HAROLD EISENBERG FOUNDATION 2013 CASE CHALLENGE

Marshall Bennett Institute of Real Estate | Roosevelt University

Vision This development concept, known as The Marquette Park Promenade, was primarily produced by immersing ourselves in the Chicago Lawn community. We gathered information by conducting live interviews with Chicago Lawn residents, local businesses, community stakeholders, and City of Chicago officials. The core of our vision is a combination of this research and the goals outlined in the Greater Southwest Development Organization’s ‘Making Connections’ quality of life plan. Our vision is for The Marquette Park Promenade and Sears Holdings Corporation to be viewed as the catalyst of this positive change and revitalization.

“Sears is an anchor of the site and the community” – Ghian Foreman, Executive Director, GSDC

DEVELOPMENT VISION The Marquette Park Promenade

COMMUNITY INTERVIEWS

The Marquette Park Promenade

“Blast is seen as a vibrant part of the community and people in the neighborhood love that its there” -Bill Langlois, Regional VP Blast Fitness

“Your concept is realistic! It shows that you truly thought about the good of the community”– James Wilson, City of Chicago, DHED

“The retail and medical uses, complimented with community sports, will create a great sense of space and will bring more spending power along with responding to the need of a Federally Qualified Health Center” – Ghian Foreman, Greater Southwest Development Corporation

“ The community driven development will help capitalize upon different funding sources, i.e. TIF, New Market Tax Credits , Land Write down.”- Michelle Nolan, City of Chicago, DHED

EXISTING CONDITIONS

Chicago Lawn Community & 62nd/Western

Strengths

Tootsie Roll, Nabisco, Solo Cup employment hubs 62nd & Western commercial activity Rich racial and cultural diversity Marquette Park Population under the age of 50 years Multiple community pillars Support and presence of SEARS and the City of Chicago

Weaknesses High unemployment and crime statistics Low education attainment High foreclosure rates Recent small retail failures History of retail failure on this site (ex: Cinema) Odd shape and limited frontage exposure on land site CSX rail line noise and air pollution

Opportunities Youthful population Latino population growth Rich multicultural makeup Introduction of employment opportunities, health resources and education

Threats

Previous development proposals have been rejected or not implemented Racial demographic shifting creates complexity in forming a development plan Previous landsite stigma as being undesirable or “difficult to work with” Inability to attract and retain retailers

S.W.O.T ANALYSIS

FAVORABLE UNFAVORABLE

INTE

RNA

L EX

TERN

AL

SEARS

9.14 ac

ICE Theater

6.29 ac

Blast Fitness

1.77 ac

SEARS

5.8 ac

SEARS

2.9 ac

City of Chicago 3 ac

SITE OVERVIEW

Sears Development Site—62nd & Western

PUBLIC TRANSIT ANALYSIS

Chicago Lawn Community

Bus Routes & Ridership Trends on Major Corridors

Residential

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Vacancy-Homeowner

Vacancy-Rental

Vacancy Rates Chicago vs. Chicago Lawn

Chicago Lawn

Chicago

NON - FEASIBLE USES The Marquette Park Promenade

Industrial

-9,819

-37,453

-298,300

-2,700,000

-3,000,000

-2,500,000

-2,000,000

-1,500,000

-1,000,000

-500,000

0

-40,000

-35,000

-30,000

-25,000

-20,000

-15,000

-10,000

-5,000

0

2012 SFAbsorbed

2009 SFAbsorbed

ChicagoLawnChicago

Office

“I do not see an industrial distribution center locating here. The distribution center would ideally want to be located on the East side of the rail. You’re on the west.” – Jeff Wagoner, Industrial Development Manager, CSX

Class B 6%

Class C 94%

Vacancy % Contribution by Building Class

TRANSITION FROM NON FEASIBLE TO FEASIBLE USES

Finance 3%

Inst. 15%

Medical 23%

Retail 18%

Service 40%

Office Building Use Distribution

Class B 30%

Class C 70%

Office Space by Building Class

“A movie theater concept on this site would be disastrous. All movie theaters are declining in revenue because of iPads, iPhones, and Netflix. This concept is not profitable.”---Barry Schain, Center Creek Development

“ I suggest a super market such as Pete's or Del Rio …. Also a medical component called an FQHC works exclusively with Medicaid and Medicare and would be ideal for the growing number of people that will have Medicaid after reform”---Dennis Ryan, Vice President, Holy Cross Hospital

“The scale of this site does not permit an industrial user, therefore this is not feasible” – Jim Connor, Senior Executive VP, Midwest, Duke Realty

ECONOMIC FEASIBILITY SNAPSHOT

Chicago Lawn Community

RETAIL MARKET ANALYSIS Chicago Lawn Community

RETAIL MARKET ANALYSIS The Marquette Park Promenade

RETAIL PROGRAM The Marquette Park Promenade

Person/ Physician Primary Care Clinics

MEDICAL MARKET ANALYSIS

The Marquette Park Promenade

• Chicago has 138 primary care clinics,

Southwest region has the least number of primary care clinics

MEDICAL MARKET ANALYSIS

Federally Qualified Health Centers (FQHC)

• Chicago outpatient facilities are serving 42% Hispanic and 52% African American

• Despite increase in

Hispanic population, the southwest shows only 5.5% of Hispanic Patients

Regional Health Centers FQHC Locations

• Access has been proposed for the site based upon its preferred target population

• Number of doctor per

facility is 8 with 20 patients per day makes approx. 57,000 patients year

• Retail , fitness and athletic facilities and Everest college will act as a catalyst for ACCESS

• Public transit and major arteries will make it a neighborhood scale destination health center

“The community demographics and location is aligned with Access service area” Pat Johnston– Facilities Manager; Access Health Network)

Hispanic 48%

African American

33%

Others 19%

Service Population

Medicaid 63%

Medicare 4%

Com 10%

Uninsured 23%

Patients Insurance Structure

MEDICAL ANALYSIS

Access Health Network

MEDICAL ANALYSIS

Access Health Network

Holy Cross

School Based

14,000 sf

5,000 sf

4,000 sf

School Based

• ACCESS centers around our site are currently 5,000 sf. but they are consolidating into larger facilities.

African American

Hispanic

ACCESS Health Network

38 Locations

EVEREST COLLEGE

The Marquette Park Promenade

“We service the age group between 20’s and 40’s. The demographics are African American and Hispanic… We also partner with hospitals and medical centers to provide internships and we have a relationship with Holy Cross already”---Daniel Martinez, Admissions Director, Everest College

FEASIBILITY INTERVIEWS The Marquette Park Promenade

“Big retailers draw people in…yes, a grocery store is a good start” – James Matanky, CEO, Matanky Realty

They are co-locating and consolidating the 2-3 small facilities that share the common trade area. Their lease term is 10-20 years , when Federal money is involved they tend to sign 20 years lease with an option In rent they can go as high as $25----Pat Johnston, Facilities Manager, Access Health Network

“Fairplay is fabulous for this site and it is going to Rock because of the demographics and income profile of the community ” – Mike Mallon, CEO, DKMallon: Draper and Kramer

“I love the idea of a soccer-recreational field, it will be a great strategy to attract people to the community”---Dennis Ryan, Vice President, Holly Cross Hospital

DEVELOPMENT STRATEGY

The Marquette Park Promenade

Phase I A: • Grocery Store • South-Retail Container • Out-door Recreational Field (soccer) Phase I B: • Access Health Network • Everest College • Central-Retail Containers • Pharmacy Operator

Phase II A: • Expansion of retail along

Northern section of the site

Phase II B: • Repositioning of Sears • Indoor-Recreational Field

INTEGRATION STRATEGY

Container Re-Use

Sustainability CriteriaDevelopment

Pts Max Pts

Sustainable Sites 18 35

Water Efficiency 8 10

Energy & Atmosphere 17 35Materials & resources 11 14

Indoor Environmental Quality 9 15

Innovation Design process 3 6

Regional Priority credits 1 4

Total 67 119

SUSTAINABILITY: UP-CYCLING

The Marquette Park Promenade

UP-CYCLING STRATEGY The Marquette Park Promenade

Client: Guo Feng Development Building Type: Retail, offices + restaurants Location: Beijing, China Size: 240,000 SF Completed: 2008

Starbucks drive-thru and walk-up store made from shipping containers in Tukwila, Washington is the first LEED-certified structure in town

Puma’s store opening in 2006 in New York City’s Union Square

Apparel Store: Aether Clothing Store Location: San Francisco

PREDEVELOPMENT

The Marquette Park Promenade

“Access health network has partnered with Wal-greens to provide pharmaceutical services to its patients”----Valincia Woolridge, Executive Admin. Access Health Network

RSF COST $ Per RSF Percent Acquisitions 2,666,949 10%

DEVELOPMENT PHASE I-A

The Marquette Park Promenade

RSF COST $ Per RSF PercentRSF - Grocer 40,000 7,032,227 175.81 26%RSF-Container South 10,000 1,709,550 170.95 6%

Soccer Field 371,278 1% Site Work 708,840 2.5% Totals 50,000 9,821,895 196.44 35.5%

1 YEAR

DEVELOPMENT PHASE I-B

The Marquette Park Promenade

RSF COST $ Per RSF PercentRSF - Med/Sch 29,750 9,794,550 329.23 37%RSF - Sears 3rd Fl 20,000 2,105,061 105.25 6%RSF-Container Central 10,000 1,709,550 170.95 8%

Site Work 708,840 2.5% Totals 59,750 14,318,001 239.63 53.5%

2 YEARS

FUTURE DEVELOPMENT PHASE II-A

The Marquette Park Promenade

5-7 YEARS

FUTURE DEVELOPMENT PHASE II-B

The Marquette Park Promenade

7-10 YEARS

FINANCIAL SUMMARY: PHASE I

The Marquette Park Promenade

PHASE I CONSTRUCTION PERIOD SOURCES AND USES

SOURCES USESConstructionLoan $ 15,690,931

Direct Development (Hard Costs) $ 19,758,448

Land Sale $ 1,000,000Direct Development (Soft Costs) $ 3,148,682

TIF $ 833,333Direct Development (Site Costs) $ 1,232,765

NMTC $ 3,000,000Acquisition Private (Theatre & Land) $ 1,100,000

EquityContribution $ 8,310,198

Land Acquisition Public (City Parcel) $ 1,566,949

CSX $ 0 Loan Fees and Closings $ 156,909construction Interest $ 458,812Year 1 Operating Loss $ 1,411,898Environmental $ 0

TOTAL SOURCES $ 28,834,463 TOTAL USES $ 28,834,463

FINANCIAL SUMMARY: PHASE I

The Marquette Park Promenade

FINANCING ASSUMPTIONS

CONSTRUCTION LOAN: Interest Rate 3.75%Loan-to-Cost 65.0%

PERMANENT LOAN: Interest Rate 3.85%Amortization Term (years) 25Loan-to-Value 70.0%Debt Coverage Ratio 1.25

PROJECT PERFORMANCEEquity contribution $ 8,310,198Equity recapture and profit $ 16,390,011Equity multiple 1.97XUnleveraged IRR 6.28%Leveraged IRR 24.45%Stabilized Annual NOI (Jan 2018) $ 1,956,471

LEVERED NPV (10%) hurdle 4,907,871.62

CONCLUSION

The Marquette Park Promenade

• “Your concept is realistic! It shows that you truly thought about the good of the community”– James Wilson, City of Chicago, DHED

• “The retail and medical uses, complimented with community sports, will create a great sense of space and will bring more spending power along with responding to the need of a Federally Qualified Health Center” – Ghian Foreman, Greater Southwest Development Corporation

• Economic Impact: – Estimated Sale Tax Revenue: $ 2.2 Million (Phase I) – Estimated Property Tax Revenue: $ 3.6 Million – Jobs Created: 1,200