2011 Kootenai County Market Forum

Retail
Pat Eberlin
Agenda
• Project Updates
• Kootenai County Retail Sales
• Current Vacancy Rates
• Current Asking Rents
• Taxable Retail Sales
• 2010 Overview
• 2011 Forecast & Recommendations
The Pointe at Post Falls
EXPO at Post Falls
Love’s Travel Center (10 Acres)

Starting Construction March 2011
Pointe at Post Falls

- Cabela’s
- Wal-Mart
Future Beck Rd. Interchange

2012 Estimated Completion
I-90 Exit 2
Pleasant View Rd. Interchange
(46,000+ CPD 2006)
Riverbend Commerce Park

Spokane River
Post Falls Factory Outlet
Riverstone Buildings B & C
Riverstone
Riverstone Phase 1
Parkwood Business Properties
Prairie Shopping Center
Prairie Shopping Center
Silver Lake Mall
GVD
Hayden Walmart
Winco
Winco
Kootenai County Retail Sales Volume
• $8.3 Million (Recorded in MLS)
• 15 Closed Transactions
Kootenai County Retail Vacancy
Overall Retail Vacancy = 8.72% | 7.7 Million Sq. Ft. Surveyed

Absorption
Kootenai County Overall Retail Vacancy
10
Positive
9 Absorption
8
Percent
5
2009 2010
Current Asking Rents
Class A Buildings Class B Buildings Class C Buildings
•Prime locations •Slightly older buildings •Functionally obsolescent
•Newer buildings •Good locations •Older neighborhoods
•$15 - $20 per SF NNN •$9 - $12 per SF NNN •$6 - $9 per SF NNN
•All rates quoted annually

•NNN = Tenant’s pro-rata share of common area maintenance,
property taxes, insurance, and other operating expenses
Taxable Sales
Taxable Sales
$1,300,000,000
$1,200,000,000
$1,100,000,000
$1,000,000,000
$900,000,000
$800,000,000
2010 Overview
• Tenants Using Negotiation Leverage
• Asking Rents vs. Actual Rents
• Infill/Grocery Anchored Retail Performance
• Net Positive Absorption
• Limited New Construction
• Local Taxable Sales Down
• National Taxable Sales Up
• 2010 Turning Point
2011 Forecast and Recommendations
• Tenant Retention and Creativity Key
• Reality Check
• Rent Concessions & Tenant Improvements
• Hands on Approach
• Consumer Confidence on the Rise
• Challenges vs. Opportunity
Thank You
For Slides
• Email pat@cbcsr.com
• Visit www.cbcsr.com
Office
Craig Hunter, CCIM
Class “A” Office Class “B” Office Class “C” Office
•Quality of construction •Slightly older buildings •Functionally obsolescent
•Newer buildings •Good locations •Older neighborhoods
•$16 - $21 + NNN •$10 - $16 + NNN •$6 - $10 + NNN
•NNN Charges $4-$6/sf •NNN Charges $3-$5/sf •NNN Charges $2-$4/sf
•All rates quoted annually

•NNN = Tenant’s pro-rata share of common area maintenance,
property taxes, insurance, and other operating expenses
$17.36
$15.99 $14.39
$5.52
3,835,854 Total SF Surveyed
Coeur d’Alene
Total Sq.Ft.
Post Falls
Rathdrum
Hayden
% Vacant 5% 10%
600 N. Thornton Street 8680 Wayne Boulevard
Post Falls, ID 83854 Coeur d’Alene, ID 83815
17,000 Square Feet 7,686 Square Feet
122 E. Poplar Avenue 1336 W. Kathleen Avenue
2204 Ironwood Place 311 E. Mullan Avenue

Moody’s/REAL Commercial Property Price Index (CPPI)
National – All Property Type Aggregate
200 Based on data through the end of October 2010
180
Index, December 2000 = 100
160
140
120
100
80
2204 Ironwood Place, Coeur d’Alene, Idaho
180
160
140
120
100
80
180
160
140
120
100
80
180
160
140
120
100
80
180
160
140
120
100
80
180
160
140
120
100
80
180
160
140
120
100
80
10%
9%
7.88%
8%
7%
6% 5.39%
5.13% 5.23%
5% 4.45%
4%
3.25%
3%
2.02% 2.03%
2%
1%
0.26% 0.26%
0%
WSJ Prime 1 Mo. LIBOR 3 Mo. LIBOR 5 Yr. Treasury Federal Home
Loan Seattle
"Bullet" Index
2006 Today
Thank You
For Slides
• Email craig@cbcsr.com
Multi-Family
Glenn Sather
• Where we are today
• Trends for tomorrow
Where we are today
Where we are today
New Construction Permits
Kathy Reed House
Trends for Tomorrow
Demographics
• Larger Tenant Pool
Supply
• Less Apartment Stock
Economy
• More Household Formations
Thank You
For Slides
• Email glenn@cbcsr.com
Industrial/Flex-Tech
Dani Kramer, CCIM
Industrial Market – Kootenai Vs. Spokane
Know Your Competition
Kootenai Vs. Spokane
•The state of Idaho does not have an estate tax. The state of
Washington has an estate tax with the rate ranging from 10% to
19% based upon a taxable estate value range of $0 to $9 million
and above (with some exemptions and deductions available)
•Sales/use tax in Kootenai County is 6%, Spokane Valley

Washington is 8.7%
Source: Jobs Plus, Inc., State of Idaho, State of Washington, taxfoundation.org, idahosif.org
•2008 figure – Idaho taxpayers pay $3,670 per capita in state and
local taxes compared to Washington taxpayers who pay $4,334
per capita
•Instead of a corporate tax system, Idaho is a flat 7.6% tax on all

corporate income, Washington levies the Business and
Occupations Tax, a gross receipt tax which is levied a various
rates by category
•Workers Compensation rates in Idaho are based on a per $100
of payroll. In Washington, rates are based on per hours worked.
Example of Potential Savings:
Idaho – CDA MSA Washington

Code 739000 Beer or Ale Dealer, Code 2105 Beer, Wine, Soft Drink
Wholesale, Drivers Distributor
$5.23 per $100 of payroll $1.2864 per hour worked
160 hours worked at $11.35/hr. = $1,816 160 hours worked = $205.83
18.16 x $5.23 = $94.98
Some Relocations to Idaho - 2010
•6875 W. Woodard, CDA •314 N. 3rd Street, CDA

•Coeur Lumber Group •Kira’s Kiss Deserts
•11,880 SF •Commercial baking company
•5,600 SF
Kootenai County – Lack of Large SF Inventory
EXPO Industrial – Post Falls
•No vacant warehouse/industrial

buildings
•Units available range from +-2,000
SF up to +-3,000 SF
Riverbend Commerce Park – Post Falls
•Operating at +-94% occupied
•No vacant industrial
buildings
•10,000 SF of office vacant
Warren K Industrial Park - Hayden
•4 buildings available for lease
•2 buildings available for sale
•All available buildings are less than 10,000 SF
Industrial Market – Kootenai Vs. Spokane
Larger/Older Industrial Park
•Over 120 companies

•Employees in excess of 4,500
people
•Over 4.5 million SF of space
•One of the largest business
and industrial parks in the
country
www.thepark.biz
Industrial Market – Spokane Vacancy Report
Industrial Vacancy – Historical Average
10.0%
9.0% 8.3%
8.1%
8.0%
7.0%
6.0% 5.5% 5.6%
Percentage
4.8% 5.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2005 2006 2007 2008 2009 2010
Year
Source: Mark Lucas, SIOR & Tracy Lucas, CCIM
Industrial Market – Kootenai Vacancy Report
Industrial Market – Vacancy vs. Absorption
2010 Industrial Market Rents - Kootenai
City Rental Rate Average Change from 2009

Newer Older
Post Falls $0.40 - $0.50 $0.30 - $0.40
Coeur d'Alene $0.35 - $0.45 $0.35 - $0.45
Hayden $0.35 - $0.45 $0.28 - $0.35
• All rates quoted monthly

• Modified Gross = Landlord pays for property taxes and building
fire insurance. The Tenant typically pays for all other operating
expenses.
Some 2010 Industrial Sales
1016 W. Hayden Ave., Hayden 10636 N. Government Way, Hayden

• 3,260 SF • 6,368 SF
• 0.33 Acres • 0.46 Acres
• Sold for $312,500 • Sold for $275,000
*MLS Statistics/Info
11836 N. Tracey Road, Hayden

• 6,880 SF
• 0.59 Acres
• Sold for $395,000
115/119 E. 3rd Ave., Post Falls 4909 W. Industrial Ave., CDA

• 11,486 SF • 6,840 SF
• 0.42 Acres • 0.96 Acres
• Sold for $383,250 • Sold for $287,500
Local Companies Expanding
- Industrial Market -
Kuma Stoves
Completed a 17,000 SF on Old Highway 95

*Picture is of their existing building on Hayden Ave.
LA Aluminum Casting Co.
•Added +-10,000 SF
•Total Facility is now
+- 30,000 SF
C & S Glass Company
New Building: +-8,500 SF
Accurate Molding Plastics
Total of 60,000 SF
Rocky Mountain Construction Group
Expanded into
additional 12,000 SF
Manufacturing Employment
Job Sector Employment Effect on Economy
Job Sector - For Every 100 Jobs
Personal & Service
Retail
Industrial/Manufacturing
0 100 200 300 400 500
Additional Jobs Created

Source: Alliance for American Manufacturing
Companies Adding Employees
Buck Knives
Empire Aerospace
Ground Force
Acquired – Knife River Property

CDA-MSA
5,000
4,800
4,600
4,400
4,200
Number of Jobs
4,000
3,800
3,600
2003
2004
2005
2008
2009
2010
2006
2007
Source: http://lmi.idaho.gov/Employment/NonfarmJobsCES/tabid/760/Default.aspx
Current Employment Estimates for Idaho: Manufacturing
Source: http://lmi.idaho.gov/Employment
Current Employment Estimates for Idaho: Manufacturing
0.08 % Change from January
0.06
0.04
0.02
-0.02
-0.04
-0.06
-0.08
-0.1
2006 2007 2008 2009 2010 Max Increase
Source: http://lmi.idaho.gov/Employment
Looking Forward to 2011 - Industrial Market
1. Rents will stabilize at lower rates
2. Vacancy will remain the same or

decrease slightly
3. Similar sales activity to 2010

Looking Forward to 2011 - Industrial Market
Life is ten percent what happens to

you and ninety percent how you
respond to it.
Lou Holtz
Thank You
For Slides
• Email dani@cbcsr.com
Investments
Mike King, CCIM
Thank You
For Slides
• Email mike@cbcsr.com
L
J obs
ocation
L
J obs
ocation
L
J obs
ocation
Coeur d'Alene MSA Employment
Recession
Coeur d'Alene MSA Private Employment
Coeur d'Alene MSA Government Employment
60,000
50,000
40,000
30,000
20,000
10,000
Source: Idaho Department of Labor

Coeur d'Alene MSA
Recession Population Employment
140000
120000
100000
80000
60000
40000

Coeur d'Alene MSA
Recession Labor Force Employment
75000
70000
65000
60000
55000
50000
45000

Driver’s License Surrenders
2000
1800
1600
1400 Arizona
1200 California
Colorado
1000
Montana
800
Nevada
600
Oregon
400 Washington
200
0
2002 2003 2004 2005 2006 2007 2008 2009
Kootenai County
Wayne County (Detroit)
Kootenai County
Spokane County
Los Angeles County
Pie I Have Eaten
Pie I Have Left

Looks like Pac-Man
Does not look like Pac-Man
CAP Rates
US CMBS Historical and Project Issuance
Commercial Real Estate Debt Maturities
$2,000
Billions
$1,800
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400 $500
$410
$200 $310
$0
2008/2009
2008/2009 2010
2010 2011 2012+
2012/2013
Sam Zell: “Wave of distressed
assets won’t come”
• Sept. 16th conference
– Interest rates are too low, banks holding on as
interest carry cost is very low
– Construction is at a standstill and not expected to
recover anytime soon
– Imbalance of supply & demand; still lots of money
chasing too few deals
Recommendations
• Lock in Loans
• Risk-Return Tradeoff
“Keep expectations low”
- Warren Buffett
Recommendations
• Lock in Loans
• Buy Land
Recommendations
• Lock in Loans
• Buy Land
• Jobs, Jobs, Jobs
Thank You
For Slides
• Email mike@cbsr.com
Essential Ingredients for Growth
No Pressure… no “diamond”
No Irritation… no “pearl”
No Struggle… no “butterfly”
No Endurance… no “perfection”
Author Unknown
Gross Domestic Product
Consumer Confidence
US Public Debt as % of GDP
Are you optimistic about 2011?
• Yes
• No
• Maybe
• Cautious
John Wooden
1910 - 2010
“His great strength was a knack for knowing

when and what to change, and when to
leave things be”
The Business Cycle
“Sometimes you have to just
grind it out to get to the
good times”
-Cal Ripkin Jr.
We are in the grind mode now!

It is a tenants’ market!
If you want them…

you have to pay to get them!
Region Banks
• Region has a number of quality banks
• Most have sufficient capital – some constrained
• Most must watch their concentrations in real estate
• Most still have some problem assets
• All have changed their underwriting fundamentals
Project valuations are lower
Loan to values 55% to 65%
Means more cash – equity
Lower leverage
Resulting in fewer projects being built
Typical Bank Loan Rating System
If a loan is rated:
#1 Loan - best of the best
#2 Loan - strong borrower
#3 Loan - average business or individual
#4 Loan - new business - signs of weakness
Ratings 5 through 8 are regulatory grades:

#5 “Other Mention” - temporary problems
#6 “Sub Standard” - major problems
#7 “Doubtful” - high probability that bank will not get money back
#8 “Loss” - get loan off the banks balance sheet
So, we had…
The Perfect Storm
• Vacancies are up
• Cap rates are up = lower project values
• Rental rates have fallen
• Loan requirements are more strict
• Regulators are tougher
• Rating agencies are down grading issues
Lake Coeur d’Alene
Lake Pend Oreille

Coeur d’Alene Public Library
Post Falls City Hall
Hayden City Hall
Sunshine Minting, Inc.
StanCraft Boat Company
Raycap, Inc.
Education Corridor
McEuen Field Master Plan
Coeur d’Alene Resort
Kroc Center

2011 Kootenai County Market Forum

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Retail

Love’s Travel Center (10 Acres)

Pointe at Post Falls

Future Beck Rd. Interchange

Riverbend Commerce Park

Overall Retail Vacancy = 8.72% | 7.7 Million Sq. Ft. Surveyed

•All rates quoted annually

•All rates quoted annually

2204 Ironwood Place 311 E. Mullan Avenue

200 Based on data through the end of October 2010

200 Based on data through the end of October 2010

200 Based on data through the end of October 2010

200 Based on data through the end of October 2010

200 Based on data through the end of October 2010

200 Based on data through the end of October 2010

200 Based on data through the end of October 2010

•Sales/use tax in Kootenai County is 6%, Spokane Valley

•Instead of a corporate tax system, Idaho is a flat 7.6% tax on all

Example of Potential Savings:

Idaho – CDA MSA Washington

•6875 W. Woodard, CDA •314 N. 3rd Street, CDA

•No vacant warehouse/industrial

•Over 120 companies

City Rental Rate Average Change from 2009

Post Falls $0.40 - $0.50 $0.30 - $0.40

Coeur d'Alene $0.35 - $0.45 $0.35 - $0.45

Hayden $0.35 - $0.45 $0.28 - $0.35

• All rates quoted monthly

1016 W. Hayden Ave., Hayden 10636 N. Government Way, Hayden

11836 N. Tracey Road, Hayden

115/119 E. 3rd Ave., Post Falls 4909 W. Industrial Ave., CDA

Completed a 17,000 SF on Old Highway 95

Personal & Service

0 100 200 300 400 500

Additional Jobs Created

Acquired – Knife River Property

1. Rents will stabilize at lower rates

2. Vacancy will remain the same or

3. Similar sales activity to 2010

Life is ten percent what happens to

Source: Idaho Department of Labor

Source: Idaho Department of Labor

Source: Idaho Department of Labor

Pie I Have Left

“His great strength was a knack for knowing

We are in the grind mode now!

If you want them…

Ratings 5 through 8 are regulatory grades:

Lake Pend Oreille

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