CCC Market Study

09-13-2022

Mr. Jerry Lewis President

JLL Construction Services, Inc.

2532 W. Warren Blvd., Suite A

Chicago, Illinois 60612

RE: Appraisal Report

Calumet Country Club Redevelopment

2136 175th Street

Homewood, Cook County, Illinois 60430

Dear Mr. Lewis:

In accordance with your request, we have performed a market study of the above referenced property. This market study sets forth the pertinent data gathered, the techniques employed, and the reasoning leading to our value opinions. This letter of transmittal does not constitute an appraisal report and the rationale behind the value opinion(s) reported cannot be adequately understood without the accompanying appraisal report.

The subject property, as referenced above, is located on the northwest corner of 175th Street and Dixie Highway, just south of I-80 and is further identified as tax parcel number(s) 29-30-300-005,103 and -102. The subject site is a 128.36000-acre or 5,591,362-square-foot parcel. The subject property consists of a 128.36-acre parcel of land that is currently occupied with the Calumet Country Club. The Calumet Country Club is a private 18-hole championship golf course. The property is improved with various structures, including:

• An approximately 31,500 square foot, two-story clubhouse

• An approximately 1,240 square foot, single-story locker room and swimming pool building

• An approximately 275 square foot, single-story halfway house

• An approximately 5,940 square foot, single-story storage building

• An approximately 4,900 square foot, single-story maintenance building

• A pump house

The subject property is located in a commercial/residential area formerly in Homewood, Cook County, Illinois. However, in April of 2021, by direction of the owner, the Homewood Village Board approved disconnecting the property from the village. Therefore, a majority of the property currently is located in unincorporated Cook County, with a small portion at the northwest corner of 175th Street and Dixie Highway falling with the village boundaries of Hazel Crest. Currently, the property is under review for potential redevelopment with proposed uses to include industrial, retail, commercial, residential condos, hotel, training facility, recreational land and aquaponics along with a

dog park and walking trails. More specifically, the proposed development will feature an indoor waterpark and a state of the art sporting complex. Other tenants may include a fresh market farm stand, per groomer, UPS Store, Bamenda Coffee shop and more. The mixed-use industrial plans will also include the introduction of Factory Town and Warehousing. This inclusion will provide continuous support and growth for the proposed retail tenants. This is all pending re-zoning to a mixed-use industrial district either within Cook County or re-annexation into the neighboring village of Hazel Crest. The subject property is bound on the north by Interstate 80/294, on the east by Dixie Highway, on the south by 175th Street, and on the west by The Lanco Group of Companies and Community Care Systems, Inc.

Valbridge has reviewed the property and the associated client provided documentation, zoning applications and other public files associated with the use on the property, in addition to local regulations and planning practice. Please note that this market study is a general overview of high level economic, demographic and property level statistics for the local area and PMA along with the proposed components of the subject property development. Given the scope of the current assignment, a detailed marketability/feasibility study on the proposed development was not conducted. If such a study is required, it will be conducted under a separate engagement.

We developed our analyses, opinions, and conclusions and prepared this report in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; and the requirements of our client as we understand them.

The client in this assignment is JLL Construction Services, Inc. and the intended users of this report are Jerry Lewis of JLL Construction Services, Inc., his development team and legal counsel and no others. The sole intended use is to complete a narrative market study on various planned land uses slated for the subject for internal asset management purposes. The value opinions reported herein are subject to the definitions, assumptions, limiting conditions, and certifications contained in this report.

The findings and conclusions are further contingent upon the following extraordinary assumptions and/or hypothetical conditions, the use of which might have affected the assignment results:

Extraordinary Assumptions:

 This appraisal is predicated on the extraordinary assumption that hazardous substances do not exist at the subject property. The appraiser, however, is not qualified to detect such substances, including the existence of urea-formaldehyde insulation, radon gas, foam and asbestos insulation, lead paint or other potentially hazardous material that may affect the value of the property. Additionally, no soil survey has been furnished, and it is assumed that no surface or subsurface contaminants are present. No responsibility is assumed for any such conditions, nor for any expertise or engineering knowledge required to discover them.

 It is assumed that the information provided to us by the owner and city/county officials is accurate. Any deviation from how this information was represented to us could result in a change in opinion of value.

 The use of these extraordinary assumptions may have affected the assignment results. Furthermore, we reserve the right to change our opinions of value on a time and material basis, should any information contrary to the assumptions described herein and which affects the value and/or marketability of the subject property arise.

Hypothetical Conditions:

 None pertaining to this assignment

Respectfully submitted, Valbridge Property Advisors | Chicago

Anthony S. Mulé, MAI, CCIM Managing Director and Principal Illinois License 553.002360 amule@valbridge.com

Gary K. DeClark, MAI, CRE, FRICS, R/W-AC Senior Managing Director and Principal Illinois License 553.000218 gdeclark@valbridge.com

Summary of Salient Facts

Property Identification

Property NameFormer Calumet Country Club - Land Market Study

Property Address2136 175th Street

Homewood, Cook County, Illinois 60430

Latitude & Longitude41.574557, -87.670261

Census Tract8284.01

Tax Parcel Numbers29-30-300-005 & -103

Property OwnersW&E Ventures, LLC

Site

ZoningPublic Land and Open Space (PL-2)

FEMA Flood Map No. 17031C0733J

Flood ZoneZone X

Gross Land Area128.360 acres

Usable Land Area128.360 acres

Valuation Opinions

Highest & Best Use - As VacantIndustrial and commercial

Reasonable Exposure Time6 to 12 months

Reasonable Marketing Time6 to 12 months

CALUMET COUNTRY CLUB REDEVELOPMENT AERIAL AND FRONT VIEWS

Aerial and Front Views

AERIAL VIEW FRONT VIEW

Location Map

Introduction

Client and Intended Users of the Appraisal

The client in this assignment is JLL Construction Services, Inc. and the sole intended users of this report are Jerry Lewis of JLL Construction Services, Inc., his development team and legal counsel. Under no circumstances shall any of the following parties be entitled to use or rely on the market study appraisal or this appraisal report:

i. The borrower(s) on any loans or financing relating to or secured by the subject property,

ii. Any guarantor(s) of such loans or financing; or

iii. Principals, shareholders, investors, members or partners in such borrower(s) or guarantors.

Intended Use of the Appraisal

The sole intended use of this report is to complete a narrative market study on various planned land uses slated for the subject for internal asset management purposes. The purpose of this assignment is to provide the Client with solid market intelligence useful to their decision-making regarding the redevelopment of this property.

Real Estate Identification

The subject property is located at 2136 175th Street, Homewood, Cook County, Illinois 60430. The subject property is further identified by the tax parcel number 29-30-300-005, -103 and -102.

Legal Description

A copy of the legal description was found from the deed of the prior sale which is included in the Addenda.

Use of Real Estate as of the Effective Date of Value

As of the effective date of value, the subject was a country club/golf course property.

Use of Real Estate as Reflected in this Appraisal

The opinion of value for the subject as is reflects use as a mixed-use industrial, commercial and residential redevelopment project.

Ownership of the Property

According to a title policy, title to the subject property is vested in W&E Ventures, LLC.

History of the Property

Ownership of the subject property has changed within the past three years. The current owner acquired the subject property on 10-20-2020 for a recorded consideration of $3,300,000. The grantor was CCC Investors, LLC according to Cook County public records. This does not include the gas station parcel along the northwest corner of Dixie Highway and 175th Street. The recording number was 2031917096. We have considered and analyzed the known history of the subject in the development of our opinions and conclusions.

Analysis of Listings/Offers/Contracts

The subject property is not offered for sale on the open market.

Type and Definition of Value

The appraisal problem is to develop an opinion of the market value of the subject property. “Market Value,” as used in this appraisal, is defined as “the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.” Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

 Buyer and seller are typically motivated.

 Both parties are well informed or well advised, each acting in what they consider their own best interests;

 A reasonable time is allowed for exposure in the open market;

 Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

 The price represents the normal consideration for the property sold unaffected by special or creative financing or sale concessions granted by anyone associated with the sale.”1

The value conclusions apply to the value of the subject property under the market conditions presumed on the effective date of value. Please refer to the Glossary in the Addenda section for additional definitions of terms used in this report.

Underlying Assumptions and Limiting Conditions

The conclusions reached in a market analysis are inherently subjective and should not be relied upon as a determinative predictor of results that will actually occur in the marketplace. Thus, a market study is not a substitute for management's ultimate decision-making responsibilities. There can be no assurance that the estimates made, or assumptions employed in preparing this report will in fact be realized or that other methods or assumptions might not be appropriate. The conclusions expressed in this report are as of the date of this report, and an analysis conducted as of another date may require different conclusions. The actual results achieved will depend on a variety of factors including the performance of management, the impact of changes in general and local economic conditions and the absence of material changes in the regulatory or competitive environment. Reference is made to the statement of Underlying Assumptions and Limiting Conditions that can be found in the Addenda of this analysis and area incorporated in this report.

Neither all nor any part of the content of this report, especially any conclusions as to market study, the identity of the analysts, or any reference to Valbridge Property Advisors shall be disseminated through advertising media, public relations media, news media or any other means of communication other than for this specific document without the prior written consent of the firm. Consent has been granted to JLL Construction Services, Inc. and its designees.

1 Source: Code of Federal Regulations, Title 12, Banks and Banking, Part 722.2-Definitions

Date of Report

The date of this report is 09-13-2022.

List of Items Requested but Not Provided

 All requested information was provided

Assignment Issues

None

Assumptions and Conditions of the Appraisal

This appraisal assignment and the opinions reported herein are subject to the General Assumptions and Limiting Conditions contained in the report and the following extraordinary assumptions and/or hypothetical conditions, the use of which might have affected the assignment results.

Extraordinary Assumptions

 This appraisal is predicated on the extraordinary assumption that hazardous substances do not exist at the subject property. The appraiser, however, is not qualified to detect such substances, including the existence of urea-formaldehyde insulation, radon gas, foam and asbestos insulation, lead paint or other potentially hazardous material that may affect the value of the property. Additionally, no soil survey has been furnished, and it is assumed that no surface or subsurface contaminants are present. No responsibility is assumed for any such conditions, nor for any expertise or engineering knowledge required to discover them.

 It is assumed that the information provided to us by the owner and city/county officials is accurate. Any deviation from how this information was represented to us could result in a change in opinion of value.

 The use of these extraordinary assumptions may have affected the assignment results. Furthermore, we reserve the right to change our opinions of value on a time and material basis, should any information contrary to the assumptions described herein and which affects the value and/or marketability of the subject property arise.

Hypothetical Conditions

 None pertaining to this assignment

Researchers for the Analysis

The principal-in-charge of this assignment has been Gary K. DeClark, MAI, CRE, FRICS, R/W-AC, Senior Managing Director. He has over 40 years of appraisal, valuation, real estate development, finance and consulting experience. Most relevant to this assignment, DeClark has successfully completed feasibility assessments for commercial opportunities throughout the Chicagoland area and the Midwest.

Anthony S. Mule, MAI, CCIM is a Managing Director with Valbridge Property Advisors | Chicago and has 15 years of consulting and appraisal experience for various commercial real estate property types. Mulé has completed numerous assignment concentrated in the Chicago Metropolitan area along with various parts of the Midwest and is familiar with hotel and multifamily characteristics in these markets.

Additional information on the firm and directors are found in the Addenda at the end of this study.

Scope of Work

The elements addressed in the Scope of Work are (1) the extent to which the subject property is identified, (2) the extent to which the subject property is inspected, (3) the type and extent of data researched, (4) the type and extent of analysis applied, (5) the type of appraisal report prepared, and (6) the inclusion or exclusion of items of non-realty in the development of the value opinion. These items are discussed as below.

Extent to Which the Property Was Identified

The three components of the property identification are summarized as follows:

 Legal Characteristics - The subject was legally identified via various client documents and Cook County public records.

 Economic Characteristics - Economic characteristics of the subject property were identified via market participant surveys, our company database, and/or third party sources, talking with city and county officials, real estate brokers, appraisers, and local property owners, CoStar, MRED, Crexi, STDB and ESRI, as well as a comparison to properties with similar locational and physical characteristics.

 Physical Characteristics - The subject was physically identified via an appraisal inspection that consisted of exterior observations of land.

Extent to Which the Property Was Inspected

We inspected the subject on 06-07-2022. The improvements were not measured during the course of the inspection.

Type and Extent of Data Researched

We researched and analyzed: (1) market area data, (2) property-specific market data, (3) zoning and land-use data, and (4) current data on comparable listings and transactions. We also interviewed people familiar with the subject market/property type.

Appraisal Conformity and Report Type

We developed our analyses, opinions, and conclusions and prepared this report in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; and the requirements of our client as we understand them. This is an Appraisal Report as defined by the Uniform Standards of Professional Appraisal Practice under Standards Rule 2-2a.

Regional and Market Area Analysis

Market Definition

The dynamic nature of economic relationships within a market area has a direct bearing on real estate values and the long-term quality of a real estate investment. In the market, the value of a property is not based on the price paid for it in the past or the cost of its creation, but on what buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a property within a specific neighborhood or market area reflects the probable future trend of that area.

Since real estate is an immobile asset, economic trends affecting its location quality in relation to other competing properties within its market area will also have a direct effect on its value as an investment. To accurately reflect such influences, it is necessary to examine the past and probable future trends, which may affect the economic structure of the market and evaluate their impact on the market potential of the subject. This section of the report is designed to isolate and examine the discernible economic trends in the region, which influence and create value for the subject property.

The subject is located in Homewood, in Cook County. It is part of the Chicago-Naperville-Arlington Heights, IL MSA. As defined by the U.S. Bureau of the Census, the Chicago “Primary Metropolitan Statistical Area” (PMSA) covers nine Illinois counties. However, in relation to the region’s principal growth and economic activity the metropolitan area is usually considered to consist of six Illinois counties of Cook, DuPage, Kane, Lake, McHenry and Will, exclusive of outlying DeKalb, Grundy and Kendall counties. This area includes the City of Chicago and 272 suburban communities and includes 75 miles of Lake Michigan shoreline. These six counties, in conjunction with the City of Chicago, form an interlocking economic structure.

Geographic Location

The subject property is located in the geographic area generally referred to as the Chicago metropolitan area, which is centrally located in the Midwestern United States. Other major metropolitan areas in the region include Milwaukee, Wisconsin (90-miles north), Indianapolis, Indiana (185-miles southeast) and Detroit, Michigan (279-miles east).

The standards for statistical areas are defined on the federal level by the Office of Management and Budget. Recent changes to these standards by the OMB resulted in new area configurations and new names to identify them. The Chicago metropolitan area, formerly known as the Chicago Metropolitan Statistical Area, is now identified as the Chicago-Naperville-Joliet, IL-IN-WI Metropolitan Statistical Area. The primary area within this new MSA is now referenced as the Chicago-Naperville-Joliet, IL Metropolitan Division. (For ease of reference, this report retains the term “Chicago MSA,” but it will refer to the Chicago-Naperville-Joliet, IL-IN-WI Metropolitan Statistical Area. “Chicago MD” is used to refer to the Chicago-Naperville-Joliet, IL Metropolitan Division. Additionally, combined with the neighboring Metropolitan Statistical Areas including the Michigan City-La Porte, IN MSA to the east and Kankakee-Bradley, IL MSA to the south, the ChicagoNaperville-Joliet, IL-IN-WI MSA is a part of the larger Chicago-Naperville-Michigan City, IL-IN-WI Combined Statistical Area (CSA).

Chicago-Naperville-Joliet, IL MD

Cook, DeKalb, DuPage, Grundy, Kane, Kendall, McHenry, and Will

Chicago-Naperville-Joliet, IL-IN-WI MSA

Gary, IN MD

Jasper, Lake, Newton, and Porter

Lake (IL) and Kenosha (WI) Kankakee-Bradley,

Lake County-Kenosha County, IL-WI MD

Source: Executive Office of the President of the United States, Office of Management and Budget

The Chicago-Naperville-Joliet, IL Metropolitan Division consists of eight counties in northeastern Illinois. These eight counties are Cook, DeKalb, DuPage, Grundy, Kane, Kendall, McHenry and Will. Also included within the MSA are the counties found in the Gary, IN Metropolitan Division which are

Japser, Lake (IN), Newton, and Porter as well as the counties found in the Lake County-Kenosha County, IL-WI which are Lake (IL) and Kenosha. The Michigan City-La Porte, IN MSA and KankakeeBradley, IL MSA consist solely of LaPorte and Kankakee Counties respectively.

Overview

The City of Chicago is located on the shores of freshwater Lake Michigan and is the third most populous city in the United States. As of the 2021 census-estimate, Chicago has a population of 2,700,000, which makes it the most populous city in both the state of Illinois and the Midwestern United States. It is the county seat of Cook County, the second most populous county in the U.S. Chicago is the principal city of the Chicago metropolitan area, which is often referred to as "Chicagoland." The Chicago metropolitan area has nearly 10 million people, is the third largest in the United States, the fourth largest in North America, and the third largest metropolitan area in the world by land area.

The city of Chicago is part of the Chicago-Naperville-Arlington Heights, IL MSA. As defined by the U.S. Bureau of the Census, the Chicago “Primary Metropolitan Statistical Area” (PMSA) covers nine Illinois counties. However, in relation to the region’s principal growth and economic activity the metropolitan area is usually considered to consist of six Illinois counties of Cook, DuPage, Kane, Lake, McHenry and Will, exclusive of outlying DeKalb, Grundy and Kendall counties. This area includes the City of Chicago and 272 suburban communities and includes 75 miles of Lake Michigan shoreline. These six counties, in conjunction with the City of Chicago, form an interlocking economic structure.

In 2022, Chicago is amongst the top 10 most visited cities in the United States not far behind San Francisco, Las Vegas, and New York City. Landmarks in the city include Millennium Park, Navy Pier, the Magnificent Mile, the Art Institute of Chicago, Museum Campus, the Willis (Sears) Tower, the Museum of Science and Industry, and Lincoln Park Zoo. Chicago's culture includes the visual arts, literature, film, theater, comedy (especially improvisational comedy), and food. Chicago is also well known for their music, particularly jazz, blues, soul, hip-hop, gospel, and electronic dance music including house music. Of the area's many colleges and universities, the University of Chicago, Northwestern University, and the University of Illinois at Chicago are classified as "highest research" doctoral universities and located within the city’s limits.

The Chicago region is economically diversified and has a healthy balance between financial services, manufacturing, wholesale and retail trade, transportation, and health care industries. Its assets include a central location served by an extensive air, rail and highway network which allows for a viable central-city downtown district accessible by several forms of public transportation.

Chicago remains a mature economy with a large manufacturing base. Though the MSA’s economy is exposed to periodic distressed in the manufacturing industry, it is somewhat shielded by the diversity of the overall manufacturing base. As such, manufacturing conditions are generally solid with a majority of the area’s companies experiencing order growth. Demand for capital goods, such as machine tools, is robust, and steelmakers are seeing improved conditions, all of which is favorable for manufacturing.

Several Fortune 500 industrial or service companies are located in the metropolitan area. According to Economy.com, current employment is 3.74 million which is projected to increase to 3.87 million by 2022. The Northeastern Illinois Planning Commission (NIPC) projects that employment will grow to

5.56 million by 2030. The region is the third largest retail market in the U.S. and is a national and international tourism center. Conventions, trade shows and sales meetings bring in about 4.5 million visitors each year.

In addition to corporate headquarter presence, Chicago is the nation’s second most important financial center and the world leader in commodities with the Chicago Board of Trade, the Chicago Board Options Exchange, the Chicago Mercantile Exchange, and the Chicago Stock Exchange all located within the city. Chicago is the national leader in stock options trading, currency trading, currency futures and interest rate futures. The complex financial activity associated with this volume of trading along with the Midwest’s expanding role in world trade has created a solid base for growth in the financial community.

Chicago remains a mature economy with a fairly large manufacturing base. Though the MSA’s economy is exposed to periodic distressed in the manufacturing industry, it is somewhat shielded by the diversity of the overall manufacturing base. As such, manufacturing conditions are generally solid with a majority of the area’s companies experiencing order growth. Demand for capital goods, such as machine tools, is robust and steelmakers are seeing improved conditions, all of which is favorable for manufacturing.

Recent Performance

Chicago is home to one of the largest and most diverse economies in the nation. Chicago's role as the international trade hub for the entire Midwest, as well as its critical place in many distribution networks, can be traced back to its geographical and infrastructural advantages, which include being the only U.S city connected to six Class 1 railroads. Chicago has recently recovered 41% of its lost jobs since the pandemic. In 2022, Chicago is expected to see a 4.4% increase and is expected to recover all lost jobs by Q1 of 2024. Looking medium term, Chicago is expected to see an average annual job growth of .3% from 2022 to 2025 which ranks 42nd of 51 metros. Since May of 2021, unemployment rates have significantly decreased in the past 12 months. One year ago today, the United States had an average unemployment rate of 5.5%. Chicago in this time had a 1% higher unemployment rate at 6.5%. in May of 2022, the United States unemployment rate is at 3.4% with Chicago’s being just above that at 4.2%. Compared to a year ago, nonfarm payroll employment increased by 249,700 jobs, with gains across nearly all major industries. The industry groups with the largest jobs increases were Leisure and Hospitality (+84,600), Professional and Business Services (+43,500), and Trade, Transportation and Utilities (+41,900). The Mining sector (-300) was the only industry

sector that reported an over-the-year decline in payroll employment. In May, total nonfarm payrolls were up 4.3 percent over-the-year in Illinois and up 4.5 percent in the nation.

Population

Population characteristics relative to the subject property are presented in the following table.

Although the City of Chicago’s population declined by 0.7% between 2000 and 2010, it continues to represent about one third of the region’s total population. In 2020, Chicago recorded a population of about 2.70 million people and approximately 1.081 million households residing within the city limits of Chicago. More than half the population of the state of Illinois lives in the Chicago metropolitan area.

Cook County is the most heavily populated region within the MSA with approximately 59% of the area’s population. The racial makeup of the city in 2021 was 47.7% white (33.3% non-Hispanic white), 29.2% black, 6.8% Asian, and 5.3% from two or more races. The ethnic makeup of the population is 28% Hispanic and 72% belong to non-Hispanic background. From 2016-2020, 20.3% of the population was foreign born; of this, 56.3% came from Latin America, 23.1% from Europe, 18.0% from Asia and 2.6% from other parts of the world. Chicago has the fifth highest foreign-born population in the United States.

Source: ESRI (ArcGIS)

Chicago ranks as the country’s third largest city, behind New York and Los Angeles. In 1950, the city of Chicago reached a population of 3.62 million, then as time passed the population dropped by approximately 837,000 residents (a 23% decline) in the following four decades as residents and new families moved to the suburbs. In 1990, the city’s population fell below three million residents to 2.78 million, for the first time since the 1930’s. This pattern reversed itself in 2000 when an influx of young workers boosted its population by 4% to 2.9 million. Its current population of 2.78 million is approximately 3.8% below that of the 2000 census and is projected to increase to 2.83 million by 2022 primarily due to the migration of corporate headquarters and millennials along with baby boomers moving into the city.

The City of Chicago’s Central Business District has gradually expanded outside of its initial configurations within the confines of the public transit elevated train tracks that gave it its name as the “The Loop.” At present, it is generally bounded by the Chicago River on the north (300 North), and west (400 West), by Roosevelt Road on the south (1200 South) and Lake Michigan on the east.

Chicago’s economic growth has been maintained by its large employment base, healthy downtown business center, an extensive network of expressways and public transportation. The metro area also supplies two airports, and various tourists’ attractions. O’Hare international airport serviced 48,410,636 domestic and 54,024,784 international passengers in 2021. Additionally, Midway airport serviced another 15,333,690 domestic and 15,884,058 international passengers in the year 2021, a 77.3% increase from 2020.

An expanded downtown district, defined as the Central Area by the City for planning purposes, covers the area generally bounded by North Avenue (1600 North), Halsted Street (800 West), Cermak Road (2200 South) and the lake. This expanded area is roughly the equivalent to all of the community area designated by the City of Chicago as The Loop, most of the Near North Side Community area, and part of the Near South Side. The city is estimated to have an employment base of 1.42 million workers and has shown resilience in its ability to resume job growth following periods of national recessions.

Chicago’s Central Area is estimated to contain approximately 40% to 45% of the city’s total workforce. Also located within this district area the city’s dense concentration of high-rise office and apartment/condominium buildings, numerous hotels, The Art Institute, Millennium Park, Navy Pier (the city’s most visited tourist attraction), stage theaters, municipal, county and federal government offices, and the internationally known as the “Magnificent Mile” shopping district.

New and Future Developments

Chicago is a very exciting city for new developments and with the pandemic slowing down opens up more opportunities. Many projects were postponed but developers have restarted their efforts. A recent project has been Chicago’s Old Post Office. This building stood vacant for many years until recently when 601W redeveloped the building into office space. This building sits a top Ida B. Wells Drive just south of the Loop and has plans for a rooftop terrace. The renovation cost was over $800 million, and their largest tenant is Uber with 355,000 SF.

There are also five developments in the Chicago metro area that are either in-progress or completed. These are the 78, Lincoln Yards, 400 Lake Shore Drive, Willis Tower Redevelopment, and

O’Hare 21. The 78 is a project along the South Branch of the Chicago River which is being marketed as the 78th neighborhood of Chicago. This 62-acre site has sat vacant for years until Related Midwest bought the property with plans to turn the area into a mixed-use development. Related Midwest is currently in negotiations with the city for a casino to be built on the site. There are also plans for residential and retail uses as well.

The Lincoln Yards project is a new development by Sterling Bay along the North Branch of the Chicago River in between the neighborhoods of Wicker Park and Lincoln Park. This is another mixed-used development with office, residential and retail uses. There will also be ample public space and riverwalk access. 400 Lake Shore Drive which was the site of the proposed Chicago Spire. This site is adjacent to Navy Pier and the Chicago Harbor Lock, where the Chicago River meets Lake Michigan. Even though the pandemic set these projects back, there are still major development companies willing to risk millions on new projects based on the high demand that Chicago offers.

In 2017, Clayco and Turner Construction Company began construction for the reimagining and transformation of Chicago’s iconic Willies Tower. Approximately 460,000 square feet of existing space within the tower has been reconfigured. This also included 150,000 square feet of space for exclusive tenant use, including full-service fitness center, expansive tenant lounges, private event spaces, and concierge services to create a more inclusive and energetic work environment. The intended mission of the redevelopment project was to create an all-season, urban destination that brings the surrounding community together. It created a sense of place rather than a place of work. The lobby reopened in 2019 and finished construction in 2021. Some exclusive tenants include Shake Shack, Starbucks, Fifth Third Bank, Do-Rite Donuts, and Market Creations.

In 2019, the idea of O’Hare 21 came into the sight of the public with a long-term plan to progressively update certain areas of the international airport. Some focal points of the expansion would include an entirely new “global” terminal, a new satellite concourse to terminal 1, and a complete makeover of the existing terminal 5. The plan includes over 100 different plans, many of which are smaller but functional improvements, such as upgrades to parking garages, new water mains and electrical distribution systems, and refurbished underground pedestrian tunnels. At the earliest, the public shouldn’t see any major improvements until 2028 but some areas of the new terminal 5 have been refurbished and are already open to the public. The development team at O’Hare are spending more than a billion dollars on terminal 5 alone, which will be spent modernizing systems, adding 10 new gates, and more security checkpoints.

Urban core

Chicago's Revival Food Hall runs through downtown, where business/professional services will account for the bulk of the new jobs this year. There has been an explosion of tech-related hiring in the urban core, which has become the new economic engine for the metro division and enticed workers to move downtown. More talent hungry firms will join the inward migration this year. Most venture capital funding in Illinois gets funneled into Chicago, and the dollar volume of deals last year exceeded $1 billion for the first time since the dotcom bust, with half coming in the fourth quarter. The capital infusion will enable startups to hire more aggressively and support the downtown apartment market.

Construction development in the Metropolitan area has been prominent even through the pandemic years. In the year 2022 thus far, over 2.3 million SF of office space has been delivered to

the city with another 2.4 million SF expected to be delivered over the next few years. An initial 1.5 million SF at BMO Tower at 320 S Canal was 52% leased and expects banking namesake (500,000 SF), and law firm Chapman & Cutler (88,000 SF), both expected to move into their spaces in early 2023. In addition, there is 2.4 million still under construction with an availability rate of 15%. 50% of this inventory comes from the 1.2 million SF Salesforce Tower at 333 W Wolf Point Plaza in River North. Its namesake tenant agreed to occupy about 500,000 SF, while law firm Kirkland Ellis committed to almost 600,000 SF. The Hines development is projected to be over 96% occupied when it delivers to the River North Submarket in spring 2023.

Although the pandemic slowed many variables to life down, the commercial real estate industry stayed headstrong in the urban core of Chicago. In the time of July 1, 2020, to June 30, 2021, 18 commercial office/retail buildings sold in the Greater Chicago Area. The three most prominent sales included the McDonald’s Headquarters which sold for $412.5 million ($717.13/SF), Northern Trusts 1.2 million square foot office space which sold for $376 million ($311.58/SF), and Googles Fulton Market office selling for $354.8 million ($667.93/SF).

Other drivers

Other growth drivers will be less potent, however. Although Chicago does not export a lot of what it produces, weaker foreign demand will slow the ascent of transportation and warehousing. Cargo traffic through O'Hare and Midway airports softened around the turn of the year. Meanwhile, tourism is also at risk from a strong dollar, which makes it more expensive for foreigners to visit the Windy City. Overseas tourism is important because international visitors stay longer and spend more than their domestic counterparts. Finally, financial services are a lingering concern because smaller banks, which have been slow to shed problems and write down the value of their assets, will be slow to expand. Delinquency rates on commercial mortgages in Chicago are the highest among the 100 largest metro areas.

With the pandemic beginning almost two years ago today, many people have found their worth in the professional world. During the pandemic, people began learning that working from home was much more proficient, leaving employees with no interest in traveling to the office. A study by FlexJobs found that 58% of people wanted to work from home permanently, and that 38% wanted to have a hybrid work environment. We can assume that this preference will not change anytime soon knowing that people will be searching for hybrid positions as this is accepted as the new standard. This has had effect on economies in large cities like Chicago because people want to move out to the suburbs to shy away from the expensive lifestyle in the city. With the ability to

work from home, people would rather have the slower paced life with more space to live. A historical high of 96.8 million square feet of office space is currently vacant within the city limits which is about 19% of the total inventory. In quarter 1 on 2020, that number was at 20 million. The hybrid environment is bringing a change to the way people see work environments.

Fiscal

Chicago will need to get its fiscal house in order to be able to sustain the explosion of tech-related hiring downtown. Although the metro division has done more than the state to gain its fiscal footing, challenges remain. Last year the mayor won approval in the legislature for pension changes that cover nearly half of the city's workforce, narrowed the city's structural budget deficit, and reduced the rate at which it is borrowing. However, Chicago is still wrestling with general obligation and interest debt that makes it an extreme outlier among its peers, and the mayor, who has held the line on property taxes, has not ruled out a hike to help the city meet its pension obligations.

In addition, Illinois is in one of the worst debt crises the nation has ever seen. Illinois overall pension debt is 268% higher than its annual revenue due to government-workers’ pensions. It is suffering from a pension shortfall of over $111 billion with 19% of its state “budget” going towards pay for pensions while other states are around 4%. This problem came from politicians who offered generous pension benefits to government workers who in turn failed to properly fund and supply these pensions. Since pensions last for the rest of one’s life and possibly beyond, Illinois has a serious debt crisis on their hands.

Transportation

Chicago, like any big city, has its share of traffic issues and it can sometimes be very frustrating traveling through the city by car. Not to mention the scarcity of street parking and the everincreasing costs of parking garages if you're staying at a downtown hotel, and Chicago public transportation starts to look like an excellent choice for getting around. Fortunately, Chicago trains and buses are a great way to get you where you need to go.

As a result of Chicago’s strategic location, it has become a central point for all forms of transportation. Located at the junction of four interstate highways, it is the nation’s largest trucking center, offering a comprehensive motor carriage system which attracts more than 30 million tons of freight annually. Furthermore, the integrated system of interstate and arterial roadways consists of over 3,000 highway miles in combinations of tollways and expressways.

The Chicago Transit Authority (CTA) runs a network of trains and buses that service nearly every corner of the city. The trains fall under two categories: subway and elevated trains (the "L"). A quick look at a map of the Chicago train system, and you can see that it spiders out from downtown and is your best bet for getting to most of your Chicago destinations. The CTA buses fill in the gaps, running on a regular schedule on most major city streets.

Furthermore, the Chicago area is served by over 630 miles of expressway and by one of the most comprehensive and efficient public transit systems (the Regional Transportation Authority is comprised of the CTA, Metra and Pace) in the world.

The Chicago MSA has seven major Interstate highways crossing through it. However, the various

roadways are more typically known to Chicagoans not by their Interstate route numbers but rather by various given names, the vast majority of which use the suffix "Expressway" rather than "Freeway." These include Interstate 90/94 (Kennedy Expressway, northwest), Interstate 90 (the Jane Addams Memorial Tollway, Interstate 94 (Edens Expressway, north), Interstate 90/94/57 (Dan Ryan Expressway, south), Interstate 290/IL Route 53 (Eisenhower Expressway, west), Interstate 55 (Stevenson Expressway, southwest), Interstate 355 (Veterans Memorial Tollway, north/south perimeters), Interstate 88 (Ronald Reagan Memorial Tollway), Interstate 94/IL Route 394 (Bishop Ford Freeway) and the Tri-State Tollway which is comprised of Interstate 41, 80, 94 and 294. The Chicago Skyway (I-90, east) became a revenue generator in 2005 when the City of Chicago signed a $1.83 billion lease with Cintra-Macquaire Consortium to operate the roadway for 99-years.

Employment

Chicago’s level of employment growth has been modest over the past several decades. Prior to the end of Great Recession, the employment gains were not evenly distributed throughout the area; the city had recently been losing jobs overall, while the suburbs had been gaining. Historically, in 1972 the city had 54% of all jobs in the metropolitan region; by 2000 the figure had fallen to 31.3%. However, it appears there once again is a migration of jobs back to city as companies search for the greatest talent pool of potential employees, primarily with regards to millennial. In 2017, for the first time ever, a majority of jobs in Chicago as a whole were located in the central area of the city. Companies like McDonald’s, Kraft Heinz, Motorola, Mondelez International and United Airlines have moved their corporate headquarters to downtown Chicago. These companies were located in the suburbs and have recognized the benefits of moving to an urban environment. Chicago’s Loop is already home to many corporations such as Boeing, Exelon, JLL, Cushman & Wakefield, Northern Trust, Hyatt and U.S. Cellular. The West Loop and Fulton Market neighborhoods have attracted many developers and companies such as Google, McDonald’s and Mondelez International. According to Crain’s List for 2022, the largest employers in the greater Chicagoland area are Government and state jobs. The leading U.S. Government positions have risen in employment by 14.5% since 2019. Second on the list is teachers and administrative workers at Chicago Public Schools. Since October of 2019, there has been a slight increase of 2.4% of hirings within the country’s third largest school district. Along with the teacher strike in October of 2019, a

separate article from NPR came out just two months prior showing the number of absences teachers had throughout the Chicago public school in 2018-2019. Upon visits to each local school, 99 majority black schools, 45 majority Hispanic, and majority 8 mixed schools reported instructor absences. The slight increase in hirings is a promising look for the future of students learning in the Chicago Public School District. Some of the more prominent changes on the Crains List for 2022 would be Amita Health and United Airlines Holdings INC. Amita Health has shown an increase of 24.2% since 2019 and will continue to grow as nurses and doctors gain more knowledge on the COVID-19 pandemic and feel safer entering health facilities. United Airlines has lost 23.8% in employment since 2019 due to the lack of travel during the pandemic. With travel becoming more prominent again, we should likely see an increase in employment within the next two years.

The top industries by percentage of employment in DuPage County according to the chart above were Manufacturing, Professional/Scientific/Tech Services and Health Care/Social Assistance.

Unemployment

The following table exhibits current and past unemployment rates as obtained from the Bureau of Labor Statistics. Overall, the Region boasts one of the lowest unemployment rates for metropolitan statistical areas in the country at 4.2 percent.

Employment by Industry - Cook County

Source: ESRI (ArcGIS)

Median Household Income

Total median household income for the region is presented in the following table. Overall, the subject’s MSA and county compare favorably to the state and the country.

Education, Recreational and Cultural Amenities

Chicago is home to fifteen major public and private universities, including the highly regarded Northwestern University and University of Chicago. Other major educational institutions include University of Illinois at Chicago, which has the largest local enrollment, as well as Loyola University and DePaul University. These institutions offer a variety of undergraduate and graduate fields of study. The total enrollment of these Chicago area universities is approximately 105,000 students. Prominent MBA programs in the Chicago area include Northwestern University’s Kellogg School of Management, University of Chicago’s Graduate School of Business and DePaul University’s Kellstadt Graduate School of Business.

The surrounding area of Chicago also has a number of private liberal arts colleges and universities including North Central College, Wheaton College, Elmhurst College, North Park University, Benedictine University and Lake Forest College. Additionally, many of the major universities have established satellite campuses in the suburban areas. DePaul University has suburban campuses located in Naperville, Oak Forest, O’Hare, and Rolling Meadows. Northern Illinois University has suburban campuses in Hoffman Estates and Naperville. The Chicago area also has an extensive community college system comprised of twelve two-year colleges with a total enrollment of 145,000 students. There are also seven City Colleges of Chicago with an enrollment of over 75,000 students.

Arts, science, and history museums, as well as the theater, opera companies and symphony orchestras are well represented. The area’s extensive lakefront and systems of parks and open spaces (Forest Preserve Districts) provide residents with year-round recreational entertainment. Furthermore, sports are embedded within the fabric of the area. Major league franchises such as the Chicago Bears football team, the Chicago Bulls basketball team, the Chicago Cubs and White Sox

Source:

baseball teams, and the Chicago Blackhawks hockey team call Chicago home. In addition, several minor league and college teams have a strong following as well.

The City of Chicago provides tools, resources, special programs, and education training for students, job seekers, and professionals seeking development. Provided below are links to Services, News, Alerts, and Supporting Information from all departments across the City, on topics relevant to Education and educational opportunities in Chicago.

The following table details the education attainment for the region. Thornton Township demonstrates the lower education attainment as compared to the County and MSA. However, the region demonstrates higher education attainment levels than the state and national level.

Tourism

Chicago is a very popular city for American and international tourists. According to the Illinois Office of Tourism Department of Commerce and Economic Opportunity press release dated 08-21-2020, the state received 120 million tourists in 2019. Illinois experienced tourism growth for the ninth year in a row. The U.S. Travel Association estimates that tourists spent $43.1 billion in Illinois last year. That was a 3% increase over the prior year. This helped to support over 340,000 jobs and created over $2.5 billion in state sales tax revenue. The City of Chicago accounted for around 55 million of these visitors.

The popular tourist attractions in the city include Navy Pier, Museum Campus, the Magnificent Mile, Grant Park, Millennium Park and the Willis Tower. However, the COVID-19 pandemic has put travel on hold. 2020 saw an enormous decrease in tourism much like other major US cities but there was a rebound in the summer of 2021. According to the Chicago Sun Times, “the average hotel occupancy rate on summer weekends was 71% — and it reached 85% during Lollapalooza weekend. Counting weekdays, summer capacity “topped out at” 51% overall, reaching 57.5% in July. That’s the best occupancy rate Chicago has recorded since February 2020, the month before the stay-at-home shutdown that prompted scores of major hotels to close their doors” (Spielman, 2021). This shows an upward trend coming into 2022 with the majority of the population being vaccinated and a decline of cases since the holidays.

In recent years, the Chicago Bears have been in contract with the Arlington Horse Racing Track in Arlington Heights, Illinois to purchase the track and surrounding land to redevelop the area and call it home. In July of 2022, an article came out showing the importance of sports franchises and the surrounding real estate. The Chicago Bears wouldn’t be the first to do this, but the Rams and Chargers with the construction of Sofi Stadium in Inglewood, California. Not only do these two teams call Sofi Stadium home, but they also boosted the commercial real estate market in the process.

Roughly $616 million in commercial property was sold within 1-mile of the development zone which is far more than any investment in the Inglewood area in the past three decades. The Bears plan to follow this course and begin redeveloping the 326-acre property in Arlington Heights. To counteract this move, the mayor of the city, Lori Lightfoot, is proposing a 2.2 billion remodel of the historic solider field to keep fans and tourist inside city limits. If the Chicago Bears decide to move, they would develop the 326-acre property with a stadium, retail, and living commodities. They would then own the entirety of the site and make a profit outside of the sports community.

Conclusions

In conclusion, the Chicago metropolitan area has an established history of economic stability due to its accessibility to major markets, its central location, excellent transportation facilities, and its diversified economic base. These features of the subject area are positive factors reinforcing the value of local real estate, inclusive of the subject property, over the long term with the services sector continuing to grow at a faster rate than other segments of the market.

Chicago-Joliet-Naperville has been experienced a robust economic expansion over the past several years. The public sector will continue to be a sore spot, but it will not prevent a self-sustaining expansion from taking hold, as growth in private industries broadens and strengthens. Longer term, a huge talent pool of skilled workers, world-class universities, and an airport with direct connections around the globe give Chicago an advantage over the rest of the state and other parts of the Midwest.

Chicago was facing considerable fiscal deficits prior to the pandemic, and now faces deeper challenges as its large office sector is complicated by the work-from-home trend which will hurt the office market and the CTA. It is not expected to see office employment reach the 2019 peak level until 2023. With close to 5-million SF more in office space expected by the end of 2023, this could soon change. In terms of living arrangements, people will more than likely continue to migrate out to the suburbs with the ability to now work remote. With Illinois rising tax rates, sales tax of 10.25%, and property taxes being a third higher than the national average, it’s almost a no brainer. The ultimate duration and impact that the pandemic will have on the local, regional, and national economies remains uncertain. But, Continuing through 2022, momentum is expected to increase in subsequent quarters due to pent-up demand as the pandemic becomes more controlled.

City and Neighborhood Analysis

NEIGHBORHOOD MAP

Overview

The subject is located in in an unincorporated portion of Cook County, formerly within the village of Homewood in Cook County. As noted earlier, in April of 2021, by direction of the owner, the Homewood Village Board approved disconnecting the property from the village. Therefore, a majority of the property currently is located in unincorporated Cook County, with a small portion at the northwest corner of 175th Street and Dixie Highway falling with the village boundaries of Hazel Crest. For purposes of this analysis, we have provided an overview of Homewood as it most closely represents the socio economic characteristics of the subject property. Location influences from the village of Hazel Crest are also considered in this market study.

Homewood is in Chicago’s south suburbs and part of the greater Chicago MSA, about 21.5 miles south of the Chicago Loop. Surrounding communities include Hazel Crest to the west, Thornton to the east, Flossmoor to the south and Harvey to the north.

Neighborhood Location and Boundaries

The subject neighborhood is located to the north of Homewood, now within Thornton Township, Cook County, IL. The southeast corner of the site is located in Hazel Crest. The area is suburban in nature. The neighborhood is bounded by Interstate 80 to the north, Dixie Highway to the east, 183rd Street to the south, and Kedzie Avenue to the west.

Transportation Access

Within the immediate area of the subject property, transportation access helps define the character of its development. Major east/west traffic routes include Interstate 80, 175th Street, Ridge Road, 183rd Street and 187th Street. North/south routes include Ridge Road, Governor’s Highway and Halsted Street. Metra services Homewood with stations at Calumet, East Hazel Crest, Homewood

Amtrak Station, and Flossmoor. The commute to the Chicago Central Business District is about 20 to 40 minutes, although it may be substantially longer during peak traffic hours. Access to the area is considered good.

Road Improvements

No major road improvements are planned for the immediate area surrounding the subject property.

Neighborhood Land Use

The subject neighborhood is located in an area with primarily residential and industrial land uses. An approximate breakdown of the development in the area is as follows:

LAND USES

Like most suburbs, land uses are mixed with single family being most prominent. Other uses such as multi-family and industrial are scattered throughout as well. Support retail and office uses are primarily located along the main arteries.

Land Use Trends

The subject property is a large part of the neighborhood which will most likely be changing from open space to industrial and retail use. Although there are plans for redevelopment of the subject parcel, there is little other new construction or change in land uses noted within proximity.

Proposed East Hazel Crest and Homewood Casino

In 2019, the Villages of East Hazel Crest and Homewood were awarded a casino bid. East Hazel Crest and Homewood joined hands on a potential casino in 2012, when they were in the running for a potential license along with Calumet City, Chicago Heights, Country Club Hills, Ford Heights and Lynwood.

The Wind Creek Casino proposed for Homewood and East Hazel Crest would cost $440 million. The proposal is for a 64,000 square-foot casino off of Interstate-80 and Halsted Street.

Along with the casino, which would have 2,000 gaming positions — the number of gambling locations including machines and table games — the casino would have a 13,000-square-foot buffet area and 10,000-square-foot entertainment area, according to the proposal. Two hotels, each with 225 rooms, would be built.

The casino is slated to open in the end of 2023/early 2024, with construction delayed almost a year due to COVID-19 supply chain issues and planning setbacks. The casino will be mostly on East Hazel

Crest land, with a parking garage overflowing into Homewood's property. The construction site is located off of Interstate 80 near Halsted Street and 175th Street.

A revenue sharing agreement would be in place once the casino is built, and the 2019 law that provided a south suburban license calls for the host community and 42 other south suburbs to share in 5% of revenue generated.

In this instance, with two host communities, they would keep 2% of monthly adjusted gross receipts, while another 3% would be shared among 41 other suburbs. The host communities also would get $1 of the $3 admission tax for each person entering the casino.

Wind Creek has estimated that $3 million in tax revenue would flow annually to Homewood and East Hazel Crest, and another $4 million a year to the other communities.

Demographics

The following table depicts the area demographics in Homewood within a one-, three-, and five-mile radius from the subject.

Within a three-mile radius, the reported population is 78,754 with a projected growth rate of approximately -0.6% annually. There are 31,388 housing units within that three-mile radius. The growth rate is expected to be 0.0% annually. Most of the housing is owner-occupied. Our research indicates that property values in the area are stable to increasing.

Within a three-mile radius, the median household income is $70,319. Looking ahead, annual household income growth is projected at 3.4% per year. The average income figures suggest that the inhabitants are within the middle income brackets.

Nuisances & External Obsolescence

Neighborhood properties have adequate levels of maintenance. No adverse or unfavorable factors were observed.

Neighborhood Life Cycle

Most neighborhoods are classified as being in one of four stages: growth, stability, decline, or renewal. Overall, the subject neighborhood is in the stability stage of its life cycle.

Immediate Area Uses

The below aerial photo exhibits the uses located in the subject’s immediate vicinity.

Uses along 175th Street in the vicinity of the subject are primarily residential in nature. Another golf club is located less than ¼ mile to the south of the subject, Ravisloe Country Club. To the immediate west is industrial development and established residential dwellings further west. Single family development is to the south, in between the subject and the Ravisloe Club. There are government buildings to the east, including the Hazel Crest Village Hall, as well as parking for the Calumet Metra station. The subject abuts Interstate 80 to the north, with single family development north of the highway. A drive of the neighborhood revealed that occupancies in the area are quite high. The area has remained popular with no signs of this changing into the future. As shown above, the density of uses in the area is relatively high with few vacant parcels available.

Analysis and Conclusions

The subject neighborhood is a developed suburban community which exhibits great access to local traffic linkages. Moreover, local demographics indicate a loosely defined but stable population with average income levels at the metropolitan and statewide averages. Given the surrounding population figures and access, the subject neighborhood should remain a viable commercial area for the foreseeable future.

Source: Google Maps

Subject

Site Description

The subject site is located on the northwest corner of 175th Street and Dixie Highway, just south of I80. The characteristics of the site are summarized as follows:

Site Characteristics

Gross Land Area: 128.36000 Acres or 5,591,362 SF

Usable Land Area: 109.00000 Acres or 4,748,040 SF

Usable Land %: 84.9%

Shape: Generally Rectangular

Average Depth: 2,140.00 feet

Topography: Gently sloping

Drainage: Assumed adequate

Grade: Varies above and below street grade

Utilities: All Available

Off-Site Improvements: Asphalt paved street, curbs, gutters

Interior or Corner: Corner

Signalized Intersection: Yes - Traffic signal at the site that enhances access

Excess or Surplus Land: None

Additional Access Alley Access: None

Water or Port Access: None

Rail Access: None

Flood Zone Data

Flood Map Panel/Number: 17031C0733J

Flood Map Date: 08-19-2008

Portion in Flood Hazard Area: 0.00%

Flood Zone: Zone X

The areas of minimal flood hazard, which are the areas outside the SFHA and higher than the elevation of the 0.2-percent-annualchance flood, are labeled Zone C or Zone X (unshaded).

Other Site Conditions

Soil Type: Assumed adequate

Environmental Issues: A Phase I Environmental Site Assessment was conducted by ECS Midwest, LLC and dated October 12, 2020. According to this document, a 1,000-gallon gasoline UST was removed from the property on January 3rd, 1990. The Illinois EPA issued a No Further Remediation Letter on April 15, 1991, and no associated land use restrictions and/or engineering/institutional controls were placed on the property as part of site closure. Other than this historical condition, ECS revealed no evidence of environmental conditions with the property.

Easements/Encroachments: The easements are described in the Addenda.

Earthquake Zone: None

Wetlands Classification: Cherry Creek is on the northwest corner of the site. This area is subject to federal regulation. There are a number of other designated wetlands but have been determined to not be under federal regulation.

Adjacent Land Uses

North: Interstate 80

South: Single-Family Residential Neighborhood

East: Single-Family Residential Neighborhood, Retail Buildings, Calumet Metra Station

West: Industrial Buildings, Vacant Land

Site Ratings

Access: Good Visibility: Good

Zoning Designation

Zoning Jurisdiction: Village of Homewood

Zoning Classification: PL-2, Public Land and Open Space

General Plan Designation: Public Land and Open Space

Permitted Uses: A variety of uses (see exhibit)

Zoning Comments: The purpose of the PL 2 Public Land and Open Space Zoning District is to protect and maintain public properties owned by the Village, the park district, school districts, non-profit organizations, and privately-owned country clubs. The development standards provide flexibility to local government bodies, non-profit organizations, and country clubs in the use of their land while protecting surrounding uses.

TIF Overview

Based on information provided to us by ownership, the intent is to secure a Cook County Class 8 incentive for the entire development, including all components. This will allow the entire development to be assessed at 10% of market value, instead of the 25% for all commercial and industrial properties in the county.

The Class 8 tax incentive promotes industrial and commercial development in areas of Cook County that are “experiencing severe economic stagnation.” An amendment to the Classification Ordinance allows property located in any of the five townships (Bloom, Bremen, Calumet, Rich and Thornton) included within the South Suburban Tax Reactivation Pilot Program and/or in an Enterprise Zone is eligible for Class 8 without any application for certification of an area. Any new construction, significant rehabilitation, or reutilization of abandoned buildings developed or reoccupied for industrial or commercial use may qualify for the Class 8.

Qualifying buildings will be assessed at 10% of market value for 10 years, 15% in the 11th year and 20% in the 12th year. Again, this is a significant reduction from the standard assessment level of 25% for industrial and commercial properties.

For more information on the ownerships assumptions for estimating the incremental revenue for the proposed redevelopment, please see the Addenda. Please note that estimating the preliminary incremental property taxes, the assessed values, equalized assessed value and the effect on value for the subject property is beyond the scope of this analysis.

Analysis/Comments on Site

The subject is a corner site and is of adequate shape and size allowing for development. The parcel has a gross acreage of 128.36 acres or 5,591,362 square feet with adequate access, frontage, and visibility. The usable area of the site is 109 acres or 4,748,040 square feet. The northwest corner of the site has a creek which is considered surplus land and will be turned into a retention area. The site is currently a golf course with various degrees of topography. One of the two parcels is within the Village of Homewood, while the other is within the Village of Hazel Crest.

TAX/PLAT MAP – 1 OF 2

TAX/PLAT MAP – 2 OF 2

Improvements Description

Existing Improvements

The subject property consists of a 128.36-acre parcel of land that is currently occupied with the Calumet Country Club. The Calumet Country Club is a private 18-hole championship golf course. The property is improved with various structures, including:

• An approximately 31,500 square foot, two-story clubhouse

• An approximately 1,240 square foot, single-story locker room and swimming pool building

• An approximately 275 square foot, single-story halfway house

• An approximately 5,940 square foot, single-story storage building

• An approximately 4,900 square foot, single-story maintenance building

• A pump house

The subject property is located in a commercial/residential area formerly in Homewood, Cook County, Illinois. However, in April of 2021, by direction of the owner, the Homewood Village Board approved disconnecting the property from the village. Therefore, a majority of the property currently is located in unincorporated Cook County, with a small portion at the northwest corner of 175th Street and Dixie Highway falling with the village boundaries of Hazel Crest. Currently, the property is under review for potential redevelopment with proposed uses to include industrial, retail, commercial, residential condos, hotel, training facility, recreational land and aquaponics along with a dog park and walking trails. More specifically, the proposed development will feature an indoor waterpark and a state of the art sporting complex. Other tenants may include a fresh market farm stand, per groomer, UPS Store, Bamenda Coffee shop and more. The mixed-use industrial plans will also include the introduction of Factory Town and Warehousing. This inclusion will provide continuous support and growth for the proposed retail tenants. This is all pending re-zoning to a mixed-use industrial district either within Cook County or re-annexation into the neighboring village of Hazel Crest. The subject property is bound on the north by Interstate 80/294, on the east by Dixie Highway, on the south by 175th Street, and on the west by The Lanco Group of Companies and Community Care Systems, Inc.

Proposed Development and Improvement Summary

As noted earlier, currently, the property is under review for potential redevelopment with proposed uses to include industrial, retail, commercial, hotel, recreational land and aquaponics among other uses noted above. This is pending re-zoning to a mixed-use industrial district either within Cook County or re-annexation into the neighboring village of Hazel Crest. At this stage, development plans are very fluid, however, we have been provided with a proposed site plans that includes various building layout, configurations and areas. This market study will consider the overall proposed plan and research the general market conditions for the various uses and report on findings that include rental and vacancy rates, absorption, supply and demand factors among other financial, demographic and economic considerations. The following chart details the current proposed development and land area along with associated building type and area for the respective improvements.

Calumet Country Club Redevelopment

PROPOSED SITE LAYOUT

ALTERNATIVE PROPOSED SITE LAYOUT

ALTERNATIVE PROPOSED SITE LAYOUT

ALTERNATIVE PROPOSED SITE LAYOUT

PROPOSED RENDERING

PROPOSED RENDERING

IMPROVEMENTS DESCRIPTION

PROPOSED RENDERING

CALUMET COUNTRY CLUB REDEVELOPMENT

CALUMET COUNTRY CLUB REDEVELOPMENT IMPROVEMENTS DESCRIPTION

PROPOSED RENDERING

PROPOSED RENDERING

PROPOSED RENDERING

CALUMET COUNTRY CLUB REDEVELOPMENT IMPROVEMENTS DESCRIPTION

PROPOSED RENDERING

Market Analysis

In this section, Valbridge task is to describe the market environment for the Project, particularly from an economic and demographic perspective. We review population, housing and economic trends within the market area then compare them to those in Chicago MSA overall in order to better understand the demand for each proposed use at the subject. However, first we will discuss the macro-economic factors effecting commercial real estate.

COVID-19 Pandemic

Market activity in all property sectors in 2021 and 2022 has shown little, if any, impact from COVID19. Most markets have experienced growth, fueled by low lending rates and inflationary pressures. Demand for investment properties continues to be high in all markets and is expected to increase in secondary and tertiary markets as investors look for higher yields. Investors and owners are also expected to continue to watch federal involvement in business loans, as the government may need to intervene if inflation continues to grow. This will influence the decision of business owners to choose between buying or leasing their commercial space. Continued supply chain issues have the potential to impact both inflation and the ability to satisfy space demand. A shortage of supplies as well as labor continues to cause delays in construction across the country.

Inflation

Inflation is perhaps the biggest 2022 concern for CRE markets and investors. High inflation rates are being driven by both demand (stimulus, more businesses opening, high savings rates) and supply factors (labor shortages and supply chain disruptions). While at the highest rate in 30 years, inflation will likely stay high for the next year. The following table presents historical inflations rates:

ANNUAL CPI RATE OF CHANGE

Source: U.S. Bureau of Labor Statistics

The median CPI is now increasing at an annual rate of more than 9%, which is a pace not seen since 1990. Because of the unique nature of the causes of this rate of inflation, the demand outlook does not point to accelerating inflation over the medium term, which is most important for the overall economic outlook and for decision makers at the Federal Reserve. Market participants anticipate that

the Fed will continue to hike interest rates in through 2022 to combat inflation. The biggest risk is that unexpected runaway inflation would be damaging to the economy and negatively affect commercial property markets. However, this is not the expected scenario and elevated inflation can have a net positive impact on commercial property values.

Interest Rates

To combat inflation, the Federal Reserve raised the federal funds rate by 25 basis points in March 2022, reflecting the first increase since 2018. However, this increase had little to no impact in year over year inflation and the Federal Reserve raised rates by an additional 50 basis points in May 2022 and 75 basis points in June 2022.

Interest rate increases affect capital-intensive industries like real estate. As credit becomes more expensive, investor return requirements increase, which can lead to higher capitalization rates expectations. As inflation persists and the market anticipates additional rate hikes by the Fed, slower growth in CRE pricing and transactions should be expected.

In general, nominal (non-inflation adjusted) real estate returns perform well under a variety of rate environments, while inflation-adjusted real estate returns are strongest during periods of stability, according to research done by Trepp. In a March 2022 report on interest rates and commercial real estate, moderate declines or slight increases (0 to 50 basis points) create the strongest returns, with median annual growth at 3.1%. Trepp outlined the following possible impacts of higher interest rates on major CRE sectors:

Multifamily

Issuance in this sector has surged in the low-interest-rate environment of the last two years. Sharply higher interest rates could put a dent in issuance in the near term, as higher borrowing costs could reduce demand for debt financing. In the long-term, issuance could rebound. Despite the current trend of declining unemployment and rising income, wage inflation is outpacing price inflation as of now. If this inflation trend continues, consumer demand could be pushed further toward rental properties.

However, the market is currently experiencing a shift away from renting. According to data from the United States Census Bureau, the homeownership rate increased to 65.5% in Q4 2021, a decline from the Q2 2020 peak of 67.9% (a rate height that has yet to be surpassed by those seen post-2008 financial crisis). Additionally, those between the ages of 25 to 29 have increased their homeownership share to 35.4%, up from 34.8% a year earlier, possibly suggesting that younger families are moving away from renting.

Office

The office sector also benefited from the low-interest-rate environment. However, rising interest rates could lead to an overall drag on growth in 2022 which may result in some companies reducing their projections for future office space needs. With that in mind, landlords may be more willing to lock in tenants at their current rates rather than risk losing them. However, firms are already in the midst of the debate over hybrid, in-person, and fully remote expectations from employees, and some are choosing to offload their excess office spaces and either downsize or do away with their inperson spaces for good.

Additionally, Trepp estimates that the CMBS market can expect to see $10.3 billion in office loan

maturities for 2022, rising rates could be problematic when it comes to refinancing. The office market is already in turmoil and rising interest rates will likely not serve to alleviate the uncertainty in the market.

Retail

With rising interest rates and a slowing economy, retailers may curtail plans for growth in response to an up-and-coming potential drop in disposable consumer income. This curtailment may make it more difficult to backfill vacant spaces and lead to consolidation by retailers. Investors could choose to approach 2022 with a more conservative view of retail occupancy going forward.

Lodging

The hotel industry faces challenges from both a supply and demand perspective. CMBS lenders abruptly stopped funding loans when the pandemic took effect in 2020, but, since then lodging loan issuance has picked up. While this seems like good news, the uptick in issuance could prove too fast and there is a potential for the supply to outpace demand. There may not be enough demand to absorb the new supply if consumers and businesses maintain and reduce their levels of spending.

Conclusions

Various market participants will feel the effects of rising interest rates. As highlighted above, each sector of the CRE space will react differently to these rising rates. Ultimately there may be some nearterm volatility in 2022 seen across all sectors of CRE, but higher rates should attract capital later in the year and beyond.

Primary Market Area Definition

We have defined the subject site’s geographic Primary Market Area (PMA) to be a 20 minute drive time, which includes select portions of Cook County, focusing primarily on those locations within the County which have optimized access and are proximate to a concentration of commercial activity. We believe these areas are an accurate reflection of the current market environment within Cook County,

Given the proximity to several interstates, the Village of Hazel Crest/Homewood still provide the best opportunities for businesses interested in this region of Cook County.

The PMA is generally bounded as follows: Munster, IN to the East, Mokena/Orland Park to the West, Oak Lawn to the North and Steger/Crete to the South.

The subject property is proposed for a mixed use development with multiple uses including industrial, retail, commercial, hotel, aquaponics, sports complex and waterpark. It will draw demand from multiple areas. A large component of the proposed development will include industrial and commercial/retail users. The site is ideal for industrial uses given its excellent linkage with local transportation including I-94, I-80, I-294 and I-57 which connects the site to Chicago to the North, Indiana to the east and the remainder of IL and the Midwest to the south and west. It can be expected that many industrial users would prefer to be located within this area.

Another large component of the proposed subject property is retail/commercial. Many retailers look for sites that are within a 10-20 minute drive time to their customer base. Some of the other proposed uses of the site draw from larger drive times parameters, such as the hotel, entertainment venue, water park and sports complex. However, we are careful not to over extend the PMA boundaries as to cast too wide of a net in estimate local market demographics for which a majority of the subject property will draw. Therefore, we have chosen the 20-minute drive time for purposes of estimating the boundaries of the PMA. Furthermore, the area that encompassed the 20-minute drive time best fits the submarket boundaries of most of the various uses that are proposed for the subject development. Given the site is proposed for a mixed use development with over 5 different uses, we have chosen a PMA that best encompasses the subject for all proposed uses.

Furthermore, Valbridge makes comparison to broad Cook County trends and in the Chicago Metropolitan area in order to understand the near- and long-term development context. Reference is also made to Statewide trends where useful.

Sources

Our analysis uses data available from the 2020 U.S. Census and from the Census Bureau’s 2016-2020 American Community Survey. We have consulted current estimates and future projections of population, households and incomes calculated by Environmental Systems Research Institute, Inc. (ESRI), a nationally recognized data provider; the ESRI forecasts incorporate 2020 Census data.

The following map depicts the boundaries of the Subject PMA. The 10-minute drive time is depicted by the red area, the 20-minute drive time is depicted by the green area and the 30-minute drive time is depicted by the blue area.

Demographic Characteristics

Valbridge uses ESRI projections for population, household and income estimates for 2022 and 2027. These estimates are based upon the 2020 U.S. Census data. It is important to note that the current ESRI demographic projections likely underestimate the overall growth trends within the PMA, since they are not as attuned to the market area and its surroundings as local planning officials and governments. Please note once again, we are focusing on the 20-minute drive time data.

Population Trends

Population and household data developed by ESRI are summarized in the table on the following below.

The total population in 2022 is estimated at 872,366, which is expected to decrease to 850,302 in 2027, indicating an annual rate of change of -0.51%.

Based on 2020 Census Redistricting Data as seen below, total population in the PMA is down as compared to 2000 and 2010, when it was 921,546 and 904,363, respectively.

As can be seen from the chart above, similar population decreases have been experienced across all aforementioned geographies. The MSA is expected to expereince a decrease in population from 2022 to 2027 at an annual rate of change of -0.24%, while the county is expected to experience a slightly higher decrease with an annual rate of change of -0.41%.

The following table and chart depict the total population from 2010 to 2027 for the PMA, County, MSA and State.

Household Trends

The total households in 2022 is estimated at 322,493, which is expected to decrease to 326,277 in 2027, indicating an annual rate of change of -0.38%.

As can be seen from the chart above, similar decreases have been experienced across all aforementioned geographies. The MSA is expected to expereince a decrease in households from 2022 to 2027 at an annual rate of change of -0.09%, while the county is expected to experience a slightly higher decrease with an annual rate of change of -0.25%.

The following table and chart depict the total households from 2010 to 2027 for the PMA, County, MSA and State.

Housing Units by Occupancy – 20-Minute Drive Time

The following breaks down the housing units by Occupancy Status and Tenure for the 20-minute drive time for 2010, 2022 and 2017.

Similar to the surrounding area, the majority of the housing units within the PMA are owneroccupied, with 65% in 2022, only slightly decreasing to 64.7% in 2027. Renter occupied housing is at 26.9% with 8% of the housing units vacant as of 2022. Total occupied housing units is expected to decrease in 2027 to 90% down from 92% in 2022.

The following table and chart depict the housing units by tenure from 2022 to 2027 for the PMA, County, MSA and State.

As noted above, the PMA demonstrates a higher percentage of owner-occupied housing units then as compared to the County, MSA and State levels, Renter occupied housing represents a higher percentage of housing units in the County, MSA and State, with 38.9%, 32.1% and 30.3%, respectively.

Housing Characteristics

Valbridge here reviews certain housing characteristics of the PMA and the County, as revealed in an analysis of residential building types, values of owner-occupied homes and rents.

Structure Type

As outlined in the table below, the American Community Survey for 2016-2020 reports that the supply of single-family homes in the PMA is greater for detached than attached homes, with 66.4% being detached. In the County, only 40.5% of single-family homes were detached. The PMA is primarily located within Cook County, however, small portions of the PMA are located within Will County, IL and Lake County, IN. Nonetheless, the comparison below is an accurate representation of the local market characteristics.

Housing Evaluation

Housing is significantly more affordable in the PMA and the southern portion of Cook County relative to other Chicago MSA jurisdictions. While the PMA offers a lower proportion of multifamily buildings, both the PMA and a significant portion of the County are still suburban communities where single-family homes are in the majority. As one moves further away from the City of Chicago, multifamily rental opportunities become less prevalent.

Economic Characteristics

The table below provides summarized income trends for the PMA, Cook County, Chicago MSA and Illinois based on ESRI estimates for 2022 and 2027. First, we provide a detailed breakdown of the Households by Income for the PMA:

Next, we provide a detailed breakdown of the Households by Income for the County:

Next, we provide a detailed breakdown of the Households by Income for the MSA:

The following chart depicts the per capita income, median and household income for the PMA, County, MSA and State.

Household Incomes Evaluation

ESRI estimates the median household income for the PMA in 2022 at $68,671 which is 11.4% lower than Cook County’s median of $77,539. The Chicago MSA has a median household income of 83,320 in 2022, which is 21.3% higher than the PMA. This gap is expected to continue through 2027 with PMA households earning an estimated $81,752 while overall County incomes will reach an estimated $92,996 and the MSA at $100,297. Households in Cook County earning less than $25,000 comprised 16.4% of all households with MSA at 13.9% as compared to 17.2% of PMA households overall in that category. The share of PMA households earning more than $100,000 in 2022 was 33.2% as compared to 39.4% for Cook County and 42.4% for the Chicago MSA.

Business Types

An overview of ESRI’s 2020 Business Summary data for the PMA provides additional insights into which classification of business users are most prevalent and thus more likely to contribute to the overall demand for commercial and employment space at the subject. ESRI’s Business Summary reports are extracted from data on over 13 million businesses across the country and references several sources including directory listings such as Yellow Pages and business white pages;, 10-K and SEC information; federal, state and local government data; business magazines, newsletters and newspapers and information from the United States Postal Service. Attention should be given to the following factors:

 Retail Trade and Health Care/Social Assistance is more prevalent in the PMA

 Professional, Scientific & Tech Services business are more prevalent in the County and MSA than in the PMA. This sector includes Scientific Research and Development in the Physical, Engineering and Life Sciences which typically require lab space.

 The proportion of construction businesses is less prominent in the PMA than in the County and MSA, overall.

Tapestry Segmentation Area Profile

ESRI provides locational data, known as Tapestry Segmentation, which categorizes behavioral market segmentation for US Neighborhoods. People have unique needs. Understanding the uniqueness of different consumer personas can help businesses produce valuable products and services. Tapestry Segmentation classifies US neighborhoods into 67 unique segments, based on demographics and socioeconomic characteristics. Esri Tapestry Segmentation includes three indexes displaying average household wealth, socioeconomic status, and housing affordability for the market relative to US standards. The following is the top twenty Tapestry Segments for the PMA.

As noted above, the Top 5 segments include Family Foundations, Parks and Rex, Pleasantville, Comfortable Empty Nesters and Front Porches. The following pages detail the socioeconomic makeup of the Top 3 Segments:

Family Foundations

Pleasantville

Property Market Analysis - Industrial

Industrial/Warehouse Distribution

A major component of the proposed development is industrial warehouse distribution space. Overall, the component of the proposed development accounts for over 1,000,000-square feet of space or more than a third of the total buildable area.

According to CoStar, the subject property is located within the Far South Cook industrial submarket. However, it also borders the Near South Cook industrial submarket. For purposes of this market study, we will use the combined data for both submarkets in order to understand the market fundamentals effecting the subject property’s immediate area more accurately. The map below depicts the metro MSA market with the subject property denoted by a red star.

CHICAGO INDUSTRIAL MSA MARKET MAP

Chicago Market Conditions – Current and Pre-Pandemic

The following market analysis of the Chicago industrial and class a property market is based on data obtained from the CoStar Group, Inc., a leading provider of real estate information services. The

analysis presents the subject property’s macro and micro industrial markets and includes a breakdown of class a space.

The following table illustrates the historical market performance of the Chicago Metropolitan market:

Chicago Industrial Market Statistics

Rental Rates

The Chicago Metro had a 2022 2nd Quarter average quoted rental rate of $6.42 per square foot for all industrial space, compared to $6.30 in the 2021 2nd Quarter, or a 1.9% increase over the last year. Quoted rental rates for class a space only were approximately 6% lower at $6.04 per square foot.

Vacancy

The Chicago Metro has a 2022 2nd Quarter vacancy of 3.3% for all industrial space and 3.7% for class a space only. Vacancy rates are relatively unchanged over the prior year.

Construction and Absorption

There is currently 38,287,706 square feet of industrial space under construction in the market, of which 84.7% is class a. Net absorption for the prior year was positive.

Far South Cook/Near South Cook Submarket

The map below depicts the local submarket with the subject property denoted by a red star.

Chicago - All Industrial SpaceChicago - Class A Space Only

Near South Submarket

Far South Submarket

The following table illustrates the historical market performance of the Far South Cook/Near South Cook submarket:

Rental Rates

The Far South Cook/Near South Cook submarket had a 2022 2nd Quarter average quoted rental rate of $5.72 per square foot for all industrial space, compared to $4.92 in 2021 2nd Quarter, or a 16.3% increase over the last year. Quoted rental rates for class a space only were similar at $5.75 per square foot.

Vacancy

The Far South Cook/Near South Cook submarket has a 2022 2nd Quarter vacancy of 2.8% for all industrial space and 2.0% for class a space only. Vacancy rates are relatively unchanged over the prior year.

Construction and Absorption

There is currently 3,644,717 square feet of industrial space under construction in the market, of which 59.8% is class a. Net absorption for the prior year was positive.

CoStar Submarket Report – Far South Cook Industrial Market – Mid-Year 2022

Far South Cook is a very large submarket, containing roughly 32.4 million SF of industrial space. Like in the metro, logistics facilities account for the largest proportion of local supply, and these properties contain around 22.8 million SF. The local inventory pool is rounded out by 9.2 million SF of specialized space and 430,000 SF of flex space.

The overall vacancy rate, 3.5%, has tightened by 2.7% over the past four quarters. Net absorption over the past year clocked in at about 1.5 million SF, more than twice the five-year average.

Far South Cook/Near South Cook Industrial Submarket Statistics

Far South Cook/Near South Cook - All Industrial Space Far South Cook/Near South Cook - Class A Space Only

Rents grew by 9.6% over the past 12 months, easily exceeding the 4.5% average annual change over the past decade. Industrial rents in Far South Cook run for about $6.30/SF, which is considerably below the metro average. A similar pattern holds for logistics space, which at $5.70/SF, rents for well below the $8.00/SF metro average for that subtype.

The 1.2 million SF currently underway in Far South Cook is a significant expansion to the inventory. This is a continuation of new development in the submarket, which had already seen 2.9 million SF deliver over the past three years, representing an inventory expansion of 9.8%.

Industrial properties traded with regularity last year, consistent with the generally high level of activity over the past three years.

Rent – Far South Cook Industrial

Industrial rents in Far South Cook run for about $6.30/SF, which is considerably below the metro average. A similar pattern holds for logistics space, which at $5.70/SF, rents for well below the $8.00/SF metro average for that subtype.

Rents grew at an impressive rate of 9.6% over the past 12 months. This growth rate was close to the highest annualized rate in the past three years.

Over a longer horizon, industrial rent growth in both the Far South Cook Submarket and the Chicago metro at large has been nothing short of sensational. In the past 10 years, rents in the submarket have cumulatively risen by 58.0%, a performance essentially matched when zoomed out to the entire Chicago metro.

Sales – Far South Cook Industrial

The Far South Cook Submarket is a regular target among industrial buyers searching for investment opportunities in the Chicago metro. Historical investment trends have largely held serve in the past 12 months. Annual sales volume has averaged $98.1 million over the past five years, and the 12month high in investment volume hit $261 million over that stretch. In the past 12 months specifically, $256 million worth of assets sold. Deals involving logistics properties drove recent sales volume.

Market pricing, derived from the estimated price movement of all industrial properties in the submarket, sat at $71/SF during the third quarter of 2022. That figure is up from this time last year, and the price is a notable discount compared with the average for the region. The market cap rate has ticked up in the past 12 months, and it's fairly similar to the metro average. While the rate is up from this time last year, it remains below the five-year average.

Far South Industrial Submarket Conclusion

The Far South Cook Submarket is a regular target among industrial buyers searching for investment opportunities in the Chicago metro. Historical investment trends have largely held serve in the past 12 months. Annual sales volume has averaged $98.1 million over the past five years, and the 12month high in investment volume hit $261 million over that stretch. In the past 12 months specifically, $256 million worth of assets sold. Deals involving logistics properties drove recent sales volume.

Market pricing, derived from the estimated price movement of all industrial properties in the submarket, sat at $71/SF during the third quarter of 2022. That figure is up from this time last year, and the price is a notable discount compared with the average for the region. The market cap rate has ticked up in the past 12 months, and it's fairly similar to the metro average. While the rate is up from this time last year, it remains below the five-year average.

CoStar Submarket Report – Near South Cook Industrial Market – Mid-Year 2022

Near South Cook's massive inventory base of 50.0 million SF places it among the nation's largest industrial submarkets. Like in the metro, logistics facilities account for the largest proportion of local supply, and these properties contain around 32.4 million SF. The local inventory pool is rounded out by 15.3 million SF of specialized space and 2.3 million SF of flex space.

The vacancy rate, 3.5%, has edged downward by 1.6% in the past four quarters. Net absorption over the past year clocked in at about 790,000 SF, above the five-year average.

Rents grew by 8.9% over the past 12 months, easily exceeding the 4.3% average annual change over the past decade. Industrial rents in Near South Cook run for about $8.70/SF, which is more or less in line with the metro average. A similar pattern holds for logistics rents, which at $8.20/SF, are right in line with the metro average for that subtype.

There is about 2.5 million SF underway in Near South Cook, the most space under construction in more than a decade. This is a continuation of new development in the submarket, which had already seen 1.9 million SF deliver over the past three years, representing a cumulative inventory expansion of 4.0%.

Industrial properties have traded with regularity in recent years, and last year, the number of sales significantly exceeded the three-year average.

Rent – Far South Cook Industrial Industrial rents in Near South Cook run for about $8.70/SF, which is more or less in line with the metro average. A similar pattern holds for logistics rents, which at $8.20/SF are right in line with the metro average for that subtype.

Rents grew at an impressive rate of 8.9% over the past 12 months. This growth rate was close to the highest annualized rate in the past three years.

Over a longer horizon, industrial rent growth in both the Near South Cook Submarket and the Chicago metro at large has been nothing short of sensational. In the past 10 years, rents in the submarket have cumulatively risen by 55.5%, a performance essentially matched when zoomed out to the entire Chicago metro.

Sales – Far South Cook Industrial

Industrial investors have been very active in the capital markets in Near South Cook, making it one of the most heavily traded industrial areas in the region over the past several years. Annual sales volume has averaged $150 million over the past five years, and the 12-month high in investment volume hit $249 million over that stretch. In the past 12 months specifically, $237 million worth of assets sold. Deals involving logistics properties drove recent sales volume.

The market pricing, based on the estimated price movement of all industrial properties in the submarket, sat at $79/SF during the third quarter of 2022. That figure is up from this time last year, and the price still comes up short of the overall average for the Chicago area. The market cap rate has ticked up in the past 12 months, and it's fairly similar to the metro average. While the rate is up from this time last year, it remains below the five-year average.

Near South Industrial Submarket Conclusion

Industrial investors have been very active in the capital markets in Near South Cook, making it one of the most heavily traded industrial areas in the region over the past several years. Annual sales volume has averaged $150 million over the past five years, and the 12-month high in investment volume hit $249 million over that stretch. In the past 12 months specifically, $237 million worth of assets sold. Deals involving logistics properties drove recent sales volume.

The market pricing, based on the estimated price movement of all industrial properties in the submarket, sat at $79/SF during the third quarter of 2022. That figure is up from this time last year, and the price still comes up short of the overall average for the Chicago area. The market cap rate has ticked up in the past 12 months, and it's fairly similar to the metro average. While the rate is up from this time last year, it remains below the five-year average.

REIS/Moody’s Analytics Distribution/Warehouse Q3 2022 Report – Chicago Market

The following Market InSites report is provided by Moody’s Analytics CRE and CCIM Technologies. This is a Q3 Report for the Chicago Industrial Market. The following is an executive summary of the report. The full report can be found in the Addenda.

Executive Briefing on Market Conditions

Market Overview

The Chicago warehouse/ distribution market is comprised of 623.0 million square feet in thirteen geographic concentrations ranging in size from the 102.4 million square foot Dupage County submarket to the McHenry County submarket, which amounts to 11.0 million square feet. In the tenyear period beginning with Q3 2012, the Interstate 55 North/ Will County submarket has experienced the greatest introduction of new inventory, 25.9 million square feet, amounting to 24.2% of all new competitive stock added to the market.

Asking and Effective Rent

Asking rents in the Windy City increased by 1.4% during the second quarter of 2022 to an average of $5.78. The market's streak of eight consecutive quarterly gains, which began in Q3 2020, has

MOODY’S INDUSTRIAL CHICAGO MARKET MAP

increased asking rents by a cumulative total of 8.9%. Since the beginning of Q3 2012, the metro as a whole has recorded an annual average increase of 2.9%. Effective rents, which take into account concessions offered to new lessees, increased more quickly, up by 1.9% during the second quarter. The faster pace of effective rent growth suggests that that landlords are enjoying more pricing power at the negotiating table. During the past four quarters, positive movement in asking rent was recorded in all thirteen of the metro's submarkets.

Competitive Inventory, Employment, Absorption

Total employment in the Chicago metropolitan area increased by 22,700 jobs during the second quarter, amounting to a growth rate of 0.6%, while industrial employment grew by 3,600. Since the beginning of Q3 2012, the average growth rate for industrial using employment in Chicago has been -0.1% per year, representing the average annual loss of 703 jobs. The metro experienced absorption of 9.4 million square feet during the second quarter. Over the last four quarters, market absorption totaled 62.7 million square feet, more than quadruple the average annual absorption rate of 15.5 million square feet recorded since the beginning of Q3 2012. From an historical perspective, the second quarter vacancy rate is 7.3 percentage points lower than the 12.6% average recorded since the beginning of Q3 2012.

Outlook

Reis is tracking construction activity that is expected to deliver 4.4 million square feet to the metro by the end of the year, and net total absorption will be positive 7.2 million square feet. In response, the vacancy rate will continue to drift downward to finish the year at 4.9%. Developers appear to have taken notice of recent market conditions. Construction activity is expected to continue during each of the following two years, during which a total of 14.2 million square feet is projected to be introduced to the market. Industrial job growth during 2023 and 2024 is expected to average 0.4% annually. The market vacancy rate will finish 2023 at 4.4% and will decline 0.3 percentage points to 4.1% by year end 2024. Between now and year-end 2022 asking rents are expected to rise 2.4% to a level of $5.92. On an annualized basis through 2023 and 2024, asking and effective rents are expected to climb by 4.7% and 5.0%, respectively, to finish 2024 at $6.49 and $6.15.

REIS/Moody’s Analytics Distribution/Warehouse Q3 2022 Report – Southwest Cook Submarket

The following Market InSites report is provided by Moody’s Analytics CRE and CCIM Technologies. This is a Q3 Report for the Southwest Cook Industrial Submarket. The following is an executive summary of the report. The full report can be found in the Addenda.

Executive Briefing on Market Conditions

Submarket Overview

The Southwest Cook County submarket, one of thirteen distinct geographic concentrations within Chicago, contains 26.3 million market rate rental square feet, or 4.2% of the metro's total inventory of warehouse/ distribution space. In the ten- year period beginning with Q3 2012, new additions to the submarket totaled 9.3 million square feet, amounting to an annualized inventory growth rate of 4.5%; over the same period, the metro growth rate has been 1.9%.

MOODY’S SOUTHERST COOK INDUSTRIAL CHICAGO SUBMARKET MAP

Asking and Effective Rent

During the second quarter of 2022, asking rents rose by 0.5% to an average of $4.27, the lowest observed across the metro's thirteen submarkets. The submarket's streak of eight consecutive quarterly gains, which began in Q3 2020, has increased asking rents by a cumulative total of 22.3%. The Southwest Cook County submarket's current asking rent levels and growth rates compare unfavorably to the metro's averages of $5.78 and 1.4%. Effective rents, which take into account concessions offered to new lessees, increased more quickly, up by 1.0% during the second quarter. The narrowing gap between asking and effective rents suggests that that landlords are enjoying more pricing power at the negotiating table.

Competitive Inventory, Employment, Absorption

Total employment in the Chicago metropolitan area grew by 22,700 jobs during the second quarter, while industrial employment expanded by 3,600. Since the beginning of Q3 2012, the average growth rate for industrial-using employment in Chicago has been -0.1% per year, representing the average annual loss of 703 jobs. Over the same time period, the metro recorded an average annual absorption rate of 15.5 million square feet. During the second quarter, metropolitan absorption totaled 9.4 million square feet, of which the Southwest Cook County submarket captured 1.7%, or 156,000 square feet. Over the last four quarters, submarket absorption totaled 11.1 million square feet, far exceeding the average annual absorption rate of 1.1 million square feet recorded since the beginning of Q3 2012. The submarket's average vacancy rate fell by 60 basis points during the second quarter to 5.1%, which is 10.8 percentage points lower than the long- term average, and 0.2 percentage points lower than the current metro average.

Outlook

Between now and year's end, 1.0 million square feet of competitive warehouse/ distribution stock will be introduced to the submarket, and Reis estimates that net total absorption will be positive 1.2 million square feet. As a result, the vacancy rate will continue to drift downward to finish the year at 4.4%. Recent market conditions appear to have attracted development activity. During 2023 and 2024, developers are expected to deliver a total of 89,000 square feet of warehouse/distribution space to the submarket amounting to 0.6% of the new construction introduced to Chicago. Industrial job growth during 2023 and 2024 is expected to average 0.4% annually. The Southwest Cook County submarket will claim an insignificant 1.9% of this demand. The submarket vacancy rate will finish 2023 at 4.0% and will decline 0.6 percentage points to 3.4% by year end 2024. Between now and year-end 2022 asking rents are expected to advance 3.7% to a level of $4.43. On an annualized basis through 2023 and 2024, asking and effective rents are projected to increase by 3.9% and 4.2%, respectively, to finish 2024 at $4.78 and $4.41.

Property Market Analysis – Retail/Commercial

Retail/Commercial

A second major component of the proposed development is retail commercial space. Overall, the retail component of the proposed development accounts for over 500,000-square feet of space or approximately 16% of the total buildable area.

According to CoStar, the subject property is located within the Far South retail submarket. However, it also borders the Near South Cook retail submarket. For purposes of this market study, we will use the combined data for both submarkets in order to understand the market fundamentals effecting the subject property’s immediate area more accurately. The map below depicts the metro MSA market with the subject property denoted by a red star.

Local Market Performance

Market analysis is a study of market conditions for a specific property type. The following market analysis of the Chicago Retail property market is based on data obtained from the CoStar Group, Inc., a leading provider of real estate information services. The analysis presents the subject property’s macro and micro markets and includes a breakdown of Class A. The following is the Chicago retail submarket map (Far South/Near South Cook), as presented by CoStar Group, Inc.:

CHICAGO RETAIL MSA MARKET MAP

CHICAGO - QUOTED RENTAL RATE TRENDS

Chicago - Retail

The Chicago had a 2022 2nd Quarter average quoted rental rate of $17.74 per square foot for Retail space, compared to $16.79 in the 2021 2nd Quarter, or a 5.7% increase over the prior year. This was higher than the long-term trend.

Chicago - Class A

The Chicago had a 2022 2nd Quarter average quoted rental rate of $25.96 per square foot for Class A space, compared to $20.58 in the 2021 2nd Quarter, or a 26.1% increase over the prior year. This was higher than the long-term trend.

Sector Comparison

The average quoted rental rate for Class A space was 46.3% higher than Retail space and the longterm growth trend was similar.

CHICAGO - VACANCY AND NET ABSORPTION TRENDS

Chicago - Retail

The Chicago had a 2022 2nd Quarter vacancy rate of 5.1% for Retail space. Net absorption was positive with 2.9 million square feet absorbed in the prior year and 1.5 million square feet delivered. This resulted in a vacancy rate decrease of 50 basis points.

Chicago - Class A

The Chicago had a 2022 2nd Quarter vacancy rate of 6.7% for Class A space. Net absorption was positive with 394,692 square feet absorbed in the prior year and 335,680 square feet delivered. This resulted in a vacancy rate decrease of 70 basis points.

Sector Comparison

The vacancy rate for Class A space was higher than retail space. Both sectors had vacancy rates that were relatively consistent with the long-term trend.

CHICAGO - EXISTING SUPPLY AND CONSTRUCTION TRENDS

Chicago - Retail

There were 48,165 buildings totaling 583.07 million square feet of Retail space in the Chicago with 1.1 million square feet under construction in the 2022 2nd Quarter. New construction represented 0.2% of existing supply.

Chicago - Class A

There were 904 buildings totaling 48.8 million square feet of Class A space in the Chicago with 0 square feet under construction in the 2022 2nd Quarter. No new construction was occurring.

Sector Comparison

Class A space represented 8.4% of existing supply and none of new construction in the 2022 2nd Quarter.

FAR SOUTH/NEAR SOUTH COOK - QUOTED RENTAL RATE TRENDS

Far South/Near South Cook - Retail

The Far South/Near South Cook had a 2022 2nd Quarter average quoted rental rate of $14.48 per square foot for Retail space, compared to $11.10 in the 2021 2nd Quarter, or a 30.5% increase over the prior year. This was higher than the long-term trend.

Far South/Near South Cook - Class A

The Far South/Near South Cook had a 2022 2nd Quarter average quoted rental rate of $17.01 per square foot for Class A space, compared to $7.44 in the 2021 2nd Quarter, or a 128.6% increase over the prior year. This was higher than the long-term trend.

Sector Comparison

The average quoted rental rate for Class A space was 17.5% higher than Retail space and the longterm growth trend was higher.

FAR SOUTH/NEAR SOUTH COOK - VACANCY AND NET ABSORPTION TRENDS

Far South/Near South Cook - Retail

The Far South/Near South Cook had a 2022 2nd Quarter vacancy rate of 4.9% for Retail space. Net absorption was positive with 388,774 square feet absorbed in the prior year and 40,027 square feet delivered. This resulted in a vacancy rate decrease of 130 basis points.

Far South/Near South Cook - Class A

The Far South/Near South Cook had a 2022 2nd Quarter vacancy rate of 12.2% for Class A space. Net absorption was positive with 75,425 square feet absorbed in the prior year with 4,380 square feet delivered. This resulted in a vacancy rate decrease of 130 basis points.

Sector Comparison

The vacancy rate for Class A space was higher than retail space. The Retail sector had a vacancy rate that was lower than the long-term trend, but the Class A sector had a vacancy rate that was relatively consistent with the long-term trend.

Far South/Near South Cook - Retail

There were 3,485 buildings totaling 43.2 million square feet of Retail space in the Far South/Near South Cook with 44,259 square feet under construction in the 2022 2nd Quarter. New construction represented 0.1% of existing supply.

Far South/Near South Cook - Class A

There were 46 buildings totaling 2.8 million square feet of Class A space in the Far South/Near South Cook with 0 square feet under construction in the 2022 2nd Quarter. No new construction was occurring.

Sector Comparison

Class A space represented 6.4% of existing supply and none of new construction in the 2022 2nd Quarter.

Market Analysis Conclusions

The rental rate trends, vacancy rate and absorption trends, and existing supply and new construction levels indicate the market is undersupplied after experiencing a long period of no development in the local submarket. Prudent developers are expected to move forward with future speculative development, however, only after achieving significant pre-leasing prior to development.

CoStar Submarket Report – Far South Retail Market – Mid-Year 2022

Vacancies for retail properties in Far South were under the five-year average during the third quarter, but they were essentially unchanged from this time last year. The rate also sits above the overall market's average. Meanwhile, rents have surged in the past 12 months, growing by 4.8% year over year. That is the strongest rate of annual rent growth observed over the past five years.

As for the pipeline, construction has returned to Far South after a lull in net new supply over the past few years.

Far South is a very liquid investment market, characterized by heavy trading, and those trends have largely held serve in the past 12 months. At $129/SF, market pricing is considerably lower than the region's average pricing.

Rent – Far South Retail

The broader Chicago metro is neither remarkably cheap or expensive when it comes to the cost of leasing retail space. But there are exceptions for tenants in search of attainable retail space, none more so perhaps than in the Far South Submarket. Rents in the submarket average $13.70/SF triple net, far below the metro's $20.00/SF price point.

Rents in the submarket grew by 4.8% over the past 12 months, outpacing the 2.0% annualized average over the past three years.

A longer horizon paints a muted picture on rents, which have only eked out an average annual gain of 0.7% over the past 10 years. The story looks quite a bit better in the broader metro, where retail rents have managed an uptick of 1.3% per year on average.

Sales – Far South Retail

Investors have been especially active in the capital markets in Far South, making it one of the most heavily traded submarkets in the region over the past several years. Historical trading trends have largely held true in the past 12 months. Annual sales volume has averaged $51.2 million over the past five years, including a 12- month high of $87.8 million over that stretch. The recorded

transaction volume here reached $63.7 million in the past year. The general retail sector drove that volume.

Market pricing, based on the estimated price movement of all properties in the submarket, sat at $129/SF during the third quarter of 2022. That market price is up compared to the third quarter from last year, but that price is looking up at the average for the region. The market cap rate has edged up in the past 12 months to 8.0%, which is higher than the region's average.

Far South Retail Submarket Conclusion

Investors have been especially active in the capital markets in Far South, making it one of the most heavily traded submarkets in the region over the past several years. Historical trading trends have largely held true in the past 12 months. Annual sales volume has averaged $51.2 million over the past five years, including a 12-month high of $87.8 million over that stretch. The recorded transaction volume here reached $63.7 million in the past year. The general retail sector drove that volume.

Market pricing, based on the estimated price movement of all properties in the submarket, sat at $129/SF during the third quarter of 2022. That market price is up compared to the third quarter from last year, but that price is looking up at the average for the region. The market cap rate has edged up in the past 12 months to 8.0%, which is higher than the region's average.

CoStar Submarket Report – Near South Cook Retail Market – Mid-Year 2022

Vacancies for retail properties in Near South Cook were under the five-year average during the third quarter, and they compressed in the past year. The rate also comes in below the region's average. Meanwhile, rents have surged in the past 12 months, growing by 4.0% year over year.

As for the pipeline, development has been relatively steady over the past few years in Near South Cook, and it remains up and running today. Near South Cook is a very liquid investment market, characterized by heavy trading, and the market proved to be yet again this past year. At $163/SF, market pricing is considerably lower than the region's average pricing.

Rent – Near South Cook Retail

Retail tenants should be able to find space in the Near South Cook Submarket at somewhat of a discount to other parts of the Chicago metro. Retail space commands $17.50/SF triple net on average in the submarket, moderately below the $20.00/SF metro-wide average.

Rents in the submarket grew by 4.0% over the past 12 months, outpacing the 2.0% annualized average over the past three years.

Retail rent growth in both the submarket and the Chicago metro at large is firmly in the green over a longer horizon, if modest. In the past 10 years, rents in the Near South Cook Submarket have cumulatively risen by 12.8%, a performance essentially matched when zoomed out to the entire Chicago metro.

Sales – Near South Cook Retail

Investors have been especially active in the capital markets in Near South Cook, making it one of the most heavily traded submarkets in the region over the past several years. Annual sales volume has averaged $146 million over the past five years, including a 12-month high of $266 million over that stretch. The recorded transaction volume here reached $225 million in the past year.

Market pricing, based on the estimated price movement of all properties in the submarket, sat at $163/SF during the third quarter of 2022. That market price is up compared to the third quarter from last year, but that price is looking up at the average for the region. The market cap rate is within a few basis points of its year ago level, at 7.6%, which is higher than the region's average.

Near South Cook Retail Submarket Conclusion

Investors have been especially active in the capital markets in Near South Cook, making it one of the most heavily traded submarkets in the region over the past several years. Annual sales volume has averaged $146 million over the past five years, including a 12-month high of $266 million over that stretch. The recorded transaction volume here reached $225 million in the past year.

Market pricing, based on the estimated price movement of all properties in the submarket, sat at $163/SF during the third quarter of 2022. That market price is up compared to the third quarter from last year, but that price is looking up at the average for the region. The market cap rate is within a few basis points of its year ago level, at 7.6%, which is higher than the region's average.

REIS/Moody’s Analytics Retail Q3 2022 Report – Chicago Market

The following Market InSites report is provided by Moody’s Analytics CRE and CCIM Technologies. This is a Q3 Report for the Chicago Retail Market. The following is an executive summary of the report.

Executive Briefing on Market Conditions

Market Overview

A comprehensive overview of the Chicago retail market reveals that the largest concentrations of competitive retail space are located in the Lake/McHenry submarket, representing 15.6 million square feet and 14.8% of the metropolitan inventory, followed by Far West, with a 11.1% share, and Lombard/Addison (10.0%). Since the beginning of Q3 2012, the fastest growing area has been the Lake/ McHenry submarket, adding 808,000 square feet over that period, or 35.1% of total metropolitan retail completions.

MOODY’S RETAIL CHICAGO MARKET MAP

Asking and Effective Rent

During the second quarter of 2022, asking rents in the Windy City fell by 0.2% to an average of $20.78. Since the same reporting period last year, asking rents have ticked upward by 0.1%, up from $20.75. Since the beginning of Q3 2012, the metro as a whole has recorded an annual average increase of 0.9%. Effective rents, which exclude the value of concessions offered to prospective tenants, fell by 0.3% during the second quarter to an average of $18.29. Although all of the Chicago metropolitan area's thirteen retail submarkets contributed to the metro's recent rent growth, it is instructive to observe that the 0.1% asking rent growth rate of the past four quarters compares unfavorably to the metro's long term performance.

Competitive Inventory, Employment, Absorption

The metro experienced absorption of 90,000 square feet during the second quarter. Over the last four quarters, market absorption totaled 327,000 square feet, 54.0% greater than the average annual absorption rate of 212,400 square feet recorded since the beginning of Q3 2012. From an historical perspective, the second quarter vacancy rate is 0.1 percentage points higher than the 12.2% average recorded since the beginning of Q3 2012.

Outlook

Reis is tracking construction activity that is expected to deliver 15,000 square feet to the metro by the end of the year, and net total absorption will be positive 200,000 square feet. As a result, the vacancy rate will continue to drift downward to finish the year at 12.1%. During 2023 and 2024, developers are expected to deliver a total of 277,000 square feet. Total employment growth during 2023 and 2024 is projected to average 0.7% annually, while household formations are anticipated to average an increase of 0.1% per year. The market vacancy rate will finish 2023 at 11.9% and will fall 0.2 percentage points to 11.7% by year end 2024. Between now and year-end 2022 asking rents are expected to advance 0.4% to a level of $20.87. On an annualized basis through 2023 and 2024, asking and effective rents are expected to rise by 0.8% and 0.9%, respectively, to finish 2024 at $21.19 and $18.72.

REIS/Moody’s Analytics Retail Q3 2022 Report – Far South Submarket

The following Market InSites report is provided by Moody’s Analytics CRE and CCIM Technologies. This is a Q3 Report for the Far South Retail Submarket. The following is an executive summary of the report.

Executive Briefing on Market Conditions

Submarket Overview

The Far South submarket, one of thirteen distinct geographic concentrations within Chicago, contains 7.6 million square feet, or 7.2% of the metro's total inventory of neighborhood and community shopping center space. In the ten-year period beginning with Q3 2012, new additions to the submarket totaled 138,000 square feet, while 320,000 square feet were removed by developer activity. The net total loss of 182,000 square feet amounts to an annualized inventory growth rate of -0.2%; by contrast, the annualized growth rate for the metro over the same period was 0.3%.

MOODY’S FAR SOUTH CHICAGO SUBMARKET MAP

Asking and Effective Rent

Asking rents fell by 0.1% during the second quarter of 2022 to an average of $15.96, the lowest observed across the metro's thirteen submarkets. Over the past four quarters, asking rents have drifted higher a total of 0.4%, up from $15.90. The Far South submarket's current asking rent levels are lower than the metro's average of $20.78, while asking rent growth in the second quarter compares favorably to the metro average of 0.2%.

Competitive Inventory, Employment, Absorption

Since the beginning of Q3 2012, the metro experienced an average annual absorption rate of 212,400 square feet. During the second quarter, metropolitan absorption totaled 90,000 square feet, of which the Far South submarket captured the lion's share, 47,000 square feet. Over the last four quarters, submarket absorption totaled 49,000 square feet; by comparison, the average annual absorption rate recorded since the beginning of Q3 2012 is negative 19,000 square feet. The submarket's average vacancy rate declined by 70 basis points during the second quarter to 22.9%, which is equal to the long-term average, but 10.6 percentage points higher than the current metro average.

Outlook

Between now and year's end, no new competitive retail stock will be introduced to the submarket, and Reis estimates that net total absorption will be negative 4,000 square feet. In response, the vacancy rate will drift upward by 0.1 percentage points to 23.0%. During 2023 and 2024, developers are expected to deliver a total of 20,000 square feet of neighborhood and community shopping center space to the submarket amounting to 7.2% of the new construction introduced to Chicago. Total employment growth during 2023 and 2024 is projected to average 0.7% annually, while household formations are anticipated to average an increase of 0.1% per year. The Far South submarket will capture 12.2% of this absorption. The submarket vacancy rate will finish 2023 at 22.6% and will fall 0.6 percentage points to 22.0% by year end 2024. Between now and year-end 2022 asking rents are expected to increase 0.3% to a level of $16.00. Thereafter, Reis projects that asking rent growth will accelerate to an annualized average of 0.8% during 2023 and 2024 to reach a level of $16.26 per square foot. Effective rents will climb by a more rapid annualized average rate of 1.3%, as landlords begin to trim the value of their concessions packages.

Local Restaurant Market Performance

The subject property is proposed to feature a 5,000-square foot restaurant, independent from one that will be part of the hotel. Additionally, there is a 3,500-square foot restaurant planned within the remodeled Clubhouse.

Market analysis is a study of market conditions for a specific property type. The following market analysis of the Chicago Retail property market is based on data obtained from the CoStar Group, Inc., a leading provider of real estate information services. The analysis presents the subject property’s macro and micro markets and includes a breakdown of Restaurant space. The following is the Chicago retail submarket map (Far South/Near South Cook), as presented by CoStar Group, Inc.:

COSTAR SUBMARKET MAP

CHICAGO - QUOTED RENTAL RATE TRENDS

Chicago - Retail

The Chicago had a 2022 2nd Quarter average quoted rental rate of $17.78 per square foot for Retail space, compared to $16.90 in the 2021 2nd Quarter, or a 5.2% increase over the prior year. This was higher than the long-term trend.

Chicago - Restaurant

The Chicago had a 2022 2nd Quarter average quoted rental rate of $24.64 per square foot for Restaurant space, compared to $22.35 in the 2021 2nd Quarter, or a 10.2% increase over the prior year. This was higher than the long-term trend.

Sector Comparison

The average quoted rental rate for Restaurant space was 38.6% higher than Retail space and the long-term growth trend was higher.

CHICAGO - VACANCY AND NET ABSORPTION TRENDS

Chicago - Retail

The Chicago had a 2022 2nd Quarter vacancy rate of 5.1% for Retail space. Net absorption was positive with 2.9 million square feet absorbed in the prior year and 1.5 million square feet delivered. This resulted in a vacancy rate decrease of 50 basis points.

Chicago - Restaurant

The Chicago had a 2022 2nd Quarter vacancy rate of 5.9% for Restaurant space. Net absorption was positive with 388,151 square feet absorbed in the prior year and 58,057 square feet delivered. This resulted in a vacancy rate decrease of 130 basis points.

Sector Comparison

The vacancy rate for Restaurant space was higher than retail space. Both sectors had vacancy rates that were relatively consistent with the long-term trend.

CHICAGO

Chicago - Retail

There were 48,165 buildings totaling 583.07 million square feet of Retail space in the Chicago with 1.1 million square feet under construction in the 2022 2nd Quarter. New construction represented 0.2% of existing supply.

Chicago - Restaurant

There were 3,192 buildings totaling 19.7 million square feet of Restaurant space in the Chicago with 30,900 square feet under construction in the 2022 2nd Quarter. New construction represented 0.2% of existing supply.

Sector Comparison

Restaurant space represented 3.4% of existing supply and 2.7% of new construction in the 2022 2nd Quarter.

FAR SOUTH/NEAR SOUTH COOK - QUOTED RENTAL RATE TRENDS

Far South/Near South Cook - Retail

The Far South/Near South Cook had a 2022 2nd Quarter average quoted rental rate of $14.48 per square foot for Retail space, compared to $11.42 in the 2021 2nd Quarter, or a 26.8% increase over the prior year. This was higher than the long-term trend.

Far South/Near South Cook - Restaurant

The Far South/Near South Cook had a 2022 2nd Quarter average quoted rental rate of $19.95 per square foot for Restaurant space, compared to $13.75 in the 2021 2nd Quarter, or a 45.1% increase over the prior year. This was higher than the long-term trend.

Sector Comparison

The average quoted rental rate for Restaurant space was 37.8% higher than Retail space and the long-term growth trend was higher.

FAR SOUTH/NEAR SOUTH COOK - VACANCY AND NET ABSORPTION TRENDS

Far South/Near South Cook - Retail

The Far South/Near South Cook had a 2022 2nd Quarter vacancy rate of 4.9% for Retail space. Net absorption was positive with 388,774 square feet absorbed in the prior year and 40,027 square feet delivered. This resulted in a vacancy rate decrease of 130 basis points.

Far South/Near South Cook - Restaurant

The Far South/Near South Cook had a 2022 2nd Quarter vacancy rate of 4.6% for Restaurant space. Net absorption was negative with -955 square feet absorbed in the prior year with 0 square feet delivered. This resulted in a vacancy rate increase of 10 basis points.

Sector Comparison

The vacancy rate for Restaurant space was similar than retail space. Both sectors had vacancy rates that were lower than the long-term trend.

FAR SOUTH/NEAR SOUTH COOK - EXISTING SUPPLY AND CONSTRUCTION TRENDS

Far South/Near South Cook - Retail

There were 3,485 buildings totaling 43.2 million square feet of Retail space in the Far South/Near South Cook with 44,259 square feet under construction in the 2022 2nd Quarter. New construction represented 0.1% of existing supply.

Far South/Near South Cook - Restaurant

There were 256 buildings totaling 1.3 million square feet of Restaurant space in the Far South/Near South Cook with 0 square feet under construction in the 2022 2nd Quarter. No new construction was occurring.

Sector Comparison

Restaurant space represented 3.1% of existing supply and none of new construction in the 2022 2nd Quarter.

Market Analysis Conclusions

The rental rate trends, vacancy rate and absorption trends, and existing supply and new construction levels indicate the market is undersupplied for restaurant space after experiencing a long period of no development in the local submarket. Prudent developers are expected to move forward with future speculative construction, however, only after achieving significant pre-leasing prior to development.

IBISWorld Single Location Full-Service Restaurants in the US – June 2022

The following is an IBISWorld report on the Single Location Full-Service Restaurants industry in the US. IBISWorld specializes in industry research with coverage on thousands of global industries. Our comprehensive data and in-depth analysis help businesses of all types gain quick and actionable insights on industries around the world.

This industry includes single-location, independent or family-operated restaurants that provide food services to patrons who order and are served while seated (i.e. waiter and waitress service) and pay after eating. These businesses may sell alcohol and other beverages in addition to providing food services to guests.

The following excerpts consider the several first components of the report.

Local Grocery Market Performance

The proposed subject property has a 25,000-square foot grocery store planned. Therefore, we will review the market dynamics effective this industry segment.

Market analysis is a study of market conditions for a specific property type. The following market analysis of the Chicago Retail property market is based on data obtained from the CoStar Group, Inc., a leading provider of real estate information services. The analysis presents the subject property’s macro and micro markets and includes a breakdown of Grocery/Supermarket space. The following is the Chicago retail submarket map (Far South/Near South Cook), as presented by CoStar Group, Inc.:

COSTAR SUBMARKET MAP

CHICAGO - QUOTED RENTAL RATE TRENDS

Chicago - Retail

The Chicago had a 2022 2nd Quarter average quoted rental rate of $17.78 per square foot for Retail space, compared to $16.90 in the 2021 2nd Quarter, or a 5.2% increase over the prior year. This was higher than the long-term trend.

Chicago - Grocery/Supermarket

The Chicago had a 2022 2nd Quarter average quoted rental rate of $10.97 per square foot for Grocery/Supermarket space, compared to $10.27 in the 2021 2nd Quarter, or a 6.8% increase over the prior year. This was higher than the long-term trend.

Sector Comparison

The average quoted rental rate for Grocery/Supermarket space was 38.3% lower than Retail space and the long-term growth trend was lower.

CHICAGO - VACANCY AND NET ABSORPTION TRENDS

Chicago - Retail

The Chicago had a 2022 2nd Quarter vacancy rate of 5.1% for Retail space. Net absorption was positive with 2.9 million square feet absorbed in the prior year and 1.5 million square feet delivered. This resulted in a vacancy rate decrease of 50 basis points.

Chicago - Grocery/Supermarket

The Chicago had a 2022 2nd Quarter vacancy rate of 1.5% for Grocery/Supermarket space. Net absorption was positive with 232,030 square feet absorbed in the prior year and 55,532 square feet delivered. This resulted in a vacancy rate decrease of 80 basis points.

Sector Comparison

The vacancy rate for Grocery/Supermarket space was lower than retail space. The Retail sector had a vacancy rate that was relatively consistent with the long-term trend, but the Grocery/Supermarket sector had a vacancy rate that was lower than the long-term trend.

Chicago - Retail

There were 48,165 buildings totaling 583.07 million square feet of Retail space in the Chicago with 1.1 million square feet under construction in the 2022 2nd Quarter. New construction represented 0.2% of existing supply.

Chicago - Grocery/Supermarket

There were 419 buildings totaling 18.2 million square feet of Grocery/Supermarket space in the Chicago with 9,100 square feet under construction in the 2022 2nd Quarter. New construction represented 0.05% of existing supply.

Sector Comparison

Grocery/Supermarket space represented 3.1% of existing supply and 0.8% of new construction in the 2022 2nd Quarter.

Far South/Near South Cook - Retail

The Far South/Near South Cook had a 2022 2nd Quarter average quoted rental rate of $14.48 per square foot for Retail space, compared to $11.42 in the 2021 2nd Quarter, or a 26.8% increase over the prior year. This was higher than the long-term trend.

Far South/Near South Cook - Grocery/Supermarket

Overall, there was limited data available on grocery/supermarket rents in the local submarket. Many grocery stores in this submarket area owner-occupied and operated by small local businesses. Typically, grocery stores serve as anchor or junior anchor tenants for shopping centers throughout the metro area. These stores are sizably larger than the in-line space and as a result, typically command lower rents on a price per square foot basis. They also have leverage with the landlord as they are demand generators for the rest of the centers and again are able to negotiate lower rentals rates as compared to the other in-line tenants. As was noted in the Chicago MSA overview, the average net rents were around $10,00 per square foot. Based upon market data for the general market, rents typically range from $8.00 to $12.00 per square foot, NNN. We would expect this local submarket to command similar rents achieved in the greater metro area.

Sector Comparison

On average, based on general market parameters, quoted rental rate for Grocery/Supermarket space ranged from 25% to 50% lower than Retail space.

FAR SOUTH/NEAR SOUTH COOK - VACANCY AND NET ABSORPTION TRENDS

Far South/Near South Cook - Retail

The Far South/Near South Cook had a 2022 2nd Quarter vacancy rate of 4.9% for Retail space. Net absorption was positive with 388,774 square feet absorbed in the prior year and 40,027 square feet delivered. This resulted in a vacancy rate decrease of 130 basis points.

Far South/Near South Cook - Grocery/Supermarket

The Far South/Near South Cook had a 2022 2nd Quarter vacancy rate of 3.2% for Grocery/Supermarket space. Net absorption was positive with 16,730 square feet absorbed in the prior year with 0 square feet delivered. This resulted in a vacancy rate decrease of 130 basis points.

Sector Comparison

The vacancy rate for Grocery/Supermarket space was lower than retail space. Both sectors had vacancy rates that were lower than the long-term trend.

Far South/Near South Cook - Retail

There were 3,485 buildings totaling 43.2 million square feet of Retail space in the Far South/Near South Cook with 44,259 square feet under construction in the 2022 2nd Quarter. New construction represented 0.1% of existing supply.

Far South/Near South Cook - Grocery/Supermarket

There were 32 buildings totaling 1.3 million square feet of Grocery/Supermarket space in the Far South/Near South Cook with 0 square feet under construction in the 2022 2nd Quarter. No new construction was occurring.

Sector Comparison

Grocery/Supermarket space represented 2.9% of existing supply and none of new construction in the 2022 2nd Quarter.

Market Analysis Conclusions

The rental rate trends, vacancy rate and absorption trends, and existing supply and new construction levels indicate the market is undersupplied for grocery/supermarket space after experiencing a long period of no development in the local submarket. Prudent developers are expected to move forward with future speculative construction, however, only after achieving significant pre-leasing prior to development.

IBISWorld Supermarkets & Grocer y Stores in the US – July 2022

The following is an IBISWorld report on the Supermarkets & Grocery Stores in the US. IBISWorld specializes in industry research with coverage on thousands of global industries. Our comprehensive data and in-depth analysis help businesses of all types gain quick and actionable insights on industries around the world.

The Supermarkets and Grocery Stores industry accounts for the largest food retail channel in the United States. Operators in this industry retail general lines of food products, including fresh and prepared meats, poultry and seafood, canned and frozen foods, fresh fruits and vegetables and various dairy products. Delicatessens primarily retailing food are also included.

The following excerpts consider the several first components of the report.

Grocery Store Business/Real Estate Outlook 2022

The following is an article published in early 2022 by First National Realty Partners, who are a national firm that specialize in the acquisition and management of grocery store anchored commercial real estate centers.

Grocery Store Business Outlook in 2022

Logically, a discussion on grocery store anchored commercial real estate trends should begin by talking about the health of the grocery business itself. Let’s start with the good.

Positive Grocery Trends in 2022

Spending is Expected To Rise

According to Supermarket News, an industry trade publication, a recent survey of 1,000 consumers indicate that they expect to increase their average monthly grocery spend to $611, which is up from $532 last year (2021). The increases are driven by a combination of rising prices and an increased focus on preparing meals at home due to the pandemic.

On the whole, the increase in grocery spend is a tailwind for grocery stores because it will drive higher revenue and profitability.

The Number of Customers is Increasing

According to the same report, the number of grocery store customers rose by 5% from January to September 2021. This trend is expected to continue throughout 2022 and it is driven by growth in the online grocery delivery channel. Net new customer additions is a good thing for grocers because they can also drive higher revenue and profitability.

Online Grocery/E-Commerce Sales Continue To Grow

Online grocery sales is the fastest growing segment of the grocery business. From January to September 2021, they saw a ~200% increase from previous years according to Supermarket News. Again, this trend is expected to grow through 2022 and beyond given the safety and convenience of shopping this way. In fact, many of the newest grocery store customers are entering through the online channel which is a positive for eventual in person sales.

Demand Remains Resilient

The main thing that makes a grocery store such a good anchor tenant is that demand for their product – food – is evergreen. Every single person in the US needs it every day to survive. As a result, their sales have remained stable over the past year – a time of great uncertainty. This will not change in 2022. In fact, it is precisely because of this fact that CBRE says, in 2022, “…grocery anchored centers remain the gold standard of retail investment.”

Near Term Risks To The Grocery Business

Despite the overwhelmingly positive trends in the grocery business, the news isn’t all good. There are near term risks that many grocers will have to mitigate in order to maintain their current levels of sales and profitability.

Supply Chain Risks

The fast spreading Omicron variant of the coronavirus has caused staffing issues at grocery suppliers. When combined with shipping challenges and surging demand, grocery stores may struggle to keep their shelves full. Shortages of staple products like milk and fruits/vegetables pose a risk to sales volumes.

Inflation

Prices are rising, there is no doubt about it. In fact, a late December 2021 inflation reading indicated overall inflation of nearly 7%, the highest growth since 1982. But, certain food items like meat, poultry, fish, and eggs rose even faster at 12.8%. The cause of inflation – supply chain disruption, staffing shortages, increased demand, higher input costs – can be debated, but the risks it presents can’t be. Food price increases outpace income gains which means that consumers may not be able to afford to buy the same amount of groceries they are used to.

Safety

Of course health and safety still present an issue. A more highly transmissible variant of the virus means that some shoppers may stay away from the store and health and safety protocols mean that infected staff members may need to be sidelined for a certain period of time. This can exacerbate staffing issues and cause a poor customer experience.

To address these risks, grocers will need to be proactive to secure their supply chains and they’ll need to continue to adapt their health and safety protocols to the ever-changing nature of the virus. We believe that grocers with the most experience and strongest management teams are best suited to address these risks in 2022.

So, What Does This Mean For Grocery Anchored Real Estate?

Given the 2022 outlook for the grocery business described above, there are several commercial real estate investment implications that should be considered.

Distribution Matters

We know that online sales are the fastest growing segment of the grocery business. Therefore, we believe it is best to look for grocery store tenants who have a clear commitment to the online channel. For example, the Whole Foods/Amazon partnership is a strong one that allows customers to receive their grocery deliveries or pick them up in store on the same day they were ordered.

Grocery businesses who continue to invest in their ecommerce channel represent lower credit risk so we believe they will continue to be great tenants.

Management Matters

With all of the pandemic related change still swirling, we think that grocery store tenants with strong, experienced management will make for better tenants than those with inexperienced or ineffective management.

Markets Matter

Markets and locations have always mattered to real estate investors. But, they may matter now more than ever. The pandemic has driven wider acceptance of work from home trends, which means that there are large shifts in where people are choosing to live. As a general rule, they are avoiding major cities like Seattle, San Francisco, New York City, and heading for the relative affordability, desirability, and space of secondary markets like Orlando and Nashville. There is no coincidence that the housing market and home prices in these markets are also among the hottest in the country. So, from a real estate investment perspective, it will be important to be able to leverage the growth in these secondary markets to drive profitable investment.

Price Matters

This may seem obvious, but grocery store anchored centers must be acquired at a good price to maximize the chances of a profitable return. Competition for this asset class is intense with many

well capitalized actors (like REITs) looking to deploy capital. So, real estate investors must take a disciplined approach and not get caught up in a bidding war where they end up paying an above market price for a property.

Interest Rates Matter

For the time being, the era of historically low interest rates appears to be over as the Federal Reserve and economists have signaled multiple rate hikes in the coming year. Rising commercial mortgage rates have the potential to make commercial real estate investments less profitable over the next year – especially those that are financed with variable rate debt. To protect against rising rates in the commercial real estate industry, it is important for investors to look for deals where lenders have provided long term, fixed rate debt. This will provide some degree of certainty about required debt service and limit impacts to cash flow over the investment holding period.

Tenant Mix Matters

We have spent much of this article focusing on the importance of the grocery store anchor – and they are very important. But, the mix of tenants complementing the grocery store anchor must also be considered. We think that tenants/renters with a multi-channel distribution strategy, experiential component, and service based offerings tend to fare better than those with commoditized products. For example, we like boutique fitness, quick service restaurants, coffee shops, emergency healthcare clinics, and nail/hair salons.

Perhaps the broader point is that, in a time of unprecedented change, fundamentals matter more than ever. Experienced real estate professionals, real estate experts, and first time investors alike should carefully evaluate potential investment opportunities using a conservative approach that focuses on the fundamentals of a property’s tenant base and cash flows. Those that are conservatively leveraged with strong tenants on long term leases and with fixed rate debt will be steady performers in a time of great uncertainty.

Final Thoughts on Grocery Store Real Estate Market & Trends in 2022

Since the start of the pandemic, there has been a great deal of speculation about when investment markets will return to pre-pandemic levels. There is an argument that they may never return to that point – instead it is time to focus on a new normal in the new year.

With this in mind, the grocery business appears set to benefit from continued tailwinds like new customers, increased monthly spend, rising prices, and the expansion of the online/delivery business.

But, there are also risks. Rising prices mean that consumers may not be able to buy as much. In addition, supply chain bottlenecks, staffing shortages, and continued focus on health and safety protocols mean that it is more expensive to operate a grocery store.

From an investment standpoint, these changes and market conditions mean that the best tenants will have a multi-channel distribution strategy, strong management, and excellent locations in growth markets. In addition, they will be supported by a roster of complementary tenants whose shopping experience offers some sort of experiential component. In short, the fundamentals matter in 2022. Investors should take a disciplined approach that includes conservative levels of fixed rate debt and a market justified price.

Property Market Analysis – Hotel Hotel

A third major component of the proposed development is a hotel venue. Overall, the component of the proposed development accounts for over 420,000-square feet of space or approximately 14% of the total buildable area. The proposed hotel is projected to be 11 stories with 200 keys. A brand or operator is unknown at this time.

According to CoStar, the subject property is located within the Chicago South hotel submarket. The map below depicts the metro MSA market with the subject property denoted by a red star.

CoStar Market Report – Chicago Hotel Report – Mid-Year 2022

Performance metrics in Chicago are expected to improve this year, albeit at a slower pace compared to other urban markets that were also the hardest hit during the pandemic. While the market's recovery has lagged through the pandemic, due to the lack of business and group travel, there is some recent momentum in both occupancy and average daily rates. Occupancy in June was 75.7%, still behind June 2019 by 7.4 percentage points. Average daily rate showed vast improvement in June, as ADR surpassed 2019 levels for the second consecutive month as hotels capitalized on the return of the leisure customers. June ADR improved to $188.42, representing a 108% recovery index

CHICAGO HOTEL MSA MARKET MAP

to June 2019. This year, RevPAR is forecast to recover to 90% of 2019 RevPAR levels, driven primarily by group and leisure demand. Returning to pre-pandemic levels of RevPAR is not forecast until 2024 and is highly dependent on the full return of the large group and business traveler segments. These two segments combined made up approximately 70% of Chicago's pre-pandemic room night demand. As office occupancy continues to lag 2019 levels, we expect this to have a prolonged negative effect on the recovery. Chicago's supply pipeline of new hotels is very active, with 20 hotels (3,029 rooms) currently under construction. Although some projects have been delayed because of the pandemic, 1,900 rooms opened in 2021, with another 2,100 rooms scheduled to open in 2022. The market was still absorbing significant supply growth pre-pandemic with 13,000 rooms added between 2015 and 2020. The additional supply anticipated over the next few years will have a negative impact on market occupancy, particularly in the CBD, where most of the new hotel development is concentrated.

The pace and volume of hotel transactions in Chicago have picked up this year, after a challenging previous two years. Year-to-date sales volume has already surpassed last year's annual amount. While transaction volume has improved recently, it is still 50% below 2019 annual levels. Due to the lagging recovery of the market, owners and operators are likely to face some distress in the short term, yielding meaningful acquisition opportunities for well-capitalized buyers. There are currently 19 hotels in special servicing and 46 hotels on watchlists.

Economy

The economic impact of the coronavirus pandemic was severe in Chicago and throughout Illinois, but the area is on the road to recovery, albeit slowly. The statewide unemployment rate continues to improve, dropping to 4.6% in April 2022 since its peak of 16.5% in April 2020. The higher unemployment rate is driven by greater job losses in Chicago and the slow recovery of the leisure and hospitality segment.

The Chicago metro area lost over 500,000 jobs at the beginning of the pandemic in early 2020 but has since regained approximately 75% of those jobs as of 22Q1. While there have been significant job gains since the pandemic began, the leisure and hospitality sector remains impacted. Leisure and hospitality employment peaked at 160,000 in August 2019 but fell to 75,000 in May 2020. Despite increases that have been made over the past year, many hospitality workers sought jobs elsewhere in 2020 and have not returned. Jobs in the leisure and hospitality sector have become increasingly

difficult to fill, due to higher wages, more flexibility better working conditions in other sectors. The impact of the omicron variant and the lack of business and group travel will likely hinder further hiring throughout 2022.

Recent announcements by a few companies on relocating out of Chicago to other destinations will have a ripple effect on the local Chicago economy. In May, Boeing announced that it is relocating its headquarters from Chicago to Arlington, Virginia. In June, hedge fund Citadel announced that it is moving its headquarters to South Florida citing high taxes and crime in Chicago. Caterpillar also announced that it is moving its headquarters from Peoria, Illinois to Texas. All three companies referenced high taxes and crime as reasons for relocating out of Chicago.

Tourism is an important industry for Chicago and the state of Illinois as a whole. In 2019, Chicago welcomed 58 million visitors who generated an economic impact of approximately $16.5 billion in direct spending. About 55% of visitors stay overnight representing 32 million room nights for hotels. International visitation to Chicago lags other major U.S. markets and represents only about 3% of overall visitors, a number that has remained stagnant despite increased marketing efforts. Canadians represent Chicago's largest group of overseas travelers, comprising approximately 35% of its international visitors. With restrictions now lifted for Canadian travel to the U.S., hotels should see some uptick in demand.

Convention and group demand are as important to the region as tourist demand in terms of economic impact and the number of jobs it supports. McCormick Place, Chicago's convention center, generates an estimated economic impact of $1.1 billion annually. With large cancellations due to COVID in 2020 and more cancellations in 2021 because of the delta variant, 2022 is looking much stronger with the return of many groups. According to Choose Chicago, major meetings scheduled at McCormick Place in 2022 suggest renewed optimism for the group segment. There are 72 shows booked that are expected to attract 1.4 million attendees representing 1.7 million room nights for Chicago hotels. Fourteen meetings will be in Chicago for the first time.

Performance

Chicago's recovery has been anemic throughout the pandemic due to its reliance on conventionrelated business and corporate travel. While the pace of recovery has picked up in recent months, full RevPAR recovery to pre-pandemic levels is not expected until 2024.

Chicago's recovery has lagged the top 25 U.S. markets. At year-end 2021, market RevPAR was down -40% to 2019, which placed Chicago as one of the bottom performers of these 25 markets. Hotel performance has seen a recent uptick with increased summer leisure travel, with June RevPAR at $142.64, only 2% below June 2019 RevPAR. However, year to date through June, market occupancy of 57% is still 11% points below year-to-day June 2019 occupancy. Year-to-date RevPAR through June is $81, which is an 86% RevPAR recovery to the same period in 2019.

Recent headlines in the market are not helping the recovery. Over the past 24 months, negative press about multiple tragic incidents of crime has caused serious concern across the business community and is hindering both investment and inbound tourism. Additionally, recent announcements of corporate relocations out of the Chicago area, including Boeing, Citadel and Caterpillar, will exacerbate the situation around the slow pace of business travel recovery in the market.

While leisure travel has shown strength, particularly in the summer months, business travel, which makes up about 40% of Chicago room nights demand, is still minimal. This segment is the primary driver of hotel occupancy in the CBD. Office occupancy, as measured by Kastle Systems, remains in the CBD at approximately 42%. As a result, mid-week hotel occupancy is expected to remain low, and local hoteliers expect that market occupancy will remain depressed until corporate and group travel rebound.

Groups and conventions are an extremely important segment of business for the Chicago hotel market, making up approximately 30% of the market's room night demand. This segment has powered Chicago's recent recovery, while the business travel segment has lagged. After capacity restrictions were eliminated in June 2021, McCormick Place and city hotels hosted 135 short-term meetings generating 92,000 room nights for area hotels. The outlook for group business looks encouraging for 2022. According to Choose Chicago, more than 325 hotel-based meetings are on the books for 2022, resulting in 576,000 room nights for city hotels. There are 72 shows booked at McCormick Place for 2022, representing an expected 1.7 million room nights for area hotels. The peak convention volume for McCormick Place occurred in 2018 with 86 events hosted and 1.9 million room nights generated for area hotels.

Additionally, near-term recovery will be helped by the return of Canadian travelers. Canada is Chicago's top feeder market for international travel and is expected to provide some occupancy lift, particularly over the summer and fall, although the strong U.S. dollar may be somewhat of a deterrent for Canadian travelers.

Construction

Hotel inventory growth in Chicago continues despite the severe impact the pandemic has had on hotel performance. Anticipated new inventory will further delay the full recovery of the market, particularly in the CBD. There are 20 hotels (3,029 rooms) under construction, with another 16 hotels (1,880 rooms) in final planning.

Most of the hotels under construction are in the Upper Midscale class. These hotels traditionally target the midweek business traveler and the weekend leisure traveler, albeit at more moderate room rates.

Downtown Chicago continues to attract the most investment in terms of new hotel development. Nine of the 20 hotels under construction are in the CBD.

Hotel supply growth in Chicago slowed considerably in the aftermath of the global financial crisis. From 2010–14, only 2,800 new rooms opened in the market. Since then, there has been a significant increase in supply growth. From 2015–20, more than 13,000 rooms opened, 75% of which were in downtown. This significant new supply exerted downward pressure on pricing power across the region, with average rate growing less than 1% from 2015–19.

New supply additions in the luxury segments should help the market regain some pricing power as Luxury hotels will establish a higher price point and typically do not discount. One of the most anticipated openings includes the Luxury class, 192-room St. Regis Chicago, which will open at the end of 2022. The hotel is part of a 101- story mixed-use building at 363 E Wacker Drive, originally called the Wanda Vista Hotel & Residences, but the entire project was rebranded as the St. Regis Chicago and includes approximately 400 luxury residential units.

Another notable new opening this year was the 235- room LaSalle Hotel, part of Marriott's Autograph Collection, which opened in June. The hotel is collocated with the 610-room JW Marriott Chicago in the historic Continental Bank Building originally built in 1914. The JW Marriott opened in November 2011 and is on floors 1-12; the LaSalle will occupy floors 13-18. The two hotels will have different owners and managers, but both are part of the Marriott franchise system. The JW Marriott was recently transacted back to its lender Wells Fargo via a foreclosure auction sale.

Sales

As a result of the market's lagging recovery combined with the significantly increased cost of debt since the beginning of the year, the hotel investment market in Chicago will likely experience some distress in the short term. Pre-pandemic pricing and sales volume remain elusive for now. The current situation presents potential opportunities to acquire assets at a meaningful discount to pre-pandemic values. Several hotels are experiencing financial distress, and according to CoStar's CMBS data, there are 19 hotels currently in special servicing and 46 hotels on watchlists.

The JW Marriott Chicago downtown entered the foreclosure process last year after owner Estein USA defaulted on a $203 million loan. Subsequently, that amount grew to $243 million. The 610-room hotel was auctioned in July, with Wells Fargo as trustee for investors in the loan emerging as the only bidder, submitting a credit bid at $251 million ($411,000/key). Wells Fargo has taken control of the hotel, and it remains open. Since this transaction was based on the note holder's credit bid, it is excluded from CoStar's sales comp data.

The iconic Palmer House Hilton, the second-largest hotel in the city at 1,635 rooms, is also in the foreclosure process after owner Thor Equities defaulted on a $333.2 million mortgage in 2020. In July, a judge ordered the foreclosure sale of the property, which will likely occur in the next few weeks. An appraisal conducted in March valued the property at $328 million compared to a $560 million appraisal in 2018, when Thor took out the mortgage, representing a 41% decline in asset value over a three-year period. Wells Fargo is the senior lender, and there are two other loans on the property, including a $94 million mezzanine loan and a $62 million CMBS loan on the retail portion of the property. Investors in the mezzanine loan would lose their stake in a foreclosure sale.

Still, overall, sales pace picked up this year; however, there is ground to make up to get back to prepandemic transaction volumes. Through July, 27 properties traded at a sales volume exceeding $430 million, which is significantly ahead of last year's sales volume of $292 million. In 2019, total hotel sales volume was in excess of $875 million.

Some of the notable transactions this year include the sale of the 159-room Ace Hotel Chicago to Onni Group out of Vancouver for $61 million ($383,000/key), which represents the highest price per key paid since the beginning of the pandemic. This is an exception to the trend of recent trades occurring at discounted values. The hotel has been converted to an independent boutique hotel named The Emily Hotel.

Sunstone Hotel Investors exited the Chicago market this year and sold all three of its hotels in the city. In March, Sunstone sold two hotels to Magna Hospitality for $129.5 million ($178,000/key). The properties included were the 368-room Embassy Suites Chicago Downtown and the 361-room Hilton Garden Inn Chicago Downtown/Magnificent Mile. In February, Sunstone sold the 419-room Hyatt Centric Chicago Magnificent Mile to Northwestern Medicine for $67.5 million ($162,000/key).

CoStar Submarket Report – Chicago South Hotel Submarket – Mid-Year 2022

According to CoStar, the subject property is located within the Chicago South hotel submarket. The map below depicts the submarket with the subject property denoted by a red star.

CHICAGO SOUTH HOTEL MARKET MAP

The Chicago South submarket comprises 9,300 hotel rooms spread across 122 properties. Unlike the broader market, Chicago South is characterized by hotels that tend to be smaller than the national norm. The average hotel in the submarket has 76 rooms, a clear contrast to the 148-room-perbuilding market-wide average. Those two measures are on either side of the national average of about 90 rooms per building.

The submarket's inventory skews towards cost-efficient lodging: Over half of the rooms here are Economy or Midscale.

The COVID-19 pandemic had a profound impact on the entire U.S. hospitality sector, and the Chicago South hotel submarket was no exception to this trend. At worst, occupancies dropped to a monthly rate of 43.7% in April of 2020. While occupancies have started to recover, room demand is down by 0.2% as of June, when compared to the same month the prior year. Twelve-month RevPAR in the Chicago South hotel submarket was up sharply as of June, climbing at a 30.5% year-over-year

rate. In the Chicago market, RevPAR increased at an even stronger rate of 130.5% over the same timeframe.

The construction pipeline is highly active: The 510 rooms currently underway in the Chicago South submarket represent a 5.5% expansion to the existing inventory. While this is not the only construction the submarket has seen in recent memory, it does represent a turnabout from the overall trend. Specifically, the inventory has contracted over the past 10 years, as demolition activity has outpaced new construction. The submarket recorded 10 hotel trades closed over the past year, well above the number of deals that typically close in a given year.

Chicago South Hotel Submarket Conclusion

The submarket's inventory is heavily weighted towards the cost-efficient lodging with over half of the rooms being Economy or Midscale. The construction pipeline is highly active: The 510 rooms currently underway in the Chicago South submarket represent a 5.5% expansion to the existing inventory. However, when you look at the construction by class, all of this inventory is part of the Upscale & Upper Midscale class, leaving an opportunity for more rooms to come online in the Midscale and Economy class.

The COVID-19 pandemic had a profound impact on the entire U.S. hospitality sector, and the Chicago South hotel submarket was no exception to this trend. At worst, occupancies dropped to a monthly rate of 43.7% in April of 2020. While occupancies have started to recover, room demand is down by 0.2% as of June, when compared to the same month the prior year. Twelve-month RevPAR in the Chicago South hotel submarket was up sharply as of June, climbing at a 30.5% year-over-year rate.

Sales volume remained strong in this submarket, which is expected to continue along with a gradual increase in sale price per room. Average cap rates hover around 10% while the average price per room is currently around $51,000. The market outlook for the Chicago South submarket remains positive.

Aquaponic/Aquaculture US Market Overview

Another major component of the proposed subject development is an aquaponics manufacturing and retail components. The manufacturing component will be approximately 173,000-square feet while the retail component is proposed to be approximately 23,300-square feet. An overview of the industry is provided below.

Industry Defined

Aquaponics is the agricultural practice of growing plants and fish in a closed, recirculating ecosystem. Within a closed system, aquaponics recycles water which, by many estimates, reduces water consumption by 90 percent to 99 percent. The majority of the water in the aquaponics system is directly used by the plants, resulting in higher efficiency. More water is used in traditional agriculture because very little of it goes straight to the plants. Much of the water is lost to runoff, evaporation, and soil absorption.

Aquaponics is a combination of both hydroponic and aquaculture methods.

Hydroponics is the process of growing plants in sand, gravel, or liquid, with added nutrients but without soil. While aquaculture is the rearing of aquatic animals or the cultivation of aquatic plants for food.

This is the simplest approach to categorizing aquaponics, but as you'll see, aquaponics is distinct from both hydroponics and aquaculture. Like hydroponics, aquaponic agriculture grows plants without the use of soil. This is possible because soil is not a necessary component for growing plants. In traditional, soil-based agriculture the soil acts as a reservoir for the nutrients required by plants to grow. In hydroponics, the plants pull nutrients directly from the water.

However, most water supplies contain minimal nutrients. Hydroponic agriculture often requires nutrients to be added to the water by using organic or chemical solutions. Typically, this chemicalrich water cannot be re-used after it has been cycled through a hydroponic system, and in many cases, is actually considered toxic to humans and animals. In this case, the water should not be reintroduced to the environment. Admittedly, not all hydroponic production results in toxic water, and the hydroponic industry has improved over the years. Producers now have safer, more effective options to raise produce. Not every producer (whether hydroponic or traditional agriculture) unfortunately has embraced environmentally friendly practices.

Aquaculture is a farming method used to raise aquatic species. This is done in a controlled water environment, such as large tanks, confined pools and segregated portions in natural bodies of water. A variety of aquatic creatures like fish, mollusks, crustaceans and plants may be raised and harvested in these environments. However, the practice of aquaculture can cause an array of damage to the natural environment. High-density populations of fish result in high-density waste, which must be managed through cleaning, mitigation or removal. In natural bodies of water, waste accumulation can upset the delicate balance of the aquatic ecosystem. In the worst case scenario, the waste is not removed and the water becomes toxic to the fish resulting in the death of most or all the fish. Additionally, there is ample concern about the introduction of invasive, non-native species into nature.

Both hydroponics and aquaculture on their own have challenges and require additional inputs for a single product. Hydroponics requires added nutrients and often results in an unwanted output (toxic

water). While in aquaculture, the burden of managing fish waste is tremendous, not to mention managing other potential environmental risks. There is a single product in both methods, either a plant or a protein. Aquaponic agriculture combines the best of both worlds by leaving behind the unwanted parts. Aquaponic systems cycle the fish waste in the water is cycled into grow beds where seeds or plants are growing. This fish wastewater provides the essential nutrients for plant growth and reduces the need for added chemical nutrients. In turn, the plants essentially clean the waste from the water and return it back to the system where it is reused and recycled efficiently.

Aquaponics relies upon microbiological processes to foster the relationship between plants and fish. While the above information provides a general picture, there is actually a lot of science behind the relationship between the fish and plants thriving together. A brief explanation is as follows; however, for a more technical discussion, we recommend you check out this peer-reviewed article. Ammonia is released by the fish waste. While high levels of ammonia would normally kill fish in an aquaponic system, this ammonia is converted into nitrites and then into nitrates by naturally occurring bacteria that develop in the aquaponic system. Remember, not all bacteria is bad. The bacteria that occur naturally in this system are good bacteria and are necessary for a thriving aquaponic system, much like many of the bacteria humans carry on their body are good bacteria that actually keep us healthy. Plants then absorb the nitrates that result from this conversion process, providing all the necessary nutrients for the plant to grow. The result of this natural process is clean water that provides a safe environment for the fish.

IBISWorld Fish and Seafood Aquaculture in the US – December 2021

The following is an IBISWorld report on the Fish and Seafood Aquaculture industry in the US. IBISWorld specializes in industry research with coverage on thousands of global industries. Our comprehensive data and in-depth analysis help businesses of all types gain quick and actionable insights on industries around the world.

Companies in this industry farm aquatic animals or plants in controlled aquatic environments. Industry operators use some form of intervention in the rearing process to enhance production, such as holding in captivity and protecting from predators, pests and disease. This industry does not include the fishing and harvesting of wild fish and shellfish.

The following excerpts consider the several first components of the report. To view the report in its entirety, please refer to the Addenda.

Property Market Analysis - Residential Component

Another major component of the proposed development is a mixed use commercial residential building. According to ownership, the residential component will comprise of luxury condo units. The building is projected to be six-stories. Overall, the commercial/residential component of the proposed development accounts for over 700,000-square feet of space or approximately 23% of the total buildable area.

The following is a housing market report for Illinois and the Chicago PMSA as of August 2022. The report was presented to the Illinois REALTORS® from the UIC Stuart Handler Department of Real Estate.

Housing Price Forecast: Illinois and Chicago PMSA, August 2022

The Housing Market

In July, sales experienced a negative annual change, whereas median prices experienced a positive annual change in both Illinois and Chicago PMSA. 15,068 houses were sold in Illinois, changing by22.6% from a year ago and -17.1% from a month ago. In the Chicago PMSA, 10,400 houses were sold, changing by -25.6% from a year ago and -20.1% from a month ago. The median price was $273,000 in Illinois, up 4.0% from July last year; the comparable figure for the Chicago PMSA was $325,000, up 4.8% from July last year.

In July, for the Chicago PMSA, the percentage of foreclosed sales (e.g. REOs) among the total sales was 3.58%. 9,970 regular sales were made, -26.3% less than last year. 370 foreclosed properties were sold, 9.1% more than last year. The median price was $326,500 for regular property sales, up 5.0% from last year; the comparable figure for the foreclosed properties was $240,000, down -2.3% from last year.

The sales forecast for August, September, and October suggests a decrease on a yearly and monthly basis for both Illinois and the Chicago PMSA. Annually for Illinois, the three-month average forecasts point to a decrease in the range of -14.4% to -19.5%; the comparative figures for the Chicago PMSA are a decrease in the range of -13.8% to -18.7%. On a monthly basis, the three-month average sales are forecast to decrease in the range of -2.5% to -3.4% for Illinois and decrease in the range of -1.1% to -1.5% for the Chicago PMSA.

The pending home sales index2 is a leading indicator based on contract signings. This July, the number of homes put under contract was less than last year in Illinois and Chicago PMSA. The pending home sales index is 107.2 (2019=100) in Illinois, down -19.7% from a year ago. In the Chicago PMSA, the comparable figure is 101.7 down -22.7% from a year ago. At the latest average annual pending sales rate, Illinois had enough housing inventory for 1.9 months (down from 2.1 last year)3. In the Chicago PMSA, the comparable figure was 2.0 months (down from 2.2 last year). Months of supply for homes in the lowest price ranges (<100K) experienced declines both in Illinois and the Chicago PMSA. The highest price ranges ($700K+) showed the largest decline.

2 The base level (100) of pending home sales is the average pending home sales of year 2019, the year before the Covid-19 Crisis 3 Months’ supply of inventory is defined as inventory of homes for sale at the end of the month divided by the average monthly pending sales in the last twelve months.

The median price forecast indicates positive annual growth for August, September, and October in both Illinois and the Chicago PMSA. In Illinois, the median price is forecast to change by 4.2% in August, 4.8% in September, and 5.0% in October. For the Chicago PMSA, the comparable figures are 5.7% in August, 6.8% in September, and 5.6% in October. As a complement to the median housing price index (HPI), the SHDRE HPI forecasts a positive growth trend for both Illinois and the Chicago PMSA4. In Illinois, the SHDRE HPI (Jan 2008=1) is forecast to change by 7.9% in August, 6.9% in September, and 5.7% in October. The comparable figures for the Chicago PMSA are 7.3% in August, 7.6% in September, and 7.7% in October. SHDRE HPI takes housing characteristics into account and constructs comparable “baskets” of homes for each month.

In July, the Conference Board Consumer Confidence Index decreased while the University of Michigan Consumer Sentiment Index increased. The Conference Board Consumer Confidence Index Survey noted that inflation and additional rate increases are likely to continue discouraging consumer spending and economic growth for a while. The University of Michigan Consumer Sentiment Index Survey noted that the one-year economic outlook fell to its lowest since 2009. At the same time, concerns over global factors have been more or less softened.

The Housing Market – Current Condition



In July, sales experienced a negative annual change, whereas median prices experienced a positive annual change in both Illinois and Chicago PMSA. 15,068 houses were sold in Illinois, changing by -22.6% from a year ago and -17.1% from a month ago. In the Chicago PMSA, 10,400 houses were sold, changing by -25.6% from a year ago and -20.1% from a month ago. The median price was $273,000 in Illinois, up 4.0% from July last year; the comparable figure for the Chicago PMSA was $325,000, up 4.8% from July last year. (Reference: Illinois and Chicago PMSA Median Home Sales Price and Total Home Sales figures; Forecast for August 2022 report table)

 In July, for the Chicago PMSA, the percentage of foreclosed sales (e.g. REOs) among the total sales was 3.58%. 9,970 regular sales were made, -26.3% less than last year. 369 foreclosed properties were sold, 9.1% more than last year. The median price was $326,500 for regular property sales, up 5.0% from last year; the comparable figure for the foreclosed properties was $240,000, down -2.3% from last year. (Reference: Ratio of Foreclosed Sales over Total Sales, Sales & Median Prices: Foreclosed vs. Regular Sales figures)

 In July, at the latest average annual pending sales rate, Illinois had enough housing inventory for 1.9 months (down from 2.1 last year)5. In the Chicago PMSA, the comparable figure was 2.0 months (down from 2.2 last year). Months of supply for homes in the lowest price ranges (<100K) experienced declines both in Illinois and the Chicago PMSA. The highest price ranges ($700K+) showed the largest decline. (Reference: Illinois and Chicago PMSA Annual Months’ Supply by Price Range figures)

 In July, the market shares of homes in the low price ranges ($100-200K) experienced the largest change compared to a year ago for both Illinois and the Chicago PMSA. In Illinois, the market share for homes at $100-200K decreased to 22.5% from 24.1% a year ago; the Chicago PMSA decreased to 15.5% from 17.6% a year ago. (Reference: Illinois and Chicago PMSA Price Stratification figures)

4 SHDRE HPI succeeds REAL HPI, developed by Esteban Lopez and Minshu Du.

5 Months’ supply of inventory is defined as inventory of homes for sale at the end of the month divided by the average monthly pending sales in the last twelve months.

The Housing Market – Forecast and Future Condition

 The median price forecast indicates positive annual growth for August, September, and October in both Illinois and the Chicago PMSA. In Illinois, the median price is forecast to change by 4.2% in August, 4.8% in September, and 5.0% in October. For the Chicago PMSA, the comparable figures are 5.7% in August, 6.8% in September, and 5.6% in October.

(Reference: Forecast for August 2022 report table)

 As a complement to the median housing price index (HPI), the SHDRE HPI forecasts a positive growth trend for both Illinois and the Chicago PMSA6. In Illinois, the SHDRE HPI (Jan 2008=1) is forecast to change by 7.9% in August, 6.9% in September, and 5.7% in October. The comparable figures for the Chicago PMSA are 7.3% in August, 7.6% in September, and 7.7% in October. SHDRE HPI takes housing characteristics into account and constructs comparable “baskets” of homes for each month. (Reference: Housing Price Index)

 The sales forecast for August, September, and October suggests a decrease on a yearly and monthly basis for both Illinois and the Chicago PMSA. Annually for Illinois, the three-month average forecasts point to a decrease in the range of -14.4% to -19.5%; the comparative figures for the Chicago PMSA are a decrease in the range of -13.8% to -18.7%. On a monthly basis, the three-month average sales are forecast to decrease in the range of -2.5% to -3.4% for Illinois and decrease in the range of -1.1% to -1.5% for the Chicago PMSA. (Reference: Forecast for August 2022 report table)

 The pending home sales index7 is a leading indicator based on contract signings. This July, the number of homes put under contract was less than last year in Illinois and Chicago PMSA. The pending home sales index is 107.2 (2019=100) in Illinois, down -19.7% from a year ago. In the Chicago PMSA, the comparable figure is 101.7 down -22.7% from a year ago.

(Reference: Illinois and Chicago PMSA Pending Home Sales Index figure)

 In July 2022, 1,187 houses were newly filed for foreclosure in the Chicago PMSA (up 362.0% and up 1.0%, respectively, from a year and a month ago). 478 foreclosures were completed (up 232.0% and down -1.0% respectively from a year and a month ago)8. As of July 2022, there are 8,183 homes at some stage of foreclosure — the foreclosure inventory. The monthly average net flows of foreclosures (foreclosure inflows - outflows) were 722.17 in the past 6 months, 319.67 in the last 12 months, and 231.08 in the previous 24 months. (Reference: Chicago PMSA Foreclosure Inflows and Outflows, and Inventory figures).

The Economy

 In July 2022, according to the Bureau of Labor Statistics (BLS) Employment Situation Report, the national unemployment rate dropped to 3.5%, and non-farm payroll jobs experienced a gain of 528,000 jobs. Notable job gains occurred over the month in Leisure and Hospitality (+96,000), Professional and Business services (+89,000), and Health Care (+70,000).

 In June 2022, according to the Illinois Department of Employment Security (IDES) news release, the Illinois unemployment rate fell to 4.5%. Non-farm payroll jobs rose by 18,800 over the month. The industry sectors that reported the largest over-the-month gains in employment were: Leisure and Hospitality (+9,900), Professional and Business Services (+3,100), Construction (+2,000), and Educational and Health Services (+2,000).

6 SHDRE HPI succeeds REAL HPI, developed by Esteban Lopez and Minshu Du.

7 The base level (100) of pending home sales is the average pending home sales of year 2019, the year before the Covid-19 Crisis

8 Including cancelled foreclosures and auctions.

 According to Redfin, the “stale” housing supply has increased on an annual basis for the first time since the beginning of the COVID-19 pandemic. Redfin defines “stale” homes as those on the market for at least 30 days without contract but still actively listed on a month's final day. It is also the second largest annual increase since Redfin started tracking the metric in 2012.

Longer-term Outlook

 In July, the Conference Board Consumer Confidence Index decreased while the University of Michigan Consumer Sentiment Index increased. The Conference Board Consumer Confidence Index stands at 95.7, down from 98.4 last month. The survey noted that inflation and additional rate hikes are likely to continue discouraging consumer spending and economic growth for a while. The University of Michigan Consumer Sentiment Index increased to 51.5 in July from 50.0 last month. The survey noted that the one-year economic outlook fell to its lowest since 2009. At the same time, concerns over global factors have lightened somehow.

 In July, the Fannie Mae Home Purchase Sentiment Index (HPSI) decreased 2.0 points to 62.8, its lowest level since 2011 and well below the all-time high set in 2019. The survey noted that consumers consider high mortgage rates as a top reason to presume it is a bad time to buy or sell a home. Additionally, consumers indicate that selling conditions have worsened, as the “Good Time to Sell” component has declined for the last two months. In addition, on net, fewer consumers expect that home prices would go up.



“The number of sales remains low in Illinois, while prices continue to grow,” noted Daniel McMillen, Head of the UIC Stuart Handler Department of Real Estate (SHDRE). “Increases in interest rates and concerns about inflation have caused a decline in consumer confidence in the economy and may lead to lower price growth in the future.”

Local PMA Residential Market Analysis

In order to get a more refined understanding on the local PMA, we have researched various housing market statistics using the MLS/MRED. Based on site search parameters functionality, we were able to search within an area that encompasses 270 square miles which represents a radius of about 10 miles which is approximately equivalent to the area of the 20 minute drive time or the subject’s PMA.

The following information was sourced from InfoSparks, which is a software powered by the MLS/MRED.

Average and Median Sales Price

Attached Single-Family

The average sales price in the Chicagoland PMSA for attached single family was $323,231 in August of 2022, up 6.2% over the trailing 12 month period. Cook County experienced a 4.6% annual increase, with the average sales price ending at $359,455 in August of 2022. The subject PMA was significantly lower at $171,945, however, it was up almost 11% from the same time last year.

Please note that the Median Sales Price over the same time period was $249,000 in the Chicago PMSA, up 8.0% over the last 12 month period. Cook County was up 1.9% at $270,000 and the PMA median sales price was up 11.5% at $165,000.

Attached Single Unit – Sales Over Past 24 months – Constructed Post 2010

In order to drill down a bit more on recent attached single unit sales, we searched the MLS for sale that occurred over the past two years that were constructed after 2010. The following chart details the results of aforementioned search.

Overall, there was a total of 26 recent sales and 1 under contract transaction that occurred over the past two years. Based on the chart above, the sales ranged from $143,500 to $375,075 with an average of $274,490 and a median of $297,500. The under contract property is listed at $349,490. The average market time was about 64 days and the median was 30 days.

These sales included all 2 and 3 bedroom attached single unit housing. The following are the summary statistics for the 2 and 3 bedroom units, independently. Please note that were no sales of 1 bedroom units.

The following is the summary for the 2 bedroom units:

For the 2 bedroom units, there was a total of 14 recent sale transactions that occurred over the past two years. Based on the chart above, the sales ranged from $143,500 to $348,000 with an average of $229,571 and a median of $215,500. The average market time was about 61 days and the median was 31 days.

The following is the summary for the 3 bedroom units:

For the 3 bedroom units, there was a total of 12 recent sales and 1 under contract transaction that occurred over the past two years. Based on the chart above, the sales ranged from $290,000 to

$375,075 with an average of $326,895 and a median of $326,250. The under contract property is listed at $349,490. The average market time was about 68 days and the median was 22 days.

Condo

The average sales price in the Chicagoland PMSA for condos was $327,235 in August of 2022, up 5.1% over the trailing 12 month period. Cook County experienced a 4.3% annual increase, with the average sales price ending at $355,693 in August of 2022. The subject PMA was significantly lower at $171,945, however, it was up 13.2% from the same time last year.

Please note that the Median Sales Price over the same time period was $236,000 in the Chicago PMSA, up 4.9% over the last 12 month period. Cook County was up 1.0% at $260,000 and the PMA median sales price was up 10.5% at $138,000.

Condos with Price Range of $200,000+

An important point to note is that when the parameters for the condo units was modified to a sales price of $200,000 or more, there was a period in time back between 2013 and 2018 in the PMA where the average sales price ranged from $400,000 to $470,000. However, the 14 year average for condos in the PMA was $234,158, which is slightly down -0.7% from last year.

The average sales price in the Chicagoland PMSA for condos over $200,000 was $441,695 in August of 2022, up 0.9% over the trailing 12 month period. Cook County experienced a 2.4% annual increase, with the average sales price ending at $468,851 in August of 2022.

Please note that the Median Sales Price over the same time period was $335,000 in the Chicago PMSA, down -2.9%. Cook County was down 1.6% at $361,000 and the PMA median sales price remained flat at $225,000.

The average sales price in the Chicagoland PMSA for detached single family was $428,797 in August of 2022, up 6.8% over the trailing 12 month period. Cook County experienced a 4.5% annual increase, with the average sales price ending at $440,000 in August of 2022. The subject PMA was significantly lower at $225,600, however, it was up 9.4% from the same time last year.

Please note that the Median Sales Price over the same time period was $340,000 in the Chicago PMSA, up 5.6% over the last 12 month period. Cook County was up 3.2% at $325,000 and the PMA median sales price was up 11.8% at $215,000.

Condo Average and Median Market Time

According to InfoSparks, the average market time for condos in the Chicagoland PMSA was 58 days, down 12.1% from last year while Cook County was 64 days, down 9.9% from last year. The PMA had a shorter average market time of 30 days, which is down 25% from last year.

The median market time for condos in the Chicagoland PMSA was 19 days, down 24% from last year while Cook County was 23 days, down 23.3% from last year. The PMA had a shorter median market time of 11 days, unchanged from last year.

Condo Average and Median Percent from Original List Price to Close

According to InfoSparks, the average percent from original list price closed price for condos in the Chicagoland PMSA was 98.1%, up 0.9% from last year while Cook County was 97.8%, up 0.8% from last year. The PMA had a higher percentage at 99%, which is up 1.3% from last year.

The median percent from original list price closed price for condos in the Chicagoland PMSA was 98.7%, up 0.9% from last year while Cook County was 98.4%, up 0.7% from last year. The PMA had a higher percentage at 100%, which is up 1.2% from last year.

Residential Summary Conclusion

In summary, similar to the general residential market, prices of residential real estate have increased over the past few years. However, the residential market has pulled back in recent months with the increase of interest rates. In general, price increases in the attached housing market in the MSA, County and PMA range from 4% to 12%, with the highest increases seen in the PMA. The price increases for housing over $200,000 increased at a lower percentage from approximately 0.5% to 2.5%.

It should be noted that there has been minimal new construction of both single unit detached and attached housing over the past 20 years within the subject’s PMA. The majority of the new construction within the PMA has been focused on three story townhouses. There has been virtually no new construction of a similar mixed-use development that can be compared to the proposed subject property. Therefore, it can be expected that the subject will be geared towards luxury residential condominium and their pricing would fall towards the upper end or possibly above the ranges indicated above in this analysis.

Highest and Best Use

The Highest and Best Use of a property is the use that is legally permissible, physically possible, and financially feasible which results in the highest value. An opinion of the highest and best use results from consideration of the criteria noted above under the market conditions or likely conditions as of the effective date of value. Determination of highest and best use results from the judgment and analytical skills of the appraiser. It represents an opinion, not a fact. In appraisal practice, the concept of highest and best use represents the premise upon which value is based.

Analysis of Highest and Best Use As Though Vacant

The primary determinants of the highest and best use of the property As Though Vacant are the issues of (1) Legal permissibility, (2) Physical possibility, (3) Financial feasibility, and (4) Maximum productivity.

Legally Permissible

The subject site is currently zoned PL-2, Public Land and Open Space, however, there is an ongoing effort to re-zone the subject property to allow for the mixed use development. The new zoning would be mixed use in nature, which controls the general nature of permissible uses but is appropriate for the location and physical elements of the subject property, providing for a consistency of use with the general neighborhood. Currently, the property is under review for potential redevelopment with proposed uses to include industrial, retail, commercial, hotel, recreational land and aquaponics. As noted above, this is pending re-zoning to a mixed-use industrial district either within Cook County or re-annexation into the neighboring village of Hazel Crest. The location of the subject property is appropriate for the proposed uses allowed, as noted previously, and a change in zoning is likely. There are no known easements, encroachments, covenants or other use restrictions that would unduly limit or impede development.

Physically Possible

The physical attributes allow for a number of potential uses. Elements such as size, shape, availability of utilities, known hazards (flood, environmental, etc.), and other potential influences are described in the Site Description and have been considered. There are no items of a physical nature which would adversely impact development with the legal permitted uses.

Financially Feasible

The probable use of the site for mixed use development conforms to the pattern of land use in the market area. A review of published yield, rental and occupancy rates suggest that there is an undersupply and demand is sufficient to support construction costs and ensure timely absorption of additional inventory in this market. Therefore, near-term speculative development of the subject site is financially feasible.

Maximally Productive

Among the financially feasible uses, the use that results in the highest value (the maximally productive use) is the highest and best use. Considering these factors, the maximally productive use as though vacant is for mixed use redevelopment for industrial, commercial, retail and residential use.

Conclusion of Highest and Best Use As Though Vacant

The conclusion of the highest and best use As Though Vacant is for mixed use redevelopment for industrial, commercial, retail and residential use.

Analysis of Highest and Best Use As Improved

In determining the highest and best use of the property As Improved, we consider three possibilities for the property: 1) continuation of the existing use with or without modification to improvements, 2) a change in use, or 3) demolition and redevelopment of the land.

Retaining the improvements as they exist meets the tests for physical possibility, legal permissibility and financial feasibility.

As noted, the analyzed current use of the subject property is a country club/golf course site. We believe the property to be a legal use per the zoning regulations, however, the improvements are an under utilization of the site and are not consistent with surrounding uses.

As noted above, currently, the property is under review for potential redevelopment with proposed uses to include industrial, retail, commercial, hotel, recreational land and aquaponics. As noted above, this is pending re-zoning to a mixed-use industrial district either within Cook County or reannexation into the neighboring village of Hazel Crest.

Conclusion of Highest and Best Use As Improved

Therefore, the highest and best use of the subject property, As Improved, is a mixed use redevelopment for industrial, commercial, retail and residential use.

Most Probable Buyer

As of the date of value, the most probable buyer of the subject property is a regional or national developer.

Please note that this market study is a general overview of high level economic, demographic and property level statistics for the local area and PMA along with the proposed components of the subject property development. Given the scope of the current assignment, a detailed marketability/feasibility study on the proposed development was not conducted. If such a study is required, it will be conducted under a separate engagement.

Final Conclusions and Analysis

Demographic

Population

Similar population decreases have been experienced across all aforementioned geographies. The MSA is expected to expereince a decrease in population from 2022 to 2027 at an annual rate of change of -0.24%, while the county is expected to experience a slightly higher decrease with an annual rate of change of -0.41%.

Households

Similar decreases have been experienced across all aforementioned geographies. The MSA is expected to expereince a decrease in households from 2022 to 2027 at an annual rate of change of0.09%, while the county is expected to experience a slightly higher decrease with an annual rate of change of -0.25%.

Household Income

ESRI estimates the median household income for the PMA in 2022 at $68,671 which is 11.4% lower than Cook County’s median of $77,539. The Chicago MSA has a median household income of 83,320 in 2022, which is 21.3% higher than the PMA. This gap is expected to continue through 2027 with PMA households earning an estimated $81,752 while overall County incomes will reach an estimated $92,996 and the MSA at $100,297. Households in Cook County earning less than $25,000 comprised 16.4% of all households with MSA at 13.9% as compared to 17.2% of PMA households overall in that category. The share of PMA households earning more than $100,000 in 2022 was 33.2% as compared to 39.4% for Cook County and 42.4% for the Chicago MSA.

Housing Trends

Housing is significantly more affordable in the PMA and the southern portion of Cook County relative to other Chicago MSA jurisdictions. While the PMA offers a lower proportion of multifamily buildings, both the PMA and a significant portion of the County are still suburban communities where single-family homes are in the majority. As one moves further away from the City of Chicago, multifamily rental opportunities become less prevalent.

As noted above, the PMA demonstrates a higher percentage of owner-occupied housing units then as compared to the County, MSA and State levels, Renter occupied housing represents a higher percentage of housing units in the County, MSA and State, with 38.9%, 32.1% and 30.3%, respectively.

Employment/Businesses

Attention should be given to the following factors:

 Retail Trade and Health Care/Social Assistance is more prevalent in the PMA

 Professional, Scientific & Tech Services business are more prevalent in the County and MSA than in the PMA. This sector includes Scientific Research and Development in the Physical, Engineering and Life Sciences which typically require lab space.

 The proportion of construction businesses is less prominent in the PMA than in the County and MSA, overall.

Tapestry Segments

ESRI provides locational data, known as Tapestry Segmentation, which categorizes behavioral market segmentation for US Neighborhoods. The following is a brief overview of the individual top three segments.

Family Foundations

Family and faith are the cornerstones of life in these communities. Older children, still living at home, working toward financial independence, are common within these households. Neighborhoods are stable: little household growth has occurred for more than a decade. Many residents work in the health-care industry or public administration across all levels of government. Style is important to these consumers, who spend on clothing for themselves and their children as well as on smartphones.

Parks and Rec

These suburbanites have achieved the dream of homeownership. They have purchased homes that are within their means. Their homes are older, and townhomes and duplexes are not uncommon. Many of these families are two-income married couples approaching retirement age; they are comfortable in their jobs and their homes, budget wisely, but do not plan on retiring anytime soon or moving. Neighborhoods are well established, as are the amenities and programs that supported their now independent children through school and college. The appeal of these kid-friendly neighborhoods is now attracting a new generation of young couples.

Pleasantville

Prosperous domesticity best describes the settled denizens of Pleasantville. Situated principally in older housing in suburban areas in the Northeast (especially in New York and New Jersey) and secondarily in the West (especially in California), these slightly older couples move less than any other market. Many couples have already transitioned to empty nesters; many are still home to adult children. Families own older, single-family homes and maintain their standard of living with dual incomes. These consumers have higher incomes and home values and much higher net worth (Index 364). Older homes require upkeep; home improvement and remodeling projects are a priority preferably done by contractors. Residents spend their spare time participating in a variety of sports or watching movies. They shop online and in a variety of stores, from upscale to discount, and use the internet largely for financial purposes.

Industrial Market

Southwest Cook Industrial Submarket

Between now and year's end, 1.0 million square feet of competitive warehouse/ distribution stock will be introduced to the submarket, and Reis estimates that net total absorption will be positive 1.2 million square feet. As a result, the vacancy rate will continue to drift downward to finish the year at 4.4%. Recent market conditions appear to have attracted development activity. During 2023 and 2024, developers are expected to deliver a total of 89,000 square feet of warehouse/distribution space to the submarket amounting to 0.6% of the new construction introduced to Chicago. Industrial job growth during 2023 and 2024 is expected to average 0.4% annually. The Southwest Cook County submarket will claim an insignificant 1.9% of this demand. The submarket vacancy rate will finish 2023 at 4.0% and will decline 0.6 percentage points to 3.4% by year end 2024. Between now and

year-end 2022 asking rents are expected to advance 3.7% to a level of $4.43. On an annualized basis through 2023 and 2024, asking and effective rents are projected to increase by 3.9% and 4.2%, respectively, to finish 2024 at $4.78 and $4.41.

Retail Market

Far South Retail Submarket

Between now and year's end, no new competitive retail stock will be introduced to the submarket, and Reis estimates that net total absorption will be negative 4,000 square feet. In response, the vacancy rate will drift upward by 0.1 percentage points to 23.0%. During 2023 and 2024, developers are expected to deliver a total of 20,000 square feet of neighborhood and community shopping center space to the submarket amounting to 7.2% of the new construction introduced to Chicago. Total employment growth during 2023 and 2024 is projected to average 0.7% annually, while household formations are anticipated to average an increase of 0.1% per year. The Far South submarket will capture 12.2% of this absorption. The submarket vacancy rate will finish 2023 at 22.6% and will fall 0.6 percentage points to 22.0% by year end 2024. Between now and year-end 2022 asking rents are expected to increase 0.3% to a level of $16.00. Thereafter, Reis projects that asking rent growth will accelerate to an annualized average of 0.8% during 2023 and 2024 to reach a level of $16.26 per square foot. Effective rents will climb by a more rapid annualized average rate of 1.3%, as landlords begin to trim the value of their concessions packages.

Hotel Market

Chicago South Hotel Submarket

The submarket's inventory is heavily weighted towards the cost-efficient lodging with over half of the rooms being Economy or Midscale. The construction pipeline is highly active: The 510 rooms currently underway in the Chicago South submarket represent a 5.5% expansion to the existing inventory. However, when you look at the construction by class, all of this inventory is part of the Upscale & Upper Midscale class, leaving an opportunity for more rooms to come online in the Midscale and Economy class.

The COVID-19 pandemic had a profound impact on the entire U.S. hospitality sector, and the Chicago South hotel submarket was no exception to this trend. At worst, occupancies dropped to a monthly rate of 43.7% in April of 2020. While occupancies have started to recover, room demand is down by 0.2% as of June, when compared to the same month the prior year. Twelve-month RevPAR in the Chicago South hotel submarket was up sharply as of June, climbing at a 30.5% year-over-year rate.

Sales volume remained strong in this submarket, which is expected to continue along with a gradual increase in sale price per room. Average cap rates hover around 10% while the average price per room is currently around $51,000. The market outlook for the Chicago South submarket remains positive.

Residential Market Residential PMA Summary

In summary, similar to the general residential market, prices of residential real estate have increased over the past few years. However, the residential market has pulled back in recent months with the increase of interest rates. In general, price increases in the attached housing market in the MSA, County and PMA range from 4% to 12%, with the highest increases seen in the PMA. The price increases for housing over $200,000 increased at a lower percentage from approximately 0.5% to 2.5%.

It should be noted that there has been minimal new construction of both single unit detached and attached housing over the past 20 years within the subject’s PMA. The majority of the new construction within the PMA has been focused on three story townhouses. There has been virtually no new construction of a similar mixed-use development that can be compared to the proposed subject property. Therefore, it can be expected that the subject will be geared towards luxury residential condominium and their pricing would fall towards the upper end or possibly above the ranges indicated above in this analysis.

Final Comments

Overall, demographic indicators within the Subject’s PMA are similar to the surrounding area and the County and MSA as a whole; minimal to negative change over the next five year period. Commercial and industrial market’s have been performing well, within slower positive growth expected in the near term with minimal new construction on the horizon. This is similar in the residential market.

Positive market fundamentals with low existing inventory and even lower new construction supply has continue to place upward pressure on residential home values. The lack of new construction is a positive factor for the subject development and the various mix of commercial, industrial, residential and special purpose components at the subject property are expected to create a healthy demand for new users within the PMA.

The proposed development will benefit from the central southern Cook County location and is ideally located between various modes of transportation. It will also benefit from various economic financial and tax incentives, further strengthening the financial feasibility of the development. The proposed East Hazel Crest and Homewood Casino development will act as a demand drive for the subject and the new entrance to the industrial park will enhance access between the two developments. The various components of the development will act as a catalyst for change within an area that has historically experienced depressed economic growth.

General Assumptions and Limiting Conditions

This appraisal is subject to the following general assumptions and limiting conditions:

1. The legal description – if furnished to us – is assumed to be correct.

2. No responsibility is assumed for legal matters, questions of survey or title, soil or subsoil conditions, engineering, availability or capacity of utilities, or other similar technical matters. The appraisal does not constitute a survey of the property appraised. All existing liens and encumbrances have been disregarded and the property is appraised as though free and clear, under responsible ownership and competent management unless otherwise noted.

3. Unless otherwise noted, the appraisal will value the property as though free of contamination. Valbridge Property Advisors | Chicago will conduct no hazardous materials or contamination inspection of any kind. It is recommended that the client hire an expert if the presence of hazardous materials or contamination poses any concern.

4. The stamps and/or consideration placed on deeds used to indicate sales are in correct relationship to the actual dollar amount of the transaction.

5. Unless otherwise noted, it is assumed there are no encroachments, zoning violations or restrictions existing in the subject property.

6. The appraiser is not required to give testimony or attendance in court by reason of this appraisal, unless previous arrangements have been made.

7. Unless expressly specified in the engagement letter, the fee for this appraisal does not include the attendance or giving of testimony by Appraiser at any court, regulatory or other proceedings, or any conferences or other work in preparation for such proceeding. If any partner or employee of Valbridge Property Advisors | Chicago is asked or required to appear and/or testify at any deposition, trial, or other proceeding about the preparation, conclusions or any other aspect of this assignment, client shall compensate Appraiser for the time spent by the partner or employee in appearing and/or testifying and in preparing to testify according to the Appraiser’s then current hourly rate plus reimbursement of expenses.

8. The values for land and/or improvements, as contained in this report, are constituent parts of the total value reported and neither is (or are) to be used in making a summation appraisal of a combination of values created by another appraiser. Either is invalidated if so used.

9. The dates of value to which the opinions expressed in this report apply are set forth in this report. We assume no responsibility for economic or physical factors occurring at some point at a later date, which may affect the opinions stated herein. The forecasts, projections, or operating estimates contained herein are based on current market conditions and anticipated short-term supply and demand factors and are subject to change with future conditions. Appraiser is not responsible for determining whether the date of value requested by Client is appropriate for Client’s intended use.

10. The sketches, maps, plats and exhibits in this report are included to assist the reader in visualizing the property. The appraiser has made no survey of the property and assumed no responsibility in connection with such matters.

11. The information, estimates and opinions, which were obtained from sources outside of this office, are considered reliable. However, no liability for them can be assumed by the appraiser.

12. Possession of this report, or a copy thereof, does not carry with it the right of publication. Neither all, nor any part of the content of the report, or copy thereof (including conclusions as to property value, the identity of the appraisers, professional designations, reference to any professional appraisal organization or the firm with which the appraisers are connected), shall be disseminated to the public through advertising, public relations, news, sales, or other media without prior written consent and approval.

13. No claim is intended to be expressed for matters of expertise that would require specialized investigation or knowledge beyond that ordinarily employed by real estate appraisers. We claim no expertise in areas such as, but not limited to, legal, survey, structural, environmental, pest control, mechanical, etc.

14. This appraisal was prepared for the sole and exclusive use of the client for the function outlined herein. Any party who is not the client or intended user identified in the appraisal or engagement letter is not entitled to rely upon the contents of the appraisal without express written consent of Valbridge Property Advisors | Chicago and Client. The Client shall not include partners, affiliates, or relatives of the party addressed herein. The appraiser assumes no obligation, liability or accountability to any third party.

15. Distribution of this report is at the sole discretion of the client, but third-parties not listed as an intended user on the face of the appraisal or the engagement letter may not rely upon the contents of the appraisal. In no event shall client give a third-party a partial copy of the appraisal report. We will make no distribution of the report without the specific direction of the client.

16. This appraisal shall be used only for the function outlined herein, unless expressly authorized by Valbridge Property Advisors | Chicago.

17. This appraisal shall be considered in its entirety. No part thereof shall be used separately or out of context.

18. Unless otherwise noted in the body of this report, this appraisal assumes that the subject property does not fall within the areas where mandatory flood insurance is effective. Unless otherwise noted, we have not completed nor have we contracted to have completed an investigation to identify and/or quantify the presence of non-tidal wetland conditions on the subject property. Because the appraiser is not a surveyor, he or she makes no guarantees, express or implied, regarding this determination.

19. The flood maps are not site specific. We are not qualified to confirm the location of the subject property in relation to flood hazard areas based on the FEMA Flood Insurance Rate Maps or other surveying techniques. It is recommended that the client obtain a confirmation of the subject property’s flood zone classification from a licensed surveyor.

20. If the appraisal is for mortgage loan purposes 1) we assume satisfactory completion of improvements if construction is not complete, 2) no consideration has been given for rent loss during rent-up unless noted in the body of this report, and 3) occupancy at levels consistent with our “Income and Expense Projection” are anticipated.

21. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures which would render it more or less valuable. No responsibility is assumed for such conditions or for engineering which may be required to discover them.

22. Our inspection included an observation of the land and improvements thereon only. It was not possible to observe conditions beneath the soil or hidden structural components within the improvements. We inspected the buildings involved, and reported damage (if any) by termites, dry rot, wet rot, or other infestations as a matter of information, and no guarantee of the amount or degree of damage (if any) is implied. Condition of heating, cooling, ventilation, electrical and plumbing equipment is considered to be commensurate with the condition of the balance of the improvements unless otherwise stated. Should the client have concerns in these areas, it is the client’s responsibility to order the appropriate inspections. The appraiser does not have the skill or expertise to make such inspections and assumes no responsibility for these items.

23. This appraisal does not guarantee compliance with building code and life safety code requirements of the local jurisdiction. It is assumed that all required licenses, consents, certificates of occupancy or other legislative or administrative authority from any local, state or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value conclusion contained in this report is based unless specifically stated to the contrary.

24. When possible, we have relied upon building measurements provided by the client, owner, or associated agents of these parties. In the absence of a detailed rent roll, reliable public records, or “as-built” plans provided to us, we have relied upon our own measurements of the subject improvements. We follow typical appraisal industry methods; however, we recognize that some factors may limit our ability to obtain accurate measurements including, but not limited to, property access on the day of inspection, basements, fenced/gated areas, grade elevations, greenery/shrubbery, uneven surfaces, multiple story structures, obtuse or acute wall angles, immobile obstructions, etc. Professional building area measurements of the quality, level of detail, or accuracy of professional measurement services are beyond the scope of this appraisal assignment.

25. We have attempted to reconcile sources of data discovered or provided during the appraisal process, including assessment department data. Ultimately, the measurements that are deemed by us to be the most accurate and/or reliable are used within this report. While the measurements and any accompanying sketches are considered to be reasonably accurate and reliable, we cannot guarantee their accuracy. Should the client desire more precise measurement, they are urged to retain the measurement services of a qualified professional (space planner, architect or building engineer) as an alternative source. If this alternative measurement source reflects or reveals substantial differences with the measurements used within the report, upon request of the client, the appraiser will submit a revised report for an additional fee.

26. In the absence of being provided with a detailed land survey, we have used assessment department data to ascertain the physical dimensions and acreage of the property. Should a survey prove this information to be inaccurate, upon request of the client, the appraiser will submit a revised report for an additional fee.

27. If only preliminary plans and specifications were available for use in the preparation of this appraisal, and a review of the final plans and specifications reveals substantial differences upon request of the client the appraiser will submit a revised report for an additional fee.

28. Unless otherwise stated in this report, the value conclusion is predicated on the assumption that the property is free of contamination, environmental impairment or hazardous materials. Unless otherwise stated, the existence of hazardous material was not observed by the appraiser and the appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea-formaldehyde foam insulation or other potentially hazardous materials may affect the value of the property. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required for discovery. The client is urged to retain an expert in this field, if desired.

29. The Americans with Disabilities Act (“ADA”) became effective January 26, 1992. We have not made a specific compliance survey of the property to determine if it is in conformity with the various requirements of the ADA. It is possible that a compliance survey of the property, together with an analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this could have a negative effect on the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible noncompliance with the requirements of ADA in developing an opinion of value.

30. This appraisal applies to the land and building improvements only. The value of trade fixtures, furnishings, and other equipment, or subsurface rights (minerals, gas, and oil) were not considered in this appraisal unless specifically stated to the contrary.

31. No changes in any federal, state or local laws, regulations or codes (including, without limitation, the Internal Revenue Code) are anticipated, unless specifically stated to the contrary.

32. Any income and expense estimates contained in the appraisal report are used only for the purpose of estimating value and do not constitute prediction of future operating results. Furthermore, it is inevitable that some assumptions will not materialize and that unanticipated events may occur that will likely affect actual performance.

33. Any estimate of insurable value, if included within the scope of work and presented herein, is based upon figures developed consistent with industry practices. However, actual local and regional construction costs may vary significantly from our estimate and individual insurance policies and underwriters have varied specifications, exclusions, and non-insurable items. As such, we strongly recommend that the Client obtain estimates from professionals experienced in establishing insurance coverage. This analysis should not be relied upon to determine insurance coverage and we make no warranties regarding the accuracy of this estimate.

34. The data gathered in the course of this assignment (except data furnished by the Client) shall remain the property of the Appraiser. The appraiser will not violate the confidential nature of the appraiser-client relationship by improperly disclosing any confidential information furnished to the appraiser. Notwithstanding the foregoing, the Appraiser is authorized by the client to disclose all or any portion of the appraisal and related appraisal data to appropriate representatives of the Appraisal Institute if such disclosure is required to enable the appraiser to comply with the Bylaws and Regulations of such Institute now or hereafter in effect.

35. You and Valbridge Property Advisors | Chicago both agree that any dispute over matters in excess of $5,000 will be submitted for resolution by arbitration. This includes fee disputes and any claim of malpractice. The arbitrator shall be mutually selected. If Valbridge Property Advisors | Chicago and the client cannot agree on the arbitrator, the presiding head of the Local County Mediation & Arbitration panel shall select the arbitrator. Such arbitration shall be binding and final. In agreeing to arbitration, we both acknowledge that, by agreeing to binding arbitration, each of us is giving up the right to have the dispute decided in a court of law before a judge or jury. In the event that the client, or any other party, makes a claim against Valbridge Property Advisors | Chicago or any of its employees in connections with or in any way relating to this assignment, the maximum damages recoverable by such claimant shall be the amount actually received by Valbridge Property Advisors | Chicago for this assignment, and under no circumstances shall any claim for consequential damages be made.

36. Valbridge Property Advisors | Chicago shall have no obligation, liability, or accountability to any third party. Any party who is not the “client” or intended user identified on the face of the appraisal or in the engagement letter is not entitled to rely upon the contents of the appraisal without the express written consent of Valbridge Property Advisors | Chicago. “Client” shall not include partners, affiliates, or relatives of the party named in the engagement letter. Client shall hold Valbridge Property Advisors | Chicago and its employees harmless in the event of any lawsuit brought by any third party, lender, partner, or part-owner in any form of ownership or any other party as a result of this assignment. The client also agrees that in case of lawsuit arising from or in any way involving these appraisal services, client will hold Valbridge Property Advisors | Chicago harmless from and against any liability, loss, cost, or expense incurred or suffered by Valbridge Property Advisors | Chicago in such action, regardless of its outcome.

37. The Valbridge Property Advisors office responsible for the preparation of this report is independently owned and operated by Valbridge Property Advisors - Chicago Metro. Neither Valbridge Property Advisors, Inc., nor any of its affiliates has been engaged to provide this report. Valbridge Property Advisors, Inc. does not provide valuation services, and has taken no part in the preparation of this report.

38. If any claim is filed against any of Valbridge Property Advisors, Inc., a Florida Corporation, its affiliates, officers or employees, or the firm providing this report, in connection with, or in any way arising out of, or relating to, this report, or the engagement of the firm providing this report, then

(1) under no circumstances shall such claimant be entitled to consequential, special or other damages, except only for direct compensatory damages, and (2) the maximum amount of such compensatory damages recoverable by such claimant shall be the amount actually received by the firm engaged to provide this report.

39. This report and any associated work files may be subject to evaluation by Valbridge Property Advisors, Inc., or its affiliates, for quality control purposes.

40. Acceptance and/or use of this appraisal report constitutes acceptance of the foregoing general assumptions and limiting conditions.

41. The global outbreak of a "novel coronavirus" (known as COVID-19) was officially declared a pandemic by the World Health Organization (WHO). It is currently unknown what direct, or indirect, effect, if any, this event may have on the national economy, the local economy or the market in which the subject property is located. The reader is cautioned, and reminded that the conclusions presented in this appraisal report apply only as of the effective date(s) indicated. The appraiser makes no representation as to the effect on the subject property of this event, or any event, subsequent to the effective date of the appraisal.

Certification – Anthony S. Mule, MAI, CCIM

I certify that, to the best of my knowledge and belief:

1. The statements of fact contained in this report are true and correct.

2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions.

3. I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.

4. The undersigned has not performed services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.

5. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.

6. My engagement in this assignment was not contingent upon developing or reporting predetermined results.

7. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

8. My analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

9. Anthony S. Mule has personally inspected the subject property.

10. No one provided significant real property appraisal assistance to the person signing this certification.

11. The reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

12. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

13. As of the date of this report, the undersigned has completed the continuing education program for Designated Members of the Appraisal Institute.

Anthony S. Mulé, MAI, CCIM Managing Director and Principal Illinois License 553.002360 amule@valbridge.com

Certification – Gary K. DeClark, MAI, CRE, FRICS, R/W-AC

I certify that, to the best of my knowledge and belief:

1. The statements of fact contained in this report are true and correct.

2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions.

3. I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.

4. The undersigned has performed services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.

5. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.

6. My engagement in this assignment was not contingent upon developing or reporting predetermined results.

7. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

8. My analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

9. Gary K. DeClark has personally inspected the subject property.

10. No one provided significant real property appraisal assistance to the person signing this certification.

11. The reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

12. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

13. As of the date of this report, the undersigned has completed the continuing education program for Designated Members of the Appraisal Institute.

Gary K. DeClark, MAI, CRE, FRICS, R/W-AC Senior Managing Director and Principal Illinois License 553.000218 gdeclark@valbridge.com

Addenda

Additional Subject Photographs

CCC TIF Redevelopment Revenue Assumption

Glossary

Qualifications

 Anthony S. Mule, Managing Director and Principal

 Gary K. DeClark, Senior Managing Director

Information on Valbridge Property Advisors

Office Locations

Additional Subject Photographs

Existing Clubhouse

Existing Fairway

Existing Green and Pond

Existing Garage Building

Neighborhood view facing west along 175th Street

Neighborhood view facing east along 175th Street

CCC TIF Redevelopment Revenue Assumption

Glossary

Definitions are taken from The Dictionary of Real Estate Appraisal, 7th Edition (Dictionary), the Uniform Standards of Professional Appraisal Practice (USPAP), and Building Owners and Managers Association International (BOMA).

Absolute Net Lease

A lease in which the tenant pays all expenses including structural maintenance, building reserves, and management; often a long-term lease to a credit tenant. (Dictionary)

Amortization

The process of retiring a debt or recovering a capital investment, typically through scheduled, systematic repayment of the principal; a program of periodic contributions to a sinking fund or debt retirement fund.

(Dictionary)

As Is Market Value

The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date. (Interagency Appraisal and Evaluation Guidelines) Note that the use of the “as is” phrase is specific to appraisal regulations pursuant to FIRREA applying to appraisals prepared for regulated lenders in the United States. The concept of an “as is” value is not included in the Standards of Valuation Practice of the Appraisal Institute, Uniform Standards of Professional Appraisal Practice, or International Valuation Standards. (Dictionary)

Base Rent

The minimum rent stipulated in a lease. (Dictionary)

Base Year

The year on which escalation clauses in a lease are based. (Dictionary)

Building Common Area

In office buildings, the areas of the building that provide services to building tenants but that are not included in the office area or store area of any specific tenant. These areas may include, but shall not be limited to, main and auxiliary lobbies, atrium spaces at the level of the finished floor, concierge areas or security desks, conference rooms, lounges or vending areas, food rvice facilities, health or fitness centers, daycare facilities, locker or shower facilities, mail rooms, fire control rooms, fully enclosed courtyards outside the exterior walls, and building core and service areas such as fully enclosed mechanical or equipment rooms. Specifically excluded from building common area are floor common areas, parking space, portions of loading docks outside the building line, and major vertical penetrations. (BOMA)

Building Rentable Area

The sum of all floor rentable areas. Floor rentable area is the result of subtracting from the gross measured area of a floor the major vertical penetrations on that same floor. It is generally fixed for the life of the building and is rarely affected by changes in corridor size or configuration. (BOMA)

Bulk Value

The value of multiple units, subdivided plots, or properties in a portfolio as though sold together in a single transaction. (Dictionary)

Certificate of Occupancy (COO)

A formal written acknowledgment by an appropriate unit of local government that a new construction or renovation project is at the stage where it meets applicable health and safety codes and is ready for commercial or residential occupancy. (Dictionary)

Common Area Maintenance (CAM)

The expense of operating and maintaining common areas; may or may not include management charges and usually does not include capital expenditures on tenant improvements or other improvements to the property. (Dictionary)

The amount of money charged to tenants for their shares of maintaining a [shopping] center’s common area. The charge that a tenant pays for shared services and facilities such as electricity, security, and maintenance of parking lots. Items charged to common area maintenance may include cleaning services, parking lot sweeping and maintenance, snow removal, security, [amenities,] and upkeep. (ICSC – International Council of Shopping Centers, 4th Ed.)

Condominium

An attached, detached, or stacked unit within or attached to a structure with common areas that are held as tenants in common (an undivided interest) with other owners in the project. The units can be residential, commercial, industrial, or parking spaces or boat docks. These units are commonly defined by state laws in their locations. Because units can be stacked on top of other units, these units can be defined both vertically and horizontally. (Dictionary)

Conservation Easement

An interest in real estate restricting future land use to preservation, conservation, wildlife habitat, or some combination of those uses. A conservation easement

may permit farming, timber harvesting, or other uses of a rural nature as well as some types of conservationoriented development to continue, subject to the easement. (Dictionary)

Contributory Value

A type of value that reflects the amount a property or component of a property contributes to the value of another asset or to the property as a whole.

The change in the value of a property as a whole, whether positive or negative, resulting from the addition or deletion of a property component. Also called deprival value in some countries. (Dictionary)

Debt Coverage Ratio (DCR)

The ratio of net operating income to annual debt service (DCR = NOI÷Im), which measures the relative ability of a property to meet its debt service out of net operating income; also called debt service coverage ratio (DSCR). A larger DCR typically indicates a greater ability for a property to withstand a reduction of income, providing an improved safety margin for a lender. (Dictionary)

Deed Restriction

A provision written into a deed that limits the use of land. Deed restrictions usually remain in effect when title passes to subsequent owners. (Dictionary)

Depreciation

In appraisal, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the value of the improvement on the same date.

In accounting, an allocation of the original cost of an asset, amortizing the cost over the asset’s life; calculated using a variety of standard techniques. (Dictionary)

Disposition Value

The most probable price that a specified interest in property should bring under the following conditions:

1. Consummation of a sale within a specified time, which is shorter than the typical exposure time for such a property in that market.

2. The property is subjected to market conditions prevailing as of the date of valuation;

3. Both the buyer and seller are acting prudently and knowledgeably;

4. The seller is under compulsion to sell;

5. The buyer is typically motivated;

6. Both parties are acting in what they consider to be their best interests;

7. An adequate marketing effort will be made during the exposure time;

8. Payment will be made in cash in U.S. dollars (or the local currency) or in terms of financial arrangements comparable thereto; and

9. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

This definition can also be modified to provide for valuation with specified financing terms. (Dictionary)

Double Net (Net Net) Lease

An alternative term for a type of net lease. In some markets, a net net lease is defined as a lease in which the tenant is responsible to pay both property taxes and premiums for insuring the building(s). (Valbridge)

(The market definition of a double net lease varies depending on the market)

Easement

The right to use another’s land for a stated purpose. (Dictionary)

EIFS

Exterior Insulation Finishing System. This is a type of exterior wall cladding system. Sometimes referred to as dry-vit.

Effective Date

1. The date on which the appraisal opinion applies. (SVP)

2. The date to which an appraiser’s analyses, opinions, and conclusions apply; also referred to as date of value. (USPAP, 2020-2021 ed.)

3. The date that a lease goes into effect. (Dictionary)

Effective Gross Income (EGI)

The anticipated income from all operations of the real estate after an allowance is made for vacancy and collection losses and an addition is made for any other income. (Dictionary)

Effective Rent

Total base rent, or minimum rent stipulated in a lease, over the specified lease term minus rent concessions; the rent that is effectively paid by a tenant net of financial concessions provided by a landlord. (TIs). (Dictionary)

EPDM

Ethylene Propylene Diene Monomer Rubber. A type of synthetic rubber typically used for roof coverings.

Escalation Clause

A clause in an agreement that provides for the adjustment of a price or rent based on some event or index. e.g., a provision to increase rent if operating expenses increase; also called escalator clause, expense recovery clause or stop clause. (Dictionary)

Estoppel Certificate

A signed statement by a party (such as a tenant or a mortgagee) certifying, for another’s benefit, that certain facts are correct, such as that a lease exists, that there are no defaults, and that rent is paid to a certain date. (Black’s) In real estate, a buyer of rental property typically requests estoppel certificates from existing tenants. Sometimes referred to as an estoppel letter (Dictionary)

Excess Land

Land that is not needed to serve or support the existing use. The highest and best use of the excess land may or may not be the same as the highest and best use of the improved parcel. Excess land has the potential to be sold separately and is valued separately. (Dictionary)

Excess Rent

The amount by which contract rent exceeds market rent at the time of the appraisal; created by a lease favorable to the landlord (lessor) and may reflect unusual management, unknowledgeable or unusually motivated parties, a lease execution in an earlier, stronger rental market, or an agreement of the parties. (Dictionary)

Expense Stop

A clause in a lease that limits the landlord’s expense obligation, which results in the lessee paying operating expenses above a stated level or amount. (Dictionary)

Exposure Time

1. The time a property remains on the market.

2. An opinion, based on supporting market data, of the length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal. (USPAP, 2020-2021 ed.)

Extraordinary Assumption

An assignment-specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions.

Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions or trends; or the integrity of data used in an analysis. (USPAP)

Fee Simple Estate

Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. (Dictionary)

Floor Common Area

In an office building, the areas on a floor such as washrooms, janitorial closets, electrical rooms, telephone rooms, mechanical rooms, elevator lobbies, and public corridors which are available primarily for the use of tenants on that floor. In essence, floor common area represents all of the area on the floor that is common to that respective floor with the exception of those areas that penetrate through the floor, such as the elevator shaft and stairwell. The significant point to be made is that floor common area is not part of the tenant’s usable area. (BOMA)

Full Service (Gross) Lease

A lease in which the landlord receives stipulated rent and is obligated to pay all of the property’s operating and fixed expenses; also called a full service lease (Dictionary)

Furniture, Fixtures, and Equipment (FF&E) Business trade fixtures and personal property, exclusive of inventory. (Dictionary)

Going-Concern Value

An outdated label for the market value of all the tangible and intangible assets of an established and operating business with an indefinite life, as if sold in aggregate; more accurately termed the market value of the going concern or market value of the total assets of the business. (Dictionary)

Gross Building Area (GBA)

1. Total floor area of a building, excluding unenclosed areas, measured from the exterior of the walls of the above-grade area. This includes mezzanines and basements if and when typically included in the market area of the type of property involved.

2. Gross leasable area plus all common areas.

3. For residential space, the total area of all floor levels measured from the exterior of the walls and including the superstructure and substructure basement; typically does not include garage space. (Dictionary)

Gross Measured Area

The total area of a building enclosed by the dominant portion (the portion of the inside finished surface of the permanent outer building wall which is 50 percent or more of the vertical floor-to-ceiling dimension, at the given point being measured as one moves horizontally along the wall), excluding parking areas and loading

docks (or portions of same) outside the building line. It is generally not used for leasing purposes and is calculated on a floor by floor basis. (BOMA)

Gross Up Method

A method of calculating variable operating expenses in income-producing properties when less than 100% occupancy is assumed. Expenses reimbursed based on the amount of occupied space, rather than on the total building area, are described as “grossed up.” (Dictionary)

Gross Sellout Value (Sum of the Retail Values)

The sum of the separate and distinct market value opinions for each of the units in a condominium, subdivision development, or portfolio of properties, as of the date of valuation. The aggregate of retail values does not represent the value of all the units as though sold together in a single transaction; it is simply the total of the individual market value conclusions. An appraisal has an effective date, but summing the sale prices of multiple units over an extended period of time will not be the value on that one day unless the prices are discounted to make the value equivalent to what another developer or investor would pay for the bulk purchase of the units. Also called the aggregate of the retail values, aggregate retail selling price or sum of the retail values. (Dictionary)

Ground Lease

A lease that grants the right to use and occupy land. Improvements made by the ground lessee typically revert to the ground lessor at the end of the lease term.

(Dictionary)

Ground Rent

The rent paid for the right to use and occupy land according to the terms of a ground lease; the portion of the total rent allocated to the underlying land.

(Dictionary)

HVAC

Heating, ventilation, air conditioning (HVAC) system. A unit that regulates the temperature and distribution of heat and fresh air throughout a building. (Dictionary)

Highest and Best Use

1. The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.

2. The use of an asset that maximizes its potential and that is possible, legally permissible, and financially feasible. The highest and best use may be for continuation of an asset’s existing use of for some alternative use. This is determined by the use that a market participant would have in mind for the asset

when formulating the price that it would be willing to bid. (IVS)

3. [The] highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future. (Uniform Appraisal Standards for Federal Land Acquisitions) (Dictionary)

Hypothetical Condition

1. A condition that is presumed to be true when it is known to be false. (SVP)

2. A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.

Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. (USPAP)

Insurable Value (Replacement Cost for Insurance Purposes)

The estimated cost, at current prices as of the effective date of valuation, of a substitute for the building being valued, using modern materials and current standards, design, and layout for insurance coverage purposes guaranteeing that damaged property is replaced with new property (i.e., depreciation is not deducted). (Dictionary)

Investment Value

1. The value of a property to a particular investor or class of investors based on the investor’s specific requirements. Investment value may be different from market value because it depends on a set of investment criteria that are not necessarily typical of the market. (Dictionary)

2. The value of an asset to the owner or a prospective owner given individual investment or operational objectives (may also be known as worth). (IVS)

Just Compensation

In condemnation, the amount of loss for which a property owner is compensated when his or her property is taken. Just compensation should put the owner in as good a position pecuniarily as he or she would have been if the property had not been taken. (Dictionary)

Leased Fee Interest

The ownership interest held by the lessor, which includes the right to receive the contract rent specified

in the lease plus the reversionary right when the lease expires. (Dictionary)

Leasehold Interest (Leasehold Estate)

The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease. (Dictionary)

See also Positive Leasehold and Negative Leasehold.

Lessee (Tenant)

One who has the right to occupancy and use of the property of another for a period of time according to a lease agreement. (Dictionary)

Lessor (Landlord)

One who conveys the rights of occupancy and use to others under a lease agreement. (Dictionary)

Liquidation Value

The most probable price that a specified interest in property should bring under the following conditions:

1. Consummation of a sale within a short time period.

2. The property is subjected to market conditions prevailing as of the date of valuation.

3. Both the buyer and seller are acting prudently and knowledgeably.

4. The seller is under extreme compulsion to sell.

5. The buyer is typically motivated.

6. Both parties are acting in what they consider to be their best interests.

7. A normal marketing effort is not possible due to the brief exposure time.

8. Payment will be made in cash in U.S. dollars (or the local currency) or in terms of financial arrangements comparable thereto.

9. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (Dictionary)

Loan to Value Ratio (LTV)

The ratio between a mortgage loan and the value of the property pledged as security, usually expressed as a percentage. (Dictionary)

Major Vertical Penetrations

Stairs, elevator shafts, flues, pipe shafts, vertical ducts, and the like, and their enclosing walls. Atria, lightwells and similar penetrations above the finished floor are included in this definition. Not included, however, are vertical penetrations built for the private use of a tenant occupying office areas on more than one floor. Structural columns, openings for vertical electric cable or

telephone distribution, and openings for plumbing lines are not considered to be major vertical penetrations.

(BOMA)

Market Rent

The most probable rent that a property should bring in a competitive and open market under all the conditions requisite to a fair lease transaction, the lessee and the lessor each acting prudently and knowledgeably, and assuming the rent is not affected by undue stimulus. Implicit in this definition is the execution of a lease as of a specified date under conditions whereby:

1. Lessee and lessor are typically motivated;

2. Both parties are well informed or well advised, and acting in what they consider their best interests;

3. Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and

4. The rent reflects specified terms and conditions, such as permitted uses, use restrictions, expense obligations, duration, concessions, rental adjustments and revaluations, renewal and purchase options, and tenant improvements (TIs).

(Appraisal Institute)

Market Value

The following definition of market value is used by agencies that regulate federally insured financial institutions in the United States: The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;

2. Both parties are well informed or well advised, and acting in what they consider their own best interests;

3. A reasonable time is allowed for exposure in the open market;

4. Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (Dictionary; 12 C.F.R. Part 34.42(g); 55 Federal Register 34696, August 24, 1990, as amended at 57 Federal Register 12202, April 9, 1992; 59 Federal Register 29499, June 7, 1994)

Marketing Time

An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of the Appraisal Foundation)

Master Lease

1. A lease in which a part or the entire property is leased to a single entity (the master lessee) in return for a stipulated rent. The master lessee then subleases the property to multiple tenants.

2. The first lease in a sandwich lease. (Dictionary)

Modified Gross Lease

A lease in which the landlord receives stipulated rent and is obligated to pay some, but not all, of the property’s operating and fixed expenses. Since assignment of expenses varies among modified gross leases, expense responsibility must always be specified. In some markets, a modified gross lease may be called a double net lease, net net lease, partial net lease, or semigross lease. (Dictionary)

Negative Leasehold

A lease situation in which the market rent is less than the contract rent. (Dictionary)

Operating Expense Ratio

The ratio of total operating expenses to effective gross income (TOE/EGI); the complement of the net income ratio, i.e., OER = 1 – NIR (Dictionary)

Option

A legal contract, typically purchased for a stated consideration, that permits but does not require the holder of the option (known as the optionee) to buy, sell, or lease real estate for a stipulated period of time in accordance with specified terms; a unilateral right to exercise a privilege. (Dictionary)

Partial Interest

Divided or undivided rights in real estate that represent less than the whole, i.e., a fractional interest such as a tenancy in common or easement. (Dictionary)

Pass Through

A tenant’s portion of operating expenses that may be composed of common area maintenance (CAM), real property taxes, property insurance, and any other expenses determined in the lease agreement to be paid by the tenant. (Dictionary)

Percentage Lease

A lease in which the rent or some portion of the rent represents a specified percentage of the volume of business, productivity, or use achieved by the tenant. (Dictionary)

Positive Leasehold

A lease situation in which the market rent is greater than the contract rent. (Dictionary)

Potential Gross Income (PGI)

The total income attributable to property at full occupancy before vacancy and operating expenses are deducted. (Dictionary)

Prospective Opinion of Value

A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy. (Dictionary)

Replacement Cost

The estimated cost to construct, at current prices as of a specific date, a substitute for a building or other improvements, using modern materials and current standards, design, and layout. (Dictionary)

Reproduction Cost

The estimated cost to construct, at current prices as of the effective date of the appraisal, an exact duplicate or replica of the building being appraised, using the same materials, construction standards, design, layout, and quality of workmanship and embodying all of the deficiencies, superadequacies, and obsolescence of the subject building. (Dictionary)

Retrospective Value Opinion

A value opinion effective as of a specified historical date. The term retrospective does not define a type of value. Instead, it identifies a value opinion as being effective at some specific prior date. Value as of a historical date is frequently sought in connection with property tax appeals, damage models, lease renegotiation, deficiency judgments, estate tax, and condemnation. Inclusion of the type of value with this term is appropriate, e.g., “retrospective market value opinion.” (Dictionary)

Sandwich Leasehold Estate

The interest held by the sandwich leaseholder when the property is subleased to another party; a type of leasehold estate. (Dictionary)

Sublease

An agreement in which the lessee in a prior lease conveys the right of use and occupancy of a property to another, the sublessee, for a specific period of time, which may or may not be coterminous with the underlying lease term. (Dictionary)

Subordination

A contractual arrangement in which a party with a claim to certain assets agrees to make that claim junior, or subordinate, to the claims of another party. (Dictionary)

Surplus Land

Land that is not currently needed to support the existing use but cannot be separated from the property and sold off for another use. Surplus land does not have an independent highest and best use and may or may not contribute value to the improved parcel. (Dictionary)

TPO

Thermoplastic polyolefin, a resilient synthetic roof covering.

Triple Net (Net Net Net) Lease

An alternative term for a type of net lease. In some markets, a net net net lease is defined as a lease in which the tenant assumes all expenses (fixed and variable) of operating a property except that the landlord is responsible for structural maintenance, building reserves, and management; also called NNN lease, net net net lease, or fully net lease. (Dictionary)

(The market definition of a triple net lease varies; in some cases tenants pay for items such as roof repairs, parking lot repairs, and other similar items.)

Usable Area

The measured area of an office area, store area, or building common area on a floor. The total of all the usable areas for a floor shall equal floor usable area of that same floor. (BOMA)

Value-in-Use

1. The amount determined by discounting the future cash flows (including the ultimate proceeds of disposal) expected to be derived from the use of an asset at an appropriate rate that allows for the risk of the activities concerned. (FASB Accounting Standards Codification, Master Glossary)

2. Formerly used in valuation practice as a synonym for contributory value or use value. (Dictionary)

VTAB (Value of the Total Assets of a Business)

The total amount that the real property, tangible personal property, and intangible property assets of a business would sell for in an asset-based transaction.

(Dictionary)

Qualifications

Qualifications of Anthony S. Mulé, MAI, CCIM

Managing Director and Principal

Valbridge Property Advisors | Chicago Metro

Independent Valuations for a Variable World State Certifications

Certified General State of Illinois, Wisconsin, Indiana, Missouri and Michigan

Education

Bachelor of Science

Commercial Real Estate and Entrepreneurship

Marquette University

Contact Details

312-429-0121 ext. 601 (p)

847-338-3416 (c)

312-929-4216 (f)

amule@valbridge.com (e)

Valbridge Property Advisors | Chicago Metro

566 Lake Street, Suite 240 Chicago, IL 60661

www.valbridge.com

Membership/Affiliations

Member: Appraisal Institute – MAI Designation

Member: Mainstreet Organization of Realtors

Member: National and Illinois Association of Realtors

Member: NAIOP, CCIM and The Harold E. Eisenberg Foundation

Appraisal Institute & Related Courses

Continuing education courses taken through the Appraisal Institute and other real estate organizations.

Experience

Managing Director and Principal

Valbridge Property Advisors | Chicago Metro (2019-Present)

Director of Real Estate Analysis

Valbridge Property Advisors | Chicago Metro (2017-2019)

Senior Appraiser

CBRE, Inc. (2014-2017)

Appraiser

Integra Realty Resources (2013-2014)

Appraiser

JSO Valuation Group (2008-2013)

Appraisal/valuation and consulting assignments include: Singlefamily, condominium, apartments, vacant land, mobile home parks, office buildings, hotels/motels, service stations, retail, restaurants, industrial plants, research and development, warehouses, fractional interest valuations, contaminated properties, self-storage facilities, special purpose properties, feasibility/market studies, lease/buy-out option analysis, condemnation/eminent domain/easement right-ofway valuations, real estate tax appeals, HUD rent studies and impact studies.

Has over 13 years of professional experience in the commercial real estate industry, primarily focused on commercial valuation and consulting work. Mulé’s valuation work includes a comprehensive portfolio across the Midwest.

Along with conventional appraisal work, other major activities center on unique and unusual property analysis and litigation support potential. Mulé holds licenses as Certified General Real Estate Appraiser in several Midwest states along with an Illinois Real Estate

Broker license.

Qualifications of Gary K. DeClark, MAI, CRE, FRICS, R/W-AC

Senior Managing Director and Principal

Valbridge Property Advisors | Chicago Metro

Independent Valuations for a Variable World State Certifications

Certified General States of Illinois, Indiana, Michigan, Wisconsin, Missouri, and Arizona

Education

Master of Arts

Real Estate and Urban Development

University of Georgia

Bachelor of Science

Finance

University of Illinois at UrbanaChampaign

Contact Details

312-429-0131 (p)

gdeclark@valbridge.com (e)

Valbridge Property Advisors | Chicago Metro

566 Lake Street, Suite 240 Chicago, IL 60661

www.valbridge.com

Membership/Affiliations

Member: Appraisal Institute – MAI Designation

Member: Counselors of Real Estate – CRE Designation

Fellow: Royal Institution of Chartered Surveyors – FRICS Designation

Member: International Right of Way Association – R/W-AC Designation

Member: Chicago Estate Planning Council

Appraisal Institute & Related Courses

Continuing education courses and seminars taken through the Appraisal Institute, Counselors of Real Estate, International Right of Way Association and other real estate organizations.

Experience

Senior Managing Director

Valbridge Property Advisors | Chicago Metro (2017-Present)

Senior Vice President

Valuation and Advisory Division, CBRE, Inc. (2014 - 2017)

Managing Director

Integra Realty Resources – Chicago Metro (1999-2014)

Valuation and consulting assignments include unique and unusual property types, special purpose parcels, partial and full takings in eminent domain including temporary and permanent easements, fractional interests, condominium developments, apartments, vacant land, office buildings, hotels/motels, service stations, retail, industrial warehouse and manufacturing plants, research and development facilities, landfills, contaminated properties, properties with construction defects, and review appraisals.

Mr. DeClark has provided valuation services in a wide variety of complex civil litigation including real estate, land use cases, condemnation, estate matters, property taxation, contract disputes, partnership and corporate disputes, environmental lawsuits, professional negligence cases, financing, construction defects, and bankruptcy/creditors matters.

Qualified as an expert witness in federal district courts in northern

Illinois, northern and southern Indiana, and southern New York, county circuit courts in Illinois of Cook, Lake, McHenry, Winnebago, Ogle, Dekalb, DuPage, Kane, Grundy, Kendall, Kankakee, Champaign, Peoria and Tazewell. Indiana counties include Lake and Marion. Wisconsin counties include Kenosha, Racine, Milwaukee, Brown and Dane. Other venues include the U.S. Tax Court and various real estate Tax Tribunals or Appeals Boards in Illinois, Indiana, and Wisconsin. He is a highly experienced forensic appraiser having provided testimony in many trials/hearings over 37 years of practice.