2013 APPRAISAL INSTITUTE YEAR IN REVIEW WISCONSIN RETAIL

2013 APPRAISAL INSTITUTE YEAR IN REVIEW WISCONSIN RETAIL

2013 APPRAISAL INSTITUTE YEAR IN REVIEW WISCONSIN RETAIL MARKET OVERVIEW WESTON J. ROBERTSON DRIVERS OF RETAIL DEMAND Employment Housing/Population Office/Industrial Apartment/Single Family Markets Markets Market Shopping/Dining Retail RECENT TRENDS Milwaukee Metro Area Year Non-Farm Employment

% Increase County Population % Increase September 2013 831,500 0.2% 950,410 0.2% September 2012 829,600 1.1% 948,322 0.0%

September 2011 820,600 N/A 948,369 N/A Madison Metro Area Year Non-Farm Employment % Increase County Population % Increase September 2013 359,700 1.3%

491,555 0.5% September 2012 355,100 0.7% 489,331 0.3% September 2011 352,700 N/A 488,073 N/A MOSTLY STAGNANT? Overall Retail Vacancy Rate Metro Area

3rd Quarter 2013 3rd Quarter 2012 Milwaukee 6.7% 6.9% Madison 6.4% 6.6% CoStar Market Survey Average Retail Rent Rate Metro Area 3rd Quarter 2013 3rd Quarter 2012 Milwaukee

$10.66 $10.91 Madison $11.79 $11.80 HOW ABOUT THE INVESTMENT MARKET? Band of Investment Typical Multi-tenant Retail Low Avg. High Interest Rate 5.0% 5.5% 6.0% Number of Periods

25 yr 25 yr 25 yr Loan to Value 75% 75% 65% Investor Return 10% 12% 14% Indicated Cap Rate 7.76% 8.53%

9.93% Surveys Source Cap Rates Marcus and Millichap Low 8% to low 9% Realty Rates Average 9.82% HOW ABOUT THE NET LEASE MARKET? Property Type Tenant 2013 Asking Cap 2012 Asking Cap Drug Store

Walgreens 5.75% 6.40% CVS 6.07% 6.60% 5.00% 5.85% Advance Auto Parts 7.25% 7.90% AutoZone 6.50% 7.05%

OReilly Auto Parts 6.55% 7.01% Dollar General 8.25% 8.40% Family Dollar 8.28% 8.45% Bank Ground Lease Auto Parts Stores Dollar Stores THE CONSTELLATION - MADISON Opened August 2013 $39 million cost

32,500 SF Commercial/Retail 220 apartments Google office, Star Bar, Cargo Caf, Andersen Dental, and others VARSITY QUARTERS - MADISON Scheduled Open Fall 2014 Located near UW Campus Project cost not disclosed 162 bed student housing 7,500 SF retail 309 W JOHNSON ST - MADISON Scheduled Summer 2015 600,000 SF Over 250 apartments with over 300 bedrooms Retail on 1st and 2nd floors

800 BLOCK OF E. WASHINGTON - MADISON Proposed project $65 million cost 4.5 acres Phase 1 50,000 SF grocer 175-240 apartments 350 parking stalls Phase 2 22 owner-occupied homes 65,000 SF retail/office 173 parking stalls THE MAYFAIR COLLECTION - WAUWATOSA Dicks, Nordstrom Rack, Saks off 5th, ULTA, Old Navy Phase I - 266,000 SF $49 million cost Expected opening Spring 2014

Future phases to include Restaurants, a Hotel, and Mixed Use Office/Retail DREXEL TOWN SQUARE OAK CREEK Mixed use development 600+ apartments City hall, public library, farmers market Meijer anchored, 191,000 SF grocery store $175 million $20 million TIF financing WOODMANS GROCERY STORE WAUKESHA Opened July 2013 $7 million, $3.5 TIF financing 243,753 square feet Approximately 40% liquor store NORDSTROM MAYFAIR WAUWATOSA

Opening Fall 2015 138,000 SF Three stories Addition to existing Mayfair Mall NEW MILWAUKEE RESTAURANTS Black Sheep 216 S 2nd Street Self-Serve Wines, Tapas, Haute Dogs Bel Air Cantina - Wauwatosa 6817 North Avenue, Wauwatosa Margaritas, 25 Kinds of Tacos Carsons 1141 North Old World Third Street Steaks, BBQ NEW MILWAUKEE RESTAURANTS Anodyne Coffee Roasting 224 West Bruce Street Sandwiches, Pastries, Free Trade

Coffee Wolf Peach 1818 North Hubbard Street European Fine Dining Pizza Man 2597 North Downer Avenue Italian and Specialty Pizzas WHERE DO WE GO FROM HERE? Concern over increasing interest rates Source projects a 50 bp interest rate increase Low Avg. High Interest Rate 5.5% 6.0% 6.5% Number of Periods

25 yr 25 yr 25 yr Loan to Value 75% 75% 65% Investor Return 10% 12% 14% Indicated Cap Rate 8.03% 8.80%

10.17% Increase (bp) 27 27 24 Continued low cap rates in the NNN market Slow, gradual new development as space is absorbed Minimal, if any, increase in market rents 2013 APPRAISAL INSTITUTE YEAR IN REVIEW WISCONSIN RETAIL MARKET OVERVIEW WESTON J. ROBERTSON

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