Supermarket Study

8/13/2019 Supermarket Study

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NortheastOklahoma CityGrocery Store

Location AnalysisPrepared for:

The Greater Oklahoma City

Chamber and The City of OklahomaCity, OK

11019 N. Towne Square RoadMequon, Wisconsin 53092

262-240-0045Fax: 262-240-1057

www.thekilduffcompany.com


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Table of Contents

1. Executive Summary

2. Preface

3. Background and Methodologya. Backgroundb. Methodology

4. Overall Market Observationsa. Oklahoma Cityb. Northeast Oklahoma City

5. Tapestry Observationsa. Tapestry Observationsb. Community Tapestry Definitions

6. Demographic Observations

7. Retail Marketplace Profile

8. Residential Market Observations9. Strengths and Weaknesses

10. Recommendation and Implementationa. Recommendationb. Implementation

11. Closing Summary

11. Appendixa. Demographic & Income Profileb. Net Worth Profilec. Census 2000 Summary Profiled. Retail Market Potentiale. Retail Marketplace Profile


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Executive SummaryThe task of determining the feasibility of a Northeast Oklahoma City GroceryStore may be approached using the traditional, statistical analysis method. In this

method, a potential site will be selected and a projected trade area will beanalyzed to determine if there are enough shoppers (or dollars available for thepurchase of food). This study takes into account trade area competition, and theresults will show that the study area does or does not support feasibility for anadditional food store.

This type of study relies heavily on population and income information from anarbitrarily drawn trade area. Usually the assumption is made that a food store is alocal convenience retailer and the trade area is relatively small. Often thedemographic information studied is U.S. Census based and can be several yearsold. Current trends and changes on the ground, which are known in the market,

are rarely represented. Factors such as development trends, daytime population,and metrics such as the number and value of building permits and homeimprovement loans are not reflected in the Census based data.

This statistical only approach can result in a feasibility study for the location of afood store, but it can also overlook opportunities that result from the dynamicchanges in a marketplace and the rapidly changing strategies of food operatorslooking for ever better ways to serve their customers and differentiate andcompete with large and powerful competitors in an industry of historically lowprofit margins and massive consolidation.

We are often asked to review feasibility in a way that recognizes and values thedynamic forces in markets, in an effort to better describe the entire market pictureand tailor a recruitment strategy reflecting the whole story. This is the approachtaken in the prior study of Northeast Oklahoma City, performed by RW Venturesin October 2005. The results were relied upon, in whole, for this study.

Attracting grocery retail to a marketplace that is not seen by the industry as vitalis difficult. Retailer capital for expansion is limited, competition is fierce and weare competing for capital in a Global Market. No longer is the neighboringcommunity your only competitor. Markets are competing for retail capital on aglobal scale. This means that even having a clear market demand in yourcommunity may not result in attracting a food retailer. We believe that this alsomeans that a market that makes its case loudly and often is more likely tosucceed than one that waits for the market to respond to the traditional statisticalsignals.

A statistical analysis of Northeast Oklahoma City and the report of RW Ventures,indicates that there is feasibility for a Northeast Oklahoma City Grocery store.The challenge of attracting a grocery store is difficult and the choice is to wait


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until the market responds, or develop a recruitment strategy that will work toattract a grocer to the marketplace.

We recommend a recruitment approach. The following report will detail thisstrategy. While attracting a grocery store to Northeast Oklahoma City will be

difficult and could take three years or more, the case for this store should bemade now and repeatedly. A recruitment strategy should be adopted andimplemented immediately.

This strategy should target neighborhood grocery operators that attract shoppersfrom a typical neighborhood trade area of approximately two to three miles.These grocers will typically operate in a store of between 20,000 and 45,000square feet.

We selected three possible sites for study. These sites are:

NE 23rd

Street and N. Kelley Avenue NE 23 rd Street and N. Martin Luther King Avenue

NE 36 th Street and N. Lincoln Boulevard

While the demographics of each of the studied subject sites are similar, theexisting retail at NE 23 rd Street and Kelley has a high rate of vacancy and theexisting retail appears weak. Farther east at 23 rd Street and Martin Luther King

Avenue, the retail appears more vibrant with more national retail investment. The

intersection of 23rd

Street and Martin Luther King Avenue is home to CVSPharmacy, a Hollywood Video store, a Sonic restaurant, Kentucky Fried Chickenand Taco Bell restaurants and AutoZone Auto Parts. There is also a PublicLibrary and an existing Hometown Market food store. The site at NE 36 th Streetand Lincoln Boulevard was also studied, but it is too far removed from thetargeted trade area population to satisfy the needs of the neighborhood.Therefore we recommend that a site be assembled for recruitment anddevelopment at:

NE 23 rd Street and N. Martin Luther King Avenue

Additionally, it is our recommendation that an overall retail recruitment strategybe implemented for Oklahoma City and that it be incorporated into the planningprocess for all development planning within the city.

Retailers should be targeted with information on the unmet demand for groceryproducts and services in the Northeast Oklahoma City trade area. They must beinformed of the continuing growth in downtown jobs and the large daytimepopulation in the nearby downtown, Oklahoma Health Center, and State Capitol


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areas. They must be told of the success of downtown retail and entertainmentthat draws from the region. The revitalization of nearby historic neighborhoodsand the continued residential growth that is underway in the downtown areashould be detailed. Although outside the trade area, all of the growth andrevitalization in the downtown area is important in terms of supporting the

Northeast, but the customer of a northeast grocery store will likely live in theimmediate trade area.

The implementation of this strategy may take several years and there is noguaranty of success. However, other cities, including Chicago and WashingtonD.C. have utilized similar strategies to great success. The following report willdetail our findings and the steps necessary to implement our recommendations.


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B. Why do retailers congregate together?

Retailers tend to locate near one another due to the synergistic effect. Shoppingtrips are concentrated in one place and the repetitive trips to the same general

location are comfortable for customers. One national retailer locating in an areacan say a lot about the entire trade area. For example, when a strong nationalretailer chooses a site in an area that may have long been ignored by others, theeffect may move other retailers to thinking why did they choose that location?Do they know something about the market that I dont? Do they draw the sametype of customer that I do? If the answer is yes, then another retailer mighttake a deeper look at the area. Once a major retailer has acted as a pioneerothers are often drawn to the area creating a new retail marketplace.

C. What Grocery is right for the site?

This question is answered by studying the demographic profile of the trade area. An industry fact is that people generally visit a grocery store between one andthree times per week. By studying the profile of Northeast OKC we can describea list of prospective grocers/retailers that would be attracted to this set of tradearea parameters. This list is drawn from national and local retailers who haveestablished operations in Oklahoma City. In addition, there may be other groceryoperators that do not currently operate in the market, but might consider themarket for future expansion.

D. What is a Site?

Identifying a market demand and a list of prospective grocers that match thetrade area does not result in the development of a grocery store without alsoidentifying the development site. Site selection includes identifying the size,location, cost, and development feasibility of the proposed development. Some ofthis work can be done in advance and will be discussed in the Recommendationand Implementation sections of this report. Some aspects of this process includesoil testing, site engineering, zoning approvals, etc. and are done as necessaryafter a development project is underway.


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Background and Methodology

Background

The Kilduff Company, LLC has been commissioned by the Greater OklahomaCity Chamber and the City of Oklahoma City, to conduct an analysis of thenortheast area of Oklahoma City and to determine the likely location(s) andrecommend the steps that will lead to a successful grocery store development.Through the Phase 1 report titled NeighborhoodScan: Retail and CommercialDevelopment Opportunities in Northeast Oklahoma City that was done in

August, 2005 with RW Ventures, it was determined that there is indeed a marketfor a full service grocery store in the Northeast area of the city.

The recommendations of this report are based on the following:

Report dated August, 2005 by RW Ventures and The KilduffCompany, LLC entitled NeighborhoodScan: Retail and CommercialDevelopment Opportunities in Northeast Oklahoma City

Determining the best real estate location within the trade area Determining the site with the best access to high traffic volumes Evaluating the projection of future growth patterns in the trade area Determining the availability of parcels and confirming the parcels

will be able to be assembled for a project site

The following questions were addressed as a part of this analysis:

The Phase I report determined there is a market for a grocery storein Northeast Oklahoma. What are the best locations and why?

To whom would this development appeal? What genre of grocer should be delivered at the site: i.e.

Neighborhood, Specialty, or Regional appeal? What are the strengths and weaknesses (from a market

perspective) of the selected development site?

Once a site and grocer(s) are selected, what implementation plan isrecommended to attract and successfully develop this project?


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Methodology

In order to address the above questions, The Kilduff Company, LLC hasconducted a detailed field evaluation of the Oklahoma City marketplace as wellas the northeast area of Oklahoma City. Three potential sites were then chosenand evaluated by observing existing market conditions, i.e. retail, office,residential and industrial developments in the trade area. During our study, TheKilduff Company, LLC thoroughly drove the market, visited and evaluated allexisting and planned developments, as well as nearby trade areas. Censusbased data was collected and reviewed and extensive research was completedin the market. The subject area was visited numerous times to gain a primaryqualitative understanding of the existing and known retail in the area, and any

competition that may or may not exist. Traffic and the likely gravitational patternsof shoppers were reviewed and a qualitative assessment of the market profile ofthe trade area was completed. Additional factors taken into consideration werethe realistic possibility of site assemblage and preparation.

Generally, real estate professionals look at population and incomes in a definedtrade area. The trade area may be defined by concentric circles, a polygon, ordrive times in minutes from the proposed site. A trade area is always impacted bytraffic patterns that exist in the marketplace. For our analysis, it is important tofocus on sites at major intersections with good vehicular access, heavy trafficand close proximity to the population base. Grocers require a strong, healthypopulation base with good visibility and access in order to be successful.


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Overall Market Observations

Oklahoma City (Overall Summary)

Based on the 2000 U.S. Census, Oklahoma City is ranked number 38 out of thetop 100 fastest growing cities in the U.S. It is located in the central part of thestate on the Oklahoma River. The city is comprised of four counties, Canadian,Cleveland, Oklahoma and Pottawatomie. There are many points of interest in thecity that contribute to a strong population base with heavy traffic potential. Someof the major attractions include the State Capitol, the State Historical Museum,the National Cowboy and Western Heritage Museum, the civic center buildingsand monuments, the Oklahoma City National Memorial, a downtown theatercomplex, the Cox Convention Center, the new city library, and zoo. Educationalinstitutions include the Oklahoma Health Center, Oklahoma City University, andOklahoma Christian University .

Oklahoma City, in addition to being the state capital, is the largest city inOklahoma with a total population of 528,042 and a land area of 621 squaremiles. The city is 68.4% White, 15.4% African American, 10.1% Hispanic and6.1% other. There are 204,434 households in the city of which 59.4% are owner-occupied. Of that 59.4% of owner-occupied homes, the median value is $80,300.The median household income is $34,947. The top employers in the city are theState of Oklahoma with 38,100 employees, Tinker Air Force Base with 26,000employees and the US Postal Service with 8,706 employees.

Oklahoma City is undergoing significant growth. There are many areas ofeconomic rebound within the trade area which are of importance; two specificallyare the Oklahoma Health Center, and the success of the Bricktown retail andentertainment district.

The Oklahoma Health Center is a grouping of seven health-related colleges,located in a fifteen block area near the State Capitol. An internationally prominentfaculty, state-of-the-art facilities and new technology combine to make theUniversity of Oklahoma Health Sciences Center a leader in education, researchand patient care. The institution serves as the state's training facility forphysicians, biomedical scientists, nurses, dentists, pharmacists and a wide rangeof allied health and public health professionals. The Oklahoma Health Centercomplex includes 32 public and private health care institutions.


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The Bricktown District, located just east of downtown, has become the fastestgrowing entertainment district in the state. Bricktown is home to a mile-longRiverwalk style canal, a AAA baseball stadium, a multi screen theatre complex,

shopping and restaurants. The Ford Center, located adjacent to Bricktown, is anew arena that hosts the NBAs New Orleans/Oklahoma City Hornets, rockconcerts and minor league hockey. The Deep Deuce apartment complex is anew development in the area with nearly 300 apartments and is 100% leasedwith a waiting list of new renters.

Most talked about Public Projects

15,000 seat AT&T Bricktown Ballpark is home to the OklahomaRedHawks. This $34.2 million facility was completed in 1998 and isnamed one of the nations top two minor league baseball facilities.

Bricktown Canal, a $32 million project that opened in 1999 and extendsthrough the Bricktown entertainment district A $63 million facelift and renovation of the Cox Business Services

Convention Center in 1999 added new meeting rooms and lobby areas,along with a remodeled exterior and exhibit space and is known as theCox Business Services Convention Center

The Civic Center Music Hall is the premier performing arts venue in theSouthwest. A $52.4 million renovation of the historic art deco building hasbeen warmly received by residents and performers

The new 20,000 seat Ford Center opened in 2002. This $87.7 millionfacility includes 56 suites and 3,600 club level seats

The Oklahoma State Fairgrounds were renovated in 1998 with a $14million facelift to the facilities that are home to more than 10 world andnational championship horse events each year

The $21.5 million downtown City Library and Learning Center houses abusiness information center, updated information services, classroomsand meeting spaces for area universities

A new trolley system, the Oklahoma Spirit loops through downtown withan additional segment of the trolley system linking the state fairgroundsarea with downtown and Bricktown

Stockyards City Main Street is deeply rooted in Oklahomas pioneerheritage and is located adjacent to Oklahoma National Stockyards, theworlds largest stocker and feeder cattle market. Stockyards City MainStreet consists of 75 merchants and restaurants and hosts live cattleauctions. The district is thriving and is often the focus of national attentionwith requests for western-style documentaries, tourism information andlocal news coverage

The revival of the Historic neighborhoods north of downtown is significant.This revival continues to attract people to the area to invest and add valueto these beautiful and historic homes


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Northeast Oklahoma CityTrade Area Observations

The northeast area of Oklahoma City is a neighborhood just north and east of theCentral Business District (Downtown Oklahoma City). The northeast area iseasily accessible by three major highway systems, I-44 located immediatelynorth, I-235 located immediately west and I-35 located to the south and east.Northeast Oklahoma City has an estimated population of 27,633 and coversapproximately 27 square miles. In addition, this neighborhood includes the StateCapitol and related government offices, the Governors mansion, and theOklahoma Health Center which currently employs over 13,000 people and isattended by over 3,000 students. The complex includes 32 medical entitiesincluding hospitals, foundations, private biomedical companies, and a UniversityMedical School. The medical complex alone brings nearly 18,000 people to the

area everyday.This neighborhood also includes The Adventure District, and is the home of theNational Cowboy and Western Heritage Museum, the State Firefighters Museum,the Omniplex Science Museum, a major race track (Remington Park), andTinseltown USA, a 20 screen cinema complex. These institutional attractionsbring over one million people to the area each year. This influx of people and theneighborhoods close proximity to downtown Oklahoma City and the BricktownEntertainment District greatly enhances its attractiveness to potential retailers.

Trade Area Detailed Descr iptionWhile conducting our study of Northeast Oklahoma City, it was noted that,though very close in distance, the Downtown area and the Northeast area aretwo distinct markets. Many times there are natural barriers that form a trade areasuch as interstate highways, rivers, or railroads, etc. When studying a trade area,these barriers can be used as parameters. The natural barriers separating thenortheast area and downtown include; the rail line, which runs parallel to I-235,the State Capitol Complex and the Oklahoma Health Center. In markets all overthe country people form general traffic patterns. These patterns are influenced bynatural barriers and often work to define a trade area. The population ofNortheast Oklahoma City is greatly impacted by the barriers mentioned above.

Northeast Oklahoma City shows familiar signs of a lack of reinvestment andredevelopment. While there are public improvements underway, including thestreetscape of NE 23 Street, there are many abandoned and boarded structuresthroughout the trade area. There is only limited availability of grocery retail andthe existing commercial corridors (NE 23 rd Street and NE 36 th Street) appear tohave high rates of vacancy. It is notable that this area suffers from many of the


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same redevelopment challenges as other urban trade areas in the United States. A promising observation is that both real and perceived challenges can be andhave been, overcome in the redevelopment of similar trade areas. Our selectedpotential sites will all present varying degrees of these characteristics.

Based on our review of the marketplace and the work previously done by RWVentures, we have selected the following three intersections, which in ourprofessional opinion represent the best potential sites for a grocery storedevelopment. Each of the sites will be evaluated using a trade area defined byconcentric circles.

Selected Intersections for consideration:

NE 23 rd Street and N. Kelley Avenue

NE 23 rd Street and N. Martin Luther King Avenue

NE 36 th Street and N. Lincoln Boulevard


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NE 23 rd Street at N. Kelley Avenue


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NE 36 th Street at N. Lincoln Boulevard


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Tapestry Observations

One of the tools used to determine the contrasts and similarities of communitiesis to review the market segments in a profile analysis. Using information fromESRI (www.esri.com), a data provider that compiles these Tapestry SegmentProfiles, we have reviewed the top five segments in the one, two, and three miletrade area for all three of the subject sites. Using these Tapestry SegmentProfiles helps retailers determine in a qualitative way, who resides in thecommunities in which they may locate.

The Tapestry charts on the following pages indicate that the trade areassurrounding all three selected sites show significant similarities. The top threeTapestry Segments (see Appendix for definitions) were identical in the two mileradius and included Modest Income Homes as the largest segment. Thissegment was even greater in a one mile radius of the sites. The Modest IncomeHomes segment is typically found in older portions of cities. This segment ismade up of mostly single family homes, and suggests the residents are familyoriented and multigenerational with a median age of 34 years, and that nearlyhalf own their own homes. The median home value is $51,000.

Another observation is the indication that Tapestry characteristics begin to shiftbeyond two miles at all three sites. This is due to the two and three mile radiusportion of the trade area encompassing a portion of Oklahoma City beyond thenatural trade area barriers. This suggests that a grocery store locating in thenortheast area would likely be sited far enough away from the downtown area,but close to the population in the northeast to attract and serve the localneighborhood.

All three sites share similar tapestry The three mile ring begins to reflect segments outside the trade area A grocery store development should be sited to draw customers from

within the Northeast neighborhood, staying close to the population, andfurther away from the areas outside the natural barriers

Tapestry segments suggest the best fit for the trade area would be agrocery store with modest prices and discounted merchandise


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Tapestry Segment Analysis

The one and two mile Tapestry Segments, which approximates the primary tradearea, differ considerably from that of the three mile radius.

NE 23 rd Street and Kelley Avenue

Top 5 Segments in 1 MileRank No. Tapestry Segment Percentage

1 62. Modest Income Homes 60.3%2 65. Social Security Set 13.8%3 36. Old and Newcomers 8.8%4 64. City Commons 7.0%5 33. Midlife Junction 5.9%

Top 5 Segments in 2 MilesRank No. Tapestry Segment Percentage

1 62. Modest Income Homes 39.48%2 65. Social Security Set 10.5%3 36. Old and Newcomers 8.2%4 34. Family Foundations 7.4%5 52. Inner City Tenants 6.4%


1 62. Modest Income Homes 24.2%2 60. City Dimensions 12.3%3 22. Metropolitans 11.3%4 48. Great Expectations 8.8%5 65. Social Security Set 8.2%


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NE 23 rd Street and Martin Luther King Avenue


1 62. Modest Income Homes 84.6%2 65. Social Security Set 9.0%3 34. Family Foundations 6.5%45


1 62. Modest Income Homes 58.8%2 34. Family Foundations 9.9%3 64. City Commons 7.6%4 65. Social Security Set 6.8%5 51. Metro City Edge 6.6%


1 62. Modest Income Homes 34.1%2 65. Social Security Set 8.9%3 52. Inner City Tenants 7.9%4 22. Metropolitans 7.1%5 36. Old and Newcomers 6.3%


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NE 36 th Street & Linco ln Boulevard


1 62. Modest Income Homes 40.3%2 22. Metropolitans 18.2%3 34. Family Foundations 17.0%4 64. City Commons 13.5%5 33. Midlife Junction 7.0%


1 62. Modest Income Homes 24.8%2 22. Metropolitans 16.3%3 36. Old and Newcomers 7.9%4 48. Great Expectations 7.4%5 60. City Dimensions 6.7%

Top 5 Segments in 3 MilesRank Tapestry Segment Percentage

1 62. Modest Income Homes 18.6%2 48. Great Expectations 12.3%3 22. Metropolitans 9.9%

4 60. City Dimensions 9.7%5 36. Old and Newcomers 7.5%

Top Three Tapestries for each intersection(Within a one mile radius)

Tapestry Segment 23 rd & Kelley 23 rd & MLK 36th & LincolnModest IncomeHomes

60.3% 84.6% 40.3%

Social Security Set 13.8% 9.0% 0%Old & Newcomers 8.8% 0% 0%Metropolitans 0% 0% 18.2%Family Foundations 0% 6.5% 17.0%*Please find the definitions of these Tapestry Segments on the pages to follow. A full list of Tapestry segments can befound in the Appendix.


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Community Tapestry Segment SummaryDescriptions

62. Modest Income HomesMost residents in these neighborhoods earn modest incomes. Half of themown their homes, mainly single-family homes in older suburbs ofmetropolitan cities. The median home value is $51,100. Modest IncomeHomes residents are family oriented and multigenerational. The medianage is 34 years. Television is central to the lives of these residents; theyfrequently watch daytime and primetime shows. They are content to waitfor movies to be shown on TV instead of going to the theater, and theyprefer to watch movies on Lifetime, TNT and USA Network. They enjoywatching major sports events on TV also. Being frugal, they shop atdiscount stores, limit their long-distance calls, and do not pay for access to

the Internet. Residents tend to drive used domestic sedans.65. Social Secur ity Set

Elderly residents who live alone characterize this market. More than fourout of 10 householders are 65 years of age or older. This market has oneof the lowest household incomes. Most residents live in low-rent, high-riseapartment buildings in large cities across the United States. Limitedresources somewhat restrict the purchases and activities of SocialSecurity Set residents. They usually shop at discount stores, but for food,they shop at the closest grocery store. Residents depend on Medicare andMedicaid to cover their health care costs. They prefer to pay with cash andbank in person. Many households subscribe to cable or satellite TV, sincewatching television is essential. Residents especially enjoy watching avariety of sporting events.

34. Family FoundationsThe bedrock of this market is family life married couples, single parents,grandparents, young children, and adult children. This small urban marketcan be found in large metropolitan areas. Their neighborhoods arecomposed of row houses or single-family detached, primarily pre-1960s,owner- occupied houses. There is a gradual decline in population thoughattrition, but little turnover in the neighborhoods. Unemployment is aboveaverage, although 30 percent have completed some college classes. Theirmedian household income is $41,800. Family Foundations residents areactive in their communities; they attend church services, serve on churchboards, help with fundraising projects, and participate in civic activities.Most of their consumer expenditures are for home maintenance andfamily; baby products and clothing are priority items in their budgets.Basketball is a favorite sport of Family Foundations residents; they enjoyplaying and attending college and professional games.


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22. Metropolitans Metropolitans residents favor city living in older neighborhoods populatedby singles or childless couples. These neighborhoods are an eclectic mix

of single and multifamily structures, with a median home value of$183,000. Residents include both Generation X'ers and retirees, most ofwhom are prosperous with a median household income of more than$55,000. Busy and actively living the urban lifestyle, Metropolitans residents participate in yoga, attend rock concerts, and visit museums.They listen to jazz, news, talk, and sports radio and rent foreign videos.They travel for business or pleasure, belonging to three or more frequentflyer programs. They participate in numerous civic activities such asvolunteering for environmental causes.

36. Old and Newcomers

Old and Newcomers neighborhoods are in transition, populated by renterswho are starting their careers or retiring. Many householders are in theirtwenties or above the age of 75. The median age of 36 years simply splitsthis age difference. Spread throughout the U.S. metropolitan areas, Oldand Newcomers neighborhoods have more single-person and sharedhouseholds than families. Many residents have moved recently. Mid orhigh-rise apartment buildings constructed in the 1970s dominate thehousing market. The purchase choices of Old and Newcomers residentsreflect their unencumbered lifestyle as singles and renters. Compact carsare preferred by these non-family households. Cats are the preferred petsbecause of apartment living. Among markets with median householdincome below the U.S. level, this segment has the highest readership ofbooks. Depending on their age, they play sports such as racquetball andgolf in addition to jogging or walking.

*A full list of Community Tapestry Segment Summary Descriptions islocated in the Appendix.


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Demographic Observations

Comparing the Demographic Profiles of the three sites, we find that the trade

area population at 23rd

Street & Kelley and at 23rd

Street & Martin Luther King arevery similar and the population at 36 th and Lincoln is significantly less.

The population at 23 rd Street & Kelley is nearly 10,000 people in a onemile radius

The population at 23 rd Street & Martin Luther King is 9,476 in a one mileradius

The population at 36 th Street & Lincoln Boulevard is 5,395

Observations show that all three sites have similar incomes as well. However,36 th Street and Lincoln Boulevard includes population from outside the trade

area. Our goal is locate a successful grocery store development that will servethe northeast community. The existing infrastructure of products and servicesavailable should be appealing to the target population within the trade area.

With regard to other key demographic metrics, the percentage of familyhouseholds is at roughly 80% within the trade area as a whole. This is animportant metric measured by retailers. A measure of above 75% is consideredvery good by most retailers. The following pages show detailed comparisons ofthe demographic profiles of the sites.


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Site Comparison By Demographics(ONE MILE)

ONE MILE23 rd &Kelley

Avenue

23 rd &MartinLutherKing

36 th &LincolnBlvd.

Population2005

9,632 9,476 5,395

2010ProjectedPopulation

10,082 9,808 10,082

Number ofHouseholds

4,042 3,815 2,192

Median HH

Income

$19,041 $19,644 $28,827

Average HHIncome

$33,085 $30,198 $42,537

23 rd 16,178 vpd

23 rd

31,819 vpd36 th 12,399 vpd

TrafficCounts

Kelley(no count)

MLK11,765 vpd

Lincoln18,680 vpd


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Site Comparison By Demographics(TWO MILES)

TWO MILES23 rd &Kelley

Avenue


36 th &LincolnBlvd.

Population2005

29,063 22,619 30,559


30,351 23,619 31,703

Number ofHouseholds

13,189 9,620 13,585

Median HH

Income

$24,265 $21,361 $31,127

Average HHIncome

$39,376 $33,851 $48,174


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Site Comparison By Demographics

(THREE MILES)

THREEMILES

23 rd &Kelley

Avenue


36 th &LincolnBlvd.

Population2005

58,785 38,909 65,981


61,037 40,526 68,453

Number ofHouseholds

24,106 17,195 28,313

Median HHIncome

$27,617 $26,739 $30,068

Average HHIncome

$42,879 $42,735 $45,706


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NE 23 rd Street at Kelley AvenueTwo Miles


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NE 23 rd Street at N. Martin Luther King Avenue

One MIle


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NE 23 rd Street at N. Martin Luther King AvenueTwo Miles


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NE 23 rd Street at N. Martin Luther King Avenue

Three Miles


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NE 36 th Street at N. Lincoln BoulevardOne Mile


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NE 36 th Street at N. Lincoln BoulevardTwo Miles


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NE 36 th Street at N. Lincoln Boulevard

Three Miles


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Retail Marketplace Profile

We believe the most effective method to determine the viability of a grocery store

in Northeast Oklahoma City is a dynamic market feasibility analysis. This type ofanalysis was done by RW Ventures in 2005 and was relied upon in theconstruction of this report. We also review the retail capacity of the market from astatistical supply/demand perspective. The shortcoming of this method is that ittends to underestimate the market vitality and does not account for synergy,niche marketing and non traditional metrics that result in a better estimate ofbuying power (see RW Ventures report). Notwithstanding, we reviewed the RetailMarketplace Profile, Demographic and Income Profile, Net Worth Profile, andMarket Profile for each of the intersections. These reports are attached in the

Appendix to this report.

The summary of the Retail Potential suggests that the site with the greatestdemand for more retail is the intersection of 23 rd Street & Martin Luther King Avenue. The one mile tapestry chart (below) indicates the demand for productsand services in total retail trade including food & drink outpaces supply by morethan $13,000,000 from the supply of $37,524,707 and a demand of $50,853,209.

The Retail Potential analysis suggests that the market will support neighborhoodoriented retail such as building materials and supplies and discretionarypurchase retailers in categories such as, Books, Periodicals, and Music;Electronics & Appliance, General Merchandise, Furniture & Home Furnishingsand Food Services.


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RETAIL MARKETPLACE PROFILE FOR 23 rd STREET AND KELLEY AVENUE

ONE MILE

Industry Summary Supply (RetailSales)

Demand (RetailPotential

Leakage/Surplus

Number ofBusinesses

Total Retail Tradeand Food & Drink

$60,116,146 $60,518,133 0.3 76

Total Retail Trade $56,285,824 $51,141,797 -4.8 57

Total Food &Drink

$3,830,322 $9,376,336 42.0 19

SurplusBooks, Periodical, and Music Stores -93.2

Auto Parts, Accessories, and Tire Stores -88.3Sporting Goods, Hobby, Book, and Music Stores -87.4Jewelry, Luggage, and Leather Goods Stores -51.3

Health & Personal Care Stores -50.1Shoe Stores -48.1

LeakageElectronics & Appliance Stores 84.5

Automobile Dealers 82.4General Merchandise Stores 69.9Miscellaneous Store Retailers 61.4

Food Services & Drinking Places 42.0Furniture & Home Furnishings Stores 39.6


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RETAIL MARKETPLACE PROFILE FOR 23 rd STREET AND MARTIN LUTHER KING AVENUE

ONE MILE



Leakage/Surplus

Number ofBusinesses


$37,524,707 $50,853,209 15.1 66

Total Retail Trade $35,688,578 $43,014,519 9.3 53

Total Food &Drink

$1,836,129 $7,838,690 62.0 13

SurplusOther Motor Vehicle Dealers -67.8Jewelry, Luggage, and Leather Goods Stores -61.5Shoe Stores -54.9

Auto Parts, Accessories & Tire Stores -49.9

Health & Personal Care Stores -41.6Beer, Wine & Liquor Stores -38.2

LeakageElectronics & Appliance Stores 89.9Building Materials, Garden Equipment & Supply Stores 89.4General Merchandise 81.0Furniture & Home Furnishing Stores 75.8

Books, Periodical & Music Stores 68.5Food Services & Drinking Places 62.0


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RETAIL MARKETPLACE PROFILE FOR 36 th rd STREET AND LINCOLN BOULEVARD

ONE MILE



Leakage/Surplus

Number ofBusinesses


$86,440,376 $42,137,312 -34.5 71

Total Retail Trade $79,419,593 $35,564,849 -38.1 53

Total Food &Drink

$7,020,783 $6,572,463 -3.3 18

SurplusBooks, Periodical, and Music Stores -96.0

Auto Parts, Accessories, and Tire Stores -93.3Sporting Goods, Hobby, Book and Music Stores -92.5Clothing Stores -85.1

Home Furnishing Stores -78.3Other Motor Vehicle Dealers -52.0

LeakageGeneral Merchandise Stores 80.3Department Stores 56.6Other Miscellaneous Store Retailers 42.0Jewelry, Luggage & Leather Goods 40.9

Grocery Stores 39.2Sporting Goods, Hobby, Musical Instrument Stores 33.3


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Retail MarketPlace Observations

Statistically, Northeast Oklahoma City hasan unmet total retail trade and food anddrink demand of over $13,000,000.

Based upon the RW Ventures report, a foodstore of approximately 35,000 Square Feetis clearly needed in Northeast OklahomaCity

In addition to a grocery store, Northeast

Oklahoma City also has unmet demand forretailers such as:

General Merchandise Stores Electronics & Appliance Stores Building Materials, Garden Equipment &

Supply Stores Furniture & Home Furnishings Stores Books, Periodical & Music Stores Food Services & Drinking Places


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Residential Market ObservationsThe residential marketplace in Northeast Oklahoma City is similar at all threesites. However, as indicated earlier in this report, the intersection at 36 th andLincoln, while showing good signs of growth and displaying higher incomes,draws from outside trade area.

Northeast Oklahoma City at 23 rd Street and Kelley Avenue, based upon the 2005census forecasts, is projected to have 4,337 housing units with a median homevalue of $38,725. The median age of the housing is 53 years old. Owner

occupied housing units account for 37% of the housing units while renteroccupied housing units total 41%.

At the intersection of 23 rd Street and Martin Luther King Avenue, the 2005census forecast projects 4,668 housing units with a median home value of$33,351. The median age of the housing stock is 55 years. Owner occupiedhousing units account for 44% of the housing units while renters occupied about38% of the housing.

At the intersection of 36 th Street and Lincoln Boulevard, the 2005 census forecastindicates 2,764 housing units of which 45% were owner occupied. Renteroccupied housing units make up 35% of housing available. The median homevalue is $55,042 with an average age of 51 years.


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Most Probable Grocers forNortheast Oklahoma City

Wal-Mart Neighborhood Market Independent operators

Stores like Save-A-Lot


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Market Strengths and Weaknesses

23 rd Street & Kelley Avenue

Strengths

This is a significant intersection inNortheast Oklahoma City and is a majoreast/west thoroughfare with a primarynorth/south road.

There is an existing base of retail at thisintersection.

There are multiple large tracts of land andpreviously developed retail centers thatappear available for acquisition.

The intersection is well positioned in thetrade area with regard to population.

Weaknesses

Kelley Avenue does not pass through theentire trade area.

There is no unmet statistical demand forretail at this intersection.

There is little existing quality retaildevelopment at this intersection. There is a large inventory of abandoned

commercial structures at the intersection.


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23 rd Street & Martin Luther King AvenueStrengths

There is significant existing national retail

at this intersection. The intersection is well positioned in thetrade area with regard to population.

There is excellent vehicular access andvisibility to the intersection from alldirections.

There is vacant property available at thenortheast quadrant of the intersection.

This intersection is positioned with betterstatist ical unmet demand for retail.

*There is an existing small grocery storeat the northeast corner of theintersection.

Weaknesses The streetscape and public infrastructure

is old. There is a high rate of vacancy along NE

23 rd Street within a block of theintersection.

A multiple parcel assemblage will likelybe required if a new grocery store isdeveloped here.

*There is an existing small grocery storeat the northeast corner of theintersection.

* Note: The fact that there is an existing grocery store is a strength in that it shows there is a need for a grocery store atthis location and traffic is used a food store at the site. However, this is also a weakness in that it will require great efforton the city leaders part in getting the community involved, and will take time to negotiate new ownership of this parcel(s).


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36 th Street & Lincoln Boulevard

Strengths

There is high traffic volume on LincolnBoulevard.

There is a large vacant parcel at thenortheast corner of the intersection.

This location provides good access andvisibility to significant daytimepopulation.

Weaknesses

This site is not well located with regard tothe majority of the trade area population

This property is master planned for otheruses.

There is no significant retail nearby.


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Recommendation andImplementation

Recommendations

Based on the above strengths and weaknesses and the comparisons madethroughout this report, we feel the best site for a grocery store in the NortheastOklahoma City trade area is at the northeast corner of 23 rd Street and MartinLuther King Avenue.

The following list of recommendations is intended to begin to move the projectforward. No retailer or developer will look seriously at a proposed project withoutthe assurance that the site proposed can feasibly be made available. Most urbaninfill projects fail because the site cannot be delivered for development, withcertainty, and on a known schedule. The greatest obstacles to delivering a site inthese cases involve the political will on the part of the community stakeholdersand the difficulty of site assemblage. Therefore the following recommendationsdeal exclusively with these issues.

1. Identify the appropriate community leaders to work with The KilduffCompany to begin implementation. This project will require guidance fromthe community level and will require local support to successfullycomplete.

2. Select a specific site for presentation to the business community, localresidents and ultimately to the retail and development community. Thissite should be described exactly by survey so costs of acquisition andpredevelopment can be projected.

3. Negotiate control of the proposed site. This is the most importantrecommendation.

4. Begin discussions with property owners at the Northeast Corner of N.E.23 rd Street & Martin Luther King Avenue. It will be important to determinethe level of interest in cooperation on the part of existing business andproperty owners at and near the proposed site.

5. Begin discussions with local developers and brokers regarding thepotential development. A private sector developer should always take thelead in any development effort. If at any point along the way a qualifiedprivate sector developer can be brought into the process, they should takethe lead with full support from the community.


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6. Compile a list of likely Grocery Operators that will fit the Market Profile ofthis Site. This list might include operators existing in Northeast as well aselsewhere in Oklahoma City and those not currently in the market.

7. Engage planners, architects, engineers and attorneys as necessary to

analyze the process and progress as you move forward.8. Begin the Predevelopment Due Diligence necessary to determine site

development costs in an effort to provide more certainty to the developersand operators who are reviewing the project site.

Implementation

There are many trade areas in the United States where even though retail is

feasible, none exists. This is due in large part to the fact that there are moreviable sites than there is retailer capital with which to invest. The result is thatmany communities are bypassed in favor of another locale which better fitsdistribution, strategic, or, business parameters.

In recent years, the world market has become very receptive to American retailresulting in the competition for scarce retail investment capital becominginternational. Most communities see themselves competing with neighboringcities and states. In fact, they may be competing for grocery store developmentcapital with far flung areas in the United States and even the world. For thisreason, communities are actively recruiting retail investment much as they did

industrial investment in the past.

The development process is not linear and many tasks must be implementedsimultaneously. However, in an effort to describe the process we have attachedthe following list of development tasks. It is important to note that this is a generallist and all tasks do not apply to all projects and many tasks are performedsimultaneously and can go beyond the phase of the process in which theyappear. Notwithstanding, the list will give insight into the scope and magnitude ofthe implementation of a development project.


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OUTLINE OF DEVELOPMENT TASKS

I. Pre-Development Phase

Economic Analysis of Economy for U.S., State, City, CommunityDesignate potential propertyMarket research and competitor center analysisSite evaluation/land useOption arrangementDue diligence as to titleMajor tenant meetings

Architectural selection and contractPreliminary engineeringPreliminary site plan and analysisSoils test

Environmental studiesDetermine government fee schedulePreliminary financial feasibility reviewsPreliminary construction meetingsPreliminary governmental meetingsPreliminary pro formasGo/no decision (Still under option but usually entails option payment)

II. Development Phase

Site plan reviewSite plan re-designMajor tenant commitments (signed Leases or Letters of Intent)Site plan finalizationUpdate pro forma and establish target rentsCommence tenant marketing program - tenant mix, public relationsactivitiesLease negotiationsStatus meetings with construction lenderLegal reviewsFinal engineeringGovernmental reviews/meetingsGovernmental approvals to the extent that buildings permits are probable

Architectural reviewsCommence project design (final)Update pro formaDetermine type of financing, (i.e., mortgage, joint venture, for sale, etc.)Construction financing arrangedPurchase land (land loan)Monitor tenant leasing program


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III. Design and Construct ion Phase

Working drawings review/approvalSelection of general contractors for bid purposes

Bidding procedure and selection on contractorContract negotiationsDetermine final pro formaConstruction schedulingConstruction loan in placeLegal/accounting reporting procedures coordinated (contractadministration)Governmental releases/approvalsProject changes/change order systemConstruction managementTenant improvements

Permits and noticesTenant/construction requestsPermanent financing/project dispositionFinalize check list and approval of retention paymentsFinalize tenant leasing programTenant walk-thru

IV. Tenant Move-In Phase

1. Tenant changes/approvals2. Legal notices

3. Tenant coordination4. Governmental releases

V. Loan Closing

2. Meet all lender requirements3. Estoppel certificates, etc

VI. Operational Phase

1. Conversation from construction phase to property management

responsibility. Establishment and introduction of accounting andmaintenance procedures2. Planning and coordination of Grand Openings and formation of

merchants association, promotional fund, etc.


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Specific implementation tasks for Northeast Oklahoma City

As has been noted earlier, all development projects are difficult and may takeconsiderable time to be successful. A simple suburban grocery store

development in a community that embraces it and has minimal developmentobstacles can take three years from start to finish. A project that is not on theradar screen of targeted retailers can easily take three or more years tocomplete.

Be prepared to be told no by the retailers, initially Many projects are rejected one or more times by retailers and developers Many of those rejected projects become very successful developments

after the case is fully and objectively made

A key component to successful urban retail development is the active

participation of city leadership, including the City Council and City Administratorsduring retail recruitment process. Developers and brokers often have differinggoals and objectives from those of the city economic development team, whichis natural. Development is motivated by profit and only success is rewarded.Developers and brokers measure the time, effort and risk on a given project andmove on if the prospect for success does not match their criteria for time andvalue. The objective of the City is economic development and long term viabilityregardless of the difficulty of a project.

While developers and brokers may have commonality with the City from time totime, their objectives are different. It is imperative that the same city leadership

develop its own discrete relationship with key retailers. The relationship the citybuilds with these retailers is an important one, and should not be delegatedsolely to the development community.

The following are additional, specific implementation steps recommended:

1. Assemble a package of industry friendly marketing material for the siteselected. This marketing package is the cornerstone of the recruitmenteffort and cannot be developed without site specific information.

2. Develop a list of targeted grocery retailers, developers and brokers and

begin to promote the project in meetings.

3. Involve community leaders and elected officials in the meetings withgrocers to encourage better participation. Many of the companies andindividuals on this prospect list have already made up their minds aboutthis trade area or there would already be development. Often localperceptions are outdated or simply wrong, but they can be a largeobstacle in the path to success.


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4. Follow up these preliminary meetings with additional appointments at the

various meetings of The International Council of Shopping Centers.Include the ICSC Annual Convention in Las Vegas, NV, and other regionaland local meetings of ICSC. The annual convention and other national

meetings attract the most senior retail executives as well as thedevelopment community. Meetings should be scheduled in advance andthe office of the Mayor should request the meeting. Retailers are veryapproachable at these events and are unlikely to decline a meetingopportunity with a Mayor or senior elected official.

5. Continue to move forward on the predevelopment of the selected site.Even the parties that have said no will be watching and looking for signs ofstrength or weakness in the viability of the project. Once they have beenintroduced to the project it will be on their radar screen.


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Documents

Supermarket Study