Luxury Buyer Focus Group by Adam Greenfader

LUXURY ESTATES FOCUS GROUP

PREPARED & CONDUCTED BY ADAM GREENFADER

Introduction

Cittadella, a luxury residential community in Mayagüez, is the process of finalizing its strategic sales and marketing plan. As part of its plan, it undertook three (3) separate focus group studies to help determine market acceptance of its site and unit designs. Two separate site plans were presented and four different home models. In addition, the project presented the main entrance and the recreational facilities (see addendum).

The Cittadella focus group had several specific goals: 1) Determine if the “Hacienda” look and feel was well received by future buyers 2) Determine if the classical courtyard and balcony concept was deemed valuable 3) Determine what key finishings and amenities were most desired by a luxury residential buyer 4) Determine what lot sizes were deemed most luxurious 5) Determine what site plan configuration would be best received

Scope Of Market Study: The scope of this study is to identify current market trends and consumer tendencies.

Key Design Criteria: The key design criteria in this study are centered on specific architectural and engineering elements that provide the greatest amount of value to the end user. As all design elements have corresponding cost trade offs, we will try to prioritize said design elements. The specific design elements fall into three main categories:

Community & site design Exterior building design Interior unit design & layout

It should be noted that AXYON participated actively in the design of the units with the architectural firm of Carlos Lopez Atienza and Architect Jesus Trias. This participation however had no material affect on the results of the focus group.

Focus Group Research Sources This report and its conlclusions were compiled from the below noted sources:

1. Focus Group Questionnaire 2. Focus Group Discussions

2007 Economic Snap Shot

Since 2001, Puerto Rico’s economic growth (Average GNP) has been anemic - less than 2%.

In 2006, consumer confidence reached its low point due to a government

shutdown. Significant living cost increases, a new sale tax, and the high cost of petroleum have fueled a Puerto Rican exodus towards the mainland U.S. Real Estate in particular has been affected by an inept land use plan (P.U.T.), a “moratorium” of construction permits, and skyrocketing construction costs (15-25%). The Real Estate crisis has been particularly tough on investment properties, 2 nd homes, and those projects in poor locations.

Specifically, homes ranging from $350,000-

$700,000 have seen their absorption rates increase from 30 days to over 180 days or more. Lastly, but not least, the majority of Puerto Rico’s financial institutions have suffered dramatic losses due to accounting irregularities and the sub-prime loan fiasco.

Methodology

The methodology of the study was both quantitative and qualitative. In all three studies a similar format was followed; the guests were received in a casual cocktail setting. They were presented “boards” of models and floor plans. Thereafter, there was a short verbal and PowerPoint presentation. The presentation highlighted the project’s location, architectural design, project philosophy, and key goals. The guests were served appetizers and were invited to share their observations with the Cittadella team.

Each focus group study averaged from 3-4 hours. There were a total of 54 people who responded to the questionnaire. The first study was held in San Juan, and the remaining two studies in Mayag端ez.

Margin of error

There were several questions that individuals responded more than one answer. There will therefore be discrepancies in the total number of responses on some questions. Six questions were eliminated completely because of erroneous or unclear answers.

Caveat Emptor

Most focus group respondents will give you their wish list when asked questions without price considerations. Once pricing becomes an issue, the consumer is more discriminating about what he/she is willing to pay for.

In the Cittadella study the price point issue was avoided. When asked about value, the respondents were told “very luxurious homes.” They were given a price per square foot range of $300-$500 S.F.

Target Market

The target market was selected from a group of individuals who reside in Puerto Rico. The average age of the respondents was approximately 47 years.

There were more 36 male respondents and 18 females. The numbers reflect both a quantitative difference as well as a cultural bias. A significant percentage of couples filled out the questionnaire together but signed it with the male partner’s name.

In order to adequately test the luxury product, high net worth individuals were required. The high net worth individuals (annual incomes of $200,000 +) were individually selected by the Cittadella team. For discretionary reasons, no direct income questions were asked in the study.

However, all of the individuals who participated in the study were selected based on three key factors:

1) Homeowners 2) Leaders in their respective industries 3) Capable of acquiring luxury homes.

It is important to note that in the last two focus group studies a majority of participants were medical doctors.

Conclusions

There appears to be a very strong approval for the proposed product. When asked, “how much do you like the architectural style of the homes presented?”, over 75% said “Very Much.” Similarly, the clients responded favorably to the questions about the interior courtyard concept and large balconies. When asked, “What is the number #1 reason you would move to a Luxury home community?”, an overwhelming majority of respondents selected that the

ambiance was most important (56%) -more important than the home design or the services offered.

In discussing ambiance, many respondents emphasized green areas, walking trails, the recreational facilities, green spaces, and ample lots with large setbacks to the street. Several slides during the presentation depicted park scenes and street examples. In conversations with the respondents, these slides were received very favorably.

In terms of house and lot sizes, 48% prefer homes that are 3,000-4,000S.F and 54% lots that are 2,000-4,000M2. The above noted responses are based on the designs and photographs presented. It is our experience that open floor plans with efficient space planning “appear” larger than homes with more classical designs. Similarly, most of the respondents are seeking lot areas that provide privacy – privacy from both the street and the adjacent neighbor. There was no clear consensus if landscaping by the developer was a high priority.

As for single or two stories home models, the majority of respondents fell into categories typical of their age and demographics. When asked, “How many floors (levels) do you want in your next home?”, the majority (70%) responded that they wanted a single story home. There seems to be a clear desire not to walk up stairs in the 48+ age group.

In the last focus group, a supplemental question with picture was added to reinforce this question (see question below # 32). The picture was added to highlight that an elevator would be included in the two story home and that there would be additional backyard space because of the two story model configuration. The results were consistent with previous questions – single story homes received 83%. The three car garage today is standard. Many of the respondents want four garages. When asked, “How many cars do you want to park inside your garage?”, over 81% choose either 3 or 4 cars.

There is also a trend towards increased services. There appears that the luxury consumer does not want to hassle with maintenance and installation of a/c and appliances. When asked “How would you prefer to have your luxury home delivered?” , over 69% said “Ready To Move-In. ” This trend seems to contradict the status quo or industry standard of delivering homes without appliances and A/C systems.

As for community size, smaller still seems to be more luxurious. The majority of respondents want to live in communities that are between 50 and 200 units. In sum, it appears the consumer has high acceptance of the product. The architectural style was well received. The respondents want maintenance free living – both during the acquisition process as well as afterwards. There seems to be a desire for large lots and homes that are at least four bedrooms.

HOME BUYER QUESTIONNAIRE The below noted questionnaire was filled out by 54 respondents after a brief presentation of the proposed Cittadella Projects. The respondents were told that their answers were confidential and that they would be able to confer with their spouses. The majority filled out the questionnaire in 10-15 minutes. We have included below both the original question, the answers received, and when appropriate a graph to highlight the answers. We have also taken the liberty to add comments to some of the answers.

What is your Gender?  18 Female

 36 Male

What is your age range?  9 Under 35

 15 36-40

9 41-47

11%

16%

28%

15 48-55

28%

 6 56+

Under 35

36-40

41-47

48-55

56+

17%

What is your marital status?  40 Married

 7 Single

 7 Living with a partner

What kind of home do you own (principal residence)? *  35 Detached Single Family

 10 Multi-Family (condo, mid-rise, walk-up)  5 Other  N/A

* Note: many clients own multiple homes and apartments.

What is the number #1 reason you would move to a Luxury home community? (Choose only 1)  30 (56%) Ambiance of luxury community (Landscaping, recreational facilities, amenities)  17

Unit layout and bedroom distribution



Support services (concierge, housekeeping, gardening, spa)

Ambiance of luxury community

25 20

Unit layout and bedroom distribution

15 10

Support services

5 0 Motivation To Move

How many bedrooms and baths do you want in your Home? 4 3bed / 2 bath

 32 4 bed/3 bath

15

5 bed/4 bath

 1 5 bed/5 bath or larger

3bed / 2 bath 2%

29% 61%

4 bed / 3 bath 5 bed / 4 bath 5 bed / 5 bath

How many floors (levels) do you want in your next home? 38

15

Single story

28%

2 floors  1 2 floors +

2% Single story 2 floors 2 floors +

70%

10.

How many square feet would you like in your new home? 2 2,000SF or less

20

2,000-3,000SF

26 3,000-4,000SF

6

4,000 + SF

30 2,000SF or less

25 20

2,000-3,000SF

3,000-4,000SF

10 4,000 + SF

5 0 Home Size

11.

How many square meters (M2) would you like in your new lot?  1 900 M2 or less

19 900-1,900M2

29 2,000-4,000M2

4 more than 4,000 M2

30 900 M2 or less

25 20

900-1,900M2

15 2,000-4,000M2

10 4,000 M2 +

5 0

Home Size

12.

How many cars do you want to park inside your garage? (choose 1 only) 10 2 cars

20 3 cars

24

4 cars or more

44% 19%

2 Cars

3 Cars

37% 4 Cars +

13.

Would you pay for your A/C system pre- installed in your home? 50

Yes

3

6% 94%

14.

What A/C system would you prefer in your new home? (Choose 1 only)  34 Split units in all rooms

15.

Yes

13 Central A/C in home

 5 Install my own system

Please select the 1 recreational facilities you most desire in your new residential community? (Please select one only)

      

16 12 2 16 20 5 10

Basketball and Tennis Courts Pool Racquetball Court Gym Walking trails Spa Entertainment Center (billiards, ping-pong, Club house)

Basketball and Tennis Courts

Pool

16 14

Racquetball Court

Gym

Walking trails

8 6

Spa 4

Entertainment Center

2 0 Recreational Facilities

16.

How often do you use the recreational facilities in your community?  21 Every week 9 Every month  10 Once in a while

17.

7 Never

4 N/A

How would you prefer to acquire your home appliances (stove, refrigerator, washer dryer) in your new home? (Choose 1 only)  26 Developer includes high quality brands

52%

 28 Buy my own appliances

48% Developer includes high quality brands Buy my own appliances

18.

What would be the minimum ceiling height that you would accept in a new home? (Choose 1 only) 2 8 feet

14 9 feet

29 (53%) 10 feet

9

More than 10 feet

30 8 feet

25 9 feet

20 15

10 feet

10 10 feet +

5 0 Ceiling Height

Note: Many clients wrote-in that 10 feet is a luxury. 19.

3 13 37

Shell Condition Puerto Rico Standard Ready To Move-In

(exterior windows and plumbing/electrical rough-in only) (high quality bath & sanitary equipment only) (premium appliances, A/C units, bath & sanitary equipment)

6% Shell Condition

24%

Puerto Rico Standard

70%

Ready To Move-In

20.

How important is having a double master (large guest bedroom) in your home? (Choose 1 only)  5 Very important

 23 Important

 15 Somewhat Important

 11 Not Important

* Note: that half the respondents think that a double master is important or very important.

21.

How important is additional storage space in your home?  25 (47%) Very important

(Choose 1 only)

23 Important 4 Somewhat Important

 1 Not Important

* Note: store continues to be a hot button. Many respondants like the additional covered parking for storage.

22.

How important is a walk-in closet in every bedroom? (Choose 1 only) 21 Very important

23.

16 Important 14 Somewhat Important

2 Not Important

How important is having a Jacuzzi bathtub in your master bedroom? (Choose 1 only) 13 Very important

9 Important

13 Somewhat Important

15 Not Important

* Note: Many older couple report not wanting a Jacuzzi but prefer alternative bathing such as an out door shower or hot tub in the master balcony.

24.

Please select the top 1 home finishing for your new home? (Choose 1 Only)

13 Floor tiles 15 Security features  5 Interior wood doors and frames  1 Lighting 13 Energy saving features 5 Granite counter tops 3 Bathroom sanitary equipment 6 Kitchen cabinets

Floor tiles

Security features

10%

8% 21%

21%

Interior wood doors and frames

25%

Lighting Energy saving features Granite counter tops

2% Bathroom sanitary equipment Kitchen cabinets

25.

Would you pay more to live in a community that has concierge services? 28

Yes

 23 No

45% 55%

26.

Yes No

What service would you want available “pay per use” in your community? (choose 1 only )  4  4

 18 1  15  5  10  3  1

House keeping Vehicle cleaning Handyman Spa treatments Personalized security guard Medical care Driver

2% 5%

In-home chef

Child care (babysitting)

16%

House keeping Vehicle cleaning Handyman

29%

Spa treatments Personalized security guard Medical care

Driver

25% 2%

27.

How important is energy efficiency (Green Building) for you new home? (choose 1 only ) 28 Very important

19 Important 6 Somewhat Important

 Not Important

Very important

11% 0%

Important

53%

36%

Somewhat Important Not Important 28. How important is it for you to have an electrical generator & cistern included in your new home?  43 Very important

4 Important

6 Somewhat Important  Not Important

0% 8%

Very important

11%

Important

81%

Somewhat Important Not Important

29.

How much do you like the architectural style of the homes presented?  40 Very much

11 Much

2 Somewhat

 Not

4% 0%

21%

Very Much

Much

Somewhat

Not

75%

30.

How much do you like the interior court yard concept?  36 Very much

12 Much

4 Somewhat

1 Not

7% 2% 23%

Very Much

Much

Somewhat

Not

68%

31.

How important is the front porch (gallery) concept to your definition of luxury?  19 Very important

21 Important

10 Somewhat Important 3 Not Important

6% 36%

19%

Very Much

Much

Somewhat

Not

39%

34.

What is you ideal community size?  7 50 or less 20 51-100 units 19 101-200 units 5 201-300 units 1 300+ units

20 18 16 14 12 10 8 6 4 2 0

50 or less 51-100 units 101-200 units 201-300 units 300+ units

Community Size

THIS SECTION IS PRESENTED AS COPIED DIRECTLY FROM THE RESPONDENTS ANSWERS. 35.

What would you like to change in order to make the community and home designs even more attractive?

No piscina en Casa Club., o tiendas en casa club, proveer varias canchas de tenis y gazebo en ellas.

Cambiar según lo presentado, no lo haría. Pero entiendo que mantener la vegetación siempre al día sería un éxito. Haría un poco más pequeñas las dimensiones para mejor comunicación.

More green areas.

El proyecto es muy bueno, se debe incorporar la topografía al mismo y el uso del peatón deber ser primordial.

Design is incredible for the high-end consumer.

Seguridad, facilidad comercial cercana y mantenimiento areas comunes.

Make amenities where the members of the community can relate to each other. Security is very important.