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2008 REAL ESTATE

REPORT
Branson, MO. Market Area
Prepared BY; Commercial One Brokers LLC 500 West Main, Suite 302-A, Branson Financial Center Branson, MO. 65616 www.commercialonebrokers.com 417-334-3149

INSIDE THIS ISSUE

1 2 3 4 5 5
The Local Economy Residential Market Down Office Market Rebounds Strong Retail Attracts National Investors Hospitality Market Continues To Be Active Here Comes Hollister

GUARDED OPTIMISM

The national commercial real estate industry may have caught a cold from all the coughing and sneezing by the housing market. There are certainly parts of the country where the housing market is deathly ill. Even worse, the residential mortgage crisis has now spread to the rest of the credit markets, infesting everything from corporate bonds to commercial mortgage-backed securities (CMBS). We know that the national market can and does affect our local economy and it has certainly been a drag on the local residential market during the last half of 2007. We are cautiously optimistic however about the local commercial market in 2008, but we expect the housing sector to slow to 2003 sales levels. Our guarded optimism for the commercial market is driven by healthy occupancies, lack of overbuilding and price moderation. Thanks to the aggressive growth policies enacted by past city councils and city staff, the Branson area may just hold its own during this national slow down. The unknown of course is the price of gas during 2008 and what effect will the increased cost have on our visitors. The national travel market is projected to be flat to down in 2008, however we believe that the increased area marketing along with the first full year of operation for the Branson Convention Center should keep our market nearly even with 2007 visitor numbers. At Commercial One Brokers LLC., we maintain an exhaustive database of over sixty commercial properties in the Branson/Hollister market totaling nearly three million square feet. By tracking these properties, we offer you the very best of our knowledge regarding the direction, trends, changes and economics in the area commercial real estate market.

2008 Real Estate Report Published By Commercial One Brokers LLC. March 2008 Addition II

THE BRANSON REAL ESTATE CYCLE

SEGMENT Overall Market Retail Office Hospitality New Res. STAGE Expansion

LOCAL ECONOMY CONTINUES EXPANSION Tax Revenues Set New Records For 2007
New records for the collection of sales and tourism taxes were set once again in 2007. Total city sales tax collected equaled $14.8 million, up 12.8 percent from 2006. The tourism tax increased to $12 million, up 9.5 percent from $11 million in 2006. Sales tax collections had been flat from 2001 thru 2005 and hovered between $11.8 million and $12.1 million during those years. With the announcement in 2005 of Branson Landing and the Branson Hills Plaza, tax collections began to rise above inflation levels with a record of $13.6 million collected in 2006. For the third consecutive year, the value of new construction in the city of Branson totaled more than $100 million dollars. The 2007 number equaled $117.9 million dollars. Only two major projects were built outside of Branson Hills and Branson Landing, again confirming the importance that these two major projects have had on our economy.

Expansion Oversupply Expansion Oversupply

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CITY OF BRANSON SALES TAX HISTORY

2008 REAL ESTATE REPORT

ESTIMATED VISITOR NUMBERS 2005 +1.3% 2006 +14% 2007 +7.27%

2004 -1.3%

2005
7,330,000

2006
7,984,000

2007
8,375,000

Source: City of Branson

SOURCE: Branson Lakes Area Chamber Of Commerce & CVB

The increases in visitors and development growth have not only dropped the unemployment rates in the area, it has also increased the number of those seeking jobs in the area according to the Missouri Career Center.

Residential Sales Drop 16% In 2007

Based on sales information collected from The Tri-Lakes Multiple Listing Service by Cooper Real Estate Consulting the number of closings in the TriLakes area dropped a total of 16% from 2006 sales. In addition, Cooper projects that the total number of listings has also increased by 34%. When the supply is increasing and the demand is slowing, it is fair to assume that price pressures and increased days on the market will soon follow. While there are parts of the country that are suffering 20 40 % and more price depreciation, we believe that the local market will see price drops of 4 to 6% or less in 2008 depending on the price range. The local market slow down has not been caused by area economic conditions but is the function of the national decline. We project area sales will match only the total sales that occurred in 2003 in a range of 1350 to 1500+/- for the year, down approximately 300 units from the 2007 number of closings and nearly 900 units off of the record year of 2005. Commercial One has looked deeper into the numbers and it appears that the Taney County residential market was down far less than the Stone County area. In addition, the condo market sales numbers showed a much smaller sales decline than did the rest of the residential segment. However, like the other residential listings, the total number of condo listings in each county showed large double-digit increases at the end of 2007.

Y E H e Sales ear nd om
2500 2000 1500 1000 500 0
19 95 19 97 19 99 20 01 20 03 20 05 20 07

Source: Cooper Real Estate Consulting & Tri-Lakes MLS.

Active MLS Listings

2008 2007 2006 2005 2004 2003 0 500 1000 1500 1746 1614 1761 1900 2000 2500 3000 2341 2578

Condominium Closings by County

COUNTY 2006 CLOSINGS 2007 CLOSINGS

Stone Taney
Source: The Tri-Lakes MLS

151 343

102 339

PERCENTAGE - 49 (-6%) -4 (-1%)

It is apparent that the commercial growth occurring in the Branson/Hollister markets has helped to maintain much of the residential sales activity for Taney County in 2007. Stone County saw a decrease of over 30% in sales last year while Taney County absorbed only a 9% drop. The no-growth policies adopted in Stone County over the last decade are now adding to the negative residential market results. As the national housing market continues to work out of the sub-prime issues, the Stone County market will, in our opinion, continue to suffer at a greater rate than its next door neighbor, Taney County. Buyers who would like to buy, with reasonable price expectation and are able to qualify will find 2008 a good year to get that primary or second home.

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Office Market Shows Improvement

The Branson office market continued to rebound in 2007. The majority of leasing activity occurred at the extremes of the rent schedules. Most of the available inventory was found either in the $8.00 per square foot range or in the more upscale $15.00 a foot and higher rate sectors. Inventories in the lower rental ranges are virtually non-existent today as most have been leased. The market absorbed slightly more than 34,500 net square feet last year allowing the city-wide vacancy rate to fall from 33% to 19% by year end. The average rate increased slightly from $12.54 per SF (NNN) to $12.69 per square foot (NNN). We expect the market will absorb a similar amount of office space in 2008 which will decrease vacancy rates even further probably to 10% or less and very near stability. Demand will continue to be for smaller office spaces that range in size from 1000 to 1200 sq ft. or even virtual office and office suites. Additional demand has grown for well located office/warehouse and or office/showroom space as well. Again the majority of users for the office/warehouse spaces is also smaller and will generally require spaces from 2000 sq ft. or less. Commercial One Brokers marketing in 2008 will focus a bit more on those areas of financial and medical as well as professional services that are not currently found in the area. The increased demand for data processing and storage capacity should add several new segments to the office market not previously available.

Total Office Space - City of Branson

Totals By Sub-Market Located on Hwy 76 Located off Hwy 76 Downtown Combined

12/31/ 07

2006 Occupancy 2007 Occupancy 85.1% 88.8% 74.9% 76.1% 56.0% 85.2% 77% 81%

Change UP 3.7% UP 1.2% UP 29.2% UP 4.0%

Source: Commercial One Brokers LLC.

The data above includes thirteen office properties with a minimum of 5000 sq ft located within the city limits of Branson. These properties total just over 247,000 sq ft with approximately 199,900 sq ft. occupied by year-end 2007. Investors recently purchased the remaining 51% of the Branson Financial Center from Cushman Properties LLC. The purchase included all of the leased suites owned by Cushman and included the Commerce Bank lease among others. The balance of this Class-A building is owned by individual businesses who own their own suites. The projected purchase cap rate was approximately 8.4%.
Branson Financial Center The Branson Financial Center

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2008 REAL ESTATE REPORT

STRONG RETAIL ATTRACTS NATIONAL INVESTORS

Three major shopping centers changed ownership during 2007. Dixie Station, Vista Plaza and The Grand Village all were sold to out of state investors during the year. Selling Cap rates were a point to a point and one half higher than those typically offered in other national markets. Stable rents and occupancies also were attractive to these out of market investors. Nearly 80,000 sq ft of additional retail inventory was added to the Branson market in 2007. However, the total amount of square footage occupied was nearly 9,500 sq ft less than the prior year. The negative net absorption raised the area wide vacancy rates from 4.6% to 8.6%. As new retail is added to Branson Hills this year, we believe that developers considering any new retail projects should be very cautious. Its probably not a good time to build another 25,000 sq ft strip center some where and hope that it will be leased. A strong anchor, theme and top location will all be required more than ever in order to be successful in 2008 and 2009. Rents have remained steady in all submarket locations. Triple-net leasing rates continue to range from $8 to $12 per sq ft per year in location generally on Hwy 165; $19 to $24 per ft for class A & B space located on the strip; $12 to $17 per sq ft for locations on the Hwy 248 corridor. Rents for the outlet malls and The Branson Landing are not included in these numbers.
The Grand Village

Vista Plaza

Dixie Station

NET ABSORPTION RATES

On Hwy 76 VS. Off Hwy 76
2006 AND 2007 DECEMBER 31, 2006
On Hwy 76 Off Hwy 76

TOTAL SQ FT. 270, 505 746,946 TOTAL SQ FT. 282,405 815,141

OCCUPIED SQ FT. 258,873 708,852 OCCUPIED SQ FT. 262,199 701,552

VACANCY RATE 4.3% 5.1% VACANCY RATE 7.2% 13.9%

DECEMBER 31, 2007

On Hwy 76 Off Hwy 76
Source: Commercial One Brokers LLC.

DID YOU KNOW?

Commercial One Brokers LLC. leased 75,612 sq ft of retail and office space during 2007. Our sister company, Maples Properties Of Branson LLC. now manages nearly 300,000 sq ft of commercial properties in Branson including many of the top performing properties in the area. When you need to manage, lease or locate property for your business in Branson or Hollister, call Commercial One Brokers LLC. for results.

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HOSPITALITY MARKET CONTINUES TO BE ACTIVE

The hospitality market posted strong growth for the third consecutive year. The improving occupancy rates and growing room revenues also helped to generate the sale of nearly two dozen properties during the year.

YEAR 2005
% CHG

OCCPANCY 46.8
+.09

ROOM RATE $65.58

+1.3

REVPAR $30.69
+2.2

ROOM ROOM ROOM SUPPLY DEMAND REVENUE 5,441,205 2,546,724 167,012,885

-1.8 -.09 +.04

2006
% CHG

49.7
+6.2

$69.92
+6.6

$34.72
+13.1

5,389,061 2,767,366 187,129,391

-1.0 +5.1 +12.0

2007
% CHG

49.9
+.04

$75.90
+8.6

$37.86
+9.0

5,568,010 2,777,354 210,793,757

+3.3 +3.8 +12.6

SOURCE: Smith Travel Research: Standard Historical TREND

RevPAR is arguably the most important of all ratios used in the hotel industry. Because the measure incorporates both room rates and occupancy, it provides a convenient snapshot of a how well a market is filling its rooms, as well as how much it is able to charge. With a 23% total increase in RevPar over 2005 numbers, it is no wonder that investors have been drawn to the Branson/Lakes market. The future of the areas hospitality market will be determined largely by the cost of gas, the convention center bookings and the completion of the Branson airport scheduled for 2009.

HERE COMES HOLLISTER

While no one was looking, the Hwy 65 Hollister intersection is sprouting new businesses and some exciting new attractions for the region. A 112-acre entertainment district has been established on land located southeast of the Hollister interchange. The entire interchange case study is a great example of a city and a developer working together to benefit the entire community. The sales tax generated by the increased commercial development helped to make the highway interchange a reality and now will generate over $220 Million dollars in new development to Hollister. Some of the new businesses recently announced are: Back Yard Burgers, a movie/bowling alley complex, Cold Stone Creamery, Arbys and Whiskey Creek Steakhouse. In addition, a 90-room Holiday Inn Express and a second Codys convenience Store all have confirmed their intention of building. Hollister will soon become a very strong competitor for sales tax dollars with its next door neighbor Branson.

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2008 REAL ESTATE REPORT

In addition to the businesses identified above, plans have also been announced for a world-class indoor/outdoor water park resort and 7500 seat events center that will be the centerpiece for the entertainment district. A large condominium/timeshare project has also been announced as part of the project. Other restaurants, retail and fast-food operations are expected to also announce within the year. Besides commercial development, several housing areas have also started and or have been annexed into the city of Hollister. In fact, the Hollister city limits now expand south to Table Rock Lake. Several thousand new homes are being planned for areas inside of Hollister as well as areas next to the city limits. Hollister has been very proactive with the installation of infrastructure that will help to accommodate the population that is expected to triple within ten years. Commercial One Brokers LLC will establish a Hollister data base this year and will add this data to future reports.

COMMERCIAL ONE BROKERS LLC.

Commercial One Broker LLC. serve exclusively the real estate needs of commercial and investment clients in the Branson/Hollister area. Bob Huels Jr. and Steve Critchfield have over twenty-eight years of combined commercial experience in the Branson real estate market and more than forty-six years of combined real estate experience. Both men have represented the whos who of local and national clients with the sale, leasing and or purchase of Branson commercial properties. Commercial One Brokers provide only commercial brokerage services to include, brokerage, landlord/tenant representation, site selection as well as consulting services and financial analysis. The commercial real estate business has become much more specialized and both local and national users are demanding more specialized services than residential real estate agents are able to offer. As Branson becomes better known nationally, more sophisticated investors and developers from outside are now considering this area for possible real estate investments. These developers and investors must have a complete view of the Branson real estate market in order to limit their risk and to not overbuild the market.

Robert R. Huels Jr. CCIM Broker/Partner Stephen N. Critchfield Broker/Partner

417-334-3149 500 West Main Street www.CommercialOneBrokers.com Suite 302 Branson, MO. 6516

Commercial One Brokers LLC