NAIOP UNIVERSITY CHALLENGE – 2016
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NAIOP UNIVERSITY CHALLENGE – 2016
Challenge Overview
Welcome to the 13th annual NAIOP Minnesota Chapter University Real Estate Challenge.
We appreciate your willingness to participate and look forward to seeing your
presentations. The committee has chosen Pentagon Park – South Parcel for this year’s
competition. The site, recently purchased by Hillcrest Development, reflects a complex
project with vast development potential.
The “challenge” is to act as a development consultant to determine the most profitable, yet
feasible, project. What would you choose to develop and why? The developer is looking for
a creative combination of one or more uses, while also generating the highest return and
greatest positive impact to the surrounding communities and stakeholders. You will still
need to perform a detailed market analysis to determine the appropriate amount of each
use that conforms to zoning regulations and respects site constraints, as well as generates
attractive returns on the invested equity.
To properly assess the site, you will need to answer the following questions:
1) What mix of product type(s) maximizes the value of the site and achieves the
highest risk-adjusted return for the developer?
2) What are the major strengths, weaknesses, opportunities and risks for this project?
For the detailed financial analysis section of this project (may be included in the appendix),
we would like you to include the assumptions and techniques you use to create your
analysis. This will help the judges understand your case study and findings.
Please keep in mind that there are multiple answers for the case question and you will be
judged on your ability to support your conclusions.
The written proposals will be limited to 10 pages. Outside of the proposal we also request
you submit a 1-2 page executive summary that highlights the main deal points. As a real
estate professional who is trying to pitch a deal to potential investors, it is important that
you know how to prepare a concise presentation that can be easily followed without your
audience losing interest. However, you must include enough detail to allow them to
accurately understand your vision for the site as well as analyze the deal.
We’ve included a list of general information that should be discussed in the proposal. We
suggest that you summarize the financial highlights in the report and include more detailed
financial analysis/proformas in the appendix.
1. Development plan
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2. Construction timeline
3. Budget
4. Leasing plan and schedule
5. Financing plan – debt (construction and permanent) and equity
6. Pro-forma
7. Market analysis
Please keep in mind that aside from any detailed financial analysis, any information
contained in the appendices will be considered supplementary and will not be used in the
overall scoring of the written proposal. In addition to the written proposal and verbal
presentation, you should also be prepared to answer questions from the judges pertaining
to any written statements, assumptions or conclusions included in your proposal.
In addition to your proposal and executive summary, we are requesting your team select a
“theme song” that will be used for your entrance at the formal event. There is also a simple
bio sheet we ask each team member to complete. The bios will be circulated to the
industry attendees in hopes that it will help add additional value by facilitating discussion
at the reception, and ideally leading to future internships or positions.
You have been provided a list of industry “experts” who have graciously volunteered their
time to assist you as you work through your development proposal. These volunteers are
available to help facilitate your research and answer any specific questions you may have
as you continue to prepare your development proposal.
Participants in the challenge will need to use the resources provided as well as their own
market research to prove their findings. We want you to treat this as a real consulting
assignment so it is necessary to stay within zoning, comprehensive planning, and legal
guidelines when choosing what to do with the site. Please do not call the City of Edina.
Any city related questions should be directed to Tom Whitlock (expert).
The 2016 NAIOP University Challenge presentation is scheduled for Thursday, April 14th,
2016 at the International Market Square in Minneapolis, MN. Accordingly, 10 copies of your
written case study, executive summary, theme song, and team bios will need to be
submitted to the NAIOP University Challenge committee no later than Tuesday, April 5th,
2016 so that we can forward them to the judges for review. Submissions may be made
electronically to stephen.davidson@cushwakenm.com on April 5th, with hard copies to
follow via overnight delivery to 3500 American Blvd W #200 - attention: Stephen
Davidson. We kindly request that proposals and executive summaries submitted do not
include school logos, colors or any other identifying words or symbols. We would like
to ensure that the judges are able to view the presentations from an unbiased perspective.
A single sheet that can be easily removed should be included with your written case study
to allow the committee members to identify packets.
The event format will again include pre-judging where each team will have 10 minutes to
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present their recommendation. The top three teams will present in front of the NAIOP
chapter later that afternoon. Once each school has given their presentation, we will have an
awards ceremony, and then a reception will be held allowing student teams to network
with local industry professionals.
Best of luck, and thank you for your participation!
2016 NAIOP University Challenge Committee
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Site Information
Aerials:
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Summary
Site Name:
Pentagon Park – South Parcel
Size:
Five Parcels
31-028-24-33-0010 (8.06 Acres – 351,131 SF)
31-028-24-33-0013 (.1 Acres – 4,177 SF)
31-028-24-33-0014 (1.79 Acres – 78,041 SF)
31-028-24-33-0015 (1.77 Acres – 77,094 SF)
31-028-24-33-0012 (.4 Acres – 17,400 SF)
Total: 12.12 Acres – 527,843 SF
Zoning:
PUD (Planned Unit Development)
Adjacent Uses:
Local Amenities:
Environmental
Considerations:
Land Cost:
Retail, office, hotel, industrial, multi-family
Local amenities include Fred Richards Park and Nine Mile Regional
Trail. The South parcel of Pentagon Park is situated at the landmark
intersection of Hwy 100 and I-494 in the Twin Cities. There is access
to nearly unlimited area amenities, restaurants, shops and
businesses. Its close proximity to metro transit and placement within
the city of Edina means a highly-connected and desirable work
destination.
Prior to demolition, asbestos was abated out of the buildings.
Crushed concrete from the buildings (clean) has been placed in the
subsurface/basement areas of the former building, and is available
for reuse on the site. No soil or groundwater contamination concerns
exist. Depth to groundwater ranges from about 6’-10’. Due to
extensive organic swamp deposits of mostly peat and some clay
(starting at 2’ below the surface), soils will need correcting and
structures placed on geotechnical piles.
$50 PSF
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Financial Analysis
For your financial analysis pro-forma, please assume the purchase price for the site is $50
PSF.
At a minimum, you will need to formulate assumptions for the following items in order to
complete the financial analysis that you will provide in your case study:
1. A projected development and lease-up schedule for each phase of your project
2. Initial Net Rent Rate based on market conditions
3. Average occupancy in Year 1 based on projected lease-up period (support based on
market absorption)
4. Net rental rate for lease renewal assumptions
5. Renewal probability
6. Vacancy allowance
7. Land development costs
8. Land interest
9. Construction/hard costs
10. Construction Interest
11. Tenant Improvements - Initial
12. Tenant Improvements - Renewal
13. Tenant Improvements - Replacement/New
14. Commissions - Initial
15. Commissions - Renewal
16. Commissions - Replacement/New
17. Development/soft cost interest
18. Debt -Percent Financed
19. Interest Rate
20. Other Sources of Equity or Reduction in Capital Needs (TIF, Grants, Tax Abatement,
etc.)
21. Sale - Cap rate
22. Costs of sale
23. Pre-Debt and Post-Debt Internal Rates of Return (IRR’s)
Please support your assumptions with market research!!!
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NAIOP UNIVERSITY CHALLENGE – 2016
Experts
Planning
Brokerage
Tom Whitlock
President
Damon Farber
612-332-7522
twhitlock@damonfarber.com
http://damonfarber.com/
Dan Gleason
Executive Director
Cushman & Wakefield/NorthMarq
952-893-8884
Dan.gleason@cushwakenm.com
www.cushwakenm.com
Tax Increment Financing
Commercial Lending
Bob Strachota/Heather Burns
President/Senior Public Finance and Valuation
Analyst
Shenehon/Shenehon
612-333-6533/612-767-9448
value@shenehon.com/hburns@shenehon.com
www.shenehon.com/www.shenehon.com
Gabe Philibert
Senior Vice President of Business
Bell State Bank & Trust
952-905-5035
gphilibert@bellbanks.com
https://www.bellbanks.com/
Construction
Rick Weiblen
VP, Development
Liberty Property Trust
952-833-5262
rweiblen@libertyproperty.com
https://www.libertyproperty.com/
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Judging Criteria
WRITTEN PROPOSAL CRITERIA
POINTS
Analysis of Market Opportunity
Understanding of relevant market data and external influences
Appropriate sourcing
5
Highest and Best Use Analysis
Market data obtained
Product types considered
Support for product type selected
10
SWOT Analysis
Understanding of competition
Assessment of strengths and weaknesses
Differentiating factors
10
Financial Analysis
Thorough project budget (land, hard and soft costs)
Market assumptions for income and expense
Annual operating pro forma(s) for project components
Assumed capital structure
Investment return analysis
15
Development Proposal Submittal Package
Concise, complete Executive Summary
Graphic presentation
Quality of written narrative
Appropriate supporting material/exhibits
15
Demonstrated Utilization of Outside Resources
5
Total Possible Points – Written
PRESENTATION CRITERIA
Oral Presentation
Involvement of team members
Quality of oral presentation
Quality, relevance of supporting graphics
Creativity in presentation
Professionalism
60
POINTS
10
20
Development Proposal Decision and Explanation (no right or wrong)
Conveyance of core points from written Proposal
Feasibility of project
Financial model and analysis
SWOT assessment
Q & A Response
Explanatory value of answers to questions offered
Anticipatory data or information available
10
Total Possible Points – Presentation
40
TOTAL OVERALL POSSIBLE POINTS
100
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Example Bio
You will receive a copy of this in PowerPoint, so you may simply change the pertinent
information.
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