Lee & Miles Retail Development Proposal Caylen Payne 2013 UST 610 Dr. Simons Cleveland State University Levin College of Urban Affairs
Overview
Site: Intersection of Lee Rd and Miles Avenue in South-East Cleveland Proposed Mixed Retail Use with a Limited Assortment Grocery Store Phased Approach to Expansion Very Low Acquisition Costs Low Income – Primarily African American Neighborhood New 40-Unit CMHA Senior Housing Project Adjacent to Site; Opened Spring 2013
Site Attributes and Area Map Table 7 Site Layout Building and Lot Size
Building Size 2,000
Min. Req. Lot Size Actual Parcel Size
Quick Oil Change Limited Assortment Store
15,000
18,000
72,000
Strip Mall
23,000
92,000
89,354
95,395
Notes: This assumes a best practice ratio of 3:1 sq/ft of parking per building sq/ft Sources: See Works Cited for Full list C.Payne 2013
•Total Site Area: 4.13 Acres •17 Total Parcels •Mixed Commercial and Exempt Zoning
Highest and Best Use Table 8: Highest and Best Use Analysis for Lee-Miles Development Area Site Attributes
Supermarket
Convenience Store
Entertainment Rental New Warehouse/Lig /Bar/Retail Housing Housing ht industrial
Public Space
Office
Visibility/Views 2 2 2 -1 -1 0 0 1 Auto Traffic 2 2 2 -2 -2 0 0 1 Adequate Parking 2 2 2 2 2 0 2 2 Pedestrian Access 2 2 2 2 2 2 2 2 Highway Access 2 2 2 2 2 2 2 2 Rapid/Bus 2 2 2 2 2 2 2 2 Freight Rail 0 0 0 -1 -1 2 0 0 Noise level 0 0 0 -1 -1 0 -1 0 Resident Base 1 2 1 0 0 0 1 0 Day time use 1 2 2 2 2 0 1 2 Brownfield 0 0 0 0 0 0 0 0 Infrastructure 2 2 2 2 2 1 1 2 Zoning 2 2 1 -2 -2 0 0 -2 Condition of Parcel 0 0 0 0 0 0 -2 0 Size of Parcel 2 2 2 2 2 -2 1 -2 Compatibility to Structure -1 2 2 2 2 -1 0 -1 Future Expansion -2 2 1 2 2 -2 2 1 Competition -2 -2 2 0 2 -2 1 2 Value of Land 2 2 2 2 2 2 0 2 Building Tax Base 1 0 1 2 2 0 -2 2 Totals 18 26 28 15 17 4 10 16 Notes: Auto Traffic was based on a daily count of 14830 vehicles per day Rapid/Bus Access is based on the fact there are 2 routes that converge near, (1 minute walk) of the study area Highway Access: 1 mile from I-480 Railway access: The site is quite close to an active rail-way Brownfield: Nothing is currently registered with the Ohio EPA, or through the Cuyahoga County Planning GIS website Zoning: A combination ofCommercial/Vacant land and exempt Land Bank Parcels Cost of Land is $2.35 sq ft for all parcels combined, which could fluctuate based on necessary re-zoning and Land Bank parcel aquisition costs Sources: NOACCA Daily Traffic Count Study 2012, Cuyahoga County Planning GIS website, Ohio EPA, Cleveland RTA, Google Earth Caylen Payne 2013
Parking Mixed(Open Use Lot) 0 0 2 2 2 2 2 2 2 2 2 2 0 0 0 0 0 2 1 2 0 0 2 2 0 1 0 0 2 2 2 2 2 2 0 0 0 2 -2 2 17 27
Project Concept – Site Layout Primarily industrial and service oriented businesses within PMA Small amount of boutique retail but mostly limited to convenience stores and gas stations High amount of vehicular traffic at intersection – auto oriented businesses nearby including gas stations, car-wash and full service centers Project concept: Local, walkable, mixed-retail with possible restaurant
Acquisition: Parcel Data and Zoning Table 1: Lee and Miles Neighborhood Shopping Anchor Parcel Assesment Spreadsheet PPN (Parcel Number)
•Total Parcel Size: 174,180 sq/ft •17 Total Parcels •Mix of Commercial /Vacant and Exempt •10 parcels Owned By Cleveland Land Bank •Total Acquisition Cost Including Back Taxes Plus demolition of 1 Building : $408,671 •$2.35 sq/ft
Owner
14305001 Colombo Enterprises Inc
Street Address
16607 Miles Ave
Size of Market Value Parcel (Sq ft.) $
142,700
Zoning/Class
Buildings (#) Property Tax Sq ft.
Commercial/Vac 47,580 ant None
$
Commercial/Vac 39,600 ant None $ 7,000 Commercial 3,305 $
4,857 N
14305003 Colombo Enterprises Inc 14306001 2nd New Hope Nc. City of Cleveland Land 14306002 Reutilization Program City of Cleveland Land 14306003 Reutilization Program City of Cleveland Land 14306004 Reutilization Program City of Cleveland Land 14306005 Reutilization Program City of Cleveland Land 14306006 Bank/96
16605 Miles Ave 16701 Miles Ave
$ $
79,200 63,800
Miles Ave
$
12,500
6,250 Land Bank
None
Exempt
Miles Ave
$
12,500
6,250 Land Bank
None
Exempt
Miles Ave
$
18,800
9,375 Land Bank
None
Exempt
Miles Ave
$
6,300
3,125 Land Bank
None
Exempt
Miles Ave
$
1,500
6,250 Land Bank
None
Exempt
14306007 Zion Memorial Park Assn City of Cleveland Land 14306008 Bank/95 City of Cleveland Land 14306009 Reutilization Program City of Cleveland Land 14306010 Bank/92
Miles Ave
$
1,880
9,375 Commercial/V
None
Back Taxes-->
Miles Ave
$
1,500
3,125 Land Bank
None
Exempt
Miles Ave
$
12,500
6,250 Land Bank
None
Exempt
Miles Ave
$
1,500
6,250 Land Bank
None
Exempt
14306011 Patrick Realty Corp.
Miles Ave
$
6,300
3,125 Commercial/V
None
$
215
14306012 Patrick Realty Corp. City of Cleveland Land 14306013 Bank/95
Miles Ave
$
6,300
3,125 Commercial/V
None
$
215
Miles Ave
$
1,500
3,125 Land Bank
None
14306014 Patrick Realty Corp.
Miles Ave
$
12,500
6,250 Commercial/V
None
City of Cleveland Land 14306015 Bank/97
Miles Ave
$
1,500
8,125 Land Bank
None
$
382,780
Bottom Line Totals
174,180
2,695 N 2,508 Quit Claim Deed Sheriffs Deed
$
68,329
$
68,329
Exempt $
425
Exempt 3,305
TOTAL AQUISTION: This includes pure market value, any taxes owed, and any outstanding liens.
TOTAL: $397,109 plus demolition costs (range $2 -$5 a sq/ft $6,610 - $16,525) Assuming there are no unexpected environmental concerns we'll assume a median site preperation cost of $11,562 Taking this plus the market value of all properties yields a TAC of $408,671 which equals $2.35 a sq/ft Notes: •For Property Tax, if not current then look in mortgage/liens.All other figures shown as reference •Any listing that is filled in with grey represents parcelsowned by the City of Cleveland Land Reutilization Program •For parcels with no address, none was given through County Records Sources: •http://gis.cuyahogacounty.us/en-US/home.aspx (My Cuyahoga Interactive Map) •http://recorder.cuyahogacounty.us/searchs/generalsearchs.aspx (DeedSearches) •http://fiscalofficer.cuyahogacounty.us/AuditorApps/real-property/REPI/transfer.asp (Property Searches)
Mortgages/ Liens
Primary Market Area •Determined using Reilly’s Law of Retail Gravitation
•Additional calculations Made using Google Earth and Proportional Census Tract Data
Table 2 : Retail PMA Subject Lee&Miles Shopping Center Store
Distance (Miles)
Subject: Lee&Miles Shopping Center
Square Footage
18,000
Trade Area Boundary (Miles) Total Area 1.13 SQ MILES
Table 6: PMA Conversions for Census Tracts FULL Census Tract Area of Census Percentage of CT Census Tract Area sq/ft Tract in PMA sq/ft in PMA
Aldi Miles SuperMarket Dave's SuperMarket Mapletown Bi-Rite
2 1.45
0.54 1.71
20,356 49,617
66,354 115,997
0.97 0.55
0.18 0.48
122100
17,489,965
3,609,907
20.6%
122200
19,908,822
7,646,092
38.4%
122300
15,882,930
8,356,087
52.6%
188104
36,939,603
9,021,782
24.4%
121900 7,641,243 2,344,403 30.7% Notes: Calculations involved using Google Earth to Map the area of the various census tracts within the PMA
Primary Market Area Demographics Table 4 Primary Market Area Demographics and Income Assesment Households and Adjustments
Census Tract
Income and Demographics
Median HH Income 2011 Adjustment Adjusted PMA (Including Percentages Complete # of # of Occupied Benefits) Infl. Adj. to 2012 for CT in PMA Occupied HH HH
Percent of Population 16 & over Unemployed
Percentage of HH with no vehicle available
%of Population 25 and over w/Bachelor's Degree or higher
% of Population 65 years old and over
% of Population Identifying Themselves as African-American
121900
30.7%
567
174 $
37,774
5.4%
4.8%
9.7%
26.3%
95.6%
122100
20.6%
1345
277 $
35,209
8.0%
12.0%
8.2%
28.0%
97.9%
188104
24.4%
846
206 $
40,480
5.1%
9.6%
13.4%
19.2%
93.4%
122300
52.6%
854
449 $
31,703
15.8%
16.9%
10.7%
23.7%
92.3%
122200
38.4%
728
280 $
40,521
9.4%
10.4%
6.6%
21.5%
98.6%
$
51,771
6.5%
9.2%
28.6%
13.4%
12.6%
Baseline U.S. Total Households
2012 Total Year Income
1,386
$50,255,525
Notes: 2010 Total Year Income was calculated by taking the median household income by census tract and multiplying that by the number of total households in each census tract. The 2013 Inflation Adjusted Total PMA Income was calculated using the Bureau of Labor Statistics Online Inflation Calculator, as well as referring to the CPI for October 2013 http://www.bls.gov/data/inflation_calculator.htm Sources: Bureau of Labor Statistics, United States Census Bureau, American Community Survey 2007-2012, 5 year totals, American Fact Finder U.S. Basline Data ACS 2010-2012 Table by Caylen Payne
Total Households: 1,386 HH ; Income $37,137 Unemployment: 8.74% Percentage HH with no vehicle 10.75% : Bachelor’s or Higher 9.7% Percentage 65 & Older 23.75% ; Percentage African-American 95.5%
Competitive Influences and Retail Demand Demand For Anchor Limited Assortment Food Retailer
PMA # of HH
1386
Annua l Cons umer Uni t/HH Expend on Food At Home
$3,409
Net Leakage Estimated Demand
15% $
Total Competitive Market Space in PMA
4,016,143 0
Net Market Support
$
4,016,143
Average Sales Sq/ft
$
312
Supportable Market Space in PMA (sq/ft)
12,872
Sources: Fanning, Market Analysis For Real-Estate US Census Bureau Consumer Expenditure Survey 2011-12 Midwest region, Cleveland city.
The immediate area surrounding the proposed site has not seen any substantial development, or construction opportunities in the last several years aside from the new CMHA complex. While there have been sales of some properties, none of these represent a retail oriented transaction and have been confined to third party and family deed transactions.With such as small supply of retail within our area a true niche analysis resides in our ability to gauge our HBU information as well as creating demand within a walkable area to our tenant mix.
Proposed Tenant Mix: Retail Niche
Cleveland Absorption Rates for Q2 2013 ◦ Cleveland Retail
YTD +580,588 sq/ft Q2 +278,000 sq/ft Vacancy 8.5% Avg. Rental $10.33 sq/ft
Cleveland SouthEast YTD Rates ◦ Net Abs. +77,205 sq/ft ◦ Vacancy 10.2% ◦ Avg. Rental $13.80 sq/ft
Table 10: Proposed Retail Market Niche with Bldg Size Tenant Space
Quick Oil Change Limited Assortment Grocery Store Locally Owned Boutique Retail
2000
Locally Owned Boutique Retail
2000
Sit-Down Restaurant
2000
To-Go Restaurant
1000
To-Go Restaurant Retail Re-Sale Home Entertainment
1500
Convenience Store
2000
Fitness or Sports Retail
5000
Source: Colliers International; Knowledge Report Rent-to-Own Store Cleveland Q2 2013 http://www.colliers.com/~/media/40102c9750e446dca613ba495698c4c3.ashx
1000
6500
Building Size
Min. Req. Lot Size Approx. Parcel Size
2000
15000
18000
72000
23000
92000
89354
95395
Table 9-3 Back-Door Analysis
Table 9 :Front Door - Back Door Analysis : Lee&Miles Development Variables and Assumptions Land Cost (plus demolition) New Commercial
Monthly
Yearly $
Total New Building Size Sq/Ft Total Project Costs Property Tax (Not Given) Property Maintenance Vacancy (Not Given) Total Expenses Cap Rate Discount Rate (ROR) Net Leaseable Space
Retail/Commercial Space Limitied Assortment Food Market Quick Oil Change Center Total Total Net Rents Loan To Value Ratio Loan Amount
Debt Service Constant Years Interest Rate Debt Service Debt Service Ratio
Additional Calculations
Income & Expenses
Totals
104.00
$
3.4% Calculated with current property value Retail Lease Tenant Pays
8.5%
$408,671 4,472,000 43,000 $4,880,671 $13,895 $0 $32,640 $46,535
Site Aquistion Hard Cost Total Capital Budget
$408,671 $4,472,000 $4,880,671
Required Equity (.30) Required Annual Cash Flow
$1,464,201 $190,346
Mortgage Amount Annual Debt Service
$3,416,470 $409,976
8% 13% $/sqft
Retail Space Sq/Ft
$8 $10 $10
23,000 18,000 2,000 43,000
$184,000 $180,000 $20,000 $384,000
70% $3,416,470
Based on LTV------>
$3,416,470
0.12 20 7% $409,976 1.3
Gross potential Income Vacancy Effective Gross income Property Tax Operating Expenses NOI
$600,323 $0 $13,895 $614,217 $32,640 $646,857
Required Revenue Per Month Actual Monthly Rent (Average per unit per month) Rent Gap (negative for no gap) Total Capital Budget Justified Project Investment Gap
Table 9-2 Front-Door Analysis Income & Expenses
NOI Operating Expenses Property Tax Effective Gross Income Vacancy Gross Potential Income
Annual Debt Service Before Tax Cash Flow Required Equity Investment
$384,000 $32,640 Annual Debt Service $351,360 Debt Service Constant $13,895 Mortgage Amount $0 Justified Project Investment $337,465 Actual Project Cost Gap?
$15 $9.3 $6 $4,880,671 $2,762,289 $2,118,382
$259,589 $77,877 $599,050.63 $259,589 0.12 $2,163,238 $2,762,289 $4,880,671 $2,118,382
Conclusion
Project is probably a no-go unless lease rates are raised or gap financing is acquired Possible solutions: ◦ Scale down the size of the project ◦ Limited developer involvement; Acquire land and work with multiple partners in a micro-phased approach ◦ Expand current market research to find a more suitable location and/or mix of tenants to supply retail market-niche