STUDYPURPOSE

1. ToanalyzethefeasibilityofredevelopingtheGlenmontShoppingcenterasenvisionedinthe GlenmontSectorPlanVision. 2. Todevelopanimplementationstrategythatisrealisticfromamarketandeconomic perspective.

STUDYPROCESS
WZHAestimatedthecosttodeveloptheGlenmontTownCenterapplyingindustrystandardsforthe Washington,DCregion.WZHAidentifiedandanalyzedexistingresidentialandcommercialprojectsin Glenmontandnearbyareastounderstandcurrentmarketrents.Assumptionsweremadeon supportablerentsintheGlenmontTownCentergivenitscompetitivepositioninthemarketplace.An investmentyieldanalysiswasconductedtodeterminedevelopmentfeasibility.Thelevelofsubsidy necessarytomaketheprojectfeasiblefromtheprivateinvestorsperspectiveispresentedaswellasa descriptionofvariouslandassemblyapproaches.

DRAFTVISIONFORGLENMONTSHOPPINGCENTER
TheGlenmontShoppingCenterisenvisionedasGlenmontTownCenter,amixeduse,pedestrian orientedhub.Newtransitorienteddevelopmentisenvisionedthatestablishesanewimageand identityforGlenmont.TheTownCenterwillincluderetail,commercialandresidentiallanduses.The preliminarydevelopmentprogramhasbeendefinedbyMontgomeryCountyandissummarizedinthe tablebelow.

DevelopmentProgram GlenmontTownCenter SqFt 1,121,190 254,900 169,900 1,545,990 Units 1,108 Parking 1.05 /Unit 4.0 /1,000sf 1.1 /1,000sf Spaces 1,163 1,020 184 2,367

Residential Retail Office TotalBuildings TownSquare FloorAreaRatio(NetofTownSquare)

Source:MontgomeryCounty
F:\8000s,misc\80087Glenmont\[numbers2.xlsx]devprogram

1.25 Acres 1.95

2 TheVisionincludesthreetofivestorybuildings,someofwhicharesinglepurpose(residentialoroffice) andothersthataremixedusewithretailonthegroundfloorandeitherofficeorresidentialabove.The TownCenterconceptincludesstructuredparking.AcentralTownSquareisanimportantfeatureof theVision. GlenmontTownCenterIllustrative

GLENMONTSHOPPINGCENTEREXISTINGCONDITIONS
TheGlenmontShoppingCenterisa196,381squarefootshoppingcenterthatoccupies19.45acresof land.TheCenterincludesacommercialstripportionthatisapproximately112,220squarefeet.Most ofthisportionoftheshoppingcenterwasdevelopedintheearly1960s.Thereareoutparcelsthat containaShoppersFoodWarehousestore(60,000squarefeet),CountryBoys(6,000squarefeet),a McDonalds(3,400squarefeet),abank(2,880squarefeet),andotheruses.Mostoftheoccupiedout parcelbuildingsweredevelopedmuchlaterthattheoriginalstripcenter. GlenmontShoppingCenterconsistsoffifteenlandparcelswithtwelveseparatepropertyowners1.A significantchallengefacingGlenmontShoppingCentersredevelopmentisitsfragmentedownership.

GeorgiaAvenue12301LLClandisnowownedbytheStateofMaryland.

3 PropertyOwnershipStripCenterandPropertiesWest

PropertyOwnershipTriangleArea

AccordingtoCountytaxrecords,theassessedvalueofGlenmontShoppingCenteris$37.9millionor approximately$2millionperacre.

REDEVELOPMENTFEASIBILITY
Redevelopmentoccurswhenthereisahigherandbetteruseforaproperty.Theprivatesectorengages inredevelopmentwhenprojectednetoperatingincomefromredevelopmentissufficienttopayforland acquisitionanddevelopmentandgeneratesasufficientinvestmentreturn.WZHAtestedthefinancial feasibilityoftheGlenmontTownCenterVision. DevelopmentCost ThefollowingtablesummarizesdevelopmentcostassumptionsfortheVisionsbuildingsandparking. Thebuildingsassumestickbuiltconstruction.Theparkingisassumedtobeaboveground,structured parking.
DevelopmentCostAssumptions:BuildingsandParking GlenmontTownCenter Demolition Residential Office Retail(cold&dark) DevelopmentCost Office/RetailTenantImprovements TotalDemo,Building,TI StructuredParking DevelopmentCost(NetofLand)
Source:RSMeans;REIS;DeveloperInterviews;WZHA
f:\8000s,misc\80087Glenmont\[Copyofnumbers.xlsx]devcostnettownsq

196,381 1,121,190 169,900 254,900 424,800

SqFt SqFt SqFt SqFt SqFt

* * * * *

$4.00 $155 $120 $100 $40

Cost/SqFt Cost/SqFt Cost/SqFt Cost/SqFt Cost/SqFt

$785,524 = $173,784,524 = $20,388,000 = $25,490,000 = $219,662,524 = $16,992,000 $237,440,048 $47,340,000 $284,780,048

2,367

Spaces

$20,000

Cost/Space

TheVisioncallsforacentral,TownSquareofapproximately1.25acres.Thereisnodesignforthis space.Forpurposesofthisanalysis,a$90perlandsquarefootdevelopmentcosthasbeenallocatedfor theTownSquarespace.Thisamountsto$4.9million .

5
DevelopmentCostAssumptions:TownSquare GlenmontTownCenter

TownSquareLandArea DevelopmentCost(BuildingsandParking) TotalCost(NetofLand)

Source:RSMeans;REIS;DeveloperInterviews;WZHA
f:\8000s,misc\80087Glenmont\[Copyofnumbers.xlsx]townsquare

54,450

SqFt

* $90

Cost/SqFt =

$4,900,500 $284,780,048 $289,680,548

TheestimatedtotalcosttodeveloptheVisionPlanisapproximately$290million.Thiscostdoesnot includethecosttoacquiretheproperty. ResidentialLeaseRates CurrentaskingrentsamongapartmentcommunitiesnearGlenmontaresummarizedbelow.Itis importanttonotethattheseapartmentprojectsarenotnewandparkingisfree.

6
CurrentAskingRents GlenmontAreaApartmentCommunities Efficiency Rent na na $1,080 $1,155 na na 1,019 1,109 na na 1Bedroom Rent na na $1,216 $1,505 $1,079 $1,115 $1,168 $1,285 $1,335 $1,430 2Bedroom Rent $1,816 $1,960 $1,414 $1,850 $1,251 $1,326 $1,329 $1,533 $1,490 $1,610 3Bedroom Rent $1,863 $2,020 na na $1,485 $1,517 $1,644 $1,769 $1,950 $1,970

TheGlen WinexburgManor OakfieldApartments GlenmontForest PrivacyWorld/1

SquareFeet na na 473 473 na na 368 368 na na

RentPerSqFt na na $2.28 $2.44 na na $2.77 $3.01 na na

Rentfor~850SF na na na na na na na na na na

TheGlen WinexburgManor OakfieldApartments GlenmontForest PrivacyWorld/1

SquareFeet na na 630 949 696 789 542 708 741 859

RentPerSqFt na na $1.48 $2.13 $1.37 $1.60 $1.74 $2.25 $1.66 $1.90

na $1.57 na na $1.66

na $1.72 na na

TheGlen WinexburgManor OakfieldApartments GlenmontForest PrivacyWorld/1

SquareFeet 1,115 1,144 926 1,230 854 960 728 915 938 1,053

RentPerSqFt $1.59 $1.74 $1.27 $1.74 $1.30 $1.55 $1.62 $1.99 $1.53 $1.59

na na $1.46 $1.62 na

na na $1.55 $1.76 na

TheGlen WinexburgManor OakfieldApartments GlenmontForest PrivacyWorld/1

SquareFeet 1,128 1,308 na na 960 1,077 960 1,085 na na

RentPerSqFt $1.47 $1.73 na na $1.38 $1.41 $1.56 $1.84 na na

na na na na na

na na na na na

1.Unitsquarefeetnotquoted,butestimatedgivenfloorplans.
Source:WZHA
f:\8000s,misc\80087Glenmont\[Copyofnumbers.xlsx]existingglenmont

ThetwoprojectsclosesttotheGlenmontMetroStationcommandthehighestresidentialrentsin Glenmont.Rentforan850squarefootapartmentrangedfrom$1.46to$1.72persquarefoot.

Thefollowingtablesummarizestheaskingleaseratesamongnewstickbuiltapartmentprojectsin neighboringcommunities.Gaithersburgpropertiesofferthefirstparkingspacefree,theprojectsin Rockville(Twinbrook)andWheatonchargeforparking.

CurrentAskingRents StickBuiltApartmentComplexesinSurroundingCommunities Efficiency SquareFeet na 560 na na na na 586 na na na $1,275 na na na Rent $1,500 $1,350 $1,455 $1,605 $1,395 Rent $1,935 $1,835 $1,933 $1,960 $1,890 Rent $1,658 2,500 na na na $2,237 2,500 na na na $2,525 $1,985 $2,415 $2,448 $2,590 $2,035 $1,838 $2,044 $2,029 $1,965

Property TheAlaire/1 MetroPointe/2 ArchstoneWheaton/3 ArchstoneGaithersburg/4 HighlandSquare/5 Property TheAlaire/1 MetroPointe/2 ArchstoneWheaton/3 ArchstoneGaithersburg/4 HighlandSquare/5 Property TheAlaire/1 MetroPointe/2 ArchstoneWheaton/3 ArchstoneGaithersburg/4 HighlandSquare/5 Property TheAlaire/1 MetroPointe/2 ArchstoneWheaton/3 ArchstoneGaithersburg/4 HighlandSquare/5

Location TwinbrookStation WheatonStation Wheaton GaithersburgStation Gaithersburg Location TwinbrookStation WheatonStation Wheaton GaithersburgStation Gaithersburg Location TwinbrookStation WheatonStation Wheaton GaithersburgStation Gaithersburg Location TwinbrookStation WheatonStation Wheaton GaithersburgStation Gaithersburg

Rent na $1,300 na na na

RentPerSqFt na $2.22 na na na na $2.28 na na na Rent~850SF $2.09 $1.95 $2.13 $1.97 $1.90

na 1Bedroom SquareFeet 1,059 1121 1265 1,038

RentPerSqFt $1.82 $2.26 $1.57 $2.34 $1.63 $2.31 $1.95 $2.14 $1.78 $2.15 RentPerSqFt $1.85 $2.12 $1.72 $2.01 $1.76 $1.91 $1.57 $1.89 $1.66 $1.82 RentPerSqFt $1.47 $1.71 $1.77 $1.77 na na na na na na

640 705 693 809

677 1,087 2Bedroom SquareFeet 1,031 927 911 956 1,245 1,118 2,511 1,425

1,067 1,562 3Bedroom SquareFeet 1,128 1,411 na na na 1,308 1,411 na na na

1.Parkingcosts$50permonthinprivateparkingbelowbuildingand$25permonthinadjacentpublicparkinggarage. 2.Parkingcosts$85permonthperspace.Structuredparking. 3.Parkingcosts$70permonthforfirstspaceand$85permonthforsecondspace.Structuredparking. 4.1stparkingspaceisfree,secondparkingspaceis$25permonth,thirdparkingspace$85permonth.Surfaceparking. 5.1stparkingspaceisfreeand$50permonthforeachadditionalspace.Structuredparking. Source:WZHA

f:\8000s,misc\80087Glenmont\[Copyofnumbers.xlsx]newstick

Rentforan850squarefootapartmentinthesenewerprojectsrangesfrom$1.90to$2.13persquare foot. GlenmontismostcomparabletoWheatonbecauseoflocation.However,theaskingrentsfornew productinGlenmontwilllikelybelessthaninWheatongiventhatGlenmontisfartheroutandisnotan employmentorretailcenter.ItisassumedthatnewresidentialproductinGlenmontcanachievean averagerentof$1.85persquarefootoranaverageof$1,570permonth.

8 A12.5percentModeratelyPricedDwellingUnit(MPDU)allocationhasbeenassumed.Theaverage MPDUrentis$1,095permonth.ThisassumesthattheMPDUunitsaredesignedforhouseholdsofone totwopeople. WehavereviewedaskingrentsforofficespaceonGeorgiaAvenueinWheaton.CurrentClassBspace leasesfor$17.50to$24.50psf.GiventhatGlenmonthasnotrackrecordasanofficemarket,isnotan employmentcenter,andisfartheroutweconcludethatnewspaceinaredevelopedGlenmontwill leasefor$22.00psf. ListingsforretailspaceintheWheaton,Kensington,andSilverSpringhavebeenreviewed.Retailrents rangefrom$21to$35persquarefoot.RetailspaceinTheVeridan,anewhighriseapartmentbuilding inSilverSpringisasking$22.00persquarefootforretailspace.Weestimatethatretailspacein Glenmontwillrentfor$22.00persquarefootfullservice. RequiredYield Inourexperience,whenevaluatinginvestmentopportunitiesinvestorstypicallyrequireayieldatleast 1.5to2percentagepointsabovetheoverallcapitalizationrateforthethegivenlanduse.Asof1st quarter2012,theoverallcapitalizationrateforrentalapartmentsrangedfrom4.0to7.5intheMid Atlanticmarket.TheWashington,DCRegionisatthelowendofthecapitalizationratescale,becauseof itsrelativelystableeconomy. TheoverallcapitalizationrateforofficeintheintheWashington,DCRegionrangedfrom4.5to8 percentinthe1stQuarterof2012.Nationally,stripretailsoverallcapitalizationratewas5.5to9.5 percentduringthissametimeperiod.Onceagain,theWashington,DCRegionislikelyatthelowendof thecapitalizationratescale,becauseofitsrelativelystableeconomy. Theredevelopmentprogramisdominatedbyresidentialuses.Assumingthelandcanbeassembledin anefficientmanner,aninvestmentyieldof7.5percentissufficienttoattractaprivateinvestortothe Glenmontredevelopmentproject.Projectyield,inthecaseofincomegeneratinguses,issimplythenet operatingincomedividedintothedevelopmentcost.Note,everyinvestorhastheirownyield threshold. Conclusion Giventheseassumptions,theprojectyieldis6.67percentwhichisbelowthe7.5percentthreshold.The projectisnotfeasiblefromaprivateinvestorsperspectiveevenwithoutthecostoflandacquisition. Therefore,evenifallpropertyownersagreetocooperateandsell,therewouldbenoprivate investmentinterest.Marketrentsarenothighenoughtocoverlandacquisition,developmentcosts, structuredparkingcostandanadequateinvestorreturn.

9
GlenmontTownCenterDevelopmentEconomics StickBuiltwithStructuredParking Units MarketRate MPDU NetSqFt/Unit GrossSqFt/Unit RentableArea BuildingArea 1,108 87.5% 12.5% 970 138 850 1,012 941,800 1,121,190

Demolition Residential Office OfficeTenantImprovements Retail(cold&dark) RetailTenantImprovements Total StructuredParking

DevelopmentCost GSF Cost/GSF 196,381 $4 1,121,190 * $155 169,900 * $120 169,900 * $40 254,900 * $100 254,900 * $40 1,545,990 Spaces 2,367 Cost/Sp $18,000

= = = = =

$785,524 $173,784,524 $20,388,000 $6,796,000 $25,490,000 $10,196,000 $237,440,048

$42,606,000

TownSquare SqFt Cost/SqFt 54,450 * $90 = TotalDevelopmentCost(NetofLandCost) AssessedValueofProperty TotalCost NetOperatingIncome /Month /SqFt/Mo Apartments Rent $1,573 $1.85 MPDURent $1,095.00 $1.29 Vacancy Market> 5% MPDU> 3% NetRent ParkingIncome $50.00 /mo 1,163 Spaces OtherIncome 10% TotalIncome OperatingCost/Unit $6,500 NetOperatingIncome Office Rent Vacancy NetRentalIncome ParkingIncome OperatingCost/psf NetOperatingIncome Retail Rentnnn Vacancy NetRent OtherIncome TotalIncome OperatingCost/psf NetOperatingIncome TotalNetOperatingIncome PrivateInvestmentProspects
Source:WZHA
f:\8000s,misc\80087Glenmont\[numbers2.xlsx]Glenmontmixeduse

$4,900,500 $284,946,548 $37,868,300 $322,814,848

$18,303,900 $1,813,320 ($969,595) $19,147,625 $697,800 $1,914,763 $21,760,188 ($7,202,000) $14,558,188

SF/Year $22.00 7% $50.00 /mo $8.50 184 Spaces

$3,476,154 ($243,331) $3,232,823 $110,400 ($1,444,150) $1,899,073

SF/Year $22.00 7% 0% 3%

$5,607,800 ($392,546) $5,215,254 $0 $5,215,254 ($156,458) $5,058,796 $21,516,058 6.67%

Yield

10

CONSIDERATION:ALLOWHIGHRISEDEVELOPMENTONTHESITETOINCREASEDENSITYAND DRIVEMOREVALUETOTHELAND
Ithasbeensuggestedthatonewaytoenhanceprivateinvestorinterestistoallowforhigherdensity residentialdevelopmentatGlenmontTownCenter.Ratherthan3to5storybuildings,theplanshould allowfor8to10storybuildings.Theideaisthatwithmoredensity,thelandwillbecomemore valuable. TherearetworeasonsthatallowinghighrisedevelopmentontheSitewillnotresolvefeasibilityissues. Thefirstisacostissueandthesecondisamarketissue.Highriseconstructioncostsareapproximately 20percenthigherthanstickbuiltconstructioncosts. Ayieldanalysiswasperformedtotesttherentrequiredtosupportthecostofhighriseassumingthe sameunitmix,butdoublethenumberofunits.Tosupporttheincreaseincostassociatedwithtaller buildingsandthecostofparkingandland,anaveragerentalrateof$1,930permonth,or$2.27per squarefootpermonthmustbeachieved.Thisrentis23percenthigherthanwhatweconsidertobe supportableinGlenmont. Amonthlyrentof$1,930permonthishigherthanthehighestonebedroomrentatMetroPointeand wellabovetheaveragerentpersquarefootforan850squarefootapartmentamongnewprojectsin Wheaton,TwinbrookandGaithersburg.

11
GlenmontTownCenterDevelopmentEconomics HighRiseBuildingwithStructuredParking Units MarketRate MPDU NetSqFt/Unit GrossSqFt/Unit RentableArea BuildingArea 2,216 87.5% 12.5% 1939 277 850 1,012 1,883,600 2,242,381

Demolition Residential Office OfficeTenantImprovements Retail(cold&dark) RetailTenantImprovements Total StructuredParking

DevelopmentCost GSF Cost/GSF 196,381 $4 2,242,381 * $186 169,900 * $120 169,900 * $40 254,900 * $100 254,900 * $40 2,667,181 Spaces 3,530 Cost/Sp $18,000

= = = = =

$785,524 $417,082,857 $20,388,000 $6,796,000 $25,490,000 $10,196,000 $480,738,381

$63,540,000

TownSquare SqFt Cost/SqFt 54,450 * $90 = TotalDevelopmentCost(NetofLandCost) AssessedValueofProperty TotalCost NetOperatingIncome Apartments /Month /SqFt/Mo Required Rent $1,930 $2.27 MPDURent $1,095.00 $1.29 Vacancy Market> 5% MPDU> 3% NetRent ParkingIncome $50.00 /mo 1,163 Spaces OtherIncome 10% TotalIncome OperatingCost/Unit $6,500 NetOperatingIncome Office Rent Vacancy NetRentalIncome ParkingIncome OperatingCost/psf NetOperatingIncome Retail Rentnnn Vacancy NetRent OtherIncome TotalIncome OperatingCost/psf NetOperatingIncome TotalNetOperatingIncome PrivateInvestmentProspects
Source:WZHA
f:\8000s,misc\80087Glenmont\[numbers2.xlsx]Glenmontmixeduse

$4,900,500 $549,178,881 $37,868,300 $587,047,181

$44,895,606 $3,639,780 ($2,353,974) $46,181,412 $697,800 $4,618,141 $51,497,354 ($14,404,000) $37,093,354

SF/Year $22.00 7% $50.00 /mo $8.50 184 Spaces

$3,476,154 ($243,331) $3,232,823 $110,400 ($1,444,150) $1,899,073

SF/Year $22.00 7% 0% 3%

$5,607,800 ($392,546) $5,215,254 $0 $5,215,254 ($156,458) $5,058,796 $44,051,223 7.50%

Yield

12

Thelevelofrentrequiredtomaketheprojectfeasibleiscomparabletorentsachievedinthehighrise productsnearby,whichareinSilverSpring.
CurrentAskingRents NewHighRiseApartmentProjects Efficiency Property SolaireMetroApts/1 TheCameron/2 ThePortico/3 Property SolaireMetroApts/1 TheCameron/2 Portico/3 Property SolaireMetroApts/1 TheCameron/2 Portico/3 Location SilverSpring SilverSpring SilverSpring Location SilverSpring SilverSpring SilverSpring Location SilverSpring SilverSpring SilverSpring SquareFeet 536 475 576 642 475 $1,549 $1,450 Rent $2,000 $1,450 RentPerSqFt $2.49 $2.89 $3.05 $3.05 $2.79 $2.79 RentPerSqFt $2.36 $3.57 $2.33 $2.70 $2.53 $2.56

576 $1,605 $1,605 1Bedroom SquareFeet Rent 868 1,049 $1,749 $1,820 $2,413 $2,440

Rent~850SF $2.59 $2.15 na

632 693 767

767 $1,940 $1,960 2Bedroom SquareFeet Rent 1,500 1,453 1,137 $2,605 $2,253 $2,600 $3,940 $2,564 $2,670

RentPerSqFt $2.29 $2.62 $2.05 $2.70 $2.32 $2.35

1,000 964 1,121

1.Parkingcosts$125permonthinundergroundgarage. 2.Parkingcosts$125permonthinundergroundgarage. 3.Parkingcosts$150permonth. Source:WZHA

f:\8000s,misc\80087Glenmont\[Copyofnumbers.xlsx]Sheet9

SilverSpringisacultural,employment,andretailcenter.Assuch,itcommandshigherrentsthan Glenmont.

13

CONSIDERATION:SUBSIDIZEPUBLICPARKINGINFRASTRUCTURETOMAKETHEPROJECTFEASIBLE FROMAPRIVATEINVESTORSPERSPECTIVE.
Structuredparkingisinthebestinterestofthecommunityasitcontributestoplacemakingby reducingtheneedforsurfaceparkinglots.Structuredparking,however,addscosttotheprojectand,in turn,absorbsresourcesthatcouldbeusedbytheprivatesectorforlandacquisition. Inthisscenario,itisassumedthatallparkingandaportionofthelandbeneaththeparkingarepaidfor bythepublicsector.Asubsidyofapproximately$46.6millionor14percentoftheprojects developmentcostisnecessarytoprovideanadequateprivateinvestmentyield. Whilefinanciallyfeasible,theprojectisstillseverelyhamperedbythecomplexityoflandacquisition.

14
DevelopmentEconomics:IncentiveNoStructuredParkingCost StickBuiltwithStructuredParking Units MarketRate MPDU NetSqFt/Unit GrossSqFt/Unit RentableArea BuildingArea 1,108 87.5% 12.5% 970 138 850 1,012 941,800 1,121,190

Demolition Residential Office OfficeTenantImprovements Retail(cold&dark) RetailTenantImprovements Total StructuredParking

DevelopmentCost GSF Cost/GSF 196,381 $4 1,121,190 * $155 169,900 * $120 169,900 * $40 254,900 * $100 254,900 * $40 1,545,990 Spaces 2,367 Cost/Sp $0

= = = = =

$785,524 $173,784,524 $20,388,000 $6,796,000 $25,490,000 $10,196,000 $237,440,048

$0

TownSquare SqFt Cost/SqFt 54,450 * $90 = TotalDevelopmentCost(NetofLandCost) AssessedValueofProperty TotalCost NetOperatingIncome /Month /SqFt/Mo Apartments Rent $1,573 $1.85 MPDURent $1,095.00 $1.29 Vacancy Market> 5% MPDU> 3% NetRent ParkingIncome $0.00 /mo 1,163 Spaces OtherIncome 10% TotalIncome OperatingCost/Unit $6,500 NetOperatingIncome Office Rent Vacancy NetRentalIncome ParkingIncome OperatingCost/psf NetOperatingIncome Retail Rentnnn Vacancy NetRent OtherIncome TotalIncome OperatingCost/psf NetOperatingIncome TotalNetOperatingIncome PrivateInvestmentProspects
Source:WZHA

$4,900,500 $242,340,548 $33,868,300 $276,208,848

$18,303,900 $1,813,320 ($969,595) $19,147,625 $0 $1,914,763 $21,062,388 ($7,202,000) $13,860,388

SF/Year $22.00 7% $0.00 /mo $8.50 184 Spaces

$3,476,154 ($243,331) $3,232,823 $0 ($1,444,150) $1,788,673

SF/Year $22.00 7% 0% 3%

$5,607,800 ($392,546) $5,215,254 $0 $5,215,254 ($156,458) $5,058,796 $20,707,858 7.50%

Yield

31 f:\8000s,misc\80087Glenmont\[numbers2.xlsx]Glenmontmixeduse

15

CONSIDERATION:IMPLEMENTTHEPROJECTINPHASESINORDERTOMAKETHEPROJECTMORE MARKETABLE,REDUCETHENUMBEROFLANDOWNERS,ANDREDUCETHELEVELOFSUBSIDY REQUIREDTOMAKETHEPROJECTFEASIBLE.

TheassemblageofthesevenpropertiesthatrepresentthestripshoppingcenterplustheCountryBoy Marketpropertytotal11.4acres(seemapbelow). PhaseIProperties

Notonlyarethesepropertiesoldandobsolete,theyrepresentthecoreoftheproject.Thislandareais ofsufficientsizetodevelopamixedusetowncenterproject.Seveninterestsownthispropertyandits assessedvalueis$21.8million. ThefirstphaseoftheTownCenterprojectcouldbedevelopedonthese11.4acreswhiletheShoppers FoodWarehouse,McDonalds,andotherlandusesinthetriangleremain.Overtime,asdevelopment economicsimprove,theseoutparcelscanredevelop. UsingthesamefloorarearatioasproposedintheVision(1.95netofTownSquareland),thestrip shoppingcenterandCountryBoyMarketpropertiescouldsupport954,700squarefeetofnewmixed usedevelopmentaswellasaTownSquare.Adevelopmentprogramconsistingof720dwellingunits and140,000squarefeetofretailhasbeenassumed.

16 Forpurposesofthisanalysis,thissmallerdevelopmentprogramisassumedtoconsistofresidentialand retailonly,noofficespace.Intheneartomidterm,itislikelythattheresidentialandretailmarkets willbestrongerthantheofficemarket. Theprojectsnetoperatingincomeisnotsufficienttoprovidetheinvestorareasonableinvestment yieldandcovertheland,structuredparkinganddevelopmentcosts.

17
PhaseIDevelopmentEconomics StickBuiltwithStructuredParking Units MarketRate MPDU NetSqFt/Unit GrossSqFt/Unit RentableArea BuildingArea 87.5% 12.5% 850 1,012 612,000 728,790 DevelopmentCost GSF 124,469 728,790 * 0 * 0 * 140,000 * 140,000 * 868,790 720 0 140,000 Spaces 1,316 SqFt 54,450 TotalDevelopmentCost(NetofLandCost) AssessedValueofProperty TotalCost Apartments Rent MPDURent Vacancy NetRent ParkingIncome OtherIncome TotalIncome OperatingCost/Unit NetOperatingIncome Retail Rentnnn Vacancy NetRent OtherIncome TotalIncome OperatingCost/psf NetOperatingIncome TotalNetOperatingIncome PrivateInvestmentProspects
Source:WZHA
f:\8000s,misc\80087Glenmont\[numbers2.xlsx]smaller

720 630 90

Demolition Residential Office OfficeTI Retail(cold&dark) RetailTI Total StructuredParking Residential Officepsf Retailpsf

Cost/GSF $4 $155 $120 $40 $100 $40

= = = = = = =

$497,876 $112,962,476 $0 $0 $14,000,000 $5,600,000 $133,060,352

756 0 560 Cost/Sp $18,000 Cost/Sp $90

$23,688,000

TownSquare * = $4,900,500 $161,648,852 $21,830,900 $183,479,752

NetOperatingIncome /Month /SqFt/Mo $1,572.50 $1.85 $1,095.00 $1.29 Market> 5% MPDU> $50.00 /mo

3%

756 Spaces 10% $6,500

$11,888,100 $1,182,600 ($629,883) $12,440,817 $453,600 $1,244,082 $14,138,499 ($4,680,000) $9,458,499

SF/Year $22.00 7% 0% 3%

$3,080,000 ($215,600) $2,864,400 $0 $2,864,400 ($85,932) $2,778,468 $12,236,967 6.67%

Yield

18 Asubsidyof$25.5millionwouldberequiredtodevelopthePhaseIprogram.Thesubsidyrepresents9 percentoftheland,development,andparkingcostforthisphaseofdevelopment.
PhaseIDevelopmentEconomics:ParkingSubsidy StickBuiltwithStructuredParking Units MarketRate MPDU NetSqFt/Unit GrossSqFt/Unit RentableArea BuildingArea 87.5% 12.5% 850 1,012 612,000 728,790 DevelopmentCost GSF 124,469 728,790 * 0 * 0 * 140,000 * 140,000 * 868,790 720 0 140,000 Spaces 1,316 SqFt 54,450 TotalDevelopmentCost(NetofLandCost) AssessedValueofProperty TotalCost Apartments Rent MPDURent Vacancy NetRent ParkingIncome OtherIncome TotalIncome OperatingCost/Unit NetOperatingIncome Retail Rentnnn Vacancy NetRent OtherIncome TotalIncome OperatingCost/psf NetOperatingIncome TotalNetOperatingIncome PrivateInvestmentProspects
Source:WZHA
f:\8000s,misc\80087Glenmont\[numbers2.xlsx]smaller

720 630 90

Demolition Residential Office OfficeTI Retail(cold&dark) RetailTI Total StructuredParking Residential Officepsf Retailpsf

Cost/GSF $4 $155 $120 $40 $100 $40

= = = = = = =

$497,876 $112,962,476 $0 $0 $14,000,000 $5,600,000 $133,060,352

756 0 560 Cost/Sp $0 Cost/Sp $90

$0

TownSquare * = $4,900,500 $137,960,852 $19,230,900 $157,191,752

NetOperatingIncome /Month /SqFt/Mo $1,572.50 $1.85 $1,095.00 $1.29 Market> 5% MPDU> $0.00 /mo

3%

756 Spaces 10% $6,500

$11,888,100 $1,182,600 ($629,883) $12,440,817 $0 $1,244,082 $13,684,899 ($4,680,000) $9,004,899

SF/Year $22.00 7% 0% 3%

$3,080,000 ($215,600) $2,864,400 $0 $2,864,400 ($85,932) $2,778,468 $11,783,367 7.50%

Yield

19

LANDASSEMBLYAPPROACHESANDIMPLEMENTATION
Landassemblyoccurswhenthereisahigherandbetteruseforthelandthanwhatexiststoday.Before consideringlandassembly,anincentivepackagemustbedevelopedthatmakestheredevelopmentof theGlenmontShoppingCenteranattractiveinvestment.Thefollowingalternativesassumethat redevelopmentmakesinvestmentsense. MarketDriven ThisishowmostlandassemblyoccursintheUnitedStates.Aprivateinvestorindependently purchasesand/oroptionspropertytoallowforredevelopment. Advantages MinimizesCountyexpenseandtime.

Disadvantages Redevelopmenttimingisdrivenbythemarket,whichmayresultinan extendedtimeframe. Asinglelandownerwhoisunwillingtosellcanmaketheprojectinfeasible. Otherthanlanduseregulations,theCountyandcommunityhavelittle influenceonthecharacterofdevelopment.

EminentDomain Eminentdomainhasbeenusedasameanstoacquirelandinredevelopmentareasacrossthe country.Undereminentdomain,thejurisdictionseizesprivatelandforapublicpurpose. Eminentdomainistypicallyusedwhenpublicuseassetssuchasroads,utilities,parkinggarages, etc.needlandfortheirdevelopment. Eminentdomainforeconomicdevelopmentpurposestypicallyrequiresthatthepropertiesin questionbeblighted.Atanassessedvalueof$2millionperacre,itwouldbedifficultto considerGlenmontShoppingCenterablightedproperty.Eminentdomainforeconomic developmentpurposesiscontroversialandcanresultinlitigation(seeKelsovs.CityofNew London). Advantages Anindependentappraisaldeterminesvalue. IfeminentdomainemployedtheCountycontrolstheland.

20 Disadvantages PrivateLandPooling Theprivatepropertyownerscouldformadevelopmentcompanytoundertakesite redevelopment.Theownerswouldtransfertheirproperty(landandimprovements)tothe developmentcompanyinexchangeforapercentinterestinthecompany.Thepercentage wouldlikelybebasedontheirshareofassessedvalueand/orthelandarea.Theentitycould beajointventure,corporationoralimitedliabilitycorporation.Eitherapropertyownercould taketheleadindevelopmentoraDevelopercouldberetainedbythedevelopmentcompany. TheNewTownatCapitalCityMarketinWashington,DChasadoptedthisapproach.This projecthasyettobeimplemented. Advantages Disadvantages Public/PrivateVenture ThisapproachissimilartothePrivateLandPoolingapproachexcepttheCounty(oralegalentity thereof)wouldformadevelopmentcorporation.Thedevelopmentcorporationwouldbethe ManagingMemberofaLimitedLiabilityCorporation(LLC).TheCountywouldprovidefinancial incentives(taxabatement,grants,etc)tomaketheprojecteconomicallyfeasible. Inexchange,thepropertyownerswouldcontributetheirpropertyinexchangeforalimited partnerinterest.TheManagingMemberwouldsolicitdevelopersandenterintoadevelopment Theriskoftheholdoutpropertyownerremains. Itisunlikelythatthelandownerswillrecouptheirlandvalueupon redevelopment,whichmaydetertheirmotivationtoalign. Thetypeofdevelopmentthatmaybefeasibleinthenearterm(surface parkedretail)isnotwhatthecommunityenvisions. ItisunlikelythatthecommunitiesVisionfortheSitewillberealized underthisapproach,givenmarketandeconomicrealities. ProvidesunifiedownershipoftheSite. Landownerstaketheleadinredevelopment. Eminentdomainforeconomicdevelopmentpurposescanbe controversialandresultinlitigation. Condemnationcanbetimeconsuming.

21 agreement.Thedevelopmentagreementwouldensure1)thatthepropertyownersinterests aresatisfiedand2)thatredevelopmentisconsistentwiththecommunitysVision. TheSkylandShoppingCenterredevelopmentinWashington,DCisanexampleofthisapproach. TheNationalCapitalRevitalizationCorporationismanagingthatproject. Advantages Disadvantages SignificantCountyfinancialincentiveswillbenecessarytoattracta privateinvestor; Thisapproachwillrequiresignificantresourcestoworkwiththe propertyowners,structureanequitablebusinessarrangement,solicit andselectadeveloper,andnegotiateadevelopmentagreement; Thereisstilltheriskthatapropertyownerwillnotparticipate. Compulsorypurchaseiscontroversialandcanresultinlitigation. Countywouldinitiatetheprocess; TheCountycouldprovideamethodologyfordeterminingequitable propertyvalue; Potentialforcondemnationmayexist; Allowsfortheuseofgovernmentincentivestomaketheproject feasible; EnsuresthatthecommunitysVisionisrealized

RecommendedApproach ThePublic/PrivateVentureApproachistheonlyfeasiblealternativebecausesubsidyis necessary.TheCountymustbeinvolvedbecausepublic/privatefinancingisnecessarytomake theVisionareality.ThefollowingstepsarerecommendedtoimplementtheGlenmontTown CenterPlan: 1. DevelopaPhaseISitePlanthatachievestheVisionand,atthesametime,strivesto reducethecostsofdevelopment(particularlystructuredparking).PhaseIwouldonly includethestripshoppingcenterpropertiesandtheCountryBoysMarketproperty; 2. Identifypotentialsourcesofsubsidytomaketheprojectanattractiveprivate investmentopportunity; 3. ConductaDeveloperRoundtabletopresentpublic/privatedevelopmentapproachand receivefeedback;

22 4. Presenttopropertyownerstheiroptionswithregardtofuturevalueoflandandhow theCountysubsidycommitmentisaunique,shorttermopportunitythatshould incentivizethemtoparticipate. 5. DevelopLimitedLiabilityCorporationwithbusinesstermsthatclearlyspelloutthe Countyincentivepackageandexistingpropertyownerobligationsandrights; 6. Solicitprivatedevelopers; 7. EnterintoaNonProfit/PrivateDevelopmentAgreement.