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HomeMy WebLinkAboutORD 2006-104 - Williams Dr Gateway TIRZAN ORDINANCE DESIGNATING A CONTIGUOUS GEOGRAPHIC AREA WITHIN THE CITY OF GEORGETOWN CONSISTINGOF APPROXIMATELY APPROXIMATELY QUARTERS OF iNG THE SOUTHBOUND FRONTAGE ROAD OF BETWEEN NORTHWESTBOULEVARD ON THE NORTH!' AND THE NORTHi OF aN GABRIEL RIVER ON THE SOUTH, •PURPOSES TO CHAPTER 311 OF i! BOARD OF DIRECTORS i •CONTAINING PROVISIONS ! TO THE FOREGOINGAND PROVIDING CouncilWHEREAS, the City of of a • determined that the creationof • by c -r by the Tax Increment Financing Act, Chapter of the Texas Tax Code,Vernon's•r- •' - (the "Act") within the area of described in Exhibit•• hereto s in the best of • Article VIII, Sectionof the Texas platting,Constitution as the area is predominantly open, underdeveloped and, because of obsolete r impairs • •, growth of and plan,WHEREAS, the City has prepared a preliminary reinvestment zone project and financing • correct copyof -•' hereto as Exhibit: and on with the City Secretary, which plan provides that a portion of of -• g- a a valorem constitutingtaxes • be deposited a the hereinafter created tax increment fund, and that taxes of other taxing units may be utilized of proposed Zone; i t intentionWHEREAS, the City, on July 26, 2006 the City provided written notice of the City's • create the proposed •ne, complying with the requirementsa Section 311.100 Texas Tax •rl_ to the governing body of on property proposed • - noticeWHEREAS, a of r- . 2006 public hearing on • of Isroposed Zonepublished • -t t- # 2006 in the Williamson County newspaper of •°.•.neral circulatii and WHEREAS, formal presentations were made to other taxing entities on August 7, 2006 and August 8, 2006; and Ordinance No. Q amp - 10 1 Williams Drive Gateway Tax Increment Reinvestment Zone Page 1 of 7 WHEREAS, at the public hearing on September 26, 2006 interested persons were allowed to speak for or against the creation of the proposed Zone, its boundaries, or the concept • tax increment financing and • • property in the proposed • were given a reasonable •rr• to protest the inclusion • their property in the proposed • and WHEREAS, evidence was received and presented at the public hearing in favor of the creation of the proposed Zone and its boundaries under the provisions of Chapter 311, Texas Tax Code; and WHEREAS, no owner of real property in the proposed zone protested the inclusion of his property in the proposed Zone; and WHEREAS, not more than 10 percent of the property within the proposed Zone is currently used for residential purposes, as that term is defined in Section 311.006(d) of the Texas Tax Code; and WHEREAS, the City has provided all information, and made all presentations, given all notices and done all other things required by Chapter 311, Texas Tax Code, or other law as a condition to the creation of the proposed • and WHEREAS, the City has not previously created any tax increment reinvestment zones or any industrial districts; and WHEREAS, the total appraised value of taxable real property in the proposed Zone does not exceed 15 percent of the total appraised value of taxable real property in the City. Section 1. Findings. a) That the facts and • contained in the preamble of this Ordinance are hereby found and declared to be true and correct and are adopted as part of this •• for all purposes. b) That the City Council further finds and declares that the proposed improvements in the Zone will significantly enhance the value of all the taxable real property in the proposed zone and will be of general benefit to the City. c) That the City Council further finds and declares that the proposed reinvestment Zone meets the criteria and requirements of Section 311.005 of the Texas Tax Code because - (1) The proposed Zone substantially impairs and arrests the sound growth of the City, retards the provision of housing accommodations, constitutes an economic Ordinance No. a7 ()OU - I OH Williams Drive Tax Increment Reinvestment Zone Page 2 of 7 and social liability and is a menace to the public health, safety, morals, or welfare in its present condition and use because of: a. the predominance of defective or inadequate sidewalk or street layout; and/or b. faulty lot layout in relation to size, adequacy, accessibility or usefulness; and/or (2) The proposed Zone is predominantly open and, because of obsolete platting, deterioration of structures or site improvements, or other factors, substantially impairs or arrests the sound growth of the City. d) That the City Council, pursuant to the requirements of Chapter 311, Texas Tax Code, further finds and declares: (1) That the proposed Zone is a contiguous geographic area located wholly with the corporate limits of the City of Georgetown; I (2) That the total appraised value of taxable real property in the proposed Zonl does not exceed fifteen •' • the total r•'. value • taxable re, property in the City and in the industrial districts created by tlie City. - (3) That the proposed Zone does not contain more than fifteen percent of the total appraised value of real property taxable by Williamson County; (4) That the development or redevelopment of the property in the proposed Zone will not occur solely through private investment in the reasonably foreseeable future; (5) That less than ten percent of the property in the proposed Zone is used for residential purposes within the meaning of Section 311.006(d), Texas Tax Code; and • That the improvements proposed to be implemented in the proposed reinvestment • will significantly enhance the value of all taxable real property *in the proposed reinvestment Zone. e) The City Council finds and declares that the creation of the Zone is in conformance with the following Policy Statements in the City's Century Plan: Ordinance No. r.2 cro Cp .-10 H Williams Drive Tax Increment Reinvestment Zone Page 3 of 7 1.0 The community enjoys the benefits of well-planned land use in which conflicting needs are balanced. 9.0 Citizens and commercial goods move safely and efficiently throughout all parts of the City. 10.0 Georgetown's citizens and businesses enjoy an attractive community with a unique sense of place and a positive, identifiable image, at a cost which is consistent with other city social and economic priorities. 13.0 All municipal operations are conducted in an efficient business -like manner and sufficient financial resources for both current and future needs are provided. 15.0 The City manages its resources in a sound and fiscally conservative manner. Section 2. Designation of the Zone. That the City, acting under the provisions of Chapter 311, Texas Tax Code, including Section 311.005(a), does hereby designate as a reinvestment zone, and create and designate a reinvestment zone over, the area described in Exhibit "A" to promote the redevelopment of the area. The reinvestment zone shall hereafter be named for identification as "Reinvestment Zone No. 3, City of Georgetown" (the "Zone"), which also may be referred to as the Williams Drive Tax Increment Reinvestment Zone. Section 3. Board of Directors. That there is hereby created a Board of Directors for the Zone, which shall consist of five (5) members. The directors appointed to Positions One, Three and Five shall be appointed for tw• year terms, beginning on effective date of the zone while the directors appointed to Positio Two and Four shall be appointed to one year terms beginning on the effective date of the Zon All subsequent appointments shall be appointed for two-year terms. The member of the Boar of Directors appointed to Position One is hereby designated to serve as chair of the Board Directors for the term beginning on the effective date of the Zone, and ending upon expiration of the initial term of Position One. Thereafter the City Council shall annua n nominate and appoint a member to serve as chair for a term of one year beginning January 1 1 the following year. The City Council authorizes the Board of Directors to elect from i members a vice chairman and such other officers as the Board of Directors sees f* Notwithstanding the foregoing, the term of any City Council member serving on the Board Directors shall automatically expire when their term on the City Council ends. The Board of Directors of the Zone shall comply with Chapter 551, Texas Government Code (the Open Meetings Act) and Chapter 552, Texas Government Code (regarding public records and information). The Board of Directors shall make recommendations to the City Council concerning the administration of the Zone. The Board of Directors shall prepare or Ordinance No. dOOke - 10!J Williams Drive Tax Increment Reinvestment Zone Page 4 of 7 cause to be prepared and adopt a project plan and a reinvestment zone financing plan for Zone as described 'in Section 311.011, Texas Tax Code, and shall submit such plans to the Ci Council for its approval. The City, pursuant to Section 311.010(a) of the Texas Tax Code hereb authorizes the Board of Directors to exercise all of the City's powers necessary to admMiist manage or operate the Zone and to prepare the project plan and reinvestment zone financi plan, 'including the submission of an annual report on the status of the Zone. Notwithstandi el the foregoing, the Board of Directors shall not be authorized to issue tax increment bonds notes, impose taxes or fees, exercise the power of eminent domain or give final approval to t project plan and reinvestment zone financing plan. The Board of Directors of the Zone may n exercise any power granted to the City by Section 311.008 of the Texas Tax Codo additional and prior authorization from the City. Section 4. Duration of the Zone. That the Zone shall take effect immediately upon the passage and approval of this Ordinance, and termination of the operation of the Zone shall occur on December 31, 2031, or at an earlier time designated by subsequent ordinance of the City Council in the event the City determines in its sole discretion that the Zone should be terminated due to insufficient private investment or other good cause, or at such time, subsequent to the time that all project costs, tax increment bonds, notes and other obligations of the Zone, and the interest thereon, have been paid in full. Section 5. Tax Increment Base; Amount of Tax Increment. That the Tax Increrne Base of the City or any other taxing unit participating in the Zone for the Zone is the tot appraised value of all real property taxable by the City or other taxing unit participating in Zone and located in the Zone, determmied as of January 1, 2006, e year in w ic one w designated as a reinvestment zone (the "Tax Increment Base"). The amount of the t increment for a year is 100% of propertv taxes levied and collected by the City Td allZor th� portion of property taxes of other taxing units participating in the Zone and located in e o t.? 11 raise] , -i-igt fortk 2i�i Value of real property taxable by City or other taxing unit participating in the Zone and locate in the Zone. The Captured Appraised Value of real property taxable by City or other taxi tmidv!I by the unit and located in the Zone for that year less the Tax Increment Base. I Section 6. Tax Increment Fund. That there is hereby created and established a Tax Increment Fund for the Zone which may be divided into subaccounts as authorized by subsequent resolutions or ordinances. All Tax Increments, as defined herein and in the Texas Tax Code, shall be deposited in the Tax Increment Fund. Any expenditure to be made from the Tax Increment or any contract related thereto, must be approved by the City Council prior to such expenditure being made or contract beffig executed. The Tax Increment Fund and any subaccount shall be maintained at the depository bank of the City and shall be secured *in the manner prescribed by law for funds of Texas cities. The annual Tax Increment less any amounts that are to be allocated pursuant to the Act shall be deposited directly into the Tax Ordinance No. 900&#. (OH Williams Drive Tax Increment Reinvestment Zone Page 5 of 7 Increment Fund. All revenues from the sale of any tax increment bonds, notes or other *bligations hereafter issued for the benefit of the Zone by the City, if any; revenues from the sale of property acquired as part of the project plan and reinvestment zone financing plan, if any; and other revenues to be used in the Zone shall be deposited into the Tax Increment Fund. Prior to the termination of the Zone, money shall be disbursed from the Tax Increment Fund only to pay project costs, as defined by the Texas Tax Code, for the Zone, to satisfy the claims of holders of tax increments bonds or notes issued for the Zone, or to pay obligations incurred pursuant to agreements entered into to implement the project plan and reinvestment zone financing plan and achieve their purpose pursuant to Section 311.010(b) of the Texas Tax Code. Section 7. Purpose of Zone. That the City Council hereby finds that the creation of the Zone and the expenditure of moneys on deposit in the Tax Increment Fund necessary or convenient to the creation of the Zone or to the implementation of the pro'ect plan for the Zone constitutes J a program to promote local economic development and to stimulate business and commercial activity in the City. The City Council further finds that the Zone will facilitate a program of public improvements to allow and encourage the development and redevelopment of downtown Georgetown into a mixed use, pedestrian oriented environment consistent with the goals of the City's Downtown Master Plan. Construction of the public improvements is anticipated to take place in phases over a number of years and timed in coordination with new development and redevelopment pr jects in the Zone. 01 Section 8. Severability. If any provision, section, subsection, sentence, clause or p rase of this Ordinance, or the application of same to any person to set circumstances, is for any reason held to be unconstitutional, void or invalid, the validity of the remaining provisions of nereilly, 1 Te in T Te nTelpfe 1 4 or regulations connected herein shall become inoperative or fail by reason of any unconstitutionality, voidness or invalidity of any portion hereof, and all provisions of this Ordinance are declared severable for that purpose. Section 9. Open Meetings. It is hereby found, determined and declared that a ;wfficient written notice of the datei. hour -j -dace and sub."ect of the me—efing of the CitW Council at which this Ordinance was adopted was posted at a place convenient and readily accessible at all times to the general public at the City Hall of the City for the time required by law preceding its C eeting, as required by the Open Meetings Law, Texas Government Code, Ch. 551, and that this meeting has been open to the public as required by law at all times during which this Ordinance and the subject matter hereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Ordinance No S)000-104 Williams Drive Tax Increment Reinvestment Zone Page 6 of 7 Council of Georgetown at a regular meeting on October 26, 2004, at which a quorum was present and for which due notice was given pursuant to Section 551.001, et. seq. of the Texas Government Code. READ, CONSIDERED, PASSED AND APPROVED ON SECOND AND FINAL READING by the City Council of Georgetown at a regular meeting on the October 10, 2006, at which a quorum was present and for which due notice was given pursuant to Section 551.001, et. seqof the Texas Government Code. 9 . I 6ary Noon, Mayor City of Georgetown, Texas ATTEST - Sandra Lee City Secretary APPR7: AS,O FORM: By: * CC� L Patricia Carls City Attorney Ordinance No. —�W All AEST 184B GEORG�ET­OWN TEXAS Williams Drive Gateway T.I.R.Z. NE, Legend Proposed T.I.R.Z. -Y, Boundary Property Line !,Z4 Ri ver . . . . . . . . . . Water Body Cartographic Data For General Planning Purposes Only f slob 0 500 NOEL -JMML- Feet I inch equals 500 feet PROJECT PLAN AND REINVESTMENT ZONE FINANCING PLAN WILLIAMS DRI VE GA TE WA Y REINVESTMENT ZONE June 2006 TABLE OF CONTENTS I. INTRODUCTION I-1 Il. PROJECT PLAN II-1 A. Existing Uses and Conditions (311.011(b)(1)) II-1 B. Municipal Ordinances and Agreements (311.011(b)(2)) II-1 C. Zone Non -Project Costs (311.011(b)(3)) II-1 D. Relocation (311.011(b)(4)) II-1 III. FINANCING PLAN III-1 A. Project Cost Description (311.01 l(c)(1)) III-1 B. Location of Proposed Public Improvements (311.011(c)(2)) III-1 C. Anticipated Budget for Project Costs III-1 D. Economic Feasibility Study (311.011(c)(3)) III-2 E. Estimate of Bonded Indebtedness to be Incurred (311.011(c)(4)) III-2 F. Time of Incurring Monetary Obligations (311.011(c)(5)) III-2 G. Method of Financing (311.011(c)(6)) III-2 H. Current Appraised Value/Captured Appraised Value (311.011(c)(7)(8)) III-3 I. Duration of the Zone (311.011(c)(9)) III-3 IV. BOARD OF DIRECTORS OF THE ZONE IV-1 TABLE OF EXHIBITS AND APPENDICES Exhibit A Map Indicating Existing Conditions Exhibit B Zone Boundary Map Exhibit C Preliminary Project List Exhibit D Projected Captured Appraised Value and Tax Increment Appendix 1 Economic and Market Feasibility Studies L INTRODUCTION Williams Drive Gateway Reinvestment Zone (the "Zone") is a tax increment reinvestment zone, proposed to be designated by the City of Georgetown (the "City") pursuant to the Tax Increment Financing Act, as codified in Chapter 311 of the Texas Tax Code (the "Act"). The Zone is proposed to cover approximately 70(+/-) acres, is located entirely in Williamson County (the "County") and within the corporate limits of the City, and is generally located approximately one half mile along the southbound frontage road of Interstate 35, between Northwest Boulevard on the north end and the north fork of the San Gabriel River on the south. The Zone is proposed to be created for a 25-year duration. The Zone will facilitate a program of public improvements to allow and encourage the development and redevelopment of downtown Georgetown into a mixed use, pedestrian oriented environment consistent with the goals of the City's Williams Drive Gateway Redevelopment Plan. Construction of the public improvements is scheduled to take place in phases over a number of years and timed in coordination with new development and redevelopment projects in the Zone. Public improvements scheduled for the Zone include, but are not limited to, the construction of- (i) sidewalks, cross walks and pedestrian crossing systems (ii) storm sewers and drainage ponds, (iii) sanitary sewers, (iv) landscaping, streetscape, fountains, works of art, and street furniture, (v) plazas, squares, pedestrian malls, trails, and other public spaces, (vi) parking lots and roadways, (vii) utility line relocation and installation, (viii) water system improvements (ix) parks, and outdoor performance spaces, (x) bicycle routes and facilities, (xi) public transportation projects, (xii) signage, and (xiii) other related necessary or convenient public improvements (collectively, the "Project Costs"). I-1 H. PROJECT PLAN A. Existing Uses and Conditions (311.011(b)(1)) The City will designate approximately 70 (+/-) acres as Williams Drive Gateway Reinvestment Zone. Exhibit n is a map illustrating the existing conditions of property within the Zone, as required by Section 311.011 (b)(1) of the Act. The area currently includes several different uses including retail, restaurant, office, institutional and limited residential. The purpose of the Zone is to facilitate a program of public improvements to allow the development and redevelopment of Williams Drive Gateway area into a mixed use, pedestrian oriented environment consistent with the goals of the City's Williams Drive Gateway Redevelopment Plan. For illustrative purposes, Exhibit B depicts the vicinity and boundaries of the Zone. B. Municipal Ordinances and Agreements (311.011(b)(2)) All of the property located within the Zone is within the corporate limits of the City. The City has agreed to participate in the Zone by contributing 100% of its tax increment. The proposed development does not anticipate any additional changes to the City's comprehensive plan, City ordinances or building codes other than those relating to the creation of the Zone or those ordinances or comprehensive plan amendments already approved by the City for the development. C. Zone Non -Project Costs (311.011(b)(3)) Non -Project Costs represent the expenditures estimated by public and private investors necessary to complete the development and redevelopment efforts in the Williams Drive Gateway area. It is difficult to quantify the maximum extent of non -project costs as these investments will happen over time by multiple parties. Over the life of the reinvestment zone it is anticipated that substantial new investment will occur within the zone. D. Relocation (311.011(b)(4)) No residential relocation will be required as apart of the creation of the Zone. Less than 10% of the property within the Zone is currently used for residential purposes. III. FINANCING PLAN A. Project Cost Description (311.011(c)(1)) Project Costs will include all costs associated with the projects listed in I'Aiiibit (' and will include: 1. Capital Costs a. water system improvements; b. storm sewers and drainage ponds; C. sanitary sewers; d. utility line relocation and installation; e. parking lots and roadways; f. streetscape and landscape areas; g. public areas and plazas; h. sidewalks, cross walks and pedestrian crossing facilities; i. parks, trails and outdoor performance areas; j. public transportation projects; and k. bicycle routes and facilities. 2. Design, Architectural, and Engineering Fees The public improvements will require professional services for design and engineering, including inspecting/testing of soils and construction materials and overseeing construction operations. Additionally, certain studies, including market and economic feasibility studies will be prepared. 3. Zone Administration - Over 25-Year Life of Zone The ongoing administration of the Zone will require services including, but not limited to, such services as accountants and bookkeepers, engineers, legal counsel, planners or other administrative services deemed necessary by the Zone Board to implement this Plan. B. Location of Proposed Public Improvements (311.011(c)(2)) The approximate location of the proposed public improvements, as required to be demonstrated by Section 311.011 (c)(2) of the Act, is shown on I'Aiiibit 11, which follows. The public improvements will be constructed in phases consistent with the development and redevelopment of properties within downtown Georgetown. C. Estimate of Project Costs Project Costs will vary depending on the nature, timing and number of development and redevelopment projects within the Zone. It is anticipated that total Project Costs will not exceed $25,000,000. Project Cost expenditures will vary from year to year and may range from $500,000 to $1,000,000 annually. Such Project Costs may be paid from the tax increment on deposit from time to time in the Fund, defined below, or through the issuance of bonds, notes or other obligations (the "Obligations"). D. Economic Feasibility Study (311.011(c)(3)) A market analysis and recommended action plan as well as a master plan for the proposed Zone have been conducted. See Appendix 1 for a copy of these studies. E. Estimate of Obligations to be Incurred (311.011(c)(4)) The City will finance certain Project Costs described above necessary to develop the property in the Zone. The City will finance such Project Costs through using funds on deposit in the Fund, the issuance of Obligations or any combination thereof depending upon the growth of the tax increment and the number of other taxing jurisdictions participating in the Zone. The City estimates that it will issue Obligations in one or more series in an aggregate amount not to exceed $25,000,000 at such time and amount as financially feasible based upon the tax increment and the nature and scope of development and redevelopment projects within the zone. F. Time of Incurring Monetary Obligations (311.011(c)(5)) The repayment term on any Obligations issued is estimated at 20 years. It is anticipated that Obligations will be issued no sooner than City of Georgetown fiscal year 2007. G. Method of Financing (311.011(c)(6)) Any Obligations issued by the City will be secured in whole or in part by ad valorem taxes collected by the City on the incremental increase in the assessed value of real property located within the Zone. For purposes of this financing model, it is anticipated that the City will participate in the Zone at a participation rate equal to 100% of its total tax rate. The City anticipates requesting the County to participate in the Zone. The City will establish a Tax Increment Fund (the "Fund") for the Zone in the ordinance designating the Zone. In accordance with Section 311.013 of the Act, each participating taxing jurisdiction will pay into the Fund the amount of increment generated by the taxing jurisdiction. The tax increment deposited into the Fund will be used to pay Project Costs, Obligations issued to finance Project Costs and costs related to maintaining, operating and administering the Zone. H. Current Appraised Value/Captured Appraised Value (311.011(c)(7)(8)) The Plan will be implemented in part through the Zone's ability to capture and utilize incremental ad valorem tax revenue generated from real property in the Zone, known as the captured appraised value. The base value, from which captured appraised value is calculated, is the total assessed taxable value of all property within the Zone on January 1, 2006, as shown on the rolls of the Williamson County Appraisal District. III - 2 The development and redevelopment in the Zone is anticipated to occur over a number of years, the projected captured appraised value will increase as development continues. Exhibit D shows the projected captured appraised value and tax increment over the 25-year duration of the Zone. I. Duration of the Zone (311.011(c)(9)) The Zone will have a duration of 25 years. III - 2 IV. BOARD OF DIRECTORS OF THE ZONE The City will create a Zone Board of Directors composed of 5 members in the Ordinance designating the Zone. It is anticipated that other taxing entities within the Zone will waive appointment to the Board of Directors. However, if the County participates in the Zone, and does no waive appointment, the County will be entitled to appoint one director to the Board of Directors. The City will appoint the remaining four members of the Board of Directors. The Board of Directors of the Zone will prepare (i) an Annual Zone Budget; (ii) an Annual Report of Zone activities; and (iii) an Annual Financial Statement prepared in accordance with Generally Accepted Accounting Principles for presentation to the City. IV-1 EXHIBIT A -MAP INDICATING EXISTING CONDITIONS AND ZONE BOUNDARYMAP EXHIBIT B — PRELIMINARYPROJECT LIST Project 1. Construct additional surface and structured parking 2. Re -configure on -street parking to maximize number of spaces 3. Install additional landscaping around existing surface parking lots 4. Develop a master landscape and streetscape plan 5. Expand pedestrian amenities throughout zone to include: bike racks, benches, trash cans, lighting, public restrooms, public art, pedestrian crossing systems 6. Construct new City and County offices and facilities within the zone 7. Develop additional small parks within the zone 8. Construct and outdoor performance space 9. Add public art along sidewalks 10. Create a scenic overlook for the San Gabriel River 11. Bring all sidewalks into compliance with Downtown Master Plan sidewalk hierarchy 12. Install brick crosswalks 13. Install pedestrian controlled street crossings 14. Create bike routes 15. Create a public transit shuttle service to downtown 16. Create additional housing units 17. Create a hotel and convention site 18. Create a wayfinding si na a program and install si na e 19. Improve signage along trails 20. Bury overhead utility lines 21. Replace and upgrade water and sewer lines 22. Build a regional water quality system for the zone 23. Make Williams Drive more pedestrian friendly APPENDIX I - MARKETANALYSISAND DOWNTOWN MASTER PLAN Williams. Drive Gateway Market Feasibility Analysis Prepared for Mr. James Hill Civic Design Associates 2136 Kipling Street Houston, Texas 77098 by Capitol Market Research, Inc. 605 Brazos Street, Suite 300 Austin, Texas 78701 (512) 476-5000 on November 23, 2005 ■o+ij,: II.:_,.�r,.� �l•� L�wi Real Estate Research, Land Development Economics & Market Analysis November 23, 2005 Mr. James Hill Civic Design Associates 2136 Kipling Street Houston, Texas 77098 Re: Market Feasibility Analysis for the residential and retail components of a proposed mixed -use redevelopment project to be constructed at the intersection of Williams Dr. and IH-35 in Georgetown, Texas Dear Mr. Hill: The potential for mixed -use development at the Williams Drive Gateway is specified in the report that follows. The market demand for retail and multifamily residential development is identified, and a forecast for the Gateway area is prepared. The resulting demand analysis is combined with data on future supply and an assessment of the characteristics of the redevelopment site, which results in a potential absorption forecast for the subject property. The analysis and forecast is shown in the report that follows. We invite you to review the report and contact us with any questions or comments you may have. Respectfully submitted, CAPITOL MARKET RESEARCH, INC. Charles H. Heimsath, AICP President CHHlmm Capitol Market Research, Inc. 605 Brazos, Suite 300 Austin, Texas 78701, (512) 476-5000 cheimsath@cmraustin.com TABLE OF CONTENTS TABLE OF CONTENTS List of Tables iv Site Analysis and Neighborhood Data Static Attributes 1 Legal Attributes Dynamic Attributes 2 Environmental Attributes 2 Demographic Trends and Forecasts 6 Historical Trends 6 Forecast 6 Austin Retail Market Conditions 11 Retail Market Overview 11 Current Market Conditions 11 Georgetown Retail Market Conditions 14 Overview 14 New Construction 14 Occupancy & Absorption 14 Average Rents 14 Market Outlook 14 Market Area Purchasing Power 17 Estimates of Purchasing Power 18 Planned Retail Development 19 Georgetown Gateway Retail Absorption 21 Multifamily Market Trends in the Austin MSA 22 Apartment Market Overview 22 Current Market Conditions 22 Georgetown Apartment Market Conditions 24 Overview 24 New Construction 24 Occupancy 24 Average Rents 24 Market Outlook 24 Planned Projects in the Georgetown Market Area 27 Market Area and Subject Absorption Forecast 29 Current Market Conditions 30 Townhome and Condominium Demand 32 Georgetown Townhome/Condominium Market Conditions 33 Overview 33 New Construction 33 Absorption 33 Pricing 33 Market Outlook 33 Gateway Area Townhome/Condominium Absorption Forecast 36 Conclusions 37 APPENDIX 38 CERTIFICATE 39 III List of Tables Page Table (1) Table (2) 24-hour Traffic Volumes Population and Household Growth by Tract: Market Area, Williamson County 2 and Austin MSA: 1990 — 2000 7 9 Table (3) Market Area Household Forecast: 2000 — 2015 10 Table (4) Market Area Multi -Family Forecast: 2000 — 2015 13 Table (5) Retail Market Summary: 1991 — 2005 15 Table (6) Georgetown Market Area Retail Summary: October 2005 Table (7) Current Purchasing Power 17 is Table (8) Estimated Purchasing Power 20 Table (9) Table (10) Supply and Demand Comparison Supply and Demand Comparison: Georgetown Gateway Project Area 21 Table (11) Citywide Apartment Summary: 1991 — 2005 23 Table (12) Georgetown Market Area Apartment Summary: 1995 — 2005 25 Table (13) Competitive Multifamily Sites 27 28 Table (14) Proposed Project Timing 28 Table (15) Subject Absorption Forecast 31 Table (16) New Townhome/Condo Sales: Austin MLS Region 32 Table (17) Market Area Townhome/Condo Demand: 2000 — 2015 Table (18) Georgetown Market Area Condominiumrrownhome Sales 34 Table (19) Georgetown Gateway Condominiumrrowhome Absorption: 2005 — 2015 36 iv Site Analysis and Neighborhood Data In order to fully explore the market and development feasibility of the subject property, it is necessary to analyze the site and neighborhood attributes and characteristics. These attributes can then be assessed in order to determine their relative importance to the potential for commercial development of the site. Characteristics felt to be most relevant to the subject site are outlined below and are followed by a more detailed discussion of each. 1. Static Attributes - the physical characteristics of the site and existing structures that comprise the subject property. 2. Legal Attributes - consists of public controls and potential legislation restricting and defining use, such as zoning (existing and proposed), and other restrictions that may enhance or adversely affect the subject. 3. Dynamic Attributes - characteristics with potential to affect project viability both on and off the subject site including access, exposure, and neighborhood characteristics. 4. Environmental Attributes - impact of physical, social and economic factors such as drainage, floodplain and compatibility with the immediate neighborhood. Static Attributes Size and shape: Approximately 58.68 acres total, consisting of several contiguous parcels, with an irregular shape Location: The subject site is located on the southbound frontage of IH-35, where it intersects with Williams Drive in Georgetown, Texas. It is bordered on the north by Northwest Blvd., bisected by Williams Dr. and bordered on the south by the San Gabriel River. Flood Plain: According to the Flood Hazard Map produced by ESRI/FEMA Project Impact, a small portion of the subject property (along the San Gabriel River) lies within the 100-year flood plain. Further consultation with an engineer is recommended. Topography: The site is relatively flat with vacant tracts of land in the far northern and far southern portions of the study area. At the southern end of the study area, the land drops off sharply toward the north fork of the San Gabriel River. Legal Attributes The subject property is located within the City of Georgetown city limits, and is subject city zoning and site plan regulations. There are five zoning districts that make up the study area: C-1 (Local Commercial), C-3 (General Commercial), OF (Office), RS (Residential Single -Family) and TF (Two Family). Capitol Market Research (CMR) obtained from the Williamson Central Appraisal District the 2005 tax roll that includes a property "structure code" that can be used to establish land use. The appraisal data shows total land value within the study area of $7,082,991 and total improved property value of $8,979,338 and a total assessed value of $16,062,329, The land use map shows a concentration of commercial uses throughout the study area, residential uses on both sides of Williams Dr., north of Park Lane/Cedar Drive and vacant land in the far northern and southern portions of the study area. Both land uses and values represent the current conditions as of September 30, 2005. Dynamic Attributes The site is located on and may be accessed from IH-35, Williams Drive (FM 2338) and Northwest Blvd. Traffic counts shown in Table (1) indicate that IH-35 and Williams Drive are the major arterials that may be quickly accessed from the subject site. Table (1) 24-hour Traffic Volumes LOCATION 1968 19^.2 1976 1980 1984 1988 1992 1997 2002 IH-35 North of 195 n a. n a. n a. n a n.a. n.a. 37780 50240 62300 Al Berry Creek 9980 11640 17150 17600 n.a. 31120 38470 59830 72230 South of Airport Road 8180 10720 15710 16800 n a. 31780 39460 61810 73030 South of San Gabriel River North 9830 11420 19250 20000 n a. 44270 55430 75290 99970 North of San Gabriel River South 9880 11690 19290 22000 40500 45770 56630 86400 104890 South of FM 2243 9720 11640 18400 23000 39010 44570 53700 87470 101930 I1-11-35 BUSINESS At San Gabriel River 5880 7890 12250 13500 n.a 17740 15950 20220 22540 North of FM 2338 2610 3730 6340 9400 n.a 11050 12340 17950 18350 SH 29 West of IH 35 1100 1700 2180 2800 no 5690 7030 13640 19160 East of1H 35 1890 2710 3540 4700 na 8000 13720 17480 22470 FM 2338 (Wl1.1.1AMS DR) West oflH 35 Business 3250 4100 8790 12300 na 17250 20410 22530 22360 West of IH 35 2650 3170 10390 13200 n a 21260 23520 31400 36580 South of Co Rd 264 (Booty's Cro! 530 960 3810 5500 n a 15290 15440 21260 29690 NORTHWEST BLVD West oflH35 na. n.a. n.a. n.a. n.a. n.a. 2610 3110 2720 .\'uur, e: 'rnC d.: : rulhe Vdwicr Land uses in the area include several established neighborhoods, vacant parkland along the San Gabriel River, and nearby shopping centers such as The Rivery, located in the southern portion of the subject study area along IH-35, and Wolf Ranch, which is nearing completion and is located at SH 29 and IH-35, approximately 1.4 miles southwest of the study area. The subject site has frontage on IH-35 and is bisected by Williams Dr. (FM 2338) and has excellent access to both major arterials. Environmental Attributes According to Flood Hazard Map produced by the Federal Emergency Management Agency (FEMA) and ESRI Project Impact, a portion of this approximately 58.68-acre site lies within the designated 100-year floodplain. Further consultation with an engineer is recommended. 2 Exhibit A Study Area Boundary Page 7 City of Georgelown, Texas Williams Drive Gateway �--- - _ 2005 Land Uses �\ h y WCAD Land Uses Single Familiy j Multi -Family IDuplex Vacant � Commercial N / Tgr484911kh.shp _ Tgr48491wat.shp p files _ Prepurod by Caphol Motko(Rosoon:h, October 2005!_ �n...mrrel9MSIM.rGnma lMvo a(eWa IOL)I8 NDnd use _ Williams Drive Gateway 2005 Zoning Districts 1 t'• ��! -,,, ._ City of Georgetown Zoning Districts C-1: Local Commercial ,� •� / C-3: General Commercial ; 2 Offic OF: Residential /\V\ • ' � IRS:Residential Single -Family TF: Two Family -----� — Tgr48491wat.shp N Tgr484911kh.shp i 0 0.2 iles c:IPro(eds12001 Hams Dnvo afow94nops`ap pnlrrp Proporod by.CeplfG WAN Rosoarch, Oclobor 2005� i i . Demographic Trends and Forecasts Historical Trends The defined Georgetown market area has experienced a significant amount of population and household growth since 1990 when the area had 21,986 people living in 7,889 households. Total population in the subject area census tracts grew from 23,283 in 1990 to 42,151 in 2000, an increase of 81.04%. The 18,868-population increase during the 1990s was approximately 17.09% of total household growth in Williamson County and 4.03% of the growth experienced in the Austin MSA. However, recent trends in new building permits issued in the market area suggest that the aggregate rate of growth has increased since the late nineties, with the development of several new single-family subdivisions west of IH-35. Viewed from the perspective of existing home sales, the Georgetown market area has accounted for approximately 4.47% of MLS homes sales in the Austin region since 2000 and 15.28% of sales in Williamson County. This level of activity indicates a strong market demand for housing in this part of the region. New construction in the Georgetown market area added more than 4,000 new units to the market area from 2000 through the end of 2004, and accounted for 6.3% of the growth in the Austin MSA and 17.7% in Williamson County. Forecast After reviewing the historical capture rate, new home sales and recent MLS activity in the market area, and recognizing that the market area has a substantial amount of undeveloped land in inventory, a market area population and household forecast has been prepared and is shown in Table (3) on page 9. The household forecast shows a potential growth of approximately 1,403 new households added in the market area on an annual basis. According to the 2000 census, approximately 23.1% of the existing households were renters, and this is down by 10.6 percentage points from 33.7% in 1990. Because this area has an abundance of vacant land and a number of large scale single-family developments planned, it seems likely that the overall market will continue to be dominated by owner -occupied single-family housing. However, the increasing demand for well located rental housing and movement away from traditional single family development as the predominate housing type in the market area should result in an increase in the demand for multifamily housing in the market area. Consequently, CMR has assumed a modest increase in the historical tenure split (to 25% in 2015) that will result in demand of 318 new renter units on an annual basis over the next 10 years (Table (4)). 51 _N 1 k aYeeee�ee°Mp e NcNNY --t p1 W)ti N N O] Opp `, ti V N 0W N O W N n N O 1n r n OR q (l� ti tD 00 ((f V! N (v N N N N N N cv tV N N 2 d Lo Q tr N N M M (O (p N (n r 00 O (OrnnnntD f�naO �t th N N N N N N N 1 N N N e o0) ye e e eeoee wee N co 'T T N TNV) co (pNON :L.i N W) N N OMi W N OOi A w) r a ppO 10 � y g iD M CD (n M M r to r O d N 010 O a) = r .R O n(nN oo (�(ppn o0a, Goo (O Obi to � � M C 13 S3 m o2eeoQ-9-P-.OQo`o ee N_ O to in p �atr NOcq rn00NW to d N C U MtoqirZ s, co h(O H O V r O r (O ty O C E L 8� (N-�- (; W CI O 1� O CD•— CO W CDy, � Or ) N w 0 wi sr (O M M (`! M N N. _ 3 O ca N C 7 LD as p 01 N a R j t0(D(n MNV7(N (n0O N0 C - vi C6 NN rN, (V 0Ln h a a c mrn eeeeeeeo eee O C NC4(D m CD O((D m O� m r C4 pOj (=j M VN' n °,2 (n 0 N oo n v�i r P. 10 G^� f. aoo w--'oil C N 0 tD L •Q (O (n M N d N N Q O r _N a a Mn(c(n(c(nMoopp (pn O nONNNM (O 04 gj r 6C7M NNNN •- Nin w g000ssoo o (ppvvv_ '� N R N N N N N N N O N p N m a c o 0 0 0 o 0 0 o m E d a, NN N N N NNN N t0 a 2 r Table (3) Market Area Household Forecast 2000 - 2015 Year Williamson County Population Annual Change Market Area Percent Market Area Forecast Household Size Total Households 2000 249,967 16.9% 42,151 2.66 15,006 2001 266,088 16,121 17.1% 44,908 2.66 16,883 2002 282,209 16,121 17.1% 47,664 2.66 17,919 2003 298,331 16,121 17.1% 50,421 2.66 18,955 2004 314,452 16,121 17.1% 53,178 2.66 19,992 2005 330,573 16,121 17.1% 55,935 2.66 21,028 2006 350,263 19,690 17.1% 59,302 2.66 22,294 2007 369,953 19,690 17.1% 62,669 2.66 23,560 2008 389,644 19,690 17.1% 66,036 2.66 24,825 2009 409,334 19,690 17.1% 69,403 2.66 26,091 2010 429,024 19,690 17.1% 72,770 2.66 27,357 2011 452,973 23,949 17.1% 76,865 2.66 28,897 2012 476,922 23,949 17.1% 80,960 2.66 30,436 2013 500,872 23,949 17.1% 85,056 2.66 31,976 2014 524,821 23,949 17.1% 89,151 2.66 33,515 2015 548,770 23,949 17.1% 93,246 2.66 35,055 Prepared by: Capitol Market Research, October 2005 Notes: Projections based on Texas State Data Center, June 2004 (scenario 1.0) Market area capture rate based on 1990 - 2000 growth trend. Household size based on 2000 US Census poptrend.xls 9 Table (4) Market Area Multi -Family Forecast 2000 - 2015 Year Total Households Annual Change Percent Renter % Multi- Renter Households Family Multi -Family Demand 2000 15,006 ..... 2001 16,883 1,877 23.1% 433 93.6% 406 2002 17,919 1,036 23.1% 239 93.6% 224 2003 18,955 1,036 23.1% 239 93.6% 224 2004 19,992 1,036 23.1% 239 93.6% 224 2005 21,028 1,036 23.1% 239 93.6% 224 2006 22,294 1,266 23.3% 295 93.6% 276 2007 23,560 1,266 23.5% 297 93.6% 278 2008 24,825 1,266 23.7% 300 93.6% 280 2009 26,091 1,266 23.9% 302 93.6% 283 2010 27,357 1,266 24.1% 304 93.6% 285 2011 28,897 1,540 24.2% 373 93.6% 349 2012 30,436 1,540 24.4% 376 93.6% 352 2013 31,976 1,540 24.6% 379 93.6% 355 2014 33,515 1,540 24.8% 382 93.6% 358 2015 35,055 1,540 25.0% 385 93.6% 360 Prepared by: Capitol Market Research, November 2005 Notes: Projections based on Texas State Data Center, June 2004 (scenario 1.0) Market area percent renter based on 2000 census data. Percent multi -family based on TAMU Real Estate Center building permit starts, 1990-2004 poptrend.xls 10 Austin Retail Market Conditions Retail Market Overview The Austin multi -tenant retail market has shifted away from the traditional location and concentration of retail space in neighborhood shopping centers and large regional malls to a more diverse base that includes "power centers," "super centers," and off -price shopping. Approximately 10.5 million square feet of multi -tenant space have been added to the citywide inventory since 1995, an increase of 36.6%, and much of that space has been located near Lakeline Mall, in the MoPac corridor at the Arboretum, at La Frontera in Round Rock and in Sunset Valley. Gross retail sales for the Austin MSA rose at an average of 16,54% per year from 1980-1985. Rising incomes and a rapidly expanding population base provided the growth impetus. Then in 1986, the bottom fell out of the market and retail sales dropped by almost 5%. This drop in sales persisted during 1987 and 1988, however, from 1991 to 2000 retail sales increased dramatically, growing an average of 10.9% per year from 1991 to 2000. With the "dot.com" bust in 2001, gross retail sales dropped, and recently the growth rate has been a more modest 3.3% per year (2001-2003). However, with employment and population growth forecasted to be 3% per year, the future prospects for retail development in Austin are encouraging. The combination of rapid population growth and increases in disposable income has created a healthy demand for retail space in the Austin area. In addition, the national trend toward replacement of neighborhood retail stores and malls with "big box" outlet stores and "lifestyle centers" has generated a demand for new construction, even during the late eighties, and in 2001 and 2002 when the Austin economy was stagnant and there was little population growth. Between 1986 and 1992 there was very little improvement in average occupancy and rental rates, but during that same period, a total of 1.3 million square feet of shopping center space was built and absorbed at very high rental rates. Consequently, absorption of new retail space averaged 200,000 square feet per year between 1988 and 1992 and, as a result of the new construction, the shopping center landscape began to change in response to the new retailing formats. Between 1992 and 1995, the evolution of the shopping center accelerated and the retail market improved considerably. Occupancy rates which had been stuck in the low 80% range climbed to more than 93% and, as the market improved, absorption increased to 1.0 million square feet in 1993. In 1995 the opening and lease -up of Lakeline Mall at Highway and FM 620 pushed absorption to 1.9 million square feet, however the occupancy rate for regional shopping malls dropped from 90.3% in 1994 to 88.9% in 1995 due, in part, to space availability at Lakeline Mall. Since that time occupancy rates have continued to increase and have now stabilized at approximately 94%. In recent years, annual absorption has routinely exceeded 1 million sq. ft. as major suburban "nodes" of retail activity have opened and expanded. Current Market Conditions Citywide occupancy decreased slightly from December 2003, dropping from 94.1% in December 2003 to 93.5% in December 2004 and again in June 2005 to 93.4%. Average rents also decreased $0.37 per square foot from $16.22 in December 2003 to $15.85 in December 2004 per square foot, but increased 11.0% to $17.59 per square foot, the highest average rate ever recorded in the Austin area. In spite of the small declines in occupancy, the market remains strong with the expansion of power centers, large community "super centers," new "lifestyle centers" and a growing trend of demolition and renovation. 11 The June 2005 inventory of multi -tenant retail space in the Austin area included 29.2 million square feet evenly distributed among the four major types of retail centers. The regional malls, which include Lakeline, Barton Creek Square, Highland and Northcross Malls, and Capital Plaza, account for more than 4.3 million square feet of retail space. Community and power centers (by definition) include at least one junior department or discount store and are concentrated on Highway 183, MoPac and IH-35. Neighborhood centers, usually anchored by a grocery store/drugstore combination, are distributed throughout the city among the various residential subdivisions. Strip centers, which generally have no "anchor" tenant, are found along every major thoroughfare in the city and surrounding suburban residential markets. 12 Table (5) Retail Market Summary Austin: 1991 - 2005 Date Total SF Occupied SF Percent Occupied SF Additions Absorption Avera e Rent 1991 18,615,066 14,312.101 76.9% 533,000 347,825 $9.19 1992 19,010,914 14.792,832 77.8% 395,848 568,007 $9.26 1993 19,286,206 16,105,328 83.5% 275,292 1.030,636 $9.47 1994 19,337,926 17,001,589 87.9% 51,720 840,493 $10.21 1995 21,400,556 18,973,430 88.7% 2,062,630 1,977,355 $12.94 1996 21,751,044 19,916,993 91.6% 350,488 1,081,861 $12.92 1997 21,716,879 20,336,836 93.6% -34,165 557,335 $13.70 1998 23,319,543 21,655,479 92.9% 1,602,664 1,340,491 $15.02 1999 24,161,615 22,929,209 94.9% 842,072 1,311,473 $14.81 2000 25,615,824 24,757,048 96.6% 1,454,209 1,324,776 $16.85 2001 26,476,299 25,014,511 94.5% 860,475 557,628 $16.00 2002 26,584,952 25,212,128 94.8% 21,000 94,045 $15.96 2003 28,536,372 26,847,571 94.1% 1,844,992 1,522,224 $16.22 2004 28,583,179 26,712,487 93.5% 301,804 2,937 $15.85 2005 29,191,534 27,258,299 93.4% 446,318 562,982 $17.59 Source: Capitol Market Research, Austin Area Retail Survey, 1991-2005 retail sum.zls Retail Historical Rent & Occupancy 1991-2005 $20.00 $18.00 $16.00 LL $14.00 $12.00 o. $10.00 $8.00 W $6.00 $4.00 $2.00 $0.00 100.0% V m 90.0% 3 70.0% �N �V � CbIK °J� �ro �A °5� PI� o� �� �� �� �� �3 Noy No, Noy ,�°' N°' 'o, Noy °� ,y0 ,y0 `ya �O �� �4 F=Average Rent -+-Percent Occupied] 13 Georgetown Retail Market Conditions Overview In October 2005, Capitol Market Research surveyed 13 multi -tenant shopping centers in the Georgetown market area with a total of 1,648,366 square feet of net rentable area. Currently. the market area occupancy is 89.6%. Average rents are $26.00 per square foot. Community centers in this area have the highest average rent at $32.31, and are 92.6% occupied. Neighborhood centers have the highest occupancy rate at 97%, but the lowest average rent at $18.44, white strip centers have the lowest occupancy at 70.7% and average rent is $19.84. New Construction A majority of the retail centers in the Georgetown market area were completed since 2000. Eleven of the 13 retail centers in this market area, comprising 87.1% of the net rentable area, were completed since 2000. Within the last two years, seven retail centers with 1,169,819 sq. ft. (71%) were completed, including three small strip centers, one HEB-anchored shopping center, and two large community shopping centers (Rivery Towne Crossing and Wolf Ranch). These centers are achieving rental rates that are 17% higher than the market average while maintaining a higher occupancy rate. Occupancy & Absorption The market area occupancy in October 2005 was 89.6%. According to brokers active in the Georgetown market, occupancy rates have remained above 90% over the last few years, but absorption has been relatively low until recently (2004) due to the small size of the older centers in the market area and the lack of attractive lease space. Average Rents Average rents in the Georgetown are increasing as new product is introduced in the market at higher than average rates. The new construction product (built since 2004) has out -performed the market, achieving higher average rents ($30.41) and maintaining higher than average occupancy (90,5%). Market Outlook The high occupancy rates and strong population growth in this market area have created a strong opportunity for new retail development. For the last several years, the growth in retail space has not kept pace with the residential growth in the market area; but with completion of Wolf Ranch and Rivery Towne Crossing, the retail offerings in the area have expanded dramatically. 14 y N N N y a Co L c°a (D m E E a O1 o fE m�gomY « �c m d0 U' 3 �tf o .- C Y E Or yy N 2 O N w U n Y O m C L 2 — r N p y a C U p 0 aviaELLJ� uim,v. 0) m 1) 9. E- 4) m_1n .0 m E $c>.ia1n== �)U O m O W NO1'7 M m 00 m un W ) O ON'M n V c'7N1`7 c+7 f�710 Np)NN(�t7N1� V V) N! fig °M IH OM Vi K! 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O) p) I N p) fn m P] In N O) In W .T, m N or- O) �2E m c MYt* � Q°1 E cc@�VmmO � c � Cn `- ppro1u gQQq��eouj ma C1 Q a00C72JCw5�� G A � LO 0 , f � � C i c U a= U g m L U `o a0i �a E t U y E rn a o d o U Z (n FL • • • im U �a N p� C fN0 O) y C I f6 fa Y O O OE �— _ m U W ro R�o� C U V O N O O N O 3 7 d N O 3p c CU U 0 N C UQ� •c 0 >� n'fO�aS'my�na�iw �8 a)0CDwMa)Z QmUUUC7S������ ACV eM 4 L66r,: 06ci 7CV vi A I ii Market Area Purchasing Power The proposed Gateway redevelopment area in Georgetown is located on the southbound frontage road of IH-35 where it intersects with Williams Drive, in a market area that has several community shopping centers (Rivery Towne Crossing, Georgetown Market Place, and several along Williams Drive) and a large "power center" nearing completion (Wolf Ranch). As shown below, the market area (defined as zip codes 78626 and 78628) has a substantial population base and a significant amount of disposable income. Since 1990, the number of single-family households in the market area has increased by 33.9%, based on the construction of 3,780 new single-family homes and two new apartment communities, Water's Edge and Georgetown Place, which together added 506 units. The new households that have moved into the area to occupy the new homes and apartments have added an estimated $467.8 million in additional household income to the market since April 2000. Based on these data, CMR estimates that at the end of 2004, there is approximately $1.26 billion in disposable income among the estimated 16,913 households located in the subject market area. Table (7) Current Purchasing Power Georgetown Market Area Year Market Area Average HH Total HH Total Disposable Households Income Income Income Estimated Retail Purchases Actual Retail Purchases 2000 13,849 $71,063 $984,157,189 $910,246,984 $600,763,010 $554,903,368 2001 14,771 $78,061 $1,153.041,499 $1,066,448,082 $703,855,734 •$700,173,389 2002 15,458 $85,783 $1,326,030,957 $1,226,446,032 $809,454,381 $767,113,451 2003 16,026 $80,715 $1,293,546,411 $1,196.401,076 $789,624,710 $807,300,819 2004 16,913 $80,715 $1,365,141,049 $1,262,618,956 $833.328,511 $852.871,601 Sources: (1) Household estimate based on new construction of housing in the market area (2) Average income based on HUD annual increases in Median HH Income for the Austin MSA (3) Disposable income is assumed to be 92.49% of total, based on 1999 Consumer Expenditure Survey (4) Retail purchases are estimated to be 66% of disposable income (5) Census tracts used for retail projections differ from those used for household forecast (pages 9-11); does not include 206.01 Retail Demand As 17 Estimates of Purchasing Power The previous sections have documented the current disposable income and have provided a growth trend analysis for the retail market area based upon the documented construction of new homes and apartments in the area since 2000. Using this historical information as a base, and recognizing the growth potential of the area based on land and utility availability, CMR has provided a forecast of anticipated new population and household growth expected in the market area in Table (7). This housing forecast is then combined with a forecast of household income to create a future income estimate for the retail market area through 2015. Since a significant portion of total income is used for housing and transportation expenses, only that portion of "Disposable Income" that is available for retail purchases is used to estimate the demand for retail from area households, as shown below in Table (8). Table (8) Estimated Purchasing Power Georgetown Market Area Market Area Average HH Total HH Total Disposable Estimated Vanr Hnimphnlds Income Income Income Retail Purchases 2000 13,849 $71,063 $984,157,189 $910,246,984 $600,763,010 2001 14,771 $78,061 $1,153,041,499 $1,066,448,082 $703,855,734 2002 15,458 $85,783 $1,326,030,957 $1,226,446,032 $809,454,381 2003 16,026 $80,715 $1,293,546,411 $1,196,401,076 $789,624,710 2004 16,913 $80.715 $1.365,141,049 $1,262,618,956 $833,328,511 2005 17,949 $82,733 $1,485,011,372 $1,373,487,018 $906,501,432 2006 19,215 $84,802 $1,629,478,540 $1.507,104,701 $994,689,103 2007 20,481 $86,922 $1,780,240,933 $1,646,544,839 $1,086,719,594 2008 21,747 $89,095 $1.937,523.022 $1,792,015,043 $1.182,729,929 2009 23,013 $91,322 $2,101,556,565 $1,943,729,667 $1,282,861,580 2010 24,278 $93,605 $2,272,580,833 $2,101,910,013 $1,387,260,608 2011 25,818 $95,945 $2,477,111,994 $2,291,080,883 $1,512,113,383 2012 27,358 $98,344 $2,690,449,349 $2,488,396,603 $1,642,341,758 2013 28,897 $100,803 $2,912,905,377 $2,694,146.183 $1,778,136,481 2014 30,437 $103,323 $3,144,802,676 $2,908,627,995 $1.919,694,477 2015 31,976 $105,906 $3,386,474,274 $3,132,150,056 $2,067,219,037 Sources: (1) Household estimate based on new construction of housing in the market area (2) Average income based on HUD annual increases in Median HH Income for the Austin MSA (3) Disposable income is assumed to be 92.49% of total, based on 1999 Consumer Expenditure Survey (4) Retail purchases are estimated to be 66% of disposable income (5) Average HH income increase assumed to average 2.5% per year retail demand.xls 18 Planned Retail Development The 16,913 plus households that currently live in the Georgetown market area have an estimated $1.3 billion in disposable income and approximately 213 of that income is spent on retail purchases. According to records obtained from the State Comptroller's office, actual retail sales in the market area exceed estimated retail purchases based on disposable household income in the market area by 2.3%. This retail sales "excess" is due in large measure to households from outside the designated market area traveling into the market area to make purchases, which most likely occurs at those retail establishments that have a broad market penetration (e.g. Rivery Towne Crossing, Wolf Ranch). In 2004, the total demand for retail purchases was estimated to be $833 million, and an estimated $852 million was spent within the trade area. However, this is a unique market area where the existing retail centers draw consumer expenditures from an area that is larger than the existing defined population base. The high rental rates achieved at the newer centers in Georgetown (Booty's Crossing, Cedar Breaks Village and Rivery Towne Crossing) attracted the interest of Simon Property Co., which recently completed a new "power center," Wolf Ranch, at the southern edge of the study area. Wolf Ranch has a total of 664,713 sq. ft. and is anchored by Target and includes a Linens N Things, PetsMart and Office Depot. The positive response Wolf Ranch has received by the City of Georgetown and its residents has encouraged Simon Property Group to continue with plans for Wolf Lakes, a similar retail project located across SH 29 from Wolf Ranch. Preliminary plans for Wolf Lakes show that it will occupy 145 acres and include retail, entertainment and restaurants and possibly office and residential. Currently, there is no timeline or completion date set for Wolf Lakes. In addition to Wolf Lakes, the Rivery mixed -use development includes Rivery Park Il, a mixed -use development at Rivery Blvd. and Wolf Ranch Parkway that will be anchored by a 12-screen movie theatre. The proposed "City Lights" movie theatre and cafe is scheduled to break ground in late 2006 and open in the spring of 2006. Even though the retail supply currently exceeds the demand for space in the market area, it is likely that additional "neighborhood serving" retail space could be built at the Gateway location, in the short term. Further addition to the Gateway retail component is most likely to be dependent upon growth in the "local" population base as residential units are completed and occupied in the Gateway development, and the Williams Drive submarket. 19 Table (9) Supply and Demand Comparison Georgetown Market Area Year Estimated Retail Purchases Actual Retail Sales "Leakage" in Dollars Estimated Sales/SF Add. Demand for Retail SF Total Retail Space Added Excess/Deficit in Sq. Ft. _ 2000 $600,763,010 $554,903,368 $45,859,642 $260 176,383 0 0 176,383 14,163 2001 2002 $703,855,734 $809,454,381 $700,173,389 $767,113,451 $3,682,345 $42,340,930 $260 $260 14,163 162.850 0 162,850 2003 $789,624,710 $807,300,819 -$17,676,109 $260 (67,985) 0 0 (67,985) (73,748) 2004 2005 $833,328,511 $906,501.432 $852,871,601 $874,193,391 -$19,543,090 $32,308,041 $265 $272 (73,748) 118,944 664,713 (545,769) 2006 $994,689,103 $896,048,226 $98,640,877 $278 354,294 150,000 204,294 589,644 2007 $1,086,719,594 $918,449,431 $168,270,162 $285 589,644 0 0 824,994 2008 2009 $1,182,729,929 $1,282,861,580 $941,410,667 $964,945,934 $241,319,261 $317,915,646 $293 $300 824,994 1,060,344 0 1,060,344 2010 $1,387,260,608 $989,069,582 $398,191,026 $307 1,295,694 0 0 1,295,694 1,581,950 2011 $1,512,113,383 $1,013,796,322 $498.317,061 $315 $323 1,581,950 1,868,207 0 1,868,207 2012 2013 $1,642,341,758 $1,778,136,481 $1,039.141,230 $1,065,119,760 $603,200,528 $713,016,721 $331 2,154,463 0 2,154,463 2014 $1,919,694,477 $1,091,747,754 $827,946,722 $339 2,440,719 0 0 2,440,719 2,726,976 2015 $2,067,219,037 $1,119,041,448 $948,177,589 $348 2,726,976 Sources: (1) Retail Sales per square foot based on ICSC "The Score" , 2004 and the existing inventory of 29 million sq.ft. of mull(Henant retail space (2) Retail Sales assumed to increase at 2.5% per year (3) Planned Shopping Center Additions In Georgetown Include Rlvery Park Ph.11 and Wolf Lakes Planned New Centers Center Name Total NLA Date Developer Wolf Lakes 700,000 not set Simon Property Rivery Park II 150,000 2006 Bourn Dev. Total 850.000 retail demand.xls 20 Georgetown Gateway Retail Absorption The previous section shows the market area supply and demand picture, which shows the addition of Wolf Ranch in 2005 and Rivery Park in 2006 capturing a large portion of the unmet demand for retail services in the Georgetown market area. However, the continued strong growth of 1,400 to 1,700 households per year will result in more demand for retail services in the area. The subject site, with frontage on Williams Drive and IH-35, will have significant retail development potential, provided, however, that the area is redeveloped in a cohesive and well -planned manner. For the most part, the existing buildings that comprise the redevelopment area are not suitable for conversion to uses that will be needed to accommodate the existing and future demand. In most cases, the existing improvements should be demolished to allow a more unified and architecturally appropriate redevelopment. Table (10) Supply and Demand Comparison Georgetown Gateway Project Area Year Estimated Retail Actual Retail Sales "Leakage" in Dollars Estimated Sales per SF Additional Demand for Retail SF Annual Change in Sq.Ft. Area GatewaArea Area Gatewa Y Gateway Capture Rate Sq.Ft. Added 2000 $600,763,010 $554,903,368 $45,859,642 $260 176,383 ... 0 0 2001 $703,855,734 $700,173,389 $3,682,345 $260 14.163 (162,220) 0 0 2002 $809,454,381 $767,113,451 $42,340,930 $260 162,850 148,687 0 0 2003 $789,624,710 $807,300,819 -$17,676,109 $260 (67,985) (230,835) 0 0 2004 $833,328,511 $852.871,601 -$19,543,090 $265 (73,748) (5,762) 0 0 2005 $906,501,432 $874,193,391 $32,308,041 $272 118,944 192,691 10.0% 19,269 2006 $994,689,103 $896,048,226 $98,640,877 $278 354,294 235,350 10.0% 23,535 2007 $1,086,719,594 $918,449,431 $168,270,162 $285 589,644 235,350 10.0% 23,535 2008 $1,182,729,929 $941,410,667 $241,319,261 $293 824,994 235,350 10.0% 23,535 2009 $1,282,861,580 $964,945,934 $317,915,646 $300 1,060,344 235,350 10.0% 23,535 2010 $1,387,260,608 $989.069,582 $398,191,026 $307 1,295,694 235,350 10.0% 23,535 2011 $1,512,113,383 $1.013,796.322 $498,317,061 $315 1,581,950 286,256 10.0% 28.626 2012 $1,642,341,758 $1,039.141,230 $603,200,528 $323 1,868,207 286,256 10.0% 28,626 2013 $1,778,136,481 $1,065.119.760 $713,016,721 $331 2,154,463 286,256 10.0% 28,626 2014 $1,919,694.477 $1.091,747,754 $827,946,722 $339 2,440,719 286,256 10.0% 28,626 2015 $2,067,219,037 $1,119.041,448 $948,177,589 $348 2,726,976 286.256 10.0% 28.626 251,447 Total Sources: (1) Retail Sales persquare root based on ICSC 'The Score', 2004 and the existing inventory of 28 million sgJt. of mullti-tenant retail space (2) Retail Sales assumed to increase at 2.5% peryear retell demand xls 21 Multifamily Market Trends in the Austin MSA Apartment Market Overview Traditionally, apartment projects in Austin have been clustered near activity centers, major employers and the university areas. Examples of this phenomenon include the cluster of apartments near IBM, Dell, Abbott Labs and Solectron as well as the apartments surrounding the University of Texas, St. Edwards University, and the various Austin Community College campus locations. The Central Business District has, until recently, had relatively few residential rental units, but several apartment communities have been developed within 1 to 2 miles of the CBD. Market conditions in the Austin area multifamily market were volatile in the eighties, when an apartment construction boom caused dramatic overbuilding in 1985 and 1986, which was followed by several years of inactivity. After dropping to 80% occupancy in the mid -eighties, occupancy rates steadily increased, and by 1990, rapid rent escalation was underway. However it was not until 1993 that overall market rental rates were high enough to support widespread construction activity. As Austin's economy experienced robust growth in the early nineties, the resurgence of multifamily construction began in 1991 when 148 units were constructed and 220 units were absorbed. At that time citywide occupancy was at 93.7% and apartments leased for an average $0.57 per square foot. From that period through mid-1996, average rent per square foot and absorption accelerated dramatically. Occupancy first peaked in December 1994 at 97.4%, and then again in June 2000 (at 98.2%), while new unit completions peaked in 1996 at 6,405 units and then again at 8,472 in 2001. Since 1996, the pace of new construction has fluctuated from year to year but both occupancy and average rental rates have, until recently, steadily increased. In 2001, for the first time in many years, new unit completions dramatically exceeded absorption and the market plunged from 97.6% in January to 90.0% by the end of the year. The building continued into 2002, in spite of the softness in the market, and by 2003 the construction boom was tapering off. Current Market Conditions Beginning in late 2003, new construction activity began to diminish and regional apartment demand regained strength and has continued the positive absorption trend through 2004 and the first half of 2005. Based on the CMR mid -year survey of 122,877 apartment units, the market occupancy rate increased 1.3 percentage points to a current occupancy rate of 92.7% (up from 91.4% in December 2004) with rental rates also increasing $0.01 to $0.82 per square foot. Since the beginning of 1992, 58,589 apartment units in 206 complexes were completed including 25 completed in 2003 (5,156 units), 9 in 2004 (2,262 units) and 6 in the first half of 2005 (714 units). As of June 2005, 12 additional projects are currently under construction, with three partially completed and leasing. In 2004, unit demand, as measured by absorption, exceeded new unit completions by 2,342 units, and in 2005 demand exceeded new unit completions by 1,604. The lack of new construction has allowed existing units to be absorbed by the market. Rental rates increased slightly in June 2005 to $0.82, and occupancy increased to 92.7%. New unit completions were 554 and absorption was 2,158 for the first six months of 2005. The table on the following page provides apartment market conditions from 1991-2005. Historical data on occupancy, average rent, unit completions and absorption for 1991 - 2005 is taken from CMR's Austin Apartment Survey, a semi-annual survey of all projects of more than 50 units in the Austin area. 22 Table (11) Citywide Apartment Summary 1991-2005 Occupied Percent New Units Calculated Rent per Sq. Trends Date Total Units Units Occupied Added Absorption Ft. 1991 61,113 57,266 93.7% 148 220 $0.57 Positive 1992 61,118 58,448 95.6% 348 1,160 $0.64 Positive 1993 63,074 61,174 97.0% 594 1,229 $0.71 Positive 1994 66,379 64,662 97.4% 2,178 2,212 $0.75 Positive 1995 69,324 67,101 96.8% 3,010 3,098 $0.79 Positive 1996 77,019 71,452 92.8% 7,695 3,882 $0.81 Caution 1997 81,382 77,270 94.9% 4,363 5,697 $0.82 Positive 1998 86,428 83,683 96.8% 5,046 5,929 $0.86 Positive 1999 89,699 87,531 97.6% 3,271 3,643 $0.91 Positive 2000 96,114 93,786 97.6% 6,415 5,773 $0.98 Positive 2001 105,162 94,651 90.0% 9,048 1,368 $0.94 Caution 2002 113,380 99,794 88.0% 8,218 4,925 $0.86 Caution 2003 120,169 107,290 89.3% 6,789 5,828 $0.81 Positive 2004 122,323 111,786 91.4% 2,154 4,133 $0.81 Positive 2005 122,877 113,944 92.7% 1,496 3,309 $0.82 Positive Source: Capitol Market Research, 1991-2005 Apartment Market Survey apt sum.xls CMR estimates of new completions based on a review of city documents and developer plans Absorption based on forecasted population increase from employment forecaset generaged using the three econometric forecasts for the Ausitn MSA: an historical share analysis conducted by CMR, demographicsnow.com and CAMPO. 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 Historical Absorption and New Units Added 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 ®New Units Added Calculated Absorption -*-Percent Occupied 23 100% 95% 90% 85% 80% 75% Georgetown Apartment Market Conditions Overview In October 2005, Capitol Market Research surveyed 11 apartment communities in Georgetown with a total of 1,836 units. Currently, the market area occupancy is 92.4%, which is up (4.1% points) from December 2004 when it was 88.3%. Average rents are $0.77 per square foot, also up since December 2004. Of the 1,836 total units, 984 (53.6%) have been built (completed) since the beginning of 1997. New Construction New construction has been sporadic in Georgetown, with unit completions occurring in only 4 of the last 10 years, in 1997, 2000, 2002 and 2003. Among the new completions were several class "A" market rate products, including Parkview Place, Water's Edge and Westwood Village. These properties are leasing relatively well at average rental rates that are 6.5% above the market average, while their occupancy is lower at 89.5%. In addition to the three new market rate apartment projects, there were two income -restricted, Low Income Housing Tax Credit (LIHTC) projects built since 1996 with a combined total of 368 units. Since there are only 1,836 units in the market area, the lower rates offered at the 368 income -restricted units have had an effect on the market rate properties and contribute to the overall lower rental rate in Georgetown. Occupancy The market area occupancy in October 2005 was at 92.4%, up from the 88.3% posted at the end of 2004 The current occupancy shows the market slowly recovering from the low of 87.9% in 2002- This market area is likely to continue to experience a slow increase in occupancy due to relatively small job base in the area and competition from projects in Round Rock and other areas that are closer to major employment nodes. Average Rents Average rents in the Georgetown market area rose dramatically from $0.68 per sq. ft. in December 1995 to $0.84 in December 2001, a 23.5% increase over a six -year period. Since then, rents have dropped 25% back down to $0.74 per sq. ft. in December 2004 and are currently $0.77 per sq. ft. As noted above, the new class "A" product has generally out -performed the market, achieving higher rents while maintaining an occupancy rate slightly below the market average, Market Outlook The slow recovery in occupancy from a low of 67.9% in 2002 combined with very low average rental rates will result in a slower than average rate of recovery in comparison with other market areas in the Austin region. This slow pace of recovery will curtail new construction until the market occupancy moves up and rental rates begin to climb again. In the short term, there are two Low Income Housing Tax Credit (LIHTC) projects planned on River Bend at Northwest Blvd. The first project is a senior housing project with 200 units. Site work is currently underway. The second project has 180 "family" units and has not yet broken ground. 24 Table (12) Georgetown Market Area Apartment Summary 1995 - 2005 Occupied Percent New Units Calculated Rent per Sq. Trends Date Total Units Units Occupied Added Absorption Ft. 1995 728 651 89.4% ... ... $0.68 Positive 1996 728 720 98.9% 0 69 $0.72 Caution 1997 1,030 790 76.7% 302 70 $0.70 Positive 1998 1.030 1,015 98.5% 0 225 $0.73 Positive 1999 1.030 1,007 97.8% 0 -8 $0.74 Positive 2000 1,386 1,267 91.4% 356 260 $0.82 Positive 2001 1,386 1,275 92.0% 0 8 $0.84 Caution 2002 1,692 1,488 87.9% 306 213 $0.77 Positive 2003 1,836 1,636 89.1 % 144 148 $0.75 Positive 2004 1,836 1,621 88.3% 0 -15 $0.74 Positive 2005 1.836 1,696 92.4% 0 75 $0.77 Positive Source: Capitol Market Research, 1995-2005 Apartment Market Survey Historical Absorption and New Units Added 500 400 300 P a 200 E 7 z 100 0 -100 i 1996 1997 1998 1999 2000 2001 2002 2003 2004 ® New Units Added Ilia Calculated Absorption —6—Percent Occupied 25 histocc.xls T 100% 95% 1 90% d ii u u 85% O ! c m u 0) nu. 80% 75% 70% Georgetown Market Area , Existing Apartments 1. Apple Creek 2. Georgetown Park 3. Georgetown Place 4. Georgetown Station 5. Georgian 6. Indian Creek . Oaks at Georgetown 8 . Parkview Place 9. San Gabriel N 10. Waters Edge 11. Westwood Village 0 0.25 0.5 Miles I c:IProjects120051Williams Drive Gafewaylmap .apr1 isfing a Prga d Capitol Ma of Research, October 2005 Planned Projects in the Georgetown Market Area Currently, the occupancy rate in the Georgetown market area is 92.4%, which is approximately equal to the occupancy for the Austin market area (92.7%). Therefore, the subject location will be competing primarily with the undeveloped tracts in the market area that are zoned for multifamily use and that may be developed with apartments within the forecast time period. Recent interviews with the City of Georgetown Planning Department and local brokers and apartment developers, revealed plans for 4 new multifamily projects in the area. Projects are defined as being "competitive" if the land is currently zoned appropriately for multifamily development and utilities are available. In order to be considered as immediate and direct competition, the proposed projects must either be held by or under contract to a developer with known intention to move forward with a multifamily project. The annual additions to the market area resulting from the development of this potential inventory of multifamily units may vary based on the capacity of the apartment developer to obtain the necessary construction financing and city approvals. It is also possible that other projects not currently in the development stage could be quickly developed and brought to the market. Thus, the list of planned additions is both actual, because it represents current plans, and representative, because it presents a position that the subject project will be competing with other new apartment projects during the anticipated development horizon. Table (13) Competitive Multi -Family Sites Georgetown Market Area No PROJECT ACRES UNITS Developer STATUS Zoning 1 River Bend Apt. (Seniors) 21.0 200 Bonner Carrington Site work under way MF 2 Northwest Apartments 10.0 180 Bonner Carrington Closed MF 3 Fairfield at Rivery 13.4 274 Fairfield Residential planning underway PUD 4 University Vista 4.0 32 Don Mordecai Closed MF 48.4 685 Source: Capitol Market Research Developer/Sroker lnlervlews, September 2005 CompSltes As 27 � 1 gleads now mom M, a- logo CII4 Market Area and Subject Absorption Forecast It is estimated that the Georgetown market area will accommodate an annual demand for new apartment units for 2005 through 2009 of approximately 1,341 total units. The timing of the previously identified planned projects is shown in Table (14). Combining the current market conditions with the plans for new unit construction developed in the previous section, an absorption analysis for the market area and the subject project can be developed and is shown in Table (15) below. The annual Deficit/Surplus shows the relationship between forecast demand and the proposed units planned, on an annual basis. It appears that the Georgetown market area will have a deficit of new unit completions, even if all the planned projects start when the developer indicates that they should. However, it is often the case that the development timetable is not met (thus reducing the number of units added) or the leasing activity far exceeds that which has occurred historically because the area becomes "hot' and there is little competition from other market areas. In the Georgetown market area, the demand will exceed the potential supply through the forecast period. Table (14) Proposed Project Timing Georgetown Market Area Map No. Project Name Units 2005 2006 2007 2008 2009 Future 1 River Bend Apt. (Seniors) 2 Northwest Apartments 3 Fairfield at Rivery 4 University Vista 200 180 274 32 0 0 0 0 200 0 0 0 0 0 274 0 0 0 0 0 0 0 0 0 0 180 0 32 Supply Totals: 686 0 200 274 0 0 212 Demand: 224 276 278 280 283 1,341 Annual Balance of Demand - Supply 224 76 4 280 283 Source: Capitol Market Research Developer/Broker Interviews, November 2005 Table (15) Subject Absorption Forecast Georgetown Market Area Multifamily Units Subject Proportionate Competitive Average Subject Year Demand Added Units Market Share Market Share Market Share Absorption 2005 224 0 0 0 0 0 0 2006 276 200 75 37.5% 37.0% 37.3% 75 2007 278 274 0 0.0% 0.0% 0.0% 0 2008 280 0 100 35.7% 36.0% 35.8% 100 2009 283 0 100 35.4% 35.5% 35.4% 100 2010 285 0 0 0.0% 0.0% 0.0% 0 2011 349 0 0 0.0% 0.0% 0.0% 0 2012 352 0 0 0.0% 0.0% 0.0% 0 2013 355 0 0 0.0% 0.0% 0.0% 0 2014 358 0 0 0.0% 0.0% 0.0% 0 2015 360 0 0 0.0% 0.0% 0.0% 0 Total 3,400 474 276 276 Prepared by: Capitol Market Research, November 2005 compsiles.Yls 9 Town home/Condom inium Market Trends in the Austin MSA Historically, townhome and condominium projects in the Austin MSA have been clustered in the central city, mostly in neighborhoods close to downtown, the Arboretum area and the University of Texas. Over the last few years, the area has expanded to include more neighborhoods such as Tarrytown, Bouldin Creek, Travis Heights, Barton Creek, Lakeway, East Austin and the Central Business District (CBD). The combination of strong consumer demand for housing and the rapid escalation of land prices in desirable neighborhoods has provided opportunities for new, higher density housing options. The most viable, and perhaps most successful, emerging market is the CBD. Beginning in 1997, almost 600 new condominiums have been completed and absorbed, and many units have sold for prices that exceed $300 per square foot. The current market trend has a solid footing in basic land economic fundamentals, unlike the condominium construction boom in the mid -eighties, which was fueled by favorable income tax treatment of "passive" real estate investments. In addition to rising single-family home prices, the demand for higher density housing has a strong demographic basis in ageing baby -boomer households and busy young professionals. In the late nineties there were almost no new condominium or townhome projects for sale in Austin. Then in 2000, suburban construction began with the Courtyard Homes at Cobblestone (59 units) and Bouldin Creek Condominiums (33 units). Both projects were enthusiastically received by the young professional homebuyer and sold out quickly. Liberty Hill was also built in 2000, and sold rapidly to both young professionals and the empty nesters who live in the Westlake area. The success of these three projects enticed other developers to explore the market, and most of the new product ahs been well received. In roughly the same time period, the downtown condominium market emerged, expanding from two small "adaptive reuse" projects on East Fifth St., to several new condominium towers. Current Market Conditions As discussed above, the townhome/condominium market in the Austin area is rapidly gaining strength, and is emerging as an important segment of the new home market. Since 2001, the number of new townhome/condominium permits issued by the City of Austin has increased from 73 to 358 in 2004, an increase of 390.4%. Also during that time period, the number of "new" units sold through MLS increased from 186 in 2001 to 296 in 2004, an increase of 59.1%. While it is clear that one of the motivations to buy a condominium unit is its relatively low price, the average price of a new unit sold through MLS has generally increased and is now at $208,247for 1,526 sq. ft., or $136.47 per sq. ft. One of the most interesting aspects of this higher density market is the degree to which homebuyers are accepting new innovative product, whether it is stark urban lofts in East Austin (The Pedernales), or elegant stone townhomes in South Austin (Kinney Muse) or expensive high-rise condominiums (5 fifty- five East Fifth Street). W Table (16) New Townhome/Condo Sales Austin MLS Region Units Number of Average Sales Median Sales Average Average Year Permitted Sales Price Price SF $ISF 2000 213 268 $195,477 $150,975 1,440 $135.75 2001 73 186 $202,343 $169,725 1,606 $125.99 2002 91 194 $221,665 $175,625 1,659 $133.61 2003 263 219 $189,733 $153,220 1,579 $120.16 2004 358 296 $208,247 $156,112 1,526 $136.47 2005 233 219 $215,039 $179,900 1,520 $141.47 Source: Austin Board of Realtors, MLS Database Prepared by Capitol Market Research, July 2005 2000 2001 2002 2003 2004 condo sum.xls $185,000 $180,000 $175,000 $170, 000 $165,000 $160,000 IL $155,000 rn $150,000 $145,000 $140,000 ' - $135,000 2005 ® Units Permitted Cl Number of Sales —,A Median Sales Price 31 Townhome and Condominium Demand Townhome and condominium demand in this area historically has not been strong due to the lack of available product. The Georgetown market area accounted for 3.2% of the households and 3.4% of the population in the Austin MSA in 1990, but only 0.10% of all the existing condominiums in the MSA. Currently 5.3% of the total MLS listings in the Georgetown market area are for townhomes and condos. As of October 28, 2005, there are 22 MLS listings for condos and townhomes in the market area in addition to the new units available directly from the condominium developers. In order to develop a forecast for this market area that recognizes both the potential of the area and the current lack of available supply, we first developed a forecast for Williamson County based on the condominium percentage of total residential sales and then applied the market area capture rate of 18.2%, based on the average percentage of total sales between 2001 and 2004. This forecast assumes a reasonably high level of demand for condominium units over the forecast time period. Table (17) Market Area Townhome/Condo Demand 2000-2015 Year Williamson County Total HH Annual Change Percent TH/Condos County TH/Condo Demand Mkt. Area Percent Mkt. Area TH/Condo Demand 2000 88,641 ..... ..... ..... ..... 2001 94,358 5,717 1.5% 86 36.8% 32 2002 100,074 5,717 1.4% 78 14.3% 11 2003 105,791 5,717 2.0% 112 2.7% 3 2004 111,508 5,717 1.4% 80 18.9% 15 2005 117,224 5,717 5.0% 286 18.2% 52 2006 124,207 6,982 5.5% 384 18.2% 70 2007 131,189 6,982 6.0% 419 18.2% 76 2008 138,171 6,982 6.5% 454 18.2% 82 2009 145,154 6,982 7.0% 489 18.2% 89 2010 152,136 6,982 7.5% 524 18.2% 95 2011 160,629 8,493 8.0% 679 18.2% 123 2012 169,121 8,493 8.5% 722 18.2% 131 2013 177,614 8,493 9.0% 764 18.2% 139 2014 186,107 8,493 9.5% 807 18.2% 147 2015 194,599 8,493 10.0% 849 18.2% 154 Prepared by: Capitol Market Research, November 2005 Notes: Projections based on Texas State Data Center, June 2004 (scenario 1.0) Percent TH/Condo demand Is based on the 2001 - 2005 percentage of Total MLS Sales in Williamson Co. This percentage is expected to increase to at least 10% by 2015 Market area capture rate based on 1990 - 2000 growth trend. poptrend.xls 32 Georgetown Town home/Condominium Market Conditions Overview In October 2005, Capitol Market Research surveyed the 7 new condominium communities in the Georgetown market area that, when completed, will have a total of 239 units. Currently, the market area has 113 new condominium units available for sale. Average sales prices are $112 per sq. ft., but the range is $40 to $167 per square foot. Of the 239 planned units, 147 (61.5%) have been built (completed) since the beginning of 1998. New Construction Prior to 1998, there were no condominium or townhome communities in the Georgetown market area. The first project, Villas of Katy's Crossing, presented a duplex style townhome product and was met with relatively good market acceptance, selling out in less than three years. After a few years of inactivity, new townhome/condominium construction in the Georgetown market area resumed in 2003. The most recent projects, such as Village Park Condos and Old School City Homes, present a high quality, higher density attached condominium product. Village Park Condos are two-story "stacked flat" condos, which has met with reasonably good market acceptance. Despite the higher average sales price (due to the high quality of finish -out), it has experienced rapid absorption. Old School City Homes has 40 three-story attached townhome units. It has just recently begun construction (October 2005), and no units have been sold. In contrast, Ryan's Cove and University Park, a duplex -style townhome product, has not experienced a rapid absorption, due in part to the inferior location and lack of visibility. Old Town has four attached townhomes and four single-family style condominiums on small lots. Construction on this product began in February and marketing began in June 2005. Absorption Absorption rates among these three projects varies, from less than 1 unit per month to more than 1.9, However, the absorption potential in this market area has not yet been fully established due to the lack of new construction. Pricing The average unit price among these five projects varies from a low (estimated price) of $88,297 at Villas of Katy 's Crossing to a high of $314,500 at Old School City Homes. As noted above, units with better access and visibility have been selling more rapidly, and the market has responded favorably to the products at both the high and lower end of the price spectrum. Market Outlook The increasing demand for smaller, well located units combined with the lack of new product in the area should result in rapid absorption rates for those developers who offer an attractive attached product at a reasonable price. Access and visibility, whether from drive -by traffic or from commuters at a passenger rail station, will increase the viability and absorption potential of planned new projects. Currently there are many types of product under construction, from affordable projects such as Townhomes at Katy's Crossing and Ryan's Crossing to high -end projects such as Old School City Homes. There are currently no other projects planned in the Georgetown market area, but it is likely that there will be several more projects developed over the next few years. 33 d � a U. c0i Q a U. d Q > N Q d N � 0. Q N 45 .0 C 0 W d N 0 N 0 u d C O co U d S3 d c c. E O U d 'C C C e0 l�0 } 0 m mLO �i 609 � to 0 N O 0 ti N s- N O o o M O,qr,- O o M M M f,- . Lo o cD N Cq N N �t M O q- 00 m 00 00 O O M o M N T •-- N tF, EA to to fA EA tq O o o 0 o o o °O Iq � 00 cM N C) O CIJ COO Uj q O O T- N N � C LO M IT LO LO M o0 0 0 0 0 0 0 O O O O O O O O x m N E to � co o t U N o ►Z- C=) d, O c E 0 N of L N H O 69 0 C m a e � a c� v £ O m m E 0 oa o c ti W L c v m co N N m 2 a ! C � o rn cM N A �V 1 0 N N C1 �1 t p E U m O N m �. w1e OU U N 'no Y O O (D c �Y O U dw 'o e U O (A L N Uc��m� m ' :2 OE 0 ((- =) "-: CV (M'i Ln (D !-� Ln Z n! O O I-- tt N It O O ►n Ui O (O -T r N M 'o ''t N �t (O o6 ri cD Oi I` O O M � N M In r� O r r r 6Ci E m E .h C fU a N M-;T O O r N M C r r r r N N N N L N V- E a m o o > n N -0 d h `° 0 E � O O O O O O O O o y o ui ui Sri Sri Sri Sri iri ui Z m v m cc)� Cc mco �> N U G N O In M r 0 P- N W 03 0 0 (V M cM L O O a m 00 O O r N M'I, 11i O O r r r r r c- w ( z O O O O O O O O Oco NNNNNNNN I--P x N n C n �O M Conclusions The preceding data and analysis have included an evaluation of the Gateway Redevelopment Area and competitive projects and land in the Georgetown market area. Three land uses were considered for the evaluation: retail, multi -family residential and townhome and condominiums. The forecasted strong growth in Georgetown of 1,400 to 1,700 households per year will result in more demand for retail services in spite of the recent completion of the Wolf Ranch power center. The subject site, with frontage on Williams Drive and IH-35, will have significant retail development potential, provided, however, that the area is redeveloped in a cohesive and well -planned manner. For the most part, the existing buildings that comprise the redevelopment area are not suitable for conversion to uses that are needed to accommodate the existing and future demand. In most cases, the existing improvements should be demolished to allow a more unified and architecturally appropriate redevelopment. Among the findings in this analysis is the relative strength of the retail market in comparison with higher - density residential land uses. After evaluating the subject tract and competitive sites throughout the Georgetown market area, it became apparent that the subject tract could be attractive for retail and multi- family uses if a comprehensive plan and redevelopment strategy is prepared and implemented. The subject location on Williams Drive at IH-35 and its access to the IH-35 access road will provide excellent exposure and accessibility to drive -by traffic. This exposure is critical to the success of both retail and residential development. The retail uses that will be attracted to this site are likely to be neighborhood oriented, due to the huge number of stores recently completed at Wolf Ranch and Rivery Towne Crossing. It is possible that as much as 250,000 sq. ft. of retail could be supported at the site over the next few years. It is also likely that this site will be attractive for multi -family residential use as that market recovers. The continued expansion of employment in the region and the Georgetown market area, indicate a growing demand for multi -family development in Georgetown and at the subject site. At least 275 new apartment units could be developed in the redevelopment area. In addition to the retail and multi -family uses, this site should support at least 156 condom inium/townhome units. According to our analysis, the market for condominiums is strong enough to support new construction immediately. MA APPENDIX CERTIFICATE The undersigned do hereby certify that, except as otherwise noted in this market/feasibility report: We certify that we have personally inspected the aforementioned subject property, and that our fee is in no way contingent upon the determination of feasibility reported herein. We have no present or contemplated future interest in the real estate that is the subject of this report. To the best of our knowledge and belief the statements of fact contained in this report, upon which the analyses, opinions and conclusions expressed herein are based, are true and correct. This report sets forth all of the limiting conditions (imposed by the terms of our assignment or by the undersigned) affecting the analyses, opinions and conclusions contained in this report. Recognition is hereby given to Sarah Gilbreath, Meghan McCarthy and Cindy Phung for their assistance in the preparation of this report. No one other than the undersigned prepared the analyses, conclusions and opinions concerning real estate that are set forth in this report. Respectfully submitted. CAPITOL MARKET RESEARCH, INC. Charles H. Heimsath, AICP President