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RETAIL DEVELOPMENT PROJECT Adapting to Changing Market Conditions

RETAIL DEVELOPMENT PROJECT Adapting to Changing Market Conditions. Marketing 4411 Case 6 T Malisa Chhuon Demetre Christou Blair Stewart. AGENDA. Assumptions Business Case Resale Business Plan IMC Plan. ASSUMPTIONS. Marketing team from BDM Properties

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RETAIL DEVELOPMENT PROJECT Adapting to Changing Market Conditions

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  1. RETAIL DEVELOPMENT PROJECTAdapting to Changing Market Conditions Marketing 4411 Case 6 T MalisaChhuon DemetreChristou Blair Stewart

  2. AGENDA • Assumptions • Business Case • Resale • Business Plan • IMC Plan

  3. ASSUMPTIONS • Marketing team from BDM Properties • Developer wants to abandon retail-mixed use project by November 30th,2010 • Mitigate risk / loss and avoid 2% surtax • Sell land and build-out plans to a developer

  4. Action Plan • Past 7 days have shown economic changes affecting cost of money • Must re-evaluate strategy

  5. BUSINESS CASE

  6. BUSINESS CASE • Market Updates • Comparative sites • Go Criteria

  7. Market UpdateGO CRITERIA UPDATE GO Criteria dependent on: • Is there a need for serviced land within this market? • North Surrey (South Whalley) • Can we mitigate risk & loss?

  8. NEW DEFINITION • Market and sell serviced land • Include development proposal • Justifies land-price increase

  9. MARKET UPDATE Economical • Prime rate has increased to 3.25% • Canadian banks raise prime rate by 1.25% • Mortgage rates increased by 1.25% • Commercial mortgage: Median rate is at 5.25% • Jan 1, 2010 – 2% surtax on all Real Estate transactions

  10. MARKET UPDATE Social Consumer confidence in British Columbia: • 92.8 points • 8.3% from 100.5 points Canada consumer confidence • 84.8 points • Fell 7.8 points

  11. Market UpdateCOST OF MONEY FUEL Interest Rates: Prime – 3.25% 5 Year – 6.25%

  12. Cap Rates • Retail: 6.3% - 6.8% • Office: 5.7% - 7.4% • Rising interest rates = Rising cap rates • Must be taken into consideration when re-evaluating contingency plans

  13. Market UpdateCOMPARISONS

  14. LAND COST - ASSUMPTION Maximum we were willing to pay (13% Profit): $4,200,000.00 Amount we paid for the property in April, 2010: $3,000,000.00 • $69.52per square foot • Median of comparables: $63.30per square foot • Close to our location • Not a corner lot • Further north (Whalley) • More competition within area • $600,000.00 higher than assessed value

  15. BUSINESS CASE“GO” CRITERIA OCP suggest need for more commercial businesses; our land is favourably zoned to accommodate the need GO Criteria: • Is there a need? • Can risk be mitigated? YES Comparisons show that owner can still recover investment costs. Potential for profit. YES

  16. BUSINESS CASESummary • Market Update • Comparative sites • Go Criteria

  17. BUSINESS PLAN

  18. BUSINESS PLAN • Vision • Execution Plan • Contingency Plan • Measurement & Evaluation • Action Plan

  19. BUSINESS PLANVision • To Market and Sell: • Serviced bare-land in Whalley to a developer for $4,280,000 • Include build out development proposal which reflects our end price • UVP: • Unique build-out plans and favorably zoned property located strategically in up and coming community

  20. BUSINESS PLANFinancial Strategy

  21. BUSINESS PLANFinancial Strategy

  22. BUSINESS PLANContingency Plan PLAN B • Sell land at $3,750,000 • Decrease profit to 10% • Increase developer profit to 12% • Sell land at $3,200,000 • Increase in developer profit to 13%

  23. BUSINESS PLANContingency Plan PLAN C • If market conditions turn favourable Example: Increasing lease rates, lower interest rates, etc. • Reassess and possibly build-out according to original plan

  24. BUSINESS PLANMeasurement / Evaluation

  25. BUSINESS PLANAction Plan

  26. BUSINESS PLANSummary • Vision • Execution Strategy • Contingency Plans • Measurement & Evaluation • Action Plan (Timeline)

  27. IMC PLAN

  28. IMC PLAN • The Six P’s • Target Markets • Market Target • Budget Analysis • Measure & Evaluate

  29. IMC PLANTarget Markets Trusts & Syndicates • Focus on acquisitions + Leasing • Based in Vancouver • Diverse portfolio • Retail, Industrial, Office • Seeking new investment Opportunities Local Developers • Focus on acquisitions + Leasing • Based in Vancouver • Diverse portfolio • Retail, Industrial, Office • Seeking new investment Opportunities • Private Investors • Focus on Real Estate • Qualified • Financial and Market • Experienced • Seeking new investment Opportunities

  30. IMC PLANTarget Market Market Target #1 Development Companies

  31. IMC PLANTarget Market • Potential Investors

  32. IMC PLANMarket Target • Potential Investors

  33. IMC PLANMarket Target • Developer / Development Manager / Project Managers • Retail, Commercial, & Residential portfolio • Experience and success in Surrey • Company Principals are knowledgeable and successful Panorama Place (Mixed use Retail and Office) 152nd and King George Hwy

  34. IMC PLANMarket Target • Developed similar projects • Based in Vancouver • Focus on income-producing real estate • Diverse portfolio • Retail, Industrial, Office,

  35. IMC PLANMarket Target • Diverse development portfolio • Similar developments in our area (Guildford) • Opportunistic developers • Successful developments in GVRD (including Surrey)

  36. IMC PLANMarket Target • 40+ years of experience in GVRD • Diverse portfolio • Experience in Surrey • 10+ commercial properties in GVRD • Successful track record

  37. IMC PLANBudget Analysis

  38. IMC PLANMeasure & Evaluate

  39. IMC PLANSummary • The Six P’s • Target Markets • Market Target • Budget Analysis • Measure & Evaluate

  40. CONCLUSION • Business Case • Business Plan • IMC Strategy

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