1. LAKE EVE RESORT FEASIBILITY STUDY
M att Caffrey
REAL 576 – Real Estate Valuation &Analysis
Prof. Nate Gundrum
Drexel University
November 23, 2010
2. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
I. Market Analysis
Area Overview
Lake Eve Resort is located within Orange County, FL just minutes from downtown Orlando, an area that is
world renowned as a destination location for tourists. Orlando is arguably best known for its most popular
attraction and largest employer, Walt Disney World Resort, however the central Florida location, tropical
climate, and affordable cost of living [Table 1] has lead to significant increases in population and major
investments by employers. From 1990 to 2009, population in the region increased by over 42%, and increase of
almost 900,000 people. Within the next five years, the population in the Orlando region is expected to increase
an additional 10.8% [Table 2].
Lake Eve Resort is located on International Drive with convenient access to Interstate 4, the Florida Turnpike
(I-417), and is within 10 minutes to many of the areas most popular attractions including Walt Disney World
Resort, SeaWorld Orlando, Universal Orlando Resort. Additionally, Lake Eve Resort is less than 15 miles from
the Orlando International Airport (the 11 th busiest airport in the nation), and less than 20 minutes from
Downtown Orlando. Additional airports in the region include the Orlando Sanford International Airport (3rd
most active international airport in Florida), Kissimmee M unicipal Airport, Leesburg International Airport, and
M id-Florida Airport. Lake Eve Resort is less than 1 hour from Port Canaveral, FL – a popular port for
launching cruise ships.
Orlando will soon be home to a new commuter rail system, SunRail, and the nation's first high speed rail system
linking Tampa and Orlando.
Regional Economy
The tourism and hospitality industry is without question the most prominent component of the economic engine
in the Orlando market, employing over 110,000 employees in the region as well as providing a major influx of
consumers and income from outside of the area [Table 3]. Fortunately, the tourism industry’s resilience has
been better than most nationwide. According to the Cushman and Wakefield 2Q10 Office Report, the largest
employment gains from January through M ay 2010 occurred in the lifestyle and hospitality industry, which
gained 16,800 new jobs during that time frame.
However, the regional economy is comprised of much more than M ickey M ouse, as more than 150 international
companies, representing approximately 20 countries, have facilities in M etro Orlando. In actuality, the region
boasts significant growth in several industries, with special attention to technological research and development,
and a booming health care industry [Table 4].
According to the Orlando Economic Development Commission, M etro Orlando has a rapidly growing $13.4
billion technology industry employing 53,000 people, and has nationally recognized clusters of innovation in
digital media, agritechnology, aviation and aerospace, and software. Industry giant Electronic Arts - the world's
leading independent developer and publisher of interactive entertainment software - creates some of the world's
top-selling games in M etro Orlando, including the popular M adden NFL Football, NCAA Football, Tiger
Woods PGA Tour and several other game series.
M etro Orlando has the 7th largest research park in the country (Central Florida Research Park) with over 1,025
acres. It is home to over 120 companies, employs more than 8,500 people, and is the hub of the nation’s military
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3. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
simulation and training programs. The University of Central Florida’s Institute for Simulation & Training
developed the nation’s first master's and PhD programs in simulation and human performance enhancement.
The University of Central Florida, now the 2nd largest university in the country with over $122 million in
research, is located in Orlando and is gaining international reputations in innovations in lasers/optics and
hospitality; and a newly opened medical school.
Additionally, with respect to the Health Care Industry, Orlando is home to an emerging 'medical city' at Lake
Nona with a new University of Central Florida College of M edicine, Sanford-Burnham M edical Research
Institute and M . D. Anderson – Orlando Cancer Research Institute. Coming by 2012 is the Nemours Childrens'
Hospital, Orlando VA M edical Center, and a University of Florida research center. By year 10, the life science
cluster could create 30,000 jobs with $7.6 billion in economic impact.
Per the Cushman Wakefield Year-End 2009 Orlando M ultifamily Report, despite the national economic
slowdown, the Orlando M SA began to show indications of economic stabilization in the last quarter of 2009, as
employment increased 9,500 from September to December 2009. Further growth is anticipated, particularly in
the sectors of trade, transportation & utilities, leisure and hospitality services, professional and b usiness
services, education, and health services are forecasted to grow by more than 2.4% annually through 2014.
Income and Employment
Orange County is the 12th wealthiest county in Florida, with a median household income of $52,133 [Table 6],
although the area has been hit by the same economic downturn that has affected the majority of the country. The
labor force in the region is strong, and can offer in excess of 1.1M workers. Although the latest unemployment
rate (11.7%) is above that of the national average, it is still slightly better than that Florida average (12.0%).
Market S ectors
The Orlando markets are subdivided into many smaller submarkets. Lake Eve Resort is located within the
Tourist Corridor submarket, a suburban market outside of downtown Orlando [Table X].
Office
Like most markets nationwide, the office market in Orlando continues to struggle with today’s economy.
However, there are several indicators that point to the market bottoming-out, particularly in the Orlando Central
Business District (CBD) where absorption is trending upward, with 59,061 square feet absorbed in the second
quarter 2010. Additionally, the vacancy rate dropped 80 basis points to end the second quarter at 17.9%.
According to the Orlando Economic Development Commission, Class A office space within the CBD is leasing
at $21.60/sq.ft. Given the high vacancy and low absorption, it is no surprise that tenants continue to be in the
driver’s seat as leases and renewals are being signed at shorter terms, with reduced rent rates, and additional
concessions offered by landlords.
The CBD submarket is still starkly better than submarkets in the surrounding suburban areas, including the
Tourist Corridor, which are experiencing increased office vacancy and a decrease in absorp tion. Per the Grubb
and Ellis’ Office Trends Report for the 2nd Quarter 2010, vacancy in the suburban markets are up to 20.3% and
absorption is a negative 2,280 square feet. In particular, the Tourist Corridor has one of the highest vacancy
rates at 26.7%. This Tourist submarket and Southwest submarket combine for a total of 9,085,761 square feet of
office space, with an additional 48,500 currently under construction. By comparison, the Downtown/CBD
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4. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
market totals only 7,373,901 sq.ft., with an additional 105,000 sq.ft. under construction. Despite the surplus
of office space in the Tourist Corridor submarket, landlords are asking for higher-than-average rent rat es for
Class A space at $23.33/sq.ft.
One of the bright spots for the office market has been sales activity, which nearly doubled from 231,395 sq.ft.
during the first half of 2009, to 427,703 sq.ft. during the same time period in 2010. There were two office sales
of significant size in the Orlando market: the sale of the Southpoint Executive Center in the M aitland submarket
and the University Corporate Center III purchase by TA Associates Realty in the University/Research Park
submarkets. These transactions were $7,400,000.00 ($54.01/sq.ft.) and $16,500,000.00 ($158.66/sq.ft.)
respectively.
Looking to the future, according to Cushman & Wakefield, the growth in professional and business services
should improve but will otherwise still be negative, resulting in high vacancy through 2010 and into 2011.
Vacancy rates are expected to ease gradually through 2011, although rental rates will remain flat.
Retail
The Orland M SA retail market continues to look bleak; although the worst may be over, with record high
national unemployment and economic malaise, recovery is still a long ways off. Although the worst of the retail
store closing may be over, overall retail vacancy rate is expect to slowly tick further upward – ultimately
leveling off by the end of 2010. This is particularly disturbing as retail trade comprises 10% of the employment
in the Orlando market, with an additional 5% based on warehousing and transportation.
Vacancy rates have continued to rise for the past three years, while rental rates continue to decline. In 2010,
vacancies were around 23%, with an average rental rate around $15.00/sq.ft . M ore desirable centers and
locations, such as the Sandlake Road area, have commanded rents at $30.00/sq.ft. (down from rent highs in
2008 of $52.00/sq.ft.). Less desirable locations or centers without an anchor tenant are seeing rents as low as
$4.00/sq.ft. for large boxes and as low as $8.00/sq.ft. for smaller users.
The few bright spots in the retail market are the addition of several new restaurant chains into the market, and
the expansion of several existing franchises. Additionally, affordable shop ping stores such as Dollar G eneral,
Dollar Store, and Dollar Tree continue to thrive with plans to expand or open new stores throughout Florida and
nationwide.
However according to Cushman & Wakefield, a more clear evidence of recovery will be present in 2012. Retail
development construction levels are expected to continue to drop, however an increase in building activity
could begin as early as 2012. The return of credit and capital, along with an uptick in marketing and advertising
activity, could be a much-welcomed shot in the arm for local retail real estate.
Multi-Family Residential
One sector that has fared better than most has been the multi-family residential market which by year end of
2009 had shown signs of improvement in both absorption and occupancy levels, resulting in increased rental
rates throughout the region. By the end of 2009, vacancy was down to 6.0% on average, with rents fast
approaching $1.00 per sq. ft.
While the collapse of the housing market can attribute for some of the influ x of renters to the market, population
increases are the main driver behind the multi-family market. The Orlando M SA has consistently added 60,000
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5. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
new residents annually for the past 10-years, and is expected to increase an additional 10% in the next five
years. According to the US Census Bureau, almost 60% of the total housing units in Orange County, FL were
rental units, totaling 53,053 units [Table 7]. Of those rented units, the median rent was $977/unit [Table 8]. The
number of units is projected to increase by approximately 12,000 units (approx. 23%) by the end of 2010 as
outlined below.
Increased population and employment in the region points to further growth within the multi-family market, and
stability after the housing market recovers, however much of that will depend on the inventory of new and
proposed projects. Seven projects, totaling 2,176 units were added to the Orlando inventory in 2009, and an
additional 9.700 total units slated for delivery in the greater metro area in 2010. M ost of the units are proposed
in the M aitland/Winter Park submarket (3,400 units) and the Southeast/Airport submarket (1,400 units). The
pipeline beyond those projects appears to be drying up.
In 2009, there were a total of 16 transactions of multi-family residential assets totaling $222 million [Table 9].
Although this was a decline from the sales volume of 2008, the dramatic decreases are partially attributable to
the distressed nature of the overall market, as well as the fact that many of the sales are fractured or partial sales
of larger projects. On average, the transaction price ranged between $28,873 to $97,995 per unit, with a median
price of $54,213 per unit.
Cushman & Wakefield project markets to show slight signs of stabilization to Net Operating Incomes ( NOI),
which would bode well for future transactions of properties. More dour forecasts, such as the regional outlook
for M ultifamily Executive, point to soft fundamentals in the market that will continue to weigh on NOI, pushing
down values and creating distress. Cap rates for stabilized assets may start at 8.5% or more, but sales of
underperforming or distressed properties tend to distort pricing trends.
Hotel
As previously mentioned the leisure and hospitality markets comprise a significant portion of the overall
economic activity in the Orlando market. Despite the downturn in the economy, the tourism market still resulted
in $13.6 Billion in annual wages for the region in 2009. Although these figures are a decrease from years past, it
is a testament to the popularity of the area and a strong indicator for future growth as visitor volume is project to
increase to over 47 M illion in 2010.
Of the 46.6M illion visitors to the Orlando area in 2009, approximately 60% (27 M illion) required overnight
lodging. Demand for 2010 appears to be surpassing 2009. In Orange County, there is a 9.5% increase in
demand, which translates to a 70.0% occupancy rate (a 4.6% increase from the previous year). However there is
still a stark difference between supply and demand (f avoring demand), which results in both decreased A verage
Daily Rate and Revenue Per Available Room (RevPAR) caused by increased competition among the existing
hotel providers. Average Daily Rate and RevPAR are down 5.3% and 0.9% respectively to $100.42/room and
$70.29/room. While these figures exclude Disney -owned hotels, they far surpass both the National and Florida
averages during the same time period. According to the Hospitality Real Estate Counselors, Inc., the RevPAR
in Florida has significantly increased during the first quarter of 2010.
Recent sales of existing hotel properties have largely comprised been limited service properties, although there
have been some larger sales of older, full-service properties. In the Orlando market recent sales include the
Altamonte Springs, a 210-room Hampton Inn that was acquired by 3H Group Hotels for $10.0MM
($47,619/key) and the Sheraton Downtown Orlando, which was foreclosed upon and subsequently acquired by
Glenmont Capital M anagement for $8.0MM ($23,500/key ).
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6. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
Table 1
COST OF LIVING INDEX
CITY COMPOSITE INDEX GROCERY HOUSING
Atlanta, GA 96.0 96.3 89.9
Austin, TX 95.0 90.6 84.4
Denver, CO 103.4 99.5 108.8
Miami, FL 105.2 109.8 107.5
New York, NY 209.7 153.0 365.2
ORLANDO, FL 97.1 97.1 85.3
Raleigh, NC 98.5 104.4 88.3
Richmond, VA 104.4 102.4 105.3
Seattle, WA 120.2 115.7 137.3
Source: C2ER The Council For Community of Economic Research
(formerly ACCRA) - 2nd Quarter 2010
Table 2
Demographic Detail Summary Report
Metro Orlando
Population Demographics
Percent Change
1990 Census 2000 Census 2009 Estimate 2014 Projection 1990 to 2000 2000 to 2009 2009 to 2014
Total Population 1,224,851 1,644,561 2,124,270 2,354,381 34.3% 22.6% 10.8%
Population Density (Pop/Sq
305.4 410.1 529.7 587.0 34.3% 22.6% 10.8%
Mi)
Total Households 465,277 625,248 774,210 816,857 34.4% 19.2% 5.5%
Source: Metro Orlando Economic Development Commission
Table 3
Corrections Accommodations
Education Administrative
1% & Food Service,
Finance &
9% Support
Management of
Insurance
Government 1%
Companies
3%
Utilities 4% 2%
0% Health Care & Social
Transportation & Assistance
Warehousing 13%
5% Information
5%
Retail Trade
10%
Real Estate & Leasing Leisure &
2% Hospitality
Professional, Scientific 40%
& Technical Services Manufacturing
4% 1%
ORLANDO AREA EMPLOYMENT BY INDUSTRY
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7. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
Table 4
ORLANDO AREA MAJOR EMPLOYMENT INDUSTRIES
Education
Government
Health Care & Social Assistance
Information
Employees
Leisure & Hospitality
Professional, Scientific & Technical Services
Retail Trade
Transportation & Warehousing
0 20,000 40,000 60, 000 80, 000 100,000 120,000
Table 5
INCOME AND BENEFITS
Total Households 91,679.00 (X)
Less Than $10,000 7,030.00 7.7%
$10,000 to $14,999 5,187.00 5.7%
$15,000 to $24,999 10,915.00 11.9%
$25,000 to $34,999 11,602.00 12.7%
$35,000 to $49,999 16,604.00 18.1%
$50,000 to $74,999 17,168.00 18.7%
$75,000 to $99,999 9,394.00 10.2%
$100,000 to $149,999 8,003.00 8.7%
$150,000 to $199,999 2,484.00 2.7%
$200,000 or more 3,292.00 3.6%
Median Household Income (dollars) $ 52,133.00 (X)
Mean Household income (dollars) $ 62,842.00 (X)
Source: US Census Bureau, 2006-2008 American Community
Survey
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8. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
Table 6
MEDIAN HOUSEHOLD INCOME BY COUNTY
Rank County Income
1 St. Johns County, Florida $ 63,927
2 Clay County, Florida $ 61,909
3 Collier County, Florida $ 60,133
4 Seminole County, Florida $ 59,317
5 Nassau County, Florida $ 59,072
6 Okaloosa County, Florida $ 57,111
7 Monroe County, Florida $ 56,984
8 Santa Rosa County, Florida $ 54,718
9 Palm Beach County, Florida $ 54,301
10 Martin County, Florida $ 54,182
11 Broward County, Florida $ 53,236
12 Orange County, Florida $ 52,133
13 Lee County, Florida $ 51,599
14 Hillsborough County, Florida $ 50,384
15 Duval County, Florida $ 50,301
Source: U.S. Census Bureau, 2006-2008 American
Community Survey
Table 7
Housing Charateristics - 2008 US Census Estim ates
Estimate Percent
Total Housing Units 108,901
Occupied Housing Units 91,679 84.2%
Owner-Occupied Housing Units 38,626 42.1%
Renter-Occupied Housing Units 53,053 57.9%
Vacant Housing Units 17,222 15.8%
Owner-Occupied Homes 38,626
Median Value (dollars) $ 241,600
Source: U.S. Census Bureau, 2006-2008 American Community
Survey
Table 8
Gross Rent
Estimate Percent
Occupied Units Paying Rent 52,102 (X)
Less than $200 525 1.0%
$200 to $299 721 1.4%
$300 to $499 2,032 3.8%
$500 to $749 7,540 14.2%
$750 to $999 16,833 31.7%
$1,000 to $1,499 20,276 38.2%
$1,500 or more 4,175 7.9%
Median (dollars) $ 977 (X)
No rent paid 951 1.8%
Source: U.S. Census Bureau, 2006-2008 American
Community Survey
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9. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
Table 9
SIGNIFICANT 2009 APARTMENT SALES TRANSACTIONS
PROPERTY NAME CITY/SUBMARKET UNITS TOTAL PURCHASE PRICE PRICE PER UNIT
Promenade Crossing North Orlando/Winter Park/Mailand 212 $ 20,775,000.00 $ 97,995.28
Stonebrook Sanford/Lake Mary 356 $ 18,019,100.00 $ 50,615.45
Golf Brook Longwood/Altamonte Springs 195 $ 17,752,020.00 $ 91,036.00
Chatham Harbor Longwood/Altamonte Springs 324 $ 15,900,000.00 $ 49,074.07
Mosaic at Millenia South Orlando 256 $ 14,800,000.00 $ 57,812.50
Sabal Park Longwood/Altamonte Springs 162 $ 14,747,832.00 $ 91,036.00
Riverfront East Orlando/UCF 356 $ 10,279,000.00 $ 28,873.60
Legacy Parc Kissimmee/St. Cloud 185 $ 5,800,000.00 $ 31,351.35
Source: Cushman & Wakefield Orlando Multifamily Reprot Year-End 2009
Orlando S ubmarket Map
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10. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
Metro Orlando Major Employers
(By Employment)
Rank Company City Employment Industry
1 Walt Disney Co. (Walt Disney World) Lake Buena Vista 62,000 Leisure & Hospitality
2 Orange County Public Schools MSA 24,063 Education
3 Florida Hospital (Adventist Health System) Orlando 16,000 Health Care & Social Assistance
4 Publix Super Markets Inc. MSA 15,606 Retail Trade
5 Universal Orlando Orlando 13,000 Leisure & Hospitality
6 Orlando Health Orlando 13,000 Health Care & Social Assistance
7 Orange County Government MSA 7,426 Government
8 SeaWorld Orlando Orlando 7,290 Leisure & Hospitality
9 Lockheed Martin Corporation Orlando 7,200 Professional, Scientific & Technical Services
10 Seminole County Public Schools MSA 7,000 Education
11 Darden Restaurants Inc. Orlando 6,500 Accommodation & Food Service, Management of Companies
12 Osceola County Public Schools MSA 6,465 Education
13 Marriott International Inc. Orlando 6,312 Leisure & Hospitality
14 Starwood Hotels & Resorts Worldwide Inc. Orlando 5,369 Leisure & Hospitality
15 Central Florida Investments Orlando 5,000 Real Estate & Leasing
16 Walgreen Co. MSA 4,990 Retail Trade, Transportation & Warehousing
17 Lake County Public Schools MSA 4,353 Education
18 United Parcel Service Inc. Orlando 4,000 Transportation & Warehousing
19 CenturyLink Apopka 3,900 Information
20 City of Orlando Orlando 3,272 Government
21 Siemens Orlando 3,249 Manufacturing, Professional, Scientific, & Technical Services
22 Cendant Corp. Windermere 3,201 Leisure & Hospitality
23 SunTrust Banks Inc. Orlando 3,165 Finance & Insurance
24 Rosen Hotels And Resorts Orlando 3,000 Leisure & Hospitality
25 CVS Corp. Orlando 2,900 Retail Trade
26 Space Gateway Support Orlando 2,886 Transportation & Warehousing
27 Loews Hotels Corp. Orlando 2,800 Leisure & Hospitality
28 Northrop Grumman Corp. Orlando 2,659 Professional, Scientific & Technical Services
29 FedEx Corp. Orlando 2,600 Transportation & Warehousing
30 Lowes Cos. Inc. MSA 2,546 Retail Trade, Transportation & Warehousing
31 Cingular Wireless LLC Lake Mary 2,500 Information
32 Orange Lake Resort & Country Club Kissimmee 2,500 Leisure & Hospitality
33 Southwest Airlines Co. Orlando 2,332 Transportation & Warehousing
34 Hilton Hotels Corp. Altamonte Springs 2,100 Leisure & Hospitality
35 Leesburg Regional Medical Center Leesburg 2,093 Health Care & Social Assistance
36 The Villages The Villages 2,022 Real Estate & Leasing
37 Mears Transportation Group Orlando 2,000 Transportation & Warehousing
38 AirTran Airways Orlando 2,000 Transportation & Warehousing, Management of Companies
39 HCA Inc. Orlando 1,962 Health Care & Social Assistance
40 YMCA of Central Florida MSA 1,900 Health Care & Social Assistance
41 Bank of America Corp. Orlando 1,775 Finance & Insurance
42 Bright House Networks Orlando 1,724 Information
43 Osceola County Government MSA 1,715 Government
44 Orange County Corrections Department MSA 1,673 Corrections
45 Subway Restaurants MSA 1,600 Retail Trade
46 Gaylord Palms Resort & Convention Center Kissimmee 1,500 Leisure & Hospitality
47 Health Central Ocoee 1,500 Health Care & Social Assistance
48 Wachovia Corp. Orlando 1,422 Finance & Insurance
49 Tempus Resorts International Orlando 1,400 Leisure & Hospitality
50 Convergys Corp. Lake Mary 1,355 Professional, Scientific & Technical Services
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Source: Nexis.com and Harris Info Source, Direct Company Contact, & OBJ Book of Lists
11. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
II. Property Valuation
Included herein is a property valuation that was used to determine the value of the Lake Eve Resort property in
its current use as a upscale hotel. The property valuation consists of t hree different approaches that were
employed: the Sales Comparison approach which uses data from recent transactions of comparable properties to
determine value, the Cost approach which uses construction cost data to determine the replacement cost of
reconstructing the property, and lastly the Income Approach which analyzes the income and expenditures of the
property operations to ultimate calculate a present value.
Based on the Sales Comparison Approach, the estimated value of the Lake Eve Resort is $12,054,226.
Using the Cost Approach, the value of the Lake Eve Resort was determined to be: $19,873,240.
Lastly, the Income Approach derived a value of $19,763,339.
Detailed worksheets and further explanation are as follows.
S ales Comparison Approach
M any publications and reports have pointed to the softening of markets throughout the country, and the Orlando
hospitality market, while resilient, is also susceptible to the deterioration of the market. The implications of
these economic changes were discussed in the M arket Analysis portion herein. The quantity and quality of
transactions in the region has declined from the peaks observed in 2007, however there are still a few examples
of hotel properties that can serve as a basis for the analysis.
Lake Eve Resort is an upscale, full service hotel resort located in the highly desirable Tourist Corridor in the
Orlando market. The high rise building is ideally situated near many of the main theme parks and attractions,
and offers a variety of amenities including: swimming pool, fitness center, business center, spa, and dining area
and boasts luxury suites with 1, 2, and 3 bedroom layouts. Although the comparable properties do not advertise
suites, they rooms were treated as equals between the subject property and comparison properties.
Three transactions of properties within the Orlando market with characteristics and attributes comparable to the
Lake Eve Resort were identified and included in the sales comparison. The closest comparable property appears
to be the Sheraton Downtown Orlando property, which was recently acquired through foreclosure. The property
is similar in size and structure to the Lake Eve Resort, and is relatively close in proximity at 8.1 miles from the
subject property. M uch like the Lake Eve Resort, the Sheraton is a high-rise hotel property that offers a highly
desirable location; whereas the former resides in the highly traffic Tourist Corridor, the latter offers visitors the
ability to stay right in Downtown Orlando.
Because the Sheraton Downtown Orlando was acquired in an unconventional manner (via foreclosure), it can be
rationalized that the property has a significantly higher value than the $8MM purchase price. Realistically, in
today’s market this project is likely worth between 25% and 30% more than the acquisition price. This
adjustment, along with a major adjustment to compensate for the Sheraton parking garage, is reflected in the
Sales Comparison Report. From there, it was determined that the Total Adjusted Value for the Sheraton
Property was $10,093,500, or $34,805 per key.
The next closest comparable used in the analysis was the Renaissance Orlando Airport Hotel, in which 60% of
the shares were sold between the Joint Venture partners in January 2010. Although this was not a conventional
transaction, the estimated value of the property was $35MM. The Renaissance is located approximately 15
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12. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
miles from the subject property, but still offers a desirable location near the Orlando International airport;
although it was determined that that Tourist Corridor is still much more desirable than the Airport sub-market,
which was adjusted for, in addition to adjusting for some of the amenities that the Lake Eve Resort offers that
are not present at the Renaissance property. Because this transaction was not a typical arm’s length deal, the
sale price may not reflect fair market value. In fact, for the purpose of this analysis, it was assumed that the
property was overvalued by $1.2M which was adjusted accordingly. In total, the adjusted value for the
Renaissance was $34,613,500, or $116,153 per unit.
Lastly, this property valuation also include the Hampton Inn property in Altamonte Springs, FL which w as sold
in a conventional, arm’s-length transaction in September 2009. The comparable property serves as a great basis
because of the typical nature of the transaction, however the location (24.6 miles from the subject property), the
less desirable sub-market, the timing of the transaction, and the many differences between the properties
required significant adjustment to be comparable to the Lake Eve Resort. M ost notably, the property’s suburban
location and building style (Garden style) needed to be accounted for, in addition to the many lacking amenities
featured at the Lake Eve Resort that are absent at the comparable property. The total adjusted value for the
Hampton Inn was $11,947,500 or $56,893 per key.
The adjusted per unit values of the comparable properties were averaged together, equating to $69,284/unit.
Based on the 176 units at the Lake Eve Resort, the result of the Sales Comparison analysis is a value of
$12,054,226.02.
Cost Approach
The second analysis conducted to determine the current value of the Lake Eve Resort utilized the Cost
Approach. Using the RS M eans Building Construction Cost Data, 68th Edition, the subject property can be
valued based on the cost of reproducing or replacing the existing property with an identical, new construction.
The RS M eans Building Construction Data provided did not have construction costs for a hotel, however
because the Lake Eve Resort consists of 1, 2, and 3 bedroom suites, the High-Rise data was used.
Furthermore, two sets of data were considered: the first being the square feet cost to reconstruct the gross living
area ($115 per sq. ft.) and the second was to consider a per unit construction cost provided ($114,000/unit). It
was calculated that the Living Area of the hotel (comprised exclusively of the units) was 196,016 sq. ft., which
equates to $22,541,840 if reconstructed using the data provided. This does not account for the 153,984sq. ft. of
non-living areas, so it can be deduced that based on an itemized construction basis the value would be
significantly greater.
Alternatively using the per unit assessment, the 176 units tot als $20,064,000. Because the per unit cost also
includes the mechanical, electrical, and plumbing, the latter option was employ ed as it was more encompassing.
Similarly, the per unit cost does not take into consideration the net area that is uninhabitable or is service-based,
so the value could be even greater. However, given the general state of the economy, the cost of construction
may be inflated, especially as many contractors are doing work at minimal margins slightly above cost.
After accommodating for physical depreciation (calculated at 6.5%) and adding a value for the site and site
improvements, the estimated value of the Lake Eve Resort was determined to be $19,873,240.
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13. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
Income Approach
Lastly, the third analysis conducted to determine property value was the Income Approach. This methodology
analyzed the potential revenue and operating expenses of the income producing property, and used a terminal
capitalization rate to estimate value.
The formula to determine the terminal value used is:
Terminal Value (TV) = Net Operating Expenses / Terminal Capitalization Rate
To determine the terminal value required to first calculate the Net Operating Expenses (NOI). The formula for
calculating NOI is as follows:
Potential Gross Income (PGI)
- Vacancy & Collection Loss (VC)
= Effective Gross Income (EGI)
- Operating Expenses (OE)
- Capital Expenditures (CAPX)
=Net Operating Income
Potential Gross Income for the property was derived by determining the Average Daily Rate (ADR) per Room,
and then multiplying the ADR for each room (174 units) for 365 days to get the Potential Income from
Revenue. Profit and Loss (P&L) statements for M arch, April, M ay, and June which were provided, and
included additional sources of income such as: food & banquet, beverage, telephone, and other miscellaneous
income. The data for the months was averaged, and the revenue of the four month set was annualized to get
estimated yearly totals that were added to the Potential Gross Income.
M onthly occupancy rates were also provided for the aforementioned range of months, from which the monthly
vacancy and collection loss could be determined. Similarly, the average of the months were annualized and the
percentage of vacancy and loss was identified and applied to the Potential Gross Income to determine the
Effective Gross Income.
The P&L statements also included the operating costs for a variety of expenditures, as were Capital Expenditure
reserves, which were also annualized to identify Operating Expenses and CAPX. By subtracting the O E and
CAPX from the EGI, the resulting Net Operating Income could be established.
In reviewing the P&L statements for the Lake Eve Resort, the year-to-year occupancy rates were dras tically
increased from 2008 to 2009. This could be the result of being a new property that was recently opened, or the
fruits of better management for the property. As a result, it was difficult to extrapolate these same increases for
the following years. According to the Hotel Valuation Index (HVI), the Orlando M arket was identified as
having extremely low volatility in the market and project substantial increases in per-room value over the next 3
years, before tapering off to minimal increases. These values were then applied to the future net operating
income for the next five years to determine the Net Operating Expenses throughout the holding period, which
would ultimately result in a highly profitable hotel operation.
Additionally, the Hotel Valuation Index estimated that a property comparable to the Lake Eve Resort cou ld see
a capitalization rate of between 8 and 9%. Furthermore, the HVI estimated Discount Rate between 11% and
12.5% for this type of property.
13
14. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
Finally, after taking into consideration selling expenses and accounting for a Discount Rate, the Net Present
Value of the property was calculated to be: $19,763,339.
Final Reconciliation:
Each approach identified and applied herein relied heavily on the information and data that was either provided
or collected, however each also required considerable assumptions to be made by the evaluator. The Cost
Approach and the Income Approach resulted in values that were almost identical (less than 1% difference),
which is positive reassurance that the assumptions made were at least consistent. However, the results of the
Sales Approach would indicate that either the comparables were too grim, reflections of the tight credit market
and better positioning for qualified buyers, or the adjusted values were too conservative. As a result, there is no
clear and present methodology that is vastly superior than the other two, and the disparity between the Cost and
Income Approach with the Sales Approach indicates that an across-the-board averaging of the values would not
be prudent.
Instead, the property valuation was determined by weighing the three values in such a manner so that no one
method has a majority weight. Overall, the value from the Sales Approach was deeply discounted, while the
heaviest emphasis was placed on the Income Approach. The final, reconciled value for the Lake Eve Resort has
been estimated at an even $18,700,000.00.
Approach Indicated Value Weight (%) Weighted Value
Sales Comparison Approach: $ 12,054,226 15% $ 1,808,134
Cost Approach: $ 19,873,240 45% $ 8,942,958
Income Approach: $ 19,763,339 40% $ 7,905,336
Total: 100% $ 18,656,428
Value Rounded: $ 18,700,000
14
15. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
UNIFORM APPRAISAL REPORT
FEATURE SUBJECT COMPARABLE SALE NO. 1 COMPARABLE SALE NO. 2 COMPARABLE SALE NO. 3
Lake Eve Resort - 123888 Hampton Inn - 151 N. Douglas Ave., Altamonte Sheraton Downtown Orlando - 5905 Rennaisance Orlando Airport Hotel - 5445
International Dr. South Orlando, FL Springs, FL International Drive, Orlando, FL Forbes Place, Orlando, FL
Proximity to Subject: - 24.6 miles 8.1 miles 14.9 miles
Sale Price: $ 12,054,226.02 $10,000,000.00 $8,000,000.00 $35,000,000.00
Sale Price/Room $ 68,490 $47,619 $23,500 $114,460
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION +/- ADJUSTMENTS DESCRIPTION +/- ADJUSTMENTS DESCRIPTION +/- ADJUSTMENTS
Sale or Finance Concessions: Conventional Typical Foreclosure $3,000,000 Share sale to JV Ptnr ($1,250,000)
Date of Sale: Sept. 2009 $150,000 Dec. 2009 $75,000 Jan. 2010 $60,000
SALES COMPARISON APPROACH
Location/Submarket: Tourist Corridor Suburban $500,000 Downtown Airport $250,000
Design (Style): U-Shaped, High-Rise Mid-Rise $500,000 High Rise Mid-Rise $500,000
Laundry Equipment: Yes Yes Laundry/Valet Service $6,000 Valet Dry Cleaning $6,000
Available
Room Count: 176 210 290 298
Dining Area: Yes Yes Yes Yes
Bar Area: Yes No $250,000 Yes Yes
Meeting & Banquet Facilities: Yes Yes Yes Yes
Pool: Yes Yes Yes Yes
Parking Lot/Garage: Yes Lot Garage ($1,000,000) Lot
Spa: Yes No $20,000 Yes Yes
Children's Pool: Yes No $10,000 Yes No $25,000
Fitness Center: Yes Yes Yes Yes
Video Game Room: Yes No $5,000 Yes No $10,000
Business Center: Yes Yes Yes Yes
Pantry/Market Area: Yes No $2,500 No $2,500 No $2,500
Sun Deck: Yes No $10,000 No $10,000 No $10,000
Net Adjustment (Total): $ 1,447,500 $ 2,093,500.00 $ (386,500)
Adjusted Sale Price of Total Adjusted Value: $ 11,447,500 Total Adjusted Value: $10,093,500.00 Total Adjusted Value: $ 34,613,500
Comparables: Adjusted Value Per Room: $ 54,512 Adjusted Value Per Room: $ 34,805 Adjusted Value Per Room: $ 116,153
Net Adjusted Value: 14% Net Adjusted Value: 26% Net Adjusted Value: -1.10%
15
16. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
UNIFORM APPRAISAL REPORT
Estimated REPRODUCTION OR X REPLACEMENT COST NEW
Source of Cost Data: RS MEANS BUILDING CONSTRUCTION COST DATA, 68TH EDITION
COST APPROACH
(APARTMENTS -HIGH-RISE)
UNITS PRICE TOTAL
OPINION OF SITE VALUE $ 100,000 $ 440,000.00
Unit Cost per Guestroom 176 $ 114,000 $ 20,064,000.00
Total Estimate of Cost New: $ 20,504,000.00
Less Physical Functional External
Depreciation (6.5%) $ 1,332,760 $ - $ - $ 1,332,760.00
Depreciated Cost of Improvements: $ 19,171,240.00
"As-is" Value of Site Improvements 120,000 $5.85 $ 702,000.00
INDICATED VALUE BY COST APPROACH: $ 19,873,240.00
Site Area 4.4 Acres
Guestroom No. of Units Sq.Ft./Unit Subtotal Sq.Ft.
1-Bedroom 14 713 9,982
2-Bedroom 108 1,092 117,936
2-Bedroom Corner 28 1,172 32,816
3-Bedroom 26 1,357 35,282
176 Total Livable Area: 196,016
Option 1: Gross Living Area (Sq. Ft.) $115.00 $ 22,541,840
Option 2: Total Unit Cost per Guestroom $114,000 $20,064,000
16
18. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
III. Highest and Best Use Analysis
The 4.4 acre Lake Eve Resort property is currently zoned to allow various uses, including: office, retail, multi-
family, and hotel. As a raw, undeveloped property, the owner would have a fairly wide range of development
options to determine the ultimate use of the site.
The owner expects to get a 30 year mort gage at 6.0%, for 60% of the development costs (60% loan-to-value
ratio), with 3.0% in total up-front financing costs and selling expenses of 3.0%.
All evaluations used constants for the Orange County, FL Property Tax M illage Rate for 2010 (21.3255), as
well as the assessed value which was estimated at 90% of the sales price.
Furthermore, all analyses included an ordinary income tax of 30%, a capital gains tax rate of 15%, and a
Depreciation recapture tax rate of 25%.
The highest and best use for the property would ultimately be determined based on the development that has the
greatest Internal Rate of Return (IRR), the highest Net Present Value (NPV), using the market rents, vacancies,
and terminal capitalization rates identified in the M arket Analysis included herein. The Discount Rate us ed was
11.75% per the Hotel Valuation Index report used for the property valuation included as section II of this report.
Option 1: 4-S tory, 150-unit multi-family apartment complex
The first development option analyzed was a multi-family apartment complex, consisting of 50 studio
apartment units (500 sq.ft.), 50 one-bedroom units (700 sq.ft.), and 50 two-bedroom units (1,000 sq.ft.). The
market for apartment units in the Orlando region is relatively strong, and as inventory in the marketplace
dwindles there is a strong potential for increased demand. Currently, apartment rents in the area range around
$0.90/sq.ft. For this analysis a slight premium was placed on the one-bedroom apartments, with a slight
discount on the studio apartments, therefore the resulting rental rates were: Studio: $425.00/mo; One-Bedroom:
$665.00/mo; Two Bedroom: $900.00/mo. Assuming zero vacancies, the potential income from rents for the
apartment complex would be $1,194,000.00/year. However in reality the current occupancy rate for apartments
in the region is around 94%, and as demand in the area increases the vacancy will decline while rental rates
should increase.
According to the RS M eans Construction Cost data, the approximate cost to construct a low-rise apartment
building is $94,000 per unit. For this development proposal, the total estimated cost of the building would be
$14,100,000. The owner is expecting a loan-to-value of 60%, therefore the initial equity required would be
$5,460,000.
Operating expenses for the property were estimated to be around 20% per year, with an additional 5% reserved
for Capital Expenditures. Annual revenue growth was projected at 5%, reflecting slight increases in demand,
while operational expenses were estimated to increase by 3% annually, consistent with inflation.
Ultimately, this development option proposes the smallest IRR, at approximately 7%. The most likely reason
behind the very low return is the fact that the development costs are quite high compared to the annual rents
received, and the holding period is quite short. As a long-term investment, this option would make sense as it
generates a positive cash flow annually, but as a short-term investment the returns are simply not there.
18
19. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
Option 2: Single-story, 50,000 sq. ft. retail shopping center
The retail market in the Orlando region is quite bleak, particularly in submarkets that are less desirable or have
centers without an anchor tenant, which the Lake Eve property would likely be considered. These areas can
expect rent rates as low as $4.00/rsf for large boxes, and as low as $8.00/rsf for smaller users. Fortunately, over
the next few years the market is expected to recover.
For the purposes of this analysis, and for simplicity, the revenue for the shopping center was based only on the
base rent per square foot that was used ($8.00/sf) for a Potential Gross Income of $400,000 per y ear, however
there would be potential for additional income revenue if there is a percentage share in the lease between the
Tenant and Landlord. As the economy improves, that would result in more sales for the tenants, and a percent of
those overages would result in a greater Effective Gross Income.
Vacancy in the region remains high, estimated at around 25%, with higher vacancy the landlord would be
responsible for a greater portion of the Operating Expenses, which were estimated at 20%, and Capital
Expenses estimated at 2%.
The estimated development costs for a retail shopping center were estimated at $82.50 per square foot,
according to RS M eans Building Construction Data, for a total development cost of $4,125,000. Despite lower
occupancy levels and higher Operating Costs, this development proposal could achieve a Net Operating Income
of around $2.7M . Assuming that there will still be lower demand for partially -stabilized shopping centers in five
years, the terminal cap rate was set at 10%.
Based on the NOI of approximately $105,000 and a capitalization rate of 10%, the sale of this property would
be around $1,107,500 which, after selling costs, would not be enough to cover the balance of the loan ultimately
resulting in the owner having to bring a check to settlement in the amount of $588,417. While there is upside
through decreased vacancy and percentage share arrangements with the Tenants, the short-term sale of this
property does not seem to make any sense.
Option 3: High-Rise 500,000 sq.ft. office building with two levels of underground parking
Like most markets throughout the country the Class A office market in Orlando has been impacted by the
declining economy, resulting in high vacancy and low absorption rates, with little sign of improvement in the
near future. This is especially pronounced in many suburban submarkets, including the Tourist Corridor
submarket that the Lake Eve Resort is located. In fact, the Tourist Corridor has even more office inventory than
the CBD district for Orlando, and has even higher rent rates! The asking price for Class A office space in the
Tourist Corridor is $23.33/sq.ft.
Evaluating this proposal option, the high supply of existing office space and absurdly high rent rates would
result in an even higher-than-normal vacancy rate which was estimated at 35%.
Development costs for a high-rise office building are quite expensive, and are estimated at $150/sq.ft. for a total
of $75M in construction costs. Adding two levels of underground parking garage (approximately 84,000 sq.ft.
Total) would increase the total construction cost to over $82M . The owner would be responsible for more than
$33,000,000.00 in equity to cover the 60% LTV.
Aside from high vacancy, the biggest detriment to this development option is the exorbitant debt service.
Because of the high construction costs, the annual payment toward the mortgage is $3.6M , which means that
great than 50% of the revenue from the rents will go toward paying down debt on the property.
19
20. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
On the positive side, there has been an increase in sales activity of office buildings in the Orlando M arket,
which would result in a better terminal capitalization rate for the sale of this property, estimated at 8%. It was
estimated that the proceeds from this sale of this property, if developed, would result in a profit. The estimated
IRR would be 12%, but the high amount of equity involved up front makes the project an unattractive
proposition. However, the influx of $82M in construction costs could help to create many jobs and stimulate the
local economy.
Option 4: 8 story, 180-unit Hampton Inn
The fourth development option considered was to develop the property as a Hampton Inn hotel with 180 guest
rooms. Considering the close proximity to major tourist attractions including the Walt Disney World Resort and
Sea World Orlando, it is no surprise that this development option had the greatest IRR and NPV.
Hotel occupancy in Orange County increased in 2010 by 4.6% from the previous year, resulting in a vacancy
rate of 30%, with an Average Daily Rate of $100.42. As the economy continues to improve, the volume of
tourists to the area will inevitably recover, and vacancies should decline while providing for increased room
rates.
According to the RS M eans Construction Data, the cost to construct a high rise apartment was used to
determine the development costs. At $115 per square foot, the 110,000 sq.ft. Hampton Inn would cost $12.65M
to build, of which the owner would only have to provide $5M .
As tourism increases in the area, the demand for existing hotel properties will also increase, making the
proposition of selling the development after five years an attractive option. Considering a Cap. Rate of 8%, the
market value of this project is estimated to be around $25M . The initial equity investment of $5M , would result
in an IRR of 89%, and a Net Present Value of almost $24,732,000.
Option 5: Mixed-Use Development
The Hampton Inn proposal was hands-down the best option, although the other three proposals offered some
value as development options, but were limited by the struggling economy and oversupply of their respective
markets. A fifth option considered was a mixed-use development consisting of first floor retail (50,000 sq.ft.),
second floor Class B office (50,000sq.ft.), and multi-family apartments on the third and fourth floors (75 units).
While the marketplace may not be able to sustain the volume of space proposed as separate uses, in smaller
supply they may be absorbed faster into the market place. Plus, the lack of comp arable properties in the area
could result in a novelty that would be desirable to future tenants, and to potential buyers of mixed-use
properties.
Lastly, by capitalizing on synergies that can be created among the different uses and users, resulting in lower
vacancies and operating costs. Furthermore, by diversifying the mixture of tenants, the property as a whole may
be able to better sustain wholesale changes in the economic landscape. Because of these three factors, the
terminal capitalization rate for this property was slightly better than the previous development options, with an
estimated Cap Rate of 7%.
The IRR for this option was calculated to be 16%, which is greater than constructing only office, multi-family
apartment, or office space, with an NPV of $1,065,440.
20
21. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
Summary:
In conclusion, the best development proposal is unequivocally the 180-unit Hampton Inn, which offers the
developer a much better Internal Rate of Return, has a better Net Present Value, and requires the 3 lowest
amount of equity.
Second to the hotel option is the development of a mixed-use property that combines retail, office, and
apartments. Although the return is not nearly as great, the novelty of the product types and the variety offered
provides it with tremendous upside.
Lastly, if the owner was not interested in selling the property within five years and instead was looking to
provide a legacy property for their heirs, than the multi-family apartment component could be an attractive
development option that results in a reliable source of income.
Use IRR NPV Proceeds from Sale Equity
Hotel: 89% $24,731,846.85 $ 18,694,062.80 $5,060,000
Mixed-Use: 16% $1,065,440.63 $ 224,780.96 $7,470,000
Office: 12% ($51,416.58) $ 16,361,675.72 $33,083,333
Apartment: 7% ($423,000.00) ($4,038,269.82) $5,640,000
Retail: 2% ($533,985.54) ($588,417.49) $1,650,000
21
22. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
OPTION 1: MULTI-FAMILY APARTMENTS
INT 11.75%
NPV ($812,603.15)
Year 0 1 2 3 4 5
Annual Cash Flow $ (5,640,000) $ 1,122,360 $ 1,178,478 $ 1,237,402 $ 1,299,272 $ 1,364,236
Financing Costs $ (423,000)
Property Taxes $ (3,044) $ (3,044) $ (3,044) $ (3,044) $ (3,044)
Operating Costs $ (15,761) $ (16,234) $ (16,721) $ (17,222) $ (17,739)
Debt Service $ (614,610) $ (614,610) $ (614,610) $ (614,610) $ (614,610)
Before-Tax Cash Flow $ 488,945 $ 544,591 $ 603,028 $ 664,396 $ 728,843
Tax Liability $ 146,684 $ 163,377 $ 180,908 $ 199,319 $ 218,653
Reversion Value $ 1,585,972
$ (6,063,000) $ 342,262 $ 1,252,558 $ 1,386,963 $ 1,528,111 $ 3,262,311
Unit Type Sq.Ft./Unit Rents/SF Rents QTY Total Potential Rents
Studio Units: 500 $0.85 $425.00 50 $21,250.00
1-Bedroom Units: 700 $0.95 $665.00 50 $33,250.00
2-Bedroom Units: 1000 $0.90 $900.00 50 $45,000.00
Monthly PGI: $99,500.00
Low-Rise Apartment Annual: $1,194,000.00
RS Means Construction Data: Vacancy (6%) $71,640.00
Low-Rise Apartment $94,000.00 per unit Net Income: $1,122,360.00
Total Units: 150 units Operating Costs: 20%
Total Construction Cost: $14,100,000 Capital Expenditures: 2%
Total Development Costs $14,100,000
Equity $5,640,000
Terminal Cap Rate 8.0%
Sales Price $1,585,972
Loan Terms: Financing Costs $423,000
LTV 60%
INT 6.00%
Terms 30 year, fixed
Year: 1 2 3 4 5
Initial Balance: $ 8,460,000 $ 8,352,990 $ 8,239,560 $ 8,119,324 $ 7,991,873
Payment: $ (614,610) $ (614,610) $ (614,610) $ (614,610) $ (614,610)
Interest Portion: $ 507,600 $ 501,179 $ 494,374 $ 487,159 $ 479,512
Principal Contribution: $ 107,010 $ 113,430 $ 120,236 $ 127,450 $ 135,097
Ending Balance: $ 8,352,990 $ 8,239,560 $ 8,119,324 $ 7,991,873 $ 7,856,776
Net Sale Proceeds: Property Taxes:
Selling Price: $1,585,972.09 Orange County: 4.4347
Selling Costs: $47,579.16 Fire 2.2437
Net Sales: $1,538,393 Sheriff: 1.8043
Remaining Balance: $ 7,856,776 School State 5.396
Before-Tax Equity Reversion $ (6,318,382.94) School Local: 2.498
Capital Gains Tax: $ (1,895,514.88) Library: 0.3748
Depreciation Recapture (25%) $ 384,598.23 South Florida WMD: 0.624
Proceeds $ (4,038,269.82) Lake Buena Vista: 3.95
Total: 21.3255
NPV: ($423,000.00)
IRR: 7% Assessed Value Rate: 90%
Property Value: $1,585,972
Taxable Value: $1,427,374.88
Millage Rate: 0.00213255
Property Taxes: $3,043.95
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23. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
OPTION 2: RETAIL SHOPPING CENTER
INT 11.75%
NPV ($533,985.54)
Year 0 1 2 3 4 5
Annual Cash Flow $ (1,650,000) $ 300,000 $ 315,000 $ 330,750 $ 347,288 $ 364,652
Financing Costs $ (123,750)
Tenant Improvements $ (3,000) $ (3,150) $ (3,308) $ (3,473)$ (3,647)
Property Taxes $ (1,889) $ (1,889) $ (1,889) $ (1,889)$ (1,889)
Operating Costs $ (66,000) $ (67,980) $ (70,019) $ (72,120)$ (74,284)
Debt Service $ (179,806) $ (179,806) $ (179,806) $ (179,806)$ (179,806)
Before-Tax Cash Flow $ 49,305 $ 62,175 $ 75,728 $ 89,999 $ 105,026
Tax Liability $ 14,791 $ 18,652 $ 22,718 $ 27,000 $ 31,508
Reversion Value $ 1,107,488
$ (1,773,750) $ 34,513 $ 143,001 $ 174,174 $ 206,998 $ 1,349,048
Unit Type Sq.Ft. Rents/SF Total Potential Rents
Retail Shopping Center 50,000 $8.00 $400,000.00
RS Means Construction Data: Vacancy 25%
Retail $82.50 per sq.ft. Vacancy Losses: $100,000.00
Total Office Space: 50,000 sq. ft. Net Income: $300,000.00
Total Construction Cost: $4,125,000 Tenant Improvements 1%
Operating Costs: 20%
Capital Expenditures: 2%
Total Development Costs $4,125,000
Equity $1,650,000
Loan Terms: Terminal Cap Rate 10%
LTV 60% Sales Price $1,107,488
INT 6.00% Financing Costs $123,750
Terms 30 year, fixed
Year: 1 2 3 4 5
Initial Balance: $ 2,475,000 $ 2,443,694 $ 2,410,510 $ 2,375,334 $ 2,338,048
Payment: $ (179,806) $ (179,806) $ (179,806) $ (179,806) $ (179,806)
Interest Portion: $ 148,500 $ 146,622 $ 144,631 $ 142,520 $ 140,283
Principal Contribution: $ 31,306 $ 33,184 $ 35,175 $ 37,286 $ 39,523
Ending Balance: $ 2,443,694 $ 2,410,510 $ 2,375,334 $ 2,338,048 $ 2,298,525
Net Sale Proceeds: Property Taxes:
Selling Price: $1,107,488 Orange County: 4.4347
Selling Costs: $ 33,224.63 Fire 2.2437
Net Sales: $ 1,074,263.06 Sheriff: 1.8043
Remaining Balance: $ 2,298,525 School State 5.396
Before-Tax Equity Reversion $ (1,224,261.79) School Local: 2.498
Capital Gains Tax: $ (367,278.54) Library: 0.3748
Depreciation Recapture (25%) $ 268,565.76 South Florida WMD: 0.624
Proceeds $ (588,417.49) Lake Buena Vista: 3.95
Total: 21.3255
NPV: ($533,985.54)
IRR: 1.7% Assessed Value Rate: 80%
Property Value: $1,107,488
Taxable Value: $885,990.15
Millage Rate: 0.00213255
Property Taxes: $1,889.42
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24. LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
OPTION 3: HIGH-RISE OFFICE
INT 11.75%
NPV ($51,416.58)
Year 0 1 2 3 4 5
Annual Cash Flow $ (33,083,333) $ 7,582,250 $ 7,961,363 $ 7,961,363 $ 7,961,363 $ 7,961,363
Financing Costs $ (2,481,250)
Tenant Improvements $ (75,823) $ (79,614) $ (79,614) $ (79,614)
$ (79,614)
Property Taxes $ (90,018) $ (90,018) $ (90,018) $ (90,018)
$ (90,018)
Operating Costs $ (3,184,545) $ (3,280,081) $ (3,378,484) $ (3,479,838)
$ (3,584,233)
Debt Service $ (3,605,202) $ (3,605,202) $ (3,605,202) $ (3,605,202)
$ (3,605,202)
Before-Tax Cash Flow $ 626,662 $ 906,447 $ 808,045 $ 706,690$ 602,295
Tax Liability $ 187,999 $ 271,934 $ 242,413 $ 212,007$ 180,689
Reversion Value $ 52,764,281
$ (35,564,583) $ 438,664 $ 2,084,829 $ 1,858,503 $ 1,625,388 $ 54,149,560
Unit Type Sq.Ft. Rents/SF Total Potential Rents
Office Building W/Underground Garage 500,000 $23.33 $11,665,000.00
RS Means Construction Data: Vacancy 35%
Office $150 per sq.ft. Vacancy Losses: $4,082,750.00
Total Office Space: 500,000 Net Income: $7,582,250.00
Office Construction Cost: $75,000,000 Tenant Improvements 1%
Garage: $92.50 per sq.ft. Operating Costs: 40%
Space per floor: 41,666.67 Capital Expenditures: 2%
Garage Total: 83,333.33
Garage Cost: $ 7,708,333.33
Total Construction Costs: $82,708,333.33 Total Development Costs $82,708,333
Equity $33,083,333
Loan Terms: Terminal Cap Rate 8%
LTV 60% Sales Price $52,764,281
INT 6.00% Financing Costs $2,481,250
Terms 30 year, fixed
Year: 1 2 3 4 5
Initial Balance: $ 49,625,000 $ 48,997,298 $ 48,331,933 $ 47,626,647 $ 46,879,044
Payment: $ (3,605,202) $ (3,605,202) $ (3,605,202) $ (3,605,202) $ (3,605,202)
Interest Portion: $ 2,977,500 $ 2,939,838 $ 2,899,916 $ 2,857,599 $ 2,812,743
Principal Contribution: $ 627,702 $ 665,364 $ 705,286 $ 747,603 $ 792,460
Ending Balance: $ 48,997,298 $ 48,331,933 $ 47,626,647 $ 46,879,044 $ 46,086,584
Net Sale Proceeds: Property Taxes:
Selling Price: $52,764,281 Orange County: 4.4347
Selling Costs: $ 1,582,928.42 Fire 2.2437
Net Sales: $ 51,181,352.25 Sheriff: 1.8043
Remaining Balance: $ 46,086,584 School State 5.396
Before-Tax Equity Reversion$ 5,094,768.08 School Local: 2.498
Capital Gains Tax: $ 1,528,430.43 Library: 0.3748
Depreciation Recapture (25%) 12,795,338.06
$ South Florida WMD: 0.624
Proceeds $ 16,361,675.72 Lake Buena Vista: 3.95
Total: 21.3255
NPV: ($51,416.58)
IRR: 12% Assessed Value Rate: 80%
Property Value: $52,764,281
Taxable Value: $42,211,425
Property Taxes: $90,017.97
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![LAKE EVE RESORT, ORLANDO, FL FEAS IBILITY S TUDY
I. Market Analysis
Area Overview
Lake Eve Resort is located within Orange County, FL just minutes from downtown Orlando, an area that is
world renowned as a destination location for tourists. Orlando is arguably best known for its most popular
attraction and largest employer, Walt Disney World Resort, however the central Florida location, tropical
climate, and affordable cost of living [Table 1] has lead to significant increases in population and major
investments by employers. From 1990 to 2009, population in the region increased by over 42%, and increase of
almost 900,000 people. Within the next five years, the population in the Orlando region is expected to increase
an additional 10.8% [Table 2].
Lake Eve Resort is located on International Drive with convenient access to Interstate 4, the Florida Turnpike
(I-417), and is within 10 minutes to many of the areas most popular attractions including Walt Disney World
Resort, SeaWorld Orlando, Universal Orlando Resort. Additionally, Lake Eve Resort is less than 15 miles from
the Orlando International Airport (the 11 th busiest airport in the nation), and less than 20 minutes from
Downtown Orlando. Additional airports in the region include the Orlando Sanford International Airport (3rd
most active international airport in Florida), Kissimmee M unicipal Airport, Leesburg International Airport, and
M id-Florida Airport. Lake Eve Resort is less than 1 hour from Port Canaveral, FL – a popular port for
launching cruise ships.
Orlando will soon be home to a new commuter rail system, SunRail, and the nation's first high speed rail system
linking Tampa and Orlando.
Regional Economy
The tourism and hospitality industry is without question the most prominent component of the economic engine
in the Orlando market, employing over 110,000 employees in the region as well as providing a major influx of
consumers and income from outside of the area [Table 3]. Fortunately, the tourism industry’s resilience has
been better than most nationwide. According to the Cushman and Wakefield 2Q10 Office Report, the largest
employment gains from January through M ay 2010 occurred in the lifestyle and hospitality industry, which
gained 16,800 new jobs during that time frame.
However, the regional economy is comprised of much more than M ickey M ouse, as more than 150 international
companies, representing approximately 20 countries, have facilities in M etro Orlando. In actuality, the region
boasts significant growth in several industries, with special attention to technological research and development,
and a booming health care industry [Table 4].
According to the Orlando Economic Development Commission, M etro Orlando has a rapidly growing $13.4
billion technology industry employing 53,000 people, and has nationally recognized clusters of innovation in
digital media, agritechnology, aviation and aerospace, and software. Industry giant Electronic Arts - the world's
leading independent developer and publisher of interactive entertainment software - creates some of the world's
top-selling games in M etro Orlando, including the popular M adden NFL Football, NCAA Football, Tiger
Woods PGA Tour and several other game series.
M etro Orlando has the 7th largest research park in the country (Central Florida Research Park) with over 1,025
acres. It is home to over 120 companies, employs more than 8,500 people, and is the hub of the nation’s military
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