CHICAGO RETAIL MARKET OVERVIEW

Presenters:

Keely Polczynski, CB Richard Ellis

Eteri Zaslavsky, Next Realty, LLC

May 28, 2014

Prepared for Chicago Chapter of Appraisal Institute

2

• Brief Introductions

• Chicago Urban Retail Investment Sales Activity

• Retail Submarkets and Demographic Trends

• Investment Sales Activity by Submarket

� Michigan Avenue & Gold Coast

� Armitage & Halstead

� Southport

� Bucktown

� Fulton Market

• Chicago Grocery Industry Trends

• Chicago Grocery Investment Sales Activity

• Dominick’s Update

• Investor’s Perspective and Closing Remarks

Table of Contents

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Chicago Urban Retail Investment Sales Activity

Period# of

Transactions

Total Value

(Million)

Average

Price PSF

Average Cap

Rate

1Q2013 29 $170 $472 6.28%

2Q2013 42 $143 $725 5.98%

3Q2013 46 $110 $338 6.75%

4Q2013 47 $822 $519 5.69%

1Q2014 29 $211 $449 5.45%

Investment Activity is Robust

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Retail Submarkets

5

Income and Population Trends

6

Employment Trends

7

Housing Trends

8

FDIC Growth

9

Investment Sales Activity: Michigan Avenue

10

Investment Sales Activity: Gold Coast

11

Investment Sales Activity: Armitage & Halstead

12

Investment Sales Activity: Southport

13

Investment Sales Activity: Bucktown

14

Investment Sales Activity: Fulton Market

15

Chicago Grocery Industry Trends

• Urban Markets are Stronger and Low Density Markets are Struggling

• Upscale/Specialty/Organic Grocers are Expanding in Urban and In-Fill

Markets

� Whole Foods, Trader Joe’s, Mariano’s, The Fresh Market, Plum Market, Heinen’s, Fresh Thyme,

Spouts, Earth Fare

• Fewer National Chains in Traditional Grocery Category (Jewel-Osco)

• Other Retailers Filling Former Grocery Stores

� Home Furnishings: Art Van, HomeGoods, American Sale, Ashley Furniture

� Fashion Retailers: Ross, TJ Maxx, DSW, Nordstrom Rack

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Chicago Grocery Investment Sales Activity

Grocer # of Transactions

Aldi 14

Users (Pete’s, Tony’s, etc.) 10

Mariano’s 8

Jewel 5

Trader Joes 2

Dominick’s 2

Wal-Mart, Target, Whole Foods, Meijer’s,

Kroger, Food for Less, Cub Foods,1 (Each)

48 Transactions Completed Over the Last 6 Quarters

Period# of

Transactions

Total Value

(Million)

Average

Price PSF

Average

Cap RateNotable Transactions

4Q2012 5 $66 $205 7.68% Mariano’s, West Loop, 6.4% cap rate, $521 psf

1Q2013 6 $64 $265 6.42%

2Q2013 7 $115 $152 7.81%

3Q2013 9 $85 $100 8.86%

4Q2013 9 $92 $159 6.13% Trader Joe’s, Evanston, 5.0% cap rate, $846 psf

1Q2014 12 $178 $210 7.42% Mariano’s, South Loop, 5.8% cap rate, $618 psf

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Dominick’s Update

• 72 Stores Closed 4Q2013

• 4 Stores Previously on the Market

• 76 Total

� 42 Committed by Other Grocers

� 34 Remain on the Market

Mariano’s 11

Jewel 9

Whole Foods 7

Joe Caputo & Sons 4

Tony’s 2

Cermak Fresh Market 2

Heinen’s 2

Pete’s 1

Garden Fresh 1

Butera/Piggly Wiggly 1

Shop & Save 1

Angelo Caputo 1

Total 42

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Investor’s Perspective and Closing Remarks

• General Outlook is Positive

• Investment Environment is Active

• Plenty of Capital to Deploy

• Search for Yield

• Strong Capital Markets

• Aggressive Valuations

• What does the Future Hold?