ......................................................................................................................................... 8 Phase One .................................................................................................................................................... 8 Phase Two .................................................................................................................................................... 8 Leasing Plan .................................................................................................................................................. 8 Tenant relocation plan .................................................................................................................................. 8 Compliance with Gateway Study ................................................................................................................ 10 Financing ........................................................................................................................................... 11 Lafayette Square Mall Valuation ....................................................................................................... 11 Current Tenants .......................................................................................................................................... 11 Rent Estimate ............................................................................................................................................. 11 Operating Expenses: NNN Expenses ............................................................................................................ 11 Net Operating Income ................................................................................................................................ 12 Projected Valuation .................................................................................................................................... 12 Budget .............................................................................................................................................. 13 Site Preparation .......................................................................................................................................... 13 Soft & Hard Costs Analysis .......................................................................................................................... 14 Proforma Analysis ............................................................................................................................. 14 Assumptions ............................................................................................................................................... 14 BTCF Analysis 1: Developer invests 30% Equity ........................................................................................... 15 BTCF Analysis 2: $15M of Mezz Debt ........................................................................................................... 15 BTCF Analysis 3: $10M of Mezz Debt & Owner Donation of Land ................................................................ 15 BTCF Analysis 4: Only Perform Site Work Needed for Phase 1 ..................................................................... 15 2 Gateway Park BTCF Analysis 5: Sale of Land at Exit from Development ............................................................................. 15 BTCF Analysis 6: Pari Passu Joint Venture ................................................................................................... 15 References ........................................................................................................................................ 17 Appendix ........................................................................................................................................... 18 Exhibit A: Site Plan ...................................................................................................................................... 19 Exhibit B: Parcel Information ...................................................................................................................... 20 Exhibit C: Development Plan Outline .......................................................................................................... 21 Exhibit D: Demolition Area ......................................................................................................................... 23 Exhibit E: Construction Schedule ................................................................................................................. 24 Exhibit F: Relocation Options ...................................................................................................................... 26 Exhibit G: Mall Valuation ............................................................................................................................ 27 Exhibit H: Project Timeline .......................................................................................................................... 31 Exhibit I: Soft & Hard Cost Analysis ............................................................................................................. 32 Exhibit J: Proforma Data (BTCF Analysis 1 & 6) ............................................................................................ 34 Exhibit K: Proforma Output (BTCF Analysis 1) ............................................................................................. 35 Exhibit L: Termination/Relocation Assumptions .......................................................................................... 39 3 Gateway Park INTRODUCTION renovation, including addition of a food court, was completed but the mall continued to lose anchor Project Overview tenants: Lazarus in 2002, JCPenney in 2005, then The mission of this project is to determine the highest Macy’s (previously L. S. Ayres) in 2009 (Milz, and best use for the Lafayette Square Mall site. A 2009). Lafayette Square Mall has continued to development on the site should be profitable for struggle to retain anchor tenants, with only portions investors, maximize job creation and encourage of two of five anchor tenant spaces currently occupied community investment and engagement. The by Burlington Coat Factory and Shopper’s World. Lafayette Square area needs to be rebranded as a diverse business center