Preliminary Market Overview [ Robert Lunz – Nicollet Partners]

1. Preliminary Market Overview[Robert Lunz – Nicollet Partners] 3M Community Advisory Committee 03.19.09

2. Wave of recent store closings (Circuit City, Linens ‘n’ Things, Wilsons Leather, etc.) • Poor retail sales forecasts • Focus on necessity retail uses vs. discretionary • Many retail chains have relatively convenient proximity • Given current market, sizeable (>11 acres) retail development not likely feasible Retail 1.0

3. Large-scale retail development is the most unlikely to be supported. • Ability of additional retail uses to succeed is dubious given the large amount of existing storefront retail along major arterials in the area. • Retail could be viable as a smaller ancillary addition to a mixed-use scenario. Retail 1.1

4. Major office development likely not supported. • Site would be competing against existing Downtown Class B (30.6% vacancy, NAIOP Office Report Nov 2008). • Adding the existing office SF, post renovation, to the Downtown Class B market would represent a +7.5% increase in the base amount of space in this class. Office 1.0

5. No evidence of a market of the magnitude necessary to use all 350,000 SF of space available (or that one could be created). • Multiple adaptations and “cures” would require large capital expenditures for properties still “out of their element in attracting office space users”. • Large government office use one possibility to use existing space. Office 1.1

6. Oversupply in housing market means a three to five year period before any substantial res’l project groundbreaking. • Initial smaller residential project could break ground in a short time frame. • Last 1½ years new residential development in core cities has halted, buyers have dried up. • Risk of rising interest rates is significant given the size of the site and a total build out 5-10+ years into the future Residential 1.0

7. If mortgage rates rise substantially, a market-rate rental apartment development may be feasible. • Large-scale multi-family to be built all-at-once not financially feasible for at least five years. • Any major ‘urban village’ development would require 5-7 year holding period and associated costs. Residential 1.1

8. Saint Paul lodging market already over built, no basis to expect any growth in room nights. • Difficult to finance hotel deals due to special purpose design and business-operation critical nature (and the current financial crisis). Hospitality 1.0

9. Industrial properties to date have maintained the best market conditions of all real estate investment types. • The three main industrial building types (bulk warehouse, office/warehouse, office/showroom) have had the least amount of occupancy/rental loss. • NE Submarket absorbed a ten-year high of 1,327,000 SF in 1999, and ten-year low of 243,000 in 2008. • Currently, no spec ind’l development and very little new ind’l development overall • Opportunity exists for well-planned industrial park. Industrial 1.0

10. Prospective Market Value