2009 ccim presentation

8/14/2019 2009 CCIM Presentation

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a Colliers CMN Company

The information contained herein has been obtained from sources we deem reliable. Although we have no reason to doubt its contents, we do not guarantee them.

CCIM PresentationFebruary 4, 2009

Market OverviewPresented By:W. Grant Norling

Jeff Grose, MAI

Steven L. Waugh

PGP Valuation, Incwww.pgpinc.com

Commitment to Values
http://www.pgpinc.com/http://www.pgpinc.com/


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The Housing Market

Steve Waugh


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Industrial & Office MarketsJeff Grose, MAI


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Industrial Market Overview

Slowing economy has and will continue to shape the

market

Hangover sales volume off 60-80%

Market participants frozen in light of economic turmoil

2009 will see softening in rents and increase in cap rates


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Industrial Market Overview

Period Market Submarket Market Submarket

2003 206,479,984 13,943,125 11.0% 11.1%

2004 207,813,591 14,367,305 9.1% 9.4%

2005 208,936,088 14,837,005 7.8% 8.5%

2006 211,459,670 15,538,355 6.3% 5.3%

2007 215,011,836 16,510,776 5.0% 5.0%

Q1 2008 216,041,306 16,836,510 5.6% 9.0%

Q2 2008 216,925,883 17,567,392 6.1% 12.5%

Q3 2008 216,912,451 17,567,392 6.2% 11.8%

Q4 2008 217,071,293 17,567,392 6.3% 12.0%

2008 YTD 217,071,293 17,567,392 6.0% 11.3%

Period Market Submarket Market Submarket

2003 $0.38 $0.37 3,942,713 865,367

2004 $0.38 $0.38 4,988,711 459,598

2005 $0.39 $0.40 4,016,319 639,813

2006 $0.38 $0.41 4,596,790 1,236,093

2007 $0.42 $0.40 4,797,566 394,386

Q1 2008 $0.45 $0.42 65,229 -7,743

Q2 2008 $0.45 $0.42 -226,048 57,192

Q3 2008 $0.46 $0.44 -238,621 122,280

Q4 2008 $0.46 $0.45 9,118 -29,627

2008 YTD $0.46 $0.43 -390,322 142,102

Source: CoStar Property NNN = Triple Net Y-T-D = Year-to-Date

Portland Market & Columbia Corridor East Submarke t (Industrial)

SUPPLY VACANCY

AVERAGE ASKING RENT PSF/MO. (NNN) NET ABSORPTION


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Industrial Construction Portland Market

Completed Construction 1st Qtr. 2008:1,136,378 SF

Completed Construction 2nd Qtr. 2008:1,134,520 SF

Completed Construction 3rd Qtr. 2008: 0 SF

Completed Construction 4th Qtr. 2008:478,184 SF

Under Construction 1st Qtr. 2009: 916,345 SF


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What does it mean?

Rents Softening

Concessions?

Pressure on landlords

to retain roll-overtenants

Sales Difficulty obtaining

financing

Buyers and sellerswill not see eye to

eye in the first half2009

Transaction volumewill continue to be

low


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Cap Rates


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Acquisition FinancingSource: Real Capital Analytics


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Industrial Market Trends / Forecast

Leasing Economic conditions will continue to limitnew tenants entering the market and existing

tenants expanding. Cap Rates Rising. Risk factors will be considered

to a much greater degree than in the past.

Overall The market needs credibility. Once faithis restored in financial markets, stock market, and

economy, transactions (sales and leases) canresume. The lack of new supply coming on lineshould ease the effects of the current slow downand provide for a quick rebound when the economyimproves.


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Office Market

Like the industrial sector, the office market is

feeling the effects of the recession New construction has been moderate in 07/08

which is softening the negative impacts for2009

Market participants frozen in light ofeconomic turmoil

2009 will see softening in rents and increase incap rates


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Office Market All


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Portland Office Vacancy, Q4-2008

Central Business District: 7.8%

Class A: 5.1%

Class B: 11.4%

Class C: 11.3%

Net absorption for the CBD at +371,701 for 2008. Overallmarket also saw positive net absorption. This is due tolimited new construction.

Overall Portland market has 1,383,398 SF underconstruction with deliveries in 2009.

With slow economy and large amount of new product,vacancies will rise and there will be pressure on landlords

to retain tenants.


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Overall Cap RatesSource: Korpacz Real Estate Investors Survey, Q4 2008


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Regional Retail Market2008 Overview & Forecast

Grant Norling, Retail Manager


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Retail DemandVacancy Rates & Absorption Trends:

Year Absorption (SF) Vacancy1999 506,141 5.0%

2000 979,766 6.0%

2001 342,886 6.7%

2002 375,920 5.4%

2003 242,709 4.3%

2004 2,461,489 4.3%2005 808,981 4.7%

2006 46,584 4.8%

2007 1,100,000 4.9%

2008 339,774 5.8%

Total 9,476,332

Source: Norris Beggs & Simpson Retail Market Report

Portland Metro Retail Demand


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Retail Demand 2008 90 basis point increase in vacancy

Largest change since 2000

2009 Likely first (-) negative absorption in over a decade

More national tenants go dark

Local and regional tenants struggle in harsh economy


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Portland Metro: Where is the Vacancy?


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Portland Metro: Where is theVacancy?

Former Tenant City Sq. Ft.

Mervyns Vancouver 82,225

Linens N' Things Portland 40,160

Linens N' Things Portland 35,000Linens N' Things Beaverton 45,000

Linens N' Things Tanasbourne 38,410

Levitz Clackamas 34,103

Levitz Tigard 40,041

Wickes J antzen Beach 51,350

Shoe Pavilion Portland 17,505Shoe Pavilion J antzen Beach 19,909

Shoe Pavilion Beaverton 16,500

Total 420,203Source: New & Neville Real Estate Services

Vacant Box Spaces

Represents 1% of +/- 42 Million SF metro wide


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Portland Metro: Soon to be Vacant

Former Tenant Location Sq. Ft.Circuit City Gateway 37,857

Circuit City J antzen Beach 37,360

Circuit City Washington Square 37,000

Circuit City Clackamas 37,000

Circuit City Salem 37,000 Total Source: CoStar

Vacant Box Spaces


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2008 US Store Closings

Many spaces go dark in 2008 ICSC estimates 6,100 retail chain stores exited in 2008

nation wide

Retailer Status Stores Closed

Ann Taylor Re-Structuring 117

Banana Republic Re-Structuring 25

Circuit City Chapter 11 721

Disney Stores Chapter 11 98Foot Locker Re-Structuring 60Linens 'N Things Chapter 11 371

Macy's Re-Structuring 11

Mervyn's Chapter 7 149

Pacific Sunware Re-Structuring 154

Phillips-Van Heusen Re-Structuring 175

Sharper Image Chapter 11 96Starbucks Re-Structuring 600Wilson's Leather Chapter 11 103

Zales J ewelers Re-Structuring 105


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Investment Grade Sales Retail CAP Rates - OR

Year

Type of

Center

CAP Rate

Range

Average

CAP Rate

2002 Strip 8.3 - 10.8% 9.6%

Anchored 7.9 - 9.5% 8.9%

All Centers 7.9 - 10.8% 9.2%

2003 Strip 8.0 - 9.6% 8.8%Anchored 7.0 - 9.5% 8.7%

All Centers 7.9 - 9.6% 8.7%

2004 Strip 6.5 - 8.9% 7.6%

Anchored 7.0 - 9.4% 7.6%All Centers 6.5 - 9.4% 7.6%

2005 Strip 6.4 - 7.8% 7.1%


2006 Strip 5.5 - 10.1% 6.9%


2007 Strip 5.8 - 8.1% 6.8%

Anchored 6.2 - 7.3% 6.7%

All Centers 5.8 - 8.1% 6.8%

2008 Strip 6.5 - 7.0% 6.7%

Anchored 6.5 - 7.6% 7.0%

All Centers 6.5 - 7.6% 6.9%Source: PGP Valuation, Inc. Database

Notes

End 07 MarketTurns

08 Caps 10 bps

08 Sales Volume 75% compared to07


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National OAR Averages - Strip Centers

7.3

4%

7.20%

7.2

4%

7.2

8%

7.3

2%

7.3

3%

7.4

9%

7.05%

7.10%7.15%

7.20%

7.25%

7.30%

7.35%7.40%

7.45%

7.50%

7.55%

2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08

Source: Korpacz Strip Shopping Center

Notes

3Q07 Market Turns

4Q08 Caps 16 bps

46 bps projectedthrough 2Q09


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National OAR Averages - Power Centers

7.

06%

7.00

% 7.1

3%

7.1

3%

7.1

7%

7.1

7%

7

.57%

6.70%

6.80%

6.90%

7.00%

7.10%

7.20%

7.30%

7.40%

7.50%

7.60%

7.70%

2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08

Source: Korpacz Power Center

Notes

3Q07 Market Turns

4Q08 Caps 40 bps

58 bps projectedthrough 2Q09


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Investment Sales 2008 Retail Sales

Category Anchored Strip Other*

Size

Low 40,800 12,000 1,690

High 78,292 27,710 14,820

Average 53,306 16,465 5,264Sale Price

Low $6,925,000 $1,575,000 $625,000

High $16,762,867 $6,200,000 $7,300,000

Average $12,165,717 $4,018,250 $2,607,479

Sale Price/SF

Low $170 $131 $191

High $322 $347 $835Average $226 $248 $528

Cap Rates

Low 6.5% 6.5% 6.0%

High 7.6% 7.0% 8.5%

Average 7.0% 6.7% 7.2%Source: PGP Valuation, Inc. Database *Fast food, freestanding & NNN


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SelectedSales

Price: $8,600,000Price/SF: $204NRA: 42,129 SFDate: 2/28/2008Cap Rate: 7.39%Anchors: Kmart and Albertsons Shadow AnchoredComments: This is the sale of the strip-center component of an

approximate 200,000 SF community shoppingcenter

Berryhill RetailCenter

Oregon City, OR


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SelectedSales

Price: $16,762,867Price/SF: $322NRA: 52,001 SFDate: 10/10/2008Cap Rate: 6.75%Anchors: AlbertsonsComments: Property was never on market and was sold after a

private party made an offer

LowriesMarketplace

Wilsonville, OR


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SelectedSales

Price: $16,375,000Price/SF: $209

NRA: 78,292 SFDate: 8/28/2008Cap Rate: 7.57%Anchors: Petco, Barnes & Noble and RossComments: Sale of the center across the street from the ValleyRiver Mall. Perceived risk of anchor tenant rents appliedupward pressure to cap rate.

Valley River North

Eugene, OR


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Total Market-$18.49Mall-$25.75Shopping Center-

$19.61

General Retail-$17.14

Specialty Center-$32.00

Power Center-$16.38

PortlandMetro


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2008 YTD Summary

Vacancy rates increasing

Cap rates increasing

New construction stagnant

Retail rents softening


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2009 Projections

2009 lowest amount of new space delivered in a decade New construction will grind to a halt

The 1st & 2nd quarters will give perspective as to the depthand length of the problems retail landlords will face as post-holiday store closures are fully realized Power and regional centers likely to take the biggest hit Healthy retailers in 2009 will be able to take advantage of the

market; more so than perhaps at any time since the recession

of the early 1990s Slightly greater investment sales volume compared to 08

Savvy investors will capitalize on overleveraged ownersmisfortunes

Cap rates from 7-8+%; more cap rates >8% than


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