RECENTER YOUR LIFE AT TRINITY Urban Living For Those 55 And Over PDD610 Urban Development Process For

Robert Simons, Ph.D. Gregory SJ Soltis

OUTLINE
EXECUTIVE SUMMARY…………………………………………………………….……3 CONCEPT………………………………………………………………………………….…4-7 SITE……………………………………………………………………………………………8-11 PRIMARY MARKET AREA…………………………………………………………12-13 DEMOGRAPHICS………………………………………………………………………14-15 CURRENT SUPPLY……………………………………………………………………16-18 NICHE ANALYSIS……………………………………………………………………………19 NICHE ANALYSIS CONCLUSIONS…………………………………..……………….20 CAVEATS………………………………………………………………………………………20 FINANCIAL ANALYSIS……………………………………………………………….21-23 RECOMMENDATIONS FOR PROCEEDING………………………………………24

RESIDENTIAL FRONT DOOR BACK DOOR ANALYSIS…….…………………22 FRONT DOOR…………………………………………………………….…………………22 BACK DOOR……………………………………………………………….…………………22 PARCEL INDEX FOR REFERENCE……………..………………….……….……23-24

LIST OF FIGURES
TRINITY IN DOWNTOWN CLEVELAND………………..………COVER SHEET MATURE COUPLE WALKING ERIEVIEW CEMETARY…………...…..…..…3 TRINITY IN DOWNTOWN CLEVELAND MAP…………...……….…………..…4 TRINITY TOWERS RENDERING…………...……….……………………………….…5 TRINITY’S NEIGHBORHOOD MAP……………..…………...……….…………..…7 THE SITE MAP……………..…………...……….………………………………………..…9 SANBORN MAP……………..…………...……….………………………………………10 TRAFFIC COUNT MAP……………..…………….………………………………………10 THE HEART OF THE METRO REGION……………..…………….………………12 MID 20TH CENTURY COMMUTERS…..……………..…………….………………12 PERCAPITA INCOME FOR ALL POPULATION………………………………….15 WHERE THOSE 55+ LIVE…………………………………………………………….….15 PERCENT CHANGE IN HOUSING UNITS 2000-2010……………………..….18
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LIST OF TABLES
HIGHEST AND BEST USE……………………………………………………………..…11 HIGHEST AND BEST USE……………………………………………………….…….…11 DEMOGRAPHIC SUMMARY….………………………………………..………….…14 HOSEHOLDS BY INCOME AND AGE OF HOUSEHOLDER 55+………….. 14 DOWNTOWN CLEVELAND HOUSING MARKET NUMBERS..…..…….…16 DOWNTOWN CLEVELAND CONDO TRANSFERS FROM ’08-’11…….…17 50+ DOWNTOWN CLEVELAND RESIDENTIAL NICHE ANALYSIS…….…18

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Downtown Cleveland’s Housing Market • Vacancy rates are at all-time lows downtown. The total residential vacancy rate downtown was reported to be 5.4% in a recent report in the Plain Dealer. • There are waiting lists at most buildings. Over 250 people are on a list for East 4th Street apartments according to Tammy Oliver at MRN Ltd. • Downtown Cleveland Alliance CEO, Joe Marinucci stated in the Plain Dealer he wouldn’t even blink at putting 500 new units of housing online in a year downtown. • The primary target demographic for downtown living are young urban professionals with some empty nesters. This suggests older adults may be an underserved market.

EXECUTIVE SUMMARY 55+ Demographic Characteristics • The 50+ demographic is expected to be the only demographic to grow in Greater Cleveland by 2015 according to Census Bureau projections. •There will be an additional 48,481 people 55 and older in Greater Cleveland in the year 2015, even considering that the overall population is projected to shrink by over 30,000 in that same time period. • Cleveland-Akron MSA Median Age: 37.1 (2000) 39.7 (2010) 40.1 (2015) • There are 86,728 households, 55 plus with incomes over $75,000 per year, putting them in the income bracket of Trinity.

The Trinity Concept • The location is where three unique downtown districts meet. Each district has something to offer the 55 plus set. • The largest demographic for live theater are those 55 and older. They make up 27% of an average audience. • Trinity would be the urban equivalent of a 55 plus community found in the suburbs or in the Sunbelt with the added advantage of all the amenities of the city. This would be a vertical country club. • Trinity would not be advertised as a 55+ community, just advertised to the 55+ community. • There is no urban equivalent currently so this would be a new product.

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CONCEPT An urban lifestyle community for those 55 and older in the heart of downtown Cleveland The proposed site of the project is at the confluence of three downtown districts; the Gateway District, the Theater District, and the Campus District, thus christening the complex with the name Trinity. Trinity is a mixed-use, vertical community for the Urban GoGo in the center of downtown Cleveland’s tight residential market. Residential rental rates are at all-time highs, making the timing right for new development. The specific locations of Trinity’s three, residential towers at the intersections of Euclid Ave. & East 17th, and Prospect Ave. & East 14th allow the buildings to act as physical gateways into the Theater District; something the Playhouse Square Foundation has been seeking to develop.1 It also gels with the local development corporation’s desire to build 58 stories of residential living.2 In addition, the target demographic fits with the Theater District’s most common patron; those aged 55 and older make up nearly 27% of a typical live theater audience, a larger share than any other age group.3 The product will provide the mature set all the services of suburban, and Sunbelt, 55 plus communities, with the added convenience of easy access to all the city has to offer. Theater, professional sports, galleries; Cleveland State University, which through the state, offers free classes to those 65 and older; various cathedrals, the city’s finest dining establishments, chic lounges, jazz clubs, the West Side Market & numerous farmer’s markets, urban boutique shopping and ethnic
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neighborhoods are all within a minutes drive or rapid ride. Many of these amenities will be within a short walk of the front door of one of Trinity’s three towers and many horizontal townhouses. Due to its central location downtown and proximity to I-90, I-77, and I-71; resident’s friends, children and grandchildren in the suburbs will be but a short drive whether they live eastside, westside or to the south. In addition, for those who are still enjoying a vibrant career, Trinity puts residents in the middle of the state’s two largest employment centers; downtown Cleveland and University Circle.

Steve Citerin, Marketing and Public Relations Manager, interview, Cleveland, Ohio, April 2011. 2 Joel Henning, In Cleveland, A Model of Economic Viability in the Arts, http://online.wsj.com/article/SB10001424052748703712504576236683591903882 .html (May 2011). 3 Tom Bradshaw and Bonnie Nichols, " 2002 Survey of Public Participation in the Arts, V. Series. VI. Research Division report (National Endowment for the Arts. Research Division); 45.NX220.A164 2004 " Library of Congress Cataloging-inPublication Data, Washington, D.C

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Services and amenities at Trinity will include: unlimited access to the main tower’s Health and Wellness Center, including classes, personal training and dietician services geared to older adults; programmed events, a private restaurant and dining room for residents daily use and available for events, 24 hour security in the form of a street level doorman and manned, gated parking; two indoor, climate controlled parking spaces per unit; valet and driving services, grounds keeping; and personalized concierge service, similar to any found in the finest hotels and designed to assist residents in taking advantage of the city’s many amenities. The ground floor of each tower will feature a mix of street focused restaurant and retail, tailored for residents, the daytime office worker and evening theater patrons. Trinity’s target audience is a subset of the 55 and over set known as “Go-gos”. They are empty nesters, retirees and snow birds who value an active engagement in life. All units at Trinity will have two to three bedrooms and two bathrooms, so as to accommodate visiting children and grandchildren, friends staying in the city for the night after a show, or the occasional boomerang child. Apartments, condos and horizontal townhouses will be designed with older adults in mind. An average of 1400 square feet will all be located on one level of living space. Horizontal row houses will be designed to have a vertical presence on the street with elements of the typical row house that was once common on Prospect Avenue nearby. Street entry to the building will be in a common, vertical section of the building which then will lead to private residences that flank it horizontally. Elevators will serve units on upper floors. Garage space, directly under each townhouse unit will be accessible after entering the gated neighborhood from Prospect Avenue, and traversing the revived alley streets of Caton Court and East 16th Place. For snow birds who spend their winters in the Sunbelt, services will be available to assist them in renting their spaces to visiting foreign graduate student families studying at Cleveland State University and other area higher education institutions.
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The current, typical downtown resident fits one of two descriptions, “predominantly 25-45 y/o single professionals with some empty nesters” according to Mark Pugacz, a consultant with the Downtown Cleveland Alliance. Marketing efforts for downtown residential units are geared heavily towards the younger demographic. The presence of older adults downtown despite the marketing trends suggest that more empty nesters would live downtown if the right product was made available and marketed with them in mind. Adding to this assumption, the Cleveland metro region is home to one of the highest percentages of those 55 and over in the country. Greater Cleveland is the 5th oldest of the 54 metro areas with populations of 1 million or more people. That segment is expected to grow by nearly 50,000 from 2010 to 2015 according to the Census Bureau, while the region’s overall population is projected to shrink by close to 31,000. 4 Trinity is a completely new product to the Cleveland market. Currently there exists no residential complex that caters specifically to the healthy, independent, Urban Go-Go. The choices available to people 55 and over, looking for a residential complex designed to complement their lifestyle are all suburban country club style developments, subsidized low income apartments, or exist as retirement communities with various levels of assisted living services. The closest equivalent to Trinity is Judson Manor5 in University Circle; a retirement community that offers independent living, various levels of assisted living, and nursing care, packaged with services and amenities for older adults.

4

Rich Exner, Census shows Cleveland-Akron has near the highest median age in the U.S.: Statistical Snapshot, http://www.cleveland.com/datacentral/index.ssf/2011/06/census_2010_shows_cle veland-ak.html (June 2011). 5 http://www.judsonsmartliving.org/our-communities/university-circle/judsonmanor/care-levels.aspx

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THE SITE At the confluence of three downtown districts Trinity’s three sites lie on the edges of the Theater District in downtown Cleveland. All three act as gateways into the theater district and are currently underutilized; all three serving as surface parking for commuters, theater patrons, and fans going to events in the Gateway District. Due to the dense location of all three blocks in the urban core, all are actually comprised of many smaller parcels of land, each with its own set of governmental records. Most parcels that are located near each other in block one and two are 2.08 and 1.08 acres, in that order. They seem to be owned by one person who has them under different names and run by a law firm on Public Square. They are operated as parking lots by Mr. Frangos. The owner owes the city a substantial amount of back taxes for the properties he owns. Block three’s parcels along Euclid Avenue are .73 acres, making the total for all three 3.89 acres. Block three is owned primarily by Playhouse Square Foundation, with one parcel (#103 01 026) between the rest that has Ohio Realty -Euclid LLC & Barbara T. Candler listed as its owners. In interviews with Mr. Einhouse; Vice president of Facilities and Capital with the Real Estate division of Playhouse Square Foundation, he indicated that Playhouse Square has purchased all the properties from East 17th to the Hannah Building.

The site’s parcel numbers are as follows: Block 1 (Phase 1) 103 01 024 103 01 025 103 01 026 103 01 027 103 01 028

Block 2 (Phase 2) 10311 001 103 11 002 103 11 003 103 11 004 103 11 005 103 11 006 103 11 056 103 11 057 103 11 058 103 11 059 103 11 060 103 11 061 103 11 062

Block 3 (Phase 3) 10138 020 101 38 021 101 38 022 101 38 023 101 38 024 101 38 025

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SANBORN MAPS In reviewing the Sanborn maps, an issue was found with block 2. While it is currently a parking lot, it was at one time a gas station. It is most likely that remediation will have to occur here.

TRAFFIC COUNTS Traffic counts for the area are restricted primarily to Federal Highways and Federal Routes. Of concern to the chosen sites are the Innerbelt, which near the East 14th Street exit has a count of 103,340 vehicles below the I-77 merge and 131,230 above it. The traffic counts vary greatly within short distances along the Innerbelt due to heavy traffic both exiting and entering the freeway. Euclid Avenue, designated as Federal Route 20 has a count of 11,090 vehicles near site three. Many vehicles along this route are public transport BRT vehicles as the Siler Line runs this route. In addition, a small portion of Prospect Avenue between Ontario and East 4 th Street has been included and recorded an average of over 6,100 vehicles per day. This number is a good guess at what counts would be higher up the avenue near sites one and two.

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HIGHEST AND BEST USE STUDY A highest and best use study, found at the end of this section determined that Trinity was a top choice with entertainment, restaurant and retail close behind. The Theater District and Gateway District already act as centers of entertainment so this conclusion makes sense. Playhouse Square itself attracts more than one million visitors a year, and that is set to only increase with the addition of the Cleveland Playhouse Square to the complex.6 Combined with the demand for housing downtown, the large daytime working population of close to 110,000 and these conclusions make perfect sense

Property

Superm arke Convenienc Entertainm ent/B t e Store ar/Rest. Retail

Rental Housing

Condo

Warehouse/ Light industrial

Public Space

Office

Parking (Open Lot)

Hotel

Trinity
23 15 20 19 19

Block 1, Part A Block 1, Part B Block 2 Block 3 AVERAGE

8 2 0 3 3

9 6 4 9 7

18 14 13 18 16

13 11 11 14 12

10 11 8 13 11

-8 -7 -10 -12 -9

7 1 -1 1 2

6 3 0 6 4

8 6 8 8 8

14 11 7 9 10

6

Thomas Einhouse, Vice President of Facilities and Capital for the Playhouse Square Foundation, personal email, 06 December 2011

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THE PRIMARY MARKET AREA Metropolitan Cleveland The Cleveland-Akron MSA is Trinity’s primary market area for a number of reasons. First and foremost, the populations of Cuyahoga, Lake, Geauga, Ashtabula, Portage, Summit, Medina and Lorain counties all have ties to the central city of Cleveland. The people in this region get their news from Cleveland outlets, they root for the city’s professional sports teams, attend shows, concerts and other events in the city, and often also commute to the city for work. In addition, a high percentage of people in all eight counties can trace their roots back to a specific neighborhood in Cleveland. Either they once lived there, or their parents and grandparents did. Even as early as 1970, nearly one third of our metropolitan area’s population lived in the central city, today, only one sixth does and takes up six times the land.

.. The target demographic most likely still retains fond memories of life in the city, especially those older than 60 years of age. Along with those memories come negative emotions about the city and the events that followed Cleveland’s heyday in the 1950’s. Urban Renewal, court ordered busing and racial riots sped up the shift to the suburbs, that seems to be continuing to this day. The most recent population data from the 2010 Census show that the newest group to leave the city are the black lower and middle classes. Most white residents began their exodus decades ago.7

7

Robert L. Smith, Census data reveals new migration pattern as black families leave Cleveland, http://blog.cleveland.com/metro/2011/03/census_data_reveals_new_migrat.html (May 2011).

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Downtown is different. Downtown is one of the only “neighborhoods to grow in size over the past decade. In fact, downtown grew by 21% from 1990 to 20008, and continued to grow by more than 20 % from 2000 to 20109. Also, until the past few decades, not many people lived downtown. Downtown was for working, shopping, government services, or for entertainment. Therefore, no one group of people ever laid claim to downtown, it was always everyone’s place. It still is. Even if some older adults have negative connotations lingering, a good marketing strategy can reignite the fond memories that are sure to remain.
■Cleveland's unemployment rate fell from 9.1% in September 2010 to 7.6% in September 2011. ■In the third quarter of 2011, the median single-family home sale price in Cleveland was $113,600, down 0.8% from the $114,500 recorded one year prior. Statewide, home sales volume increased by 14.4% from a year prior. ■Year-to-date apartment absorption totaled 946 units as of September 2011, down from 1068 net move-ins during the same period in 2010. This is on pace to be the second consecutive year of positive apartment demand following two years of negative demand in 2008 and 2009. ■Through the first nine months of 2011, no new apartment units were completed, whereas during the same time last year, 236 apartment units were completed. This marks the sixth consecutive quarter in which no new units have come on-line. ■Multifamily permits for apartments and condos of 5+ units were issued for 77 units in the first nine months of 2011, surpassing last year's year end total of 75 permits issued. ■Cleveland's overall average vacancy rate tightened to 4.8% in the third quarter of 2011 from 6.2% a year earlier. This is the lowest vacancy rate recorded since 2000. ■Average apartment rent rose 1.7% over the 12-month period ended September 2011, with the average market rent increasing from $730 to
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$742. This marks the fourth consecutive quarter of positive rent growth and the highest recorded market rent over the past decade.

Alan Achkar, More people are making downtown home, April 2001 Robert L. Smith, Despite Cleveland's population plunge, civic leaders see encouraging, signshttp://blog.cleveland.com/metro/2011/03/despite_clevelands_population.ht ml, March 2011

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DEMOGRAPHICS Metropolitan Cleveland The Cleveland region has experienced an overall population loss of 29,454 people from the 2000 census to the 2010 census. The decline in population is expected to continue according to Census Bureau projections. 30,955 more people are expected to exit the metropolitan area by the year 2015. In contrast to this population loss, is a population gain in persons 50 and over. There was a gain of 146,804 people in this age demographic from 2000 to 2010 and the rise in those 50 and older is expected to continue to climb. 48,481 more people will join this age bracket by 2015. The 50 plus set currently number just over one million in the Cleveland Akron MSA, and will be approaching 1.1 million in 2015.10 Looking to downsize from the single family homes where they raised their children, empty nester and retiree households typically consist of 1 to 2 persons and half have incomes of $45,000 or more.11 Incomes are often augmented by equity, allowing households to purchase homes for $250,000 and up or rent for $1250 to $2250 a month, especially if amenities and services came as a part of their monthly rent. Those in higher income brackets that currently reside in the wealthier suburbs that follow 1-271 and the western shore suburbs can afford significantly more for monthly rent, but prefer to own. Survey results indicate that persons age 65 and up interested in living in downtown Cleveland largely favor owning two-bedroom, two-bath condominiums or townhouses.12 However, a significant number of snow birds are open to renting. Like other age groups, the desired parking and windows/natural light but also listed storage space, security and views as important housing features. While

affordability was still cited as important, it did not top the list of desired housing features as it did for younger age groups. 13 Total Households: Households 55+: 55+ Households with Incomes $75K and up: 1,158,090 318,853 86,728

According to Census Bureau estimates, the Cleveland-Akron CSA is expected to lose over 30,000 people by 2015. In that same timeframe, the region will gain 48,481 people in the 50 and over demographic.
Source: US Census Bureau American Community Survey 2009

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US Census Bureau Us Census Bureau 12 Survey conducted by author

13

Interviews conducted by the author, Cleveland, Ohio November 11 to December 11, 2011

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CURRENT SUPPLY The market is tight Housing in downtown Cleveland is in short supply. Currently, the average vacancy rate is 5.4%, with some buildings at 98% or higher. The region's occupancy rate hit a recent low of 93 percent during the first quarter of 2010. Now it's 95.2 percent - better than the national rate of 94.4 percent in the third quarter. Back downtown, there are waiting lists to get into many buildings. Tammy Oliver, an associate at MRN limited has over 250 people on a waiting list for residential units in the East 4th Street District.14 An historic rehab that used tax credits from the state of Ohio; 668, on Euclid Avenue and East 8th Street, and run by K&D Group Inc., filled up prior to opening and still maintains a waiting list greater than 200. A combination of tight lending from banks due to the economic meltdown of 2007 and 2008, plus an increase in the popularity of urban living has caused there to be a limited supply combined with high demand. Ralph McGreevy, executive vice president of the Northeast Ohio Apartment Association stated in a recent Plain Dealer article that “Downtown needs more apartments, It’s just that simple”. Joe Marinucci, the Downtown Cleveland Alliance’s Chief Executive, has publicly stated that he “wouldn’t blink at bringing 500 new apartments onto the market in a year”. The alliance's quarterly apartment surveys, which don't include student housing, show 4,171 apartments downtown.15

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Downtown for sale units, which number at 936 total, are also in demand. Even after the foreclosure crisis, those with the means often choose to buy downtown. The Avenue District‘s condominium tower was sent into foreclosure last year, but their townhome sales have remained strong. The townhomes in the Avenue District are the only new product on the market of its type downtown.17

14

Tammy Oliver, Associate at MRN Ltd., Interview, Cleveland October 2011 15 Michelle Jarboe McFee, With apartments full, developers look for new rental opportunities in downtown Cleveland, December 2011

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Mark Pugacz, Consultant to the DCA, personal email, 08 December 2011 Julie Iselin, Commercial Real Estate Broker, Allegro Reality Advisors, Interview with author, Cleveland December 2011

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DOWNTOWN CLEVELAND CONDO TRANSFERS FROM 2008 TO 2011
Source: Julie Iselin, Commercial Real Estate Broker, Allegro Realty Advisors, Ltd.
Building Name Park Building Fries & Schuele Sincere Building Grand Arcade Cloak Factory Pinnacle Condominiums Perry Payne Pointe At Gateway Water Street Avenue District Joshua Hall Stonebridge Plaza Stonebridge Condos Erie Building River Bend Condos Franklin Lofts Grove Court Lemko Hall TOTAL Building Address 140 Public Square 1951 W 26th Street 2077 E 4th Street 408 W St. Clair Avenue 635 W Lakeside Avenue 701 W Lakeside Avenue 740 W Superior Avenue 750 Prospect Avenue 1133 W 9th Street St. Clair Avenue 1148 Prospect Avenue 1237 Washington Avenue 2222 Detroit Avenue 1260 W 4th Street 1444 W 10th Street 3200 Franklin Boulevard 1900 Grove Court 2337 W 11th Street 2008 0 13 2 5 2 8 0 5 7 0 2 11 5 5 5 2 4 2 78 11.75 18% 48.92 23.00 34% 20.67 31% 10.33 16% 2009 7 4 1 6 4 5 1 2 5 5 1 10 5 0 2 1 2 0 61 2010 4 3 2 8 0 11 1 2 3 0 1 3 8 0 6 3 6 1 62 2011 YTD 0 2 1 1 0 1 0 1 0 0 0 2 1 0 0 0 0 1 10 Total 11 22 6 20 6 25 2 10 15 5 4 26 19 5 13 6 12 4 211 Avg Sale Price $ 342,617.45 $ 200,876.84 $ 293,846.67 $ 112,515.67 $ 266,166.67 $ 474,761.41 $ 160,250.00 $ 161,515.00 $ 149,710.08 $ 397,527.80 $ 320,248.50 $ 250,502.19 $ 168,368.33 $ 330,785.00 $ 176,845.00 $ 195,670.83 $ 82,152.43 $ 187,166.67 $ 244,350.53 Avg SF Avg Per SF 1,299 $ 262.05 1,199 $ 178.41 1,700 $ 173.18 903 $ 137.54 1,607 $ 167.35 2,055 $ 251.66 888 $ 182.24 986 $ 158.96 861 $ 180.24 N/A N/A 1,811 $ 177.31 1,052 $ 233.24 1,251 $ 135.89 1,520 $ 218.39 979 $ 178.63 1,410 $ 139.08 1,319 $ 78.49 2,148 $ 109.28 1,889 $ 188.11

1st Quarter Average 2008 - Present Avg 1st Quarter % of Total Sold 2011 Projection 2nd Quarter Average 2008 - Present Avg 1st Quarter % of Total Sold 3rd Quarter Average 2008 - Present Avg 1st Quarter % of Total Sold 4th Quarter Average 2008 - Present Avg 1st Quarter % of Total Sold

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NICHE ANALYSIS Profile of the residential market

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NICHE ANALYSIS CONCLUSIONS An underserved and growing segment of the market Those aged 55 plus are one of the only segments af Greater Cleveland’s population that is growing, and they are growing by almost 10,000 per year. This market of consumers are not given many choices in the downtown rental market. In fact they are mentioned more as a sidenote to the young urban professionals that choose to live downtown. In the niche analysis completed for this study, it is estimated that there are over 13,000 renters 55 and over in the Greater Cleveland Area. Even if Trinity were to get just 5% of that market, that would be 659 new households a year. Adjustments were made in the niche analysis to make sura a reliable number of older adults would be a true market for downtown that could afford downtown living without subsidies. Absorption rates mentioned earlier and lack of supply mean that new housing is appropriate to build at this time. In addition, the only two markets mentioned as downtown dwellers consistently are young urban professionals and empty nesters. The focus has been on the young urban professionals, but the older crowd will become a larger and larger segment of our population as the years pass and stand to prove a substantial market for downtown living. The fact that they are the only other demographic living downtown, even though the city has pushed to cater to the younger crowd means that there is great potential in marketing to this subset.

CAVEATS An urban lifestyle community The main obstacles to getting Trinity constructed as planned are financing and current thinking. Money is not readily available from the banks, but financing can be had. One thing that would make it difficult to prove a financially feasible project is that downtown rental rates have had only modest increases in the past decade which makes justifying the high rents needed to make new construction feasible difficult. And, For the first quarter of 2011, it remains less expensive to own a home rather than to rent in the Cleveland area, by a difference of roughly 43% based on monthly payments. The city does provide assistance and according to the city’s economic development department, the project would receive tax abatement for 15 years. In addition, Playhouse Square has been unable to get a project out of the ground to date and may be looking for a partner. The current Cleveland mindset is also another drawback. While many have fond memories of the city decades ago, they also remember all the failings, jokes, and disasters;financial or otherwise, of the late 20 th century. Crime is seen as a real problem to suburbanites who don’t travel downtown often. An innovative marketing plan would need to be put in place to counteract these perceptions and accentuate what city living offers for those in their later years that the suburbs cannot provide. Finally, block two most certainly is contaminated from previous use as a gas station. Mr. Frangos owns this site and many others. He owes a large sum of money in back taxes to the city, and probably has not remediated the site, as it currently is used for parking.

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FINANCIAL ANALYSIS An underserved and growing segment of the market New construction is difficult at this time, for many reasons. Therefore, I got creativewith the concept in order to draw more revenue from Trinity. Seeing as the towers will act as a gateway into the Theater District, be near 25 stories tall and have incredible visibility from all points south and east, especially those on the innerbelt; giant digital displays will be focused outward instead of inward like in Times Square, so as to announce to location of the Theater District, and also provide an additional source of revenue for Trinity. Mike Matonis, Vice President of Sales at Clear Channel communications estimates that revenue for each digital billboard could be upwards of $240,000 per year. That would be in addition to over 8.5 million dollars of residential and commercial rent for Tower 1 at Trinity, an apartment tower with ground floor commercial space. The digital displays would be at least twice as large as typical billboards and be oriented vertically. It will cost twice as much to install them, but provide much greater revenue as they will become iconic symbols with incredible visibility. I spoke with Josh Smith at Panzica Construction and after I explained the project to him, he quoted me $140 a square foot for construction of the residential, $100 a square foot for unfinished commercial space, and $1750 a parking space seeing as they would be indoors. I assumed $160 a square foot for new residential construction after checking some additional online sources just to be safe, and understanding this would be better quality than the average tower. I also used $160 a square foot for construction of the commercial space to really push it. Rental rates downtown average at $1.05, although Tammy Oliver over at MRN Ltd. told me that I could get $1.25 per square foot for new construction, so I assumed the top of what the market can charge. In addition, I assumed a $15 a square foot rental rate for my commercial space. Julie Iselin from Allegro suggested that I could even get $20 a square foot for new. However, in speaking with

restaurant and business owners around the Theater District, $13 a square foot was mentioned often. So, I assumed $15 a square foot would be reasonable for new construction in this part of downtown. My land values were calculated by conducting copious research into city and county records. I also received assistance from Ms. Iselin who has access to professional real estate software and databases. I assumed I would receive a tax abatement from the city of Cleveland, as new construction is eligible for such abatements. With all the assumptions I mentioned and an assumed 6.0% annual interest rate in these times of near zero federal interest rates, and potential interest free loans from the city of Cleveland for a project this size, my calculations put me $ 3,136,211 in the black every year. My net operating income should be enough to ensure a decent rate of return to investors, especially with incentives and loans from the city. I did inquire as to whether the Playhouse Square Foundation would be a partner in the venture and was told from Mr. Einhouse that “In most cases we would prefer to attract a good developer and stay out of the deal unless there is a compelling reason such as control of the use or a creative funding opportunity. We would be mostly interested in ensuring that the outcome was in line with our mission/vision and we are perfectly fine with that occurring without our financial participation.”

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RESIDENTIAL FRONT DOOR BACK DOOR ANALYSIS
ASSUMPTIONS Total Residential Units Total Residential (sqft) Residential Rent (per sqft) Amenities (sqft) Parking Deck (# of spaces) Price Per Parking Space Total Parking (sqft) Commercial Space (total sqft) Commercial Rent (per sqft) Service & Circulation (sqft) REVENUES Digital Billboard Residential Rent Commercial Rent (triple net) Total Revenues EXPENSES Property Tax Operating Expenses (per foot) Vacancy Discount Rate (ROR) = annual cash flow to developer Land Value Initial Electronic Billboard Cost Hard Cost Com. & BOH (per foot) Hard Cost Res. & FOH (per foot) Hard Cost Parking Soft Cost Total Cost LOAN INFORMATION Capitalization Rate Loan to Value Ratio Mortgage Constant Length of Mortgage (years) Debt to Coverage Ratio Interest Rate (annual) $ $ 100 160 20%

monthly

yearly

Site Size (31,277 sf)

235 unit (329,000 sf) 220 329,000 1.35 46,500 330 15,000 124,000 15,000 18 85,542

$ $ $

40,000 444,150 270,000

$ $

5,329,800 3,240,000

$ $ $ $

480,000 5,329,800 3,240,000 9,049,800

2.9% $ $ 5% 14%

6

$ $ $

45,326 3,321,252 266,490

$ $ $ $ $ $ $

1,590,400 400,000 10,054,200 60,080,000 4,950,000 12,016,000 89,090,600

0.1 75% 9.64% 30 1.25 6.00%

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BACKDOOR

FRONT DOOR
market driven approach Gross Annual Potential Income Vacancy Effective Gross Income Property Tax Operating Expenses NOI Annual Debt Service Before Tax Annual Cash Flow Equity Investment Annual Debt Service Debt Service Constant Mortage Amount Justified Project Investment Actual Project Cost Gap $ $ $ $ $ $ $ $ $ $ $ $ $ $ 9,049,800 266,490 8,783,310 45,326 3,321,252 5,416,732 4,333,385 1,083,346 7,738,188 4,333,385 9.64% 44,941,794
sum of rents net revenues less expenses = net operating income NOI/1.25 DSC BTCF=NOI-Debt service annual cash flow/ROR NOI/1.25 DSC debt service/constant

cost-driven approach Site Cost Hard Cost Soft Cost Total Capital Budget Required Equity (0.25) Required Annual Cash Flow Mortgage Amount Annual Debt Service

$ $ $ $ $ $ $ $

1,590,400 60,080,000 12,016,000 73,686,400 sum of cost 18,421,600 total capital budget *equity 2,579,024 ROR*Equity 55,264,800 total budget *LTV 5,328,752 mortgage amount *constant

NOI Operating Expenses Property Tax Effective Gross Income Vacancy Gross Annual Potential Income convert to monthly rent /120/12 Required Revenues to Justify Costs Actual Monthly Rent Rent Gap Justified Project Investment Total Capital Budget GAP

$ $ $ $ $ $ $ $ $ $ $ $

7,907,776 3,321,252 45,326 11,274,354 266,490 11,540,844

annual cash flow+debt service

52,679,982 equity + mortgage 73,686,400 (21,006,418) NO GO

gross annual potential

8,014 income/unit(month) 444,150 actual monthly rent (436,136) 52,679,982 <==from rents 73,686,400 <==from costs (21,006,418) NO GO

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23

PARCEL DATA

Design Review District

Current Zoning

2020 Land-Use Plan

Last Transfer Date

Last Transfer Sale Price

Last Owner

Market Value

Size of Parcel Size of $ per sq ft of (Sq. Ft) Parcel (acres) land

Taxes Paid 2010

Condition of Parcel

Frontage (linear feet)

Brownfield

Daily Traffic Tax protest Counts*

$ Deliquint Tax

Yes - Downtown Yes - Downtown Yes - Downtown Yes - Downtown Yes - Downtown Yes - Downtown Yes - Downtown Yes - Downtown

GR-E5 GR-E5 GR-E5 GR-E5 GR-E5 GR-E5 GR-E5 GR-E5

Mixed-Use: Downtown Mixed-Use: Downtown Mixed-Use: Downtown Mixed-Use: Downtown Mixed-Use: Downtown Mixed-Use: Downtown Mixed-Use: Downtown Mixed-Use: Downtown

28-Dec-83 1-Jan-75 1-Jan-75 1-Jan-75 1-Jan-87 1-Jan-87 30-Aug-07 28-Dec-83 $ 350,000 Vasilike Pasalis

$ $ $ $ $

237,200 129,400 122,600 372,000 688,500

5,785 3,168 3,000 9,103 16,848

0.13 0.07 0.07 0.21 0.39

$ $ $ $ $

41.00 40.85 40.87 40.87 40.87

$ $ $ $ $

6,736.24 3,675.64 3,481.72 10,565.20 19,553.06

Standard Standard Standard Standard Standard Standard

86 320

N N N N

≈65,000 ≈20,000 ≈20,000 ≈20,000 ≈20,000 ≈45,000 ≈20,000 ≈45,000 ≈65,000

N N N N N N Y N

$ $ $ $ $ $ $ $ $

24,549.37 24,549.37

573

N N

$ $ $

350,000 116,400 2,016,100

9,900 2,840 50,644

0.23 0.07 1.16

$ $ $

35.35 40.99 40.11

$ $ $

9,800.00 3,305.64 57,117.50

Standard Standard

55 42 1,076

N N

Yes - Downtown Yes - Downtown Yes - Downtown

SI-E5 SI-E5 SI-E5

Mixed-Use: Downtown Mixed-Use: Downtown Mixed-Use: Downtown

1-Jan-75 7-Mar-89 18-Jul-00 $ Voncyle Bletscher, 95,000 Lois B Miller (Trustee)

$ $ $ $

367,300 268,700 711,000 1,347,000

11,900 8,704 19,554 40,158

0.27 0.20 0.45 0.92

$ $ $ $

30.87 30.87 36.36 32.70

$ $ $ $

10,431.34 7,631.20 20,192.40 38,254.94

Standard Standard Standard

75 50 99 224

N N N

≈45,000 ≈45,000 ≈45,000 ≈45,000

N N Y

$ $ $ $

47,947.12 47,947.12

Yes - Downtown Yes - Downtown Yes - Downtown

SI-E5 SI-E5 GR-E5

Mixed-Use: Residential Mixed-Use: Residential Mixed-Use: Residential

28-Feb-06 04-Oct-94 04-Oct-94

$ $ $ $

592,700 1,023,000 609,200 2,224,900

14,580 20,460 12,184 47,224

0.33 0.47 0.28 1.08

$ $ $ $

40.65 50.00 50.00 46.88

$ $ $ $

16,832.92 29,053.61 17,301.52 63,188.05

Standard Standard Standard

150 160 370 680

N N N

≈20,000 ≈20,000 ≈45,000 ≈65,000

Y N N

$ $

71,400.38 88,877.57

$ 53,376.54 $ 213,654.49

Yes - Downtown Yes - Downtown Yes - Downtown Yes - Downtown Yes - Downtown

GR-E5 GR-E5 GR-E5 GR-E5 GR-E5

Mixed-Use: Downtown Mixed-Use: Downtown Mixed-Use: Downtown Mixed-Use: Downtown Mixed-Use: Downtown

6-Nov-06 6-Nov-06 23-Sep-09

$ $

817,766 817,766

Hanna Building LLC Hanna Building LLC

$ $

231,000 231,000

4,560 4,560

0.10 0.10

$ $

50.66 50.66

$ $

6,560.16 6,560.16

Standard Standard

24 24

N N

≈17,000 ≈17,000

N N

$ 6-Nov-06 6-Nov-06 $ $ 817,766 817,766 Hanna Building LLC Hanna Building LLC $ $ $ $

632,800 316,400 179,200 1,590,400 2,086,000

12,474 6,237 3,446 31,277 40,960

0.29 0.14 0.08 0.72 3.89

$ $ $ $ $

50.73 50.73 52.00 50.96 51.23

$ $ $ $

17,971.64 8,986.22 5,089.90 45,168.08

Standard Standard Standard

66 33 45 192

N N N

≈17,000 ≈17,000 ≈19,000 ≈19,000

N N N $ $ -

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24

RECOMMENDATIONS FOR PROCEEDING The time is right but financing may be difficult If the right group of financial incentives can be put together, the right partnerships formed with the city and perhaps the Playhouse Square Foundation, and when rental rates increase substantially downtown, than the time will be right to go ahead with a project of this sort. In order for this project to work financially, residential rental rates would need to be about $1.95 a square foot. That price takes into consideration profits derived from digital billboards. Without those, rates would need to be well over $2.00 a square foot. NO GO

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