88 Arkansas Street | San Francisco Zhuguang Properties US Marketing Analysis
CONFIDENTIAL & PROPRIETARY
PROJECT ANALYSIS
9
PROJECT STRENGTHS
Location • Desirable Potrero Hill neighborhood • Brand layering opportunities • Close to employment – SOMA, Mission Bay, Peninsula • Highly walkable and bikeable – blocks from Whole Foods and 18th Street • Freeway access • Jackson Playground • Live Oak School (K-8) • Feng shui - 88
10
Product & Design • Nearly 1:1 parking • Onsite retail space – identify tenant early
Market Factors • Lack of inventory • 94% of 1,154 units under construction in area are rentals
PROJECT CHALLENGES
Location • Removed from downtown San Francisco • Perceived safety concerns • Public transportation less convenient
11
Product & Design • Large BMR component • Stackers not ideal • Some windowless bedrooms • Lack of views • Move utility poles underground • No double sinks in masters • No entry coat closets
Market Factors • Increasing competition and inventory • Threat of condominium conversions • Rising interest rates
13
ACCELERATION, DECELERATION & DECLINE Burns Home Value Index
Deceleration
200
Acceleration
Decline
180
160
140
120
100
80
2000
14
2001 2002 East Bay MSA
2003
2004 2005 Napa MSA
2006
2007 2008 2009 San Francisco MSA
2010
2011 2012 2013 San Jose MSA
2014 2015P 2016P 2017P Santa Rosa MSA
JBRE BURNS HOME VALUE INDEX Price projections through 2019
Chart Title
12% 10%
2017P
Total 11%
2%
Total 9%
2018P
Total 8%
1%
8%
1%
4% 3%
6%
3%
4% 2%
15
Total 4% 1%
5%
5%
Napa MSA
Santa Rosa MSA
Total 3% 1%
5%
0% -2%
2019P
San Jose MSA
4%
3%
-1%
-1%
San Francisco MSA
East Bay MSA
16 New Construction Inventory New Construction Absorption Pricing Index
October 16
September 16
August 16
July 16
June 16
May 16
April 16
March 16
February 16
January 16
December 15
November 15
October 15
September 15
August 15
July 15
June 15
May 15
April 15
March 15
February 15
January 15
December 14
November 14
October 14
September 14
August 14
July 14
June 14
May 14
April 14
March 14
February 14
January 14
Inventory/Absorption 1,400 $1,400
1,200 $1,200
1,000 $1,000
800 $800
600 $600
400 $400
200 $200
0 $0
Pricing Index
SAN FRANCISCO NEW CONDOMINIUMS 2014-2016
Average absorption of 68 units per month and 816 per year
SAN FRANCISCO NEW CONDOMINIUMS
Inventory & absorption projections through 2019 3000
2500
2000 New Condominium Absorption New Condominiums Entering the Market 1500
Projected New Condominium Absorption Inventory (beginning of year) Projected Inventory with Zero Approved Units
1000
500
0 2014
17
2015
2016
2017
2018
2019
Projected Inventory with all Approved Units
TARGETED PIPELINE Development
Developer / Owner
Proposed Units
Zhuguang Properties US
102
Subject Site 88 Arkansas Street Under Construction
1
655 Folsom
Approved
2
750 Harrison Street
3
768 Harrison Street
4
Huxton - 923 Folsom Street at 5th
5 6 7
99 Rausch Street - 1140 Folsom Street
Forton Fund LLC
89
Buddha Properties LLC
79
TBD
26
Align Real Estate
114
301 6th Street at Folsom
TBD
92
345 6th Street at Folsom
SST Investments LLC
38
Angela Cheung
112
8
1075 Market Street
9
119 7th Street
10
1145-1149 Mission Street at 7th
11
22 Franklin Street
12
1700 Market Street at Gough
13
1601 Mission Street at South Van Ness
14 15 16
Potrero Flats - 1301 16th Street
Encore Funds
90
Fullview Properties
39
Darren Lee
25
SST Investments
35
George McNabb
43
Trumark Urban
220
198 Valencia Street at Duboce
TBD
28
1863 Mission Street
TBD
37
Workshop 1
176
17
603 Tennessee Street at Mariposa
TBD
24
18
2177 3rd Street, 590 19th Street
TBD
109
DM Development and Grosvenor
69
19
815 Tennessee at 19th
20
901 Tennessee Street at 20th
21
1000-1004 Mississippi Street at 25th
22
1198 Valencia Street at 23rd
23
1278 - 1298 Valencia Street at 24th
24
5050 Mission Street at Seneca Avenue
Local Development Group
44
1000 Mississippi Street Investors
28
JS Sullivan
52
TBD
35
5050 Development, LLC
61
Units Under Construction:
18
NOTE: This a targeted pipeline only and does not reflect all projects under development in San Francisco.
616
Units Approved:
1,151
Total Units:
1,767
MARKET COMPARABLES New Construction Closings: August 2016 – January 2017 Development*
Number of Sales
Average Size (SF)
Size Range
Average Price
Price Range
$/SF
450 Hayes
13
991
614 - 1,514
$1,435,915
$882,900 - $2,250,000
$1,449
One Franklin
17
615
445 - 1,008
$799,124
$549,000 - $1,310,000
$1,300
Rockwell
160
836
500 - 1,762
$1,073,610
$613,600 - $3,134,000
$1,284
1001 17th
12
711
490 - 1,059
$784,333
$550,000 - $1,160,000
$1,103
Total/Averages
202
820
445 - 1,762
$1,056,641.27
$549,000 - $3,134,000
$1,288
New Construction List Prices: February 2017 Development* 1450 Franklin Rowan One Mission Bay Knox Simple Averages *Sorted by price per square foot 19
Average Size (SF)
Size Range
Price Range
$/SF
1,229
691 - 2,076
$820,000 - $3,900,000+
$1,413
973
654 - 1,282
$772,000 - $2,007,000
$1,344
1,247
487 - 1,973
$700,000 - $3,000,000+
$1,341
994
563 - 1,353
$700,000 - $1,800,000
$1,173
1,111
487 - 2,076
$700,000 - $3,900,000+
$1,317
MARKET COMPARABLES Resale Closings: August 2016 – January 2017 Development*
Number of Sales Average Size (SF)
Size Range
Average Price
Price Range
$/SF
Onyx on the Park
2
1,075
877 - 1,272
$1,442,000
$1,149,000 - $1,735,000
$1,342
Seventy2 Townsend
4
890
785 - 1,136
$1,138,500
$1,050,000 - $1,329,000
$1,279
Arterra
8
784
597 - 970
$961,063
$845,000 - $1,250,000
$1,227
170 Off Third
6
777
484 - 1,006
$885,667
$635,000 - $1,100,000
$1,140
The Potrero
4
889
778 - 1,025
$1,007,500
$815,000 - $1,235,000
$1,133
Madrone
5
1,338
1,124 - 1,625
$1,449,400
$1,060,000 - $1,738,000
$1,083
Homes on Esprit Park
4
1,093
852 - 1,391
$1,092,500
$850,000 - $1,220,000
$1,000
Millwheel North and South
3
1,336
1,256 - 1,467
$1,191,667
$1,090,000 - $1,250,000
$892
36
979
597 - 1,625
$1,101,737
$635,000 - $1,738,000
$1,125
Averages *Sorted by price per square foot 20
RECOMMENDED PRELIMINARY PRICING Type
Units
Size Range
Avg Size
Price Range
Average Price
Total Sales
$/SF
Studio w/out parking
20
398 - 552
500
$540,000 - $640,000
$605,974
$12,119,481
$1,213
1 Bedroom w/out parking
3
576 - 603
594
$665,000 - $675,000
$671,667
$2,015,000
$1,131
1 Bedroom w/parking
38
608 - 699
641
$800,000 - $903,000
$836,905
$31,802,385
$1,306
2 Bedroom w/parking
33
891 - 1,016
950
$1,180,000 - $1,355,000
$1,262,939
$41,677,000
$1,329
3 Bedroom w/parking
8
1,020 - 1,118
1,089
$1,400,000 - $1,620,000
$1,554,337
$12,434,694
$1,428
102
398 - 1,118
747
$540,000 - $1,620,000
$980,868
$100,048,559
$1,313
All Types
Parking revenue from 19 spaces offered to BMR buyers: Total Sales with all Parking Revenue (early 2017 market conditions):
$102,423,559
Total Sales with all Parking Revenue after 1 year of 3% annual appreciation (early 2018 market conditions):
$105,496,266
Total Sales with all Parking Revenue after 2 years of 3% annual appreciation (early 2019 market conditions):
$108,661,154
Notes & Assumptions: 1) Prices shown above are for market rate units only and exclude 25 BMRs. 2) Target absorption rate is 6-8 units per month, calculated from the opening of the Sales Center through final close of escrow. 3) There are 98 parking spaces, 79 of which have been allocated to market rates units as shown above. Prices include parking. 4) Common areas and unit finishes are assumed to be aligned with currently selling high-end San Francisco developments. 22
$2,375,000
RECOMMENDED PRELIMINARY PRICING VS. MARKET COMPARABLES $2,000,000 1001 17th
$1,800,000
450 Hayes $1,600,000
One Franklin Rockwell San Francisco
$1,400,000
Seventy2 Townsend 170 Off Third
$1,200,000
Arterra Homes on Esprit Park
$1,000,000
Madrone Millwheel North
$800,000
Onyx on the Park The Potrero
$600,000
Studio w/out pkg. 1 Bedroom w/out pkg.
$400,000
1 Bedroom w/pkg. $200,000
2 Bedroom w/pkg. 3 Bedroom w/pkg.
$0 0
21
200
400
600
800
1,000
1,200
1,400
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# 1 2 3 4 5 6 7
Project 99 Rausch 88 ARKANSAS The Austin 1075 Market
Studio unit average area 417 432 438 463
2 beds unit area comparison 2 beds unit Project average area Rowan 866 88 ARKANSAS 897 Knox 951 The Austin 963 815 tennessee st 975 1075 Market 990 99 Rausch 1091
1 bed unit area comparison # 1 2 3 4 5 6 7
# 1 2 3 4 5 6 7
Project 88 ARKANSAS 1075 Market 99 Rausch The Austin Rowan 815 tennessee st Knox
1 bed unit average area 611 630 660 665 669 685 735
3 beds unit area comparison 3 beds unit Project average area 88 ARKANSAS 709 1075 Market 789 The Austin 988 Rowan 999 99 Rausch 1029 815 tennessee st 1078 Knox 1187
CONCLUSION: Area for each unit type in 88 Arkansas is relatively small, so the marketing strategy should be more focused on those more interested in small units : ‐ First time buyers ‐ Young couples without child ‐ Investors
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RESIDENTIAL FINISHES
Kitchens • Miele, Gaggenau & Bosch • Integrated design • High-quality cabinetry • One large undermount sink
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Bathrooms • Double vanities in masters • Frameless showers • Tri-view medicine cabinets • Quality fixtures
Features • Engineered hardwood flooring • Technology – state-of-the art but flexible, keyless entry • Upgraded Penthouse collection
ADDITIONAL DESIGN RECOMMENDATIONS
• All units need coat closet near entry • Two bedroom/2 bath units: – Double sinks needed in master bath – Shower in master bath • Unit A9: 118, 221, 327, 427 – Align W/D doors with kitchen cabinetry • Floor-to-floor unit numbering should be consistent for stacked floor plans vs. unit B5 (Units 106, 208, 311, 411, 509) – better from marketing perspective as less confusing
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AMENITIES & SERVICES • •
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Lobby Rooftop terrace and courtyards – Group and private seating – Firepit – Barbeques – Lit pots, WiFi and speakers Club room – Sound attenuation considerations – Staircase should not be attached to wall Pet run and washing station Beautifully-designed bicycle storage with workstation Leasing office can be conference room Virtual doorman or package locker Partner with local fitness provider – CrossFit Potrero Hill Retail space as amenity – café or restaurant
INTERIOR DESIGNERS
• Jay Jeffers • Handel Architects • Charles de Lisle
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TRAFFIC: QUANTITY AND QUALITY Sales Funnel 4,080 total leads in database
1,530 total tours
Projected • 102 units to sell • 6-8 units/month • 15 months to sell out Conversion Ratios • Sales:Leads = 1:40 • Sales:Tours = 1:15 29
272 new leads per month 102 tours per month 6-8 units per month
• Focused consumer marketing • In flight adjustments • Real time results • Call to action
USING PERSONICX PROFILES Online Ad Packages
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App Location Targeting
Facebook Advertising
POTRERO HILL / DOGPATCH BUYERS
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TARGET BUYERS Preliminary Demographics • 50%+ under 40 years old • 50%+ single • 60% have advanced degrees • Employed in tech, finance, healthcare, biotech, creative • 60% work in San Francisco • 30% work on Peninsula or in South Bay • Ethnically and culturally diverse • 10% international buyers • 80%+ will come from within Bay Area • 80% will use broker
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SALES & MARKETING PLAN
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PROJECT BRANDING
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PROJECT BRANDING
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INITIAL BRANDING CONCEPTS
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INITIAL BRANDING CONCEPTS
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INITIAL BRANDING CONCEPTS
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INITIAL BRANDING CONCEPTS
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INITIAL BRANDING CONCEPTS
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INITIAL BRANDING CONCEPTS
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SALES TRAILER & MODEL HOMES Sales Trailer • Accommodate staff of 3 • Private meeting space • Gallery with product and lifestyle imagery, finish boards, floor plans Model Homes • 2-3 models in building – studio, 2 bedroom • Partner with interior designer • Target specific buying groups • Designer pop-ups and rotating artwork
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CO-MARKETING & EVENTS | BUYER RETENTION Local Partnerships Coffee bar in lobby by Farleyâ&#x20AC;&#x2122;s, events catered by Umi, walking tour of art studios or breweries, rotating artwork from Collage Gallery, coffee table book from Christopher Books as move-in gift, Design Center events
Neighborhood Film Produce short film highlighting Potrero Hill lifestyle, residents, artists and culture
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Community Engagement Invite VIPs onsite for hosted events and fundraisers Potential partners: SPCA, San Francisco Film Society, CCA
Private Tasting Experience Offer culinary experience, cookbook or gift certificates to popular local restaurants Potential partners: Chez Maman, Plow, Aperto
PRODUCT LAUNCH Launch Fall 2018 Pros • Potential for higher prices – 1%+ • Lower marketing costs • Product to show • Potential for quicker absorption • First closings closer – buyer retention Cons • Harder to achieve 50% by first close of escrow • Lending – 35% requirements for closings
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PRELIMINARY SALES & MARKETING BUDGET Assumptions: 127 units to sell (102 market rate) with monthly average absorption of 6-8 units and 18-month sales period. Commence sales in September 2018.
Category
Cost
Notes
Sales Center Build Out & Permanent Displays
TBD
Trailer, furniture, interior design fees, displays, space
Sales Center Set Up
$14,500
Computers, iPads, phones
Ongoing Sales Center Maintenance
$83,300
Copier/computer maintenance, equipment, office supplies, flowers
Collateral Materials
$120,000
Brochures, stationery system, copywriting, photography, renderings
Digital Marketing
$374,000
Website, SEO, SEM, PPC, banner ads, social media
Signage
$82,500
Banners, construction signage, A-frames, window signage
Direct Marketing
$20,000
Eblasts
Traditional Print Advertising
$0
Creative and insertion, media planning (NOT INCLUDED)
Public Relations
$1,000
Press releases, exclusive pitches (hourly basis)
Events & Promotions
$37,000
Ongoing prospect/broker events, buyer retention gifts, broker gifts
Development Orientation Training
$1,000
Development Orientation Training (DOT)
Model Homes
$170,000
Studio, 1 bedroom, 2 bedroom, maintenance, moving
Below Market Rate Program
$13,500
Events, eblasts, printed materials
Estimated Total: 53
$916,800