rclco draft market findings092909

Waco Plan 2050: Market Analysis Findings

Greater Downtown Waco Steering Committee | September 29, 2009

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Downtown Existing Conditions and Market Assessment•

Residential•

Retail •

Office•

Hotel

Future Market Opportunities

EXISTING CONDITIONS & MARKET ASSESSMENT

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Residential Market Existing Conditions

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DEFINITION OF THE WACO DOWNTOWN AREA

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OPPORTUNITY TO ATTRACT A WIDER VARIETY OF AUDIENCES FOR RESIDENTIAL DOWNTOWN WITH WALKABILITY AND AMENITIES

STRENGTHSLarge student body and small amount of on-campus housing creates a strong market audience for apartments and affordably priced single family homes and condosRiverfront serves as an amenity, opportunity to draw audience by river-oriented productProximity Heritage Square serve as focal points for downtown areaEase of access to both Dallas and Austin through I-35Sites of cultural interest and entertainment, including proximity to BU sporting event facilities, serve as areas of interest for downtown residents.Proximity to downtown jobs (in particular government, insurance and retail employers)

CHALLENGESPerception of Downtown's quality of life deters many potential buyers Not an established residential location (lack of variety of product)Lack of appetite for dense residential developmentLack of local serving retail Challenges associated with retrofitting older buildings or building new projects downtownDirect competition with lower-cost suburban homes

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Austin Avenue Flats- newly constructed condo building with many units leasing

Heritage Quarters- new student apartments in downtown

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RESIDENTIAL MARKET IS DRIVEN BY BAYLOR STUDENTS, WITH MAJORITY CHOOSING RENTAL PRODUCT

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Apartment market driven by proximity to Baylor University and Central Business District

New urban product such as Austin Avenue Flats and Praetorian Lofts are renting for more than $1.00/sf. Highest premium for rental above retail.

Dorm style apartments for Baylor Students are highly amentized and carry hefty rents of $1.30-$1.50/sf. and are rented by room. Other new communities with the same quality of amenities but do not rent by room have rents around $1.00/sf.

Many Baylor students choose to live in older communities, east of campus that rent for $0.60 to $0.90/sf. Individually owned-professionally managed condominiums and townhomes compete with the older traditional apartments.

SOURCE: RCLCO

Baylor University area has student- oriented apartments both in student dorm and traditional apartment style.

Emerging rental market downtown includes new

construction condominium quality construction and rehabilitation of existing

product into loft style apartments.

Newly constructed Residences at Central Texas Marketplace

appeal to hospital, education and skilled-manufacturing employees.

Rents average $0.90 /sf.

Older apartments target retail and manufacturing

employees. Rents average $0.80/sf.

Newly constructed student apartments, Heritage Square, is commanding the highest rents

per unit at $1.50/sf. This apartment is performing well in lease-up, mostly due to its high

level of amenities.

Apartment CommunitiesGreater Downtown Waco

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MOST NEWER COMMUNITIES RENT FOR MORE THAN $1.00 PER FOOT, STUDENT- DORM STYLE APARTMENTS ARE CLOSER TO $1.50

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Relevant Apartment

Communities Occ

Wgt.Price Per SF

Total Units

% Under- grad

student

1 Behrens Lofts 93% $1.02 57 25%

2 Austin Avenue Flats 92% $1.68 49 30%

3 Praetorian Lofts 100% $1.16 12 25%

4 LL Sams Lofts 100% $1.11 126 95%

5Aspen Heights

75%, 100%

in 2008$1.20 107 100%

6 Abby Glen 92% $1.00 168 100%

7 Heritage Quarters 75% $1.45 368 100%

8 The Grove 98% $1.34 192 100%

SOURCE: RCLCOGreater Downtown Waco

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8

4123

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One bedrooms appear to be the most popular floorplan downtown. Not many are available and more young professions or grad students look for

apartments downtown

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HOME PRICES ACROSS WACO ARE RELATIVELY AFFORDABLE: THE DOWNTOWN AREA HAS THE AMONG THE MOST AFFORDABLE AND IS NOT AN ESTABLISHED FOR-SALE RESIDENTIAL LOCATION

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GREATER DOWNTOWN

AREA

Source: Trulia, Claritas 2008

Higher end homes are

located in more suburban locations

around the lake

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THE DOWNTOWN AREA CURRENTLYLACKS NEW RESIDENTIAL PRODUCT, EXISTING HOMES ARE VERY AFFORDABLY PRICED

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Waco has virtually no new single family homes available in Waco city limits.

Austin Avenue Lofts and other loft buildings downtown were first conceived as condo buildings but sales have been slow, priced from $119-495K. Units are currently for rent from $850 to $2,400/month.

Single family homes are priced very affordably with an average sales price $130,000, or $45/SF.

Listing prices within the downtown area average under $100,000.

Most single-family and multi-family homes around Baylor are investment properties for Baylor student rentals.

Currently on-hold redevelopment of the old Waco High site will add roughly 70 new affordable condos to downtown.

SOURCE: RCLCO

Older, more established single family

neighborhoods: Dean- Highlands, North Waco, Brook Oaks. Ranging in

price from $60,000- $150,000.

Baylor neighborhood is a mixture of single family and multifamily homes.

Older, less established single-family homes ,

majority of listing pricing from $30,000-$75,000.

Greater Downtown Waco

Old Waco High

Austin Avenue Lofts

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Retail Market Existing Conditions

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THE DOWNTOWN AREA ENJOYS A VARIETY OF RETAIL MARKET AUDIENCES, REPRESENTS AN OPPORTUNITY TO ATTRACT NEW RETAIL USES

STRENGTHSStrong downtown convention and visitor traffic will serve downtown retail Government and insurance jobs will fuel office-serving retail and restaurantsGrowing downtown residential population could fuel local-serving retailLarge student body represents a strong market audience for local-serving and boutique retailUnique entrepreneurship program at Baylor could spur boutique store-front opportunities for students

CHALLENGESHousehold incomes present challenges for recruiting retailers with narrow locationalcriteria Majority of existing space downtown is older space with smaller floorplates, makes attracting larger tenants difficultLarge amount of obsolete retail space begs redevelopmentMajority of large-scale retailers located along Valley Mills Drive and 340 LoopLack of night-time population could be difficult for grocery stores or restaurants to survive

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Major regional retailers are already present at large centers in the market, eg. Central Texas Marketplace

Shops at River Square include restaurants and local boutique retail stores, targeting Baylor students and downtown employees.

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THE DOWNTOWN AREA TYPICALLY ATTRACTS SMALLER FORMAT RETAILERS, WITH THE BIG BOX STORES LOCATING ALONG VALLEY MILLS AND I-35

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Downtown renovation is beginning in the Heritage Square and River Square area.

New trolley system linking Baylor to the downtown area will bring a greater interest to downtown retail and restaurants

Downtown street-front retail around Heritage Square rents from $12-$16/SF.

Downtown residents and students must travel to suburban centers to shop

Rents at large suburban centers range from $17-$20/SF, with restaurant/outparcel space renting from $12-$16/SF.

Planned Town Center development anticipates rents of roughly $20/SF for space. Well over current downtown average.

SOURCE: RCLCO, Costar

Central Texas Marketplace is a newly constructed 700,000 square foot power center. Major national

tenants include Belk, Sports Authority and Bed Bath and Beyond.

Richland Mall , built in 1980 and renovated in 1996,and is

more than 700,000 square feet. Main tenants are

Dillards and JCPenney and Movie Theater.

Valley Mills Drive Corridor includes lower density older strip retail

with regional serving tenants.

The western part of the study area includes

mostly vacant dilapidated street front

retail

Heritage Square area has been redeveloping in the last few

years, offering renovated and new construction space.

Tenants include restaurants, bars, and coffee shops serving

downtown employees, conventioneers ,and visitors

River Square is new office/retail development with a variety of boutique shops and

restaurants. This development is very popular among Baylor

students and downtown employees.

Retail over 10K SFRetail under 10K SFGreater Downtown Waco

Wal-Mart

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DOWNTOWN RESIDENTS AND VISITORS MUST DRIVE OUTSIDE THE DOWNTOWN AREA FOR MUCH OF THEIR SHOPPING NEEDS

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Relevant Retail

CompsKey

TenantsTotal

SF OccLease Rates(NNN)

EXISTING RETAIL CENTERS1

River Square Ninfa’s,

Crickets Bar and Grill,

92,874 100% $16

2HEB Center HEB 77,534 97% N/A

3 Heritage Square Retail

Square Bar, Olive Branch

7,85 2 100% $17

OUTSIDE GREATER DOWNTOWN AREA4

Waco Commons

Tractor Supply Store

160,000 89% $12

5 Central Texas Marketplace

Marshalls, Belk

700.000 93% $20

6 Richland Mall Dillards, JC Penny 708,068 98% $15

PLANNED AND PROPOSED

7Town Square N/A

61,000 total

plannedN/A $20-$25

8 Speight Ave. N/A 4,000 N/A $24

SOURCE: RCLCO Greater Downtown Waco

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5

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Office Market Existing Conditions

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MUCH OF DOWNTOWN OFFICE SPACE IN NEED OF REHABILITATION TO ATTRACT NEW TENANTS

STRENGTHSStudy area encompasses central business district with notable historic buildings Concentration of government and insurance employersWalkability creates active daytime population, attractive to employeesProximity to I-35Redevelopment downtown (including Chamber of Commerce and Roosevelt building) could spur further developmentRegional serving airportQuality infrastructure and streetscape

CHALLENGESDevelopable land underutilized with extensive parking lotsMany major employers are located outside of the study area and CBDLack of traditionally office using employers in the MSALarge amount of obsolete and vacant space in need of

redevelopment Asking rents for quality space are high compared to suburban spaceLack of service-oriented retail for office workers

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Vacant Waco Tribune Building

Redevelopment downtown, catalyzed by Heritage Square and Chamber Building (left)

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DOWNTOWN REPRESENTS 40% OF THE OCCUPIED OFFICE SPACE WITHIN THE MSA

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Office market in downtown Waco is small and comprised of mostly of insurance, finance, government and emerging telecom tenants..

Downtown office space rents from $6/ SF for older street front space to $18/SF for high-rise space.

Office leasing above $18/SF is sparse, many companies will settle for lower quality space under $18/sf.

The newly renovated Roosevelt is currently 100% occupied and had rents of $18/SF but offered concessions.

The Roosevelt shows a pent-up up demand for newer office space but it did not produce net- new tenants. Mostly relocations from other lower quality space downtown.

Cluster of office space along N. Valley Mills and Bosque Blvd. are achieving roughly $15/SF.

Currently proposed office at Legends Crossing is looking to collect the highest rents in the city of $22.50 to $24.50/SF.

SOURCE: RCLCO, Costar

Downtown office space, mostly built from 1910-1950, is in need of

renovation. Many office tenants are in need of better quality space

River Square

Suburban Office Downtown OfficeGreater Downtown Waco

Office space intermixed with retail centers along N. Valley Mills Road and Bosque Boulevard.

Legend Crossing

The Roosevelt

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WACO EXISTING OFFICE TENANTS ARE COST SENSITIVE, MOST WILL NOT RENT SPACE FOR MORE THAN $18/SF REGARDLESS OF THE QUALITY

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Relevant Office

Comps Key TenantsTotal

SF Occ.

Avg. Lease Rates (NNN)

EXISTING OFFICE

1River Square

Seg-it, LAN Inc., Nelson Law Firm, New England Financial

20,500 61% $16

2 National Floyd's Building

Lone Star Legal Aid, Central TX Social Services

57,332 91% $18

3

The Roosevelt

Naman, Howell, Smith & Lee, July Business Services, Pakis, Giotes, Page & Burleson

110,510 100% $16

4 Bank of America Bank of America 15,727 75% $12

5 Kress Building N/A 40,374 $17

6 Wells Fargo Wells Fargo 218,168 100% N/A

SOURCE: RCLCO

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Hotel Market Existing Conditions

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CONVENTION AND VISITOR TRAFFIC HAS FUELED WACO’S HOTEL MARKET, OPPORTUNITY TO CAPTURE MORE OF THIS DEMAND WITH RENOVATED CONVENTION CENTER

STRENGTHSClose proximity to major entertainment venuesImmediate access to convention centerAdjacent to Central Business DistrictStrong regional accessStrong demonstrated performanceProximity to Baylor University

CHALLENGESSeasonality of tourists, convention, and student activityLarge amount of delapidated underperforming productLimited tourist-serving retail and entertainment optionsLack of major airport

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Hotel Waco

Recently renovated Hilton at the Convention Center

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HOTELS WITH ADR’S ABOVE $75 ARE THE STRONGEST SEGMENT OF THE MARKET WITH 63% OCCUPANCY IN 2008

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Average hotel quality is low in Waco, yet consistent demand will continue to grow with the renovation of the convention center and visitor traffic due to Baylor athletics

Occupancy among the 29 hotels Waco area hotels (including downtown hotels) through 1Q 2009 is at 51% and is down 6% from 2008

Revenue per room, however, increased roughly 12% from 1Q 2008 to 1Q 2009.

The Waco hotels are geared towards mid-priced business travelers, conventioneers, weekend sport travelers.

Many hotels downtown are also oriented toward I-35 travelers.

The Hilton hotel, recently renovated, carries the bulk of the business and convention demand. It boasts an occupancy of 70%

SOURCE: Waco Convention & Visitors Bureau, TravelTex Hotel Location

Downtown hotels targeting business and

convention travelers with proximity to

convention center and bulk of financial and government offices

Hotels along I-35 target highway travelers and

visitors to Baylor athletics


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FEW UPSCALE HOTELS IN WACO, MANY ROOMS UNDER $90 PER NIGHT

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SOURCE: RCLCO 1 Based on weekday rack rate, August 2009

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Relevant Hotel Comps

# of Room

s

Typical Room Rate

Range1

1 Hilton 196 $119

2 Courtyard by Marriott 153 $109

3 Residence Inn 78 $100

4 Hotel Waco 114 $80

5 Clarion 148 $89

6 Best Western 84 $80

7 La Quinta 102 $67

8 Econo Lodge 53 $64

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4

5

67

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Waco Existing Conditions and Market AssessmentFuture Market Opportunities•

Opportunity by Land Use •

Target Markets•

Long-Term Demand Figures

FUTURE OPPORTUNITIES ASSESSMENT

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Office Opportunity

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MODERATE DEMAND EXISTS WITHIN DOWNTOWN WACO FOR NEW LARGE-SCALE OFFICE SPACE

Economy is relatively healthy in Waco but the fastest growing employment sectors, namely healthcare and education, are not users of conventional office space.

Other large Waco employment sectors including manufacturing and trade, transportations, and utilities typically locate in warehouse and industrial space outside of the urban core

To date, the corporate office market has had a price ceiling of approximately $18/sf, limiting the opportunity for new construction office projects

The market in Waco has largely been driven by government, insurance, and finance tenants.

Large companies seeking build-to-suit opportunities (larger floorplates, newer buildings, air & light quality, updated features) may be attracted to new construction or rehab opportunities in Downtown Waco

The Roosevelt, at approximately 110,00 SF is a good example of a recently renovated

office building in Waco

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OVER THE NEXT FIVE YEARS DOWNTOWN IS LIKELY TO ADD ABOUT 75,000 SF OF OFFICE SPACE

Statistical demand analysis shows that downtown can support approximately 76,000 SF of additional office space by 2015 and 350,000 by 2025. The demand is likely to be split between rehab projects and build-to-suit opportunities.

Additional office demand could be driven by the introduction of one or more large corporate users into the downtown market or through economic development efforts to recruit new tenants from an emerging office using sector such as information and technology.

Example of rehabbed small office space (LoDo Denver, CO.)

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Residential – For-Sale Opportunity

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THE BULK OF DOWNTOWN RESIDENTIAL DEMAND EXISTS FOR PRODUCT OFFERED AT $250K & BELOW1

Demand for residential units primarily exists for units priced $150,000 and below for multifamily units and $250,000 for single-family homes.

Young professional households and some students are typically more flexible and willing to buy into downtown neighborhoods before all residential amenities, including retailand green space have been put in place.

Younger households are most likely to seek out locations directly within entertainment districts as they are more likely to take full advantage of the entertainment benefits and more willing to put up with the challenges (parking, noise, event crowds)

The target market audience (below age 44) currently makes up nearly 70% of the downtown area

Initially, the empty-nester (age 45 and up) market will be shallow but has the potential to grow over time if the downtown is able to become a more established residential neighborhood and can connect successfully to existing cultural amenities.

1 See Exhibit III-1 for statistical demand analysis and underlying assumptions

Example of Midrise condominium project

Example of a small lot single family home

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RCLCO PRIMARY HOME STATISTICAL DEMAND MODEL ANNUAL NEW HOME DEMAND WITHIN PRIMARY MARKET AREA1

Primary Market Area

Owners

Primary Market Area

Renters

Primary Market Area

New Households

X

X

X

• Income Qualified• Annual turnover rate2

• % Remain owners

• Income Qualified• Annual turnover rate• % Renters become owners

• Income Qualified• % Owner Households

X

X

X

• % Buy New Attached3

• Downtown Capture

AGE AND INCOME QUALIFIED NEW HOME DEMAND 2009-2014

1The Primary Market Area (PMA) is defined as the Waco MSA. 2 Turnover is defined as those households that move within a given year 3 Attached product includes condominiums or townhomes

DEMAND FOR UNITS

PRICED $110,000

TO $375,000

• % Buy New Attached• Downtown Capture

• % Buy New Attached• Downtown Capture

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DEMAND FOR FOR-SALE PRODUCT DROPS OFF SHARPLY ABOVE $200,000

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12 7 4

70

22

13 1362

Less than$112,000

$112,000-$150,000

$150,000-$188,000

$188,000-$250,000

$250,000-$375,000

Single FamilyMultifamly

2009-2014 Annual Statistical Demand for Units in Downtown by Price PointNew or Rehabbed Multifamily and Small Lot Single-Family Homes

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Unit TypeAvg.

Purchase Price 1

Monthly Mortgage Payment2

Monthly Property Taxes 4

Monthly Condo Fees6

Tax Saving

s 5

Total Housing

Cost

Actual Rent 3

Cost of Owning vs.

RentingOne Bedroom $119,000 $574 $228 $110 ($214) $699 $950 -$251 (-26%)

Two Bedroom $200,000 $1062 $422 $170 ($395) $1,259 $1,870 -$611 (-33%)

AT $120K - $200K PRICE RANGE, PURCHASING A ONE-OR TWO- BEDROOM COMPARABLE CONDOMINIUM IS 30% LESS EXPENSIVE THAN RENTING IN WACO

Comparing the rents at Austin Avenue Lofts, the monthly cost of owning a one bedroom condominium is roughly $251/month less than renting at the building and a two bedroom will cost roughly $611 less per month – or 26% and 33% less than renting, respectively. This represents an unmet and underlying demand for for-sale condominium product downtown.

Mortgage Assumptions Down Payment 15%Marginal Tax Rate 28%Interest Rate 5.50%Condo Fees $0.15/sf

1 Price based on conceived pricing from Austin Avenue Lofts2 Reflects an average payment, assuming a three-year hold period, on a 30 year mortgage3 Current rents at the Property4 Based on City of Waco tax rate of $2.56 mills per $100. 5 Calculation based on property tax plus interest expense at 28% tax rate 6 Assumption of potential condo fees on site

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Residential - Rental Opportunity

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RCLCO STATISTICAL DEMAND MODEL FOR RENTAL UNITS ANNUAL RENTAL DEMAND WITHIN PRIMARY MARKET AREA1

Primary Market Area

Renters

Primary Market Area

New Households

X

X

• Income Qualified• Annual turnover rate• % Remain renters• % Rent apartment vs. home

• Income Qualified• % Renter Households• % Rent apartment vs. home

X

X

AGE AND INCOME QUALIFIED NEW RENTAL DEMAND 2009-2014

1The Primary Market Area (PMA) is defined as the Waco MSA. 2 Turnover is defined as those households that move within a given year

DEMAND FOR NEW RENTAL UNITS

• % Rent New• Downtown Capture

• % Rent New• Downtown Capture

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DEMAND FOR MULTIFAMILY RENTAL PRODUCT IS PRIMARILY BELOW $875 BUT MUCH OF DEMAND IS DRIVEN BY STUDENTS WHO TEND TO HAVE ROOMMATES

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96

1

less than $875 $875 - $1250 $1250 - $1875 $1875 - $2500

2009-2014 Annual Statistical Demand for Rental Units in Downtown by Price Point

Monthly Rent

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Rental product is a logical fit for Downtown

•

Demonstrated demand at projects like Heritage Quarters, offering amenities such as fitness center, pool, lounge area and access to downtown, have performed very well.

•

The newly implemented bus route connecting Baylor to Heritage Square, in addition to planned retail offerings and downtown events, should enhance the appeal of downtown living for students and young professionals.

•

High quality apartments would appeal to a broad market audience, particularly students and downtown employees seeking flexibility and affordability

•

Rental properties are attractive to landowners or developers seeking long-term holds on income producing assets.

STUDENT TARGETED APARTMENTS ARE A VIABLE OPTION DOWNTOWN

Recently constructed Heritage Quarters are student targeted apartments in Downtown Waco

The Praetorian lofts have a mix of students and young professionals

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Retail Opportunity

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Downtown Area Households10,086 downtown households1

$67M total annual retail spending

Students14,500 downtown students $18M total annual retail spending

Area Employees16,000 downtown employees$45M total annual retail spending2

Downtown Conventioneers106,000 conventioneer visitors$9M total annual retail spending3

Tourists2.9 M annual tourists3

$47M total annual retail spending1 Claritas2 Expenditures from ICSC "Office Worker Retail Spending Patterns"3 Based on data form the Waco Convention and Visitors Bureau

NOTE: Excludes some retail uses including automotive and electronic/mail order shopping.

DOWNTOWN WACO HAS A VARIETY OF MARKET AUDIENCES BUT ONLY CAPTURES 33% OF THEIR POTENTIAL EXPENDITURES

10%

25%

24%

36%

5%

Existing Market Audience BreakdownOf the $510 million in potential annual

spending of these markets audiences the Downtown Area is only capturing 36%.

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$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Households Students Employees Conventioneers Tourists

2008 2013

($ mil.)

+ $12M

RCLCO PROJECTS IMPROVED RETAIL DEMAND OVER THE NEXT FIVE YEARS: GROWTH IN MARKET AUDIENCES+ INCREASED MARKET CAPTURE = MORE EXPENDITURES

$24 million additional sales potential

69,000 sq. ft. additional supportable space in Downtown Area

+ $1M

+ $3M

+ $1M

+ $7M

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NEIGHBORHOOD-SERVING RETAIL NEEDED TO PREVENT RETAIL DOLLARS FROM LEAKING OUT OF THE DOWNTOWN AREA

Statistical demand1 dovetails with interview feedback which reveals the need for more service-oriented retail to support growing residential base, students and existing office tenants. Currently these market audiences are driving to Central Texas Marketplace or Valley Mills Drive for the majority of their retail needs.

Potential neighborhood retail demand (2009-2014)2:

Level of existing retail in category

Future Potential

Primary Market Audiences

Convenience Grocery/Specialty Food Low 13,000 SF Residents, Students, EmployeesApparel and Accessories Low 17,000 SF Employees, Students, ResidentsPersonal Care Low 13,000 SF Employees, Residents, StudentsRestaurant and Bars Medium/High 18,000 SF Residents, Employees,

Tourist/Convention, StudentsOther Discretionary Low 8,000 SF Employees, Residents, StudentsTOTAL 69,000 SF

Retailers at Denver’s Lower Downtown Warehouse District

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Hotel Opportunity

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CONTINUED SUCCESS IN ATTRACTING EVENTS TO DOWNTOWN AREA WILL DRIVE HOTEL DEMAND

Waco room night bookings for Events, Conventions, and Sports have increased from 411,000 in 1995 to 525,000 in 2007. This represents an annual growth rate of 2%.1

Visitor spending on hotels and motels has increased from $38 million in 2001 to $56 million in 2008. This represents an annual growth rate of 7%.1

According to the Office of the Governor occupancy in all Waco hotels was 61% in 2008, while occupancy in hotels with average daily rates above $75 was 63%.

Currently the market for hotel rooms with average daily rates above $75 is undersupplied, with demand outpacing supply.

1 Waco Convention and Visitors Bureau

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DOWNTOWN CAN SUPPORT AN ADDITIONAL HOTEL BY 2014

The demand for the next five years is within the ‘upscale’segment of the hotel market (hotel with average daily rates above $75).

RCLCO estimates demand for a 214 upscale rooms by 2014.

RCLCO recommends diversifying hotel offerings in Downtown by adding a least one non-chain hotel catering to Baylor families and offering classic ‘college town’architecture and amenities. Examples of other college towns with classic hotels include Tuscaloosa, Alabama and Auburn, Alabama.

The Auburn University Inn and Conference Center

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Summary of Overall Opportunity

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LAND USE TARGET MARKET

Commercial

Retail

Small-scale convenience retail tenants serving local households, downtown tourists, local employees, and Baylor students. Over long term the opportunity could evolve into larger scale formats as the household density increases in the downtown area.

Office

Rehab spaces will primarily appeal to small tenants such as law-firms, engineering and other small professional service firms. Also an opportunity to pursue build-to-suit opportunities for large office tenants either as a headquarters location or anchor of a multi-tenant building. These large users could include insurance companies, business service firms, or government agencies.

HotelTargeted to a wide range of convention-goers, Baylor visitors, business travelers, tourists, and event visitors. The short term opportunity calls for more hotels in the upscale segment (ADR of $75+) and a non-conventional hotel offering targeting Baylor visitors.

Residential

For-Sale MultifamilyTargeted primarily to younger professionals earning $45-$75k seeking the urban lifestyle. Mainly 1- and 2- person households seeking 1- and 2-bedroom units. Secondary target markets include empty-nesters and students.

For-Rent MultifamilyTargeted primarily to students seeking an alternative to on campus housing or lower quality rental options. The secondary market includes professionals earning $30-$55k seeking the urban lifestyle and proximity to employment. This group should include a large number of government and insurance sector employees.

Single-Family Targeted to younger professionals and empty-nesters earning $60-$100k seeking the privacy of single-family residence with the convenience of an urban location.

SUMMARY OF WACO TARGET MARKETS

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Land Use

Overall Opportunity Assessment1

Cumulative Depth of Demand in Downtown Area (SF) Initial Pricing/

Lease Rates (2009$)2

Average Annual Demand(2010 to

2050)Near

(0-5 yr)Mid

(5-10 yr)Long(10+)

By 2015

By 2025

By 2050

Commercial

Office X X XX 75K 350K 1.1M $16-$18 26K

Hotel XXX XX XX 100K 300K 900K Variable 21K

Retail XXX XX XX 85K 240K 800K $16-$19 19K

Residential

Multifamily For-Sale XX XX XX 150K 425K 1.2M $150-$200/sf 29 units

Multifamily For-Rent XXX XXX XXX 285K 800K 2.3M $1.10-1.40/sf 62 units

Single-Family XX XXX XXX 275K 777K 2.2M $110-$120/sf 24 units

SUMMARY OF FUTURE LAND USE OPPORTUNITY BASE LINE SCENARIO

1 X= minimal, XX = moderate, XXX = strong 2Commercial rents are triple net

Based on the Baseline Scenario the study area would add the following between 2010 and 2050:

5,000 housing units, 19,000 new residents, and 5,600 office using jobs.

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Land Use

Overall Opportunity Assessment1

Cumulative Depth of Demand in Downtown Area (SF)

Average Annual Demand(2010 to

2050)Near

(0-5 yr)Mid

(5-10 yr)Long(10+)

By 2015

By 2025

By 2050

Commercial

Office X X XX 100K 420K 1.4M 32K

Hotel XXX XX XX 110K 325K 1.1M 26K

Retail XXX XX XX 150K 420K 1.4M 32K

Residential

Multifamily For-Sale XX XX XX 225K 650K 1.8M 43 units

Multifamily For-Rent XXX XXX XXX 400K 1.1M 3.3M 90 units

Single-Family XX XXX XXX 450K 1.2M 3.6M 38 units

SUMMARY OF FUTURE LAND USE OPPORTUNITY AGGRESSIVE SCENARIO

1 X= minimal, XX = moderate, XXX = strong 2Commercial rents are triple net

Based on the Aggressive Scenario the study area would add the following between 2010 and 2050:

7,300 housing units, 28,000 new residents, and 7,000 office using jobs.

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LAND USE ASSUMPTIONS

Commercial

Retail

The baseline scenario is based solely on the projected growth of each of the market audience groups (residents, students, tourists, employees, etc) while the aggressive scenario is based on growth plus an additional 2% capture of expenditures.

Office

The baseline scenario has the downtown capturing its current ‘fair-share’ of office using employment growth which is currently at 40% of the MSA. The aggressive scenario shows the downtown area with a 50% capture rate, including the ability to locate 25% of healthcare and education jobs with the study area.

Hotel Aggressive scenario is based on 2% long term annual growth of business and leisure travel while the baseline scenario is based on 1% growth.

Residential

For-Sale Multifamily The baseline scenario assumes that 100% sales will occur above $112,000 while the aggressive scenario assumes that with incentives the market can deliver product below this price point.

For-Rent Multifamily The baseline scenario assumes the downtown area captures its ‘fair share’ of apartment demand at 13% of the MSA, while the aggressive scenario assumes that downtown captures 20% of demand.

Single-Family The baseline scenario assumes that 100% sales will occur above $188,000 while the aggressive scenario assumes that with incentives the market can deliver product below this price point.

ASSUMPTIONS FOR FUTURE DEMAND SCENARIOS

45

Imagine Waco: Greater Downtown Waco Plan

Building Prototype Summaries

Based on RCLCO and FAI Research – For review and consideration

Draft – 9/22/09

Building Prototypes

Project will create general prototypes for development in the Downtown:

Tipping Point Analysis

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Mixed-Use Prototypes

• Mixed Use Residential (Low- ,Mid- and High Rise)

• Mixed Use Office (Low-, Mid- and High-Rise)

• Live-Work

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Mixed Use Residential (High Rise)Uses Residential and

RetailSite Size 30,000 sf

Height 10 storiesFAR 6.8

Residential Units 163

% Open Space 15%

Parking Spaces 184

Parking Type Below-grade

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Mixed Use Residential (Mid Rise)

Uses Residential and Retail

Site Size 30,000 sfHeight 5 stories

FAR 2.24Residential Units 38

% Open Space 15%

Parking Spaces 36

Parking Type Surface and Internal

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Mixed Use Residential (Low Rise)




% Open Space 15%

Parking Spaces 28


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Mixed Use Office (High Rise)

Uses Office and RetailSite Size 30,000 sf


Residential Units N/A

% Open Space 10%

Parking Spaces 300

Parking Type Below-grade

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Mixed Use Office (Mid Rise)




% Open Space 10%

Parking Spaces 120


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Mixed Use Office (Low Rise)




% Open Space 10%

Parking Spaces 37


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Live-Work




% Open Space 30%

Parking Spaces 2

Parking Type Garage

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Residential Prototypes

• Small Lot Single Family• Townhome• Garden Apartments• Apartment Mid-Rise• Warehouse Rehab

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Small Lot Single Family

Uses ResidentialSite Size 4,000 sf


Residential Units 1

% Open Space 25%

Parking Spaces 2

Parking Type Garage

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Townhome



Residential Units 1

% Open Space 30%

Parking Spaces 2

Parking Type Garage

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Garden Apartment


Height 3FAR 1.21


% Open Space 20%

Parking Spaces 22

Parking Type Surface

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Apartment Mid-Rise

Uses ResidentialSite Size 20,000



% Open Space 10%

Parking Spaces 40


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Warehouse Rehab (Lofts)




% Open Space 0%

Parking Spaces 32

Parking Type Surface

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Commercial Prototypes

• Hotel• Office Mid-Rise• Main Street Retail• Restaurant or Theater

Rehab

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Hotel

Uses Restaurant and Hotel

Site Size 30,000Height 10 stories

FAR 2.91Residential Units 193 rooms

% Open Space 10%

Parking Spaces 202

Parking Type Structured

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Office Mid-Rise

Uses OfficeSite Size 40,000



% Open Space 10%

Parking Spaces 135

Parking Type Structured

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Main Street Retail

Uses RetailSite Size 20,000 sf

Height 1 storyFAR 0.68


% Open Space 10%

Parking Spaces 14

Parking Type Surface/On- Street

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Restaurant or Theater Rehab

Uses RestaurantSite Size 10,000 sf

Height 1 storyFAR 0.86


% Open Space 10%

Parking Spaces 0

Parking Type On-street

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Other Building Types

Adaptive ReuseOffice rehab

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ROI Model

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Prototype exampleShuttered commercial building

Parcel Size: 14,500 SQFT

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Prototype example

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Next Steps

• Input from today’s presentation• Further refinement financial

assumptions• Prepare detailed Tipping Point

analysis