DALLAS MIDTOWN

2013 UTA Maverick Development

The Dallas Midtown Project will become the new center of Dallas;

an iconic mixed-use development that creates culture, fosters

innovation, and transforms the image and economic base of the

ninth most populous city in the United States. Dallas prides itself

on being home to over 60,000 businesses, 19 Fortune 1000

companies, and 269 corporate headquarters. The Dallas area is

also home to 20 Fortune 500 companies. This project will inject

an already fertile job market with multiple levels of employment

spanning several industries including retail, technology, and fi-

nancial sectors.

Dallas Midtown

Page 2

Dallas Midtown THE NEW CENTER OF DALLAS

EXECUTIVE SUMMARY

Dallas is on the verge of completely reshaping one of the city’s landmark prop-

erties. Valley View Center has been unable to stay competitive with the ever changing

dynamics prevalent in the Dallas marketplace. Through the revitalization and rede-

velopment of the Valley View Center, Maverick Development hopes to transform a

property that at its peak was decades ahead of its time, but now sits with 500,000+

square feet of vacant retail space. The Valley View Center as currently constituted no

longer fills the economic needs of the surrounding market area. Maverick Develop-

ment is committed to creating an entirely new mixed-use concept that will act as a

catalyst for the revitalization of the first 104 acres of the 450 acre redevelopment

site.

In order to immediately start the transformation Valley View Center will be re-

named and remarketed as Dallas Midtown. Dallas Midtown provides the perfect

branding for this project due to the subject property’s central “Midtown” location.

With the large expansion of suburbs north of the central business district (CBD), the

new Dallas Midtown property actually sits at or near the geographic center of Dallas.

This location provides the project with access to several large scaled freeways and

other easily accessible primary roadways. The Dallas Midtown development will aim

to create synergy and complimentary uses with the surrounding Galleria Dallas prop-

erties which has been lacking since the construction of the Galleria project in the

1980’s.

The Galleria Dallas is a mixed use property that includes a shopping mall with

several national upscale tenants, the luxurious Westin Galleria Hotel, along with mul-

Dallas Midtown

Page 3

tiple upscale office spaces. The Galleria has played a significant (unintended) role in

the demise of the obsolete Valley View Center’s site. The glitz and glam of the Gal-

leria shopping mall made it increasingly difficult for the retailers located within the

Valley View Center to remain viable. The new Dallas Midtown concept has been care-

fully conceptualized and developed after conducting an extensive highest and best

use analysis. Conducting a highest and best use analysis has provided the developers

with the criteria necessary to create a complementary development that enhances

both the Dallas Midtown and Galleria Dallas developments. The complementary na-

ture of these developments should increase their respective market values and allow

them to continue to thrive in the new center of Dallas.

The Dallas Midtown development aims to increase the development’s density

and add a sustainable amount of class “A” office space, retail, and multi-family hous-

ing. These items will be constructed in a manner that promotes continued economic

development, increases quality of life, and escalates the amount of tax revenue gen-

erated for the City of Dallas. The success of the development will be hinged upon the

integration of four integral features. The four features include the following:

Signature Dallas Midtown Tower

Mixed-use grocer

Public/private transit station

Central plaza, appropriately named the Lone Star Garden Park.

Maverick Development has gone to great lengths to incorporate pedestrian

friendly elements including the effective use of enclosure, human scale, and transpar-

ency. Other pedestrian friendly features include design complexity, linkage, con-

trolled vehicle access, one-way streets and exterior parking garages.

The marquee property of the Phase I development will be the Dallas Midtown

Tower. The Dallas Midtown Tower takes its inspiration from the Caltrans building in

Los Angeles, California. The Caltrans building uses an exterior shell that has embed-

ded photovoltaic panels and perforated aluminum sheeting that limits heat transfer

and produces onsite energy. This same type of construction has been utilized in a

slightly different fashion on the new Perot Museum of Nature and Science located in

Dallas Midtown

Page 4

Dallas. The same architect (Morphosis Architects) designed the Caltrans building and

the Perot Museum of Nature and Science. The Dallas Midtown Tower will leverage

the lessons learned from those developments to increase the efficiency of this build-

ing, both in terms of construction timeline and cost as well as building performance.

The Dallas Midtown Tower will be designed and built in the shape of the letter “D” to

boldly symbolize the new center of Dallas. Additional signature features include a

large scaled fully enclosed sky bridge that will be home to an exclusive restaurant and

rooftop observation deck. The ninth floor will also have an outdoor terrace that will

allow visitors to grasp the beauty and detail contained within the Dallas Midtown de-

velopment. The Dallas Midtown Tower, a.k.a. the “Big D” will bring a level of ex-

citement and innovation that hasn’t been felt by Dallas residents since the Cowboys

and Mavericks championship titles.

Dallas Midtown

Page 5

MAVERICK'S PHASED DEVELOPMENT PROPOSAL

The four phases of Maverick's development proposal is detailed below.

Phase 1: The Dallas Midtown redevelopment consisting of approximately 104 acres

This phase will be anchored by the Dallas Midtown Tower, a proposed 32 story

luxury class “A” office building constructed in the shape of the letter “D”. Maverick

Development intends for the Dallas Midtown Tower to achieve LEED Silver certifica-

tion. The building will have a total Gross Building Area of 700,000 SF. The break-

down of net leasable, below grade parking, and common area are as follows:

+/- 500,000 SF of Net Leasable Area

+/- 150,000 SF of Below Grade Parking (1,250 spaces)

+/- 50,000 SF of common area

The location and scale of the Dallas Midtown Tower will take advantage of its

close proximity to Interstate Highway 635 and other major roadways (Preston,

Monfort, Alpha) and intends to provide wonderful views of the Dallas Skyline for its

tenants occupying the upper level floors. The key assumption utilized for this project

and the proposed construction of the Dallas Midtown Tower is that Maverick Devel-

opment is able to leverage the economic incentive packages offered by the City of

Dallas and the various economic development entities to secure a long term lease

with a national or international Fortune 100, 500, or 1,000 company. According to

the City of Dallas website (http://www.dallas-ecodev.org/incentives/abatements-grants/), they

can/will offer a competitive package including any combination of the following:

(Quoted from the City of Dallas Economic Development Website)

City of Dallas Regional Center (CDRC) - The CDRC is dedicated to assisting individuals

and their families through the EB-5 immigration process via investment into businesses and

development projects located within the Dallas city limits. The CDRC offers a variety of quali-

fied investments to foreign investors that meet or exceed Program requirements, and offer in-

vestors features unique to the EB-5 community.

Economic Development Grants - Companies considering a relocation/expansion or new

commercial development may be eligible for a grant in lieu of tax abatement or to defray pro-

Dallas Midtown

Page 6

ject costs such as: land purchase, building costs, public infrastructure costs, development fees,

right of way abandonment fees, loan guarantees, training costs, relocation costs, etc.

Tax Abatements - City provides tax abatement on the value added to real property or new

business personal property.

Tax Increment Financing - Special districts funded with increased tax revenues resulting

from new private development. Tax rates are the same as elsewhere in the City and no added

cost to private parties is incurred.

It is assumed in the financial analysis of this development that said anchor

tenant will occupy approximately 300,000 of the total 500,000 Net Leasable square

footage. If a tenant meeting the aforementioned criteria cannot be secured the size,

scope, and design of the Dallas Midtown Tower may change.

The Dallas office market has been considered soft over the past 3-5 years by

industry experts. However, recent market data suggests the office market is going to

stiffen in the near and foreseeable future. Per Co-Star and other market driven data

sources the Dallas office market is positioned for resurgence. According to PPR, “The

Dallas-Fort Worth office market is in the midst of a recovery. Sustained job growth

and an absence of supply have already led to substantial vacancy compression. This

momentum is anticipated to carry into the forecast and push vacancies to decade

long lows before they turn in the opposite direction a few years down the road”.

Jones Lang LaSalle says the Dallas Urban Office market is about to enter the “Rising

Phase” as represented on their office clock diagram below:

Dallas Midtown

Page 7

Another example of the Dallas office market’s condition can be found in the

Jones Lang LaSalle first quarter 2013 office outlook where Walter Bialas says, “With

overall rising asking rents and only moderate construction currently underway, a

landlord’s market is anticipated for roughly half of the submarkets later this year.”

The improving office market conditions has encouraged Maverick Development

to begin the demolition of existing site improvements and commence new construc-

tion activities in January 2014. The estimated timeline for the construction of Dallas

Midtown Tower is approximately two years. Maverick development intends to begin

the process of moving tenants into the space in January 2016. Stabilized occupancy

of 90% is expected in year two after the project’s completion. While the Dallas Mid-

town Tower is being constructed Maverick Development will also be working feverish-

ly to complete most other development demolition activities while concurrently in-

stalling the necessary infrastructure (roads, utilities, parking garages, etc.) for the

planned new construction.

Further Phase 1 development includes the reuse and expansion of the existing

Sears Auto Service Center. The Sears retail store that is currently part of the Valley

Dallas Midtown

Page 8

View Center is planned for demolition and will be rebuilt alongside Sear’s freestand-

ing Auto Service Center. Maverick Development is committed to implementing an

adaptive reuse strategy when financially feasible throughout the development of the

entire Dallas Midtown project. Maverick Development understands the importance of

utilizing sustainable building strategies and preserving as much positive history of

Valley View Center as possible.

Phase 1 will also include the construction of a mixed-use grocer similar to

those seen in Portland, Oregon. (Example Below)

Source: http://www.mazzetti.com/images/uploads/MP_website3.jpg

According to the Tapestry data covered later in this proposal; having a grocer

within the first phase of Dallas Midtown is important even though there are several

excellent groceries nearby. Placement within walking distance is crucial to populating

the residential apartments and condos located in the development area. Constructing

a Trader Joe’s with a footprint of approximately 15,000 SF, would be sufficient or

perhaps adding a Sprouts for a bigger presence. Both Central Market and Whole

Foods already have a presence in the surrounding neighborhoods.

Maverick Development intends to work with representatives from Trader Joe’s

and/or Sprouts in an attempt to have them be the namesake of the mixed-use grocer.

Dallas Midtown

Page 9

This property type will be one of many concerted attempts to increase the develop-

ment density of this project. The planned location of this building is along Preston

Road on the east side of the development.

Another integral Phase 1 development is the public/private Dallas Midtown

transit station located on the northwest corner of the development. Maverick Devel-

opment plans to create a Tax Increment Financing District within the Dallas Midtown

development that will assist with the initial infrastructure costs of building the transit

station. Maverick’s plan includes partnering with DART and incorporating bus service

to the site via Dart’s existing bus fleet. In addition to DART buses being brought to

the development site, Maverick is going to create a membership rider program that

would allow DART to operate private shuttles used exclusively by the residents and

business tenants of the development. The available routes for this private shuttle

service would include service within the development area as well as service to and

from the Addison Transit Center and Dallas Love Field. A monthly membership fee

would be assessed to all residents and tenants members, which would be utilized to

offset any additional costs incurred by DART to operate these private shuttles. Be-

yond Phase 1, Maverick Development’s long term vision includes a DART rail line be-

ing added to the development site. This would limit the required bus traffic and

would connect Dallas Midtown to the rest of the DART rail lines, greatly improving its

access to offsite patrons.

The last integral development of Phase 1 is the creation of a central plaza. The

central plaza will be located behind the AMC theatre. The existing theater will be in-

corporated into the new development plan after some minor exterior up-

dates/renovations. The plaza will create the central focal point of the development

by tying the transit station, the AMC theatre, and the Dallas Midtown Tower to the

planned street level retail and restaurant developments along the central corridor of

the Dallas Midtown development. One of the exterior renovations expected to take

place at the AMC theatre is the addition of an outdoor screen allowing for movie

viewing from the central plaza. The outdoor viewing option will further enhance the

community culture that Maverick Development is trying to achieve.

Dallas Midtown

Page 10

Phase 2: Continued development and infill of the remaining pad sites within the 104

acre site

Phase 2 construction will benefit greatly from having most of the infrastructure

completed during Phase 1 of the development. Maverick Development’s plans for

Phase 2 include selling some of the infill pad sites to other development companies

for continued construction activities. The initial vision calls for the addition of several

mixed-use multifamily/retail properties as well as the construction of a luxury senior

housing complex. These developments will be concentrated around the central plaza

and be considered the heart of the development.

One of the unique local attractions planned for Dallas Midtown is a restaurant

incubator. The intention of this project is for creative local chefs to have a place to

hone their skills and establish a name for themselves while serving the needs of the

Dallas Midtown residents, shoppers, and building tenants. The technology sector has

been utilizing the incubator strategy for several years and it has proven profitable;

Maverick Development anticipates the same results with this endeavor as well.

Phase 2 will also have a condo/hotel development located just south of the

transit station. The property will be predominantly condo space but will have a lim-

ited number of hotel rooms available for the business travelers coming to the Dallas

Midtown development.

Phase 2 also calls for another office building development on the west side of

the Dallas Midtown Tower, given the market supports the office expansion. Just to

the north of the new office buildings, a technology incubator building will also be

constructed. This will mimic the restaurant incubator strategy where local entrepre-

neurs will be given a laboratory to create new software products and services for use

in the local community and beyond. The final component of Phase 2 will be on the

northeast corner of the development along Preston and Alpha Roads. This property

sits on a highly coveted corner and will be home to mixed use retail and a parking

structure. The strategy behind placing the parking structures on what may be per-

ceived the most value tracts of the development are twofold. Maverick Development

is taking a somewhat contrarian approach to this portion of the project. The parking

Dallas Midtown

Page 11

garages have been designed to act as a traffic buffer for the development allowing

Dallas Midtown to be the most pedestrian friendly development in Dallas. The park-

ing garages will also create a barrier to the interior of the development. This will help

spur the integration and acceptance of the public/private shuttle service provided

within the development. The layout and linkages have been designed to fully en-

hance the use of the shuttle while shopping, eating, and enjoying the Dallas Midtown

experience.

The timeline for the Phase 2 development is 3-5 years from the start of con-

struction of the Dallas Midtown Tower. This timeline may move faster or slower de-

pending on the market and the larger macroeconomics faced during that time period.

Phase 3: This phase is will begin the integration of the acreage outside of the initial

104 acres

Phase 3 begins just west of Monfort Road and will include a fully functional and

meticulously planned green space. In order to maximize the beauty of this space,

row housing will be positioned on the north and south sides with exceptional views of

the green space and planned water features.

Based on a hotel survey conducted within a 5 mile radius of the subject proper-

ty Maverick Development decided that a family themed water park hotel should defi-

nitely be included in the Phase 3 development. Grapevine, Texas has maximized its

returns by having a convention center hotel (The Gaylord Texan) and a family themed

water park hotel (The Great Wolf Lodge) within its city limits. The Galleria Dallas area

is home to some of the most luxurious hotels in Dallas County so adding another up-

scale hotel would not be a complementary use of this site. However, building a hotel

that has the ability to charge upwards of $300/night/room and draw families from

the metropolitan area as well as destination travelers seems like a perfect fit for the

culture of this project. The hotel will be positioned on the north side of the green

space and on the trolley line coming from the transit center. It will have its own self-

contained parking garage and will tie into the green space in Phase 3 of the develop-

ment.

Dallas Midtown

Page 12

An arts building is planned in the initial vision for Phase 3 located to the west

of the dedicated green space and along the delineated development boundary. The

arts center would potentially play off of the central plaza and the architectural mon-

uments that are contained within that portion of the development. This would com-

plete the far western border of the development.

The timeline for Phase 3 is 5-8 years after the start of construction of the Dal-

las Midtown Tower. The reality is the same for Phase 3 as it was for Phase 2; this

timeline may move faster or slower depending on the market and the larger macroe-

conomics faced during that time period.

Phase 4: Market driven by dynamics that are potentially not present in today’s econ-

omy

The long term plan for this phase would be to finish the office build out along

Interstate 635 and add a lifestyle center type personal gym. The gym would be locat-

ed south of the green space but within walking distance of the walking/running/bike

trails around the green space.

The timeline for Phase 4 is 8-10 years after the start of construction of the

Dallas Midtown Tower. The reality is the same for Phase 4 as it was for Phases 2 and

3; this timeline may move faster or slower depending on the market and the larger

macroeconomics faced during that time period.

Dallas Midtown

Page 13

PROJECT TIMELINE BY PHASE

Dallas Midtown

Page 14

SITE AND MARKET ANALYSIS

Understanding the complexities of the local market proves challenging and

necessary when considering the development potential of a given site. Will market

forces dictate job and economic growth? Will the local market area experience a rise

in property values from the new devel-

opment or will gentrification occur and

displace residents and businesses?

These are some of the items that require

consideration when creating a develop-

ment vision and plan. Dallas benefits

from being a center of diverse business

activity. It is a hub of regional, national,

and international commerce. Technolo-

gy, energy, and financial servicers all

call Dallas home. This makes the city of

Dallas and more specifically the Dallas

Midtown site viable development op-

tions.

Accessibility and Visibilit

Site Accessibility: The subject property has superior site accessibility when

compared to other large acreage tracts located within the North Dallas business cor-

ridor. Site accessibility has the potential to significantly increase/decrease a devel-

opment’s success.

The subject property benefits greatly from its location on Interstate Highway

635, which provides superior access and visibility. The site is bound to the south by

Interstate Highway 635 which is currently undergoing a significant renovation and

expansion which will ultimately provide more traffic flow to the subject site. (Ex-

pected completion date is 2016) It if further bound on the east by Preston Road, the

north by Alpha Road, and the west by Montfort Drive. The current traffic counts for

these roads will fully support the proposed mix-used development, and are expected

Subject Site

Source: Google Map

Dallas Midtown

Page 15

to increase upon completion of the IH-635 expansion. The site is also within close

proximity to the Addison Transit Center, Dallas Love Field, and the DFW International

Airport. DART bus service is also provided at the site which the expectation of future

DART rail development.

Site Visibility: A site’s visibility will help determine the type and amount of de-

velopment sustainable for development. The subject site benefits from superior ac-

cess and visibility. The topography of the property places it above IH-635 making it

nearly impossible to miss. In addition to the natural topographical advantages of the

site, the style and complexity given to the Dallas Midtown Tower will only further en-

hance the site visibility and notoriety.

Site Limitations: All sites will have some limitations that may take several

forms. The subject site is considered superior in most all aspects when compared to

other large urban acreage tracts; however the large size of the subject property does

provide some limitations. It will be challenging to keep the development velocity and

continued development if the market softens, the economy weakens, or natural dis-

asters occur. Due to the complexity of the development with many different projects

planned the short term risks are higher due to the subject’s economies of scale.

Dallas Midtown

Page 16

DALLAS MARKET STATISTICS AND ANALYSIS

Vacancy rates: Vacancy rates have seen a significant decline over the past

twelve months with the expectation that they will continue that trajectory for the

foreseeable future. The overall office vacancy rate is reported at approximately 20%

according to Jones Lang LaSalle. It should be noted that at the same time last year

the vacancy stood at nearly 28%. These stated vacancy rates include all ranges and

classes of office space. Maverick Development feels the luxurious accommodations

and expense savings presented by the LEED Silver Dallas Midtown Tower will be able

to attract a stable mix of tenants that will produce a stabilized occupancy of 90+ per-

cent. The other third party data (CoStar and PPR) referenced earlier in this proposal

reinforces the improving market fundamentals that point to an uptick in vacancy and

rental rates. Dallas always has a need for high end office space due to its competitive

economic structure.

Segmentation: Focusing on a ten-mile radius, the local population surrounding

Dallas Midtown are young affluent families and young professionals, both getting

started on their careers and families. The area is comprised of the Esri segmentation

groups Young and Restless, Boomburgs, and Up and Coming Families. Averaging 30

years old, these are people working hard to get started in life. They are mostly white

but with quickly increasing diversity; and about a third Hispanic origin. The people in

the lower income ranges are generally younger with very young children, and have

not had time to achieve higher income levels yet in their careers as professionals in

sales, service, office and administration. The higher income ranges are attained

through dual incomes, working in management and sales, and as professionals. Be-

fore children they enjoy movie theaters, bars and night clubs, fitness and sports, buy

electronics, and live in apartments. After children, they go to theme parks (Disney

World on the higher end), and enjoy family DVDs, laptops and software and toys.

They spend money on furniture, toys, electronics, sports events, men’s clothing, SUVs

and to buy a home. The general ranges for key statistics are as follows:

Dallas Midtown

Page 17

Source: http://www.esri.com/~/media/Files/Pdfs/library/brochures/pdfs/tapestry-segmentation.pd

http://www.arcgis.com/explorer/?open=4778fee6371d4e83a22786029f30c7e1

This broad view over the ten-mile radius masks a very important segment that

is visible with a closer look at the three-mile radius. Within three miles of Dallas Mid-

town, there is a high concentration of two of the highest Esri segments, Top Rung and

Connoisseurs as shown in purple. These are a little older people who have done very

well for themselves, and are located very nearby. This group will skew the market up-

wards.

These people are in their forties and many are at the top of their earning po-

tential. The incidence of self-employment is twice the national average. Over 70% are 10 Mile Radius

3 Mile Radius

10 Mile Radius

Dallas Midtown

Page 18

married and over 30% still have children living at home. There is not much ethnic di-

versity in this group. They travel extensively, own diversified investments, and are

well insured. They hire professional services for any home improvements and remod-

eling projects, and for cleaning and lawn services. Luxury cars must have navigation

systems. They buy online and are well read.

It is worth noting that within the three-mile radius, there is a good

representation of people who prefer to rent apartments.

Retail that should do well in the Dallas Midtown area include a toy store, home

furnishings, furniture and household goods, baby and childrens’ goods, cutting-edge

electronics, men’s clothing, sports equipment, high-end prepared food and groceries

(like Eatsi’s), and garden center. Service-oriented businesses that should do well

include day care, fitness center and sports and activities for kids, pet services like

boarding, doggie day care and grooming, and spa services.

The market segmentation data supports the need for a dense mixed-use de-

velopment that incorporates walkability and a sense of community. The urban life-

style is becoming the new trend as gas prices and other commodity prices continue to

rise. Potential residents, businesses, and others are looking for a destination that al-

lows for an enjoyable live, work, play atmosphere. Dallas Midtown will provide this

lifestyle.

Employment Factors: Employment factors play an important role in the long

term viability of any development. Regions with stable or growing employment in

white collar jobs create the need for additional service oriented jobs. Dallas is known

for its professional, healthcare, and real estate industries, but according to the Bureau

of Labor Statistics, leisure and hospitality had the largest year over year change in

employment as a percentage. It can also be seen that the Dallas-Fort Worth-

Dallas Midtown

Page 19

Arlington MSA outpaced the United States as a whole in all sectors but information

and Manufacturing. (See below)

Percent Change in Employment

The following chart shows how the Dallas-Fort Worth-Arlington MSA stacks up

against the other major metropolitan areas in the United States. Dallas ranks second

only to Houston, making it further evident that the Dallas economy and employment

trends are favorable for expansion of the office, retail, and housing sectors.

Dallas Midtown

Page 20

Percent Change in Employment

Comparison of Major Metropolitan Areas

Dallas Midtown

Page 21

HIGHEST AND BEST USE ANALYSIS

Determining the highest and best use of a parcel considered for development is

paramount to the overall success of the project. A site’s highest and best use is

molded and identified by market forces such as supply and demand. There are four

main criteria utilized in evaluating a property’s highest and best use:

Legally Permissible

Physically Possible

Financially Feasible

Maximally Productive

The actual application of these four criteria is applied in a sequential manner.

Many development sites will have multiple legally permissible uses but may not pass

the test of being physically possible, of the remaining options that are physically pos-

sible, even fewer of those may be financially feasible and ultimately only one use is

considered maximally productive.

HIGHEST AND BEST USE OF THE LAND AS THOUGH VACANT

The analysis of the highest and best use of a site as if vacant assumes the

property being developed is vacant or in this case can be made vacant by demolishing

the existing improvements. The process is critical in determining the potential use of

the site as if vacant while simultaneously examining improvements and their con-

formance to the highest and best use of the site.

Legally Permissible

Private deed restrictions, municipal zoning, adopted building codes, special

district designations, and environmental regulations must all be considered when de-

termining the legally permissible development options for a specific site. Any pro-

posed or potential changes in these restrictions must also be addressed in the analy-

sis. The site is currently zoned regional retail development by the City of Dallas. The

property considered for this analysis is also owned by multiple entities causing some

potential configuration issues for the planned development. It is assumed for the

Dallas Midtown

Page 22

highest and best use analysis that the city will approve a more dense mixed use zon-

ing that includes: office, commercial, residential, retail, and entertainment. It is fur-

ther assumed that the existing land owners will work in the best interest of develop-

ment and re-platting will be utilized when necessary. Under these assumptions, the

planned development mixed-use development would be legally permissible.

Physically Possible

The physical characteristics and attributes of the site were identified earlier in

the site and market analysis component of this proposal. The site has more than ad-

equate utility and is functional in size and shape. It is also serviced with City of Dal-

las municipal utilities. The location and access to the site is considered above aver-

age compared to other parcels of that size. Many potential uses would be possible

for development with this site, including mixed-use development.

Financially Feasible

An analysis of local market conditions identified and discussed earlier in this

proposal provides a positive indication for future development. The market analysis

indicated that a mixed-use development would have demand in the marketplace.

Upon review of the Pro-Forma analysis covered later in this proposal it is evident that

the first development project, i.e. Dallas Midtown Tower will produce a sufficient in-

vestment return that is far greater than its replacement cost. The development of a

luxury class “A” office building within the context of a larger mixed-use development

is financially feasible.

Maximally Productive

The final test applied in the highest and best use analysis of the site as if va-

cant is whether the intended use will be considered maximally productive. Maximally

productive implies that the use will render the highest land value. This analysis of the

physically possible, legally permissible, and financially feasible uses of this site indi-

cate that the maximally productive use of the site as vacant is for development of a

mixed-use project. There are other potential uses for the site, but given the charac-

Dallas Midtown

Page 23

teristics described, a mixed-use is believed to produce the highest return to the site.

PEDESTRIAN FRIENDLY AND WALKABILITY IN DALLAS MID-

TOWN

Dallas Midtown aims to be a special community and Maverick Development is

focused on achieving that goal. Dallas Midtown will be pedestrian friendly and has

been planned with features that create walk ability which will reduce vehicle traffic

within the site. Parking garages will be located at the edges of the development for

ease of ingress and egress which will also reduce traffic and congestion within the

site. There will be two main east/west roads connecting Preston to Montfort. Mont-

fort will provide the main arterial access north to Alpha Rd. The main boulevards will

predominantly be one way streets with street level parking on one side and large

sidewalks with bike lanes. Dallas Midtown will enhance the living, working, and

shopping experience by being pedestrian friendly.

There are four urban design qualities that were studied and quantified in the

book Pedestrian- & Transit-Oriented Design, Ewing & Bartholomew (2013), that Mav-

erick Development is incorporating into Dallas Midtown. These are Imaginability, En-

closure, Transparency, and Complexity. These four qualities will be integrated into

the design and architecture requirements to create a pedestrian friendly and walkable

environment.

Imaginability includes landmarks, marquee signage, and visual stimulation and

gives a community a sense of place. Dallas Midtown will have one of DFW’s premiere

landmarks, the new Dallas Midtown Tower which will stand out for miles in the shape

of a “big D”. The Dallas Midtown Tower will exhibit innovative sustainable building

qualities with aluminum photovoltaic panels that people can watch open and close as

conditions warrant. Also, the spacious Lone Star Garden Park, the many fountains,

and the walk under star monument will give this site a sense of place and notoriety in

DFW.

Dallas Midtown

Page 24

Enclosure is defined by how public spaces are visually stimulated through

buildings, walls, and trees. Enclosure will be achieved by the strategic choice and

placement of foliage which will provide shade and a natural atmosphere and “create

an airy ceiling of branches and leaves,” in accordance with the ULI website. Buildings

on both sides of boulevards will be basically equal height to act as walls in the out-

door room Dallas Midtown will create.

“Transparency refers to the degree to which people can see or perceive what

lies beyond the edge of a street or other public space,” Ewing & Bartholomew, 2013.

Buildings will contribute to this transparency with the street level mixed use retail and

restaurants providing a warm and encouraging atmosphere for shoppers to enter.

Transparency fosters a feeling of belonging, when passersby can look into a store or

restaurant and imagine themselves in those spaces; patronage will increase as will the

overall success of the businesses. Architectural guidelines will discourage reflective

glass and large building setbacks as Ewing and Bartholomew concluded that these el-

ements minimize transparency.

Dallas Midtown

Page 25

Complexity is the positive visual aesthetics created by buildings, street furni-

ture, and landscape elements. Dallas Midtown will provide all of this complexity in

the variety and richness of the buildings architecture. Dallas Midtown will have mixed

use retail and multifamily/condos, brownstone townhomes, mixed architectural

themes from 19th century America to French Colonial and modern structures that will

enhance the human experience at this site. As discussed earlier there will be a multi-

tude of landscape features such as, fountains, Dallas Midtown Tower, green space

and parks, along with the walk under star monument. Dallas Midtown will have a

plethora of visual richness through the implementation of complexity.

Dallas Midtown

Page 26

TAX INCREMENT FINANCING

The city of Dallas website states, “A tax increment financing district is a special

purpose district; a way for the City of Dallas to reinvest added tax revenue from new

development back into the area where it originated. The TIF program is used to fi-

nance new public improvements in designated areas. The goal is to stimulate new

private investment and thereby increase real estate values”. (Quoted from the City of Dallas Eco-

nomic Development Website)

Dallas Midtown is perfectly situated to create a new Tax Increment Financing

District (TIF). The TIF would be utilized to help finance the initial public/private

transit station as well as assist with streetscape projects related to the initial road

projects. As the development continues to thrive the additional revenue generated

from the TIF could provide a source of funding for the long term vision of bringing a

DART line to the Dallas Midtown site. Dallas Midtown has a large amount of planned

green space and the TIF can be used to fund public landscaping projects. This would

be a useful method of reinvesting a portion of the additional tax revenue back into

Dallas Midtown.

Dallas currently has 18 active TIF’s and should be willing to assist Maverick Develop-

ment in the creation and implementation of a 19th TIF.

Dallas Midtown

Page 27

DALLAS BUILDING CODES AND SUSTAINABILITY

The City of Dallas has been very proactive in setting standards for sustainable

building requirements. According to their website, “In September 2012, the City

Council adopted Resolution 12-2428 Ordinance 28813 for Phase II of the green

building ordinance. Scheduled for full effectiveness on October 1, 2013, Phase II has

incorporated multiple building efficiency systems into the ordinance to ensure that

Dallas remains on the leading edge of green building design and use.” The Dallas

Midtown Tower will meet and exceed these requirements. The proposal for the Dallas

Midtown Tower calls for LEED Silver certification and Maverick Development plans to

acquire the LEED ND (neighborhood development) designation. Maverick Develop-

ment has built in a remarkable amount of adaptive reuse into the project and will re-

use materials when possible. The aggregate siding from the existing SEARS retail

building is going to be repurposed as the base of the water feature flowing toward

the dedicated green space. The vacant Macy’s building displays an exceptionally de-

tailed mosaic feature (west exterior wall) that will be preserved for use in the central

plaza’s dancing water feature. Maverick Development looks forward to partnering

with the City of Dallas to create a sustainable development that will showcase how

sustainable building methods can be cost effective and create enjoyable open-spaces

for the community as a whole.

Dallas Midtown

Page 28

FINANCIAL ANALYSIS

In order to complete the 700,000 SF office tower that we are proposing, we will

work to form a partnership with a large private equity contributor. The total project is

expected to cost $102,027,943 including all development fees and financing charges.

We believe that the private investment group will be attracted to the stability of the

Dallas/Fort Worth market and the attractive returns we have written into our Pro-

Forma. We would plan to contribute the land as our equity contribution, which would

be valued at $6,969,600. Our equity partner would be asked to contribute a total of

$33,841,577, with one payment at construction start of $10,418,400 and one at the

close of the permanent take-out loan of $23,423,177. The total LTV for the perma-

nent loan will be 60% with the additional investor partner contribution. After all equi-

ty contributions, the Managing Partner would have contributed 17.08% of the total

equity and the Investor Partner would have contributed the remaining 82.92%.

We expect to find debt for the construction and permanent loan at a rate based

upon the prime rate plus 200 bps. As of April 13, 2013, the prime rate was 3.25%

which means our effective interest rate would be 5.25%. We expect large financial in-

stitutions, banks, and even pension or life insurance companies to be interested in

providing debt to fund this project. We expect the construction loan to be outstand-

ing from January 2014 to December 2015, or 24 months. After our equity investment,

the construction loan amount is expected to be $71,555,760, which would be either

refinanced or paid off by a permanent loan once the building is complete. The per-

manent loan amount of $61,216,765 is also underwritten at 5.25% with a 30 year

amortization. A balloon payment is due at year 10, but the Pro-Forma is underwrit-

ten as a five year hold.

In order to cover our construction loan interest payments and operating short-

falls during the lease-up period, we plan to take advantage of EB5 financing. EB5 fi-

nancing is given to developers and investors in order to stimulate job growth in the

area. We expect to receive EB5 financing for a total of $8,000,000 at a rate of 4.5%

interest on a 20-year amortization. We expect to accept the $8,000,000 of capital

during Year 1 and plan to pay off the balance of the loan in Year 4 after the property

has stabilized.

Dallas Midtown

Page 29

In the building, we plan to have a total of 500,000 SF of leasable office space

and 11,000 SF of leasable retail space. As part of our marketing plan, we hope to at-

tract one large employer to occupy 300,000 SF or more of the office space, with the

other space available to smaller employers. The office space is underwritten at

$25/SF for the optimal space and $22/SF for the less desirable space. Office tenants

were underwritten with a flat amount of $3/SF for triple net charges. Retail space was

underwritten at $19/SF with $5/SF triple net charges. All rent information was based

upon research in the local market, particularly from the CoStar group.

For the cash flow projection, we expected higher vacancy and concessions dur-

ing Year 1 while the property is lease-up. The Year 1 vacancy was underwritten at

20% with a 50% concession underwritten to encourage tenants to consider our project

in a recovering market with many alternative options. After Year 1, vacancy was un-

derwritten at 10% and concessions were included at 5% per year. During the entire

Pro-Forma period, we expected expenses to be 35% of the Total Revenue (Effective

Gross Income) once the asset has stabilized.

In order to calculate the Internal Rate of Return, we utilized an exit cap rate of

7%, which was based upon our research completed through Integra Realty Resource.

In the underwriting, we projected to hold the project for a total term of five years,

which includes two years of construction, one year of lease-up and two years of sta-

bilized performance. Based upon a 7% exit cap rate, we determined the property

sales price to be $115,452,158 and our Unleveraged IRR to be 8.78% at Year 5. When

considering all factors, we determined the Leveraged IRR to be 14.61% at the end of

Year 5 when the property was disposed. We plan to split all proceeds pari passu

(based upon contribution percentage) between the partners.

Because of the anticipated success of the project, we expect there will be sub-

stantial interest in purchasing the property at the end of Year 5. We expect to offer

the first right of refusal to the Investor Partner at the end of Year 5 or to take the

property out to market if the Investor Partner dismisses their purchase option.

Dallas Midtown

Page 30

FINANCIAL SUMMARY

CONSTRUCTION DEBT STRUCTURE

Dallas Midtown

Page 31

PERMANENT DEBT STRUCTURE

EQUITY STRUCTURE

Dallas Midtown

Page 32

OFFICE TENANT MIX:

RETAIL TENANT MIX:

Dallas Midtown

Page 33

10 YEAR CASH FLOW ASSUMPTIONS AND CASH FLOWS:

Dallas Midtown

Page 34

DISPOSTION ASSUMPTIONS:

UNLEVERAGED IRR:

LEVERAGED IRR:

Dallas Midtown

Page 35

MAVERICK DEVELOPMENT TEAM MEMBERS & CONTRIBUTORS

Lonnie W. Hendry, Jr.

Ellen L. Boyer

Eddie C. Munoz

Steve R. Prochnow

Brent M. Card