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RETAIL DEVELOPMENT PROJECT Adapting to Changing Market Conditions. Marketing 4411 Case 6 T Malisa Chhuon Demetre Christou Blair Stewart. AGENDA. Assumptions Business Case Resale Business Plan IMC Plan. ASSUMPTIONS. Marketing team from BDM Properties - PowerPoint PPT Presentation
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RETAIL DEVELOPMENT PROJECTAdapting to Changing Market Conditions
Marketing 4411Case 6 T
Malisa ChhuonDemetre Christou
Blair Stewart
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AGENDA
Assumptions Business Case
Resale Business Plan IMC Plan
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ASSUMPTIONS
Marketing team from BDM Properties Developer wants to abandon retail-mixed use
project by November 30th,2010 Mitigate risk / loss and avoid 2% surtax
Sell land and build-out plans to a developer
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Action PlanMeasure & EvaluateAct
Plan
Past 7 days have shown economic changes affecting cost of money
Must re-evaluate strategy
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BUSINESS CASE
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BUSINESS CASE
Market Updates
Comparative sites
Go Criteria
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Market UpdateGO CRITERIA UPDATE
GO Criteria dependent on:1. Is there a need for serviced land within this market?
North Surrey (South Whalley)
2. Can we mitigate risk & loss?
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NEW DEFINITION
Market and sell serviced land
Include development proposal
Justifies land-price increase
Economical
• Prime rate has increased to 3.25%
• Canadian banks raise prime rate by 1.25%
• Mortgage rates increased by 1.25%
– Commercial mortgage: Median rate is at 5.25%
• Jan 1, 2010 – 2% surtax on all Real Estate transactions
MARKET UPDATE
Social
Consumer confidence in British Columbia:• 92.8 points
– 8.3% from 100.5 points
Canada consumer confidence• 84.8 points
– Fell 7.8 points
MARKET UPDATE
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FUELInterest Rates:
Prime – 3.25%
5 Year – 6.25%
Market UpdateCOST OF MONEY
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Cap Rates
Retail: 6.3% - 6.8% Office: 5.7% - 7.4%
Rising interest rates = Rising cap rates Must be taken into consideration when re-
evaluating contingency plans
Market UpdateCOMPARISONS
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13652 108th Ave Size SF: 15,768 $725,000 $45.97 / sq.ft
10662 King George Hwy Size SF: 102,366 $6,480,000 $63.30/ sq.ft
10315 133rd St Size SF: 43,560 $3,995,000 $91.71 / sq.ft
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LAND COST - ASSUMPTION
Maximum we were willing to pay (13% Profit): $4,200,000.00Amount we paid for the property in April, 2010: $3,000,000.00
$69.52per square foot
Median of comparables: $63.30per square foot Close to our location Not a corner lot Further north (Whalley) More competition within area
$600,000.00 higher than assessed value
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BUSINESS CASE“GO” CRITERIA
GO Criteria: Is there a need?
Can risk be mitigated?
YES
YES
OCP suggest need for more commercial businesses; our land is favourably zoned to accommodate
the need
Comparisons show that owner can still recover investment costs. Potential for profit.
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BUSINESS CASESummary
Market Update
Comparative sites
Go Criteria
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BUSINESS PLAN
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BUSINESS PLAN
Vision
Execution Plan
Contingency Plan
Measurement & Evaluation
Action Plan
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BUSINESS PLANVision
To Market and Sell: Serviced bare-land in Whalley to a developer for $4,280,000 Include build out development proposal which reflects our
end price
UVP: Unique build-out plans and favorably zoned property located
strategically in up and coming community
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BUSINESS PLANFinancial StrategyFinancial Summary Budget Price per sq.ft % of Project Cost
Land Cost $ 4,280,000 $ 30.10 11%
Development/Construction hard cost $ 24,190,000 $ 169.89 62%
Soft and financing costs $ 4,500,000 $ 31.74 12%
Profit $ 4,000,000 $ 28.04 10%
Marketing costs $ 935,000 $ 6.57 2%
Contingency $ 1,270,000 $ 8.95 3%
Total $ 39,175,000.00 $ 275.28 100%
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BUSINESS PLANFinancial Strategy
Financial Summary Budget per sqft of gross
floor area % of Project
Cost
Land Cost $ 3,000,000 $ 21.07 70%
Financing costs $ 130,700 $ 0.92 3%
Profit $ 958,560 $ 6.73 22%
Marketing costs $ 190,740 $ 1.34 4%
Total $ 4,280,000.00 $ 30.06 100%
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BUSINESS PLANContingency Plan
PLAN B
Sell land at $3,750,000 Decrease profit to 10% Increase developer profit to 12%
Sell land at $3,200,000 Increase in developer profit to 13%
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BUSINESS PLANContingency Plan
PLAN C If market conditions turn favourable
Example: Increasing lease rates, lower interest rates, etc.
Reassess and possibly build-out according to original plan
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BUSINESS PLANMeasurement / Evaluation M
easure & EvaluateAct
Plan
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Project Timeline Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10
Task
Market Research
Land Acquisition
Project Design
Land Survey
Municipal Approval
Marketing
BUSINESS PLANAction Plan
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BUSINESS PLANSummary
Vision
Execution Strategy
Contingency Plans
Measurement & Evaluation
Action Plan (Timeline)
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IMC PLAN
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IMC PLAN The Six P’s
Target Markets
Market Target
Budget Analysis
Measure & Evaluate
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IMC PLANTarget Markets
Private Investors Focus on Real Estate
Qualified Financial and Market
Experienced
Seeking new investment Opportunities
Trusts & Syndicates Focus on acquisitions + Leasing
Based in Vancouver
Diverse portfolio Retail, Industrial, Office
Seeking new investment Opportunities
Local Developers Focus on acquisitions + Leasing
Based in Vancouver
Diverse portfolio Retail, Industrial, Office
Seeking new investment Opportunities
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IMC PLANTarget Market
Market Target #1Development Companies
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IMC PLANTarget Market
Potential InvestorsSimon Property Group Bucci Group
General Growth Properties CBL & Associates Properties Inc.
Kimco Realty Corp Mills Corp.
Developers Diversified Realty Terrex Real Estate Group
The Inland Real Estate Group of Cos Anthem Properties
Onni Group Porte Realty
Macerich Co. Westfield America
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IMC PLANMarket Target
Simon Property Group Bucci Group
General Growth Properties CBL & Associates Properties Inc.
Kimco Realty Corp Mills Corp.
Developers Diversified Realty Terrex Real Estate Group
The Inland Real Estate Group of Cos Anthem Properties
Onni Group Porte Realty
Macerich Co. Westfield America
Potential Investors
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IMC PLANMarket Target
Developer / Development Manager / Project Managers
Retail, Commercial, & Residential portfolio
Experience and success in Surrey
Company Principals are knowledgeable and successful
Panorama Place(Mixed use Retail and Office)152nd and King George Hwy
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IMC PLANMarket Target
Developed similar projects
Based in Vancouver
Focus on income-producing real estate
Diverse portfolio Retail, Industrial, Office,
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IMC PLANMarket Target
Diverse development portfolio
Similar developments in our area (Guildford)
Opportunistic developers
Successful developments in GVRD (including Surrey)
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IMC PLANMarket Target
40+ years of experience in GVRD
Diverse portfolio
Experience in Surrey
10+ commercial properties in GVRD
Successful track record
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IMC PLANBudget Analysis
Marketing
Creative $10,000
Advertising/Printing/Signage $20,000
Commission (3%) $85,600
Miscellaneous (Car, Insurance, Gas, Cellphone) $15,000
Contingency (10%) $13,060
Total Marketing Costs $143,660
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IMC PLANMeasure & Evaluate
Measure & Evaluate
Act
Plan
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IMC PLANSummary
The Six P’s
Target Markets
Market Target
Budget Analysis
Measure & Evaluate
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CONCLUSION
Business Case
Business Plan
IMC Strategy