PINEVILLE MEDICAL

@

FIVE TWENTY-ONE

CHARLOTTE, NC

BELK DEVELOPMENT GROUPReal Estate Development

MBAD 6159

Prepared by: Rashmi Menon, Anthony Provenzano, Mike Foster, Bo Shinn, and Sisi Yan

Project Site

Site Plan

Site Analysis

• Target site is a greenfield.• Infill site with existing public infrastructure and

utility services. • Access from I-485, Highway 51, and Highway 521.• Good visibility and accessibility that will serve as a

plus for advertisement.

• The grade is high, and there may be additional cost to bring the grading down.

Project Description• State-of-the Art Medical Office• Three Story Brick Office, Class A • Full service leasing with signage opportunities• 57,600 Square Feet with Min. of 2,200 SF

Proposed Site

CMC at Pineville

Target Market• Customers

▫ Medical practices occupying older, Class C space.

▫ Physicians locating to Charlotte to meet growing demand.

• Our Customer Care About:▫ Strong demographics to support

medical care spending.▫ Proximity CMC-P and its

affiliations.▫ New State-of-the-art Class A

facilities.▫ Great exposure in major hospital

and retail market.

Tenant Mix Type of Practice Office

Space (Sq. Ft)

Rental Rate

Lease Status

Floor

Rehabilitation Services 12,000 $21.50 Pre-leased 1

Outpatient Services 7,200 $24.00 Pre-leased 1

Orthopedic Services 4,000 $25.77 Available 2

Psychiatric Services 2,200 $25.77 Available 2

Pediatric Services 3,000 $25.77 Available 2

Diagnostic and Imaging 3,000 $25.77 Available 2

Laboratory Services 7,000 $24.00 Pre-leased 2

Gynecological Services 6,200 $24.75 Available 3

Primary Care Practice 8,000 $23.00 Pre-leased 3

Primary Care Practice 5,000 $24.75 Pre-leased 3

Medical Nationwide

• The market for medical office and healthcare facilities is likely to continue to be strong in 2008 despite some recent volatility in this sector.

• In Charlotte MSA, due to the fast economic and population growth, more and more medical services are demanded in this area.

Market analysis

• Product driven: high medical office net absorption

• Geographic Segment: high medical care demand: • a. household income larger than $50,000 • b. a relative higher education level• c: children and senior population group.

Employment

Demand for doctors:

• Compared with Raleigh and Greensboro, with a demography character as in Charlotte, double number of doctors will be needed.

Office Net Absorption

Demography

Major Supply

• Our market analysis revealed that there is currently a large supply of medical office in the Charlotte area

• However, some of this supply is older and is facing obsolescence issues

• In addition, some of the current supply is not located near a major hospital

Construction AssumptionsItem Assumption

Time for Construction 12 Months

Land Costs per Acre $750,000

Number of Acres 3.8

Building Square Feet (3 Stories) 57,600

Hard Costs (+5% Contingency) $108.68

Tenant Improvement Allowance $36.00

Architectural/Engineering/Permitting 3%

Leasing and Marketing 7%

Closing Costs and Other $68,220

Developer’s Fee and Overhead 2%

Construction Cost Summary

Expense Amount Per Sqft

Hard Costs $ 6,259,680 $ 108.68

Soft Costs 1,205,840 20.93

Land Cost 2,850,000 49.48

Developer Fee 149,310 2.59

Total Construction Cost $10,464,831 $181.68

Space Market Assumptions

• Item Assumption

Operating expense per square ft. $7.55

% of expenses eligible for Tenant Reimbursements 0.00%

Projected Stabilized Vacancy 11.50%

Growth Rate-Rents 3.00%

Growth Rate Expenses after Year 1 3.00%

Capex Percentage 0.50%

Sales Costs (sale on completed project) 3.00%

Average Lease Term (years) 10.0

Capital Market AssumptionsConstruction Loan Assumptions

Construction Loan Interest Rate 8.0%

Construction Loan Fee 1.0%

Loan to Cost Ratio Construction Loan 75.0%

Permanent Loan Assumptions

Mortgage Interest Rate Perm Mtg 6.50%

LTV Ratio Perm Mtg 70.0%

Amortization Period Perm Mtg 20

Points/Fees Perm Mtg 1.0%

Risk Free Rate 3.93%

Expected Completed Property Cap Rate 7.75%

Terminal Cap Rate Discount 0.50%

Unlevered BT Discount Rate Development 15.05%

Unlevered BT Discount Rate Operations 10.65%

Land Price SensitivityCurrent Scenario

NPV -$20,844

Unlevered BT IRR Development 15.05%

Land Price Reduction of 80 Basis Points

NPV $0

Unlevered BT IRR Development 15.89%

Land Price Reduction of 5 Percent

NPV $115,302

Unlevered BT IRR Development 20.53%

Land Price Reduction of 10 Percent

NPV $251,488

Unlevered BT IRR Development 25.88%

Go / No Go ???

Wait until seller expectations drop to 5% of current value!!