appendix 6 market feasibility · pdf fileappendix 6 market feasibility study ... case studies...

Carvel NND Zone Petition, December 16, 2011

APPENDIX 6

MARKET FEASIBILITY STUDY

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C&F: 1755458.1

Market Feasibility Study Carvel Property Development Dutchess County, New York

1133 Taconic LLC | December 16, 2011

RCLCO Appendix 3 - Market Feasibility Study

CPD / RCLCO Market Feasibility Study / CPD-R3 / December 16, 2011 Page I

RCLCO Market Feasibility Study TABLE OF CONTENTS

1. Statement of RCLCO Qualifications and Methodological Summary..............1 1.1 Statement of Qualifications.................................................................................... 1 1.2 Methodological Approach...................................................................................... 1

2. Summary Project Description and Executive Summary .................................2 2.1 Summary Project Description................................................................................ 4 2.2 Executive Summary............................................................................................... 5

3. Target Market Area, Buyer Profile and Project Absorption.............................6 3.1 CPD Target Primary Market Area ......................................................................... 6 3.2 Buyer Profile ........................................................................................................ 10

4. Market Demand..................................................................................................12 4.1 Target Market Overview ...................................................................................... 12 4.2 Short Term Demand............................................................................................ 13

Estimated Second Home Demand ...................................................................... 13 Source of CPD Homebuyers ............................................................................... 16 Cumulative Summary .......................................................................................... 18

4.4 Project Absorption ............................................................................................... 20 4.5 Long-Term Demand ............................................................................................ 21

5. Why CPD will Predominantly be a Second Home Community .....................23 5.1 CPD – Master Planned Second Home Community ............................................ 23

Commuting Location to Major Employment Nodes............................................. 23 CPD Price Comparison ....................................................................................... 26 Dutchess County Second Home Market ............................................................. 28 New Home Product in the Hudson Valley ........................................................... 31 CPD Design and Market Demand ....................................................................... 31 CPD Second Home Character Maintenance....................................................... 32

6. Case Studies......................................................................................................33 6.1 Case Study Methodology .................................................................................... 33 6.2 Case Studies ....................................................................................................... 35

Palmetto Bluff ...................................................................................................... 35 Greenbrier Sporting Club..................................................................................... 36 Santa Lucia Preserve .......................................................................................... 36 Bay Creek Resort ................................................................................................ 36 The Peninsula on Indian River Bay ..................................................................... 37 Chapin Estate ...................................................................................................... 37 Crystal Springs .................................................................................................... 37 Unnamed Poconos Master Planned Community ................................................ 38

6.3 Case Studies Conclusions and Indications ......................................................... 38


CPD / RCLCO Market Feasibility Study / CPD-R3 / December 16, 2011 Page II

7. Golf Market Analysis.........................................................................................40 7.1 Golf as a Community Amenity ............................................................................. 40 7.2 Anticipated Golf Membership Profile ................................................................... 40 7.3 CPD Resident Golf Membership Absorption....................................................... 41 7.4 Non-Resident Golf Membership .......................................................................... 41 7.5 Long-Term Golf Viability ...................................................................................... 43

8. Critical Assumptions and General Limiting Conditions................................45 8.1 Critical Assumptions ............................................................................................ 45 8.2 General Limiting Conditions ................................................................................ 46

APPENDICES.................................................................................................................47 A. Case Studies Profiles .......................................................................................... 47

TABLE OF TEXT FIGURES

Figure 1.1 Regional Geographic Context — CPD......................................................................... 2 Figure 2.1 Types and Average Size of Proposed CPD Lots......................................................... 4 Figure 3.1 Map of the New York Regional Core Base Statistical Area (CBSA) and Delineation of

the CPD Primary Market Area ..................................................................................... 7 Figure 3.2 Number of High Net-Worth Individuals by U.S. Metro Area......................................... 8 Figure 3.3 High Income Households ($500,000 and greater/year) – CPD Primary Market Area

2010 ............................................................................................................................. 8 Figure 3.4 Population and Household Trends — New York Core Base Statistical Area and CPD

Primary Market Area 2010-2015.................................................................................. 9 Figure 3.5 Expected Buyer Profile .............................................................................................. 10 Figure 4.1 Estimated Second Home Demand Generated in the CPD Primary Market Area...... 14 Figure 4.2 Estimated Second Home Demand Generated in the CPD Primary Market Area Likely

to Choose the Hudson Valley .................................................................................... 15 Figure 4.3 Luxury Drive-to Second Home Demand within 500 miles of Primary Market Area ... 15 Figure 4.4 Projected CPD Capture of Hudson Valley Second Home Demand .......................... 16 Figure 4.5 Estimated Primary Home Demand Generated from Households within 20 Miles of

CPD............................................................................................................................ 17 Figure 4.6 Projected Residential Absorption (Number of Units per Year) by Source of Buyer .. 18 Figure 4.7 Projected Home and Lot Values ................................................................................ 20 Figure 4.8 Likely Purchase Motivations at CPD.......................................................................... 20 Figure 4.9 Projected CPD Product / Lot Type and Timeline for Absorption in the Marketplace. 21 Figure 5.1 One Hour, Non-Rush Hour Drive Time from CPD and Snapshot of Commute Time to

Regional Employment Nodes .................................................................................... 24 Figure 5.2 Subject Site and Local Transportation Infrastructure, Pine Plains, NY ..................... 25 Figure 5.3 All Home Sales (Existing and New) by Price Segment in Dutchess County (2003 to

YTD 2011).................................................................................................................. 26 Figure 5.4 Total Building Permits Issued in Dutchess County (2000 to 2010) ........................... 27 Figure 5.5 Annual Change in Residential Sales Volume (Existing and New Homes) 2005-2010

................................................................................................................................... 27 Figure 5.6 High-End Residential Transactions in Dutchess County, April 2008 to April 2010 ... 28


CPD / RCLCO Market Feasibility Study / CPD-R3 / December 16, 2011 Page III

Figure 5.7 Second Home Owners Primary Residence (Pine Plains, Milan and Northeast, Dutchess County, NY) as of 2011.............................................................................. 29

Figure 5.8 Primary Residence Location of Owners of a Second Home with an Assessed Value over $500,000 in Dutchess County as of 2011.......................................................... 30

Figure 5.9 Primary Residence Location of Owners of a Second Home with an Assessed Value over $500,000 in Dutchess County - Breakdown of Inside and Outside of the Primary Market Area as of 2011.............................................................................................. 30

Figure 5.10 Proposed Unit Mix at Silo Ridge ................................................................................ 32 Figure 6.1 Location and Summary of Case Study Drive Time, Ownership Pattern, and Market

Orientation.................................................................................................................. 35 Figure 7.1 Projected CPD Resident Membership Absorption..................................................... 41 Figure 7.2 Projected Non-Resident Membership Absorption...................................................... 42 Figure 7.3 Combined CPD Resident and Non-Resident Membership Absorption ..................... 42 Figure 7.4 Area Golf Courses...................................................................................................... 44

TABLE OF APPENDIX FIGURES

Figure A.1 Palmetto Bluff, Bluffton, South Carolina .................................................................... 48 Figure A.2 The Greenbrier Sporting Club, White Sulphur Springs, West Virginia ...................... 49 Figure A.3 The Santa Lucia Preserve, Carmel, California .......................................................... 50 Figure A.4 Bay Creek Resort and Club, Cape Charles, Virginia ................................................. 51 Figure A.5 The Peninsula, Millsboro, Delaware .......................................................................... 52 Figure A.6 Chapin Estate, Bethel, New York............................................................................... 53 Figure A.7 Crystal Springs Resort, Hardyston, New Jersey........................................................ 54

RCLCO Market Feasibility Study

CPD / RCLCO Market Feasibility Study / CPD-R3 / December 16, 2011 Page 1

CARVEL PROPERTY DEVELOPMENT MARKET FEASIBILITY STUDY

1. Statement of RCLCO Qualifications and Methodological Summary

1.1 Statement of Qualifications

RCLCO (formerly Robert Charles Lesser & Co., LLC) is recognized as the nation’s leading independent real estate advisory firm, providing entity, portfolio, and project level strategy planning, economic and market analysis, and development advisory services for real estate investors and developers, public agencies, financial institutions, and non-profit organizations. The firm is headquartered in Washington, D.C., with offices in Atlanta, Austin, Los Angeles, and Orlando. RCLCO’s work brings it to all fifty states and around the globe. The firm’s success lies in its ability to apply the insights and experience gained over 40+ years and thousands of assignments to all real estate product types, across a variety of geographies. RCLCO’s work is characterized by highly quantitative and data-driven analysis. Furthermore, RCLCO’s extensive network of clients, colleagues, professionals, and public officials, in the United States and abroad, provide it with a unique and comprehensive outlook on the industry and access to the most forward-thinking minds in real estate. RCLCO’s reputation is built on providing objective and financially responsible analysis. RCLCO’s real estate consultants draw on a broad array of experience and competencies when developing integrated strategies that align real estate decisions with organizational objectives. RCLCO is comprised of analysts, management consultants, planners, financiers, developers, and public sector practitioners that serve as in-house client advisors. Since the firm’s founding, RCLCO has focused on the community development industry, second home communities in particular, with a deeper product type expertise, perspective, and market knowledge than any firm in the industry. RCLCO has been involved in projects in the Hudson Valley for more than 25 years.

1.2 Methodological Approach

The Carvel Property Development’s (CPD) Project Sponsor and applicant, 1133 Taconic LLC, retained RCLCO to provide an updated third-party assessment (building on work completed since 2005) of the opportunity for a second home community planned in the Towns of Pine Plains and Milan in northern Dutchess County, New York (see Figure 1.1, Regional Geographic Context - CPD).



Figure 1.1 Regional Geographic Context — CPD

In undertaking this assignment, the RCLCO Market Support Evaluation included in the CPD Draft Environmental Impact Statement (DEIS) dated January 11, 2008 as Appendix 14.4, has been updated and revised so as to fulfill the requirements of the Town of Pine Plains CPD New Neighborhood Development (NND) Zoning Petition Application to demonstrate the short and long-term demand for the uses proposed in the NND (§100.28.D.2(k)). RCLCO has gathered data and utilized analyses that are consistent with best accepted industry practice. 2. Summary Project Description and Executive Summary As noted above, this Market Feasibility Study has been prepared and is being submitted in connection with the CPD NND Zoning Petition. Substantive material is presented that is required in the NND Application substantiating short and long-term demand for the proposed Project. The Study data has been updated since the 2008 DEIS submission to reflect current economic conditions and to provide expanded case studies to reflect more geographical proximity to CPD. Also reconfirmed is the Hudson Group 2008 DEIS comment that the Project Sponsor’s market evaluation “…makes a strong case that there is a demand for a second home golf resort community like Carvel...” CPD will offer highly desirable second home community product to attract the substantially untapped second home market audience residing in and around the New York Metropolitan Area. This Primary Market Area of second home consumers

Subject Site



continues to show strength, buying power, and an appetite for a product such as CPD. In fact, there is a dramatic lack of comparable product in the area, particularly with such an easy and beautiful drive-to location in the Hudson Valley. The location, landscape setting, planned community pattern, abundance of market demand, high quality design, and caliber of project amenities, coupled with the reputation of the Project Sponsors, will collectively serve as key positive factors in the future market decisions of second home buyers to choose CPD: Location – The Hudson Valley has an established reputation as an upscale vacation

destination. Nestled within the beautiful hills of northern Dutchess County with views of the Catskills, Berkshires and Taconic range, CPD offers a prime location via the Taconic State Parkway with a driving distance of approximately 2 hours from the New York Metropolitan Area.

Landscape Setting – The CPD property consists of rolling woodland hills and open

pastoral landscapes intertwined with cold water streams and several open water bodies. The rural, bucolic nature of the site and surrounding area, coupled with its proximity to local historic hamlets and villages offer a unique and truly beautiful rural second home setting.

Planned Community Pattern – CPD is designed as a compact, recreation-oriented

second home community centered around Lake Carvel. Offering a variety of diverse home and lot types surrounded by protected open space, CPD will yield higher market value, greater second home buyer attraction, and short and long-term community stability. The environmental sensitivity of the planned community pattern and extensive associated amenities sets CPD apart from other area second home options, whether in another planned community or stand-alone.

Abundance of Market Demand – The number of affluent households within the

New York Metropolitan Area (i.e., the targeted Primary Market Area for CPD) and their depth of demand for a well designed, amenity-driven master planned community as a drive-to vacation/weekend home are both substantial. With an extremely limited number of high-end second home oriented communities actively selling new product in the Hudson Valley generally, and in Dutchess County specifically, CPD will fulfill the unmet market demand with new product specifically designed for this market user.

High Quality Design – The design of CPD has evolved over several years through

careful study of the property and its ecological resources, sensitivity to existing rural character and an ongoing dialogue with the local community. The result is a thoughtfully designed plan, which preserves, protects and embraces the site’s special natural character. The site design also incorporates numerous sustainable features, vernacular architectural guidelines, and green building measures.

Caliber of Project Amenities – The site design of CPD includes an extensive array

of built and natural resource amenities, which touch on broad and varied interests among potential second home buyers. The heart of the CPD amenity program is the site’s carefully protected natural resources and a world class golf course with homeowners’ club facilities, offering numerous active and passive recreation opportunities. Project amenities also include proposed pedestrian connections to the



surrounding community, repurposing of several historic former farm buildings, and reestablishing agricultural use upon visible portions of the site.

2.1 Summary Project Description

The 2,376-acres comprising CPD are envisioned as a master planned community incorporating the highest standards for site design, construction and operations. CPD includes an extensive amenity program targeted at a recreation oriented vacation and second home market segment, as well as sustainable, renewable and energy efficient measures and attributes. The Project presently contemplates a total (including new and retention of existing residential lots) of 645 new homes (581 in Pine Plains, 10 in Pine Plains/Milan and 54 in Milan) which is a 37% reduced unit density as compared to that proposed and analyzed in the DEIS. A variety of housing and lot types are proposed, including a mix of single-family detached homes ranging in size from 0.2 acres to 12 acres or more (see Figure 2.1, Area Ranges of Proposed CPD Lots), as well as potential opportunities for semi-detached single-family homes on the smaller clustered lots. The Project will provide requisite site utilities and operational infrastructure. The Project will include many amenities as described below. As such, building on the extremely successful and sophisticated environmental design track record of the Project Sponsor, CPD is poised to aggressively capture market share at price points which make the Project financially viable.

Figure 2.1 Types and Average Size of Proposed CPD Lots

Lot Type Average size Pine Plains Pine Plains / Milan Milan

Central Lots 0.40 ac. 378 10 33 Dutch Estate Lots 0.97 ac. 155 0 0

Country Estate Lots 3.48 ac. 11 0 19 Conservancy Lots 5.0 ac. or greater 37 0 2

Totals 581 10 54 CPD’s amenity program will be one of the most comprehensive and high quality of second home oriented communities in the Hudson Valley region and Target Market Area. The highly informed and demanding vacation home target market will find the amenities an attractive draw. Club amenities will include:

New premier 18-hole golf course and driving range New golf clubhouse with dining facilities, locker rooms, and pro-shop Golf practice area and putting green Grill and store for sundries Fitness and yoga center Spa facilities Tennis courts Fitness and family swimming pools



Croquet and events lawn Lakefront recreation opportunities (including fishing and non-motorized boating) Lakefront pavilion

Cultural amenities will include:

Retention and reuse of several existing historic structures Creation of agricultural opportunities on site Provide neighborhood greens, private trails and garden space Extensive conserved and stewarded natural aquatic, floral, and open space

resources As part of the NND incentive program, the Project also proposes to provide:

o Additional open space o Establish a Chautauqua arts and cultural educational facility o Provide a public trail connecting off-site public recreation lands to unique

site features The roadways within the Project will be privately owned and maintained, and have been designed to respect the site’s varied topographic and rural scenic character.

2.2 Executive Summary

The RCLCO “Market Support Evaluation” included in the CPD DEIS dated January 11, 2008 as Appendix 14.4, established the existence of a highly qualified market and demand for the 951 unit CPD vacation home product that was proposed at that time. The DEIS Market Support Evaluation was reviewed by the Hudson Group as part of the Pine Plains Planning Board (as SEQR lead agency) SEQR evaluation process. The Hudson Group, consultant to Pine Plains, in its comments concluded that: “This report is professionally crafted and well presented. It makes a strong case that there is a demand for a second home golf resort community like Carvel on the fringes of the NY Metro area.” This Study updates the 2008 Market Study Evaluation in light of the downsizing and design changes to the Project and the current economy. This analysis confirms CPD’s character as a community made up predominantly of vacation homes, and describes likely buyer profiles, which confirm the likelihood that the Project will generate significant resident spending and few school-age children. This Study also addresses the Project’s viability in terms of short and long-term demand for the uses proposed in the NND as well as CPD’s consistency with several NND criteria (specifically those set forth in §100-28D(2)(k) of the Pine Plains Zoning Law). Finally, this Study provides additional evidence of strong demand for a second home golf community by discussing case studies previously described in the DEIS as well as new case studies. Analysis of the subject property and the proposed CPD amenities, facilities and programs suggests that there is an excellent opportunity for a second home community which will include a mix of family-serving second homes (i.e., predominantly weekend and seasonal use) and pre-retirement/retirement second homes that will typically be occupied for less than 50% of the year. The planned product at CPD responds appropriately to the appetites of the target market audiences, and the diversity of physical form and price points will help ensure strong market response. The demand



analysis, as discussed within this Study, demonstrates that the planned residential product can be absorbed by the market in an approximate 8-year time period. RCLCO’s review of the market concept for the site, given well-established second-home demand conditions in the region and the success of analogous communities in other locations, lead to the conclusion that projected home values and capture rates could ultimately prove conservative. Because CPD’s amenity program is tailored for the second home market, the Project’s market potential as a non-retiree primary home community is extremely limited. The question of the degree to which CPD could be a primary home community was raised by the DEIS lead agency and public commentators. Therefore, RCLCO’s DEIS conclusions about the predominantly vacation/second home orientation of CPD are revisited and reconfirmed in this Study. Also discussed in greater detail are aspects of CPD’s design and projected sales pricing, attributes of the target market, characteristics of the regional primary home market, and case study data which support CPD projections regarding the vacation home complexion of CPD. The Study revisits the case studies included in the DEIS and includes added case studies of master planned communities which have similar geographic characteristics as Northern Dutchess County. The Study also discusses the reasons why case study projects that do not have exactly comparable climate or geographic indicators are still informative regarding factors such as:

feasibility; population characteristics; and how master planned community residents interact with local communities.

The Study expands on the golf market regionally and in the future. Golf continues to be important as a prerequisite amenity for many buyers at high-end master planned communities. Another important aspect of golf is that it is a lifesport. Golf as an amenity provides an intergenerational link within families, helping to hold the interest of family members over multiple generations. This multigenerational interest reinforces long-term demand for the uses in the Project. 3. Target Market Area, Buyer Profile and Project Absorption

3.1 CPD Target Primary Market Area

The CPD target Primary Market Area draws from the New York Metropolitan Area, and is comprised of the following:

New York City boroughs of Manhattan, Brooklyn, Queens and The Bronx. Westchester, Putnam, and Rockland Counties, New York. Fairfield County, Connecticut. Bergen and Passaic Counties, northern New Jersey.



The selection of this area was based on the ease or difficulty of travel to the subject site, and historical trends indicating purchase of vacation and second homes in Dutchess County by residents in the selected area (see Figure 3.1, Map of the New York Regional Core Base Statistical Area (CBSA) and Delineation of the CPD Primary Market Area). Residents of the Primary Market Area account for the significant majority of second home demand in the Hudson Valley, and have a long-established pattern of second home ownership in the Hudson Valley. The Primary Market Area is also the largest and most affluent high-end vacation home demand generator in the nation. These markets comprise the major source of second home buyers at every community on the Eastern Seaboard and in many communities in the western United States.

Figure 3.1 Map of the New York Regional Core Base Statistical Area (CBSA) and Delineation of the CPD Primary Market Area

The New York Metropolitan Area leads the country in the number of high net worth households, defined as having investable assets over $1 million (see Figure 3.2, Number of High Net-Worth Individuals by U.S. Metro Area). The significant concentration of these high-income households within the Primary Market Area is demonstrated in Figure 3.3, High Income Households ($500,000 and greater/year) – CPD Primary Market Area 2010, as well as in Figure 3.4, Population and Household Trends – New York Core Base Statistical Area and CPD Primary Market Area 2010-2015.



Figure 3.2 Number of High Net-Worth Individuals by U.S. Metro Area

81,110

89,907

104,577

111,802

143,210

174,006

147,430

187,010

218,420

230,386

261,814

222,215

334,634

417,490

498,556

836,456

0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000

St. Louis

San Diego

Minneapolis

Phoenix

Seattle

Miami

Detroit

Houston

Atlanta

Dallas

Boston

Philadelphia

Chicago

Bay Area

LA CBSA

NY CBSA

Net Worth 1M+

Sources: ESRI.; RCLCO; 2010 Estimate. Note: CBSA indicates Core Base Statistical Area

Figure 3.3 High Income Households ($500,000 and greater/year) – CPD Primary Market Area 2010

Source: ESRI; RCLCO



Figure 3.4 Population and Household Trends — New York Core Base Statistical Area and CPD Primary Market Area 2010-2015

PrimaryMarket Area

New York Core Based

Statistical Area

PrimaryMarket Area as % of Core Based

Statistical Area

Total Households 4,274,070 6,921,533 62%

New Households (2010 to 2015) 60,206 99,026 61%

Household growth rate (2010 to 2015) 0.28% 0.28% -

Households over $250k annual income 168,978 271,228 62%

Households over $500k annual income 48,619 68,179 71%

Source: ESRI; RCLCO In 2005, 88% of all vacation home buyers traveled to their property via car rather than in an airplane.1 A study completed in 20082 that analyzed second home ownership patterns in Sullivan County, New York, found that 92% of second home owners in Sullivan County identified their primary residence as being within the New York Metropolitan Area or another part of New York State. Manhattan, Kings, Queens, and Nassau Counties contained the biggest concentration of second home owners in Sullivan County. While this is the most current available statistical information, there is also recent anecdotal evidence that the second home customer in the United States is putting even greater emphasis on ease and frequency of use, resulting in an increasing preference for drive-to locations. The Primary Market Area has historically been severely under-served for new, high-quality amenity-driven, drive-to communities. Given national patterns in which drive-to locations are gaining in desirability as compared to fly-to locations, and considering the extremely limited available product that caters to this most affluent and demanding purchaser group, there is tremendous untapped demand for second homes oriented to New York City and the inner suburbs. RCLCO has conducted direct consumer research with Manhattan-based prospective customers for second homes in the Hudson Valley, which confirmed the high level of interest in Dutchess County. Similarly, interviews with brokers active in the marketplace were completed to confirm the likely Primary Market Area for CPD.

1Based on 2005 National Association of Realtors Profile of Second Home Buyers 2 See Second Home Owner Study: Assessing Attitudes, Consumer Behavior, and Housing Tenure in Sullivan County, October 2008



3.2 Buyer Profile

The planned product at CPD responds appropriately to the appetites of the diverse target market audiences. This includes a broad array of the type of affluent households which seek a weekend or second home accessible by car, while continuing to reside permanently in a primary home in the New York Metropolitan Area. See Figure 3.5, Expected Buyer Profile. The diversity of the Project’s physical form, natural and sustainable features, and price points will help ensure strong capture rates.

Figure 3.5 Expected Buyer Profile

Expected User/BuyerSecond Home/

Family Households

Second Home/ Empty-Nesters

& Retirees Households

Seasonal & Full- Time/Retirees

Households

Full-Time/ Family

Households

Total/Weighted Average

% of Likely Buyers (Year 3) 60% 20% 15% 5% 100%

% of Likely Buyers (Year 8 – Build Out) 40% 30% 20% 10% 100%

Typical Weekends in Residence 18 20 25 47

Typical Time Mid-: Weeks in Residence 1.5 2.5 25 47

Sold Homes at Year 3 (Pine Plains & Milan) 152 50 39 14 255

% of Year Spent in Pine Plains & Milan 13% 16% 49% 90% 23%

Sold Homes at Year 8(Pine Plains & Milan) 258 194 129 64 645

% of Year Spent in Pine Plains & Milan 13% 16% 49% 90% 29%

Note: Numbers have been rounded. The buyer profile projections used in this Study are based on detailed analysis of available census information and data, interviews with brokers regarding the mix of high-end home buyers in northern Dutchess County, as well as a series of case studies of relevant drive-to communities located a similar distance as CPD from other major U.S markets (see Section 6, Case Studies). Factors used to identify buyer segments included the project’s location, character, market approach, planned amenities, and price points. The four broad groupings of home buyers that are likely to be drawn to CPD are:

Second Home/Family Households – This group consists of the largest contingent of buyers and residents, including affluent families (head of household less than 55 years old, likely to have children living at home) currently living in their primary residence in New York City or its suburbs. This is the primary group for whom the community has been designed and the group that will be the primary focus of the marketing campaign. These families will own property at



CPD as a second home for weekend use. This group is expected to comprise 60% of total initial home buyers during the first 3 years, but will level off to 40% of total home buyers at build-out.

Second Home/Empty Nesters & Retiree Households – This group consists of

high net worth “empty nesters” (typically 55 to 65 years old, no longer with children living at home) or retirees (households over 65 who are often in a change of work and lifestyle pattern). As above, most of these buyers are expected to continue living in their primary residences in New York City or its suburbs and will own property at CPD as a second home for weekend use. Approximately 20% of total homebuyers in the first 3 years are expected to be from this group. By build-out and afterwards, as early buyers at the community age, this group may eventually make up as much as 30% of total community homeowners.

Seasonal & Full-Time/Retiree Households – This group consists of retiree

households (typically with head of household over 65 years of age) choosing to reside at CPD full-time, or more likely spending significant lengths of time at CPD in the summer months while residing elsewhere such as a warm weather location like Florida in the winter months. These are typically 2 or 1-person households, and do not typically have children living at home. This group is projected to represent 15% of initial buyers during the first 3 years, growing to 20% by build-out.

Full-Time/Family Households – This group consists of affluent families (head of household typically less than 55 years old, many of whom will have children living at home) who are already residing in northern Dutchess County, or relocating to Dutchess County for jobs in Poughkeepsie or elsewhere within reasonable commuting distance and attracted to Pine Plains, despite the fact that the site is remote to area job centers. In the initial 3 to 5 years of marketing, this is not expected to total more than 5% of total buyers, reflecting the fact that this market is quite small. By build-out, the community is projected to consist of 10% of such households, but it is highly unlikely that they will ever represent more than this share.

Further details about these buyer profiles are discussed in Section 5, Why CPD will Predominantly be a Second Home Community.

Figure 3.5, Expected Buyer Profile above also describes how much time each of the above buyer groups are likely to spend at their CPD residence, ranging from 47 weeks for full time residents to only 18 weeks. Based on typical drive-to vacation home usage patterns in similar drive-to locations, the 18 week time spent at CPD will most likely be made up of a series of weekends, long weekends, and holiday weeks for family second home owners.



4. Market Demand The following section addresses short and long-term demand for the proposed CPD master planned second home and recreation oriented vacation community. This study, and in particular this section, specifically addresses the requirement set forth in §100-28D(2)(k) of the Town of Pine Plains Zoning Law requiring a “Market feasibility study demonstrating the short and long-term demand for the uses proposed in the NND.” This analysis demonstrates that there is a current demand for CPD as a second home community for weekend and/or seasonal use oriented to households living in the core New York Metropolitan area. The analysis demonstrates that the proposed residential program is projected to be absorbed in a reasonable short term period estimated to be approximately 8-years, and that CPD will continue to function as a stable and well-occupied second home community well into the future. Section 7, Golf Market Analysis illustrates that there is sufficient short and long-term demand for the golf element of the Project.

4.1 Target Market Overview

New York City is the most affluent market in the United States and a major source of second home buyers at every community on the eastern seaboard, as well as in many communities in the western United States, and at many international destinations. Roughly two-thirds of second homes in the United States are owned in drive-to locations.3 Current market evidence suggests that drive-to locations are gaining in desirability as compared to fly-to locations as plane travel has become more costly and more difficult. Considering the extremely limited availability of drive-to product in proximity to the New York Metropolitan Area, there is tremendous untapped demand for second homes oriented to residents of New York City and the inner suburbs. In Dutchess County, the drive-to second home market has weathered the recent downturn relatively well as discussed in Section 5.1, Dutchess County Primary Home Market Trends, under the heading Recent Market Performance. A careful analysis of the competitive landscape in Dutchess County and throughout the Hudson Valley – both the existing home market and other new or planned communities – suggests that there is adequate demand for all planned projects to be successful. In fact, many planned projects are selling different product types that will likely appeal to a variety of market audiences. In the 2005 CPD DEIS Market Support Evaluation, RCLCO assessed second home demand from income eligible families in the Primary Market Area. These households were “qualified” based on probable vacation home purchase frequency, segmentation by pertinent characteristics such as interest in golf, interest in drive-to locations, and desire for single-family housing, as well as likely interest in the Hudson Valley. The conclusion of the DEIS analysis was that there is significant demand for vacation homes generated within the Primary Market Area4 and that this demand would be attracted to northern Dutchess County and CPD.

3 National Association of Realtors Second Home Buyer Surveys, 2007 through 2010. 4 Primary Market Area second home purchases include homes bought locally, in Florida, the Caribbean, the Western states, and overseas. This does not include lower priced homes,



RCLCO has refined and further developed the analytical methodology for this Study, and has projected sales pricing of homes at CPD, based on the reduced number of proposed residential lots, as well as current demographic conditions. This analysis determined the overall likely absorption and vacation home demand at CPD, reflecting the fact that the target market of potential purchasers is defined as having a net worth of $3.5 million and will be composed of the following primary groups:

Empty-nesters and retirees with another residence in Manhattan and/or warm weather location elsewhere in the United States (“snowbirds”).

Young and mature families living in New York City, Westchester, Putnam and Rockland Counties, New York, Fairfield County, Connecticut, or parts of northern New Jersey.

The majority of residential demand at CPD will come from households with a net worth of at least $3.5 million that are seeking an accessible weekend retreat from the New York City area. The number of households within the Primary Market Area with a net worth greater than or equal to $3.5 million was estimated by premiere syndicated data provider ESRI to be approximately 275,000.5 The Primary Market Area represents roughly 70% of the high net worth households in the New York Metropolitan Area, and 7% of the high net worth households in the entire United States. This level of net worth aligns, based on RCLCO’s experience in the second home industry, with the expected home prices at CPD – home purchase prices of roughly $1 million and up – reflecting prevailing norms as demonstrated in RCLCO’s consumer research in which high net worth households will typically spend between 20% and 30% of their net worth on a second home and appear to be generally purchasing homes in the $1 million and up range in the current market environment.

4.2 Short Term Demand

An assessment of short term demand for CPD follows and includes an estimation of second home demand as well as an identification of the market segments from which buyers at CPD would be drawn. The market segments include the targeted CPD Primary Market Area as defined in Section 3.1, CPD Target Primary Market Area, buyers from outside the Primary Market Area, and the local primary home market defined as within 20 miles of the CPD site. This last segment is the smallest market drawer as discussed in Section 5, Why CPD will Predominantly be a Second Home Community.

Estimated Second Home Demand

The American Affluence Research Center completes a semi-annual survey of high net worth households who are queried relative to interest in purchasing a vacation home in the next 12 months. Since the survey’s inception in 2002, between 2.3% (Spring 2009) and 10.5% (Spring 2005) of respondents indicated that they were interested in timeshares, or other more value driven resort real estate projects, nor does it reflect primary homes (a permanent residence as recognized by the IRS). 5 Knight Frank, “The Wealth Report 2010”, The Harrison Group; ESRI; RCLCO



purchasing a home in the next 12 months. For the purpose of this analysis, RCLCO has applied the average survey result of the last 3 years, suggesting an annual purchase rate of 3.7%.6 There is of course a chance that during the next real estate cycle second home purchase activity will again surge past these levels, but in the interest of being conservative, RCLCO’s analysis does not assume this. Based on the above demographic and second home purchase potential analysis, the 275,000 high net worth households within the CPD Primary Market Area should generate slightly more than 10,175 annual second home transactions (noting that this is an annual average, wherein some years might be higher and other years lower). The analysis discussed above is demonstrated in Figure 4.1, Estimated Second Home Demand Generated in the CPD Primary Market Area.

Figure 4.1 Estimated Second Home Demand Generated in the CPD Primary Market Area

Total High Net Worth Households 275,000

Annual % Purchasing a Second Home 3.7%

Annual Second Home Activity 10,175

This group of potential second homebuyers within CPD’s Primary Market Area was further qualified to account for those who are likely to buy within 500 miles of a primary home in the New York Metropolitan Area, as opposed to those who might choose a fly-to location. According to the National Association of Realtors most recent Investment and Vacation Homebuyers Survey, 60% of recent second home buyers have bought a vacation residence within 500 miles of their primary home7. For this analysis, RCLCO has assumed that roughly 50% of the high net worth buyers in the CPD Primary Market Area will buy within this distance of their primary home ranging from a high of 60% of buyers with net wealth between $3.5 million and $5 million, and a low of 40% for buyers with net wealth of $10 million or greater. This yields a blended rate of purchase in a drive-to location of 52%. Application of this rate to the total potential second home purchases (10,175) results in 5,290 potential transactions within 500 miles of the Primary Market Area. Finally, this pool of total potential customers was further qualified to reflect the likely level of interest in the Hudson Valley. The presence of second homes was determined for different geographic areas within 500 miles of New York and its suburbs that have historically attracted second home buyers. This assumption was based on data derived from the U.S. Census Bureau’s 2006-2008 American Community Survey. This data demonstrates that 40% of all part-time second home residences owned by persons in

6 American Affluent Research Center Tracking Study, Spring 2011 7 “2010 NAR Investment and Vacation Home Survey;” National Association of Realtors, March 2010



the New York Metropolitan Area were in the 10 county8 Hudson Valley region. Other major destinations include East End Long Island (Suffolk County), New Jersey Shore Points (Monmouth and sections of Ocean County), The Poconos (Monroe County, PA), Litchfield County, Connecticut, and other parts of the New York Metropolitan Area.9 Applying the 40% capture noted above to the 5,290 total potential drive-to second home sales translates into potential activity in the Hudson Valley of slightly more than 2,100 transactions per year. See Figure 4.2, Estimated Second Home Demand Generated in the CPD Primary Market Area Likely to Choose the Hudson Valley and as demonstrated graphically in Figure 4.3, Graphical Demonstration of Distribution of Drive-to Second Home Demand Generated in the CPD Primary Market Area.

Figure 4.2 Estimated Second Home Demand Generated in the CPD Primary Market Area Likely to Choose the Hudson Valley

Annual Potential Second Home Activity from CPD Primary Market Area 10,175

% Buy in a Location within 500 miles 52.0% 5,290

% Choose the Hudson Valley 40.0% 2,100

Annual Potential Second Home Activity in the Hudson Valley 2,100

Note: Numbers have been rounded.

Figure 4.3 Luxury Drive-to Second Home Demand within 500 miles of Primary Market Area

Note: Numbers have been rounded

8 Consisting of Westchester, Rockland, Putnam, Dutchess, Orange, Ulster, Columbia, Greene, Rensselaer and Albany Counties 9 U.S. Census Bureau, 2006-2008 American Community Survey



Source of CPD Homebuyers

The sources of CPD homebuyers can be characterized into 3 sub-groups: those emanating from the Primary Market Area as described in Section 3.1, CPD Target Primary Market Area; those from areas outside the Primary Market Area; and those, constituting a small percentage, from the local primary home market within 20 miles of CPD. Primary Market Area Based on the analysis demonstrated in Figures 4.2 and 4.3 above, as many as 2,100 second home transactions might be experienced within the 10 County Hudson Valley area in a typical year, realizing again that some years may have higher volume of activity than others due to market and economic forces as well as changes in the available supply in the marketplace. In RCLCO’s experience, a high-quality, nationally marketed, planned community development such as CPD can capture as much as 3% to 5% of the regional marketplace. Therefore, the following table illustrates RCLCO’s calculations, based upon a CPD capture of 3% to 5% of the total market activity for the price sectors in which product will be offered. Figure 4.4, Projected CPD Capture of Hudson Valley Second Home Demand.

Figure 4.4 Projected CPD Capture of Hudson Valley Second Home Demand

$750K $1M $2M HOME PRICE RANGE $1M $2M &UP TOTAL

$3.5- $5M $10M QUALIFYING NET WORTH RANGE $5M $10M &UP TOTAL

Annual Potential Second Home Transactions in the Hudson Valley 1,010 760 320 2,100

Estimated CPD Capture Rate Scenarios

Base Scenario% of High Net Worth Households who choose CPD 2.0% 3.0% 5.0% 3%Annual # of High Net Worth Households who choose CPD 20 23 16 60

Conservative Scenario% of High Net Worth Households who choose CPD 2.0% 3.0% 4.0% 4.0%Annual # of High Net Worth Households who choose CPD 19 23 10 52

Aggressive Scenario% of High Net Worth Households who choose CPD 3.0% 4.0% 5.0% 5.0%Annual # of High Net Worth Households who choose CPD 28 30 17 76

Note:Numbers have been rounded. Outside CPD Primary Market Area RCLCO’s experience indicates that the demand for second homes from buyers outside of the Primary Market Area will be substantial. An analysis of the Dutchess County tax rolls suggests that approximately 27% of the second homes valued over $500,000 are owned by families whose primary residence is outside the Primary Market Area. For analysis and further discussion, see Section 5 under Second Home Market of $1



Million+ in Dutchess County Remains Strong; Figure 5.8, Primary Residence Location of Owners of a Second Home with an Assessed Value over $500,000 in Dutchess County as of 2011; and Figure 5.9, Primary Residence Location of Owners of a Second Home with an Assessed Value Over $500,000 in Dutchess County – Breakdown of Inside and Outside of the Primary Market Area as of 2011. Case study and local research indicates that 20% is a reasonably conservative factor to employ to estimate the percent of total buyers of second homes in CPD who will come from outside the Primary Market Area. This analysis shows that the demand from outside the Primary Market Area is projected to result in an additional 13 to 19 second home sales per year at CPD, or approximately 18% of the total homes sales at CPD. Local Primary Home Market The smallest percentage of demand will emanate from the local primary home market. The following analysis demonstrates demand for 6 to 1010 additional sales to be generated by households already living full-time in the local market (northern Dutchess County) with an annual income above $250,000. A percent owner-occupied figure was applied to these income-qualified households, as well as an annual turnover rate as a factor for households that choose to “buy new” homes. Finally, a likely capture rate of 33% was applied based on analysis of competitive alternatives within the local primary home market area (see Figure 4.5, Estimated Primary Home Demand Generated from Households within 20 Miles of CPD). It is estimated that these transactions will be roughly 50% family households and 50% retiree households.

Figure 4.5 Estimated Primary Home Demand Generated from Households within 20 Miles of CPD

Total Households within 20 Miles of CPD 81,600 % Earning more than $250,000 1.8% 1,468 % Owner Occupied 97.0% 1,424 Annual Turnover Rate 7.0% 100 % That Choose a New Home 25.0% 25 CPD Capture Rate 33.0% 8 Total Potential Annual Primary Home Activity at CPD 8 Note: numbers are rounded.

10The capture rate was varied to show sensitivity to the market penetration analysis. The 33% capture represents the “base” case while a 24% factor was used as a “conservative” scenario and 40% as an “aggressive” scenario.



Cumulative Summary

The cumulative of the above analyses forecasts approximately 70 to 100 sales per year (the figures have been rounded down to be conservative) at CPD, generated from the three market segments discussed above. These calculations are summarized in Figure 4.6, Projected Residential Absorption (Number of Units per Year) by Source of Buyer.

Figure 4.6 Projected Residential Absorption (Number of Units per Year) by Source of Buyer

Demand Source Conservative Base Aggressive SECOND HOME DEMAND Primary Market Area 52 60 76 Outside Primary Market Area(*) 13 15 19

Subtotal 65 75 95 PRIMARY HOME DEMAND Local Primary Home Market 6 8 10 TOTAL 71 83 105 (*) 20% of total (Primary Market Area + Outside Primary Market Area) second home demand. RCLCO evaluated the pricing of each product type (defined by lot and home size, as well as price range). This analysis compares the projected sales pricing at CPD with recently sold properties on a similarly sized lot and with similarly sized homes. The pricing analysis was conducted to determine if the marketplace will perceive value in the proposed second home product with the projected sales pricing. Given that there are no direct comparable new housing communities currently existing in the local area, this analysis focused on recent sales of similar existing products (as defined by location, size of lot and/or home, and home quality) in the northern Dutchess County market. The two smaller lot products (Central Lots and Dutch Estate Lots) show a lot-to-value ratio of 33% – the land represents one-third of the value for the home transaction, a ratio that is well established locally and nationally and which is used as a pricing guideline in the high-end housing industry. The Country Estate Lots are based on a per square foot home price (in this case, $180 per square foot of built area in the home).The Conservancy Lots, a very unique offering, were analyzed based on listed prices, since there were no recent comparable sales. This pricing analysis suggests that the logic of the projected sales pricing is sound for all of the proposed CPD product types as discussed and detailed below in Figure 4.7, Projected Home and Lot Values.

Central Lots (approximate lot area of 0.2 to 0.5 acres +/-)

The Central Lots were compared to a set of second home-oriented comparables recently sold in the local market place. These comparables were carefully chosen to reflect higher-end second homes. The average home price for this



competitive set was $1.2 million. At 33% lot-to-value, this means an average lot price of $400,000, which is consistent with the projected sales pricing at CPD.

Dutch Estate Lots (approximate lot area of 0.5 to 2.0 acres +/-)

A lot-to-value analysis was conducted for the Dutch Estate Lots product based on recent sales of homes in the northern Dutchess County market as described above. This analysis yielded an average home price of $1.75 million, which at a 33% lot-to-value translates to a roughly $575,000 lot price, consistent with the projected sales pricing at CPD.

Country Estate Lots (approximate lot area of 2.0 to 5.0 acres +/-)

There were several recent sales comparables for homes similar in character to the proposed Country Estate Lots. Given the larger size of these lots, the assumed home price (using $180 per square foot) was backed out from the home sales price of the key comparables to isolate the underlying lot price. This resulted in an average market demonstrated price of $800,000 for the lot, and $2.5 million for a lot and home package. This projected sales pricing level is consistent with that proposed for CPD.

Conservancy Lots (approximate lot area of 5.0 to 12.0 acres or more)

Finally, prices for a competitive set of Conservancy Lots were adjusted to an assumed sales price based on the demonstrated relationship of closing price to listing price from sales trends in the local area. This revealed that the gap today between sales price and listing price is only 5%. When listing prices for the comparable lots are adjusted using this factor, the average comparable home price was $1.97 million. In order to back out the home price, a $180 per square foot factor was applied to the average finished square footage of the homes in the comparable set. This results in a calculated average lot price of $1.2 million. This projected sales pricing level is consistent with that proposed for CPD.

In light of the above, RCLCO concluded that the vast majority of proposed product at CPD is priced consistently with local market averages, even without considering any significant premium for lot size, amenities, and newness. The pricing (see Figure 4.7, Projected Home and Lot Values) for CPD, which the analysis herein suggest are market driven and achievable, may in fact be conservative given that the projected sales pricing is based largely on the sale of older homes located outside of planned communities.



Figure 4.7 Projected Home and Lot Values

Product/Lot Type Unit/ Lot Count % Mix

2011 Estimated Average Home and

Lot Purchase Price/Value

2011Estimated Average

Lot Purchase Price/Value

Central Lots 421 65% $1,200,000 $400,000

Dutch Estate 155 24% $1,750,000 $575,000

Country Estate Lots 30 5% $2,500,000 $800,000

Conservancy Lots 39 6% $3,000,000 $1,200,000

TOTAL/WTD. AVG. 645 100% $1,505,000 $510,000

The household types will view the projected sales pricing favorably. The extent and content of amenities proposed at CPD will also provide a high degree of purchase motivation by targeted buyers (see Figure 4.8, Likely Purchase Motivations at CPD), and may in fact result in creating a significant premium above and beyond that contemplated by the projected sales pricing.

Figure 4.8 Likely Purchase Motivations at CPD

PURCHASE MOTIVATION CPD STRENGTH(S)

Proximity and ease of access from Manhattan and New York MSA

Within two hour drive via less traveled roads (TSP and NYS Thruway)

Well-established second home location Dutchess County and the HudsonValley have historically been a location for “weekenders” from

Manhattan

Bucolic atmosphere and rural ideal Natural surroundings and quality views, much better than other areas

of the Hudson Valley

Robust multi-generational amenity package

Subject property will offer a wide array of amenities that will appeal to a range of users and also complement the property’s natural surroundings

4.4 Project Absorption

The final element of this analysis was to project a total time for complete project absorption of the residential program, and to determine if the mix of home/lot types and the projected sales pricing corresponds to the projected level of anticipated demand. Figure 4.9, Projected CPD Product / Lot Type and Timeline for Absorption in the Marketplace estimates the likely project absorption period for each of the proposed product types. This analysis estimates that the likely project absorption period for the



product offering at CPD will be approximately 8 years for all product types. Delivery of key amenities, including the new golf course, will occur early in the development of the Project to support the projected absorption schedule and marketing effort.

Figure 4.9 Projected CPD Product / Lot Type and Timeline for Absorption in the Marketplace

4.5 Long-Term Demand

There is strong evidence that CPD will continue to function as a stable and well-occupied second home enclave well into the future. This is a conclusion based both on national demographic trends and aspects of existing project case studies which demonstrate long-term ownership, maintenance of the vacation home residences through succeeding generations, and vacation home re-sale data. The transitioning Baby Boomer generation will provide significant demand at Carvel. Demographically, in the middle of the last decade the peak of the “Baby Boomer” generation reached the age of 50.11 This is typically the age at which households enter an empty-nester/pre-retiree life stage. During this transitional time, many purchase new real estate reflective of their changing familial status and life style choices. One component of this is second home demand – the desire to own a vacation home where families can gather to spend weekends, vacations and holidays. Consumer research in recent years shows that many of these consumers are deferring the purchase of new homes until at least the age of 55 and most are waiting until ages 60, 65, or even beyond, meaning that there is significant Baby Boomer-driven second home activity yet to occur. Further, because of the recent economic downturn, a significant portion of the large Baby Boomer Generation and Generation X who follow them deferred this purchase and have yet to buy a second home. There is likely significant pent-up demand in this market.

11 U.S. Centers for Disease Control and Prevention



Once Baby Boomers do make their retirement home purchases they are likely to “age in place” and remain in these residences for a long period of time. It is very likely that as the Baby Boomer generation begins to vacate their chosen retirement residences (in approximately 2 decades) that the timing will coincide with Generation Y’s progression into pre-retirement and retirement. Generation Y is a demographic cohort that will be at least as big as the Baby Boomer generation. These trends in national demographics bode well for both the near and long-term opportunity at CPD. The amenity program has been designed to serve the emerging market and to evolve over time. The amenities will serve a broadening range of recreational and life style tastes, from the more conventional golf and homeowners’ club amenities to conserved open space, protected natural resources, hiking trails, as well as agricultural, arts and cultural activities. The long-term demand for golf emanates from the long-term ownership characteristics and patterns demonstrated in the case study material (see Section 6, Case Studies) which indicate continued viability of the golf amenity and its role as an inter-generational or cross over activity. Further discussion on golf is located in Section 7, Golf Market Analysis. Much research has been conducted on the life cycle and evolution of second home communities over the long term. One of the most highly respected of such analyses was conducted in 1987 by Geoffrey Godbey and Malcolm Bevins for the Journal of Travel Research. Their findings on the subject came from conducting a thorough case study using direct consumer research of past and current residents of a 20-year-old, large, upscale but unnamed (for confidentiality reasons) second-home community in the Poconos (in northeastern Pennsylvania). This community is approximately a 2-hour drive from New York City. See Section 6, Case Studies for additional details. The research shows that buyers at this community have generally made a “long-term financial investment” in the community with the goal of using their home as a second residence throughout different life stages and passing them along to their next generation of relatives. After 20 years, on average only 1.2% (or approximately 45) of the 3,709 properties at the case study community were sold each year, reflecting the fact that most second home purchases are with a long ownership perspective. This is much lower than typical residential communities. Sources actively involved in sales of high-end existing homes in northern Dutchess County suggest that this phenomenon is typical of the local market as well. This is especially true in the Hudson Valley region where there is a long tradition of families purchasing second homes for multiple generations. In fact, RCLCO’s ongoing consumer research into this buyer group nationally demonstrates that most second home buyers perceive their property as a legacy asset that will be owned for generations. The Second Home Owner Study discussed in Section 3.1, CPD Target Primary Market Area, pertaining to Sullivan County, which is similar to second home ownership patterns in Dutchess County, found that between 26% and 56% homeowners, had owned their homes for 21 years or more. This trend has also been demonstrated at Crystal Springs, which is a 2,500 unit second home/resort-oriented community in the highlands of Passaic County, New Jersey. According to information from the exclusive broker on site, this community has seen little



to no turnover in most of their product lines. Even after 20 years, the vast majority of residents are second home owners who purchased their properties when the project was first developed. See Section 6, Case Studies for additional details. 5. Why CPD will Predominantly be a Second Home Community

5.1 CPD – Master Planned Second Home Community

The following section discusses the characteristics of the proposed CPD Project that provide assurance that the planned master community will consist of predominantly second homes, both as originally established, and over the long term. Primary reasons include:

The location of CPD is not a viable commuting location to most major employment nodes.

The price points of CPD are well above those for the vast majority of primary housing within the surrounding area, including that in southern Dutchess County where the travel time to major employment nodes is more acceptable to commuters.

Sales of second homes in Dutchess County in the range of $1 million+ have remained strong.

There is virtually no product availability for new high-end second homes in the Hudson Valley generally, and Dutchess County specifically, particularly within an amenity driven master planned community, leaving a large untapped market for new product.

CPD fulfills the need of the above noted untapped market demand. CPD will maintain its second home character over the long term and the

percentage of primary homes in the CPD will remain small.

Commuting Location to Major Employment Nodes

Commuting patterns data available from the U.S. Census Bureau shows that the majority of households choose not to live beyond a 1-hour drive time from their place of employment. As such, the master planned community at CPD is unlikely to attract a large number of commuter households given the distance to relevant employment centers, particularly New York and southern Westchester County, which are beyond standard acceptable drive times of even the most committed New York commuters under non-rush hour conditions. Commuting by train is also not a viable option, given CPD’s relative distance from an Amtrak or Metro-North train station. The closest train station to CPD is the Wassaic Station on the Harlem Line, which is approximately 30 minutes away by car, then another approximate 1½ hours to White Plains and 2 hours or more (depending on peak or non-peak schedules) by train to Grand Central Station. Even the group of homebuyers who will “drive to qualify,” i.e., sacrifice commute time in order to acquire more affordable housing, will still not typically live beyond a 60 to 90-



minute drive time from their place of employment.12 In any event, these households tend not to be consumers of higher-end homes. The continuing increase in the cost of fuel will also remain a deterrent for such longer commutes. See Figure 5.1, One Hour, Non-Rush Hour Drive Time from CPD and Snapshot of Commute Time to Regional Employment Nodes, and Figure 5.2, Subject Site and Local Transportation Infrastructure, Pine Plains, NY.

Figure 5.1 One Hour, Non-Rush Hour Drive Time from CPD and Snapshot of Commute Time to Regional Employment Nodes

In general, northern Dutchess County communities have much less proposed and new construction activity than southern communities. Housing outside of Hamlets and Villages is oriented towards a second home buyer or retiree/pre-retiree household. Home building and commute patterns demonstrate that the northern portion of Dutchess County, in light of distance in miles and commute times, is less suitable for commuting than the southern portion of the County. Also, new home activity such as that located near Poughkeepsie and Hyde Park in northern Dutchess County tends to be of a much

12 US Census Bureau commuting patterns



lower price point and oriented to a different income/net worth demographic than those who will be likely purchasers in the proposed CPD.

Figure 5.2 Subject Site and Local Transportation Infrastructure, Pine Plains, NY

Subject Site

Woodward Hill Rd.

Columbia Co.

Dutchess Co.

Taconic Pkwy.

45 Min. Commute to Poughkeepsie

30 Min. Drive to WassaicMTA Station, then

120 Min. Ride to NYC 90 Mins. to White Plains90 Min. to 150 Min.

Commute to NYC

As noted above, a nascent long-distance commute market has emerged in southern Dutchess County. However, this market has not grown significantly in size, nor has it extended into the central and northern section of Dutchess County, which would require an additional 30 to 45 minutes commute time from the major existing employment concentrations. This is a reflection of the fact that the commute time to Pine Plains is simply unacceptable to the vast majority of homebuyers. The new home activity clustered in the southwestern portion of Dutchess County affords easier access to employment via I-84, the Taconic State Parkway and U.S. Route 9, as well as via Amtrak and Metro-North rail lines with direct service to Penn Station and Grand Central Station (respectively).The configuration of these homes, almost entirely within traditional suburban subdivisions with limited amenities, is not appealing to many second home buyers seeking a more rural setting with recreational opportunities on site or nearby. This market consists typically of family households commuting to jobs in Westchester County and even New York City given their more proximate location within 90-minutes during non-rush hour times. It is also important to note that most of the existing product is concentrated below $500,000, generally consistent with characteristics of the existing primary home market, and thus appeals to a group of households with far lower income levels than the market targeted by CPD. Further, as primary home prices have declined over the last three years in locations closer to existing job concentrations (Westchester and Putnam Counties, for instance), the pricing pressure that was pushing some buyers into southern Dutchess County has eased.



CPD Price Comparison

The vast majority of housing transactions in Dutchess County relate to primary residences, which is a very different buyer market than the one targeted by CPD. Most activity is at a dramatically lower price and is oriented to buyers that both live and work within the county or neighboring counties. These primary home transactions are typically priced below $500,000. Sales at or below $500,000 represent almost 90% of the local market activity, as demonstrated below in Figure 5.3, All Home Sales (Existing and New) by Price Segment in Dutchess County (2003 to YTD 2010).

Figure 5.3 All Home Sales (Existing and New) by Price Segment in Dutchess County (2003 to YTD 2011)

Price Band Total Sales (2003 to Current)

% of Total County Sales (2003 to Current)

Peak Sales Year

% Decline from Peak Year to 2010

< $250,000 8,165 35.7% 2003 -30%

$250,000 to $500,000 12,106 53.0% 2006 -56%

$500,000 to $750,000 2,086 9.1% 2006 -70%

$750,000 to $1m 360 1.6% 2006 -72%

$1m - $2m 102 0.4% 2006 +5%

$2m+ 43 0.2% 2005 -25%

Source: NY Office of Real Property Services Analysis of 2000 U.S. Census data13 indicates that approximately 40% of northern Dutchess County residents also work in Dutchess County, and that the balance work in surrounding counties (with only approximately 8% working in Westchester County and approximately 5% working in New York City counties). This further confirms that long-distance commuters are not likely to comprise a significant component of the market. New home construction activity in Dutchess County has been generally constrained (with homebuilding expressed by number of building permits issued) and limited by several factors. These factors include a lack of demand due to slow household growth rates, the fact that most of Dutchess County is beyond the acceptable New York regional commute area, and given regulatory mechanisms which have limited the volume of new homes available to the market. See Figure 5.4, Total Building Permits Issued in Dutchess County (2000 to 2010). New home activity has represented only 20% of total transactions, which is typical of markets with strong constraints on new home building.

13 The 2000 Census is the most current data available; 2010 detailed data has yet to be released.



Figure 5.4 Total Building Permits Issued in Dutchess County (2000 to 2010)

0

200

400

600

800

1000

1200

1400

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Num

ber

of U

nits

Per

mitt

ed

YearSingle-Family Multi-Family

Source: U.S. Census Bureau Despite the slowdown in new home permits there are signs of recovery in terms of total sales volume. Figure 5.5, Annual Change in Residential Sales Volume (Existing and New Homes) 2005-2010 demonstrates that by early 2011 sales volume had begun to stabilize. Median sales prices declined by a cumulative 20% from the peak through the mid-2011 housing market trough, but according to current MLS data and broker reports, these too have begun to stabilize.

Figure 5.5 Annual Change in Residential Sales Volume (Existing and New Homes) 2005-2010

-30%

-20%

-10%

0%

10%

20%

30%

2004 2005 2006 2007 2008 2009 2010

UlsterSullivanOrangePutnamDutchessAll HV Counties

Source: NY Office of Real Property Services.



Dutchess County Second Home Market

Analysis of current sales activity and interviews with brokers active in the regional marketplace suggest that the early stages of a housing market recovery may be underway and the broker community in the region reports that second home buyers have returned to the market and represent the majority of recent high-end housing purchases in the northern section of the County. The $1 million+ home market in Dutchess County has proven to be among the most resilient during the recent downturn in the housing market. This has also been the case in many established second home locations, in which the high-end markets have experienced less distress than the conventional housing market. This is particularly true in the more rural northern and eastern portions of Dutchess County. As demonstrated in Figure 5.6 High-End Residential Transactions in Dutchess County, April 2008 to April 2010, the $1 million+ home market is small in comparison to the overall market. Sales in this category, while still suffering a decline from their recent peaks, have proved somewhat more resilient during the downturn than other price segments as noted above. It is also notable that sales in the $1 million+ category make up a relatively low portion of the total sales in Dutchess County as shown above in Figure 5.3, All Home Sales (Existing and New) by Price Segment in Dutchess County (2003 to TYD 2011). This likely demonstrates a supply constraint due to a limited number of products in this category and a low rate of turnover among the most high-end products. Essentially all sales in this category were in the resale market which is a marked difference from more moderate price points in Dutchess County.14

Figure 5.6 High-End Residential Transactions in Dutchess County, April 2008 to April 2010

5 15

55

102

179

0

50

100

150

200

Over $2M $1M-$2M $750K-$1M $600K-$750K $500K-$600K

Dutchess County has a long tradition of second home ownership, with most second home buyers emanating from New York City or other New York Metropolitan Area communities that are more densely settled with suburban population centers. This activity was historically concentrated in the western portion of the county, near the Hudson River and clustered around Metro-North train stations. More recently, this activity has spread to the central and eastern sections of the County, including Pine 14 NYS Office of Real Property Services & Real Quest



Plains itself. Based on interviews with realtors, quantitative data (discussed below), historical purchase patterns, and analysis of local tax rolls, RCLCO determined that the Primary Market Area for CPD second and vacation homes is already the market for northern Dutchess County second home sales. Realtors in northern Dutchess County that were interviewed estimate that 85% of the relevant home sales ($500,000+) in Pine Plains and the surrounding towns have been to buyers who will not use the property full time. The county-wide data suggests that there are a fair number of second home owners in Dutchess County. In 2006, RCLCO analyzed local tax rolls for northern Dutchess County, and found that roughly 19% of the homes in the area are owned by someone with a primary residence outside Dutchess County. Of those, over 40% of the owners are listed as residing in New York County (Manhattan). For high-value second homes (those assessed at over $500,000), 75% of the owners live in Manhattan, which is the principal component of the CPD Primary Market Area as discussed throughout Section 4, Market Demand. See Figure 5.7, Second Home Owners Primary Residence (Pine Plains, Milan and Northeast, Dutchess County, NY) as of 2011; Figure 5.8, Primary Residence Location of Owners of a Second Home with an Assessed Value over $500,000 in Dutchess County as of 2011; and Figure 5.9, Primary Residence Location of Owners of a Second Home with an Assessed Value over $500,000 in Dutchess County – Breakdown of Inside and Outside of the Primary Market Area as of 2011.

Figure 5.7 Second Home Owners Primary Residence (Pine Plains, Milan and Northeast, Dutchess County, NY) as of 2011

# of Properties %Average

Assessed Value

2876 100% $285,013

1073 37.3% $353,505

481 16.7% $228,583

592 20.6% $388,697

238 8.3% $506,472

Residential PropertyTowns of Milan, Pine Plains and Northeast, NY

Total Number of Residences within Residential Tax Code Categories

Total Number of Residences, where address of owner is different than property location

Total Number of Residences, w/different address, in Dutchess County

Total Number of Residences, w/different address, not in Dutchess County

Total Number of Residences, w/addresses, in New York County

Source: Dutchess County Real Property Tax Service Agency.



Figure 5.8 Primary Residence Location of Owners of a Second Home with an Assessed Value over $500,000 in Dutchess County as of 2011

54%

1%

4%

2%

6%

2%

2%

6%

4%3%

2% 14%

New York Co., NY Suffolk Co., NY Westchester Co., NYBronx Co., NY Kings Co., NY Queens Co., NYNew Jersey Connecticut CaliforniaFlorida United Kingdon Other

Locations are listed in clockwiseorder around the pie chart

Source: Dutchess County Real Property Tax Service Agency.

Figure 5.9 Primary Residence Location of Owners of a Second Home with an Assessed Value over $500,000 in Dutchess County - Breakdown of Inside and Outside of the Primary Market Area as of 2011

Inside the Primary Market Area Outside the Primary Market Area

Location Percentage Location Percentage New York County, NY 54% Other 14%

Kings County, NY 6% California 4%

Connecticut (Fairfield County) 5% Florida 3%

Westchester County, NY 4% New Jersey 2%

Queens County, NY 2% United Kingdom 2%

Bronx County, NY 2% Suffolk County, NY 1%

New Jersey 0% Connecticut (Other Counties) 1%

Total 73% Total 27% Source: Dutchess County Real Property Tax Service Agency.



New Home Product in the Hudson Valley

Dutchess County illustrates the situation throughout the Hudson Valley region as a whole, i.e., an extremely limited number of high-end second home oriented communities actively selling new product. Those that do exist are located primarily on the western side of the Hudson River, which historically has consisted of lower priced second homes without the cachet of the communities on the eastern side of the Hudson River. Limited land availability and a rigorous entitlement environment have resulted in no new organized resort community development in Dutchess County during the recent decade. Lack of supply, however, is not an indication of level of demand, as further discussed in Section 3, Target Market Area, Buyer Profile and Project Absorption and Section 4, Market Demand.

CPD Design and Market Demand

CPD contains numerous features and design measures directed at satisfying the untapped demand for high-end second homes:

The visual beauty and natural characteristics of the site and surrounding area; The accessibility of the site from the heart of the Primary Market Area; The under-served demand for drive-to vacation homes; The proposed extraordinary design and amenity-driven program of CPD; and The reputation and expertise of the Project Sponsor.

CPD offers distinctive characteristics as a planned second home community in the Hudson Valley. In terms of physical location and natural surroundings, CPD boasts a highly desirable setting of rolling hills, water features, and medium to long-range views of the Catskills, Berkshires, and Taconic range. CPD also benefits from its location directly on the Taconic State Parkway. The location of CPD, while too distant from major employment centers to constitute an acceptable location for primary home residences, it is well within the traveling range for second home buyers. The range of lot size product mix is also designed to appeal to a wide variety of second home buyers. Finally, the amenities package proposed at CPD is diverse and substantial. The only high-end second home project in the area offering proposing to offer anything approaching a similar level of amenities is Silo Ridge in Amenia. However, the product mix at Silo Ridge is quite different than CPD, and therefore the projects will attract different buyers. Silo Ridge is planned as a mixed-use resort community adjacent to the existing Silo Ridge golf course. Millbrook Ventures is the developer, and current plans call for an initial delivery in 2013. The design of this community includes 338 housing units and 26,000 square feet of retail space. The flagship amenity onsite will be a 300 unit condo-hotel resort. Other amenities include reconstruction of the existing golf course as designed by Ernie Els with a 29,000 square foot clubhouse, a 46,000 square foot wellness center, indoor and outdoor swimming pools, a fitness center, tennis, hiking and biking trails, and ice skating. Silo Ridge also has a number of sustainable design goals. For example, the developer is pursuing a LEED silver designation for the hotel, clubhouse and event space. Silo Ridge also intends for all of its housing units to meet Energy Star requirements. As a whole, including the golf component, Silo Ridge proposes to be compliant with Audubon International’s standards for new development.



The proposed product program at Silo Ridge differs from CPD in that Silo Ridge calls for a greater frequency of attached higher-density multifamily units (see Figure 5.10, Proposed Unit Mix at Silo Ridge). These units will be much smaller than the typical single-family detached second home in this market. For example, condo flats will average close to 1,500 square feet while townhomes will be anywhere from 1,900 square feet to 2,300. This type of product mix will be attractive to a somewhat different buyer profile than to what is being proposed at CPD.

Figure 5.10 Proposed Unit Mix at Silo Ridge

Unit Type Unit Count % Mix

Condo Flats 136 40%

Townhomes 123 36%

Villas 19 6%

Cottages 19 6%

Estate Homes 41 12%

TOTAL 338 100%

In conclusion, CPD occupies a unique position, and does not compete directly with the only other project catering to a somewhat similar market

CPD Second Home Character Maintenance

The vacation and part-time occupancy patterns described above, as well as the population projected, will create a community character that is very different than a traditional full-time neighborhood. Second home communities tend to retain their character over time. This phenomenon is widely observed in established second home communities around the country such as the Hamptons, Vail, and portions of Florida, in which highly seasonal residential occupancy patterns – with short-term social engagement opportunities with permanent residents – actually discourages full-time potential residents from purchasing homes in second home communities. The above assessment is further supported by the information and assessment included in Section 6, Case Studies which addresses the relevance of the case studies to CPD, and their overwhelming second home characteristic. Because of the above factors, CPD will remain a second home community. The low percentage of full-time primary home occupancy predicted in Section 3.2, Buyer Profile (5-10%) would not be expected to change over time. Potential full-time occupants include local households that are already settled in the immediate area, and have the income required to afford the master planned community product and associated amenities. These buyers would most likely be primary home owners (full time, non-retiree residents). Based on RCLCO’s experience in similar rural markets, it would be expected that the majority of demand for such primary housing would emanate from within 20 miles of CPD, and would include affluent local professionals (e.g., lawyers,



accountants, consultants) who work in Pine Plains or a nearby community. Likely annual sales of only 8 to 11 full-time primary residences at CPD each year have been estimated (see under Local Primary Home Market in Section 4.2, Short Term Demand). There are two final groups of potential homebuyers who might consider this location as a primary home opportunity, and they are included within the percentages of occupancy provided. The first is so-called pied-a-terre buyers, who would reside locally while one or more of the adults in the households lives closer to their place of work during the week. There may well be a limited number of such buyers, but there is no significant evidence of this trend reported by the local brokerage community, nor is this buyer segment a significant portion of the market in other resort communities in which RCLCO works frequently. The second group includes professionals that could telecommute rather than work in a traditional office environment away from their residence. Such households exist in the area, although the incidence of this phenomenon is still very small, and is not considered a significant market opportunity for CPD, nor has it presented itself as a significant component of market demand in any of the resort communities around the country that RCLCO has studied. 6. Case Studies

6.1 Case Study Methodology

The CPD DEIS Market Support Evaluation contained case study profiles for projects which were selected from a larger list based on the following criteria:

Proximity to a large metropolitan area. Possessing high quality amenities. Skillful execution. No relation to past developments of the Project Sponsor.

DEIS commenter The Hudson Group and others questioned the appropriateness of the selected case studies included in the DEIS due to their locations. In response, the case studies utilized have been increased to include ones with geographic and climate characteristics that are similar to CPD’s. However, case studies of master planned communities are appropriate even if the locale and geography is not exactly the same as CPD. Trends and indications may vary by some factor based upon geographic and climate differences, but the overall characteristics and patterns remain valid. This is particularly true given the strength of the targeted New York Metropolitan Area Primary Market Area and the preponderance of drive-to location demand in overall vacation home ownership characteristics.



The added case studies, like those from the DEIS, support the weekend/vacation user profile and other characteristics updated and discussed in this Study. The analyzed case studies from the DEIS and those added (noted in italics) include:

Palmetto Bluff, Bluffton, South Carolina (oriented to the Savannah area). Greenbrier Spring Club (oriented to the Washington, D.C. area). Santa Lucia Preserve, Carmel, California (oriented to the San Francisco Bay

area). Bay Creek, Cape Charles, Virginia (oriented to the Washington/Richmond area). The Peninsula, Millsboro, Delaware (oriented to the Washington/Baltimore area). Chapin Estate (oriented to the New York Metropolitan area). Crystal Springs (oriented to the New York Metropolitan area). An Unnamed Master-Planned Community in the Poconos (oriented to the New

York Metropolitan area) – This project remains unnamed because it requested anonymity.

In addition to the analysis below in Section 6.2, Case Studies, see Appendix A, Case Studies Profiles for further details regarding these master planned communities. Both the initial case studies from the DEIS and the added case studies provide relevant comparisons to CPD’s target market. RCLCO contends that the originally selected case studies are appropriate as analogous to CPD, largely because of CPD’s proximity to the New York Metropolitan Area which is a strong generator of demand for vacation homes and which is underserved due to a lacking of vacation home communities within reasonable driving distance. The proximity of each case study to a major metropolitan area provides enough similarity in the context of the strength of the New York City drive-to market. Also see the discussion regarding golf as being a highly desirable community amenity in Section 7, Golf Market Analysis. Variations in case studies may result in numerical comparisons requiring some interpolation. However, the general trends, indications, ownership patterns and resident habits are all validated. See Figure 6.1, Location and Summary of Case Study Drive Time, Ownership Pattern, and Market Orientation.



Figure 6.1 Location and Summary of Case Study Drive Time, Ownership Pattern, and Market Orientation

Community Name Drive Time to Nearest Major Metro Area

% Second Home

% Retiree Primary Home

% Singles/Family

Primary Home

Key Feeder Market(s)/MSA (Metropolitan

Statistical Area)

Palmetto Bluff Savannah (1 Hour), Charleston (2 Hours), Charlotte (4 Hours)

60% 30% 10% Carolinas,Atlanta, Northeast, CA, Local

Greenbrier Sporting Club

Washington, D.C. (4 Hours)

98% 2% 0% Nationwide

Three Creek Ranch Not to drive-to location 80% 20% 0% Nationwide

Santa Lucia Preserve South Bay (1 Hour)SF/Oakland (2 Hours)

50% 30% 20% Bay Area

Bay Creek Resort Hampton Roads (1 Hour)Richmond (2 Hours)

70% 20% 10% Richmond, Charlottesville, DC MSA

Peninsula on Indian River Bay

D.C., Baltimore, Philadelphia (2 Hours)

80% 20% 0% DC/Baltimore and I-95NE Corridor

Chapin Estate New York (2 Hours) 90% 10% 0% New York MSA

AVERAGE -NA- 75% 19% 6% -NA-

6.2 Case Studies

In order to refine the RCLCO assessment of the CPD second home opportunity, case studies were completed on successful premier master planned communities around the country. The case studies help inform the Project Sponsor and the public review process with relevant information regarding: vacation, primary and retiree home ownership characteristics; typical buyer profiles in terms of income, age and school-age population potential, spending patterns, community service impacts and participation levels in local communities.

Palmetto Bluff

Palmetto Bluff is a Master Planned Community with a golf course comprised predominantly of owners who use their homes on weekends and on vacation. The community is located 1 hour north of Savannah, Georgia. 90% of the residents are second home buyers, and 50% of those users live within driving distance of the community. Of the 10% primary homeowners, 90% are fully retired, and as a result there are just 4 school-age children living in the 2,900 unit community. Lots start at $250,000, and the community features an 18-hole Jack Nicklaus golf course. 875 local residents work at Palmetto Bluff, generating $37 million in yearly employment and payroll revenue. In 2005, residents donated $44,000 in charitable contributions to the local Boys and Girls Club and Bluffton Historical Preservation Society. See also Appendix A.1, Palmetto Bluff, Bluffton, South Carolina.



Greenbrier Sporting Club

The Greenbrier Sporting Club is a community of luxury homes and private gated neighborhoods in a secluded area of West Virginia, adjacent to the world-renowned Greenbrier Resort. The Greenbrier Resort contains 6,500 acres of mountains, forests, fields, and streams as well as a comprehensive suite of resort amenities and services. Amenities unique to the Sporting Club itself include a Snead Gold Golf Course designed by Tom Fazio, a members’ lodge with gourmet dining and pro-shops, an equestrian center, a sports complex with a pool, 15 tennis courts, rock climbing, and fitness center. This master planned community also offers access to over 50 recreational activities including fishing, skiing, hiking, and skeet shooting. Sales at Greenbrier began in 2000. Of the 500 home lots, 390 lots have been sold to date. Lot prices range from $395,000 to $1.6 million. Given Greenbrier’s distance from major feeder markets, it is almost entirely a second home and recreational home community. Approximately 98% of the homes are used as non-primary residences by mostly family buyers. While buyers have come from all over the United States and the world, the majority come from major metropolitan markets in the eastern United States. This includes metropolitan areas within a 4-hour driving distance such as the Charlotte, Columbus, and Washington, D.C. metropolitan areas. See also Appendix A.2, The Greenbrier Sporting Club, White Sulphur Springs, West Virginia.

Santa Lucia Preserve

The Santa Lucia Preserve is located 1 hour from the South Bay Area (San Jose and surrounding communities of Silicon Valley) of California. This is a high-end community located close to the Pacific Ocean in Monterey, California. Given the proximity to these major job centers, Santa Lucia has attracted a buyer profile that is nearly 50% primary homeowners including singles, families and retirees. Santa Lucia Preserve features 300 units on over 20,000 acres in the Carmel Valley. The Preserve is 2 hours south of San Francisco, and has attracted 50% second-home users. Of the 50% primary homeowners, about half are empty nesters, and the community has not generated any school-age children. The lack of family-aged primary homeowners has been driven in large part by prices that far exceed the local market, with lot sales starting at over $1 million. Owners tend to spend prolonged periods (between 6 to 12 months) at the Preserve, and as such, these owners generate a considerable level of expenditures in the surrounding community. See also Appendix A.3, The Santa Lucia Preserve, Carmel, California.

Bay Creek Resort

Bay Creek Resort serves the Washington, DC second home market and is located 3 to 4 hours from DC. 80% of the buyers are second home users, 90% of whom drive to Bay Creek. Most owners use the property for weekends and some for extended summer vacations. Of the 20% primary homeowners, given the distance to employment, 80% are fully retired. Although 700 lots have been sold as of 2010, only 10 children are enrolled in the local public schools. The community features an 18-hole golf course and



marina facility. See also Appendix A.4, Bay Creek Resort and Club, Cape Charles, Virginia.

The Peninsula on Indian River Bay

An example that is particularly pertinent to CPD is The Peninsula on Indian River Bay in Millsboro, Delaware. This, much like CPD, is located 2 hours from a major metropolitan area. The Peninsula is 2 hours from Washington, D.C., Baltimore, and Philadelphia. This community is comprised of 80% second home part-time homeowners, with 90% living within driving distance, and 20% retirees and empty-nesters that use the residence as a primary home. Of 360 units sold to date, only 5 are full-time family-aged households, all of which send their children to private schools. The average household income of Peninsula residents is over $200,000. See also Appendix A.5, The Peninsula, Millsboro, Delaware.

Chapin Estate

Chapin Estate is a large scale second home community in the region that includes many amenities. This community is located in a rural area of Sullivan County, New York. This is a lake-oriented Adirondack-style second home community within a 2-hour drive of Manhattan. Chapin Estate occupies a large bucolic tract of wooded hills with stunning views of two lakes. Woodstone Lakes Development, LLC is developing this property, and sales began in 2001. Of the 175 lots released in Phase 1, 140 have sold at an average sales pace of 22 lots per year. Chapin Estate lots are sized between 5 and 11 acres, and are priced between $155,000 and $1.3 million. Amenities on site include a clubhouse (under construction) with an indoor pool, kayaks, canoes, motor boats, a fitness center, tennis, spa, movie room, and concierge service for members. There is direct lake access available and several lots have private lake access. One-third of the buyers to date have come from northern New Jersey, another third from the boroughs of New York City and from Westchester County, and an additional third from areas outside of the New York Metropolitan Area. Of the buyers who emanated from the New York Metropolitan area (66% of total), 90% use their home as a drive-to weekend retreat. Most of the non-local buyers, the sponsor of the project reports, use their homes during the summer season. This distribution has remained fairly constant throughout the life of this case study project.15 See also Appendix A.6, Chapin Estate, Bethel, New York.

Crystal Springs

Crystal Springs is a 2,500-unit second home/resort-oriented community located in the highlands of Passaic County, New Jersey. This community has a comprehensive amenity package including golf. However, the community is older – home sales began in 1990 – and is resort-oriented. The execution of the built product offering here is not of the highest quality. However, Crystal Springs shows the potential depth of market

15 From direct interview with The Chapin Estate



demand for a new second home product within a planned community in the New York Metropolitan Area. Absorption here reached over 220 units in 2007 when single-family, condominium, and townhome products were selling concurrently.16 Similar to the Unnamed Poconos project discussed below, the trend of low turnover has also been demonstrated at Crystal Springs. Since opening in 1990, according to information from the exclusive broker on site, Crystal Springs has seen little to no turnover in most of their product lines. Even after 20 years, the vast majority of residents are second homeowners who purchased their properties when the project was first developed. As many homeowners choose to maintain their second homes for long periods of time, there is a tendency to believe that many may make this their primary residence upon retirement. However, this is not necessarily true. After 20 years, full-time retirees accounted for only 7% of the total homeowners at this case study community. Yet, a larger proportion kept their second home once they reached retirement age but sold their primary residence (typically in New York City) to purchase another home in a warm weather climate where they spend at least half of the year. See also Appendix A.7, Crystal Springs Resort, Hardyston, New Jersey.

Unnamed Poconos Master Planned Community

As discussed in Section 4.5, Long-Term Demand above, RCLCO also considered the analysis completed by Geoffrey Godbey and Malcolm Bevins for the Journal of Travel Research, which studies residency patterns at an unnamed Poconos master-planned community 20 years after the completion of development. Among homeowners at the case study community in the Poconos, the average age of the head of the household was 49.8.This shows the proclivity of residents to maintain their second home purchase as they age. The survey and interviews with sales staff and developers showed that most buyers at the inception of the community were younger families with school-age children but that many will continue to occupy their homes well after their children have departed their households. The survey results of this community’s current and past homeowners reveal that turnover of the housing units is much rarer than in traditional (non second-home) communities. After 20 years, on average only 1.2% (approximately 45) of the 3,709 properties at the case study community were sold each year. This is much lower than typical suburban residential communities and is a testament to the fact that many second home owners choose to hold on to their property for at least a generation, if not longer.

6.3 Case Studies Conclusions and Indications

Information from the case studies demonstrates that a well-executed, golf course-oriented, master planned community, located within 2 to 3 hours drive of a major metropolitan area (close enough to drive, but too far to be attractive for commuting), will

16 From direct interview with Crystal Springs



overwhelmingly attract buyers who use their homes as weekend retreats or seasonal homes, or for retirement. During the projected approximate 8-year marketing period, the usage patterns of CPD will change somewhat before stabilizing at build-out. For instance, it is expected that during the initial years of sales the family vacation home segment would be higher while the local primary and full-time retiree segments would be lower than at build-out. The case studies indicate that as a project matures it becomes a more appealing option to local buyers (though it is still emphasized that the local market lacks the depth of upper income earners to purchase a significant number of homes in the community). The case studies also indicate that original empty nester buyers will likely make Pine Plains their full-time summer residence over time. Due to income tax considerations, it is expected that even “full time” retirees will spend less than 50% of the year in Pine Plains, spending the rest of the year at another residence or traveling, usually to a warm climate and more favorable income tax environment such as Florida. The case studies also show significant positive impact on the local host communities, without the requirements of significant services such as schooling. In addition to low pupil generation, the case studies communities have resulted in the generation of significant annual property tax revenues as well as new jobs during and after construction. The case studies also demonstrate increased local retail activity by master planned community residents, which in turn has stimulated hamlet and local economy rejuvenation, including new retail and service business development. While the local shopping opportunities in the immediate vicinity of most of the case studies do not offer the full range of businesses that commercial shopping centers might, residents still conducted 30 to 60% of their shopping locally while in residence. Local shopping activity moved upward in that range as new businesses were created, responding to the tastes and demands of the affluent resident group for specialty retail, local agricultural and artisan products, upscale restaurants, specialty supplies associated with their temporary and tourist-like residences, related personal service purchases and other business reflecting the special local flavor of the community which was part of the vacation home buyers’ decision to choose the locale. Even a community like Palmetto Bluffs, with easy access to Hilton Head, sees 60% of the homeowners’ spending in Bluffton while in residence. This was a factor in stimulating a Hamlet historic and commercial revitalization effort. Clearly, daily basics like groceries and tourist oriented specialty purchasing will be sought in the nearest location and is made a part of the vacation experience. Additionally, evident in the case studies is that residents exhibit a high level of involvement (even if only during vacation or seasonal periods) in local community organizations, libraries, churches, and others. For example, The Peninsula is the largest sponsor of a local jazz festival. Residents at Bay Creek participate in fundraisers for the local schools, while residents of Palmetto Bluffs donated over $40,000 to local charities in the year surveyed. Based upon the case studies, it was documented that because the residents were on “vacation schedules” there was time available and inclination for these activities as part of their vacation experience. Churches indicated a proportionally higher level of attendance among vacation residents than the community at large. Given the vacation residents’ income characteristics and vacation frame of mind, their financial



participation also was significant and of real importance to the local institutions as well as the vitality of local municipalities. 7. Golf Market Analysis The golf club is a significant feature of the CPD master planned vacation home community. The new golf course will be constructed during the initial phase of site development. In this section, the short and long-term market demand for golf as an integral amenity is analyzed.

7.1 Golf as a Community Amenity

While many private courses are struggling or have closed, the value of a private golf course as a community-serving amenity in a high-end second home community remains high. Interest in the most relevant local private golf clubs also remains substantial (see subsection 7.5 Long-Term Golf Viability). Further, given the character of the anticipated home buyers, a high-caliber golf course will be expected. In fact, there are a variety of likely benefits and logical reasons to implement a private golf course as a community amenity at CPD:

A significant portion (estimated at 20% to 30%) of the high-end market still considers golf a required community amenity.

Views over golf courses command a significant value premium among golfers and non-golfers alike.

Golf courses make the most economic sense in true three-season (where seven to eight months of play can be achieved) or four-season environments. In the case of CPD, the course will most likely be played from April to November (eight months) and may be used for Nordic skiing during the winter months.

Golf courses are also highly appropriate amenities for drive-to (weekend occupancy) family communities in which golfing can provide a quality family experience.

Golf is a lifetime sport which can bridge generations, thereby supporting the long-term family and inter-generational future profile of CPD.

In summary, it is RCLCO’s opinion that a private golfing club is a highly desirable and appropriate CPD community amenity that will find a willing marketplace. Most importantly, the golf course will drive interest in and broaden CPD’s appeal. This will help differentiate and add value to the vacation residential program.

7.2 Anticipated Golf Membership Profile

The industry standard is that to be self-sustaining, a private golf club needs to attract 250 to 300 dues-paying members. RCLCO’s analysis, discussed in detail below, demonstrates the ability to generate at least this level of membership within an approximate 8-year period of time.



RCLCO’s statistical demand analysis (see subsection 7.3, CPD Resident Golf Membership Absorption) and research of other local golf courses (see subsection 7.5, Long-Term Golf Viability), indicates that the golf course membership at CPD will likely be sold to CPD residents, non-residents and a small number of corporate memberships.

7.3 CPD Resident Golf Membership Absorption

The following summarizes RCLCO’s demand analyses estimating the potential absorption timeframe for CPD golf memberships. The probable level of sales activity from the first two categories above, totaling 85% of total demand, was quantified based on a statistical model evaluating the prevailing trends in golf course participation at comparable second home communities (the number of home buyers who also purchase memberships) and the private golf participation rates of other affluent households living in or having a second home in close proximity to the subject site. High-end golf course communities in the United States typically achieve a golf participation rate ranging between 15% and 50%. To be conservative, RCLCO has assumed a 23% participation rate for CPD, realizing that the true patronage may in fact be significantly higher. 23% is the participation rate for all high-income households identified in the most recent National Golf Foundation survey,17 and while participation at CPD will likely be higher than this, it represents a conservative approach to estimating demand for golf at CPD. Under this scenario, the analysis projects that 147 CPD residents will join the club over a period of approximately 8 years. See Figure 7.1, Projected CPD Resident Membership Absorption.

Figure 7.1 Projected CPD Resident Membership Absorption Year 1 2 3 4 5 6 7 8 Total

Residential Absorption 83 83 83 83 83 83 83 64 645Occupied Units 83 166 249 332 415 498 581 645 645

Golf Participation Rate 23% 23% 23% 23% 23% 23% 23% 23%

New Resident Golf Members 19 19 19 19 19 19 19 14 147Cumulative Resident Golf Members 19 38 57 76 95 114 133 147 147


7.4 Non-Resident Golf Membership

RCLCO has also prepared an estimate of achievable non-resident memberships based on the number of high-income households in the area, as implied by the number of homes worth over $500,000, multiplied by the golf participation rate for households earning more than $75,000. This is further multiplied by the percentage of those households likely to be serious golfers based on statistics provided by the National Golf Foundation. See Figure 7.2, Projected Non-Resident Membership Absorption.

17 National Golf Foundation, 2004.



Figure 7.2 Projected Non-Resident Membership Absorption

Year 1 2 3 4 5 6 7 8

Homes W orth $500,000+ in 20-Mile Radius1 3,900 3,925 3,950 3,975 4,000 4,025 4,050 4,075Golf Participation Rate2 23% 23% 23% 23% 23% 23% 23% 23%

Percent Consider High-End Private Golf2 42% 42% 42% 42% 42% 42% 42% 42%Total Demand for High-End Golf 380 380 380 380 390 390 390 390

Cummulative Market Pentration 5% 11% 16% 21% 26% 31% 36% 41%Number of Annual Non-Resident Members 20 20 20 20 20 20 20 20

Cummulative Non-Resident Members 20 40 60 80 100 120 140 1601. Claritas, Inc.2. National Golf Foundation, Golf Participation in the U.S. 2009 Note: Numbers have been rounded. Some of the existing households may already be members of existing clubs, although there are no true high-end clubs in northern Dutchess County. There is evidence of existing unmet demand for high-end private golf in the region, as indicated by the recent success of the nearest high-end golf course, Bulls Bridge Golf Club in South Kent, Connecticut, which has managed to sell 150 memberships in only 6 years. This success is despite the fact that it is not part of a high-end second home community, and despite opening in 2004 and being able to sell memberships through an economic contraction. Non-resident memberships at CPD will be offered as recallable memberships, which is a standard practice, so that future residents are guaranteed access to golf in the event of over subscription. RCLCO has calculated that CPD will capture roughly 40% of this unmet demand for non-resident memberships over the approximate 8-year marketing period, resulting in roughly 20 non-resident sales per year. Some portion of the other unmet demand for private golf may potentially be absorbed by the planned Silo Ridge project, which is the only course in the area that will compete in this market. There is sufficient unmet local demand for high-end private golf to support both planned clubs. This analysis demonstrates an ability to sell 160 non-resident memberships over an approximate 8-year period. See Figure 7.3, Combined CPD Resident and Non-Resident Membership Absorption.

Figure 7.3 Combined CPD Resident and Non-Resident Membership Absorption

Year 1 2 3 4 5 6 7 8 TotalResidential Absorption 83 83 83 83 83 83 83 64 645

Occupied Units 83 166 249 332 415 498 581 645 645

Golf Participation Rate 23% 23% 23% 23% 23% 23% 23% 23%

New Resident Golf Members 19 19 19 19 19 19 19 14 147Cumulative Resident Golf Members 19 38 57 76 95 114 133 147 147

Recallable Non-Resident Members 20 20 20 20 20 20 20 20 160Cummulative Non-Resident Golf Members 20 40 60 80 100 120 140 160 160

Total Members 39 39 39 39 39 39 39 34 307Cumulative Total Members 39 78 117 156 195 234 273 307 307




The residential demand analysis demonstrates an approximate 8-year time period to project absorption and full stabilization. By year 8, the golf club is expected to have 307 resident and non-resident members, and to be generally in a state of stabilization. Above and beyond the above elements of quantifiable demand are corporate memberships and non-local members. While it is not possible to forecast the precise level of activity, it is likely that corporate memberships from New York Metropolitan Area companies with employees that live or have weekend homes in the area will be captured but the total contribution to membership demand by corporations is likely to be minimal.

7.5 Long-Term Golf Viability

When the Project reaches stabilization as discussed above, the long-term viability of the course should not present a challenge. There are several well established and stable private golf courses in the local market as shown in Figure 7.4, Area Golf Courses. Most of these have no residential component, have still been in successful operation for a long period of time, and appear fiscally healthy. RCLCO’s national experience with private golf course developments suggests that those with a strong residential component attached to the community, as is proposed at CPD, have the highest likelihood of long-term success since the residential component provides a built-in market for the golf course.



Figure 7.4 Area Golf Courses

1

2

3

4

567

8

9

10

11

MapKey

Name Type Initation Fee/ Dues Members/ Member Cap

1 Columbia Golf & CC Equity $0$3,200

350500

2 Red Hook Golf Club Semi- Private $0$3,892

225N/A

3 Wiltwyck Golf Club Equity $3,600$5,535

200300

4 Bulls Bridge Equity $130,000$15,000

150350

5 Torrington Golf Club Non-Equity $2,500$6,000

300350

6 Silo Ridge Under Re-Construction

7 Dinsmore & McCann GCs Public $26 Green Fees

8 Casperkill GC Public $45 Green Fees

9 James Baird State Park Public $29 Green Fees

10 Beekman CC Public $44 Green Fees

11 Links at Union Vale Public $73 Green Fees



8. Critical Assumptions and General Limiting Conditions

8.1 Critical Assumptions

The conclusions and recommendations presented herein are based on RCLCO’s analysis of the information available from RCLCO sources and from the Project Sponsor as of the date of this Study. RCLCO assumes that the information is correct, complete, and reliable. RCLCO conclusions and recommendations are based on certain assumptions about the future performance of the global, national, and/or local economy and real estate market, and on other factors similarly outside the control of RCLCO and/or the Project Sponsor. To the best of RCLCO’s ability, RCLCO analyzed trends and information available to draw conclusions and make appropriate recommendations. However, given the fluid and dynamic nature of the economy and real estate markets, it is critical to monitor the economy and markets continuously. It is also important to revisit the aforementioned conclusions and recommendations periodically to ensure that they stand the test of time. RCLCO assumes that, in the future, the economy and real estate markets will grow at a stable and moderate rate. However, history tells us that stable and moderate growth patterns are not sustainable over extended periods of time. Indeed, RCLCO finds that the economy is cyclical and that the real estate markets are typically highly sensitive to business cycles. RCLCO’s analysis does not take into account the potential impact of major economic “shocks” on the national and/or local economy and does not account for the potential benefits from a major economic “boom.” Similarly, the analysis does not necessarily reflect the residual impact on the real estate market and the competitive environment of such a shock or boom. The future is always difficult to predict, particularly given changing consumer and market psychology. Therefore, RCLCO recommends close monitoring of the economy and the marketplace. The Project and investment economics should be “stress tested” to ensure that potential fluctuations in the economy and real estate market conditions will not cause failure. In addition, RCLCO assumes that economic, employment, and household growth will occur more or less in accordance with current expectations, along with other forecasts of trends and demographic and economic patterns. Along these lines, RCLCO is not taking into account any major shifts in the level of consumer confidence; in the cost of development and construction; in tax laws (i.e., stable property and income tax rates, deductibility of mortgage interest, and so forth); or in the availability and/or cost of capital and mortgage financing for real estate developers, owners, and buyers. Should any of the above change, this analysis should probably be updated, with the conclusions and recommendations summarized herein reviewed accordingly (and possibly revised). RCLCO also assumes that competitive projects will be developed as planned (active and future) and that a reasonable stream of supply offerings will satisfy real estate demand. Finally, RCLCO assumes that major public works projects will occur and are completed as planned.



8.2 General Limiting Conditions

Reasonable efforts have been made to ensure that the data contained in this Study reflect accurate and timely information and are believed to be reliable. This Study is based on estimates, assumptions, and other information developed by RCLCO from its independent research effort, general knowledge of the industry, and consultations with the Project Sponsor and its representatives. No responsibility is assumed for inaccuracies in reporting by the Project Sponsor, its agent, and representatives or in any other data source used in preparing or presenting this Study. This Study is based on information that to RCLCO’s knowledge was current as of the date of this Study, and RCLCO has not undertaken any update of its research effort since such date. This Study may contain prospective financial information, estimates, or opinions that represent RCLCO’s view of reasonable expectations at a particular time, but such information, estimates, or opinions are not offered as predictions or assurances that a particular level of income or profit will be achieved, that particular events will occur, or that a particular price will be offered or accepted. Actual results achieved during the period covered by RCLCO’s prospective financial analysis may vary from those described in this Study, and the variations may be material. Therefore, no warranty or representation is made by RCLCO that any of the projected values or results contained in this Study will be achieved. Possession of this Study does not carry with it the right of publication thereof or to use the name of "Robert Charles Lesser & Co." or "RCLCO" in any manner without first obtaining the prior written consent of RCLCO. No abstracting, excerpting, or summarization of this Study may be made without first obtaining the prior written consent of RCLCO. This Study is not to be used in conjunction with any public or private offering of securities or other similar purpose where it may be relied upon to any degree by any person other than the Project Sponsor (RCLCO’s client) without first obtaining the prior written consent of RCLCO. This Study may not be used for any purpose other than that for which it is prepared or for which prior written consent has first been obtained from RCLCO.



APPENDICES

A. Case Studies Profiles

Figure A.1 Palmetto Bluff, Bluffton, South Carolina Figure A.2 The Greenbrier Sporting Club, White Sulphur Springs, West Virginia Figure A.3 The Santa Lucia Preserve, Carmel, California Figure A.4 Bay Creek Resort and Club, Cape Charles, Virginia Figure A.5 The Peninsula, Millsboro, Delaware Figure A.6 Chapin Estate, Bethel, New York Figure A.7 Crystal Springs Resort, Hardyston, New Jersey



Figure A.1 Palmetto Bluff, Bluffton, South Carolina



Figure A.2 The Greenbrier Sporting Club, White Sulphur Springs, West Virginia



Figure A.3 The Santa Lucia Preserve, Carmel, California



Figure A.4 Bay Creek Resort and Club, Cape Charles, Virginia



Figure A.5 The Peninsula, Millsboro, Delaware



Figure A.6 Chapin Estate, Bethel, New York



Figure A.7 Crystal Springs Resort, Hardyston, New Jersey

appendix 6 market feasibility · pdf fileappendix 6 market feasibility study ... case studies...

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