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1 CVS Plaza – Investment Analysis

February 24, 2013

Table of Contents

1) Executive Summary ................................................. 2

2) Property Description ................................................ 3

3) Market Overview ..................................................... 6

4) Marketability ........................................................... 9

5) Rental Comparables ............................................... 11

6) Sale Comparables .................................................. 13

7) Financial Analysis .................................................. 16

8) Summary …………………………………………...18

9) Refernces ………………………………….……… 20

10) Exhibits……………………………………….….. 21

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1) Executive Summary The subject property, “CVS Plaza”, is located at 2411 SW 147th Avenue in Miami Florida, more specifically in Kendall - a city in west-central Miami-Dade County. The submarket as defined by “CoStar” is “Miami Airport” which is about 16 miles away. With CVS Plaza being located at the intersection of SW 147th Avenue and Coral Way, the site prospers from going-home traffic. In the future the location will benefit from enhanced traffic as soon as the extension of SW 147th Avenue connecting to SW 8th Street is completed. The expected completion date of the extension, which is located about one mile from the property, is 2013. CVS Plaza is a retail strip center that offers a gross leasable area of 18,214 square feet. Within the center the following stores are located: Bottega Grill (Restaurant), New Horizons Preschool, the Pack and Ship Store, Olga’s Liquor and Kendall South Medical Center. The center is shadow anchored by a CVS pharmacy which is not part of the sale and is separately owned. In summation with the 10,990 square feet used by CVS pharmacy the total gross leasable area of the shopping center is 29,204 square feet. The retail complex is currently 100% leased and sits on a +/- 4.05 acre land area with an additional 197 parking spaces on 6.74 acres. CVS Plaza was built in 2004 and is offered without any existing financing. The property falls under a zoning restriction called “6200 – Arterial Business”, a flood zone location of “AH, Elevation 8, Map No. 1206500165” and topography rated at “general level and road grade”. (Offering Memorandum, The Shopping Center Group) The analysis of the property begins with an overview of the demographics, spending power and market conditions of the location’s sub-market, followed by a description of the marketability factors including potential investors for whom the property might be of interest. To evaluate the value and current asking price of the property, an analysis of rent comparables and sales comparables is used to identify whether the property is priced accurately according to market conditions. The financial analysis includes “Worst Case”, “Best Case”, and “Realistic Case” scenarios to evaluate potential financing terms, projected cash flows, and before-tax and after-tax internal rates of return. The ultimate goal for an investment of this type is to maximize cash flows which convert to income for the investor. Our analysis found that the maximum cash flows for the property are achieved with a higher initial outlay of cash. Therefore this property is optimal for investors with a large amount of cash on hand that require little or no leverage. It is for this reason that our group ultimately decided against the purchase of this property.

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2) Property Description

Address: 2411 SW 147th Ave, Miami, FL 33175

Offering GLA: 18,214 Square feet

Total GLA: 26,204 Square feet (incl. CVS)

Year Built: 2004

Land Area: +/- 4.05 Acres

Parking Count: 197 Spaces

Pylon Signage: Two pylon signs

Leased: 100%

Zoning: 6200-Arterial Business

Topography: Road Grade

Flood Zone: AH, Elevation 8, Map No. 1206500165

Asking Price: $4,467,000

Source: Offering Memorandum

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Store Targe t Group (Age )

Kendall South Medical Centerall ages New Horizons II Preschool 3 months to 5 years Pack and Ship Store 12 and older Olga's Liquors 21 and older Bottega Grill all ages

Position of subject property within patterns of urban growth By analyzing the drive times map corresponding to 1, 3 and 5 minutes and the map with trade areas around 1, 3 and 5 miles from the subject property, it has been found that the people living inside the 1 mile ring that need to drive up to 3 minutes to the property are the most likely frequent customers of CVS Plaza. People living within the 1 mile and 3 mile rings that need to drive 5 minutes to the property are also customers; though with less frequency. Therefore, only the demand and supply factors from these two rings are analyzed. The 5 mile ring is not relevant for the analysis since it will take more than 5 minutes to drive to the property. Moreover, barriers such as the Palmetto and Dolphin Expressways, as well as the presence of a considerable number of retail centers in the area, makes it less likely that people beyond the limit of the 3 mile ring make frequent visits to CVS Plaza. Demographics The location of CVS Plaza is within a dense neighborhood dominated by residential housing and a mix of retail centers offering mostly everyday goods (neighborhood centers, retail strip centers). To analyze and forecast the demographic figures necessary for the investment analysis, data from STDB Online was obtained and the area clustered in three radiuses: 1-mile radius, 3- mile radius and 5-mile radius. Assuming that the majority of the demand for the subject property will come from the people that are living in close proximity the focus of the analysis will be laid on the 1- and 3- mile radius. A more specific focus, concerning the users of the CVS plaza, can be identified by examining the stores’ target groups. The following demographic analysis is based on the above assumptions concerning the distance and age of possible users. Generally, it is important to observe the population growth over the last year and upcoming years. Within the 1- and 3- mile radius around the subject property the population grew and is also estimated to keep growing. A growing population indicates that the possible future users are not declining. It has to be mentioned that the growth is moderate and other areas in Miami might exceed that growth. Concerning the previously described target groups, the growth of the most important age clusters has to be examined (Table 1: 1 mile radius; Table 2: 3 mile radius). Even though the focus should be on the age clusters surrounded by the red outline the other age groups are somewhat part of the target group.

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Within the focus area two important effects can be observed. For one the target population is growing constantly and two the greatest concentration in this area concerning the population’s age is within the target group for the CVS Plaza stores (see below). (STDB Online, 2013)

Another important factor concerning the demand side for the CVS Plaza is the dollar amount that people are willing to spend on certain services. In the case of the subject property the existing stores fall under the following categories: (STDB Online, 2013)

Tenant Product/Service Offering Description

Bottega Grill Food away from home

Family-friendly restaurant serving cuisine with an international flare. With another location in Downtown Miami, the restaurant has growing brand recognition.

New Horizons II Preschool

Child Care

Nursery/daycare center for children ages 3 months to 5 years. This is the school's second location and it also has a private elementary school. The school is part of Florida's Voluntary Pre-K (VPK) Program.

The Pack and Ship Store

Moving/Storage/Freight Express

Off-site shipping center for UPS, FedEx, and the US Post Office.

New Horizons II Preschool

Child Care

Annex of Suite 2

Olga's Liquors Alcoholic Beverages

Local liquor store serving local residents aged 21 and over.

Kendall South Medical Center

Health Services

Independently owned clinical trial center for medical care for chronic diseases and conditions.

CVS Pharmacy Health Services (Separately Owned)

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The examination of the spending power in regards to the supplied goods at the retail center shows that the amount of money people are spending within these specific categories is increasing, indicating that there will be a steady supply of customers demanding the goods offered at CVS Plaza (see table below): (STDB Online, 2013)

Radius 1 Mile 3 Mile 5 Mile 1 Mile 3 Mile 5 Mile

Total Specified Consumer Spending ($)286,7471,621,8163,525,440 320,9431,798,7853,919,287 Food Away from Home: Total Food Away from Home 23,380 132,313 290,258 26,168146,752 322,684 Alcoholic Beverages: Total Alcoholic Beverages 4,279 24,141 53,441 4,789 26,776 59,411 Health Care: Total Health 11,532 66,309 143,135 12,907 73,545 159,125 Education and Day Care: Total Education and Day Care 22,001 119,313 257,718 24,625 132,330 286,512

Day Care 3,323 17,005 36,258 3,720 18,860 40,308

20162011

3) Market Overview a) Investment Sub-Market - The Miami Airport Retail Submarket Miami-Dade County has 18 sub-markets. In terms of general retail statistics, the two largest sub-markets are Miami (11,175,534 GLA) and Miami Beach (6,095,911 GLA), while Miami Airport is the 8th sub-market with 3,337,220 GLA, just after Downtown Miami (4,117,497 GLA). CVS Plaza corresponds to the strip center type, which for statistical purposes is grouped within the category of shopping centers. For the Miami- Airport sub-market, the year-end 2012 Costar Retail Report for the Miami-Dade County Retail Market shows an existing inventory for the shopping centers of 3,337,220 SF of RBA with a vacancy rate of 0.7%, a net absorption of 60,436 SF and an average quoted rate of $37.38. (CoStar Group, 2013) b) Identification of supply and demand factors for the market area Demand Factors The retail market demand factors analyzed are population, income, number of households, consumer expenditures, the number of businesses and employees by economic activity. Also, the Market Potential Index (MPI) and the leakage/surplus factor from STDB are used to evaluate for the retail activities: (1) the relative probability of certain consumer behavior/purchasing patterns relative to the entire US market and (2) the retail opportunity (+100 = total surplus and -100 = total leakage). (STDBOnline, 2013)

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1 mile radius: In 2011 the population was 22,143 and there were 6,195 households that had an average income of $87,006 and a median disposable income of $57,824, with an average consumer expending of $46,287. There are 98 retail businesses and 3,107 employees; with the majority of them related to eating & drinking places; food stores; and miscellaneous retail (CoStar Group, 2013). Additionally, the MPI is greater than the USA average for most product/consumer behaviors; favoring new retail activity. Nevertheless, the leakage/surplus factor (+22.1) suggests that part of retail sales are already being drawn from outside the area; implying a limited trade opportunity outside this area. (STDB Online, 2013) 3 mile radius: The 2011 population was 143,919 and the number of households was 43,143, which had an average income of $70,393 and median disposable income of $50,295; and demonstrate a consumer expending of $37,592. In the area are 525 retail businesses and there are people 4,105 working in retail; with the majority of them related to eating & drinking places; food stores; and miscellaneous retail (CoStar Group, 2013). The result is favorable for new retail activity since the MPI is superior to the USA average. However, the leakage/surplus factor (+24.4) also suggests that sales are already being drawn from outside of the 3 mile trade area and there is not much trade opportunity outside this area. (STDB Online, 2013) Supply Factors The supply factors considered for the analysis are the following: existing inventory, the leasing activity absorption, vacancy and rental rates, and available space. The values of these parameters were retrieved from the Costar website and the emphasis is given to the 1 and 3 mile rings. Additionally, the results of the forecast for vacancy rate and the results of the potential available space of Costar are also presented. Cap rate information from Costar is only available for the 3 mile ring. 1 mile radius: As of 2012.4Q, there is an existing inventory of 17 buildings (404,159 SF of RBA) for the shopping center category; with absorption of 2,700 SF and a vacancy rate of 5.4%. The Costar forecast for the area indicated a vacancy rate of 5% for the beginning of 2015.4Q. Meanwhile in 2012, the average rental rates have decreased from an average level of $25.07/nnn to a level of $18.96. Also, in this area, the total available space represents 8.9% of the total RBA and the potential deliveries are 21,668 SF (immediately), 3,140 SF (1 -3 months) and, 688 SF (TBD). (CoStar Group, 2013) 3 mile radius: For the shopping centers category in 2012.4Q the existing inventory is 153 buildings (3,543,382 SF of RBA) with a vacancy rate of 4.10%. The Costar forecast indicates a vacancy rate of just above 1% for the beginning of 2015.4Q. Even though the gross absorption is positive (10,900 SF), the net absorption is negative (-9,665 SF). Under these circumstances, the average rental rate is $27.41/nnn. The total available space is 4.9% of the RBA and the potential deliveries are 38,302SF (currently) and 4,050 SF (TBD). Further, Costar indicates that the cap rate in 2012.4Q is 7.8. (CoStar Group, 2013)

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(CoStar Group, 2013)

(CoStar Group, 2013)

(CoStar Group, 2013) c) Location of Competitive Supply There are currently 192 multi-family properties within 5 miles of the subject property. Two of the closest multi-family locations within walking distance of the location total 266 units. Additionally, there are 3 proposed or under construction multi-family properties within 5 miles of the CVS Plaza which will add an additional 653 units. This should provide ample traffic to feed high number of existing retail sites within immediate proximity. Traffic Counts on nearby Coral Way are modest in comparison to this sites’ competitors at 13,850 cars per day. There are currently 471 retail sites within a 5 mile radius of CVS Plaza along with another 3 locations proposed or under construction, the closest of which is expected to be no more than 3 miles away from the subject property. Given the low number of proposed sites in the area, competition would seem to come mostly from existing sites rather than new ones. (CoStar Group, 2013)

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The Publix across the street at 19460 SW 26th Street is easily accessible from CVS Plaza and vice-versa by crossing over 26th Street via 147th Ave. This Publix alone should draw substantial traffic to the nearby locations. The below maps, which were obtained from the “CoStar” website, provide an overview of CVS pharmacy stores and shopping centers within a 1, 3, & 5 mile radius from the subject property (see below):

Locations of Competing CVS Stores Location of Competing Shopping Centers 4) Marketability a) Investment Sub-Market Conditions In the 1-mile radius surrounding CVS Plaza, there are 17 similar shopping centers. Local shopping centers of this type benefit from having a large anchor, like CVS, to help draw customers. These neighborhood centers are typically centers of convenience. Consumers will most likely only visit the center within a 5-minute drive, unless there is a specific reason to travel outside of the immediate area. (CoStar Group, 2013) b) Sub-Market End-Users and Investors Potential investors in shopping centers of this type are larger public or private investors. Public and private REITS, high-net worth individuals, families or limited partnerships could all have an interest in this type of property. The ideal investor will specialize in the local market as well as have knowledge of the acquisition and management of neighborhood retail centers. One such company is Kimco Realty, a public REIT headquartered in New Hyde Park, NY, with a portfolio of properties throughout the United States. Kimco specializes in the ownership and operation of neighborhood shopping centers. Kimco purchased $13.75 million of property in the Miami-Dade Airport sub-market in the past year.

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The investor’s main goal in investing in this type of property would be an income/cash- flow objective. The investor will benefit from the cash flows of the underlying asset in the form of base rent as well as percentage rent collected from the tenants, more specifically Olga’s Liquors which pays 6% above revenue of $238,000. Given the fact that this property is debt free, 100% leased, and the cash flow projections over the next ten years are stable with potential for growth, this center could make a valuable asset to an investment portfolio if acquired under terms that optimize cash flow. (CoStar Group, 2013) Should a private entity, such as a limited partnership, purchase the property, the cash flows will serve to increase the investor’s personal wealth. Should a public entity, such as a REIT, purchase the property, the cash flows from the underlying assets will be pooled together and sold to the public in the form of shares of stock. c) Demand and Price Analysis Recent similar properties in the Miami Airport submarket sold for an average price per square foot of $157.78 in 2012. The price per square foot for CVS Plaza is $245.25. Cap rates for retail properties in this submarket have been between 6-8% over the past five years, beginning in 2007. The average cap rate peaked at 7.8% in 2012. The time to sale in 2012 was 92 days. In the past five years, only five properties of a similar type have sold in the 7-mile radius surrounding CVS Plaza. This excludes data for 2009-2011 which was not available. (CoStar Group, 2013) Given this information, the price and cap rate for CVS Plaza are aggressive compared to the market. A closer look at comparable rent and sales data will prove helpful in determining whether CVS Plaza is indeed priced right for the market. (Offering Memorandum, The Shopping Center Group, 2103) d) Analysis of Competitive strengths and weaknesses - SWOT Analysis

Strengths Weaknesses Tenant base with local brand recognition Most leases expire in next 1-3 years with only one

renewal option CVS is a draw to center as well as adjacent Publix across the street

No vacancy - 100% leased

No debt

Opportunities Threats

Future planned extension of SW 147 th

Avenue should increase traffic

Many competitors in the area

Upcoming lease renewals provide opportunity to alter leases and add more favorable terms

Shopping centers of this type serve only immediate area

Medical Center has great deal of tenant improvement (TI), space currently cannot be used as anything other than a medical facility

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5) Rental Comparables The subject property was rated against five comparable properties with available rental space within the last year. Comparable properties are within a 2 mile radius of the subject property. The proximity of the properties was necessary in order to maintain similar demographics as the subject property. Our focus was specifically on retail centers that were similar in size and occupancy. The comparable rent analysis was carried out by using available data from the CoStar website.

(For a larger view of the table please see “Exhibits” at the end of the report)

Plaza Alegre Plaza Alegre is a thriving grocery-anchored shopping center located in the western portion of the rapidly-expanding Miami trade area. This neighborhood shopping center is occupied by a strong Publix. Additional tenants include Goodwill, Blockbuster and Wachovia Bank. Shoppes at Tamiami Featuring a stylish exterior with a Spanish tile roof, Tamiami Trail Shops attracts a growing consumer base from the densely-populated West Miami market with over 120,800 residents within 3 miles, and is located on Southwest 8th Street, with daily traffic counts exceeding 83,000 vehicles daily. For more information please see Comparable Sales Summary. Sabina Plaza Sabina Plaza is a property that is close to the same size as the subject property at 50,000 sq/ft of gross leasable area. The property is the newest of the properties compared, built in 2007. The property does have a higher vacancy rate compared to others but one of the lowest base rents. There is a Walgreens and a Bank of America outparcel on the property that help generate traffic. With the age of the property and the exterior architecture, it is one of the more attractive properties we compared. Birds Village Plaza This property is located at 14707 SW 42nd Street and offers both a CVS, Subway, Wendy’s and PigglyWiggly. Just 1.3 miles down 147th Street and with residential housing within view, this site represents significant competition for CVS Plaza.

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However, the numerous multi and single family properties within easy walking distance and view of CVS Plaza located directly across 147th Street and adjacent to Tree Island Park can more easily access CVS Plaza, which must be passed on 147th Street in order to get to the Publix at W 26th Street. This location benefits from approximately 20,000 cars per day along SW 42nd Street. Birds Square Plaza This property is located at 14505-14657 Bird Road. It offers a Winn Dixie, IHOP, and a local restaurant in it’s over 80,000 sqft. of gross leasable area. At only 1.4 miles from the CVS Plaza, it represents significant competition for the subject property. Again, there is a high density of residential housing in close proximity and within walking distance to the site. Also, traffic counts outpace the subject property by approximately 6,000 vehicles per day and 10,000 vehicles per day along Bird Road and SW 147 St. Summary Of the above comparable properties, the most highly correlated properties in terms of traffic, similarity of surrounding retail sites and anchor tenants are listed below in order of correlation: 1. Plaza Alegre 2. Shoppes at Tamiami 3. Bird Village Plaza Given the rental rate per square foot of these properties, the subject property seems to be accurately priced. The traffic locations for the subject property and the three correlated properties are ideal for an accurate comparison. An overview of where the properties are located within the two mile radius can be seen on the below map (Google Maps):

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6) Sale Comparables

The subject property “CVS Plaza” located at 2411 SW 147th Ave, Miami, Florida was rated against five comparable properties which were sold within the last year. In order to obtain similar properties, the trade area had to be widened to a seven mile range. The research on comparable sales in the closer neighborhood had shown that the sales activities in that area were not as extensive as they might have been in other areas in Miami. Therefore the focus regarding the comparable sales was laid on the similarity of center types, size and key tenants. The comparable sales analysis was carried out by using available data from the CoStar website. Even though other sources were extensively researched some key figures could not be obtained. Those numbers are marked with “N/A” which stands for “not available”.

(For a larger view of the table please see “Exhibits” at the end of the report)

Shoppes at Tamiami This retail center sold within 6 months of the subject property’s listing for sale making it an accurate comparable in terms of timing and proximity to the subject property. Additionally, both buildings were built within the same year. Having two national food and beverage anchor tenants (Bonefish Grill and Cold Stone Creamery) another similarity to CVS Plaza is that its anchor is a 5,214 square foot restaurant called “Bottega Grill”. Nevertheless, with nearly 50% more leasable space and an occupancy of 84%, representing over 10,000 more leased square footage than the subject property, the comparable sales price should not carry as heavy a weight in our analysis of the subject property’s most likely sale price. The preponderance of surrounding retail sites within less than a mile and on the same side of 8th Street as the CVS Plaza make the Shoppes at Tamiami’s market location close to that of the CVS property. Sabina Plaza Again, the timing of this sale makes this property an accurate comparable as does the distance from the subject property of only 1 mile. However, this property’s gross leasable area is over double the size of the CVS Plaza, meaning that the subject property’s sale price should not weigh heavily here. While the Dollar Tree is a solid national credit tenant the CVS at the subject property will attract a different type of patron with lower dollar value transactions. Given that there is a Walgreens on an adjacent property within easy walking distance of this site, there might be a similar amount of traffic and patron as the CVS pharmacy draws for the subject property.

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Kendall Shoppes This property was constructed 3 years after the subject property was built and is approximately 6 miles away. It also has a gross leasable square footage of approximately 9,000 above that of the subject property. Not only does this property have a CVS shopping center directly across on 157th Ave and a Chevron within walking distance but it is also in close proximity to a Home Depot. This might make it the closest comparable to the subject property. However, its largest tenant is not nearly as noteworthy as the one of the subject property. Additionally, it has to be considered that the percent leased, NOI and thus the cap rates are unknown which are important variables for our analysis. Kendall Plaza While the property has the closest square footage to the subject, it is also 7 miles away and in a less desirable area than the CVS property. The retail sites within close proximity and does not have any noteworthy anchor tenants that would draw traffic, nor does the site itself, meaning that its sale price will not be highly correlated to that of the subject property. Kings Meadow Convenience Center This site has just under double the gross leasable area of the subject property and was built 17 years earlier. Information on its NOI, base rent and anchor tenant leased square footage are unavailable. Additionally, there are currently no locations within a mile radius of this property that would draw traffic like the CVS property. This comparable should not weigh heavily in the determination of the subject property’s most likely sale price.

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Summary Of the above comparables, the most highly correlated properties in terms of traffic, similarity of surrounding retail sites and anchor tenants are listed below in order of correlation: 1. Kendall Shoppes 2. Shoppes at Tamiami 3. Sabina Plaza Given the sale prices of these properties, the subject property seems to be accurately priced above Kendall Shoppes which does not have a class “A” retail tenant like CVS but below Shoppes at Tamiami and Sabina Plaza which far outrank the subject in terms of size and base rent per square foot. An overview of where the properties are located within the seven mile range can be seen on the below map (Google Maps).

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7) Financial Analysis

For the detailed Investment Analysis calculations please see Excel file “Investment Analysis_CVS Plaza_Final”

Worst Case – Scenario: The analysis of the worst case scenario is based on the assumption of a full purchase price of $4,467,000 for the property. Given that this rarely occurs in practice for retail transactions, especially given the current conditions of the market, we felt it fitting that our worst case scenario be based on full purchase price. With an LTV of 70%, this fairly moderate debt level still yielded negative cash flows in each year of the 5 year holding period apart from the reversion year. Net Present Values before and after tax were also negative at -$336,676 and -$446,647, respectively. Additionally, with before and after tax required rates of return relatively low at 7.5% and 6.5%; our analysis yielded far lower ex-ante before and after returns of 3.8% and 1.6%. In this scenario, our expenses rose mostly with inflation while our potential gross income only increased by 1% per annum. Given that the CVS itself is not available for sale with the ancillary retail site and thus its potential rental income cannot be used in the analysis, we chose a base rent at the lower end of the range of rent comparables of $21/square feet (Costar.com). We felt this was justified when CVS Plaza’s position relative to its main competitors was taken into account. With this modest rent growth yielding less than stellar results, this scenario showed the property to be unsustainable at its list price given the rent assumption with even a moderate level of debt and thus will not be heavily weighted in our final decision on the property. (Offering Memorandum, The Shopping Center Group, 2013)

Realistic Case – Scenario: The realistic case scenario was based on the figures provided in the offering memorandum for the property. Since offering memorandums usually reflect an extremely optimistic view about an investment in order to get investors interested in the property the numbers for the calculations had to be adjusted. The listed asking price for the property was lowered to $4,100,000 since in reality usually a lower price than the asking price is paid. To create a basis for revenues as well as expenses the pro forma numbers from the offering memorandum were obtained and calculated for the following years by multiplying them at a realistic growth rate. For the revenues a reduced growth rate was applied and a greater growth rate for expenses. Even though the going in cap rate should be slightly higher than the going out cap rate as the property is likely to wear out over time and an increasing risk due to uncertain repairs the realistic case investment analysis calculated with a slightly higher going out cap rate at 8.00% compared to the going in cap rate at 8.25% in order to satisfy an investors goal of generating a gain from this investment. To obtain positive cash flows as well as positive IRR’s the invested equity was set relatively high which is only an option for liquid investors expecting a good return on the investment.

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With a LTV of 30% the BTIRR was calculated at 13.5% and ATIRR at 9.7% which satisfies the required rate of return of 8.50% before tax and 7.00% after tax. With a high equity input the NPV before and after tax were also calculated to be positive at $684,882 and $376,078. Out of all the scenarios the realistic case should be the one weighted the most in our analysis. Considering the need of a great equity input and uncertainty about the future development of the property and its surrounding area the investment seems to be very risky and let to the conclusion that this property even on a realistically calculated basis is not going to be considered for investment. (Offering Memorandum, The Shopping Center Group, 2013) Best Case – Scenario: Our optimistic assumptions include the renewing of all the leases by the end of year 2015; zero vacancy rates for the last two years; a very high average rent for Y1 ($24/SF, based on Costar.com statistics), price readjustments for rent income and expenses; ability to obtain a lower interest rate of 5.5% for a 30% financing ; the negotiation of a lower purchase price ($4,000,000), including a lower sales expense of 4%; and the realization of a higher sale price after five years of $7,028,57 due to the very low going out cap rate of 7%. In this way, we have obtained the following results: BTIRR = 23.7%; BTNPV = $2,378,419; ATIRR = 18.5% and ATNPV = $1,783,519. These results are very attractive and should let us consider the investment in CVS Plaza as a very interesting investment. Nonetheless, even if the assumptions hold, the scenario implies a great risk taking. Plus, there are other findings of our analysis that make us believe that the best case scenario is too optimistic for our risk appetite; including: mixed results about demographics statistics, new business activity and trade opportunity in the area; the not necessarily great location given the close competition, not impressive traffic counts, and surrounding empty lots. We could have a greater risk tolerance for the investment, but the conditions of the property do not give us the confidence necessary to think that the best scenario will hold during the entire investment period. Therefore, even though the best case scenario shows great prospects for the investment, the evaluation of the assumptions and other elements of the analysis let us to believe that this is a very high risk investment. Consequently, we cannot give a great weight to this scenario; and therefore, we will not base our investment decision base solely in the results of this best case scenario. (Offering Memorandum, The Shopping Center Group, 2013)

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8) Summary In summary, the property we have decided to analyze is the CVS Plaza at the corner of Coral Way and SW 147th St. in Miami, FL. The property’s largest tenants are CVS Pharmacy, Bottega Grill, and New Horizon Preschool. (Offering Memorandum, The Shopping Center Group, 2013) Our analysis resulted in reviewing factors such as traffic counts, location demographics, rent roll information and property characteristics to name a few. To remain consistent we have assumed that the property holding period for the property is five years with a five year amortization period. After completing our analysis we have concluded that the CVS Plaza is not an investment that we would choose to proceed with based on the following: Low necessary Loan to Value Ratio (LTV) Negative Cash Flows Competitive Market Analysis During our analytical review of the property we assumed varying values to arrive at three different scenarios; “Best Case”, “Realistic Case” and “Worst Case”. All of our scenarios had varying LTV ratios. The LTV directly impacted the annual cash flows, internal rates of return and the net present value. Our analysis is based on the fact that the property would be financed during our holding period of five years. Lower cash flows associated with high monthly payments due to majority debt financing and a short amortization period, yield low rates of return. In order for our group to generate positive cash flows, positive after/before tax internal rates of return and a positive net present value, we had to decrease our LTV which required a large sum of cash needed on hand to fund the project. It is for this reason this reason that our “Worst Case” scenario includes a higher LTV than the “Realistic Case” and “Worst Case” scenarios, at 70%. As a result of the LTV ratio being high, we were faced with negative cash flows for the five year holding period. Our group determined that having negative cash flows for the entire project would be unfavorable. The purpose of investing in a property would be to generate future cash flows and earn income. In order to generate the positive cash flow we desire, the investor would need more cash to lower their LTV ratio. Our group is not able to generate large sums of cash in order to generate the necessary positive cash flows we desire. Based on review of the comparable sales in the area we determined that the property location was less desirable. Each of the three sites identified as CVS Plaza’s main competitors had far greater daily traffic counts than that of the subject property. (STDBOnline, 2013) Additionally, the density of residential locations within close proximity, and in most cases walking distance to the subject property’s competition. These factors coupled with the fact that each of the main competitors also had well- known national retailers in addition to their main anchor tenant which will also draw traffic away from the CVS Plaza in favor of its competitors.

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Our group is also familiar with the location of the property and the surroundings. Through observations it is our opinion that the site layout of the subject property is not ideal and makes maneuverability and traffic flow through and around the site less than optimal which is another factor that could cause potential patrons to favor other retail locations above the CVS Plaza. To conclude, our group has found that the subject property cannot be labeled as a good investment opportunity and is therefore not prepared to make an investment in the CVS Plaza. Based on our financial and market analysis of the property, the returns associated with the purchase of the property coupled with its less than optimal market position would leave our group too highly exposed. The substantial level of risk associated with this purchase makes it an unwise addition to our property portfolio. The cash needed upfront, the negative cash flows and the property demographics are the predominant factors in our decision not to purchase the CVS Plaza.

20 CVS Plaza – Investment Analysis

February 24, 2013

9) References CoStar Group, 2013. Retrieved from: www.Costar.com GoogleMaps, 2013. Retrieved from: http://maps.google.com STDBOnline, 2013. Retrieved from: www.STDB.com Offering Memorandum, The Shopping Center Group, 2013, “CVS Plaza Miami, FL”, Anthony Blanco, Listing Broker. US Census Bureau, 2013. 2012 Building Permits: Monthly New Privately-Owned Residential Building Permits, Miami, Florida (Miami-Dade County-086). Retrieved from: http://censtats.census.gov/cgi-bin/bldgprmt/bldgdisp.pl

CVS Plaza - Comp./ Rent

Prope rty Name Location*

Distance from

Prope rty (in mile s) Status

SqFt Available

Ave rage Time on Marke t

Total GLA

Ye ar Built/ Re novate d

Ke y Te nants

Ke y Te nants

(Sqf) Pe rce ntage

Le ase d Base Re nt/

Sqf CAM

*CVS Plaza* 2411 SW 147th Ave 0.0 For Sale - - 18,214 2004 Bottega Grill 5,214 100% $18.00 - $25.00 $8.27

Plaza Alegre 14610-14660 SW 26th St 0.1 For Rent 6,740 41 months 88,411 2003 Publix 44,271 95.9% $20.66 $10.03 Shoppes of Tamiami 14218-14270 SW 8th St 1.8 For Rent 8,600 28.1 months 35,309 2004 Bonefish Grill 5,110 82.60% $25.00 $10.00 Sabina Plaza 4001-4089 SW 152nd Ave 1.0 For Rent 11,61752 months 50,000 2007 Dollar Tree 11,726 76.80% $20.00 $6.00 Bird Village Plaza 14707-14713 SW 42nd St 1.0 For Rent4,453 18.5 months 9,776 2006 LabCorp 1,279 60.70% $20.21 $9.26 Bird Square Plaza 14505-14657 Bird Rd 1.0 For Rent 8,688 12.2 months 83,600 1988 Winn Dixie 45,333 100% $17.42 $6.00

* All Properties Located in M iami, FL

CVS Plaza - Comp./ Sales

Prope rty Name Location*

Distance from

Prope rty (in mile s) Status

Date Sold Sale s Price

Sales Price Status

Total GLA

Ye ar Build/

Renovate d Key Tenants

Ke y Te nants

(Sqf) Percentage

Le as ed Base Re nt/

Sqf NOI Cap rate

*CVS Plaza* 2411 SW 147th Ave 0.0 For Sale - 4,467,000Asking 18,214 2004 Bottega Grill 5,214 100% $18.00 - 369,000 8.26%

Shoppes of Tamiami 14218-14270 SW 8th St 1.8 Sold Oct-12 6,110,000 Confirmed 35,309 2004 Bonefish Grill 5,110 84.10% $25 432,167 7.07% Sabina Plaza 4001-4089 SW 152nd 1.0 Sold Oct-12 5,400,000 Confirmed 50,000 2007 Dollar Tree 11,726 76.80% $20 N/A N/A Kendall Shoppes 8901 SW 157th Ave 5.6 Sold Nov-12 4,100,000 Confirmed 27,894 2007 Pak Mail 2,500 100% N/A N/A N/A Kendall Plaza-124 8530 SW 124th Ave 7.0 Sold Dec-12 3,566,500 Confirmed 15,600 2008 Mattress Mall/Gymboree 4287; 3000 100% N/A; $22.50 N/A N/A Kings Meadow 9901 142nd Street 5.2 Sold Dec-12 6,150,000 N/A 32,872 1987 State Farm Ins./Stop N N/A; 500 100% N/A N/A N/A

*all prop erties are located in M iami, FL

10) Exhibits