` APPRAISAL REPORT
IntrIonduction
CLIENT NO: ATS# 201602332
Table of Content NEIGHBORHOOD SHOPPING CENTER
Market Analysis 9102-9163 SEPULVEDA BOULEVARD
Property NORTH HILLS, CALIFORNIA 91343
Description Date of Value:
Income Approach January 20, 2017
Sales Approach Date of Value – PMV Upon Stabilization:
January 1, 2018
Reconciliation
Prepared For:
East West Bank
9300 Flair Dr., 6th Floor
El Monte, CA 91731
Photograph of Subject Property
Prepared By:
CCP GROUP, INC.
750 THE CITY DRIVE, SUITE 460
ORANGE, CALIFORNIA 92868
CCP FILE ID No. 17-5072
VALUATION & ADVISORY SERVICES
CCP GROUP, INC.
750 THE CITY DRIVE, SUITE 460
ORANGE, CA 92868
February 2, 2017
Mr. Ernie Lopez, MAI
FVP, CHIEF APPRAISER
EAST WEST BANK
9300 Flair Drive, 6th Floor
El Monte, CA 91731
Subject: Appraisal Report of:
Neighborhood Shopping Center
9102-9163 Sepulveda Boulevard
North Hills, CA 91343
Dear Mr. Lopez, MAI:
In accordance with your request and authorization, we have prepared an appraisal report estimating the
“as is” market value and the prospective market value “upon stabilization” of the leased fee interest in the
above-referenced real property. The Client of the appraisal assignment is East West Bank. The appraisal
report, including the market value conclusion therein, will be used by East West Bank for potential loan
underwriting or portfolio monitoring purposes. It may be used in connection with the acquisition, disposition,
and financing of the sale of the property.
Our analysis, opinions and conclusions were developed, and this report has been prepared, in conformity
with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation and
the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of
the Appraisal Institute. In addition, this report conforms to the specified requirements of the client’s appraisal
standards.
MARKET VALUE AS IS
By virtue of our inspection, investigation, and analyses, it is our opinion that the “as is” market value of the
leased fee interest in the subject property as described herein, as of January 20, 2017, is:
TWENTY-THREE MILLION FIVE HUNDRED THOUSAND DOLLARS
$23,500,000
MR. ERNIE LOPEZ, MAI CCP GROUP, INC.
EAST WEST BANK
Page | 2
PROSPECTIVE MARKET VALUE UPON STABILIZATION
Based on the research and analysis contained in this report, it is our opinion that the prospective market
value “upon stabilization” of the leased fee interest in the subject property, as of January 1, 2018, is
expected to be:
TWENTY-FIVE MILLION EIGHT HUNDRED THOUSAND DOLLARS
$25,800,000
The value opinion in this report is qualified by certain assumptions, limiting conditions, certifications, and
definitions. The report in its entirety, including all assumptions and limiting conditions, is an integral part of,
and inseparable from, this letter. We particularly call your attention to the extraordinary assumptions and/or
hypothetical conditions listed below.
EXTRAORDINARY ASSUMPTIONS
For the prospective “upon stabilization” market value opinion, we made forecasts based on support
that exists as of the date of the report. We are not responsible for unforeseeable events that alter
market conditions prior to the effective date of appraisal.
It has been a pleasure to assist you on this assignment. If you have any questions concerning the analysis,
or if we can be of further service, please do not hesitate to contact us.
Respectfully submitted,
CCP GROUP, INC.
Edward Castillo, MAI
Principal
Certified General Real Estate Appraiser
License State of CA No. AG039897
[email protected]
T/ 714.465.5500 x 101
F/ 714.248.8800
EXECUTIVE SUMMARY
The following is an executive summary of the information that we present in more detail in the report.
BASIC INFORMATION
Common Name: Neighborhood Shopping Center Date of Value: January 20, 2017
Date of Value (PMV): January 1, 2018
Address: 9102-9163 Sepulveda Boulevard Date of Inspection: January 20, 2017
Report Type: Appraisal Report
City, State: North Hills, CA
County: Los Angeles
Assessor’s Parcel Number: 2656-023-028 Interest Appraised: Leased Fee
Appraisal Premise: As Is, PMV Upon Stabilization
Client Reference No: ATS# 201602332
BUILDING/SITE INFORMATION
Type of Building: Neighborhood Shopping Center Year Built: 1970
Condition: Good
Number of Buildings: 2 224,334 square feet (Source:
Plat Map)
Net Rentable Area: 61,478 square feet (Source: Rent Land Area SF:
Roll/Leases) 5.15 acres
C-2, Commercial
Land Area AC:
Number of Stories: 1 Zoning:
HIGHEST & BEST USE As Improved:
To continue its current use as a neighborhood shopping
As Vacant: center
To develop a retail use to its highest density possible
FINANCIAL INDICATORS
Current Occupancy: 100 percent leased; 37.7 percent currently owner-occupied (one 23,200 SF suite)
Market Value As Is Upon Stabilization
Discount Rates (IRR): 7.50 percent 7.25 percent
Terminal Cap Rate: 6.00 percent 6.00 percent
Overall Cap Rate: 5.50 percent 5.50 percent
VALUATION INDICES
Value Conclusions Market Value As Is PMV Upon Stabilization
Income Approach: $23,500,000 $25,800,000
Sales Comparison Approach: $24,200,000 $25,500,000
Cost Approach: N/A N/A
Insurable Value: $8,720,000
FINAL VALUE CONCLUSIONS
Appraisal Premise Interest Appraised Date of Value Value
As Is Leased Fee January 20, 2017 $23,500,000
Upon Stabilization $25,800,000
Leased Fee January 1, 2018
Compiled by CCP Group, Inc.
TABLE OF CONTENTS
TABLE OF CONTENTS
TITLE PAGE
LETTER OF TRANSMITTAL
EXECUTIVE SUMMARY
TABLE OF CONTENTS
SUBJECT PROPERTY PHOTOGRAPHS
APPRAISAL DATA
INTRODUCTION............................................................................................................................................................1
REGIONAL ANALYSIS .................................................................................................................................................7
LOCAL AREA ANALYSIS ..........................................................................................................................................19
MARKET ANALYSIS AND TRADE AREA ANALYSIS ..............................................................................................25
PROPERTY DESCRIPTION........................................................................................................................................42
HIGHEST AND BEST USE .........................................................................................................................................52
VALUATION
APPRAISAL METHODOLOGY...................................................................................................................................54
INCOME CAPITALIZATION APPROACH ..................................................................................................................56
SALES COMPARISON APPROACH..........................................................................................................................97
RECONCILIATION OF VALUE .................................................................................................................................105
CERTIFICATION OF THE APPRAISERS .................................................................................................................108
ASSUMPTIONS AND LIMITING CONDITIONS........................................................................................................109
ADDENDA
ENGAGEMENT LETTER/INSURABLE VALUE WORKSHEET/ENVIRONMENTAL CHECKLIST
ARGUS ASSUMPTIONS
SALE/RENT COMPARABLE PHOTOGRAPHS
PROFESSIONAL QUALIFICATIONS
SUBJECT PHOTOGRAPHS
SUBJECT AERIAL VIEW (LINE APPROXIMATE)
SUBJECT PHOTOGRAPHS
SUBJECT BIRD’S EYE VIEW (LINE APPROXIMATE)
SUBJECT PHOTOGRAPHS
View along Sepulveda Boulevard, subject to the right
View along Sepulveda Boulevard, subject to the left
SUBJECT PHOTOGRAPHS
Exterior view of Skechers
Exterior view of the subject property’s regular shop space
SUBJECT PHOTOGRAPHS
Exterior view of the subject property’s pad multi-tenant building
Exterior view of the subject property’s multi-tenant side shop space suites
SUBJECT PHOTOGRAPHS
Exterior view of the subject property’s anchor suite (owner-occupied)
Typical interior view of the shop space
SUBJECT PHOTOGRAPHS
Interior view of Skechers
Interior view of Vallarta Supermarkets
SUBJECT PHOTOGRAPHS
View of the property signage
View of the parking area
INTRODUCTION
INTRODUCTION
PROPERTY IDENTIFICATION
The subject property is a 61,478-square foot, neighborhood shopping center (Source:
Rent Roll/Leases). The subject is comprised of one large multi-tenant retail building
and one, two-tenant pad building. The subject is anchored by Vallarta Supermarkets
(owner-user) and Skechers USA. Shop tenants are primarily local or regional
businesses including China Wok, Boost Mobile, and a US Post Office. The two-tenant
pad building is situated in the northern portion of the site and occupied by Chase Bank
and Tutti Frutti Frozen Yogurt.
The subject property is currently owned by 9136 Sepulveda, LLC (Vallarta
Supermarkets, Inc.) and thus the lease in place for one of the anchor suites (Vallarta
Supermarkets) is between related parties and is considered a pocket-to-pocket lease.
Therefore, we have not considered this lease in our analysis and instead, have applied
a market rent to this anchor space with typical lease-up costs deducted. As of the date
of the value, the subject property is 100 percent leased. However, as indicated, 37.7
percent (one suite-23,200 square feet) is owner-occupied. Furthermore, the subject
property is 93.9 percent occupied with one suite (Suite 9102-Stinkin Crawfish) in the
process of moving in and is scheduled to commence its lease in March 2017.
According to the public records we obtained via Realquest, the subject was built in
1970. The subject property is situated on a total site containing 5.15 acres or 224,334
square feet of land. It is located at 9102-9163 Sepulveda Boulevard, North Hills, Los
Angeles County, California. The property is identified for taxation purposes in Los
Angeles County Assessor Parcel Numbers in the tax section of this report.
OWNERSHIP AND PROPERTY HISTORY
According to public records, the owner of the subject property is 9136 Sepulveda,
LLC, which apparently purchased the property in 2002. To the best of our knowledge,
the subject property is not currently listed for sale and there have been no property
transfers in the past three years.
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INTRODUCTION
DATE OF INSPECTION, VALUE, AND REPORT
Edward Castillo, MAI inspected the subject property on January 20, 2017.
The date and premise of this appraisal valuation is “As Is” Market Value as of
January 20, 2017 and Prospective Market Value “Upon Stabilization” as of
January 1, 2018.
The date of the report is the date indicated on the letter of transmittal.
PURPOSE OF THE APPRAISAL
The purpose of this appraisal is to provide an estimate of the market value of the
subject property. Market Value is defined as follows:
The most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and seller
each acting prudently and knowledgeably, and assuming the price is not
affected by undue stimulus. Implicit in this definition is the consummation of a
sale as of a specified date and the passing of title from seller to buyer under
conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well-informed or well advised, and acting in what they
consider their best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in United States dollars or in terms of
financial arrangements comparable thereto; and
5. The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions granted by
anyone associated with the sale.1
We have also provided an estimate of the Prospective Market Value (PMV) Upon
Stabilization, which is defined as:
A forecast of a value expected at a specific future date. The value
presented is made under the assumption that all proposed construction,
conversion, or rehabilitation is hypothetically completed, or under other
specified hypothetical conditions, as of the future date when such
construction completion is projected to occur.
1 The definition of market value is taken from the Dictionary of Real Estate Appraisal, Sixth Edition. Per the Dictionary, this
definition of market value is used by agencies that regulate federally insured financial institutions in the United States. This
definition is compatible with the OTS, RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System
definition of market value.
2
INTRODUCTION
INTENDED USE AND USER OF THE REPORT
The Client of the appraisal assignment is East West Bank. The appraisal report,
including the market value conclusion therein, will be used by East West Bank for
potential loan underwriting or portfolio monitoring purposes. It may be used in
connection with the acquisition, disposition, and financing of the sale of the property.
PROPERTY RIGHTS APPRAISED
The interest appraised represents the leased fee interest, which is defined as:
A freehold (ownership interest) where the possessory interest has been
granted to another party by creation of a contractual landlord-tenant
relationship (i.e., a lease).2
APPRAISAL DEVELOPMENT AND REPORTING PROCESS
There are four main aspects to the development and reporting of this appraisal. First,
there are certain necessary procedures that were followed to arrive at a credible value
estimate. Second, the report scope and content reflects the specific needs of the
client. In other words, certain procedures and analyses may have been included or
excluded to the extent that they were requested by the client and did not prevent a
credible value estimate from being reported. Third, the development of the appraisal
is limited to the extent that specific data items may not have been available. Lastly,
there is the type of report, or level of detail, in which the appraisal has been
communicated.
Procedures: The checklist below summarizes the procedures and analysis
performed in conjunction with this appraisal assignment and deemed necessary in
order to arrive at a credible value estimate for the appraised property.
2 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015).
3
INTRODUCTION
APPRAISAL DEVELOPMENT AND REPORTING PROCESS
Procedure/Analysis Yes No N/A
Researched regional, city, and neighborhood data. √
Researched market trends (i.e. inventory, vacancy, absorption, new
√
construction, etc.) for the subject property type. √
Considered relevant comparable improved sales, comparable
improved building rental information, and comparable site sales. √
Analyzed site data. √
Reviewed data regarding taxes, zoning, utilities, easements, and
city services that impact the subject property. √
Analyzed information pertaining to any physical improvements
located on the subject site. √
Physically inspected the subject property and its surrounding market
area. √
Determined the Highest and Best Use of the site as vacant and as
currently improved. √
Performed an Income Capitalization Approach. √
Performed a Sales Comparison Approach.
Performed a Cost Approach. √
Determined the approach or approaches to value that are most √
reliable and reconciled to a final value conclusion. √
Determined reasonable marketing and exposure times associated with
the concluded value.
Client Requirements: In preparing this appraisal, we have complied with the client’s
specific guidelines.
Availability of Data: All the data item(s) requested were furnished by the client in
conjunction with this appraisal engagement.
In our opinion, the quality of the information we received was sufficient to arrive at a
credible opinion of value for the client’s intended use.
Report Type: The results of the appraisal process are being conveyed in the form of
an Appraisal Report format that is intended to comply with the reporting requirements
set forth by the Uniform Standards of Professional Appraisal Practice.
An Appraisal Report incorporates a summary explanation of the data, reasoning and
analyses that were used to develop the opinion of value. More detailed information
regarding this analysis and conclusions is retained in the working file.
4
INTRODUCTION
MARKETING PERIOD
Marketing period section is divided into reasonable exposure time and reasonable
marketing time.
Reasonable Exposure Time: Exposure time is always presumed to precede the
effective date of the appraisal. It is the estimated length of time the property would
have been offered prior to a hypothetical market value sale on the effective date of
appraisal. It is a retrospective estimate based on an analysis of recent past events,
assuming a competitive and open market. It assumes not only adequate, sufficient
and reasonable time but also adequate, sufficient and reasonable marketing effort.
Exposure time and the appraisal’s conclusion of value are therefore interrelated.
Exposure time is often expressed as a range and is based on direct and indirect
market data gathered during the market analysis, sales verifications, and interviews
with market participants and other appropriate sources. The amount of time that a
property will require to be marketed varies greatly depending on a number of factors
including market conditions, listing price, terms of sale offered and competitive listing
inventory.
Given the availability of mortgage financing, the desire for such product and specific
information regarding sales of comparable properties, we estimate the reasonable
exposure time at our estimate of market value to be six months.
Reasonable Marketing Time: A reasonable marketing time is the period a
prospective investor would forecast to sell the subject property immediately after the
date of value, at the value estimated. Anticipated marketing time is essentially a
measure of the perceived level of risk associated with the marketability, or liquidity, of
the subject as an investment grade property. The sources for this information include
those used in estimating the reasonable exposure time, but also an analysis of the
anticipated changes in market conditions following the date of appraisal. In other
words, the reasonable marketing time is the number of months it will require to sell the
subject property from the date of value, into the future, at the appraised value. The
reader must understand, however, that the future price for the subject property (at the
end of the marketing time) may or may not equal the appraised estimate. The future
price depends on unpredictable changes in the physical real estate, demographic and
5
INTRODUCTION
economic trends, real estate markets in general, supply/demand characteristics for
the property type and many other factors.
The value conclusion reported herein assumes a marketing period of less than one
year. The PwC Real Estate Investor Survey – Fourth Quarter 2016 indicates that
marketing times for similar property types (National Strip Shopping Center) ranges from
2.00 to 12.00 months, averaging 5.9 months. This represents no change from the
previous quarter and an increase from the previous year, which had average marketing
times of 5.9 and 5.6 months, respectively. Our discussions with investors, investment
brokers, and acquisition directors indicated that they would expect a marketing time of
no more than six months for the subject. The assumptions utilized within the Income
Capitalization Approach are consistent with the investment criteria drawn from the
various published surveys. Based on the current market environment for the subject, we
have projected a marketing period of six months.
EXTRAORDINARY ASSUMPTIONS
For the prospective “upon stabilization” market value opinion, we made forecasts
based on support that exists as of the date of the report. We are not responsible for
unforeseeable events that alter market conditions prior to the effective date of
appraisal.
6
REGIONAL ANALYSIS
REGIONAL ANALYSIS
REGIONAL MAP
7
REGIONAL ANALYSIS
REGIONAL OVERVIEW
The subject property is located in the Los Angeles–Long Beach–Riverside Statistical
Area (CSA). This CSA comprises Los Angeles, Orange, Riverside, San Bernardino,
and Ventura counties. The CSA comprises three MSAs (Los Angeles–Long Beach–
Santa Ana, Oxnard–Thousand Oaks–Ventura, and Riverside–San Bernardino–
Ontario). Each MSA offers its own economic environment. However, each MSA is
economically and socially linked to the greater region.
DEMOGRAPHICS
The current population of the Los Angeles–Long Beach–Riverside CSA is
approximately 18.6 million. The two largest counties (Los Angeles and Orange)
account for almost 71.5 percent of the region’s population. This is projected to slightly
decline to 71.3 percent in 2020, as new household formation is growing faster in the
county of Riverside. The following tables present the historical and projected
population trends for the counties comprising the region.
8
REGIONAL ANALYSIS
LOS ANGELES-LONG BEACH-RIVERSIDE CSA DEMOGRAPHIC TRENDS
Projected Annual Change
2000 2010 2015 2020 2000 - 2015 -
2015 2020
Population
Los Angeles 9,519,135 9,818,605 10,147,765 10,479,488 0.44% 0.65%
Orange 2,846,283 3,010,232 3,172,848 3,327,092 0.76% 0.97%
Riverside 1,545,387 2,189,641 2,341,521 2,487,343 3.43% 1.25%
San Bernardino 1,709,417 2,035,210 2,118,866 2,191,968 1.60% 0.69%
Ventura 753,419 823,318 849,512 877,389 0.85% 0.66%
CSA Total 16,373,641 17,877,006 18,630,512 19,363,280 0.92% 0.79%
State of California 33,871,648 37,253,956 38,986,171 40,718,391 1.01% 0.89%
United States 281,421,906 308,745,538 323,580,626 337,326,118 1.00% 0.85%
Households 3,133,720 3,241,204 3,321,508 3,416,966 0.40% 0.57%
Los Angeles 935,270 992,781 1,033,386 1,077,594 0.70% 0.86%
Orange 506,218 686,260 724,521 764,406 2.87% 1.10%
Riverside 528,587 611,618 628,314 645,749 1.26% 0.55%
San Bernardino 243,310 266,920 273,149 280,937 0.82% 0.57%
Ventura 5,347,105 5,798,783 5,980,878 6,185,652 0.79% 0.68%
CSA Total
11,502,870 12,577,498 13,029,292 13,549,437 0.88% 0.80%
State of California 105,480,101 116,716,292 121,786,233 126,694,268 1.03% 0.81%
United States
Average Household Income -- -- $85,730 $93,392 -- 1.79%
Los Angeles -- --
Orange -- -- $107,771 $117,276 -- 1.76%
Riverside -- --
San Bernardino -- -- $79,653 $86,537 -- 1.73%
Ventura -- --
CSA Total $74,564 $80,624 -- 1.63%
$105,062 $114,006 -- 1.70%
$88,707 $96,527 -- 1.76%
State of California -- -- $90,812 $98,876 -- 1.78%
United States -- -- $77,008 $84,021 -- 1.82%
Per Capita Income -- -- $28,565 $30,940 -- 1.66%
Los Angeles -- -- $35,570 $38,432 -- 1.61%
Orange -- -- $25,027 $26,953 -- 1.54%
Riverside -- -- $22,595 $24,220 -- 1.44%
San Bernardino $34,214 $36,923 -- 1.58%
Ventura -- -- $28,890 $31,223 -- 1.62%
-- --
CSA Total $30,905 $33,433 -- 1.64%
$29,472 $32,025 -- 1.73%
State of California -- --
--
United States --
Source: CCIM - STDB; Compiled by CCP Valuation
9
REGIONAL ANALYSIS
The region’s population growth during the past fifteen-year period averaged 0.92
percent per year. This is projected to decline over the next five years to an average
annual increase of 0.79 percent. The county of Riverside is projected to lead the region’s
growth over the next five years at 1.25 percent. This is primarily due to the availability
of land in this county. The Inland Empire, which comprises of the counties of Riverside
and San Bernardino, was one of the fastest growing regions in the nation until the recent
downturn. This trend is anticipated to continue in the county of Riverside over the long
term as affordable housing has returned to this region, which gives this region a distinct
advantage.
10
REGIONAL ANALYSIS
2015 DEMOGRAPHIC TRENDS COMPARISON
20 $105,062 $120,000
$107,771 $100,000
18
16
14 $79,653 $88,707 $80,000
$85,730 $60,000
(Millions) $74,564
12
10
8
$35,570 $34,214 $40,000
6 $28,565 $28,890
$25,027 $22,595
4
$20,000
2
0 $0
Households Population Per Capita Income Avg. Household Income
Source: CCIM - STDB; Compiled by CCP Valuation
The 2015 average household income in the region is estimated to be $88,707,
compared with the state average of $90,812. Orange County has the highest average
household income in the region at $107,771. San Bernardino County reports the
lowest median household income at $74,465. The region is projected to achieve an
annual average growth rate in average household income of 1.76 percent, over the
next five years. This is similar to the state, but lower than the nation, which have
projected annual average growth rates of 1.78 and 1.82 percent, respectively.
11
REGIONAL ANALYSIS
EMPLOYMENT AND ECONOMY
Residents of this region are employed in a wide range of industries. Employment by
industry is summarized in the following table with comparative statistics for the county
and the state.
EMPLOYMENT BY INDUSTRY
60.0%
Percent of Em ployment 50.0%
40.0%
30.0%
20.0%
10.0%
0.0% Construction Manufacturing Wholesale Retail Trade Transportation Information F.I.R.E. Services Public
Agriculture Trade /Utilities Administration
3.5% 10.7% 5.2% 3.0% 6.4% 50.0%
LA Market 0.9% 5.9% 10.8% 10.5% 2.6% 6.1% 50.6% 3.6%
State of California 2.6% 5.8% 9.8% 3.0% 11.3% 4.7% 1.9% 6.5% 49.5%
United States 2.0% 6.2% 10.2% 4.3%
2.7% 4.9%
4.7%
Source: STDBOnline; Compiled by CCP Valuation
At 50.0 percent, Services account for a significant portion of total employment in the
region. Manufacturing constitutes the second largest employment sector in the region
at 10.8 percent.
The following table summarizes employment data provided by the U.S. Bureau of
Labor Statistics for the Los Angeles/Long Beach/Riverside CSA (Combined Statistical
Area), with comparative statistics for the state of California and the nation.
12
REGIONAL ANALYSIS
COMPARATIVE EMPLOYMENT STATISTICS
Los Angeles/Long Beach/Riverside State of United
Year/Region Employment (000s) or CSA (Combined Statistical Area) Calif ornia States
Unemployment Rate Unemployment Rate
Unemployment Rate Unemployment Rate
4.6%
2006 4.5% 4.9% 4.6%
5.4% 5.8%
2007 5.0% 7.3% 9.3%
11.2% 9.6%
2008 7.3% 12.2% 8.9%
11.7% 8.1%
2009 11.2% 10.4% 7.4%
8.9% 6.2%
2010 12.2% 7.5% 5.3%
6.2% 5.1%
2011 11.7% 5.7%
2012 10.4%
2013 9.1%
2014 7.6%
2015 6.2%
Jun 2016 (P) 5.3%
Source: Bureau of Labor Statistics; Compiled by CCP Valuation
Historically, the unemployment rates in the Los Angeles/Long Beach/Riverside CSA
(Combined Statistical Area) has been similar to the state rates, but higher than the
national rates. In line with national trends, the unemployment rate spiked in 2009 and
2010. As of June 2016, the unemployment rate for the region was reported at 5.3
percent, down from a 2015 annualized rate of 6.2 percent. The region’s current
unemployment rate, although similar to the current rate of the nation, is lower than the
current rate of the state.
HOUSING
The regional market benefited greatly from home value appreciation from 2001 to
2006, with gains contributing to consumer spending and overall economic expansion.
The downturn in the housing market impacted the region earlier than almost all other
markets in the country with measurable declines in the second half of 2006. The home
value decline was severe and resulted in rising foreclosures and overall economic
strain. Home values appeared to reach a level of stability in the second half of 2009
into the first half of 2010. Home values currently appear to be increasing with California
currently seeing increases year over year. Home values are now rising and consumer
optimism is improving. The following table and chart summarize home value
performance for the region based on the most current data released.
13
REGIONAL ANALYSIS
MEDIAN SALE PRICE - JUNE 2016
Type Year Current
Los Angeles County Over Year
Single-Family $561,000
Condo 7.8% $458,000
Orange County 4.4%
$720,000
Single-Family 5.9% $451,000
Condo 7.3%
Riverside County $332,000
Single-Family 7.1% $231,000
Condo -2.9%
San Bernardino County $270,000
$253,000
Single-Family 4.8%
$615,000
Condo 1.2% $376,000
Ventura County
Single-Family 6.2%
Condo 4.7%
Source: Corelogic, Compiled by CCP Valuation
MEDIAN RESIDENTIAL PRICING - JUNE 2016
$800,000
Sale Price Level $700,000 $720,000
$451,000 $615,000
$600,000 $561,000 Orange County
$720,000
$500,000 $458,000 $451,000
$400,000 $376,000
$300,000 $332,000 $270,000 $253,000
$231,000
$200,000
$100,000
$0 Los Angeles County Riverside County San Bernardino County Ventura County
$561,000 $332,000 $270,000 $615,000
Single-Family $458,000 $231,000 $253,000 $376,000
Condo
Source: Corelogic; Compiled by CCP Valuation
New data released today by CoreLogic shows a total of 24,326 new and resale houses
and condos sold in June 2016 in Los Angeles, Riverside, San Diego, Ventura, San
Bernardino, and Orange counties, up 9.0 percent month over month from 22,327 sales
14
REGIONAL ANALYSIS
in May 2016 and down 0.2 percent year over year from 24,377 sales in June 2015.
Since 1988, the average change in sales between May and June has been an
increase of 5.9 percent. June sales have ranged from a low 18,032 in 2008 to a high
of 40,156 in 2005, and June 2016 sales were 9.5 percent below the June average of
26,881 sales since 1988 when data for this report begins (data start dates vary by
county). In June 2016, sales of newly built homes – detached houses and condos
combined - were 47.0 percent lower than the long-term June average. The resale
market, however is closer to its historical average, with June 2016 resales coming in
3.8 percent below the May average, and ignoring the 2003-2006 housing boom that
was fueled by risky home loans, last month’s resales were 2.7 percent above the
month’s average.
The median price paid for all Southern California homes sold in June 2016 was
$464,000. This was up 1.0 percent from $459,500 in May 2016 and up 5.0 percent
year over year from $422,000 in June 2015. The June 2016 median sale price was
the highest for any month since August 2007 when it was $500,000. The median sale
price has risen year over year for 51 consecutive months, and the median’s year-over-
year gains have been single-digit for the last 25 consecutive months following nearly
two years (22 consecutive months) of double-digit annual increases. The June 2016
median was 8.1 percent below the peak median of $505,000 reached in March, April,
May, and July of 2007. Home sales of $500,000 or more accounted for 45 percent of
all sales in June 2016, up from 44.4 percent of sales in May 2016 and up from 41.8
percent in June 2015. The June 2016 share of homes selling for $500,000 or more
was the highest for any month since the credit crunch hit in August 2007, when the
$500,000-plus share was 49.4 percent.
GROSS PRODUCT COMPARISON
California has a diverse and innovative economy that ranks as one of the largest in
the world. If Southern California and Los Angeles County were nations in their own
right, they would also rank among the world’s 25 leading economies. Contributing to
the strength of the economies of California and Southern California are strong and
well developed technology, manufacturing, entertainment and tourism sectors. Also
underlying their success is openness to international trade. In addition to being one of
15
REGIONAL ANALYSIS
the nation’s largest consumer markets, Southern California, also serves as the primary
conduit for trade and travel between the U.S. and Asia.
With an estimated nominal gross state product of $2.4 trillion in 2015, California had
the sixth largest economy in the world, coming in between the United Kingdom and
France. California ranked eighth in 2014 and 2013, rising from the tenth position in
2012. California has moved up in the ranks in part because its economy has outpaced
the United States in terms of real economic growth and is outperforming many of the
world’s leading developed and emerging nations including Japan, Germany, Korea,
and Australia. At the same time, the rise in value of the U.S. Dollar has played a role
in boosting the nominal value of California’s output.
16
REGIONAL ANALYSIS
17
REGIONAL ANALYSIS
SOUTHERN CALIFORNIA—FORECAST AT A GLANCE
Employment gains at slower pace, continued improvement in local
unemployment rates
Leading industries: healthcare and social assistance: professional and
business services; retail trade; and leisure and hospitality
Lagging industries: natural resources, finance and insurance, and other
services
CONCLUSION
Overall, Southern California is seeing progress in its economic recovery even though
recovery has been uneven across counties and industries. Los Angeles County has
seen steady improvement over the past four years, both in terms of job gains and
unemployment rate declines. The Orange County economy has made significant
headway over the last six years in terms of economic growth and job creation. As
employment prospects continue to improve, the population will grow moderately,
although the high cost of housing will constrain that growth. An increase in population
of about 1.0% is expected in the following years. Therefore, overall, the current
improvement in Southern California is expected to continue in 2017, although at a
slower pace. With the economy back at full employment levels, wage gains are
expected over the next year across many occupations. Households could experience
significant gains in purchasing power in the near future as wage gains spread out
more broadly than in recent years.
18
LOCAL AREA ANALYSIS
LOCAL AREA ANALYSIS
LOCAL MAP
19
LOCAL AREA ANALYSIS
LOCAL AREA ANALYSIS
The subject property is located in the town of North Hills, which is approximately
twenty miles north of Los Angeles. North Hills is a community in the north-central San
Fernando Valley and within the jurisdiction of the city of Los Angeles. Major state
highways and freeways include I-5 and I-405. Population size was 60,254 according
to 2010 Census data. The neighborhood of North Hills is bordered by the
neighborhood of Northridge to the west; the neighborhoods of Mission Hills and
Granada Hills to the north; the neighborhood of Panorama city to the east; and the
neighborhood of Van Nuys to the south. North Hills is home to the large Veterans
Administration Sepulveda Ambulatory Care Center campus, which serves veterans in
the San Fernando Valley, with residential and outpatient care. Approximately four
miles west of the neighborhood is Northridge Fashion Center which is anchored by
J.C. Penny, Macy’s, Sears, and Pacific Theater. The shopping mall is approximately
1,500,000 square feet with two levels of shopping options.
DEMOGRAPHICS
The subject property is technically located in the city of Los Angeles (in the
neighborhood of North Hills). However, specific recent demographic data for North
Hills is unavailable and data for the city of Los Angeles is too broad and not the most
relevant for this area located in the San Fernando Valley. Therefore, we gathered
demographic data for the nearest large city of San Fernando for this section of the
report. The city of San Fernando experienced a 0.64 percent increase in population
between 2010 and 2016, bringing its total population in 2016 to 24,559 residents. Over
the next five years, the city is anticipated to grow at a faster pace than over the past
six years. With a forecast average annual growth rate of 0.72 percent, the city is
expected to outpace the county, but lag the state and nation in terms of population
growth.
The city of San Fernando has a 2016 estimate of 6,151 households. Household
formation in the city of San Fernando increased over the past six years at an average
annual growth rate of 0.51 percent. This figure lags the state and nation, but outpaces
the county in terms of annual growth rate. The number of households in the city will
continue to grow at an average annual rate of 0.62 percent over the next five years.
20
LOCAL AREA ANALYSIS
The following table summarizes demographic trends for the city of San Fernando with
comparative statistics for Los Angeles County, the state of California, and the nation.
SELECTED DEMOGRAPHICS
City of Los Angeles State of United
Calif ornia States
Item San Fernando County
37,253,956 308,745,538
Population 23,645 9,818,605 38,986,171 323,580,626
2010 Census 24,559 10,147,765 40,718,391 337,326,118
2016 Estimate 25,437 10,479,488
2021 Projection 0.64% 0.77% 0.80%
2010 – 2016 % Average Annual Grow th 0.72% 0.56% 0.89% 0.85%
2016 – 2021 % Average Annual Grow th 0.65%
11,502,870 105,480,101
Households 5,967 3,241,204 12,577,498 116,716,292
2010 Census 6,151 3,321,508 13,029,292 121,786,233
2016 Estimate 6,343 3,416,966
2021 Projection 0.51% 1.56% 1.78%
2010 – 2016 % Average Annual Grow th 0.62% 0.41% 0.72% 0.87%
2016 – 2021 % Average Annual Grow th 0.57%
$62,554 $54,149
Median Income $47,115 $57,190 $71,566 $59,476
2016 Estimate $50,108 $63,257 2.88% 1.97%
2021 Projection 1.27% 2.12%
2016 – 2021 % Average Annual Grow th
Source: STDB; Compiled by CCP Valuation as of January 2017
The median household income in the city of San Fernando is $47,115. This figure is
lower than the county, state, and national medians. The household income is
projected to grow at an average annual rate of 1.27 percent over the next five years,
lagging the county, state, and nation.
EMPLOYMENT AND ECONOMY
Residents of the city of San Fernando are employed in a wide range of industries.
Employment by industry is summarized in the following table with comparative
statistics for Los Angeles County and the state.
21
LOCAL AREA ANALYSIS
EMPLOYMENT BY INDUSTRY
100.0%
90.0%
Percent of Em ployment 80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0% Construction Manufacturing Wholesale Retail Trade Transportation Information F.I.R.E. Services Public
Agriculture Trade /Utilities Administration
2.2% 11.8% 4.1% 1.7% 5.1% 41.8%
City of San Fernando 2.3% 11.3% 17.1% 10.1% 4.0% 6.1% 51.4% 2.7%
Los Angeles County 0.5% 5.5% 10.4% 3.5% 5.8% 5.3% 3.0% 10.5% 4.7%
State of California 6.7% 0.0% 9.8% 3.0%
2.6% 9.8%
2.6%
Source: STDBOnline; Compiled by CCP Valuation as of January 2017
At 41.8 percent, Services account for a significant portion of total employment in the
city of San Fernando. Manufacturing constitutes the second largest employment
sector in the city at 17.1 percent.
The following table summarizes employment data provided by the U.S. Bureau of
Labor Statistics for the city of Los Angeles (data for the city of San Fernando or for the
neighborhood of North Hills was unavailable) with comparative statistics for Los
Angeles County, the state of California, and the nation.
COMPARATIVE EMPLOYMENT STATISTICS
Year/Region Employment City of City of Los Angeles Los Angeles State of United
(000s) or Unemployment Los Angeles Calif ornia States
Employment Los Angeles County County Unemployment Rate Unemployment Rate
Rate
Unemployment Rate Employment Unemployment Rate 4.9% 4.6%
5.4% 4.6%
2006 1,769,769 5.3% 4,577,565 4.8% 7.3% 5.8%
5.1% 11.2% 9.3%
2007 1,784,155 5.7% 4,614,776 7.6% 12.2% 9.6%
11.6% 11.7% 8.9%
2008 1,761,084 8.4% 4,555,103 12.5% 10.4% 8.1%
12.2% 8.9% 7.4%
2009 1,679,925 12.8% 4,345,182 10.9% 7.5% 6.2%
9.7% 6.2% 5.3%
2010 1,709,964 13.2% 4,302,274 8.2% 5.0% 4.8%
6.7%
2011 1,721,395 12.9% 4,327,923 4.8%
2012 1,746,802 11.5% 4,385,347
2013 1,793,100 10.3% 4,494,379
2014 1,842,608 8.7% 4,611,509
2015 1,867,915 7.1% 4,674,847
Nov 2016 (P) 1,942,002 5.1% 4,860,264
Source: Bureau of Labor Statistics; Compiled by CCP Valuation as of January 2017
Historically, the unemployment rates in the city of Los Angeles have been slightly
higher compared to the county and state rates. In line with national trends, the
unemployment rate spiked in 2009 and 2010. As of November 2016, the
22
LOCAL AREA ANALYSIS
unemployment rate for the city of Los Angeles was reported at 5.1 percent, down from
the 2015 annualized rate of 7.1 percent. The city’s current unemployment rate is
slightly higher than the current rates of the county, state, and nation. However, the
unemployment rate in the city has significantly improved compared to recession levels
and continued job stability is expected to continue in the near-term in the city.
NEARBY AND ADJACENT USES
The immediate surrounding uses are as follows:
North: NEARBY AND ADJACENT USES
South: To the north of the subject property, there is an aparment complex.
West: To the south of the subject property, on the NEC of Sepulveda Boulevard and Nordhoff Street, there
East: is a Mobil Gas Station (N.A.P.). On the SEC of Sepulveda Boulevard and Nordhoff Street, there is a
neighborhood shopping center anchored by Walgreens and Marshalls.
To the west of the subject property, across Sepulveda Boulevard, there is a retail strip center. On
the SWC of Sepulveda Boulevard and Nordhoff Street, there is another retail strip center.
To the east of the subject property, there are multi-family residential uses along Nordhoff Street.
The neighborhood land uses are not projected to change dramatically from the
existing uses. No foreseeable changes in land uses or shopping patterns in the
immediate market or surrounding area are projected.
Traffic Count: Per TrafficMetrix, the latest traffic count (2015) along Sepulveda
Boulevard (near Nordhoff Street) was 32,606.
Summary of Neighborhood’s Attributes: The neighborhood’s characteristics are
summarized in the following table.
23
LOCAL AREA ANALYSIS
NEIGHBORHOOD SUMMARY
Attribute Excellent Good Average Fair Poor
Appearance of the Neighborhood
Consistency of Land Use
Demographic Trends
Access/Area Linkages
CONCLUSION AND RELEVANCE TO THE SUBJECT PROPERTY
The neighborhood of North Hills is part of the Greater Los Angeles region of Southern
California. The city of San Fernando benefits from its location with good infrastructure
and transportation linkages. The median income in the city of Los Angeles is currently
higher compared to the county, state, and nation. The unemployment rate has
improved significantly compared to recession levels and is currently slightly higher
than the county, state, and nation. Future prospects for the community appear
average, as its commercial and residential bases are poised for further gradual
stabilization in the long term. However, the traffic count is considered good for the
subject’s property type. Therefore, the demographic and physical attributes of the
region and neighborhood and its location should allow it to sustain its appeal as an
above average commercial environment over the long term.
24
MARKET ANALYSIS AND TRADE AREA ANALYSIS
MARKET ANALYSIS
Data for the following market analysis is provided by REIS, Inc., a leading provider of
multifamily and commercial real estate market information.
Reis provides commercial real estate market information and analytical tools to real
estate professionals through its Reis Services subsidiary. Reis Services, including its
predecessors, was founded in 1980. Reis maintains a proprietary database containing
detailed information on commercial properties in metropolitan markets and
neighborhoods throughout the U.S. The database contains information on apartment,
office, retail, warehouse/distribution, flex/research & development, self-storage and
seniors housing properties. It is used by real estate investors, lenders and other
professionals to make informed buying, selling and financing decisions. In addition,
Reis data is used by debt and equity investors to assess, quantify and manage the
risks of default and loss associated with individual mortgages, properties, portfolios
and real estate backed securities. Reis currently provides its information services to
many of the nation's leading lending institutions, equity investors, brokers and
appraisers.
On a quarterly basis, Reis provides updated trends and forecasts of rent, vacancy,
and inventory for Apartment, Office, Retail, Warehouse/ Distribution, Flex/R&D, Self-
Storage and Seniors Housing properties in up to 275 metropolitan areas and more
than 7,000 markets and segments.
SUBJECT PROPERTY MARKET: LOS ANGELES
Market Overview: A The Los Angeles retail market is comprised of 67.4 million
square feet in twelve geographic concentrations ranging in size from the 10.6 million
square foot San Gabriel Valley-East submarket to the Burbank/Glendale/Pasadena
submarket, which accounts for 2.7 million square feet. In the ten-year period beginning
with third quarter 2006, the San Gabriel Valley-East submarket has experienced the
greatest introduction of new inventory, 746,000 square feet, amounting to 25.6% of all
new competitive stock added to the market.
25
MARKET ANALYSIS AND TRADE AREA ANALYSIS
Asking and Effective Rent: Asking rents in California's most populous city climbed
by 0.6% during the second quarter of 2016 to an average of $31.84. This advance
extends the market's streak of gains to twenty-two quarters, during which asking rents
have climbed by a total of 10.8%. Since the beginning of third quarter 2006, the metro
as a whole has recorded an annual average increase of 1.7%. Effective rents, which
exclude the value of concessions offered to prospective tenants, also advanced by
0.6% during the second quarter. The parity in rates of change indicates that landlords
have been able to raise rents without also increasing the relative value of concessions
packages offered to new lessees. During the past four quarters, asking rent growth
was experienced broadly among the Los Angeles metropolitan area's twelve retail
submarkets, contributing to an overall asking rent growth rate of 2.6%.
Competitive Inventory, Absorption: The metro experienced absorption of 219,000
square feet during the second quarter. Over the last four quarters, market absorption
totaled 52,000 square feet, 2.0% greater than the average annual absorption rate of
51,000 square feet recorded since the beginning of third quarter 2006. In a long-term
context, the second quarter vacancy rate is 0.9 percentage points higher than the
5.3% average recorded since the beginning of third quarter 2006.
The following tables illustrate the historical supply/demand trends as well as the
historical rental/vacancy rate trends for the entire market.
26
MARKET ANALYSIS AND TRADE AREA ANALYSIS
27
MARKET ANALYSIS AND TRADE AREA ANALYSIS
SUBMARKET AREA MAP
28
MARKET ANALYSIS AND TRADE AREA ANALYSIS
SUBJECT PROPERTY SUBMARKET: SAN FERNANDO VALLEY-EAST
Submarket Overview: The San Fernando Valley-East submarket, one of twelve
distinct geographic concentrations within Los Angeles, contains 3.9 million square
feet, or 5.7% of the metro's total inventory of neighborhood and community shopping
center space. In the ten-year period beginning with fourth quarter 2006, new additions
to the submarket totaled 65,000 square feet, amounting to an annualized inventory
growth rate of 0.2%; over the same period, the metro growth rate has been 0.4%.
Asking and Effective Rent: During the third quarter of 2016, asking rents climbed by
0.4% to an average of $34.82, higher than seven of the metro's twelve submarkets.
The submarket has now experienced seven consecutive quarterly gains in asking rent,
for a cumulative total of 5.7%. The San Fernando Valley-East submarket's current
asking rent levels and growth rates compare favorably to the metro's averages of
$31.95 and 0.3%. Effective rents, which exclude the value of concessions offered to
prospective tenants, increased by 0.5% during the third quarter to an average of
$30.59.
Competitive Inventory/Absorption: Since the beginning of fourth quarter 2006, the
metro posted an average annual absorption rate of 33,400 square feet. During the
third quarter, metropolitan absorption totaled negative 87,000 square feet; in the San
Fernando Valley-East submarket, 25,000 square feet were returned to the market.
The third quarter's negative absorption in the submarket follows two consecutive
quarters of positive absorption, amounting to 9,000 square feet. The submarket saw
absorption totaling negative 6,000 square feet over the past four quarters; in historical
perspective, this recent rate of tenant outmigration is even slower than the annual
average since the beginning of fourth quarter 2006 of negative 16,900 square feet.
The submarket's average vacancy rate increased by 70 basis points during the third
quarter to 7.3%, which is 1.9 percentage points higher than the long-term average,
and 0.9 percentage points higher than the current metro average.
The following tables illustrate the historical supply/demand trends as well as the
historical rental/vacancy rate trends for the submarket.
29
MARKET ANALYSIS AND TRADE AREA ANALYSIS
30
MARKET ANALYSIS AND TRADE AREA ANALYSIS
MARKET/SUBMARKET CONCLUSION
The following table depicts a summary of the market/submarket data.
SUMMARY OF MARKET/SUBMARKET DATA
2011 2012 2013 2014 2015 CURRENT
MARKET 65,988,000 66,464,000 66,825,000 67,210,000 67,223,000 $67,411,000
Inventory SF $2.41 $2.43 $2.47 $2.54 $2.62 $2.66
Asking Rent 6.5% 6.2% 6.1% 6.0% 6.4% 6.4%
Vacancy Rate
SUBMARKET 3,867,000 3,867,000 3,867,000 3,867,000 3,867,000 3,867,000
Inventory SF $2.69 $2.73 $2.71 $2.74 $2.79 $2.90
Asking Rent 7.2% 6.9% 7.2% 6.9% 6.9% 7.3%
Vacancy Rate
Compiled by CCP Valuation
The region was significantly impacted by the Great Recession. It experienced an
increase in vacancy rates in 2009 and 2010. However, conditions in the market have
been improving in the last two to three years. The inventory in the market has been
slightly increasing since 2011. Furthermore, the current asking rent levels in the
market have been increasing since 2011. Vacancy rates have overall stayed the same
since 2011.
The submarket has been slightly inferior in its recovery. The inventory in the
submarket has experienced no change since 2011, which indicates a lack of new
construction in the submarket. However, the asking rent levels in the submarket have
been overall increasing since 2011. However, the submarket’s current vacancy rate is
currently higher than 2014 and 2015. Therefore, the submarket is considered slightly
inferior compared to the overall market. Nonetheless, the submarket has continued to
experience improvement in its asking rent.
31
MARKET ANALYSIS AND TRADE AREA ANALYSIS
TRADE AREA OVERVIEW
A retail center's trade area contains people who are likely to patronize that particular
center. These customers are drawn by a given class of goods and services from a
particular tenant mix. A center's fundamental drawing power comes from the strength
of the anchor tenants, as well as the regional and local tenants, which complement
and support the anchors. A successful combination of these elements creates a
destination for customers seeking a variety of goods and services while enjoying the
comfort and convenience of an integrated shopping environment. In order to define
and analyze the market potential for the subject, it is important to first establish the
boundaries of the trade area from which the subject will draw its customers. In some
cases, defining the trade area may be complicated by the existence of other retail
facilities on main thoroughfares within trade areas that are not clearly defined or
whose trade areas overlap with that of the subject.
Once the trade area is defined, the area's demographics and economic profile can be
analyzed. This will provide key insight into the area's dynamics as it relates to the
subject.
Property Type Defined: The following table provides an overview of the typical
center classifications and their trade areas as determined by the International Council
of Shopping Centers.
32
MARKET ANALYSIS AND TRADE AREA ANALYSIS
U.S. SHOPPING CENTER CLASSIFICATIONS AND TRADE AREAS OF GENERAL PURPOSE CENTERS
Type Square Feet Acreage Typical Anchors Anchor Typical Primary
Ratio Number Trade Area
Super Regional Mall
Regional Mall Number Type Of Area
Community Center ("Large GENERAL PURPOSE CENTERS Tenants
Neighborhood Center") 5-25 miles
800,000 + 60 – 120 acres 3 or more Full-line or junior department store, 50-70% N/A
mass merchant, discount department
store and/or fashion apparel store.
400,000 – 40 – 100 acres 2 or more Full-line or junior department store, 50-70% 40-80 stores 5-15 miles
800,000 mass merchant, discount department
store and/or fashion apparel store.
125,000 – 10 – 40 acres 2 or more Discount store, supermarket, drug, 40-60% 15-40 stores 3-6 miles
400,000 large-specialty discount (toys, books,
home improvement/furnishings,
electronics or sporting goods, etc.)
Neighborhood Center 30,000 – 3 – 5 acres 1 or more Superm arket 30 -50% 5-20 stores 3 miles
125,000
Strip/Convenience <30,000 <3 acres Anchor-less or a Convenience store, such as a mini- N/A N/A <1 mile
small convenience- m art.
store anchor
Source: ICSC Research and CoStar Realty Information, Inc.; Compiled by CCP Valuation
33
MARKET ANALYSIS AND TRADE AREA ANALYSIS
Trade Area Determination: In defining boundaries for the subject's trade area,
several factors have been considered. First, the property's location with respect to
transportation provides the basis for regional access to the area. Second, competition
and geographic boundaries help to define the potential size of the trade area as a
measure of distance from the property. Third, the merchandising mix and anchor
alignment provides the basic draw of customers that are likely to patronize the
property. As noted from the previous chart, the subject property would most likely be
classified as a neighborhood center. Given all of the above, we believe that a primary
trade area for the subject property would likely span an area encompassing about
three miles around the subject property.
Based on these observations, we have analyzed a primary demographic profile for the
subject based upon a radius of approximately three miles from the property. To add
perspective to this analysis, we have segregated our survey into one, three, and five
mile concentric circles with a comparison to the city, county, and state. The following
chart presents this data.
34
MARKET ANALYSIS AND TRADE AREA ANALYSIS
TRADE AREA DEMOGRAPHIC SUMMARY
1.0-mile 3.0-mile 5.0-mile City of Los Angeles State of
County Calif ornia
Item Radius Radius Radius San Fernando
Population Statistics
2010 Census 60,299 296,321 702,002 23,645 9,818,605 37,253,956
2016 Estimate 61,934 305,955 725,002 24,559 10,147,765 38,986,171
2021 Projection 63,783 315,693 748,227 25,437 10,479,488 40,718,391
Annual Change 0.45% 0.54% 0.55% 0.64% 0.56% 0.00%
2010 – 2016 % Average Annual Grow th 0.60% 0.64% 0.64% 0.72% 0.00% 0.00%
2016 – 2021 % Average Annual Grow th
15,388 82,864 203,859 5,967 3,241,204 12,577,498
Household Statistics 15,663 84,540 208,314 6,151 3,321,508 13,029,292
2010 Census 16,053 86,766 213,970 6,343 3,416,966 13,549,437
2016 Estimate
2021 Projection
Annual Change 0.30% 0.34% 0.36% 0.51% 0.41% 0.60%
2010 – 2016 % Average Annual Grow th 0.50% 0.53% 0.54% 0.62% 0.57% 0.80%
2016 – 2021 % Average Annual Grow th
$39,995 $49,445 $50,951 $47,115 $57,190 $62,554
Average Household Incom e $41,224 $52,996 $54,802 $50,108 $63,257 $71,566
2016 Estimate
2021 Projection
Annual Change 0.61% 1.44% 1.51% 1.27% 2.12% 2.88%
2016 – 2021 % Average Annual Grow th
Source: Esri; Compiled by CCP Valuation as of January 2017
Trade Area Population/Households: Between 2010 and 2016, Esri reports that the
population within the primary trade area (3-mile radius) increased at a compound
annual growth rate of 0.54 percent. This trend is expected to increase into the near
future as population is expected to increase to 0.64 percent per annum over the next
five years.
According to Esri, households within the primary trade area (3-mile radius) increased
at a compound annual growth rate of 0.34 percent. This trend is expected to increase
into the near future as population is expected to increase 0.53 percent per annum over
the next five years.
35
MARKET ANALYSIS AND TRADE AREA ANALYSIS
Trade Area Income: According to Esri, the median household income within the trade
area (3-mile radius) is $49,445, which is considered average compared to most of the
county of Los Angeles. A significant statistic for retailers is the income potential of a
trade area's population. Income levels, either on a per capita, per family or household
basis, indicate the economic level of the residents of the market area or form an
important component of this total analysis. More directly, average household income,
when combined with the number of households, is a major determinant of an area's
retail sales potential.
Trade area income figures for the subject show that 35.2 percent of the population is
below $35,000 per year, 44.8 percent is between $35,000 and $100,000, and 20.1
percent is above $100,000. This supports the profile of a broad middle-income market.
HOUSEHOLDS BY INCOME
1.0-m ile 3.0-m ile 5.0-m ile City of Los Angeles State of
Radius Radius
Cate gor y Radius 12.9% 12.9% San Fernando County California
11.8% 11.2%
<$15,000 16.8% 10.5% 10.6% 6.8% 12.5% 10.9%
15.2% 14.2%
$15,000-$24,999 14.9% 17.7% 17.5% 5.5% 9.8% 8.8%
11.9% 11.8%
$25,000-$34,999 11.0% 12.2% 12.8% 7.6% 9.3% 8.6%
$35,000-$49,999 17.5% 4.4% 4.8% 10.9% 12.3% 12.0%
3.5% 4.1%
$50,000-$74,999 16.4% 16.9% 16.4% 16.4%
$75,000-$99,999 9.4% 14.8% 11.8% 12.5%
$100,000-$149,999 8.5% 19.7% 14.1% 15.4%
$150,000-$199,999 2.9% 8.8% 6.3% 7.2%
$200,000+ 2.5% 8.9% 7.5% 8.2%
Source: Esri; Compiled by CCP Valuation as of January 2017
Provided below is a graphic presentation of the household income distribution
throughout the trade area.
36
MARKET ANALYSIS AND TRADE AREA ANALYSIS
37