Proposed Downtown Redevelopment Project Overview

Transcription

1 Proposed Downtown Redevelopment Project Overview

2 NOTE - The next few pages provide a general overview of the proposed Navy Hill Redevelopment Project as of November 2, Following this general summary is the independent third-party analysis performed by Hunden Strategic Partners Inc. pursuant to a request made on behalf of the City by the City s financial advisor, Davenport & Company, LLC (the Hunden Analysis ). Please note that in the case of any discrepancy between this general overview and the Hunden Analysis in the description of the number of contemplated market rate housing units and the number of affordable housing units to be created by the proposed project, this general summary reflects the current status. Proposed Navy Hill Redevelopment Project Financial Overview Largest economic development project in Richmond history. o o Total Project investment approximates $1.4 Billion. Approximately $1.1 Billion investment in private development. Approximately $350 Million investment for public amenities - new arena, Blues Armory and significant public infrastructure. All bonds non-recourse to the City and at risk of private investors. Certain incremental revenues will be used to repay debt (for the public amenities only). No use of current City funds. No use of City CIP funds/debt capacity. No use of current City tax revenues. No use of 1.5% Meals Tax set aside for schools. Projected at an additional $34 Million for schools over 30 years. Projected to generate $1.7 Billion of incremental tax revenues over 30 years, which is $1.2 Billion greater than the projected amount of incremental tax revenues over that period due to natural growth (i.e., if the City does nothing). Community Benefits Overview Largest economic empowerment project in Richmond history. o Project will create at least 680 affordable housing units providing housing opportunities in the heart of downtown to low income families. 280 affordable housing units within the project development blocks. Coordination with RRHA for potential use of housing choice vouchers. 200 affordable housing units within the Increment Financing district via developer s commitment to raise $10 Million in charitable donation and partner with BHC. 200 affordable housing units within the Increment Financing district via dedicating a portion of surplus TIF funds for such purpose. 1

3 o o o Project will create at least $300 Million worth of contracts for MBEs/ESBs. Equivalent to the amount of business generated for MBEs/ESBs over the past decade of City procurements. Commitment to follow an Equal Business Opportunity Plan and to hire MBE coordinator. Projected to create 21,800 jobs 9,000+ permanent jobs. Focus on outreach/community engagement/training for Richmond residents. Project will provide space for a permanent GRTC transit center with amenities on ground floor of mixed-use development. Targeted location = Current surface parking lot bounded by E. Clay St., E. Leigh St., N. 8 th St., and N. 9 th St. Project Description o o o o o New state of the art arena Will be largest arena in Virginia. Renovated historic Blues Armory. Grand Ballroom on the 3 rd Floor will complement the new hotel to the benefit of GRCCA and tourism. Food Market on ground floor abutting a new public pedestrian plaza across former 6 th Street (current glass structure will be removed) from E. Marshall Street to a re-established E. Clay Street. New upscale 500+ key Convention Center Hotel. At approximately 23 stories, will be prominently visible as a new landmark in Richmond s skyline from I-64/I-95. Will include meeting space, conference facilities, restaurants, retail, a connection to Blues Armory, and a rooftop bar/restaurant. Commitment for hotel operator to execute a Room Block Agreement providing for availability of rooms to assist in attracting conferences and events. Significant infrastructure improvements (without use of City CIP funds or debt capacity) re-establishing connectivity to Jackson Ward and creating a walkable/new urban community. Raising of Leigh Street to grade. Re-establishment of Clay Street from 5 th Street to 10 th Street. Re-opening of 6 th Street from Marshall to Clay as a public pedestrian plaza. Neighborhood revitalization with over $1 Billion of private investment to develop underutilized/blighted property into a vibrant mixed-use community Million total sq. feet Million sq. feet for residential use 2

4 o Approximately 2,500 units Million sq. feet for commercial use o 625,000+ sq. feet office o 225,000+ sq. feet retail o 325,000+ sq. feet for convention center hotel o Benefits to environment and City utilities. All buildings in project will achieve LEED Silver or better. Coordination with DPU to enhance storm water retention in project area. All buildings in project will utilize natural gas from Richmond Gas Works. 3

5 Richmond North of Broad/Downtown Redevelopment Project Analysis Submitted to: Davenport & Company LLC, on behalf of the City of Richmond October 31, 2018

6 October 31, 2018 Davenport & Company LLC, on behalf of the City of Richmond RE: Richmond North of Broad/Downtown Redevelopment Project Analysis Dear Davenport & Company LLC, The Davenport & Company LLC, on behalf of the City of Richmond, engaged Hunden Strategic Partners, Inc. to conduct an economic, fiscal and employment impact analysis for the for the Richmond North of Broad/Downtown Redevelopment (Project) in Richmond, Virginia. The attached is our report. This deliverable has been prepared under the following general assumptions and limiting conditions: The findings presented herein reflect analysis of primary and secondary sources of information that are assumed to be correct. HSP utilized sources deemed to be reliable but cannot guarantee their accuracy. No responsibility is taken for changes in market conditions after the date of this report and no obligation is assumed to revise this report to reflect events or conditions occurring after the date of this report. HSP has no control over construction costs or timing of construction and opening. Macroeconomic events affecting travel and the economy cannot be predicted and may impact the development and performance of the project. We have enjoyed serving you on this engagement and look forward to providing you with continuing service. Sincerely, Hunden Strategic Partners

7 TABLE OF CONTENTS Executive Summary Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Project Profile Economic, Demographic & Tourism Analysis Arena, Event and Entertainment Market Analysis Hotel and Meetings/Convention Market Analysis Retail and Restaurant Market Analysis Residential Market Analysis Office Market Analysis Demand and Financial Projections Economic, Fiscal and Employment Impact Analysis

8 EXECUTIVE SUMMARY Purpose of the Report The Davenport & Company, LLC, on behalf of the City of Richmond, engaged Hunden Strategic Partners, Inc. to conduct an economic, fiscal and employment impact analysis for the Richmond North of Broad/Downtown Redevelopment (Project) in Richmond, Virginia. This mixed-use masterplan project spans a significant area within downtown Richmond and includes a breadth of traditional and specialty real estate uses included. This report will analyze the various aspects of the Project in relation to current market and future market conditions and determine what impact the development will have on the City of Richmond. The Project Davenport & Company, on behalf of the City of Richmond (Client), engaged Hunden Strategic Partners (HSP) to provide an economic impact assessment of the North of Broad / Downtown Redevelopment proposal (Project) on the City of Richmond. In this analysis, HSP analyzed the proposed Project, profiled current conditions within the relevant real estate marketplace, and estimated the amount of local tax revenues as part of an overall estimate of the economic, fiscal, and employment impact of the Project. Capital City Developers, LLC (Developer) plans to revitalize ten blocks of downtown Richmond and, as a result the surrounding area, through the development of the Project. The Project includes a new arena to replace the aging Coliseum, a headquarters hotel for the Greater Richmond Convention Center (GRCC), traditional and research office space, multi-family housing, student housing, retail, parking, a new GRTC transfer station, and the restoration of the historic Blues Armory. The estimated total development costs are $1.43 billion. Capital City Developers, LLC is a group formed by two development firms, Concord Eastridge, Inc. and Future Cities, LLC. Citi Group and JP Morgan Chase were selected as the investment banks to work with the Project by Capital City Developers. The NH Foundation, a group led by Tom Farrell (CEO of Dominion Energy), is a group of private investors prepared to put forth the equity for the development Project. The NH foundation was created specifically for this Project. NH stands for Navy Hill, the neighborhood where this development would take place. Specific components of the Project include: The development of a new arena (17,500 seats, to be managed by a third-party operator), The development of an upscale, full-service 527-key hotel (Hyatt Regency) with 40,000 square feet of conference space, to be the headquarters hotel for the GRCC, The restoration of the Blues Armory into a food market, music club (800 seats, managed by a third-party operator), and ballroom, The development of 790,000 square feet of office space, The development of 274,354 square feet of mixed-use retail space, The development of 2,659 market rate multi-family apartments, The development of percent affordable mixed-income apartment units, Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 2

9 The development of percent affordable mixed-income apartment units, The development of 4,396 parking stalls, A new GRTC Transfer Station The raising of Leigh Street to grade The goal of this Project is to revitalize the downtown neighborhood of Richmond north of Broad Street (Navy Hill). The Project also has the goal of reconnecting Jackson Ward to downtown, something that has been attempted in the past, but has been inhibited by Leigh Street sitting below grade. The MCV Campus of Virginia Commonwealth University (VCU) and the Virginia BioTechnology Research Park, both north across Leigh Street from the development site, are forces in the area bringing an increasing number of professionals to the central business district (CBD) north of Broad Street. Development such as is proposed in the Project aims to serve as a catalyst to keep these professionals downtown outside of working hours by offering residential options, as well as retail, entertainment and dining. Additionally, the office space planned, much of which is to be tailored for VCU research purposes, could serve to augment the already existing professionals in the area to absorb the new resources purposed in the Project. HSP understands that the final development program for the Richmond North of Broad/Downtown Redevelopment is still fluid. This study assumes that all proposed project components at the time of the analysis are developed. Minor adjustments to the development program will likely have no material impact on HSP s conclusions as long as major Project components and uses are not abandoned or the scope of the Project is not reduced. Market Analysis Key Observations The following list represents the key observations from each of the chapters. Arena, Event and Entertainment (Chapter 3) The existing Richmond Coliseum is very aged and does not satisfy the needs of the entertainment market, according to entertainment managers and event promoters. Coliseum s dated appearance and limited amenities causes it to lose top national entertainment acts. The regional competitive landscape is very crowded with higher quality, newer facilities, due to Richmond s proximity to Washington, D.C., Norfolk and Raleigh/Durham. Many national entertainment tours want to make Richmond a permanent stop between North Carolina and Washington, D.C., but will not with the Coliseum as the only large venue available. Without a new facility or other major investment, the performance of the Coliseum will continue to decline. There is a strong opportunity that with the proposed arena, Richmond could host a new professional sports franchise, likely the AHL. Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 3

10 Hotel and Meetings/Convention (Chapter 4) The Downtown Richmond hotel market s performance has been improving during the past five years, however it has not resulted in the development of a large convention hotel that can help to grow the convention market. The convention market will not realize its full potential until a headquarter hotel is developed for the GRCC. GRCC loses many groups due to lack of walkable hotel rooms and a walkable room block large enough to accommodate large events. The proposed headquarters hotel is what the market needs to better leverage the GRCC and optimize performance of existing and new hotels. Retail and Restaurant (Chapter 5) An overhaul of retail and restaurant opportunities and local consumer behavior is critical to creating a successful live-work-play-visit environment in downtown Richmond. Residents and day-time workers currently leave the area for shopping and dining due to lack of offerings, while store and restaurants hours of operations are very limited, creating a negative feedback loop. The influx of thousands of new residents and day-time workers from the proposed residential and office developments will demand and support more, better and more diverse shopping and dining options. Residential (Chapter 6) Residential properties in downtown Richmond have experienced improved performance in recent years with high average occupancy rates, steady rental rate growth and low concession rates. Synergy between residential, office and retail and restaurant uses is critical to the overall attractiveness of the Project and, ultimately, its performance. The increased day-time and around-the-clock foot traffic in the area due to an increased number of residents will be necessary to support stores and restaurants that will create a more attractive and vibrant entertainment district for visitors, as well. Office (Chapter 7) The downtown Richmond office market has gained popularity and improved performance in recent years. Despite this improved performance, only two buildings (of more than 300,000 square feet) have been developed in the past decade and only two large office buildings are currently proposed or under construction. New office buildings would be welcomed by the downtown Richmond market due to the aging inventory and lack of large, contiguous office spaces available for new tenants. Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 4

11 Tenants are beginning to move into downtown Richmond from the suburbs, but the issues mentioned above are squandering the existing demand and throttling additional demand from developing. Overall Commentary and Implications HSP s analysis was an independent effort to understand, assess and measure the likely success of the individual project elements, as well as the overall impact of the total Project. With any large, complex development, the value of the whole is often greater than the sum of the parts. HSP believes, after much research and assuming all of the elements are built in the quality and timing proposed, that this will absolutely be the case for this Project. The critical mass of activity created and induced by the Project is both needed and created by other elements. If individual elements were developed independently, nearly none would perform at the level expected as part of the larger critical mass. While this is a large financial risk for the developer, HSP s assessment suggests that there is significant upside for the City, not only in the form of more than $1 billion in net new taxes over 30 years, but the reignition of the event zone, via a new arena, revitalized convention package, new restaurants, retail, office and residential development. HSP measured the Project in three primary ways. First, the individual and total project feasibility was assessed. Supply, demand, quality, timing, absorption, competition and other elements were considered in order to make projections about how each element would likely perform, as individual elements and as part of the whole. The majority of the chapters of this study focus on one particular element of the Project and break down the key factors influencing their viability and impact. Second, the net new direct spending to Richmond by new residents, workers and visitors was projected for each element, including the one-time construction and ongoing operations. The assessment did not assume that all of the activity for the elements was new to Richmond (some spending is transfer spending). However, the analysis also recognized that new spending is induced to the market that would flow to non-project elements. A good example of this is the new convention delegates who stay at other hotels due to a new convention brought to Richmond due to the existence of the new headquarters hotel. But for this new hotel and better hotel package, the new convention would not have occurred, and therefore, new hotel stays at any Richmond hotel would not have occurred. The new direct spending results in indirect and induced spending, as well as new earnings and new full-time equivalent jobs supported in Richmond. The new taxable spending also results in new Richmond tax revenues, as well as revenues to the convention center authority. The third element of the assessment was the real estate tax implications from the Project. The Project elements themselves will be improving the taxable value on the parcels upon which the Project elements are built. This Project Zone is the most impacted by the Project in terms of direct incremental real estate tax. The primary impact zone includes the blocks directly adjacent to the Project blocks and will be positively influenced by the development. Vacant lots and surface parking lots are expected to be the current uses most impacted by the Project, as it makes it more likely that these underutilized parcels will be redeveloped into active buildings, creating new impact in the future. The secondary impact zone is the area just beyond the primary impact zone. It will likely see a positive impact, but much less so than the primary impact zone. HSP assessed all three zones and netted out the future likely real estate tax generation from a growing baseline of future real estate tax growth. The net result was an increment of new property taxes significantly higher than would have occurred but for the Project. Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 5

12 HSP s assessment of the feasibility and impact of the Project in all cases was different from those of the Developer. HSP s methodology and conclusions were independent and unique and led to different results. The assessment and projections here are conservative and leave significant opportunity for upside, which is not unlikely. HSP believes the Project will be a game-changer for downtown Richmond and that the results projected here are reasonable, assuming the Developer builds the proposed elements in the timeframe, quality and manner proposed. Economic, Fiscal and Employment Impact Analysis HSP uses the IMPLAN input-output multiplier model, which determines the level of additional activity in the Richmond economy due to additional inputs. For example, for every dollar of direct new spending in Richmond, the IMPLAN model provides multipliers for the indirect and induced spending that will result. Summary of Impacts The table on the following page shows a summary of all impacts during the 30-year period. Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 6

13 Table 1 Summary of 30-Year Impacts Net New Spending (millions) Direct $6,150 Indirect $2,151 Induced $2,462 Total $10,763 Net New Earnings (millions) From New Employees in New Offices $7,722 From Direct Project Spending $2,040 From Indirect Spending $681 From Induced Spending $721 Total $11,164 Net New FTE Jobs Actual From New Employees in New Offices 3,634 From Direct 1,686 From Indirect 996 From Induced 682 Total 6,997 Net New Local Taxes Collected* (millions) Sales Tax on New Taxable Spending (1.0%) $49.8 Sales Tax on Construction Materials (1.0%) $0.7 Meals/Restaurant Tax (7.5%) $171.8 BPOL Tax (varies) $12.3 Admissions Tax (7.0%) $125.8 Lodging Tax (8.0% to GRCCA) $111.7 Total $472.0 * New to City of Richmond. Incremental Real Estate Taxes Collected** (millions) Real Estate Tax $855.0 ** Impact Zone Only (millions) Total Local New Taxes Collected $1,327.0 Construction Impact (millions) New Richmond Materials Spending $66.9 New Richmond Labor Spending $100.3 Job-Years, Actual 1,852 Source: Hunden Strategic Partners Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 7

14 The Project will generate nearly $10.8 billion in net new spending, more than $11.1 billion in net new earnings from nearly 7,000 jobs, 1,852 construction job-years and $1.327 billion in new tax revenue for the City of Richmond over the 30-year period. Of the total tax impact, $472 million is projected from new local spendingrelated taxes, while $855 million is projected from net new real estate taxes. The real estate tax projection is shown in the following section. Real Estate Valuations and Tax Assessments for TIF The following figure shows the TIF relative to the Project component locations and the rest of downtown Richmond. Figure 1 The following figure shows the TIF separated into the Primary Zone and the Secondary Zone. Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 8

15 Figure 2 The Primary Zone is the area surrounding the components of the Project that will be most directly and most greatly impacted by the construction, visitation, jobs and earnings, spending and real estate valuation increases. The Secondary Zone is further removed from the direct impacts of the Project, but will still experience an incremental uptick in valuation and performance due to the massive investment proposed within the TIF. The following table shows the estimated assessed real estate values of the Project s components and the estimated real estate taxes to be paid within the TIF. Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 9

16 Table 2 Estimate of Assessed Value and Taxes - Project Components (000s) Project Component Market Value Year Tax Paid Office $ - $ 87,784 $ 183,390 $ 240,503 $ 250,764 $ 276,864 $ 305,680 $ 337,496 $ 372,623 $ 395,430 Retail/Restaurant $ - $ - $ 6,816 $ 10,428 $ 15,955 $ 50,417 $ 55,664 $ 61,457 $ 67,854 $ 72,007 HQ Hotel $ - $ 18,036 $ 83,820 $ 94,468 $ 101,633 $ 120,108 $ 135,033 $ 151,898 $ 170,965 $ 183,587 Residential Market Rate $ - $ - $ 29,365 $ 119,809 $ 213,858 $ 562,183 $ 620,695 $ 685,298 $ 756,624 $ 802,935 Residential - 80% AMI $ - $ - $ 2,766 $ 11,287 $ 14,391 $ 18,431 $ 20,349 $ 22,467 $ 24,805 $ 26,324 Residential - 60% AMI $ - $ - $ 1,383 $ 3,386 $ 4,893 $ 5,847 $ 6,456 $ 7,127 $ 7,869 $ 8,351 Total $ - $ 105,820 $ 307,540 $ 479,880 $ 601,494 $ 1,033,849 $ 1,143,877 $ 1,265,743 $ 1,400,740 $ 1,488,634 Office per SF $ - $ 163 $ 232 $ 304 $ 317 $ 350 $ 387 $ 427 $ 472 $ 501 Retail/Restaurant per SF $ - $ - $ 89 $ 45 $ 58 $ 184 $ 203 $ 224 $ 247 $ 262 HQ Hotel per Room $ - $ 34 $ 159 $ 179 $ 193 $ 228 $ 256 $ 288 $ 324 $ 348 Residential Market Rate per Unit $ - $ - $ 11 $ 45 $ 80 $ 211 $ 233 $ 258 $ 285 $ 302 Residential 80% AMI per Unit $ - $ - $ 15 $ 62 $ 79 $ 101 $ 111 $ 123 $ 136 $ 144 Residential 60% AMI per Unit $ - $ - $ 14 $ 35 $ 50 $ 60 $ 67 $ 73 $ 81 $ 86 Project Component Est. R/E Taxes Year Tax Paid Total Office $ - $ 1,053 $ 2,201 $ 2,886 $ 3,009 $ 3,322 $ 3,668 $ 4,050 $ 4,471 $ 4,745 $ 97,685 Retail/Restaurant $ - $ - $ 82 $ 125 $ 191 $ 605 $ 668 $ 737 $ 814 $ 864 $ 16,100 HQ Hotel $ - $ 216 $ 1,006 $ 1,134 $ 1,220 $ 1,441 $ 1,620 $ 1,823 $ 2,052 $ 2,203 $ 43,110 Residential Market Rate $ - $ - $ 352 $ 1,438 $ 2,566 $ 6,746 $ 7,448 $ 8,224 $ 9,079 $ 9,635 $ 179,980 Residential - 80% AMI $ - $ - $ 33 $ 135 $ 173 $ 221 $ 244 $ 270 $ 298 $ 316 $ 6,225 Residential - 60% AMI $ - $ - $ 17 $ 41 $ 59 $ 70 $ 77 $ 86 $ 94 $ 100 $ 1,986 Total $ - $ 1,270 $ 3,690 $ 5,759 $ 7,218 $ 12,406 $ 13,727 $ 15,189 $ 16,809 $ 17,864 $ 345,084 Source: Hunden Strategic Partners Market values of the various real estate uses are stated by year in the above table. The first components will open in 2022 followed by many more openings through Market rate residential, office and the HQ Hotel are the highest valued use types overall. The total for the Project components as of 2025 (first full year after construction is completed) is more than $600 million. This figure increases year-over-year through 2048 to nearly $1.5 billion. Real estate taxes paid by year grow from $1.3 million in 2022 to $17.9 million in 2048 for a total of $345 million during the period. The following table shows the baseline projection of future incremental real estate tax assessments during the 30-year period within the TIF. Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 10

17 Table 3 Projection of Future Incremental R/E Tax Assessments (000s) Assessed Value Billed for Total Baseline Project Blocks All Blocks $ 61,759 $ 74 $ 76 $ 77 $ 79 $ 80 $ 82 $ 90 $ 100 $ 110 $ 122 $ 134 $ 3,067 Primary Impact Zone Commercial $ 281,348 $ 455 $ 464 $ 473 $ 483 $ 492 $ 502 $ 554 $ 612 $ 676 $ 746 $ 824 $ 18,819 Government $ 210,875 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Hotel $ 124,954 $ 1,531 $ 1,562 $ 1,593 $ 1,625 $ 1,657 $ 1,690 $ 1,866 $ 2,060 $ 2,275 $ 2,512 $ 2,773 $ 63,350 Industrial $ 300 $ 4 $ 4 $ 4 $ 4 $ 4 $ 4 $ 5 $ 5 $ 6 $ 6 $ 7 $ 157 Institutional $ 87,120 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 6 Mixed-Use $ 13,902 $ 157 $ 161 $ 164 $ 167 $ 170 $ 174 $ 192 $ 212 $ 234 $ 258 $ 285 $ 6,513 Multifamily $ 154,758 $ 1,914 $ 1,952 $ 1,991 $ 2,031 $ 2,071 $ 2,113 $ 2,333 $ 2,576 $ 2,844 $ 3,140 $ 3,466 $ 79,185 Office $ 774,750 $ 6,033 $ 6,154 $ 6,277 $ 6,403 $ 6,531 $ 6,661 $ 7,355 $ 8,120 $ 8,965 $ 9,898 $ 10,929 $ 249,655 Other $ 70,111 $ 88 $ 89 $ 91 $ 93 $ 95 $ 97 $ 107 $ 118 $ 130 $ 144 $ 159 $ 3,630 Parking Deck $ 136,368 $ 813 $ 829 $ 846 $ 863 $ 880 $ 898 $ 991 $ 1,094 $ 1,208 $ 1,334 $ 1,473 $ 33,651 Public Open Space $ 1,743 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Single Family $ 821 $ 10 $ 10 $ 11 $ 11 $ 11 $ 11 $ 13 $ 14 $ 15 $ 17 $ 19 $ 425 Surface Parking $ 16,501 $ 45 $ 46 $ 47 $ 48 $ 49 $ 50 $ 55 $ 61 $ 67 $ 74 $ 82 $ 1,876 Vacant $ 4,650 $ 31 $ 31 $ 32 $ 32 $ 33 $ 34 $ 37 $ 41 $ 45 $ 50 $ 55 $ 1,263 Total $ 1,878,201 $ 11,081 $ 11,303 $ 11,529 $ 11,759 $ 11,995 $ 12,234 $ 13,508 $ 14,914 $ 16,466 $ 18,180 $ 20,072 $ 458,529 Secondary Impact Zone Assessed Value Billed for Total Commercial $ 42,871 $ 285 $ 290 $ 296 $ 302 $ 308 $ 314 $ 347 $ 383 $ 423 $ 467 $ 515 $ 11,776 Government $ 15,426 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Hotel $ 25,439 $ 318 $ 324 $ 331 $ 337 $ 344 $ 351 $ 388 $ 428 $ 473 $ 522 $ 576 $ 13,158 Industrial $ 2,237 $ 28 $ 29 $ 29 $ 30 $ 30 $ 31 $ 34 $ 38 $ 42 $ 46 $ 51 $ 1,157 Institutional $ 751 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Mixed-Use $ 21,357 $ 268 $ 274 $ 279 $ 285 $ 290 $ 296 $ 327 $ 361 $ 399 $ 440 $ 486 $ 11,099 Multifamily $ 111,589 $ 1,377 $ 1,404 $ 1,433 $ 1,461 $ 1,490 $ 1,520 $ 1,678 $ 1,853 $ 2,046 $ 2,259 $ 2,494 $ 56,976 Office $ 514,686 $ 6,315 $ 6,441 $ 6,570 $ 6,702 $ 6,836 $ 6,972 $ 7,698 $ 8,499 $ 9,384 $ 10,361 $ 11,439 $ 261,319 Other $ 4,358 $ 64 $ 65 $ 67 $ 68 $ 69 $ 71 $ 78 $ 86 $ 95 $ 105 $ 116 $ 2,653 Parking Deck $ 38,777 $ 225 $ 229 $ 234 $ 238 $ 243 $ 248 $ 274 $ 302 $ 334 $ 369 $ 407 $ 9,300 Public Open Space $ 5,153 $ 8 $ 8 $ 9 $ 9 $ 9 $ 9 $ 10 $ 11 $ 12 $ 13 $ 15 $ 340 Single Family $ 7,287 $ 89 $ 90 $ 92 $ 94 $ 96 $ 98 $ 108 $ 119 $ 132 $ 145 $ 161 $ 3,668 Surface Parking $ 38,668 $ 344 $ 350 $ 357 $ 365 $ 372 $ 379 $ 419 $ 462 $ 510 $ 564 $ 622 $ 14,214 Vacant $ 8,781 $ 62 $ 64 $ 65 $ 66 $ 68 $ 69 $ 76 $ 84 $ 93 $ 102 $ 113 $ 2,582 Total $ 837,380 $ 9,382 $ 9,570 $ 9,762 $ 9,957 $ 10,156 $ 10,359 $ 11,437 $ 12,628 $ 13,942 $ 15,393 $ 16,995 $ 388,241 Total Baseline $ 2,715,581 $ 20,464 $ 20,873 $ 21,290 $ 21,716 $ 22,150 $ 22,593 $ 24,945 $ 27,541 $ 30,408 $ 33,573 $ 37,067 $ 846,770 Source: City of Richmond, Hunden Strategic Partners, Eastridge The total baseline is expected to be nearly $847 million over 30 years. This figure includes estimated incremental growth before consideration of the Project of approximately $232 million; $126 million in the primary impact zone and $107 million in the secondary impact zone. The following table shows the projection of future incremental real estate tax assessments with the Project being developed during the 30-year period within the TIF. Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 11

18 Table 4 Projection of Future Incremental R/E Tax Assessments (000s) With Project Assessed Value Billed for Total Project Components Office n/a n/a $ - $ - $ - $ 1,053 $ 2,201 $ 3,193 $ 3,526 $ 3,893 $ 4,298 $ 4,745 $ 97,685 Retail/Restaurant n/a n/a $ - $ - $ - $ - $ 82 $ 549 $ 642 $ 709 $ 783 $ 864 $ 16,100 HQ Hotel n/a n/a $ - $ - $ - $ 216 $ 1,006 $ 1,376 $ 1,546 $ 1,739 $ 1,957 $ 2,203 $ 43,110 Residential Market Rate n/a n/a $ - $ - $ - $ - $ 352 $ 6,225 $ 7,159 $ 7,904 $ 8,727 $ 9,635 $ 179,980 Residential - 80% AMI n/a n/a $ - $ - $ - $ - $ 33 $ 213 $ 235 $ 259 $ 286 $ 316 $ 6,225 Residential - 60% AMI n/a n/a $ - $ - $ - $ - $ 17 $ 67 $ 74 $ 82 $ 91 $ 100 $ 1,986 Total $ - $ - $ - $ 1,270 $ 3,690 $ 11,622 $ 13,182 $ 14,586 $ 16,141 $ 17,864 $ 345,084 Less Baseline $ (76) $ (77) $ (79) $ (80) $ (82) $ (90) $ (100) $ (110) $ (122) $ (134) $ (3,067) Increment over Existing $ (76) $ (77) $ (79) $ 1,190 $ 3,609 $ 11,532 $ 13,082 $ 14,476 $ 16,019 $ 17,729 $ 342,018 Primary Impact Zone Commercial $ 281,348 $ 455 $ 471 $ 487 $ 504 $ 522 $ 540 $ 642 $ 762 $ 905 $ 1,075 $ 1,277 $ 24,299 Government $ 210,875 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Hotel $ 124,954 $ 1,531 $ 1,592 $ 1,656 $ 1,722 $ 1,791 $ 1,863 $ 2,266 $ 2,757 $ 3,354 $ 4,081 $ 4,965 $ 89,298 Industrial $ 300 $ 4 $ 4 $ 4 $ 4 $ 4 $ 4 $ 5 $ 6 $ 7 $ 8 $ 9 $ 185 Institutional $ 87,120 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 7 Mixed-Use $ 13,902 $ 157 $ 164 $ 170 $ 177 $ 184 $ 192 $ 233 $ 283 $ 345 $ 420 $ 511 $ 9,181 Multifamily $ 154,758 $ 1,914 $ 1,981 $ 2,050 $ 2,122 $ 2,196 $ 2,273 $ 2,699 $ 3,206 $ 3,808 $ 4,522 $ 5,371 $ 102,245 Office $ 774,750 $ 6,033 $ 6,244 $ 6,463 $ 6,689 $ 6,923 $ 7,166 $ 8,511 $ 10,108 $ 12,005 $ 14,258 $ 16,934 $ 322,357 Other $ 70,111 $ 88 $ 90 $ 93 $ 96 $ 99 $ 102 $ 118 $ 137 $ 158 $ 184 $ 213 $ 4,298 Parking Deck $ 136,368 $ 813 $ 842 $ 871 $ 902 $ 933 $ 966 $ 1,147 $ 1,362 $ 1,618 $ 1,922 $ 2,283 $ 43,450 Public Open Space $ 1,743 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Single Family $ 821 $ 10 $ 11 $ 11 $ 11 $ 12 $ 12 $ 14 $ 17 $ 20 $ 24 $ 29 $ 548 Surface Parking $ 16,501 $ 45 $ 51 $ 57 $ 65 $ 73 $ 82 $ 147 $ 265 $ 478 $ 862 $ 1,553 $ 13,565 Vacant $ 4,650 $ 31 $ 34 $ 39 $ 43 $ 49 $ 55 $ 99 $ 179 $ 322 $ 580 $ 1,045 $ 9,129 Total $ 1,878,201 $ 11,081 $ 11,484 $ 11,902 $ 12,335 $ 12,786 $ 13,254 $ 15,882 $ 19,083 $ 23,021 $ 27,936 $ 34,189 $ 618,563 Less Baseline $ (11,303) $ (11,529) $ (11,759) $ (11,995) $ (12,234) $ (13,508) $ (14,914) $ (16,466) $ (18,180) $ (20,072) $ (458,529) Primary Zone Increment $ 181 $ 373 $ 576 $ 791 $ 1,019 $ 2,374 $ 4,169 $ 6,555 $ 9,756 $ 14,117 $ 160,034 Secondary Impact Zone Assessed Value Billed for Total Commercial $ 42,871 $ 285 $ 293 $ 301 $ 310 $ 319 $ 328 $ 379 $ 437 $ 504 $ 582 $ 671 $ 13,708 Government $ 15,426 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Hotel $ 25,439 $ 318 $ 329 $ 340 $ 352 $ 363 $ 376 $ 444 $ 525 $ 621 $ 734 $ 867 $ 16,697 Industrial $ 2,237 $ 28 $ 29 $ 29 $ 30 $ 31 $ 31 $ 35 $ 40 $ 45 $ 51 $ 57 $ 1,237 Institutional $ 751 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Mixed-Use $ 21,357 $ 268 $ 277 $ 287 $ 297 $ 307 $ 317 $ 375 $ 443 $ 524 $ 619 $ 731 $ 14,084 Multifamily $ 111,589 $ 1,377 $ 1,417 $ 1,458 $ 1,500 $ 1,544 $ 1,588 $ 1,833 $ 2,114 $ 2,439 $ 2,814 $ 3,246 $ 66,325 Office $ 514,686 $ 6,315 $ 6,498 $ 6,687 $ 6,881 $ 7,080 $ 7,286 $ 8,405 $ 9,697 $ 11,186 $ 12,905 $ 14,888 $ 304,200 Other $ 4,358 $ 64 $ 66 $ 67 $ 69 $ 70 $ 72 $ 81 $ 92 $ 103 $ 116 $ 131 $ 2,837 Parking Deck $ 38,777 $ 225 $ 231 $ 238 $ 245 $ 252 $ 259 $ 299 $ 345 $ 398 $ 459 $ 530 $ 10,826 Public Open Space $ 5,153 $ 8 $ 8 $ 9 $ 9 $ 9 $ 9 $ 10 $ 12 $ 13 $ 15 $ 17 $ 364 Single Family $ 7,287 $ 89 $ 91 $ 94 $ 97 $ 99 $ 102 $ 118 $ 136 $ 157 $ 181 $ 209 $ 4,269 Surface Parking $ 38,668 $ 344 $ 361 $ 379 $ 398 $ 418 $ 438 $ 560 $ 714 $ 911 $ 1,163 $ 1,485 $ 23,963 Vacant $ 8,781 $ 62 $ 66 $ 69 $ 72 $ 76 $ 80 $ 102 $ 130 $ 166 $ 211 $ 270 $ 4,353 Total $ 837,380 $ 9,382 $ 9,665 $ 9,957 $ 10,258 $ 10,568 $ 10,888 $ 12,641 $ 14,684 $ 17,067 $ 19,849 $ 23,101 $ 462,864 Less Baseline $ (9,570) $ (9,762) $ (9,957) $ (10,156) $ (10,359) $ (11,437) $ (12,628) $ (13,942) $ (15,393) $ (16,995) $ (388,241) Secondary Zone Increment $ 95 $ 196 $ 301 $ 412 $ 529 $ 1,204 $ 2,056 $ 3,125 $ 4,456 $ 6,106 $ 74,623 Total with Project $ 2,715,581 $ 20,464 $ 21,149 $ 21,859 $ 22,594 $ 23,354 $ 24,141 $ 28,522 $ 33,767 $ 40,088 $ 47,785 $ 57,290 $ 1,081,427 $ (21,290) Increment Over Baseline (Primary & Secondary Impact Zones) $ 276 $ 569 $ 877 $ 1,204 $ 1,548 $ 3,578 $ 6,225 $ 9,680 $ 14,212 $ 20,223 $ 234,657 Project Increment over Project Blocks Baseline $ (76) $ (77) $ (79) $ 1,190 $ 3,609 $ 11,532 $ 13,082 $ 14,476 $ 16,019 $ 17,729 $ 342,018 Total Incremental R/E Taxes $ 201 $ 492 $ 799 $ 2,393 $ 5,157 $ 15,110 $ 19,308 $ 24,156 $ 30,232 $ 37,953 $ 576,675 Stabilized Value Dominion Tower I (to be built) $ 378,851 $ - $ - $ 2,142 $ 4,284 $ 4,370 $ 4,457 $ 4,921 $ 5,433 $ 5,999 $ 6,623 $ 7,312 $ 160,869 Dominion Tower II (existing) $ 378,851 $ - $ - $ 674 $ 701 $ 715 $ 2,229 $ 4,921 $ 5,433 $ 5,999 $ 6,623 $ 7,312 $ 149,936 Less Base Value $ (93,437) $ - $ - $ (1,121) $ (1,121) $ (1,121) $ (1,121) $ (1,121) $ (1,121) $ (1,121) $ (1,121) $ (1,121) $ (32,516) Net Dominion Tower Increment $ 664,265 $ - $ - $ 1,695 $ 3,864 $ 3,964 $ 5,564 $ 8,721 $ 9,745 $ 10,876 $ 12,125 $ 13,503 $ 278,290 Total Incremental R/E Taxes including Dominion $ 201 $ 2,187 $ 4,663 $ 6,357 $ 10,721 $ 23,830 $ 29,053 $ 35,032 $ 42,356 $ 51,456 $ 854,964 Source: City of Richmond, Hunden Strategic Partners, Eastridge With the Project, the growth in assessed value is expected to be higher in the impact zones, especially the surface parking and vacant sites that are the most likely to be developed. Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 12

19 The result is an increment of $342 million from the Project increment, $235 million from the impact zones increment, totaling $577 million in total 30-year increment. When the Dominion towers are added to the calculation, there is an additional $278 million in net increment. Totaling the Project, impact zones, and Dominion, the total increment generated by the Project is $855 million over 30 years. When added to the baseline incremental growth of $232 million (before consideration of the Project), the total incremental growth is $1.1 billion. Richmond North of Broad / Downtown Redevelopment Project Analysis Executive Summary Page 13

20 TABLE OF CONTENTS Executive Summary Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Project Profile Economic, Demographic & Tourism Analysis Arena, Event and Entertainment Market Analysis Hotel and Meetings/Convention Market Analysis Retail and Restaurant Market Analysis Residential Market Analysis Office Market Analysis Demand and Financial Projections Economic, Fiscal and Employment Impact Analysis

21 PROJECT PROFILE Davenport & Company, on behalf of the City of Richmond (Client), engaged Hunden Strategic Partners (HSP) to provide an economic impact assessment of the North of Broad / Downtown Redevelopment proposal (Project) on the City of Richmond. In this analysis, HSP analyzed the proposed Project, profiled current conditions within the relevant real estate marketplace, and estimated the amount of local tax revenues as part of an overall estimate of the economic, fiscal, and employment impact of the Project. Capital City Developers, LLC (Developer) plans to revitalize ten blocks of downtown Richmond and, as a result the surrounding area, through the development of the Project. The Project includes a new arena to replace the aging Coliseum, a headquarters hotel for the Greater Richmond Convention Center (GRCC), traditional and research office space, multi-family housing, student housing, retail, parking, a new GRTC transfer station, and the restoration of the historic Blues Armory. The estimated total development costs are $1.43 billion. Capital City Developers, LLC is a group formed by two development firms, Concord Eastridge, Inc. and Future Cities, LLC. Citi Group and JP Morgan Chase were selected as the investment banks to work with the Project by Capital City Developers. The NH Foundation, a group led by Tom Farrell (CEO of Dominion Energy), is a group of private investors prepared to put forth the equity for the development Project. The NH foundation was created specifically for this Project. NH stands for Navy Hill, the neighborhood where this development would take place. Specific components of the Project include: The development of a new arena (17,500 seats, to be managed by a third-party operator), The development of an upscale, full-service 527-key hotel (Hyatt Regency) with 40,000 square feet of conference space, to be the headquarters hotel for the GRCC, The restoration of the Blues Armory into a food market, music club (800 seats, managed by a third-party operator), and ballroom, The development of 790,000 square feet of office space, The development of 274,354 square feet of mixed-use retail space, The development of 2,659 market rate multi-family apartments, The development of percent affordable mixed-income apartment units, The development of percent affordable mixed-income apartment units, The development of 4,396 parking stalls, A new GRTC Transfer Station The raising of Leigh Street to grade The goal of this Project is to revitalize the downtown neighborhood of Richmond north of Broad Street (Navy Hill). The Project also has the goal of reconnecting the Jackson Ward to downtown, something that has been attempted in the past, but has been inhibited by Leigh Street sitting below grade. The MCV Campus of Virginia Commonwealth University (VCU) and the Virginia BioTechnology Research Park, both north across Leigh Street from the development site, are forces in the area bringing an increasing number of professionals to the Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 2

22 central business district (CBD) north of Broad Street. Development such as is proposed in the Project aims to serve as a catalyst to keep these professionals downtown outside of working hours by offering residential options, as well as retail, entertainment and dining. Additionally, the office space planned, much of which is to be tailored for VCU research purposes, could serve to augment the already existing professionals in the area to absorb the new resources purposed in the Project. Richmond is a thriving city, but this has not always been the case, especially in the downtown area. Development and redevelopment are not a given, and often, leadership and risk by civic, business and political leadership is necessary to move the needle on the perception and reality of an urban area. This is true for downtown Richmond and it is exhibiting the results of several years of positive change. The population is increasing, new and already present companies are bringing more investment to the city s downtown, and new resources like the GRTC Pulse bus are energizing the citizens of the city. The food scene is nationally renowned, and the James River offers an outdoor escape for residents and visitors. All of the positive attributes about the city have yet to solve downtown Richmond s challenge of keeping people downtown outside of the 9 AM through 5 PM working hours. The Project has the potential to galvanize the area north of Broad Street and connect the Jackson Ward with downtown, expanding the footprint of what feels like downtown, and improving the sense of community in this part of the city. The following figure, prepared by Capital City Partners, LLC, shows a bird s eye rendering of blocks A, B, E, and F within the development site: Figure 1-1 The following figure shows the site of each Project component in downtown Richmond. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 3

23 Figure 1-2 While a majority of the Project would be North of Broad, note that blocks N, P, and U are located south of Broad Street. Development Uses The following table summarizes the square footage by type for the residential and commercial components of the Project. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 4

24 Table 1-1 Capital City Opportunity Plan: Projected Development by Type Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Residential Multi-family apartments Market Rate Units 2, ,372,614-80% AMI units ,846-60% AMI Units ,714 - Sub-total Residential 2,939 2,616,174 Commercial Mixed-use retail ,354 - Office ,000 - Full-service Hotel , Limited-service Hotel , Sub-total commercial 1,516, Total 2,939 4,133, Source: Concord Eastridge The Project is proposed to feature 2,939 multi-family apartment units, totaling more than 2.6 million in gross square feet of development. As shown, a portion of these multi-family units will be designated for affordable housing purposes. The Project is proposed to feature 183 affordable mixed-income units at 80 percent of market value and 97 affordable mixed-income units at 60 percent of market value. These residential units will have quick access to retail at the ground level, offering new downtown residents essential goods. The Project is proposed to feature 790,000 square feet of office space, including 250,000 square feet of traditional office space and 540,000 square feet of medical, research, and clinical office space. This illustrates the focus behind this development to rejuvenate the Project area by creating an office, retail, and residential ecosystem, keeping professionals living, shopping and eating downtown. The focus on office space equipped for medical, research and clinical purposes leverages the already present industries and accompanying culture of medical and research work from MCV and Virginia BioTechnology Park in the area. A 527-key full-service hotel planned to be a Hyatt Regency will be located one block east of the GRCC and serve as the convention center s headquarters hotel. The hotel will offer 40,000 square feet of its own meeting space and be adjacent to the historic Blues Armory. The renovated Blues Armory will activate all three levels into a food market, music hall and ballroom. Again, the offerings of the Blues Armory would allow professionals to live downtown more comfortably through greater access to food and entertainment. As previously noted, retail locations will be on the ground level of residential buildings. Ground level retail will allow both commuters and residents to have food and shopping options downtown. Currently options to eat and shop are limited in this part of downtown. The 274,354 square feet of mixed-use retail will work to accommodate the increased number of residences in the area, while not going beyond a point of saturation. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 5

25 Project Blocks The following section will provide greater detail on each specific Project block. Block A Block A will feature the new 17,500-seat arena (450,000 square feet) on the site of the existing Coliseum. The arena will be integrated into the larger area with diverse adjacent developments on the excess urban land beyond what is required for the arena. The proposed arena will replace the aged Coliseum and offer a competitive venue for major concerts and family shows that are current bypassing Richmond for venues in other markets as far as two hours away. There is the opportunity for a minor league hockey franchise to be located in the venue, which would generate significant activity onsite during the hockey season (often a more difficult time to get people to come downtown). Block A2 The following table summarizes the proposed development mix for Block A2. Table 1-2 Block A2 Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Residential Multi-family apartments Market Rate Units ,448-80% AMI units ,276-60% AMI Units ,276 - Sub-total Residential ,000 Commercial Retail ,000 - Total Block A ,000 Planned Absorption: 2021 Source: Concord Eastridge Block A2 will feature 163 apartment units, including 24 affordable mixed-income units. These units will consist of studio, one-bedroom, and two-bedroom apartments. The block will also offer 20,000 square feet of groundfloor retail space. Block A3 The following table summarizes the proposed development mix for Block A3. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 6

26 Table 1-3 Block A3 Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Commercial Office ,000 - Total Block A3 250,000 Planned Absorption: 2020 (60%), 2021 (40%) Source: Concord Eastridge Block A3 will feature 250,000 square feet of build-to-suit office space on six floors. Block B The following table summarizes the proposed development for Block B. Table 1-4 Block B Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Residential Multi-family apartments Market Rate Units ,080-80% AMI units ,960-60% AMI Units ,960 - Sub-total Residential ,000 Commercial Retail ,000 - Total Block B ,000 Planned Absorption: 2021 Source: Concord Eastridge Block B will house 250 residential units (mixed-income and market rate) surrounding the existing parking structure on the block. The straightening of 7 th Street will, in part, make this wrapping residential development possible. The block will also consist of 25,000 square feet of ground-floor retail space. Block C The following table summarizes the proposed development for Block C. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 7

27 Table 1-5 Block C Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Residential Multi-family apartments Market Rate Units ,750-80% AMI units ,750-60% AMI Units Sub-total Residential ,500 Planned Absorption: 2021 (20%), 2022 (80%) Commercial Retail ,000 - Total Block C ,500 Planned Absorption: 2022 Source: Concord Eastridge Block C, currently a surface parking lot, represents the largest planned residential block in the plan, containing 600 units and 517,000 gross square feet. The block will also feature 20,000 square feet of ground-level retail space. Block C will also include the GRTC Transfer Center (detailed later in this chapter). Block D The following table summarizes the proposed development for Block D. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 8

28 Table 1-6 Block D Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Commercial Retail ,000 - Office ,000 - Limited-service Hotel , Total Block D , Planned Absorption (Hotel): 2022 Planned Absorption (Office): 2020 (66%), 2021 (33%) Planned Absorption (Retail): 2020 (33%), 2021 (66%) Source: Concord Eastridge Block D is planned to have 540,000 square feet of research/lab/office/medical office space with 15,000 square feet of retail at ground level. The office space is planned for the Neuroscience program at VCU. Also of note is that this block is planned to be the new home of a tax-exempt 150-room Doorways Hospitality House, planned to be moved from block F. Block E The following table summarizes the proposed development for Block E. Table 1-7 Block E Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Residential Multi-family apartments Market Rate Units ,125-80% AMI units ,500-60% AMI Units ,625 - Sub-total Residential ,250 Commercial Retail ,000 - Total Block E ,250 Planned Absorption: 2021 Source: Concord Eastridge Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 9

29 Block E will house 150 residential units (market and affordable mixed-income) in 131,250 square feet and 15,000 square feet of retail at ground level. This development will wrap the existing parking structure on the lot on the northern and eastern sides. Block F The following table summarizes the proposed development for Block F. Table 1-8 Block F Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Commercial Retail ,354 - Full-service hotel , Total Block F 378, Planned Absorption (Retail): 2021 Planned Absorption (Hotel): 2020 (25%), 2021 (75%) Source: Concord Eastridge Block F is home to the Blues Armory, a historic building that will be renovated into a food market, music club, and ballroom on floors one, two and three, respectively. The new 527-key Hyatt Regency GRCC headquarter hotel will also be located on Block F. Block I The following table summarizes the proposed development for Block I. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 10

30 Table 1-9 Block I Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Residential Multi-family apartments Market Rate Units ,221-80% AMI units ,319-60% AMI Units ,460 - Sub-total Residential ,000 Commercial Retail ,000 - Total Block I ,000 Planned Absorption: 2022 Source: Concord Eastridge Block I will feature 457 residential units (market and affordable mixed income) in 425,000 gross square feet, with 101,000 square feet of retail space across two floors. This is retail is considered big-block and will feature a grocery component. Block N The following table summarizes the proposed development for Block N. Table 1-10 Block N Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Residential Multi-family apartments Market Rate Units ,193-80% AMI units ,598-60% AMI Units ,799 - Sub-total Residential ,590 Commercial Retail ,000 - Total Block N ,590 Planned Absorption: 2022 Source: Concord Eastridge Block N, currently a surface parking lot, will contain 512 residential units (market and affordable mixed-income) in 415,000 square feet of gross space, as well as 15,000 square feet of ground-floor retail. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 11

31 Block P The following table summarizes the proposed development for Block P. Table 1-11 Block P Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Residential Multi-family apartments Market Rate Units ,590-80% AMI units % AMI Units Sub-total Residential ,590 Planned Absorption: 2022 Commercial Retail ,000 - Total Block P ,590 Planned Absorption: 2022 (50%), 2023 (50%) Source: Concord Eastridge Block P, currently a surface parking lot, will feature 422 residential units (market) in 415,000 square feet and 12,000 square feet of ground-level retail. Parking is planned to be wrapped between the residential and retail components of the block. Block U The following table summarizes the proposed development for Block U. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 12

32 Table 1-12 Block U Development Area Property Type Units GSF Per Unit/Room Gross SF Rooms Residential Multi-family apartments Market Rate Units ,207-80% AMI units ,443-60% AMI Units ,595 - Sub-total Residential ,245 Planned Absorption: 2023 (66%), 2024 (33%) Commercial Retai ,000 - Total Block U ,245 Planned Absorption: 2023 Source: Concord Eastridge Block U will repurpose a historic public parking deck into 380 residential units (market and affordable mixedincome) and 35,000 square feet of ground-level retail. The following figure shows a map of the Project blocks detailed in this Chapter. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 13

33 Figure 1-3 Development Budget and Phasing The $1.43-billion Project will be financed through private funds of the Limited Partner (NH Foundation) and from the General Partner (Capital City Development, LLC). In addition, a portion will be funded through the issuance of revenue bond debt. The revenue bond debt will be non-recourse to the City. The following table details the proposed timing for the delivery/absorption of the commercial components of the Project. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 14

34 Table 1-13 Total Commercial Absorption Calendar Year Ending SF Cumulative SF Cumulative Rooms Cumulative GSF Cumulative Rooms Cumulative Gross SF Cumulative 31-Dec Dec , , ,820 90, ,000 30, Dec-21 76,354 76, , , , , ,000 90, Dec , , Dec-23 41, , Dec Total 274, , , ,000 Source: Concord Eastridge Mixed-Use Retail Office Full Service Hotel Limited Service Hotel The following table details the proposed timing for the absorption of the multi-family residential components of the Project. Table 1-14 Total Residential Absorption Calendar Year Ending Units Cumulative GSF Cumulative Units Cumulative Gross SF Cumulative Units Cumulative Gross SF Cumulative 31-Dec Dec Dec , , ,741 47, ,680 36, Dec-22 1,726 2,312 1,540,102 2,062, , , ,060 70, Dec , ,148 2,269, , , ,316 80, Dec , ,209 2,372, , , ,658 84, Dec Total 2,659 2,372, , ,714 Source: Concord Eastridge Market Rate Units 80% Ami Unita 60% AMI Units Construction of the Project is expected to begin on blocks A, F and D in late 2019, with the remainder of the construction occurring over the following three years. The first commercial components are expected to be completed 2020, with the opening of 510,000 square feet of office space and the two hotel projects. The first multi-family residential developments are expected to open in 2021, with the majority of the units entering the market in Ground-level mixed-use retail is expected to enter the market over a three-year period from 2021 through All Project components are expected to be completed by Project Components Richmond Coliseum Nearly $1 million each year goes into maintaining the existing aging Coliseum, which is considered to be a degrading public asset. The new arena, which will be located on the site of the existing Coliseum, will be positioned in the urban core of the city, adjacent to the GRCC and the newly renovated Blues Armory. The association of these venues will aim to create a critical mass of sports entertainment, tourism and civic destinations to enhance the quality of life for Richmond residents and visitors. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 15

35 The figure below, prepared by Capital City Partners, LLC, shows a rendering of the inside of the proposed 17,500-seat arena. Figure 1-4 The arena will be designed to the standards typical of today s first-class multi-purpose event centers. The arena seating bowl will be designed as a basketball-centric geometry with the purpose of hosting NCAA regional events, but the facility will also have the ability to accommodate concerts, family shows, assemblies and an NHL-sized ice rink for hockey, skating competitions and ice shows. The development is proposed to feature 30 mid-level suites, as well as club seating, a premium lounge and restaurant and additional mid-level suite seating. The overall Project budget for the 450,000-square foot project is $220 million. The arena is expected to begin construction in October 2019 with an expected completion date of April The arena and entertainment market is further analyzed in Chapter 3 of this analysis. Blues Armory The Blues Armory has been present in downtown Richmond since However, the long-abandoned building is need of extensive repairs to restore the building s prominence as one of Richmond s architectural landmarks. A food market, music hall and ballroom are proposed for the development to integrate this historic building back into the city. The Blues Armory offers three 20,000-square-foot floorplates that will be repurposed into the following: Ground Level: Food Market The food market will aim to offer fresh, affordable and locally grown food selections that are currently lacking in downtown Richmond. The area could also host cooking demonstrations and provide incubator facilities for startups. Second Level: Music Hall The development will leverage the character and architecture of the venue with a club-style music hall that also features breakout meeting rooms and a Foundation Room that will provide a supporting lounge for the GRCC and hotel. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 16

36 Third Level: Ballroom The third floor of the building offers 18,000 square feet of column-free space. The ballroom, which can accommodate up to 1,000 guests in a banquet style set up, will also complement the GRCC and new headquarter hotel. The figure below, prepared by Capital City Partners, LLC, shows a rendering of a ballroom after the proposed renovation of the Blues Armory. Figure 1-5 The following figure, prepared by Capital City Partners, LLC, shows a rendering of a music club after the proposed renovation of the Blues Armory. Figure 1-6 Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 17

37 The $10-million project is expected to begin construction in April of GRCC Headquarter Hotel The Greater Richmond Convention Center is a high-quality facility that is well-respected within the regional landscape. Unfortunately, as will be detailed in Chapter 4 of this analysis, the GRCC loses the opportunity to host impactful, high-rated events due to its inability to provide appropriate, walkable hotel room blocks. The proposed Project includes a 527-key convention center hotel that will be located adjacent to the new arena and one block from the GRCC. The following figure, prepared by Capital City Partners, LLC, shows a rendering of the proposed GRCC headquarter hotel. Figure 1-7 The hotel is proposed to offer a ground-floor, three-meal restaurant and bar, as well as a rooftop restaurant and bar that offers panoramic views of downtown Richmond. The hotel will also offer a 15,000-square foot ballroom in the connected Blues Armory, and 8,000-square foot junior ballroom and multiple breakout meeting rooms. Residential The aim of the residential developments in the Project is to provide affordable living alternatives for Richmond residents who prefer the benefits of urban lifestyles. Much of this demand is generated by MCV and Virginia BioTechnology Research Park s strong presence downtown. As an increasing amount of the workforce moves downtown in cities across the country to shorten commutes and eliminate auto expenses, Richmond, too, is experiencing this trend. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 18

38 The figure below, prepared by Capital City Partners, LLC, shows a rendering of the proposed residential building on Block B. Figure 1-8 The downtown Richmond residential market is further analyzed in Chapter 6 of this analysis. Office Downtown Richmond is considered an emerging innovation location that aims to become a destination for professionals to live, work and play. As part of this process, the Project will include office space, including medical offices and lab facilities that aim to attract health science researchers, clinicians and leading medical institutions. This includes flagship Health Sciences Center for VCU. The downtown Richmond office market is further analyzed in Chapter 7 of this analysis. Retail Ground-level retail is a critical component to the sustainability of the Project. A concentration of fresh food sources, necessary services and entertainment options on both side of the streets aims to activate the pedestrian network in downtown Richmond. The figure below, prepared by Capital City Partners, LLC, shows a rendering of proposed retail between blocks E and F of the plan. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 19

39 Figure 1-9 The downtown Richmond retail and restaurant market is further analyzed in Chapter 5 of this analysis. GRTC Transfer Station Located on the ground level of Block C, the Project includes a permanent downtown bus transfer center. Currently, the existing unsheltered center offers no protection for bus passengers from weather, nor does it offer, restrooms, water, and food options that should be expected from bus transfer centers. Leigh Street Improvements One of the challenges limiting Richmond from establishing itself as a connected downtown is the configuration of Leigh Street between 4 th Street and 8 th Street. The NOB Project will rebuild the street at grade to connect the Virginia Biotechnology Research Park and the VCU Medical Center to other areas downtown. This is proposed to be achieved bridging over a future loading dock and by filling the remaining depressed area with razed material from the demolished Coliseum, creating a complete street for pedestrians and bicyclists. Conclusion The City of Richmond and the NH Foundation have identified an opportunity to redevelop a segment of downtown Richmond that is ready for revitalization. This ten-block, $1.43-billion Project aims to turn the current shortcomings of the Project area into strengths, while leveraging the already-present assets in the community. A new convention center hotel will allow the GRCC to attract events that generate room nights and spending in the community, while the repurposed Blue s Armory will restore a once-iconic building of the downtown Richmond fabric. Combined with a new state-of-the-art arena, 2,939 residential units, and more than one million square feet of mixed-use retail and office space, the North of Broad Development aims to create a critical mass of activity, entertainment, dining and shopping options for Richmond residents to live, work and play, The subsequent analyses, performed by use-type, will take a deeper dive into the feasibility and potential impact of each component of the proposed development. The analysis concludes with a detailed economic, fiscal, and employment impact analysis for the Project. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 1 - Page 20

40 TABLE OF CONTENTS Executive Summary Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Project Profile Economic, Demographic & Tourism Analysis Arena, Event and Entertainment Market Analysis Hotel and Meetings/Convention Market Analysis Retail and Restaurant Market Analysis Residential Market Analysis Office Market Analysis Demand and Financial Projections Economic, Fiscal and Employment Impact Analysis

41 ECONOMIC & DEMOGRAPHIC ANALYSIS Analysis of local market area characteristics such as population, demographics, a diversified economy, access, and quality of downtown and tourist attractions gives better insight into the potential demand for a real estate project. This chapter will profile the Richmond, Virginia, area and will include an overview of the economic characteristics of the metropolitan market, as well as a description of local attractions all of which will be impacted by the North of Broad Project. Overview Downtown Richmond is the business core of the city of Richmond, a city of 227,032 residents, and a metropolitan area of 1.3 million. It is the third largest metropolitan area in Virginia after Washington D.C. (the Virginia portion contains 3.1 million people) and Virginia Beach-Norfolk-Newport News (1.73 million). Although it is a sizable metropolitan area, it has traditionally been overshadowed by the large east coast cities to the northeast, particularly Washington D.C., and therefore, large-city amenities such as major-league sports, ultraconnected international airports, national museums, major touring shows and national media exposure in general, have gravitated towards those nearby cities instead. However, the Richmond metro area is growing at a significantly faster rate than the Virginia Beach-Norfolk- Newport News (Hampton Roads) area, and is developing a strong big-city reputation along the east coast. This is partly because Richmond is generally regarded as a younger and more exciting city for Millennials and college-educated than the Hampton Roads area, and is more affordable than the Washington D.C. area. Being the state capital and largest inland city south of Washington helps its cause. The city has developed a strong sense of loyalty within its metro area, even among new residents, with businesses and residents sporting a common RVA logo on a shirt or sign in a window, because of its growing identity as a haven for contemporary arts, food scene and outdoor adventures. The James River, especially along the rapids near downtown, has become a favorite playground for kayaking, hiking, climbing and other sporting adventure. Downtown Richmond: Description and History of Growth, Decline and New Potential Growth Richmond is the capital of the Commonwealth of Virginia and one of the oldest major cities in the United States, and as such, has a wealth of historic neighborhoods, including within the downtown area. Downtown Richmond is located on the James River to the northwest of Jamestown where the first permanent English-speaking settlement was established in 1607 and has a rich historical heritage. Richmond is the home of Patrick Henry s Give me Liberty or Give me Death speech at St. John s Church in 1775, and was the site of several important events during the Revolutionary War against England. During the 1830s, the city experienced the industrial revolution, with railroads connecting the city s new industries, medical facilities and media publications to the larger region and the East Coast cities. In 1861, Richmond became the national capital of the Confederate States of America. Shockoe Bottom (today, a premier gentrified neighborhood of entertainment and restaurants) was the pre-civil War site of one of the South s largest slave trades. After Reconstruction, following the Civil War, the city s economy was bolstered by a diversifying base of activity, including tobacco, finance and banking, and served as an important land-based transportation center because of its location on the James River. By 1880, Richmond had 63,300 residents, and opened the nation s Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 2

42 first electric trolley line in 1888, becoming among the most successful streetcar systems by the 1900s. Richmond s historic Jackson Ward became known as the Wall Street of Black America during the early 1900 s and the area boasts many historically significant sites and memorials dedicated to the African-American leaders and pivotal moments in the Civil War. In 1919, the Philip Morris tobacco company was established in the city. By the end of the 1920 s the city had built new residential districts, boulevards, the large Byrd Park, and The Mosque and Lowe s theaters led the way in entertainment venues. Richmond had 183,000 residents by the beginning of the Great Depression and was a major city. As World War II ended, the exodus of white families to the suburbs, like most cities, left urban historic neighborhoods to deteriorate, and the city began urban renewal efforts. In 1958, the Richmond-Petersburg Turnpike (now I-64 and I-95) replaced several blocks of traditional African-American residential neighborhoods in the Jackson Ward (near the study Site), and also resulted in the separation of downtown Richmond from its residential neighborhoods. Businesses and department stores along the city s shopping street, Broad Street, were suffering the effects of strong competition from new suburban shopping centers closer to the new affluent residences west and southwest of the city. The metro area was growing into a city of a half-million residents, but the city proper was about to enter into a substantial decline in reputation, wealth and population. Those underutilized or empty storefronts, that still exist in 2018, are indicators that retail is still lagging behind growth in other sectors of the downtown. Modern Downtown Richmond Much of the area around the Richmond Coliseum began taking shape in the mid 1960s, as hundreds of new modern buildings were built, or planned during this time. Downtown Richmond began experiencing a massive turnover in land use, from smaller old buildings and industrial uses near the river, to new large office buildings for government, banks, insurance and state agencies, including the creation of Virginia Commonwealth University (VCU) in the Fan District and in a downtown campus. Some of these first projects include the Richmond Federal Reserve Bank, Federal Building, Farm Bureau Insurance, and City Hall. The area north of Broad was demolished in large swaths in the mid-1960s, first for the development of the current Richmond Coliseum in 1971, then in the mid 1980s for the Greater Richmond Convention Center. Plans for rebuilding downtown as the entertainment and employment center of the region came in the form of several long-range plans, including the preservation of historic buildings in Shockoe Slip and its designation as a historic district. The 6 th Street Marketplace was conceived as a festival marketplace to bring retail and pedestrians back to downtown Richmond, and included the reuse and renovation of the ground floor of the Blues Armory. The project opened in 1985, but ultimately failed and was demolished in Conversely, the half-square-mile VCU medical district and adjacent Virginia BioTechnology Research Park (1995) has been very successful and completely rebuilt its corner of the downtown core and is a major employment and student center. Shockoe Slip is the most historic part of downtown was the first area to become gentrified in the 1970s and 80s, with renovated historic buildings housing independent restaurants, artisans and boutiques, lining cobblestone streets. Shortly afterwards, Shockoe Bottom began its transformation, becoming the city s downtown entertainment district. Plans for the revitalization of the Riverfront and Canal Walk crystalized, and Brown s Island was developed as a public park, and is the site of many outdoor arts and music festivals. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 3

43 In the 1970s and 80s, more high-rise buildings were constructed, including the James Monroe Building in 1981, and the James Center Complex in 1987, which includes the Omni Hotel. The restored historic Jefferson Hotel in the Monroe Ward reopened in The conversion of historic buildings into residences along the riverfront, such as Tobacco Row began taking shape along the conversion of the old riverfront canal into a rebuilt and landscaped pedestrian Canal Walk. Because of occasional devastating floods, the city built a downtown floodwall in 1995 and was expanded after This allowed for more riverfront development, which includes the Richmond Civil War Visitor Center, upscale loft apartments, hotels, restaurants and some boutiques along the rebuilt historic canal. Richmond s river access improved with the Belle Isle Footbridge underneath the Lee Bridge, as personal recreation options increased with bike trails, hiking and rock-climbing. More new office buildings opened in the 1990s, including the Riverfront Towers, Media General Headquarters and Times-Dispatch buildings. In the new millennium, over 200 downtown new and renovated building developments brought thousands of new residential units and millions square feet of office to the city s core. The popularity of urban living jumped over the James river into Manchester, invigorating a long-dormant part of the city. The influx of interest in urban living has sparked further growth into other adjacent historic districts, where narrow streets and small-scale buildings that are favorable to the human experience. The Monroe Ward area has transformed as a result of its proximity to the riverfront and downtown district, and with the help of new boutique hotels. Jackson Ward, north of Broad Street and west of the convention center, is a historically African- American neighborhood. It suffered a long decline and is cut-off from the rest of downtown to the east, both physically and psychologically, by the convention center s multi-block size. Demand for urban housing in downtown Richmond and rising prices in the Riverfront and Monroe Ward have moved renovation efforts into the Jackson Ward s historic buildings, and although slower to grow, is becoming renovated and repopulated. As the home of the University of Richmond, Virginia Union University and Virginia Commonwealth University, the larger Richmond area has become an increasingly exciting option for young college-educated Millennials not just from the mid-atlantic Region but from around the nation. The growth of this generation has sparked new development interest in downtown Richmond as potential new residents have expressed a desire for an urban lifestyle with retail and entertainment nearby, all within proximity to work. As a result of the new building uses over new and historic urban blocks and entire neighborhoods, the overall city urban landscape has groomed and transformed into much more of an urban playground. Access to the James River and development of recreation along the riverfront has vastly improved, and thousands of new residences have opened or been renovated. While nearly every side of the downtown area has been reinvigorated with new life, the area along and to the north of Broad Street has remained somewhat stagnant compared to the Riverfront areas. Downtown Richmond has become a desirable place to locate for young employees as well as a place for employers to locate, seeking to attract and retain young talent. The 2010 census showed that for the first time in four decades, the central city of Richmond reversed its population slide and gained residents, largely due to the popularity of Shockoe Bottom, the Fan District, Museum District, Jackson and Monroe Wards, and more recently across the river in Manchester, which features historic city buildings and urban blocks. The North of Broad areas, the subject of this study, would be made more attractive to growth and new urban life-seeking residents if new, thoughtful, accessible and architecturally exciting spaces were made available to match the vibrant artistic character of Richmond. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 4

44 Regional Access The City of Richmond is the capital of Virginia and is located in the east-central region of Virginia directly along Interstate 95 between Washington, D.C., and the North Carolina state line. Richmond is an important connecting point to cities such as: Williamsburg (51 miles southeast), Charlottesville (70 miles), Norfolk (93 miles southeast), Alexandria (104 miles north), Washington, D.C. (107 miles north), Virginia Beach (107 miles southeast), Baltimore, MD (147 miles north), Raleigh, NC (155 miles southwest), Richmond is part of the 16-county, four-city Richmond-Petersburg Metropolitan Statistical Area (MSA) with an estimated 2017 population of 1.3 million. Details of local population statistics are shown later in this chapter. The figure below shows the location of Richmond in relation to the surrounding region. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 5

45 Figure 2-1 Airport Access Richmond International Airport (RIC) is the primary airport serving the area. The airport is located approximately eight miles southeast of downtown via Interstate 64 and South Airport Drive. The airport s proximity to downtown provides convenient access to Richmond residents and businesses. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 6

46 RIC opened in October of 1927 as Richard Evelyn Byrd Flying Field. Currently, the terminal complex is comprised of two concourses with 22 boarding gates. Domestic air travel is served by Allegiant Air, American Airlines, Delta Air Lines, JetBlue Airways, Southwest Airlines, Spirit Airlines and United Airlines Richmond International Airport s seven airline carriers provide daily non-stop flights to 18 destinations, which serviced roughly 3.6 million passengers in Airport access is important for many reasons to the North of Broad Project but in particular to the convention/meetings market. Air travel access to Richmond is strong which can be a benefit to the North of Broad Project. Highway Access Richmond is positioned on the mid-atlantic coast at an intersection of major highways that radiate outward like spokes on a wheel. These highways lead to myriad cities, coastal peninsulas and mountains. The East Coast s primary vehicular highway, Interstate 95, links Richmond with all the major markets of the east, including the Northeast corridor of Washington D.C., Baltimore, Philadelphia, New York, Hartford, Providence and Boston. Significant to this study is the quick connectivity to northern Virginia, and the affluent suburbs of Washington D.C. Many popular vacation and resort cities such as Charleston, Hilton Head, Savannah, Jacksonville, Orlando, Daytona Beach, Fort Lauderdale and Miami are located to the south. Interstate 85 begins its southwestward route in Richmond s southern neighbor Petersburg, providing access to Raleigh/Durham, Winston-Salem, Greensboro and Charlotte in North Carolina. I-85 eventually connects to Atlanta and I-65 at Montgomery, AL to the Bayou Coast of Mobile, AL, Biloxi, MS, and New Orleans. Richmond is just over an 80-minute drive via I-64 from both the historic colonial areas of Williamsburg and Hampton Roads (Norfolk, Virginia Beach and five significant other cities) to the southeast, and Charlottesville and University of Virginia, and the Blue Ridge and Shenandoah Mountains to the west. U.S. highways 360 and 460 are recently improved four-lane expressways bringing travelers from Lynchburg, Roanoke, and Blacksburg in western Virginia and Tennessee via Interstate 81. Richmond is well-connected in all directions and is within a 12-hour drive of approximately half of the U.S. population. Richmond has built a useful network of urban and suburban freeways and toll roads tying the regions both north and south of the James River. Interstates 195 and 295, along with state routes 288, 895, 76 and 150, create a limited access highway framework around the metro area and directly through the city, connecting the busiest through-city routes of I-64 and I-95. The local road network is shown in the following figure. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 7

47 Figure 2-1 I-295 s northeastern stretch is an important connector around Richmond directing tourists and commuters from Washington D.C, to Williamsburg and the Tidewater cities of Norfolk and Virginia Beach. This positioning between these two urban areas and tourist destinations makes Richmond a natural stop along this route and highlights how the City is positioned and functions as a hub for the region. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 8

48 Rail Passenger Service Richmond is connected via passenger train service as well, with five Amtrak routes stopping at two stations in the City. Those stations are the downtown Main Street Station, with its historic clock tower and train shed built in 1901, and the 1975 Staple Mill Road suburban station, which serves as a transfer to other Amtrak lines. The destinations currently served by Amtrak carry passengers to Richmond from Savannah, GA (the Palmetto), Charlotte, NC (the Carolinian), Newport News (Northeast Regional), and Miami (Silver Star and Silver Meteor). Richmond is part of an extension of America s most utilized and most frequent train service, the Northeast Regional, the 150-mile-per-hour high speed electric train currently operating from Boston to Norfolk, VA, through New York, Baltimore, Philadelphia and Washington DC. Ridership reached an all-time high of 11.4 million passengers in An extension of service to the Hampton Roads cities follows two routes. One route travels through Richmond s Staples Mill Road station to Petersburg, and then to Norfolk. The other route services the Main Street Station and carries passengers to Williamsburg and Newport News. Travel time to Washington is approximately two hours, with New York an additional three hours away. Population The table below shows historical population, growth changes, and estimates of the population within the United States, State, County, MSA, and City. Table Estimate United States 248,709, ,421, ,745, ,719, % Commonwealth of Virginia 6,187,358 7,078,515 8,001,024 8,470, % Richmond MSA 949,244 1,096,957 1,208,101 1,293, % City of Richmond 203, , , , % City Pop. As % of MSA 21.4% 18.0% 16.9% 17.5% -- Source: U.S. Census Bureau, Hunden Strategic Partners Population Growth Rates The sixteen counties that form the MSA recorded a 7.1 percent population increase between 2010 and The City of Richmond, which makes up 17.5 percent of the MSA, increased by 11.2 percent over the past seven years, a much faster growth rate than the US, state or MSA. Furthermore, Virginia s growth rate was approximately half a percentage point higher than that of the United States. This growth rate is especially relevant to the North of Broad Project as it can drive demand for new development in residential, retail, restaurants and other amenities. Richmond is also within a two-hour drive of three metropolitan areas over one million people: Washington DC, Raleigh/Durham and Norfolk. Raleigh/Durham grew from 855,000 people in 1990 to 2.2 million in 2017, an increase of 157 percent. Norfolk/Virginia Beach grew from 1.6 million to 1.7 million in 2012, a six-percent increase. Washington DC has experienced an increase of 45.2 percent, growing from 4.2 million in 1990 to 6.1 million in Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 9

49 Diversified Economy A healthy and diversified economy provides not only employment and disposable income for a market s residents, but it also helps to insulate an area from economic downturns. Markets that have historically relied on one sector have often had difficulty recovering from market shifts to other sectors, which lead to an overall loss of local income and employment. The following figure shows the 2016 levels of employment by sector for the City of Richmond. Table 2-2 City of Richmond Employment by Industry Description Employees Percent of Total Total Employment 190, % By Industry Farm employment 0 0.0% Nonfarm employment 190, % Private employment 145, % Health care and social assistance 25, % Professional, scientific, and technical services 14, % Accommodation and food services 12, % Administrative and support and waste management and remediation services 11, % Other services (except government and government enterprises) 10, % Finance and insurance 10, % Management of companies and enterprises 9, % Retail trade 9, % Construction 7, % Real estate and rental and leasing 7, % Manufacturing 6, % Educational services 5, % Transportation and warehousing 4, % Wholesale trade 4, % Arts, entertainment, and recreation 4, % Information 1, % Utilities % Government and government enterprises 45, % State and local 38, % State government 27, % Local government 10, % Federal, civilian 5, % Military 1, % Source: Bureau of Economic Analysis The City of Richmond has several primary industries of main employment in the private and public sector. The area is not dominated by one particular industry or sector. This is important as an economy with diverse industry spread across the board can insulate it from severe shocks relative to areas that rely heavily on one or two industries. Health care and professional, scientific, and social services are the top employing private industries, accounting for approximately 40,000 employees, followed closely by accommodation and food services with Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 10

50 6.5 percent or 12,399 of the total jobs in the city respectively. State and local government employment is the largest employment sector in the City of Richmond accounting for roughly 20 percent of the total jobs in the city. This is largely due to the fact that Richmond is the capital of the Commonwealth. Employment through government enterprises comprises 23.6 percent of total jobs in the city. Income and Housing The number of employed people and their income levels create a market for real estate developments, including residential, retail, restaurants and all categories of commercial developments. Indicators of a market s overall wealth and growth can include trends in its income, employment and housing. The following table provides data on home ownership, income and retail sales, based on the latest data from the US Census Bureau. Table 2-3 Income, Spending and Other Demographic Data Category United States Virginia Richmond Homeownership rate, % 65.8% 41.4% Median value of owner-occupied housing units, $184,700 $248,400 $199,300 Persons per household, Median household income $55,322 $66,149 $41,187 Persons below poverty level, percent, % 11.0% 25.4% Retail sales per capita, 2012 $13,443 $13,438 $9,297 Source: US Census Bureau, Hunden Strategic Partners The home ownership rate is lower in Richmond than in Virginia and the nation by nearly 25 percent, respectively. The median value of owner-occupied homes is also lower in Richmond than Virginia by approximately $50,000, yet higher in comparison to the nation by $14,600. Real estate values are determined by a combination of variables, including density, quality of schools and income levels. The Richmond poverty rate is significantly higher than both the state and nation with more than a quarter of the population below poverty level, at 25.4 percent, or 2.3 times the rate of Virginia as a whole. Retail sales per capita in 2012 were also lower than the state and national average at $9,297. This lower retail figure suggests that residents are going to the suburban areas to do much of their shopping. Interviews with local stakeholders indicated that Richmond flourishes to the east and west of downtown but has a struggling downtown core. The North of Broad Project would attempt to draw residents to downtown from outside of downtown, as well as connect those already living downtown in outer impoverished neighborhoods to the heart of downtown. The raising of Leigh Street, for example, will allow for easier foot traffic to and from Jackson Ward which could have positive impact on retail and restaurants in the Project core. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 11

51 Unemployment The figure below shows the unemployment rate of the Richmond MSA (green line), State of Virginia (orange line), the City of Richmond (purple) and the U.S. (blue line) from January 2000 through January Figure Unemployment Rates US Unemployment Rate Richmond MSA Unemployment Rate Source: Bureau of Labor Statistics, HSP State of Virginia Unemployment Rate City of Richmond Unemployment Rate The unemployment rate for the City of Richmond has been consistently higher than that of Virginia and the MSA since It has followed the U.S rate fairly closely since January of During the recession, unemployment rates drastically increased for not only the United States and Virginia, but for the City of Richmond as well. In January 2010, unemployment rates peaked for both Virginia and Richmond at 7.9 percent and 10.1 percent, respectively. As of May 2013, Richmond unemployment rate was 6.7 percent, which is a marked improvement from 2010 when the rate peaked, however it has consistently been about 1.5 to 2.0 percentage points higher than the MSA and Virginia. From January 2015 to January 2018 the average Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 12

52 unemployment rate for the City of Richmond has been 4.7 percent, which is a significant improvement since the peak in Corporate Presence & Major Employers In general, corporate presence in a cities market supports local businesses, provides employment and other opportunities that influence the city s overall sustainability. Medium to large-scale companies located within a market can also provide demand for various real estate developments including hotels, office, retail, food and beverage and more. Higher wage employees and/or those desiring a walkable urban environment could be more likely to rent the residential developments proposed by the North of Broad Project. The following table shows the largest employers by number of employees. Company Name Table 2-4 City of Richmond Top Employers Industry Number of Employees Capital One Financial Corp. Banking 11,262 VCU Health System Health Care 9,313 HCA Virginia Health System Health Care 7,628 Bon Secours Richmond Health System Health Care 7,136 Dominion Resources Inc. Energy 5,433 SunTrust Banks Inc. Banking 3,810 Altria Group Inc. Marketing 3,800 Amazon.com Online Retail 3,800 Wells Fargo & Co. Banking 2,902 Anthem Blue Cross and Blue Shield Health Insurance 2,655 WellPoint Inc. Health Care 2,627 United Parcel Service Inc. Distribution 2,490 The Kroger Co. Food Retail 2,388 DuPont Manufacturing 2,376 Bank of America Corp. Banking 1,921 Markel Corporation Insurance 1,886 Federal Reserve Bank of Richmond Federal Banking 1,882 Verizon Communications Inc. Telecommunications 1,700 University of Richmond Education 1,578 General Dynamics Corporation Call Center 1,450 CarMax Inc. Auto Sales 1,306 Southside Regional Medical Center Health Care 1,280 Genworth Financial Insurance 1,134 Source: Richmond Economic & Community Development, Hunden Strategic Partners Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 13

53 As shown above, the largest private employers in the Richmond Metropolitan Area are Capital One Financial Corporation and VCU Health System, providing over 20,000 jobs between the two. Health care makes up a large number of local employers, those include VCU Health System, HCA Inc., Bon Secours Richmond Health Systems, WellPoint Inc. and Southside Regional Medical Center which totals nearly 28,000 jobs. Educational Attainment The level of education in a community is generally linked to income potential resulting in disposable income and long-term growth. Highly educated people have more choices in their decision to choose employment and locate themselves and their families. The higher the education level, the stronger the labor market and the more disposable income that is available to spend on recreational activates, such as dining out, attending cultural events and sports activities. The following table shows the education attainment levels in the area. Table Highest Education Level Attained (Population Age 25+) Population Age 25+ Richmond Virginia United States Did Not Complete High School 16.0% 11.3% 13.0% Completed High School 22.8% 24.5% 27.5% Some College 18.7% 19.9% 21.0% Completed Associate Degree 5.8% 7.4% 8.2% Completed Bachelors Degree 21.9% 21.2% 18.8% Completed Graduate Degree 14.8% 15.7% 11.5% Source: US Census Bureau: American Community Survey Richmond s adult population ranks exceed the State s attainment level and ranks above the national average by approximately 2.5 percentage points in terms of bachelor s degree attainment. The percentage of adults earning a graduate degree in Richmond is greater than the national average but below Virginia s level. On the other end of the spectrum, 16 percent of Richmond s adult population did not complete high school which is higher than the national rate. Higher Education The presence of colleges and universities can play a large role in supporting new development in the North of Broad Project specifically as it proposes housing and retail/restaurants near the VCU campus and can be a draw to recent graduates who choose to stay in the area and work for a company in Richmond. The following table shows colleges and universities in the Richmond area. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 14

54 Institution Table 2-6 Richmond Area Colleges & Universities Location Distance from Richmond Highest Degree Offered Enrollment Virginia Commonwealth University (VCU) Richmond, VA --- Doctorate 31,627 J Sargeant Reynolds Community College Richmond, VA --- Associates 13,367 University of Richmond Richmond, VA --- Doctorate 4,348 Virginia Union University Richmond, VA --- Doctorate 1,678 ITT Technical Institute-Richmond Richmond, VA --- Bachelors 713 University of Phoenix-Richmond Campus Richmond, VA --- Masters 592 Fortis College-Richmond Richmond, VA --- Associates 511 Virginia College-Richmond Richmond, VA --- Associates 440 Centura College-Richmond Main Richmond, VA --- Associates 250 Bon Secours Memorial College of Nursing Richmond, VA --- Bachelors 245 Union Presbyterian Seminary Richmond, VA --- Doctorate 221 Centura College-Richmond Westend Richmond, VA --- Associates 131 Baptist Theological Seminary at Richmond Richmond, VA --- Doctorate 110 John Tyler Community College Chester, VA 14.1 miles Associates 10,797 Virginia State University Petersburg, VA 21.8 miles Doctorate 5,890 Richard Bland College of the College of William and Mary Petersburg, VA 28.0 miles Associates 1,629 Randolph-Macon College Ashland, VA 14.5 miles Associates 1,257 Bryant & Stratton College-Richmond North Chesterfield, VA 7.4 miles Bachelors 1,006 South University Richmond Glen Allen, VA 9.6 miles Masters 559 Richmond School of Health and Technology Chester, VA 14.6 miles Associates 392 Southside Regional Medical Center Professional Schools Petersburg, VA 22.7 miles Associates 123 Total 75,886 Source: National Center for Education Statistics, Hunden Strategic Partners There are several educational institutions in the area that offer degree programs and certifications including six universities, ten colleges, two seminaries and three other education institutions, such as a technical institute. A total of 75,886 students attend these programs within 22 miles of the North of Broad Project, which is a healthy number relative to the MSA population. The largest institution is Virginia Commonwealth University (VCU), with approximately 32,000 students. This institution is a major driver of growth and economic development in and around downtown Richmond as VCU is located near the Project area. In addition to providing opportunities for higher education, the City s colleges and universities offer attractive employment opportunities that provide stable demand generators in the market. The schools within the immediate area of Richmond enroll more than 54,200 students and this provides significant opportunities for economic activity in the community. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 15

55 Top Area Attractions & Events As Richmond Regional Tourism says it best, While you weren t looking, Richmond got cool. While widely renowned for its rich 400-year history and pivotal place in American history, Richmond has evolved to offer visitors a great variety of tourist attractions. In addition to historic landmarks and breath-taking river views, Richmond offers a wide variety of attractions that appeal to visitors of all ages and interests. These attractions can generate demand for lodging accommodations and can induce additional economic activity which can help to stimulate opportunities for local business and visitors and can offer enticing draw to individuals looking to move to the area. This section highlights some of the various categories of attractions and events in Richmond. The following table shows the Top Ten Richmond Regional Attractions by 2017 attendance as compiled by Richmond Region Tourism. Table 2-7 Top Ten Richmond Regional Attractions by Attendance 2017 Highest Attraction Attendance James River Park System 1,818,581 Virginia Capital Trail 1,200,000 Maymont Park 735,667 Virginia Museum of Fine Ats 594,087 Henricus Historical State Park 496,437 Lewis Ginter Botanical Garden 439,966 Science Museum of Virginia 393,165 Three Lakes Park & Nature Center 334,001 Children's Museum of Richmond 331,384 NPS/Richmond Battlefield 235,470 Source: Richmond Region Tourism Annual Report, HSP The Richmond Region offers attractions ranging from historic battlegrounds to museums and art galleries to theme parks and sporting events. Each year, millions of visitors experience the education and fun offered by these attractions. These attractions not only draw in visitors from outside of the region but can also offer strong appeal to individuals who choose to reside in the community as it gives them options for activities that do not require extensive travel. The James River Park System was the most highly attended attraction in the Richmond Region in The James River Park System, part of the City of Richmond s Department of Parks, Recreation and Community Facilities, extends in 14 sections from the Huguenot Bridge to a half mile beyond the I-95 Bridge. The System includes acres of shoreline along the James River and offers rocks, rapids, meadows and forests. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 16

56 The Virginia Capital Trail was the second most highly attended attraction in the Richmond Region in The Virginia Capital trail is a 52-mile multi-use trail that connects Richmond and Williamsburg along the beautiful and historic Route 5 corridor. The third most highly attended attraction in the Richmond Region in 2017 was Maymont Mansion. Maymont Mansion dates back to 1886 when James and Sallie Dooley purchased the land along the banks of the James River. This 12,000 square-foot, 33-room home has been preserved and is a document of Gilded Age design and the taste of well-educated, cosmopolitan millionaires of the past. Museums. The following table shows a snapshot of the City of Richmond s top museum tourist attractions. Name Table 2-8 Richmond Museum Attractions Virginia Museum of Fine Arts Children's Museum of Richmond - Central Science Museum of Virginia Virginia Historical Society Virginia Holocaust Museum The Valentine (including 1812 Wickham House/The Valentine First Freedom Center) John Marshall House The American Civil War Museum at Historic Tredegar Black History Museum and Cutural Center of Virginia The Branch Museum of Architecture and Design Source: Multiple sources, Richmond Region Tourism 2018 Visitor's Guide, HSP With a rich history that spans centuries, the City of Richmond has preserved artifacts that may be handled, heard and viewed in 23 museums. Many of these museums are old rehabilitated warehouses tucked within the expansive historic estates and the core of downtown. These museums represent a wide range of architecture, art and history and offer draw to residents and visitors alike. Several of the museums are within short distance of the North of Broad Project area and can add appeal for new residents. The Virginia Museum of Fine Arts drew the largest attendance of Richmond museums in 2017, with 594,087 visitors. It has hosted exhibitions featuring Picasso, Faberge and Russian Decorative Arts, and Yves Saint Laurent and has featured collections for African American Art, Native American Art and Modern and Contemporary Art. The City of Richmond also has a number of museums focused on the American Revolutionary and Civil War eras including the American Civil War Museum at Historic Tredegar, the Valentine, and the Black History Museum and Culture Center of Virginia among others. Historic Landmarks. The following table shows a brief snapshot of Richmond s dozens of historic landmarks. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 17

57 Table 2-9 Richmond Historic Landmarks Name St. John's Chuch Henricus Historical Park Beaver Dam Creek Battlefield Battery Dantzler Richmond National Battlefield Park Civil War Visitor's Center Riverfront Canal Walk Maggie L. Walker Monument Virginia Civil Rights Memorial Historic Jackson Ward Source: Multiple sources, Richmond Region Tourism Annual Report From its development as a colony and role in both the American Revolutionary War as well as the American Civil War, the City of Richmond has played a vital role in the shaping of America. Richmond is home to hundreds of historic landmarks, monuments, and battlefields. For individuals choosing to reside in the North of Broad Project area, this rich history could offer a unique draw. Richmond National Battlefield Park is one of the top attractions of all types in the region and preserves more than 2,200 acres of Civil War resources in 13 units, including the main visitor center at the famous Tredegar Iron Works and the site of the Chimborazo Hospital. In 1775, one year prior to the drafting of the Declaration of Independence, St. Johns Church in Richmond hosted the Second Virginia Convention. It is here, alongside George Washington and Thomas Jefferson, that Patrick Henry gave his famous Give me liberty or give me death speech. This speech ignited the American Revolution and has made St. John s Church a landmark for those interested not just in the American Revolution but in the struggle for human rights. The City of Richmond is also particularly rich in African American Heritage landmarks including Historic Jackson Ward, the Virginia Civil Rights Memorial, and a 10-foot bronze statue commemorating civil rights leader, Maggie L. Walker. Entertainment Attractions. The following table shows some of the most active Richmond entertainment attractions. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 18

58 Venue Table 2-10 Richmond Entertainment Attractions The Richmond Coliseum The November Theatre at Virginia Repertory Center The Byrd Theater Landmark Theater The National Dogwood Dell Carpenter Theater / Richmond CenterStage The Classic Amphitheatre Dominion Energy Center for the Performing Arts Old City Hall The Hippodrome Source: Multiple sources; Richmond Regional Tourism 2018 Visitor's Guide The City of Richmond is home to over 50 entertainment and theater venues and was ranked #1 on the Gogobot 10 Most Artistic Mid-Sized Cities in America in With the influence of Virginia Commonwealth University and groups like the Golden Rule Foundation and CultureWorks, Richmond is drawing world-class talent to the region. This is particularly important to potential residents of North of Broad as they desire entertainment options that will keep them, and their disposable income, in the Richmond area as opposed to traveling to other venues outside of the region. The Richmond Coliseum attracted shows such as Disney on Ice Dare to Dream and Dream Big, Ringling Brothers Barnum & Bailey Circus and the Trans-Siberian Orchestra. The Coliseum also hosted musical and comedy acts such as Bob Dylan, Luke Bryan and Katt Williams as well as sporting events including the Atlantic 10 Women s Basketball Championship, Arena Pro Racing and the Richmond Roughriders. The National hosts a wide assortment of musical artists and acts. The National describes itself as a musiclover s fantasyland with a state-of-the-art V-DOSC sound system and a 42 x 32 x 4.5 foot stage with unlimited clearance. Performers in 2018 include Band of Horses, Franz Ferdinand, Rupaul s Drag Race, Generate Axe and more. The City of Richmond also offers the Byrd Theater, the Classic Amphitheater and the Dominion Energy Center for the Performing Arts among many others as additional entertainment venues. Festivals. The following table shows a list of some of Richmond s dozens of festivals. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 19

59 Table 2-11 Richmond Festival Attractions Festival The Richmond Folk Festival Carytown Watermelon Festival 2nd Street Festival RVA Fireworks on the James Broad Appetit Beer, Bourbon & BBQ Dragonboat Festival National Beer Expo Richmond Jazz Festival Richmond International Film Festival Source: Multiple Sources, Richmond Regional Tourism In 2017, Richmond held more than 50 festivals ranging from food tasting to wine and beer expos to music and film. Festivals take place throughout the year and draw crowds from around the Nation. With a millennial generation that is particularly engaged in such festivals, this can be a huge draw for individuals who may choose to reside in the North of Broad development area. The Richmond Folk Festival attracted approximately 220,000 guests in 2017 and is one of the largest folk festivals in the nation. The Richmond Folk Festival is a free three-day festival offering more than 30 performing groups on live stages, children s activities, dining, folk arts shopping and more. The Watermelon Festival in Carytown, north of the City Stadium, is a local favorite that occurs annually in August. In 2017, the festival attracted approximately 118,000 attendees. The 2 nd Street Festival takes place in the first full week of October. Over the past three decades, it has grown to be one of the city s largest street festivals, attracting nearly 40,000 people to historic Jackson Ward. Athletic Attractions. The following table shows some of Richmond s many athletic events/attractions. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 20

60 Sporting Event Table 2-12 Richmond Athletic Attractions The Flying Squirrels Double-A Baseball Ukrop's Monument Avenue 10K Dominion Energy Riverrock Anthem Richmond Marathon XTERRA Arena Racing USA Richmond Kickers University of Richmond Athletics Virginia Commonwealth University Athletics Virginia Union University Athletics Source: Multiple sources, Richmond Region Tourism 2018 Visitor's Guide Richmond has an abundance of sporting events that draw numerous attendees. Several local universities have athletic departments with strong fan bases. Sporting events can be particularly interesting to potential users and residents in North of Broad as another form of entertainment and local activity. The Flying Squirrels are Richmond s Double-A baseball team. The Flying Squirrels play in the Eastern League and are an affiliate of the San Francisco Giants. Richmond is also home to the Richmond Kickers are a professional soccer club that plays in the United Soccer League which is a second tier of the American Soccer League. Ukrop s Monument Avenue 10k is one of Richmond s most popular road running races and entertains over 25,000 participants. USA Today has named the Ukrop s Monument Avenue 10k one of the ten greatest road races in the United States. Richmond also hosts a number of additional road races including Anthem Richmond Marathon, Market Richmond Half Marathon and VCU Health 8k. Dominion Energy Riverrock is the nation s premier outdoor sports and music festival. Held annually, Riverrock is home to the Filthy 5k-ish Mud Run, Boulder Bash, and Monster Energy Freestyle Bikes. Visitors are not just spectators as they can try their hands at kayaking, hiking, climbing, yoga and more. Athletic Venues. The following table shows some of Richmond s many athletic venues. Relevant venues for the new arena will be discussed later in this report. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 21

61 Venue Table 2-13 Richmond Sports Venues Richmond Coliseum City Stadium Robins Center Arthur Ashe Athletic Center The Diamond Richmond Arena Greater Richmond Convention Center Richmond Raceway Bon Secours Washington Redskins Training Center E. Clairborne Robins Stadium Source: Multiple sources, Richmond Region Tourism 2018 Visitor's Guide Richmond offers a large amount of sporting event and attractions are held at several top sports venues. These venues host sports and events ranging from baseball to tennis to professional racing. Richmond Coliseum is one of central Virginia s largest indoor venues. The facility is home to the annual CAA Men s Basketball Tournament and the Richmond Raiders indoor football team. The Coliseum has hosted ECHL and SPHL hockey, cheerleading exhibitions and NCAA Men s and Women s basketball games. Opened in 1985, the Diamond is the 12,134-seat baseball stadium home to the Richmond Flying Squirrels and the VCU Rams. The Diamond has covered over nearly 3,000 upper level seating sections with advertising tarps, reducing the seating capacity to 9,560 in an effort to create a more intimate and improved fan experience. The Richmond Raceway is an international raceway with 1,200 acres of grass and paved lots, as well as over 156,000 square feet of flexible indoor space. It is probably best known for the annual NASCAR race it hosts. The Complex can also accommodate basketball and volleyball tournaments. Richmond also offers a wide variety of college-level athletic facilities such as the Robins Center and Weinstein Center at the University of Richmond and the Stuart C. Seigel Center at Virginia Commonwealth University. Sports tournament facilities for youth sports including Ukrop Park and Sports Center of Richmond. Conclusion Richmond is growing and is benefiting from an increasing number of young graduates are interested in living in Richmond. Because of the increasing desirability of Richmond as a place to live more and more employers are selecting Richmond as a location because talent can be acquired and retained. The North of Broad Project will greatly increase the supply of apartments in the downtown core of Richmond which provides these young workers a place to live near their offices downtown. A vibrant, active downtown will provide reputation and amenities that appeal to new residents. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 2 - Page 22

62 TABLE OF CONTENTS Executive Summary Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Project Profile Economic, Demographic & Tourism Analysis Arena, Event and Entertainment Market Analysis Hotel and Meetings/Convention Market Analysis Retail and Restaurant Market Analysis Residential Market Analysis Office Market Analysis Demand and Financial Projections Economic, Fiscal and Employment Impact Analysis

63 ARENA, EVENT AND ENTERTAINMENT ANALYSIS The purpose of this chapter is to assess the arena, event and entertainment markets in Richmond and to identify and assess competing facilities within the reason to help understand the context within which the proposed new arena and the renovated Blues Armory will compete for events and attendees. This market assessment, including conversations with market participants (primarily promoters and entertainment managers), will provide implications regarding the construction of a new 17,500-seat arena in place of the current Richmond Coliseum and renovation of the existing Blues Armory facility in downtown Richmond. This chapter will determine gaps in the entertainment market in and around Richmond to understand the potential success of the new arena and renovated Blues Armory. Based on the analysis of the existing venues, quality, location and reputation, as well as conversations with entertainment professionals in the market, HSP understands that Richmond s entertainment market has tremendous potential but also that the city sits in a competitive landscape. This chapter will begin with the analysis related to the new arena and will then move into the analysis of the renovated Blues Armory before concluding with implications. Richmond Coliseum Overview Opened in 1971 and once the largest sports arena in Virginia, the 13,500-seat Coliseum has aged considerably with time and lacks the appeal and amenities desired by national promotors and users. North of Broad developers believe a new arena with improved amenities and 4,000 more seats than the current Coliseum will allow Richmond to compete on the national stage for sporting events and concerts. They believe, and HSP agrees, that a new arena will positively impact downtown Richmond, attract events that are bypassing the city, potentially attract a minor league professional hockey team, and improve the City s image as a whole. As such, the Developer plans to demolish the current Coliseum and build a new arena on the space. The proposed new Arena is to include a minimum of 56 suites and club seating located on both ends of the venue. The following figure shows an aerial view of the current Coliseum. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 2

64 Figure 3-1 The following table illustrates events hosted by the Richmond Coliseum over the past six years. Table 3-1 Coliseum Events Event Type # of Events Sporting Events 186 Family Programming 131 Local / Religious 118 Local - Conferences 24 Local - Graduations 20 Concerts - Urban 19 Concerts - Rock 17 Local Events 16 Concerts - Country 9 Concerts - Comedy 5 Concerts - Pop 3 Concerts - Christian 2 Local / Prom 2 Non-Traditional Programming 2 Source: Richmond Coliseum Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 3

65 Approximately 550 events have been held over the past six years, or about 92 per year. The following figure graphically demonstrates the distribution of events by type hosted by the Richmond Coliseum over the past 6 years. Figure 3-2 Arena Interview Feedback HSP spoke to numerous entertainment representatives to glean insight about the Richmond market and current and potential offerings. Highlights from the conversations are below: AHL Overview A new arena would increase the number of events moderately, but would increase sponsorships, marketing, general sales, and club sales greatly; this shift would move the arena from a net loss to profit. A new arena will be able to have a naming rights sponsor to provide over one million annually. The current coliseum cannot receive a naming rights sponsor for $250,000. Current fixtures in Coliseum are generally low quality. For example, the refrigeration system creates problems leaving guests dissatisfied with drink temperatures. Sporting events, such as national scale tournaments like the NCAA March Madness, could be legitimately bid on if an improved facility with a larger seating capacity is developed. The Coliseum currently loses concert events to Charlottesville, VA because the Charlottesville facility is larger. As a whole, Charlottesville is a less desirable destination than Richmond, giving Richmond the ability to host more impactful events if a new venue was developed. While not guaranteed, there is a strong chance that a professional hockey franchise could locate at the new arena if developed. The likely league is the American Hockey League (AHL), which is the primary development league for the National Hockey League (NHL). Since the season, all AHL teams have Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 4

66 had an affiliation agreement with NHL teams. AHL has a total of 31 teams across the United States (27 teams) and Canada (four teams). The following figure shows the locations of all AHL teams. Figure 3-3 In recent years, teams have been moving to the West Coast from Canadian and New England locations. There is a concentration of teams in New England, California and surround Lake Michigan currently. The most proximate teams to Richmond reside in Pennsylvania and North Carolina. The four closest teams are listed below. Hershey Bears Hershey, Pennsylvania 230 miles from Richmond Charlotte Checkers Charlotte, North Carolina 290 miles from Richmond Lehigh Valley Phantoms Allentown, Pennsylvania 300 miles from Richmond Wilkes-Barre / Scranton Penguins Wilkes-Barre, Pennsylvania 325 miles from Richmond On average AHL teams attracted attendance of approximately 5,300 spectators per game. Average per game attendance by team ranged from 3,600 to 9,300. Of the four proximate teams, the Hershey Bears attract the most attendees on average with nearly 9,100 per game. The Lehigh Valley Phantoms averaged nearly 7,900, the Charlotte Checkers averaged 6,400 and the Wilkes-Barre/Scranton Penguins averaged nearly 5,600 per game. Teams play located everywhere but California play a 76-game season, while California teams play a 68-game season. The proposed new arena could accommodate an AHL team well in seating capacity and proximity to competing teams. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 5

67 Competitive Entertainment Venues of Current and Proposed Arena HSP analyzed entertainment venues within the greater Richmond market. HSP conducted this analysis to determine the competitive set of venues for both the Coliseum and the Blues Armory Music Hall. HSP spoke with local and regional concert and entertainment promoters in order to create a competitive set of venues. This section will discuss competitive venues regarding the Coliseum and a later section will discuss competitive venues regarding the Blues Armory. It is important to note that HSP identified both venues that are competitive to the current coliseum and venues that will be competitive to a new arena development. There is a small overlap of regional facilities that are currently competitive and will remain competitive to a larger arena. In general, a new arena development will allow Richmond to compete with larger, more impactful markets like Washington D.C. The following figure highlights the facilities that are competitive to the Coliseum as it currently stands, sorted by distance from the Coliseum. Table 3-2 Competitive Environment - Current Coliseum Venue Distinction Location Pollstar Data Year Opened (Renovation) Distance From Site Capacity / Seating Hampton Coliseum Coliseum Hampton, VA ,800 John Paul Jones Arena Arena Charlottesville, VA ,200 Norfolk Scope Arena Arena Norfolk, VA 1971 (2003) 98 13,000 Veteran Loans Amphitheatre Amphitheatre Virginia Beach, VA ,000 Berglund Center Arena Roanoke, VA 1971 (2016) ,500 Average ,500 Source: Pollstar, Various Facilities, Hunden Strategic Partners To determine competitors, HSP looked at proximity as well as venue capacity, settling on venues with a capacity of between 10,000 and 20,000. The majority of venues are within a 200-mile radius with Roanoke the farthest at 164 miles. The majority of the facilities are older and three of the five have larger capacities than the current Richmond Coliseum. The following map shows the competitive set of facilities in terms of the current Coliseum. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 6

68 Figure 3-4 As shown in the figure above, the current competitive set of venues are all located within the Commonwealth of Virginia. Three of the facilities are located near in the southeastern corner of Virginia and two are located to the west of Richmond. The Richmond Coliseum is closer to centrally located and is near equal distance to the North Carolina border and Washington, DC along I-95 which can give them an advantage over the competitive set which require more indirect routes. The following figure shows the competitive set of venues for the new 17,500-seat arena (replacing the current Richmond Coliseum) as sorted by distance from downtown Richmond. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 7

69 Table 3-3 Competitive Environment - Future Development Venue Distinction Location Pollstar Data Year Opened (Renovation) Distance From Site Capacity / Seating John Paul Jones Arena Arena Charlottesville, VA ,200 Veteran Loans Amphitheatre Amphitheatre Virginia Beach, VA ,000 Capital One Arena Arena Washington, DC 1997 (2018) ,500 PNC Arena Arena Raleigh, NC ,722 Greensboro Coliseum Complex Coliseum Greensboro, NC 1958 (2011) ,000 Average ,484 Source: Pollstar, Various Facilities, Hunden Strategic Partners As with the competitive set for the current Coliseum, HSP looked at proximity as well as venue capacity when determining the competitive set for the new arena. The competitive set includes venues with a capacity of between 14,000 and 25,000. It should be noted that John Paul Jones Arena in Charlottesville and Veteran Loans Amphitheatre in Virginia Beach are in both competitive sets. The majority of venues competitive with the new arena are within a 210-mile radius with Greensboro Coliseum Complex the farthest at 205 miles. The majority of the facilities are older and only John Paul Jones Arena has a smaller capacity than the proposed new arena. While the current Coliseum competitive set were all within the Commonwealth of Virginia, the competitive set for the new arena reaches into North Carolina and Washington, DC. The following map shows the competitive set for a new 17,500-seat arena development. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 8

70 Figure 3-5 Richmond will become competitive with facilities that are located outside of Virginia if a larger arena is developed. The average distance of venues increased from 104 miles from Richmond to 132 miles from Richmond and the average size of venues increased from 14,500 to over 19,400 in the competitive set for a new arena versus the competitive set of the current Coliseum. Competitive Set Performance Summary HSP used Pollstar data over the period of 2015 through 2017 to analyze the performance of both the competitive set for the current Coliseum and the competitive set for the new arena. HSP summarized the Pollstar data into four main categories: Number of Events, Total Tickets Sold, Average Capacity and Average Ticket Price. The following table outlines the performance of the current Coliseum s competitive set. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 9

71 Table 3-4 Current Coliseum - Competitive Venue Summary ( ) Total Tickets Venue Capacity Indoor/ Outdoor # of Events Sold Average Capacity Average Ticket Price Veteran Loans Amphitheatre 20,000 Outdoor ,129 61% $35.00 John Paul Jones Arena 15,200 Indoor ,964 79% $61.00 Hampton Coliseum 13,800 Indoor ,597 84% $58.00 Norfolk Scope Arena 13,000 Indoor ,246 74% $35.00 Berglund Center 10,500 Indoor 10 48,968 69% $52.00 Average 14, ,981 73% $48.20 Source: Pollstar; Hunden Strategic Partners As demonstrated in the table above, performance among the competitive set for the current Coliseum varies greatly. The largest venue, and the only outdoor facility, is the Veteran Loans Amphitheatre with a. capacity of 20,000 seats. Based on information provided by Pollstar, the average number of events in the competitive set is nearly 30 per year and the average ticket price is $ The following table outlines the performance of the competitive set for the new arena. Table 3-5 Potential Future Coliseum - Competitive Venue Summary ( ) Venue Occupancy Indoor/ Outdoor # of Events Total Tickets Average Average Ticket Sold Capacity Price Greensboro Coliseum Complex 23,000 Indoor ,435 88% $64.00 Capital One Arena 20,500 Indoor 105 1,571,069 82% $87.00 Veteran Loans Amphitheatre 20,000 Outdoor ,129 61% $35.00 PNC Arena 19,722 Indoor ,666 90% $58.00 John Paul Jones Arena 14,200 Indoor ,964 79% $61.00 Average 19, ,453 80% $61.00 Source: Pollstar; Hunden Strategic Partners As mentioned previously, the John Paul Jones Arena and Veteran Loans Amphitheatre are included both in the current Coliseum competitive set and competitive set of the new arena. The largest venue in the competitive set for the new arena is the Greensboro Coliseum Complex with 23,000 seats. Based on information provided by Pollstar, the average number of events in the competitive set for the new arena is nearly 56 per year, or 27 more than the current competitive set. Of the tracked events, the competitive set had an average occupancy seven points higher than the current Coliseum competitive set and an average ticket price nearly $13 dollars higher. This suggests the incremental improvement in acts that could be brought to Richmond. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 10

72 Profiles of Venues Competitive to Current Coliseum This section profiles the entertainment venues that are in the competitive set for the current Coliseum. Hampton Coliseum The Hampton Coliseum is a multipurpose arena located in Hampton, Virginia, located approximately 75 miles southeast of Richmond. The venue opened in 1970 and cost $9 million to build. Hampton Coliseum has a capacity of 13,800 and is owned and operated by the City of Hampton. The following figure shows the exterior of the Hampton Coliseum. Figure 3-6 The following figure shows the Hampton Coliseum during a jazz festival. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 11

73 Figure 3-7 The following table events at the Hampton Coliseum from 2015 through Table 3-6 Hampton Coliseum Event Summary Total Average Average Average Ticket Year # of Events Attendance Attendance Occupancy % Price ,803 8, $ ,136 9, $ ,658 19, $61 Total/Average ,597 12, $58 Source: Pollstar As demonstrated above, Hampton Coliseum held a total of 10 ticketed events throughout the three years. The venue saw more than 112,500 total attendees from 2015 to Hampton Coliseum s average occupancy is high at 83.5% with an average ticket price of $58. John Paul Jones Arena John Paul Jones Arena is located in Charlottesville, Virginia, 72.7 miles northwest of Richmond. Since opening in 2006, the location serves as home to both the University of Virginia Cavaliers men s and women s basketball teams. The building cost $131 million to construct and has a maximum occupancy of 15,200. The following figure shows the interior of John Paul Jones Arena during an event. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 12

74 Figure 3-8 The following figure shows the exterior of John Paul Jones Arena. Figure 3-9 The following table summarizes events at John Paul Jones Arena from 2015 through Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 13

75 Table 3-7 John Paul Jones Arena Event Summary Total Average Average Average Ticket Year # of Events Attendance Attendance Occupancy % Price ,669 8,953 83% $ ,921 6,280 81% $ ,374 6,837 73% $49 Total/Average ,964 7,357 79% $61 Source: Pollstar As Pollstar data demonstrates above, John Paul Jones Arena held a total of 31 ticketed events throughout the three years. The venue saw nearly 219,000 total attendees from 2015 to John Paul Jones Arena average occupancy remained high at 79 percent with an average ticket price of $61. Norfolk Scope Arena Norfolk Scope Arena is located in Norfolk, Virginia 92.8 miles southeast of Richmond. The venue opened in 1971 and cost $35 million to complete and has undergone $14.5 million of upgrades since Norfolk Scope Arena has a maximum capacity of 13,000. The following figure shows the Norfolk Scope Arena during a hockey game. Figure 3-10 The following figure shows the exterior of the Norfolk Scope Arena. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 14

76 Figure 3-11 The following table summarizes events at Norfolk Scope Arena from 2015 through Table 3-8 Norfolk Scope Arena Total Average Average Average Year # of Events Attendance Attendance Occupancy % Ticket Price ,179 4, $ ,791 7, $ ,276 9, $35 Total/Average ,246 7, $35 Source: Pollstar As demonstrated, Norfolk Scope Arena held a total of 18 ticketed events throughout the three years. The venue saw more than 135,000 total attendees from 2015 to 2017 with an average attendance of just over 7,000 per event. Norfolk Scope Arena s average occupancy was 74 percent but was tied for the lowest average ticket price in the current competitive venue group for the lowest average ticket price at $35. Veteran Loans Amphitheatre The Veteran Loans Amphitheatre is an outdoor concert venue located in Virginia Beach, Virginia approximately 104 miles southeast of Richmond. The venue has the largest seating capacity of any venue in the current Coliseum competitive venue group with a maximum capacity of 20,000. The Amphitheater offers both reserved covered seating and lawn seating. The Veteran Loans Amphitheatre has hosted many popular musicians is operated by Live Nation Entertainment. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 15

77 The following figure shows the Veterans Loans Amphitheatre during a concert from the stage. Figure 3-12 The following figure shows the exterior of the Veterans Loans Amphitheatre. Figure 3-13 The following table summarizes events at Veterans Loans Amphitheatre from 2015 through Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 16

78 Table 3-9 Veterans Loan Amphitheatre Total Average Average Average Year # of Events Attendance Attendance Occupancy % Ticket Price ,685 14, $ ,131 10, $ ,313 9, $35 Total/Average ,129 11, $35 Source: Pollstar As shown above from Pollstar, the Veterans Loan Amphitheatre held a total of 77 ticketed events throughout the three years. The venue saw more than 839,000 total attendees from 2015 to 2017 with an average attendance of just under 11,300 per event. The Veterans Loans Amphitheatre s average occupancy for ticketed events was the lowest of the competitive set for the current Coliseum at 61 percent and was tied for the lowest average ticket price in the competitive set analyzed at $35. Berglund Center The Berglund Center (originally named the Roanoke Civic Center) is located in Roanoke, Virginia approximately 164 miles west of Richmond. The venue has a maximum seating capacity of 10,500, making it the smallest seating capacity of any of the competitive set for the current Coliseum. Opened in 1971, the venue cost $14 million to construct and currently hosts both professional and collegiate ice hockey games, a professional basketball team and various other special events such as concerts and Broadway shows. The following figure shows the interior of the Berglund Center. Figure 3-14 The following figure shows the exterior of the Berglund Center. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 17

79 Figure 3-15 The following table summarizes events at Berglund Center from 2015 through Table 3-10 Berglund Center Summary Total Average Average Average Year # of Events Attendance Attendance Occupancy % Ticket Price ,503 3, $ ,380 6, $ ,085 4, $62 Total/Average 10 48,968 4, $52 Source: Pollstar As demonstrated above, the Berglund Center held a total of 10 ticketed events from 2014 to The venue saw nearly 49,000 total attendees with an average attendance of just over 4,800 per event. The Berglund Center s average occupancy was 69 percent and average ticket price was $52. Profile of Future Competitive Entertainment Venues This section profiles the venues in the competitive set for the new arena. The John Paul Jones Arena and the Veteran Loans Amphitheatre are included in the future competitive entertainment venues but are profiled in the previous section. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 18

80 Capital One Arena Capital One Arena is an indoor arena located in Washington, DC, 108 miles north of Richmond. The arena has a maximum capacity of 20,500 and is home to the Washington Capitals of the National Hockey League, the Washington Wizards of the National Basketball Association and the Georgetown University men s basketball team. In addition to hosting multiple sports teams, the Arena also hosts many other special events. The building was completed in 1997 and cost $260 million. Capital One Arena is owned and operated by Monumental Sports & Entertainment. The following figure shows the exterior of the Capital One Arena. Figure 3-16 The following figure shows the interior of the Capital One Arena. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 19

81 Figure 3-17 The following table summarizes events Capital One Arena. Table 3-11 Capital One Arena Event Summary Average Year # of Events Total Attendance Average Attendance Occupancy % Average Ticket Price , $ ,473 14, $ ,235 15, $86 Total/Average 105 1,571,069 14, $87 Source: Pollstar As demonstrated above, the Capital One Arena held a total of 105 ticketed events from 2014 to This was more than any venue from the competitive venue group. The venue saw the most attendees of any of the other venues with 1,571,069 total attendees with an average attendance of nearly 14,900 per event. The Capital One Arena s average occupancy was 82 percent and had the highest average ticket price of any of the venues at $87. Greensboro Coliseum Complex Greensboro Coliseum Complex is a multipurpose complex located in Greensboro, North Carolina, 205 miles southwest of Richmond. With a maximum capacity of 23,000, Greensboro Coliseum Complex has the largest seating capacity of any of the competitive coliseum venues. The venue opened in 1959 and cost $4.5 million Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 20

82 to construct and underwent a $63 million expansion in The facility hosts a wide variety of sporting events and has held the NCAA Men s Final Four basketball tournament on multiple occasions. In addition to sporting events, the facility hosts concerts, live shows and special events. The following figure shows the Greensboro Coliseum during an event. Figure 3-18 The following figure shows the exterior of the Greensboro Coliseum Complex before an event. Figure 3-19 The following table highlights the performance of the Greensboro Coliseum. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 21

83 Table 3-12 Greensboro Coliseum Complex Event Summary Total Average Average Average Year # of Events Attendance Attendance Occupancy % Ticket Price ,236 11, $ ,738 10, $ ,461 12, $65 Total/Average ,435 11, $64 Source: Pollstar As shown above, the Greensboro Coliseum held a total of 39 ticketed events from 2014 to During the three-year period, the venue had 445,435 total attendees with an average attendance of 11,351 per event. The Greensboro Coliseum s average occupancy was percent, the second highest of any of the competitive venues, and had an average ticket price of $64. PNC Arena PNC Arena is an indoor arena located in Raleigh, North Carolina, 168 miles southwest of Richmond. The PNC Arena is home to the Carolina Hurricanes of the National Hockey League and the North Carolina State men s basketball team. PNC Arena has a maximum seating capacity of 19,722 and hosts concerts in addition to sporting events. The facility opened in 1999 at a cost of $158 million and has undergone several renovations since its opening. The following figure shows the exterior of PNC Arena. Figure 3-20 The following figure shows the interior of PNC Arena during a basketball game. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 22

84 Figure 3-21 The following table highlights the performance of PNC Arena. Table 3-13 PNC Arena Event Summary Total Average Average Average Year # of Events Attendance Attendance Occupancy % Ticket Price ,453 10, $ ,170 10, $ ,043 10, $58 Total/Average ,666 10, $59 Source: Pollstar As shown, PNC Arena held a total of 25 ticketed events from 2014 to During the three-year period, the venue had 257,666 total attendees with an average attendance of 10,326 per event. The Greensboro Coliseum s average occupancy was percent, the highest of any of the competitive venues, and had an average ticket price of $59. Blues Armory Overview The historic Blues Armory is located adjacent to the current Richmond Coliseum and once housed the Richmond Light Infantry Blues. The Blues were recognized as the oldest and arguably most prestigious military organization in the Nation until being incorporated into the National Guard in The current Blues Armory was constructed in 1910 after a fire destroyed the living quarters for the Blues in Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 23

85 The Blues Armory was vacated in 1963 and remained vacant until an attempt at development occurred in the 90 s. The development turned the first floor into a food court space and used the top two levels for office space. The project was not successful, and the space became vacant again in It has remained vacant since that time. As part of the North of Broad plans, the Blues Armory will be renovated into a food hall, musical entertainment and ballroom space. The food hall will occupy the first floor, while the music hall and ballroom will occupy the second and third floors, respectively. The facility is envisioned to host smaller, more intimate music activities. Each of the three floors at the Blues Armory span approximately 20,000 square feet. HSP analyzed the competitive set for the music hall of the Blues Armory. The competitive set is comprised of smaller music venues that are able to accommodate at least 300 attendees but no more than 4,000 attendees. The competitive set includes a mix of historic venues as well as recently constructed venues. The following figure shows the competitive set of for the Blues Armory music hall. The highlighted items are profiled herein. Table 3-14 Competitive Environment - Blues Armory Venue Distinction Location Year Opened (Renovation) Distance From Site Capacity / Seating Altria Theater Theatre Richmond, VA 1918 (2014) 1.2 3,565 The National Restaurant/Bar Richmond, VA ,500 Hippodrome Theatre Historic Theate Richmond, VA 1914 (2011) Main Street Station Special Event Venue Richmond, VA 1901 (2017) The Broadberry Restaurant/Bar Richmond, VA The Hofheimer Event Building Historic Event Venue Richmond, VA Capital Ale House - The Music Hall Restaurant/Bar Richmond, VA Average Source: Pollstar, Various Facilities, Hunden Strategic Partners As shown, Richmond currently offers seven competitive venues to the Blues Armory music hall that range in size from 300 to 3,565. The Altria Theatre in Richmond is the largest in the competitive set and is located 1.2 miles from the Armory. HSP highlighted the three largest and most competitive venues after the proposed renovation at the Blues Armory is completed. Profiles of the venues are provided below. Altria Theatre The Altria Theatre was originally built in 1918 for Shriners of the Acca Temple Shrine. The Altria was purchased by the City of Richmond in 1940 and converted much of the interior for municipal use. The Altria Theatre received a $10-million renovation gift from Altria in 2014 thus giving the company naming rights. Altria Theatre is known for annually hosting large-scale musical and theatrical performances and has a maximum capacity of 3,500. The following figure shows the interior of Altria Theatre. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 24

86 Figure 3-22 The National Theatre The National Theatre is a historic theatre that originally opened in The National is the only remaining facility of the previous Theatre Row. The Theatre remained unused for many years after its closure in 1983 but was restored and reopened in 2008 by RIC Capital Ventures. AEG Live acquired the venue in 2014 and uses the facility to host performing arts and music acts. The National was added to the National Register of Historic Places in 2003 and has a maximum capacity of 1,500. The following figure shows the inside of the National Theatre. Figure 3-23 Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 25

87 Hippodrome Theatre The Hippodrome Theatre is a historic venue located in the historical African-American neighborhood of Jackson Ward which was referred to as the Harlem of the South during the 1920 s. The Hippodrome was originally opened as a Vaudeville and movie theatre. It was widely known as a venue that was safe for African American musicians, comedians and other entertainers to perform during the era of racial segregation in the United States. The Hippodrome is currently owned by Ronald Stalling and is situated next to the former home of Rev. William Lee Taylor. Taylor s home now functions as the Speakeasy Grill restaurant that is connected to the Hippodrome Theatre. The venue has a capacity of 950. The following figure shows the interior of the Hippodrome Theatre. Figure 3-24 New Arena & Blues Armory Implications Discussions with entertainment managers and promoters revealed that the Richmond Coliseum, in its current design and offerings, does not satisfy the needs of the entertainment market in and around Richmond. While the facility is moderately-sized, it is very dated and limited in amenities. It is actually pushing away entertainment from Richmond to other venues, which means local residents are leaving with their entertainment dollars and spending them in other cities. As a result, the Coliseum is able to accommodate B+ grade shows but not able to attract top national entertainment for which the market is yearning. The regionally competitive entertainment venue market is crowded due to Richmond s proximity to Washington D.C, Norfolk and the Raleigh/Durham markets which can both help and hurt Richmond in many ways. Conversations with regional promoters indicated that many national entertainment tours traveling the East Coast would like to make Richmond a permanent stop after Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 26

88 making trips to North Carolina or Washington D.C. Until the Coliseum improves, however, those acts will continue to go to other markets unless a project like the arena proposed is built. In addition, the chances of landing an AHL hockey franchise are strong if the Project moves forward. The additional activity downtown for games, especially during the colder months, will be a major benefit to downtown restaurants, bars and hotels, as well as for employer/employees downtown. The impact of this element could be quite large. While not assumed in the base impact model, it would add significantly to the impact of the Project. The redevelopment of the Blues Armory into a mixed-use food, beverage, event and entertainment venue would be a significant improvement for downtown and would fill a void for certain sized events. The venue is historic and offers a unique experience for events. Reactivating this facility would re-energize the area surrounding it. Both proposed venues would help ameliorate the issue of downtown becoming quiet after 5pm during weekdays (as well as weekends) and help create the live/work/play/visit environment that most cities seek. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 3 - Page 27

89 TABLE OF CONTENTS Executive Summary Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Project Profile Economic, Demographic & Tourism Analysis Arena, Event and Entertainment Market Analysis Hotel and Meetings/Convention Market Analysis Retail and Restaurant Market Analysis Residential Market Analysis Office Market Analysis Demand and Financial Projections Economic, Fiscal and Employment Impact Analysis

90 HOTEL AND MEETINGS/CONVENTION MARKET ANALYSIS The proposed development includes a 527-key hotel to be the headquarters hotel for the Greater Richmond Convention Center (GRCC). This new 416,618-square foot property will aim to allow the GRCC to attract more groups to the convention center by mitigating the problem of not having enough hotel rooms downtown to host large groups. Having a package of walkable hotel rooms from the GRCC is critical to its ability to compete with other cities and convention centers. The hotel will be located on Block F of the development alongside the renovated Blues Armory. This will position the hotel two blocks east of the GRCC. The development is also proposed to include a 150-room limited-service hotel on Block D. This chapter includes a review of national hotel trends as well as an in-depth analysis of the Richmond hotel market and Greater Richmond Convention Center. National Hotel Market Trends A thorough understanding of the national hotel market and relevant industry trends is important to the development prospects of any hotel project, whether it involves macro supply and demand issues, amenity trends, financing or other trends impacting the industry. The following table shows selected characteristics of the U.S. lodging industry from 1992 through April Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 2

91 Year Occupancy Change Table 4-1 National Lodging Industry Annual Summary Average Daily Rate Change Revenue per Available Room Change % -- $ $ % 1.9% $ % $ % % 2.5% $ % $ % % 0.6% $ % $ % % -0.2% $ % $ % % -0.8% $ % $ % % -1.1% $ % $ % % -1.1% $ % $ % % 0.6% $ % $ % % -5.8% $ % $ % % -1.3% $ % $ % % 0.3% $ % $ % % 3.5% $ % $ % % 2.9% $ % $ % % 1.7% $ % $ % % -0.2% $ % $ % % -5.8% $ % $ % % -9.8% $ % $ % % 5.7% $ % $ % % 4.3% $ % $ % % 2.2% $ % $ % % 1.5% $ % $ % % 4.3% $ % $ % % 0.9% $ % $ % % 1.7% $ % $ % % -1.1% $ % $ % 2018 YTD (April) 63.2% -4.2% $ % $ % Avg. Annual Growth Rate 0.3% 3.1% 3.5% Source: Smith Travel Research, HSP The latest recession, beginning in 2008, was the most severe recorded in the hotel industry post-depression. In the years following the recession, occupancy peaked to an all-time industry high of 66.7 percent in 2016, consistently increasing on an annual basis starting in 2009 with an occupancy of 54.5 percent. Performance in 2016 was a 1.7 percent increase over Additionally, ADR followed a similar trend, continuously increasing year over year from $98.02 in 2010 to $ in This equates to 1.8 percentage points higher than in Revenue per available room (RevPAR) increased slightly in 2017 to $83.48, which was a 0.6 percent change from However, the hotel industry has experienced slight pullbacks in occupancy and revenue per available room through April, 2018, while ADR has experienced a slight uptick. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 3

92 The figure below depicts the aforementioned data in graph form, highlighting the annual change in performance statistics. Figure 4-1 National Hotel Industry Performance Annual Change 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% YTD (April) Occupancy Average Daily Rate Revenue per Available Room Source: Smith Travel Research, HSP Post-recession industry performance significantly improved from the drastic decline in 2008 and 2009 and continued to increase through As the above graph indicates, from 1996 through 1999, and again in 2007, 2008, 2017 and 2018, ADR increased even when occupancy declined. This speaks to the concept of maximum practical occupancy. At a certain average occupancy, enough sold-out dates exist, which can create enough demand pressure to raise rates. Largest Hotel Groups One of the continuing trends of the past decade has been the growth of hotel parent companies to create and expand brands into every niche of the hotel sector, including extended stay, boutique, fractional and soft branding. These companies typically do not own their hotels but brand and franchise them and provide the support, advertising, group sales and other services for the hotel owners. These companies charge fees to the hotel owners for the licensing and franchise privileges. The following table following shows the top 10 hotel groups in the world, by number of rooms as of May Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 4

93 Table 4-2 Ten Largest Global Groups by Room Count - As of May, 2018 Rank Company Hotels Existing Rooms Rooms/Hotel 1 Marriott International/Starwood Hotels & Resorts 5,974 1,170, Hilton Worldwide 5, , InterContinental Hotels Group 5, , Jin Jang International/Plateno Hotels Group 7, , Wyndham Worldwide 9, , AccorHotels 4, , Choice Hotels International, Inc. 6, , BTG Homeinns Hotels Group 3, , China Lodging Group 3, , Best Western Hotels & Resorts 4, , Source: Various Sources -- 54,790 6,372, As shown in the table above, Marriott International/Starwood Hotels & Resorts is the largest group in the world, with nearly 6,000 hotels and more than one 1.1 million rooms. In 2015, Marriott completed its acquisition of Starwood Hotels, creating the world s largest hotel company. Hilton Worldwide Hotel Group is second with over 800,000 rooms. The brands with the largest and smallest hotels on average are Marriott/Starwood and Best Western hotels with 196 and 70 rooms per hotel, respectively. Collectively, these top ten hotel groups account for more than 6.3 million hotel rooms across the globe, and they have an average hotel size of 116 rooms. It is important to note that Wyndham Worldwide is the fifth largest global hotel group with over 9,200 hotels and nearly 700,000 existing rooms as of May Hotel Financing Market In order to understand the current market for financing new hotel development, HSP reviewed the latest market statistics provided by HVS, Inc. for debt, equity, cap rates and other key metrics used to value hotel projects. The next figure shows cap rates, hotel mortgage interest rates and the ten-year T-Bill Yield. The cap rate is the rate of return on real estate that is purchased as an investment property and is based on the amount of income a property is expected to generate. The ten-year T-Bill is the standard measure by which all real estate assets are measured. Since the assumed asset holding period in any appraisal is ten years, the ten-year Treasury Bill Yield represents the safest assumed investment one could make. Relative to real estate, it is the least risky and has the lowest return and serves as a bottom benchmark for return. The riskier the real estate, the higher the cap rate and interest rates will be above the ten-year T-Bill. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 5

94 Figure 4-2 Cap Rates Remain Well Above Hotel Mortgage Interest Rates 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Cap Rate- Historical NOI Hotel Mortgage Int. Rate- ACLI 10-year T-Bill Yield Source: HVS As shown above, the cap rates have been higher than the mortgage interest rate since This suggests that one can borrow money at a lower rate for an asset than its implied return. That positive arbitrage indicates that the basic fundamentals of hotels are positive for investment. When it costs more to borrow money than the implied risk/return indicated by the cap rate, the math for investors is more difficult to support. Perhaps as important is the spread between the ten-year T-Bill and the cap rate. In 2014, this spread was more than 400 basis points (4.0 percentage points), suggesting that there is substantial yield to be gained from a hotel asset versus investing in T-Bills, which returned only 2.5 percent at that time. The tightening of interest rates to the ten-year T-Bill means that investors can borrow at lower and lower rates relative to the lowest possible rate, and still make increasing yields. For the layperson, these figures suggest a very strong incentive to invest in hotels, especially compared with the period of 2005 through However, the cost of developing hotels versus the implied value, is still very tough for full-service hotels. Nearly all convention headquarter hotels are subsidized, because they include significant public space that generates less revenue than a rooms-only hotel. Development Costs The following table shows the most current available hotel development cost data for the various quality segments of hotels for These figures are critical when considering which type of hotel to develop. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 6

95 Budget/Economy Hotels Table Hotel Development Cost Survey Per-Room Averages Land Building and Site Improvements Soft Costs FF&E Pre-Opening & Working Capital Average from Budgets $8,773 $62,906 $10,023 $11,838 $1,946 $95,486 Allocation 10% 66% 10% 12% 2% Limited-Service Hotels Average from Budgets $23,151 $98,089 $20,238 $15,826 $3,809 $159,396 Allocation 11% 65% 11% 11% 2% Extended-Stay Hotels (Midscale) Average from Budgets $10,965 $70,241 $16,846 $16,827 $3,200 $118,078 Allocation 9% 61% 13% 14% 3% Extended-Stay Hotels (Upscale) Average from Budgets $22,000 $126,800 $20,500 $18,100 $3,900 $191,300 Allocation 14% 61% 13% 10% 2% Dual-Branded Hotels Average from Budgets $22,900 $129,800 $29,900 $21,400 $5,100 $209,100 Allocation 13% 62% 14% 10% 2% Select-Service Hotels Average from Budgets $43,800 $129,600 $30,000 $19,000 $4,400 $226,700 Allocation 11% 61% 13% 11% 3% Full-Service Hotels Average from Budgets $38,500 $163,200 $52,600 $31,000 $8,100 $323,600 Allocation 13% 62% 14% 10% 2% Lifestyle/Soft-Branded Hotels Average from Budgets $54,500 $217,600 $55,600 $29,900 $8,400 $365,900 Allocation 14% 60% 15% 9% 3% Luxury Hotels Average from Budgets $60,200 $323,700 $83,100 $63,600 $19,800 $550,500 Allocation 11% 61% 13% 11% 3% Source: HVS Total Costs per room vary drastically depending on the chain scale, from a budgeted average of $95,486 for economy properties up to $550,500 for luxury properties. For most developments, the question is whether or not the ADR is greater than the cost per room to build. A typical accepted rule of the thumb in the hotel industry is that the ADR multiplied by 1,000 will give a developer a sense of what hotel cost/room the market will support. For example, a hotel expected to perform at $125 per night on average could be developed for approximately $125,000 per room. Most full-service convention headquarter hotels cost $300,000 per room or more. Other Trends of Note Several other trends have been occurring in the industry over the past several years. These include: Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 7

96 Brands Multiply. Worldwide, the expansion of brands continues to change the face of the competitive environment. Major brands are competing fiercely, as they are eager to show earnings growth and increased market share to Wall Street. Using multiple brand families clustered in the same corporate structure, proprietary reservation systems and corporate programs all work in tandem to drive business. Comparing profit potential of a branded hotel to one without a brand is becoming a serious consideration for hotel owners. At the same time, the increased proliferation of brands means that fewer independents struggle for fair share, and they are using price as the preferred strategy to drive demand. Companies Consolidate. The buyout/merger of Marriott and Starwood represents the high-water mark of many brands and companies consolidating. In the past several years, many hotel companies have merged in order to improve their scale and marketplace power, as well as take advantage of the current market dynamics. Chinese buyers have also been exerting their influence with the purchase of many hotels and hotel companies. Boutique Brands. This seemingly incongruous phrase is a trend occurring in the industry. The largest brands have run out of market segments to fill, so they are seeking the last bastion of the industry: independent boutique hotels. By creating a boutique collection or also known as a soft brand that can benefit from (and provide distribution to) the primary brand family, both the hotel and brands can prosper. For example, with all traditional niches covered, Marriott has now entered the boutique market with the Autograph Collection. These hotels are neither owned nor operated by Marriott, and do not even carry a Marriott brand, per se, but use the Marriott reservation system to route travelers to these formerly independent hotels. Guests benefit by getting their Marriott points and expectation of high quality standards they have come to expect with the Marriot brand. Hilton has also entered the boutique market with a new soft brand called Canopy and a new collection of formerly independent upscale hotels called the Curio Collection. Intercontinental Hotel Group purchased boutique hotel company Kimpton, expanding their profile beyond Intercontinental and Holiday Inns. Starwood has launched the Tribute brand, which is basically the same type of boutique hotel collection as Curio and Autograph. Shared Spaces and Home/Apartment Rentals. The advent of Airbnb has transformed the lodging industry in the past few years, much as Uber and Lyft have done with the hired car industry. Home and apartment rentals through VRBO, Homeaway, Airbnb add inventory to many compressed and expensive markets. In some places like San Francisco, Silicon Valley and New York, residents rent their homes to travelers in order to pay the rising cost of rent. High rates of hotel occupancy and rising rates have made these options viable for travelers and residents. There have been consequences for both the affordable housing market and the hotel market, although these are generally only material in extremely expensive markets or when a major event (like a Super Bowl) occurs. Many of these homes are located in residential communities, and local neighbors and nearby residents are beginning to express negative feedback and concerns over these short-term rentals. As a result, communities and municipalities have recently begun to put rental restrictions on these types of homes by imposing minimum and maximum stay requirements and taxes on earned income. Global Travel and the Impact of Energy Prices and Economic Conditions. The large fluctuations in oil and fuel costs have a continual impact on travel and will continue to be a major factor in the coming years. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 8

97 Distribution. The increase in booking travel via the Internet has been a major trend in the industry for more than a decade, with a majority of booking research done online and more than one-third of revenue booked online. This has brought transparency and increased competition to the market, and all players with a solid Internet and distribution strategy are able to compete effectively. Third party websites, smartphones and available applications are rapidly becoming a key factor in every travel stage by easing access to planning and booking tools that ease the customers experience. Travelers expect a more informed and collaborative travel experience, especially driven by evolving smartphone functionality. Hotel companies are creating propertyspecific websites to differentiate each property and reach more markets and traveler segments than a corporate single format website. Technology. The rapid advance of technology means hotels have to continually keep up with the expectations of their guests. With multiple wireless devices, guests expect a high-speed wireless network throughout the hotel that will allow them to use their smartphones, tablets and laptops without connectivity issues. Many hotels have begun to introduce in-room ipads that allow concierge services, room service, check out, entertainment and other items to be taken care of directly from the device. Social Media, Crowd-Rating and Mobile Connectivity. The rise of social media and user-based ratings have had a direct impact on hotel booking decision-making. Sites like Trip Advisor allow users to rate and comment on hotels directly on the website, which allows potential customers to determine if they will select that hotel. Hotels have to be incredibly proactive and reactive to comments posted on Twitter, Facebook, TripAdvisor and ratings sites, including online travel agencies. Approximately one in three business travelers has rated an establishment. Mobile connectivity, as mentioned above, has become a crucial factor in a traveler s experience. Mobilefriendly websites and mobile applications are the most used medium for corporate travelers. Approximately 70 percent of travelers use applications to check in to flights and/or hotels, while one in four hotel queries come from a mobile device. Demographics. Two major demographic shifts marked the beginning of positive growth in the hotel business. The first is that both baby boomers and millennials emerged as the target market for luxury consumption. The baby boomer generation became a target audience due to the large amount of disposable income and nest egg capital they accrued, thereby allowing them to travel in large numbers for the next decade. Millennials are the second demographic group tapped as an up-and-coming luxury consumer group affecting the industry and being targeted by the industry itself with marketing strategies that are different from its preceding groups. Millennials are drawn to entertainment, technology and accessibility. RICHMOND DOWNTOWN HOTEL MARKET ANALYSIS This section will detail the findings of the Richmond hotel market analysis. As part of this chapter, HSP analyzed the downtown Richmond hotel market, including the historic performance of all downtown hotels. This analysis will provide an overview of the hotel market and opportunity for development. This chapter will also profile the Greater Richmond Convention Center (GRCC), as well as the relevant walkable hotel package for the convention center and how it compares with competitive regional and national destinations. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 9

98 The following table details the total supply of hotels in downtown Richmond. The shaded properties in the previous table (Graduate Hotel, Massad Hotel, the Commonwealth, and the Berkley) do not report results to STR, so their performance is not included in the aggregated market analytics shown in the following charts. Table 4-4 Richmond Hotels Property Rooms Chain Scale Open Date Marriott Richmond 410 Upper Upscale Sep-84 Omni Richmond Hotel 359 Upper Upscale May-87 Delta Hotel Richmond Downtown 298 Upper Upscale May-86 Hilton Richmond Downtown 250 Upper Upscale Feb-09 Graduate Hotel Richmond 205 Upscale Apr-71 Jefferson Hotel 181 Indep Oct 1895 Hampton Inn & Suites Richmond Downtown 144 Upper Midscale Mar-16 Courtyard Richmond Downtown 135 Upscale Dec-14 Homewood Suites Richmond Downtown 100 Upscale Jan-16 Holiday Inn Express Richmond Downtown 100 Upper Midscale Dec-00 Residence Inn Richmond Downtown 75 Upscale Dec-14 Destination Hotels Quirk Hotel 73 Luxury Sep-15 Linden Row Inn 70 Indep Nov-88 Massad House Hotel 64 Indep Jan-00 The Commonwealth 59 Indep Jun-12 The Berkeley Hotel 56 Indep Aug-88 Average/Total 2, Feb-87 Source: Smith Travel Research As shown in the table above, there are more than 2,500 rooms across 16 properties in downtown Richmond. The largest hotel in the market, with 410 rooms, is the Marriott Richmond, which opened in Two hotels, the 144-room Hampton Inn and Suites and 100-room Homewood Suites, have opened in the last three years. While Richmond offers a strong collection of branded and independent properties of different qualities and service levels, HSP s analysis demonstrates an aging supply and the lack of a sizeable, capable headquarter hotel for the Greater Richmond Convention Center. The following figure shows a map of the existing downtown Richmond hotels. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 10

99 Figure 4-3 As shown, only one hotel, the Marriott Richmond, is located connected or adjacent to the GRCC. Accommodated Demand and Competitive Set Performance HSP utilized Smith Travel Research (STR) to analyze the set of hotel properties in downtown Richmond. The following table shows performance data for downtown Richmond s hotel properties between 2013 and June Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 11

100 Year Annual Avg. Available Rooms Table 4-5 Historical Supply, Demand, Occupancy, ADR, and RevPar for Competitive Hotels Available Room Nights % Change Room Nights Sold % Change % Occ. % Change ADR % Change RevPar % Change , , , $ $ , , % 414, % % $ % $ % , , % 474, % % $ % $ % , , % 512, % % $ % $ % , , % 520, % % $ % $ % 2018 YTD (June) 2, , % 270, % % $ % $ % CAGR* ( ) 7.1% 7.1% % % % % -- *Compound Annual Growth Rate Sources: Smith Travel Research, Hunden Strategic Partners From 2013 to 2017, total room nights sold in downtown Richmond increased every year, with a peak in 2017 at nearly 520,000 room nights. Over the same period, occupancy fluctuated but decreased in 2016 and The decrease is largely due to the increase in hotels over the same period, as five select-service hotels have opened since Despite the supply growth, ADR increased from $128 in 2012 to $162 in In conjunction with the significant ADR increase, RevPAR increased from $85 to $106 over the same period. These are all positive indicators for the Richmond hotel market. The following figure shows the supply and demand trends for the selected set. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 12

101 Figure 4-4 Monthly Supply & Demand 75,000 60,000 45,000 30,000 15,000 0 Supply Demand 12 per. Mov. Avg. (Supply) 12 per. Mov. Avg. (Demand) Source: Smith Travel Research, Hunden Strategic Partners As previously mentioned, five hotels opened in the period, resulting in a significant increase in the supply of available rooms in the market. Following this increase in 2014, demand has consistently increased, indicating that there was pent-up demand in the market prior to the opening of the new hotels. The following figure shows the room revenue changes by month (year-over-year). Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 13

102 Figure 4-5 Any data point greater than zero is a positive indicator for the competitive set. As shown, the competitive set s room revenue increased significantly in 2015 due to the influx of new supply. The revenue change for the downtown Richmond hotels has remained largely positive over the last five years, a positive indicator for future development. The following figure shows the Revenue Per Available Room (RevPAR), which is the product of occupancy and rate. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 14

103 Figure 4-6 The black line in the figure above shows the 12-month moving average. The figure above shows RevPAR remaining increasing until 2016, before leveling off for one year. Since January 2017, RevPAR growth in the downtown Richmond market has been slow but consistent. The following figure displays the seasonality of occupancy from January 2012 through July Figure 4-7 Seasonality of Occupancy January June % 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Smith Travel Research Max Average Min In terms of occupancy, September and October are the busiest months on average, with the maximum occupancies reaching 80 percent. November, December, January are the slowest months, which is typical for a city that experiences four distinct seasons. The following figure shows the seasonality of rate. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 15

104 Figure 4-8 Seasonality of Rate January June 2018 $180 $170 $160 $150 $140 $130 $120 $110 $100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Smith Travel Research Max Average Min Rates are the lowest in July and August, indicating that leisure travelers in the summer months are not willing to the pay the rates that group and corporate travelers are paying throughout the rest of the year. Outside of the summer months, rates are fairly consistent. The following figure shows the seasonality of RevPAR, which is the product of rate and occupancy, and suggests overall revenue. $140 $130 $120 $110 $100 $90 $80 $70 $60 Figure 4-9 Seasonality of RevPAR Janury June 2018 $50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Smith Travel Research Max Average Min Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 16

105 As with the other performance indicators, RevPAR data is consistent with the analysis of the previous graphs. Because RevPAR is a product of occupancy and rate, the RevPAR fluctuations match the fluctuations of the Occupancy graph. RevPAR is lowest during January and December but highest in October. The following figure shows the occupancy by day of the week during the 12 months ending June % 90% 80% 70% 60% 50% 40% 30% Figure 4-10 Occupancy by Day of Week July June % SUN MON TUES WED THURS FRI SAT Source: Smith Travel Research Max Average Min Occupancy remains fairly consistent throughout the week and on the weekends which suggests a mix between a decent corporate market and a strong leisure market. Occupancy is lowest on Sunday nights, which is typical for most markets. With a new headquarter hotel, the GRCC can be expected to help improve the average occupancies on Sundays and throughout the week for various events. The following figure shows the average daily rate by day of week. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 17

106 Figure 4-11 Average Daily Rate by Day of Week July June 2018 $200 $190 $180 $170 $160 $150 $140 $130 $120 Sun Mon Tues Wed Thurs Fri Sat Source: Smith Travel Research Max Average Min Average ADR in the downtown Richmond market remains between $160 and $170 throughout the week. This shows that there is generally a stronger corporate hotel market than a leisure market on average throughout the year. However, there are certain weekends when demand is much stronger on the weekend, leading to higher rates, while others are much lower. Weekday business is more consistent. Unaccommodated Demand Unaccommodated demand is defined as demand that would have been captured by the market but was not due to a lack of available or quality rooms. This demand is therefore deferred to later dates, accepts lesserpreferred accommodations, moves just outside the competitive set, moves its business to another area, or cancels plans altogether. Therefore, as new properties are added to the market, it is expected that this demand will be accommodated by the new supply. This suggests that when new hotels are added, they do not cannibalize existing market demand, but instead accommodate previously uncaptured demand. The following table shows the occupancy by day of the week per month for the twelve months following August Days of the week with occupancy between 75 and 80 percent are shown in yellow, suggesting mild displacement and unaccommodated demand. Orange shows days with 80 to 90 percent occupancy, suggesting very likely displacement. Days in red are for times when occupancy was beyond 90 percent for the set, suggesting near-certain displacement. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 18

107 Table 4-6 Occupancy Percent by Day of Week by Month - July June 2018 Sunday Monday Tuesday Wednesday Thursday Friday Saturday Avg Jul % 61.0% 68.5% 72.1% 67.1% 66.4% 72.7% 63.4% Aug % 63.2% 76.4% 72.8% 58.6% 65.0% 72.0% 64.0% Sep % 65.5% 79.7% 81.6% 67.1% 63.0% 71.6% 66.5% Oct % 73.3% 82.2% 83.8% 68.2% 78.0% 86.8% 73.4% Nov % 61.2% 71.3% 71.5% 68.3% 70.8% 66.6% 64.7% Dec % 51.9% 58.6% 55.6% 42.5% 45.5% 51.9% 48.1% Jan % 58.0% 65.1% 69.2% 46.3% 54.1% 61.1% 57.7% Feb % 67.5% 86.3% 80.3% 64.7% 66.1% 74.2% 68.1% Mar % 69.2% 77.5% 75.0% 63.6% 81.1% 83.1% 69.8% Apr % 64.1% 77.0% 75.7% 68.4% 78.8% 78.2% 67.6% May % 63.8% 79.9% 77.7% 63.1% 77.1% 86.0% 71.3% Jun % 73.3% 80.4% 78.1% 72.0% 80.3% 84.2% 73.9% Average 40.3% 64.3% 75.3% 74.3% 62.6% 68.8% 73.9% Sources: Smith Travel Research As shown, the overall market averages between 40.3 percent and 75.3 percent occupancy throughout the year, with sporadic small occurrences of high occupancy in the fall and spring. No set of four days averaged greater than 90 percent occupancy over the last 12 months. However, there were many days (Tuesdays, Wednesdays, Fridays and Saturdays in spring and fall) when occupancy was higher than 80 percent for all hotels, suggesting sellouts. The highest occupied dates were Tuesdays in February and Saturdays in October, May and June. The following figure shows the estimate of unaccommodated room nights over the past several years. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 19

108 Figure 4-12 As previously mentioned, an unaccommodated room night is a night when a traveler seeking accommodations within the market must either cancel their stay or settle for accommodations of lesser quality because the desired facilities have no vacancies. The number of estimated unaccommodated room nights is determined in any month when occupancy is higher than 66 percent. Based on the prior table, sellouts are currently occurring on Tuesdays and Wednesdays sporadically and occasionally during the summer. Based on HSP estimates, unaccommodated room night demand for the competitive set peaked in 2015 with more than 40,000 room nights. Following the supply increase in 2015 and 2016, unaccommodated room nights fell to closer to 10,000 annual room nights. It will be critical that a new hotel induces net new room nights to the Richmond market. The following section details the opportunity for the proposed headquarter hotel to enhance the appeal of Richmond as a destination for conventions and meetings, and drive new room nights and spending to the market. Greater Richmond Convention Center The largest meeting and exposition facility in the Commonwealth of Virginia, the 700,000-square foot Greater Richmond Convention Center sits on 5.5 city blocks in downtown Richmond. The facility, which opened in 1986 and is managed by Spectra Venue Management, features the following: 178,000 square feet of contiguous exhibit hall space divisible into four sections; 30,550-square foot grand ballrooms; 32 meeting rooms totaling 80,000 square feet The GRCC underwent a $137.5 million expansion in 2003, its most recent significant enhancement. The following table shows a summary of the spaces available at the GRCC. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 20

109 Table 4-7 Greater Richmond Convention Center Function Space Total (SF) By Division (SF) Divisions Exhibit Space 178,159 4 Exhibition Hall A 67,549 Exhibition Hall B 34,449 Exhibition Hall C 34,437 Exhibition Hall D 41,724 Ballroom Space 30,550 3 Grand Ballroom A 10,187 Grand Ballroom B 9,980 Grand Ballroom C 10,383 Meeting Space 80, Walkable Hotel Rooms 2,035 Total Exhibit Space 178,159 Per Guest Room 88 Total Ballroom Space 30, Total Meeting Space 80, Other Space 0 0 Total Function Space 288, Total Exhibit Space Divisions 4 /100 Guest Rms 0.04 Ballroom Divisions Meeting Room Divisions (incl. audit/amph) Total Divisions (including Ballroom) Source: Greater Richmond Convention Center The following figure shows the grand ballroom at the GRCC. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 21

110 Figure 4-13 Historically, the majority of the attendance to the convention center has been generated by conventions, followed by consumer shows and special events. The following table shows a summary of the events and attendance by event type at the GRCC over the last four years. Table 4-8 Greater Richmond Convention Center Events and Attendance FY 2014 FY 2015 FY 2016 FY 2017 Event Type Events Attendance Avg. Attendance Events Attendance Avg. Attendance Events Attendance Avg. Attendance Events Attendance Avg. Attendance Conventions ,783 5, ,077 3, ,055 3, ,885 3,021 Trade Shows 4 2, , , , Consumer Shows 13 46,124 3, ,228 5, ,181 4, ,692 5,543 Meetings , , , , Special Events , , , , Banquets 46 19, , , , Sporting Events 3 29,080 9, ,811 4, ,638 3, ,324 3,032 Total ,201 1, ,683 1, ,055 1, , Source: Greater Richmond Convention Center As shown, the GRCC generates more than 350 events and attracts more than 350,000 attendees to downtown Richmond each year. While conventions drive the majority of the attendance, the impact from these events has decreased each year since Of all event types, conventions attract the highest paying and most impactful event attendees to a community. The table below summarizes the hotel room nights generate by the Greater Richmond Convention Center over the last four years. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 22

111 Table 4-9 GRCC Room Nights Year # of Hotel Rooms , , , , ,636 Average 66,527 Source: Greater Richmond Convention Center Over the last five years, the GRRC has generated 66,527 room nights per year, on average. Unfortunately, this is not an ideal figure. Impact Metric. The metric that HSP uses to measure convention center success is room nights per square foot of exhibit space. A healthy convention center will generate one or more hotel room nights per square foot of exhibit space and Richmond is only performing at one-third of this level. The country s best performing facilities generate this level or higher. Small market convention centers (those much smaller than Richmond), have a difficult time achieving this hurdle. However, Richmond should be able to come close to achieving this figure if it is a compelling a destination and has a balanced, walkable hotel package. Unfortunately, it does not. The proposed headquarters hotel will help mitigate this issue and should lead to significantly more room nights related to the convention center. Convention Hotel Analysis The meetings market has evolved over the past 20 years and has grown more sophisticated, and planners have increased the requirements necessary to book meetings business. At one time, meeting planners expected to contract with multiple hotels in order to service a convention, pay for their own transportation and seek additional event and meeting locations when necessary. In recent years, however, cities began to offer room packages within just a few very large hotels adjacent to meeting facilities. This improvement in packaging of the convention/meeting product led to expectations by the market and competitive pressure for all larger meeting facilities to offer a convenient package of hotels attached, adjacent or within immediate walking distance of the facility. This proximity eliminates the need for shuttling, and often the hotels provide enough meeting and event spaces for the additional needs of the planners. Those that do not offer a sufficient package suffer considerably when competing for meetings, conferences, conventions and other events. Conversations with Richmond tourism officials and facility management indicated that the Greater Richmond Convention Center is limited by the size and quality of its walkable hotel package. The lack of a sizeable, quality headquarter hotel has hindered the facility s ability to attract impactful, high-rated groups and events. The following table shows a summary of lost business for the GRCC due to its existing hotel package over the last three years. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 23

112 Table 4-10 Greater Richmond Convenion Center Lost Business (1/1/15-2/6/18) - Hotel Package Market Segment Date Turned Lost Lead Name Meeting Dates (Preferred Start) Requested Rooms Requested Peak Room Lost Code Association 7/1/15 Southern Historical Assn Annual Conv /19/21 1, Hotel Package Association 10/21/ CIC NetVUE Conference 3/22/17 1, Hotel Package Association 12/31/ International Conference on Compound Semiconductor Manufacturing Technology 4/27/19 1, Hotel Package Sports 3/3/16 Student-Athlete Leadership Forum /23/ Hotel Package Association 6/9/ Academy of Criminal Justice Sciences Annual Meeting 3/19/23 3, Hotel Package Sports 6/10/ Girls 18's Championships 4/25/17 4,934 1,415 Hotel Package Religious 6/28/ COOLJC Holy Convocation 7/25/20 3, Hotel Package Religious 8/22/ BAPS Youth Convention 7/1/17 6, Hotel Package Military Reunion 8/23/16 Army Counter Intelligence Corps Veterans 2017 Reunion 4/25/ Hotel Package Association 3/2/17 Virginia Water Well Association 2/5/ Hotel Package Religious 3/20/ UUA General Assembly 6/20/20 7,650 1,400 Hotel Package Sports 3/22/17 Knight Eady 2018 Elevate Gymnastics Competition 1/18/ Hotel Package Association 4/17/ AEE Education Conference 10/31/19 1, Hotel Package Religious 5/22/17 The NEXT Church 2018 Conference 2/26/ Hotel Package Association 6/20/17 APWA-Mid Atlantic Chapter 2018 Annual 5/8/ Hotel Package Association 11/3/17 International Erosion Control Association 2020 Region One Environmental Connection Conference 2/22/20 2, Hotel Package Association 12/11/17 Association of Food and Drug Officials 2019 Annual Conference 6/5/19 1, Hotel Package Government 12/25/17 House Democratic Caucus 2018 Annual Conference 2/7/ Hotel Package Association 1/17/18 Association of Local Government Auditors 2020 Annual Conference 5/1/20 1, Hotel Package Association 1/18/18 Southern Sociological Society 2023 Annual Meeting 4/18/23 1, Hotel Package Total 40, Average 2, Source: Greater Richmond Convention Center The GRCC has lost 20 events totaling more than 40,000 room nights over the last three years due to the quality and size of its existing hotel package. The majority of these events have been association groups, which generally attract higher-paying attendees. Currently, the GRCC offers 2,035 rooms within a 0.5 miles, which is generally considered to be the maximum walkable radius for convention and event guests. These properties include: Marriott Richmond: 410 rooms Hilton Richmond Downtown: 250 rooms Hampton Inn & Suites Richmond Downtown: 144 rooms Homewood Suites Richmond Downtown: 100 rooms Massad House Hotel: 64 rooms The Commonwealth: 59 rooms Linden Row Inn: 70 rooms Omni Richmond Hotel: 359 rooms Delta Hotel Richmond Downtown: 298 rooms Jefferson Hotel: 181 rooms Holiday Inn Express Richmond Downtown: 100 rooms Optimal Walkable Hotel Rooms. HSP s metric for the optimal number of hotel rooms within walking distance is 15 rooms per 1,000 square feet of exhibit space. Given Richmond s facility size, it should have about 2,700 hotel rooms easily walkable or connected. There is currently a gap of at least 650 rooms. If the radius was Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 24

113 reduced to one-quarter of a mile (about four to five blocks), which many consider to be truly walkable, the gap in hotel rooms increases. The following table shows the breakdown of GRCC lost business due to hotel proximity over the last five years. Table 4-11 Greater Richmond Convenion Center Lost Business (1/1/13-2/6/18) - Hotel Proximity Market Segment Date Turned Lost Lead Name Meeting Dates Requested (Preferred Start) Rooms Requested Peak Room Lost Code(s) Association 4/22/ Annual Conference 7/13/15 1, Hotel Proximity Association 6/25/13 IMSA 2015 Annual Conference/Trade Show 7/11/15 2, Hotel Proximity Association 10/15/ ASPHO Annual Conference 4/5/16 1, Hotel Proximity Association 1/26/ National Conference 7/29/18 2, Hotel Proximity Association 4/16/15 AASL 2019 Biennial National Conference and Exhibition 10/21/19 4,816 1,400 Hotel Proximity Association 7/1/15 National Association of Educational Procurement 2020 Annual Conference 3/25/20 1, Hotel Proximity Association 7/1/15 NACCU 2018 Annual Conference 4/20/18 1, Hotel Proximity Hobby 9/14/ National Money Show 2/25/ Hotel Proximity Association 10/21/15 69th International Auctioneers Conference and Show 7/8/18 2, Hotel Proximity Corporate 8/4/16 LeMans Corporation 3/22/17 1, Hotel Proximity Association 8/4/16 US Power Squadron 9/23/18 1, Hotel Proximity Government 8/4/16 National Ataxia Foundation 2021 Annual Conference 3/1/ Hotel Proximity Corporate 8/4/16 GE Digital Global Leadership Meeting 1/13/17 2, Hotel Proximity Corporate 11/9/16 Hendon Media Group Police Fleet Expo /19/17 1, Hotel Proximity Religious 5/22/17 The NEXT Church 2018 Conference 2/26/ Hotel Proximity Association 9/7/ Association of Science-Technology Centers Annual Conference 10/13/20 3, Hotel Proximity Total 30, Average 1, Source: Greater Richmond Convention Center Over the last five years, the GRCC has lost 16 events totaling nearly 31,000 room nights due to the proximity of sizeable, full-service hotel options for convention and event guests. Combined with the quality and size of the hotel package, the GRCC has lost more than 70,000 room nights due to the existing convention hotel situation in downtown Richmond. Competitive Convention Destinations In 2017, Convention, Sports, and Leisure (CSL) completed a market study that analyzed the existing hotel package in Richmond and the added inventory needed to adequately support the GRCC. This section will summarize he data and conclusions of that analysis. As mentioned, the supply and location of hotel rooms proximate to the GRCC are very important considerations with respect to the ability to attract and accommodate conventions and impactful events. The convention market in a community cannot grow beyond the ability of its hotel base. The following table summarizes the number of hotel rooms within one half-mile of the primary competitive convention centers in the region. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 25

114 Table 4-12 Hotel Rooms within 1/2 Mile of Competitive Convention Centers City Rooms Baltimore, MD 5,499 Louisville, KY 5,322 Charlotte, NC 4,499 Cincinatti, OH 3,777 Milwaukee, WI 3,548 Columbus, OH 3,056 Tampa, FL 2,434 Greensboro, NC 2,301 Richmond, VA 2,035 Providence, RI 1,813 Memphis, TN 1,562 Birmingham, AL 1,370 Raleigh, NC 955 Hartford, CT 650 Virginia Beach, VA 292 Average 2,608 Source: CSL As shown, the GRCC ranks ninth of the 15 markets considered to be competitive to Richmond. Richmond s hotel supply is on par with markets such as Greensboro, NC and Providence, RI, but significantly lower than the average of 2,608 rooms. In addition, new convention hotel development is occurring in markets such as Milwaukee, Columbus, Louisville, and Memphis. While the number of walkable hotel rooms is critical, other factors must be considered when analyzing a destination s convention package. For example, the general proximity of larger, convention hotels must be be considered. While the largest hotel, the 410-room Marriott, is located adjacent to the GRCC, the second largest property, the 298-room Delta Hotel, is located a half-mile from the convention center. Overall, CSL s analysis indicated that the average room count of hotels near the GRCC is significantly lower than competitive markets. When considering only hotels with more than 100 rooms, the five largest hotels in Richmond average 201 rooms, compared to 614 in Louisville, 505 in Cincinnati, 380 in Columbus, and 356 in Milwaukee. The following data, prepared by CSL, shows the number of hotel properties needed to assemble a room block of 500, 1,000, and 1,500 committable, convention-quality rooms. To prepare this analysis, CSL assumed that 64 percent of total rooms would be available for a single event. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 26

115 Table 4-13 Hotels Needed for 500, 1,000 and 1,500 Room Blocks City 500 Rooms 1,000 Rooms 1,500 Rooms Louisville, KY Baltimore, MD Cincinatti, OH Tampa, FL Charlotte, NC Columbus, OH Milwaukee, WI Greensboro, NC Providence, RI Richmond, VA Memphis, TN Birmingham, AL Source: CSL As shown, Richmond ranks near the bottom of the list for number of hotels needed to accommodate 1,000- room night and 1,500-room night events. Representatives from the GRCC stated that obtaining room blocks to support bids has become increasingly difficult over the past few years, regardless of group size or time of years. Implications The downtown Richmond hotel market has experienced increases in room night demand, hotel supply, and average daily rate over the last five years. While this is a positive trend for the market as whole, the convention hotel package continues to suffer. Outside of the Marriott, which opened in 1984, there are no sizeable hotel blocks available adjacent or connected to the GRCC. Rates have reached a level where many groups are being priced out of consideration, and Richmond s hotels are unwilling to offer reduced rates for citywide conventions. All of this puts Richmond at a competitive disadvantage compared to other regional convention destinations. When considering Richmond s ability to attract impactful conventions and events, the GRCC cannot maximize its potential unless there is an increase in hotel room inventory and the walkable room block in close proximity to the convention center. The lack of quality, committable room blocks hinders the facility s ability to compete with other regional destinations and bid on events, which has resulted in the loss of more than 70,000 room nights over the last five years. As noted by HSP s convention hotel package metrics, the GRCC is only generated one-third of the room nights that it could or should be, and this is in large part due to the lack of large, walkable hotels. In addition, the necessary large hotels are not in existence within walking distance, based on pure size of the convention center. The GRCC is short at least 650 rooms and HSP suggests that it could be as many as 1,000 rooms short of an optimal package. The GRCC requires the development of a new, quality headquarter hotel development in order to be optimized, such as the one that has been proposed. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 4 - Page 27

116 TABLE OF CONTENTS Executive Summary Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Project Profile Economic, Demographic & Tourism Analysis Arena, Event and Entertainment Market Analysis Hotel and Meetings/Convention Market Analysis Retail and Restaurant Market Analysis Residential Market Analysis Office Market Analysis Demand and Financial Projections Economic, Fiscal and Employment Impact Analysis

117 RETAIL AND RESTAURANT MARKET ANALYSIS Retail is proposed for ten blocks of the North of Broad development, summing to 274,000 total square feet. The retail in this development is primarily planned to be on the ground-level of residential buildings but will also be present on Block I (home to VCU s Neuroscience research offices) and on Block F, where the headquarter hotel will be located. In total, retail will be present on blocks A2, B, C, D, E, F, I, N, P, and U. Block Table 5-1 Proposed Retail Residential Units on Total Leasble Retail SF Block User Types A2 20, Multi-Family B 25, Multi-Family C 20, Multi-Family D 15, Hotel / Office E 15, Multi-Family F 16, Hotel I 101, Student Housing N 15, Multi-Family P 12, Multi-Family U 35, Multi-Family Total 274,000 2, Source: Capital City Development, LLC, HSP This chapter includes an analysis of the downtown Richmond retail and restaurant markets and the feasibility of new development. Hunden Strategic Partners conducted interviews with multiple retail brokers specialized in the downtown market to gain a better understanding of the current supply and potential demand. Current Overview The Central Business District is not currently in demand of additional retail and restaurants. Present offerings serve the workforce that enters the area each day from 9am to 5pm before returning home outside of the area in the evening. However, if the proposed development occurs, it will likely act as a catalyst for additional retail and restaurant development. The proposed development will bring more full-time residents and nighttime patrons downtown that will keep the entire area programmed for longer hours throughout the day. In fact, such a change could push demand past present day supply. The chicken-and-egg situation with after-work activity and restaurant/retail opportunity is in play here. Without more investment in restaurants and retail, attracting residents and business will not be as likely to locate in the Project area. Without residents and employees, restaurants and retail will not have a feasible market in which to enter. The proposed Project attempts to solve both sides of the equation. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 5 - Page 2

118 Restaurant Overview HSP categorized downtown Richmond into three major subcategories. These were broken into Capitol and MCV district, 5 th and Grace District and Jackson Ward District. Although VCU is geographically close to Jackson Ward, after conversations with brokers, HSP concluded that it is disconnected from the downtown Richmond ecosystem with its own university demographics. The following map shows the entire downtown Richmond restaurant supply throughout all districts. Figure 5-1 As shown, the highest density of restaurants in downtown Richmond are found in Shockoe Slip and Shockoe Bottom. For purposes of HSP s analysis, Shockoe Bottom was not considered a part of downtown Richmond but the restaurant options were shown on the map for additional reference. VCU is located just west of Belvedere street which influences the ability of restaurant and retail development in Jackson and Monroe Ward but is also outside of the downtown boundaries. Conversations with local stakeholders and brokers indicated that a significant portion of downtown residents travel out of downtown to VCU campus for quality dining and retail options. As shown on the map, there are few fine dining or upscale options in the downtown area. The following table shows the Restaurant supply located in downtown Richmond in the Capitol District, Biotech and MCV Districts. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 5 - Page 3

119 Table 5-2 Tenant Address Concept Cuisine Jimmy's Gallery Grill The Ridge Shopping Center Casual Dining American Capitol Waffle 1110 E Main St Casual Dining Breakfast Kobe Steakhouse 19 S 13th St Casual Dining Sushi Japanese Hibachi Mijas Cantina 218 E Cary St Casual Dining Mexican Bistro Bobette 1209 E Cary St Casual Dining French Vagabond 700 E Broad St Casual Dining American/Craft Cocktails The Bistro 1320 E Cary St Casual Dining Hotel Restaurant Sine Irish Pub 1327 E Cary St Casual Dining Irish Pub Southern Railway Taphouse 100 S 14th St Casual Dining Club/Gastropub Cha Cha's Southwest Kitchen & Bar 1419 E Cary St Casual Dining Southwestern Society Social Club 1421 E Cary St Casual Dining American Coda Urban Bistro 700 E Broad St Casual Dining American Manna Café 1111 E Main St Fast Casual Comfort Food Starbuck's Coffee 100 S 12th St (Omni Hotel) Fast Casual Coffee Starbuck's Coffee 641 N 8th St Fast Casual Coffee Citizen 1203 E Main St Fast Casual Sandwiches/Breakfast Jo-Jo's Pizza 1201 E Main St Fast Casual Pizza Shockoe Espresso & Roastery 109 Shockoe Slip Fast Casual Coffee Urban Farmhouse Market & Deli 1217 E Cary St Fast Casual Organic & Coffee Cafe Bottoms Up Pizza Shockoe Bottom Fast Casual Pizza & Burgers Padow's Hams & Deli 1009 E Main St Fast Casual Deli Blimpie Subs & Sandwhiches 403 North 13th St Fast Casual Sandwhiches Alpine Bagel Café 1200 E Marshall St Fast Casual Café Hunan Café 1112 E Main St Fast Casual Chinese A La Cart Café 800 E Broad St Fast Casual Café Damon's N/A Fast Casual Pizza Pizza Hut 730 E Broad St Fast Casual Pizza Alcove Indian Cuisine 1112 E Main St Fast Casual Indian Arby's 1051 E Cary St Fast Food Beef/Chx Sandwiches Jimmy John's 1318 E Cary St Fast Food Sandwiches McDonald's 5006 Nine Mile Rd Fast Food American Cobblestone Bar & Grill 1206 E Cary St (Berkeley Hotel) Fine Dining Southern American Source: Hunden Strategic Partners CBD (Shockhoe Slip, Biotech and MCV District) Restauant Inventory As shown, the vast majority of restaurants currently offered in the Capitol and MCV district are casual or convenience-based options. This is a common theme throughout downtown Richmond as, currently, the majority of the daytime population does not stay downtown after work hours. Of the 39 restaurants offered in this district, 46 percent are fast casual, 33 percent are casual dining, eight percent are fast food and five percent are fine dining options. The following table shows the supply of restaurants in the City Centre and Central Office Districts. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 5 - Page 4

120 Table 5-3 Tenant Address Concept Cuisine Secret Sandwhich Society 501 E Grace St Casual Dining American Pasture 416 E Grace St Casual Dining Southern Wong Gonzalez 412 E Grace St Casual Dining Mexican-Asian Rapp Session 318 E Grace St Casual Dining Oyster Bar Red Door Restaurant 314 E Grace St Casual Dining Italian 3rd Street Diner 218 W Main St Casual Dining Historic Diner K-Town Kitchen & Bar 9 N 4th St Casual Dining Korean Penny Lane 421 E Franklin St Casual Dining English/American Tavern Café Ole 2 N 6th St Casual Dining Mexican JD's Fresh Garden Café 701 E Franklin St Casual Dining Mexican Kabana Rooftop 700 E Main St Casual Dining Modern Asian-Rooftop Bar Café Rustica 414 E Main St Casual Dining European Comfort Belle 700 E Main St Casual Dining Industrial-Chic Capital Ale House 623 E Main St Casual Dining Tavern & Micro Beers Chicanos Cocina Bar & Grill 523 E Main St Casual Dining Comfort/Small Plate Perly's 111 E Grace St Casual Dining Jewish Homemades by Suzanne 101 N 5th St Fast Casual Comfort Food/Quick Bite Starbuck's Coffee 500 E Broad St Fast Casual Coffee Pop's Market on Grace 415 E Grace St Fast Casual Café Tenka Ramen 110 N 5th St Fast Casual Japanese Valentino's Italian Pizza 223 E Grace St Fast Casual Pizza Quiznos 707 E Main St Fast Food Sandwiches Chez Foushee 2 E Grace St Fine Dining French-Croele Maya Mexican Grill and Tequila Lounge 525 E Grace St Fine Dining Mexican Julep's 420 E Grace St Fine Dining Southern Rappahannock Restaurant 320 E Grace St Fine Dining Seafood Lemaire (Farm-to-Table) 101 W Franklin St Fine Dining New American Source: Hunden Strategic Partners City Centre & Central Office Districts Restaurant Supply Similar to the offerings in the Capitol, MCV and Shockoe Slip offerings, the City and Central Office districts offer 16 casual dining options. Of the 27 restaurants offered in this district, 60 percent are casual dining, 18 percent are fast casual, 18 percent are fine dining and there is one fast food option. The following figure shows the Jackson Ward Restaurant offerings. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 5 - Page 5

121 Table 5-4 Jackson Ward Restaurant Inventory Tenant Address Concept Cuisine Salt and Forge 312 N 2nd St Casual Dining Breakfast Mama J's Kitchen 415 N 1st St Casual Dining Southern GWARbar 217 W Clay St Casual Dining American The Speakeasy Grill 526 N 2nd St Casual Dining Southern Rogue 618 N 1st Casual Dining Appetizers Lucy's Restaurant 404 N 2nd St Casual Dining American Jackson's Beer Garden & Smokehouse 538 N 2nd St Casual Dining Barbeque Pumpkin's Kitchen Café 219 E Clay St Casual Dining Southern Saison 23 W Marshall St Casual Dining New American Comfort 200 W Broad St, Casual Dining Southern Maple & Pine 201 W Broad St Casual Dining New American KuRu Ethiopian 415 W Grace St Casual Dining Ethiopian Big Herm's Kitchen 315 N 2nd St Fast Casual American Saadia's Juicebox & Yoga 402 1/2 N 2nd St Fast Casual Smoothies Stoplight Gelato Café 405 Brook Rd Fast Casual Gelato J Kogi 325 N 2nd St Fast Casual Korean Fighting Fish 317 N 2nd St Fast Casual Seafood Bistro W Broad St Fine Dining French & Italian Source: Hunden Strategic Partners Jackson Ward includes fewer overall options, but those that exist are fairly diverse. Most options focus on daytime patronage, but some are open into the evenings. Of the 18 restaurants offered in the Jackson Ward district, 67 percent are casual dining, 28 percent are fast casual and six percent are fine dining options. Retail Overview HSP analyzed the potential for retail development within downtown Richmond. HSP received historical performance metrics acquired from Costar, analyzed the current retail supply and had conversations with local brokers in order to better understand the Richmond Market and what opportunities are present. The following table summarizes the historic performance of the Richmond CBD retail market. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 5 - Page 6

122 Quarter Inventory Bldgs Inventory SF Vacant SF Total Table 5-5 Downtown Richmond Retail Market Historical Performance Vacant Vacant Total Available Percent % Available SF Percent % Occupancy Total Total Total SF Occupancy % Under Construction SF All Service Type Rent Overall QTD 341 2,499, , , ,350, Q ,499, , , ,343, Q ,499, , , ,344, Q ,499, , , ,360, Q ,499, , , ,354, Q ,491, , , ,358, , Q ,491, , , ,352, , Q ,491, , , ,339, , Q ,491, , , ,334, , Q ,491, , , ,338, , Q ,491, , , ,343, Q ,491, , , ,343, Q ,491, , , ,341, Q ,513, , , ,331, Q ,513, , , ,342, Q ,513, , , ,326, Q ,513, , , ,311, Q ,513, , , ,304, Q ,533, , , ,240, Q ,533, , , ,324, Source: CoStar All performance metrics suggest that the retail market in downtown Richmond has improved over the last 4.5 years. While rents have not increased, the amount of vacant space has decreased by about 50,000 square feet. Downtown retail has previously only focused on supporting the daytime working population needs but is starting to shift. With the addition of new residential units downtown, more service-based and boutique retail development opportunities will be present to serve the downtown residents. The following map shows the current retail supply in downtown Richmond. NNN Rent Overall Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 5 - Page 7

123 Figure 5-2 As shown, the majority of the retail outlets downtown are found off of Broad Street, or in Shockoe Slip and Shockoe Bottom. Currently, there is very little retail offered north of Broad Street or near the proposed North of Broad development. The following table outlines the retail supply in downtown Richmond. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 5 - Page 8

124 Table 5-6 Tenant Address Concept Subcategory Renmark Design Shop 1321 E Main St Antique Furniture Bradley's Antiques 101 E Main St Antique N/A Circle Thrift & Art Space 7 W Broad St Antique Thrift Store Quirk Gallery 207 W Broad St Antique Art Gallery Rainbow Shops 305 E Broad St Apparel Plus-size Women 707 Fine Clothing 310 E Broad St Apparel Men's Clothing Rosewoof Clothing Co. 16 W Broad St Apparel Women's Clothing Rider Boot Shop 18 W Broad St Apparel Shoe Store Utmost Co 115 W Broad St Apparel Streetwear Ledbury 315 W Broad St Apparel Men's Clothing Verdalina 325 W Broad St Apparel Women's Clothing Mod & Soul 323 W Broad St Apparel Women's Clothing Blue Bones Vintage 322 W Broad St Apparel Vintage Clothing Two Pillars Tattoo 121 E Main St Beauty Tattoo Parlor Old Soul Tattoo 209 N 3rd St Beauty Tattoo Parlor East Grace Studios 208 E Grace St Beauty Tattoo Parlor Jason Stephen 220 W Broad St Beauty Tattoo Parlor Unkindness Art 220 W Broad St Beauty Tattoo Parlor Annalise Briadl Boutique 1309 E Main St Boutique Bridal Pedego Electric Bikes RVA 1301 E Cary St Specialty Bicycle Fountain Bookstore Inc 1312 E Cary St Specialty Book Store Watch and Pen, LLC 1051 E Cary St Specialty Watch Repair General Cigar Holdings Inc 1021 E Cary St Specialty Tobacco Vogue Flowers 1114 E Main St Specialty Florist Belher's Barber Shop 909 E Main St Specialty Barber Three Bears Gift Shop 1213 E Clay St Specialty Gift Shop The Virginia Shop 800 E Broad St Specialty Gift Shop Gus's Shoe Repair 528 E Main St Specialty Shoe Repair FASTSIGNS 532 E Main St Specialty Sign Shop Leete Tire & Auto Center 12 S 2nd St Specialty Auto Repair John Marshall Barber Shop 502 E Franklin St Specialty Barber Advertising Promotions & Designs 15 S 1st St Specialty Embroidery Black Iris Floral Events 20 E Main St Specialty Florist Bunkie Trinite Trophies 12 E Grace St Specialty Trophy Shop Jefferson Loan Office Inc 10 E Broad St Specialty Pawn Shop It's A Man's World 100 W Broad St Specialty Consignment Richmond Camera 213 W Broad St Specialty Camera Steady Sounds Record Store 322 W Broad St Specialty Record Store Current Vapor Co. 406 W Broad St Specialty Vaporizer Store Source: Hunden Strategic Partners Central Business District Retail Inventory As shown from the retail supply list, downtown Richmond does not offer many traditional nationally recognized retailers found in other urban centers. The majority of retail offered in Richmond is small, locally-owned shops that are primarily focused on specialized purposes. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 5 - Page 9

125 Interview Feedback Retail Shockoe Bottom, located southeast of the proposed development area and outside of the defined downtown area, contains the majority of the high-end retail offered proximate to downtown. Downtown still does not have enough nighttime foot traffic to warrant investment in retail for many national brands. The new Pulse bus running on Broad St. should increase demand for downtown retail, making the downtown corridor more accessible to non-downtown residents and guests. The VCU retail and restaurant markets are very strong throughout the school year but struggle in the summer. Generally speaking, retailers have performed better in the west end and Shockoe Bottom (~$4/ square foot) than in the downtown corridor. Retail development downtown is focused on service-oriented rather than on traditional goods. Interest in downtown retail has increased in recent years as multi-family development has occurred and downtown as a whole has seen a resurgence. More residents and visitors are needed to support retail. Restaurant Implications Primary restaurant nodes are located in: the Fan, the Museum District, Shockoe Slip, Shockoe Bottom, Grace and 5 th, VCU, and Scott s Addition Up and coming restaurant nodes include: Jackson Ward, North Side and Manchester Restaurant offerings in Richmond lack authenticity and are generally narrow in their offerings. Many have indicated an interest in additional ethnic cuisines and unique restaurants The restaurants in the central business district cater to the daytime customers, focusing only on breakfast and lunch options Downtown Richmond has not had success attracting national restaurant chains, while the VCU neighborhood has seen more success attracting recognized restaurant chains Present day market situations do not reflect significant demand for more retail and restaurants downtown. This is driven by a lack of existing compelling supply, which has shaped residents behavior to leave the downtown area for dining and shopping. The Catch-22 situation exists where more activity is needed to support retail and restaurant. But more restaurants and retail are desired to draw more residents, visitors and employers downtown. The proposed North of Broad development will create a critical mass of dining and shopping options downtown and will spark significant demand for ground-level retail and restaurants. More than 2,500 new apartments introduced to the market, bringing 3,000+ new full-time residents to the area adds justification to developing retail and restaurant space. Downtown residents are crucial to keeping Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 5 - Page 10

126 restaurants, retail and entertainment venues alive during after-work hours. On the other hand, having these retail and restaurant amenities in some capacity will be necessary to create an optimally attractive environment for the type of residents looking to move to a walkable live, work and play area. If an influx of new residents is added to downtown, it will create the opportunity for additional restaurant development that is not only focused on breakfast and lunch meals and give retailers a strong population base to capture. Additionally, if a new Arena were to be developed, the city would be able to host larger and more impactful entertainment events. Entertainment developments often serve as catalysts for new developments due to increased programming and foot traffic near the venue. The development of a headquarters hotel for the Greater Richmond Convention Center will also serve as a catalyst for retail and restaurant demand downtown by helping the city bring more out of state tourists into conventions. Modern travelers expect to have retail and restaurant options proximate to lodging accommodations. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 5 - Page 11

127 TABLE OF CONTENTS Executive Summary Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Project Profile Economic, Demographic & Tourism Analysis Arena, Event and Entertainment Market Analysis Hotel and Meetings/Convention Market Analysis Retail and Restaurant Market Analysis Residential Market Analysis Office Market Analysis Demand and Financial Projections Economic, Fiscal and Employment Impact Analysis

128 RESIDENTIAL MARKET ANALYSIS This chapter includes an analysis of the downtown Richmond residential market and the feasibility of residential development. In order to determine the market for residential development opportunities, Hunden Strategic Partners utilized current market data and conducted interviews with local residential brokers and economic development officials. Residential units represent the largest component of the North of Broad Project. More than 2,900 apartments, including 411 student housing units, and 280 affordable units will span eight blocks of the development (A2, B, C, E, I, N, P, U). The residential units will be built during Phases 1 and 2 and will be the primary use for all three blocks developed south of Broad Street (N, P, U). The below table depicts the residential plans within the North of Broad development. Table 6-1 Proposed Residential Buildings Block Total Leasable SF Total Units Total at Market Total Affordable User Types A2 100, Multi-Family B 166, Multi-Family C 445, Multi-Family E 104, Multi-Family I 318, Student Housing N 318, Multi-Family P 308, Multi-Family U 279, Multi-Family Total 2,040,859 2,939 2, Source: Capital City Development, LLC Overview The downtown Richmond market has recently experienced an injection of residential offerings via renovation of old warehouses and commercial buildings into apartment complexes. These renovated buildings are predominately located in Rocket s Landing which is southeast of the North of Broad area. The downtown residential market is still small, particularly north of Broad Street and south of the Jackson Ward where the proposed development would take place. Demand for downtown residential offerings is rising as the downtown workforce grows and ease of commute becomes increasingly important to a millennial workforce. Neighborhoods and Residential Developments Several popular residential nodes surround downtown: VCU, The Fan, and the Museum District to the West; Oregon Hill to the Southwest; Church Hill and Union Hill to the East; Jackson Ward and Scott s Addition to the North and Northeast respectively. No real nodes downtown. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 2

129 Multi-Family (Rental) Market Inventory The following table provides a look at downtown Richmond s residential market performance over the past six years. Note that downtown in this study is defined as everything north of the James River, south and west of I64/I95, and east of Belvidere Street. Table 6-2 Downtown Richmond Historic Residential Avg. Market Quarter Inventory Buildings Inventory Units Inventory Average SF Asking Rent Per Unit Effective Rent Per Unit Avg. Effective Rent Per SF Occupancy Vacancy QTD 113 4, $1,183 $1,164 $ % 8.1% 2018 Q , $1,184 $1,166 $ % 6.7% 2018 Q , $1,180 $1,158 $ % 6.1% 2017 Q , $1,170 $1,153 $ % 5.2% 2017 Q , $1,163 $1,139 $ % 7.3% 2017 Q , $1,169 $1,158 $ % 6.5% 2017 Q , $1,180 $1,158 $ % 6.8% 2016 Q , $1,191 $1,174 $ % 7.4% 2016 Q , $1,200 $1,183 $ % 9.5% 2016 Q , $1,165 $1,149 $ % 14.0% 2016 Q , $1,128 $1,113 $ % 14.5% 2015 Q , $1,093 $1,082 $ % 9.6% 2015 Q , $1,074 $1,070 $ % 9.8% 2015 Q , $1,058 $1,054 $ % 9.8% 2015 Q , $1,043 $1,039 $ % 9.5% 2014 Q , $1,026 $1,017 $ % 9.1% 2014 Q , $1,015 $1,003 $ % 10.0% 2014 Q , $1,033 $1,025 $ % 9.1% 2014 Q , $1,040 $1,020 $ % 9.1% 2013 Q , $1,035 $1,018 $ % 8.8% Absolute Change $148 $146 $ % -0.7% Percentage Change 7.6% 20% -2.8% 14% 14% 16% 0.8% -8.0% Source: CoStar The downtown Richmond historic residential market has grown and improved in virtually every metric since the fourth quarter of Supply of residential buildings and units has increased, asking and effective rents have increased and occupancy has improved as well. Supply The eight multifamily buildings added to the market since the second quarter of 2014 have added nearly 750 units or 20 percent and have been much larger on average with approximately 93 units per building compared to 38 units per building previously. During this same period multiple closings have occurred alongside the development of new projects. The growth in supply shown is net of the closings. Rent Asking and effective rents per unit increased by nearly $150 during the period, representing an increase of 14 percent. The rent increases have occurred despite the slight cutback in unit square footage, which is illustrated in the greater percentage increase in effective Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 3

130 rent per square foot relative to unit rental rate increases. Effective rents were $14 less per month than asking rents, which is a 1.3-percent discount or concession on average. This low discount percentage indicates that asking rents are very near market rate and demand is strong for the market. Occupancy Overall, occupancy has remained stable above 90 percent during most of the period. For the first half of 2016, occupancy remained below 90 percent at approximately 86 percent. Shortly thereafter occupancy increased steadily to nearly 95 percent in the fourth quarter of Occupancy has returned to a more average level in Downtown Richmond has been growing and performing at a high level for the past few years. The market s ability to absorb the new inventory while increasing rental rates year-over-year bodes very well for the future. The following table provides an illustrative list of apartment properties in downtown Richmond. Table 6-3 Downtown Richmond Multifamily - Top 20 Overview Name Address Opened Units Occupancy Marshall at City Center 2 W Marshall Street U/C The Locks Tower 311 S 11th Street U/C Jackson Place N 1st Street Proposed th & Main 800 E Main Street % Deco at CNB 219 E Broad Street % Matrix Midtown 119 N 1st Street % Exchange Place 1313 E Main Street % The Edison Apartments 700 E Franklin Street % 4N4 Midtown 4 N 4th Street % The Locks 311 S 11th Street % 8 1/2 Canal Street 8 1/2 E Canal Street % Cary and Belvidere W Cary Street % Monroe Park Towers 520 W Franklin Street % The Berkshire 300 W Franklin Street % The Towers on Franklin 104 W Franklin Street % Sydnor Flats 108 E Grace Street % Residences at the John Marshall 101 N 5th Street % First National Apartments 823 E Main Street % American Heritage Apartments 1001 E Main Street % The Dairy 201 W Marshall Street % Average % Source: CoStar Nearly half of the Top 20 downtown residential properties have been built since 2008, while three more are proposed or currently under construction. There is generally a positive correlation between the year constructed of a property and its occupancy level in the downtown Richmond market. The new residential pieces of the North of Broad Project could expect the same positive correlation, since the market appears ready to absorb more inventory as it becomes available. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 4

131 The following figure details the location of the current top 20 largest multi-family residences in downtown Richmond. Figure 6-1 Most of the Top 20 residential buildings in downtown Richmond are located between Canal Street and Broad Street between US 301 and 9 th Street and are located within one mile of the State Capitol building. The following table shows the average rental rates for the Top 20 properties analyzed. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 5

132 Table 6-4 Downtown Richmond Multifamily - Top 20 Average Rental Rates Name Opened Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom Marshall at City Center U/C The Locks Tower U/C Jackson Place Proposed th & Main $1,350 $1, $2,398 Deco at CNB 2016 $1,141 $1,144 $1, Matrix Midtown $1,225 $1,759 $2, Exchange Place $1,172 $1, The Edison Apartments 2014 $908 $1,067 $1,403 $1, N4 Midtown $1,110 $1, The Locks $1,288 $1, /2 Canal Street $1,294 $1,666 $2,319 $2,944 Cary and Belvidere 2008 $904 $1,029 $1, Monroe Park Towers 1972 $832 $968 $1,283 $1, The Berkshire $981 $1,478 $2, The Towers on Franklin 1964 $895 $1,109 $1, Sydnor Flats $940 $1, Residences at the John Marshall 1929 $1,087 $1,430 $1, First National Apartments 1913 $1,410 $1,524 $1,865 $2, American Heritage Apartments $1,114 $1,634 $2, The Dairy 1895 $610 $736 $ Average Per Apartment $973 $1,146 $1,568 $2,155 $2,671 Average Per Bedroom $973 $1,146 $784 $718 $668 Source: CoStar This pricing schedule is for various floor plans in each of the Top 20 buildings. Information is not available for Jackson Place, the Locks Tower and Marshall at City Center which are not yet open. The downtown Richmond market offers apartments ranging from studios to four bedrooms. One bedrooms and studios are by far the most expensive apartments on a per bedroom basis, which is expected. The most expensive apartments are the four-bedrooms at the 8 ½ Canal Street building, priced at $2,944 per month. The least expensive apartment is a studio at The Dairy, which is the oldest property in the Top 20 and is $610 per month. The following table shows the average square foot per unit type. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 6

133 Table 6-5 Downtown Richmond Apartments - Top 20 Average Unit Size (SF) Name Opened Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom Marshall at City Center U/C The Locks Tower U/C Jackson Place Proposed th & Main , ,706 Deco at CNB Matrix Midtown , Exchange Place The Edison Apartments , N4 Midtown The Locks /2 Canal Street ,198 Cary and Belvidere Monroe Park Towers , The Berkshire ,462 2, The Towers on Franklin , Sydnor Flats Residences at the John Marshall , First National Apartments ,296 2, American Heritage Apartments , The Dairy Average ,540 1,952 Average per Bedroom Source: CoStar Apartments in downtown Richmond range in size from a 350-square-foot studio to a more than 2,700-squarefoot four-bedroom property. The smallest apartments, the studios at the Dairy, also happen to be the least expensive. The most expensive apartment is 1,200 square feet for a four-bedroom which is considerably smaller than the largest in the market which has more than 2,700 square feet. On average, one-bedroom apartments offer the most space per bedroom of any apartment type in the market with nearly 650 square feet. Two-, three- and four-bedroom apartments are within 25 square feet of each other on a per bedroom basis averaging approximately 500 square feet. The following table shows the average price per square foot for each unit type. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 7

134 Table 6-6 Downtown Richmond Multifamily - Top 20 Rent per SF Name Opened Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom Marshall at City Center U/C The Locks Tower U/C Jackson Place Proposed th & Main $2.00 $ $0.89 Deco at CNB 2016 $2.54 $2.19 $ Matrix Midtown $2.06 $1.85 $ Exchange Place $1.90 $ The Edison Apartments 2014 $2.10 $1.97 $1.62 $ N4 Midtown $1.96 $ The Locks $1.98 $ /2 Canal Street $2.60 $2.02 $2.33 $2.46 Cary and Belvidere 2008 $2.02 $1.62 $ Monroe Park Towers 1972 $1.77 $1.67 $1.63 $ The Berkshire $1.12 $1.01 $ The Towers on Franklin 1964 $2.22 $1.70 $ Sydnor Flats $1.09 $ Residences at the John Marshall 1929 $2.26 $1.89 $ First National Apartments 1913 $2.13 $1.78 $1.44 $ American Heritage Apartments $1.88 $1.68 $ The Dairy 1895 $1.74 $1.34 $ Average $2.10 $1.81 $1.61 $1.50 $1.67 Source: CoStar Rent on a per square foot basis ranges from $0.89 to $2.60 in downtown Richmond. Studio apartments average the highest rent per square foot of the floor plan types. The most expensive floor plan is a onebedroom apartment at 8 ½ Canal Street, which is the most expensive property overall in the downtown Richmond market. New Developments The following section profiles the recent developments in downtown Richmond. Marshall at City Center Marshall at City Center is a market-rate apartment building in downtown Richmond located at 2 West Marshall Street. Marshall at City Center s 166 units are currently under construction on a one-acre plot and will stand 5 stories tall with interior spaces totaling 115,000 square feet. The property will also offer 165 surface parking spaces. SNP Properties, LLC owns and is developing Marshall at City Center and has contracted Drucker & Falk to manage the property once completed. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 8

135 The following figure shows a rendering of the Marshall at City Center apartment building. Figure 1-2 Marshall at City Center will offer 66 studio apartments, 67 one-bedrooms and 33 two-bedrooms upon completion. All units will have access to a private balcony. 8 th and Main Apartments Located at 800 East Main Street, 8 th and Main is a mid-rise apartment building that was completed in The 11-floor building offers 197 market-rate apartments within 200,000 square feet of interior space on approximately three-quarters of an acre. The property also offers 220 parking spaces in an attached parking garage. The following figure shows the exterior and rooftop of the 8 th and Main apartment building. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 9

136 Figure 6-3 There are 176 one-bedroom apartments 18 two-bedrooms and 3 four-bedrooms at 8 th and Main,. The onebedroom apartments average 675 square feet, a monthly rent of $1,350 and a per square foot rent of $2. Two-bedroom apartments average approximately 1,000 square feet, $1,700 per month and $1.70 per square foot. The four-bedroom apartments are much larger at more than 2,700 square feet and also come at large discount, averaging nearly $0.90 per square foot and $2,400 per month. Performance at 8 th and Main is perfect in terms of occupancy at 100 percent. Concessions to maintain this level of occupancy are very low at approximately 0.2 percent on average relative to the market. Deco at CNB The Deco at CNB apartment building is a high-rise, market-rate property located at 219 East Broad Street on more than one-half of an acre. Completed in 2016, Deco at CNB offers 200 studio, onebedroom and two-bedroom apartments and nearly 265,000 square feet on 23 floors. The following figure shows the exterior of the Deco at CNB apartment building. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 10

137 Figure 6-4 The mix of 200 apartments is two-thirds one-bedrooms with a nearly equal number of studios and twobedrooms, totaling the remaining third. Studios and one-bedroom apartments are priced almost identically around $1,145 on average, while the two-bedroom apartments are similarly priced to one-bedrooms on a per square foot basis at $2.10. The Deco at CNB currently has an occupancy rate of 89 percent, which seems to be a function of relatively expensive pricing and smaller than average unit sizes. Deco s one-bedroom apartments are 522 square feet on average, which is more than 120 square feet smaller than the market average. Deco s two-bedroom apartments are nearly 100 square feet smaller than the market average at 897 square feet. Deco at CNB has had to offer concessions averaging five percent on its one-bedroom apartments, which is much higher than the market average on concessions of 1.6 percent for 2018 year-to-date. Demand and Stakeholder Feedback Developers, residential brokers and key stakeholders in the downtown Richmond market provided Hunden Strategic Partners with specific and insightful feedback regarding residential nodes and developments. The following comments represent the themes and trends shared with HSP. Residential renovations are more common than new construction. Conversions in the market are made possible through tax credits. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 11

138 Implications Major apartment offerings are south of downtown and the river in Manchester; new high rises are being constructed with a view of the James River. Scott s Addition is the newest residential neighborhood to emerge with popularity and will compete for young professionals who do not consider commute time a top priority; Scott s Addition lags behind other comparable neighborhoods in rental per SF. Belvidere, serving as the western border of downtown in this study, is a student housing node not a multi-family node currently. Major investments are being made by equity from larger markets, such as Washington D.C and New York. In addition to the need for more residential options for rent, there is demand for condos; there is currently very little for sale in downtown Richmond. The residential market in downtown Richmond has expanded and improved in recent years with steady rental rate growth and a market occupancy rate consistently higher than 90 percent. Demand has continued to grow due to the growth in area employment. MCV and BioTech Park are growing and employing more people which means that apartments are needed to serve downtown workers. These are two large employers downtown currently with several suburban offices relocating downtown as well. The young workforce wants a shorter commute (walk/bike). As the office market grows and improves, the residential market will need do the same. This provides huge opportunity for the proposed residential components of the North of Broad Project. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 6 - Page 12

139 TABLE OF CONTENTS Executive Summary Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Project Profile Economic, Demographic & Tourism Analysis Arena, Event and Entertainment Market Analysis Hotel and Meetings/Convention Market Analysis Retail and Restaurant Market Analysis Residential Market Analysis Office Market Analysis Demand and Financial Projections Economic, Fiscal and Employment Impact Analysis

140 OFFICE MARKET ANALYSIS In this chapter, HSP will analyze the current downtown Richmond office market and consider the feasibility of new office development. The chapter will first look at the entirety of Richmond s office market before focusing in on the Class A market. This will allow for an overarching understanding of the market when focusing on offices similar to those being proposed in this development. Hunden Strategic Partners conducted several interviews with office brokers knowledgeable about the downtown Richmond market to understand the market both as it is today and could be going forward. Office buildings are categorized into Classes A, B and C based on quality and other important factors. Class A office buildings are typically new, high-quality buildings that are well located with good access and professional management. Office buildings are typically developed as Class A and, as time passes and newer, better buildings open, regress into Class B and Class C. Parameters for each class are not explicit or standard. Classes are used as a relative ranking system to group buildings of similar quality for leasing and market data collection. Data presented in this chapter includes all three classes at the market level, but HSP focuses on Class A office space in downtown Richmond because the Project s office components will be Class A when developed. The North of Broad Project proposes 740,000 SF of new office and research space. The Project proposes 200,000 SF of multi-tenant office space to be set on block A3, near the Coliseum. A single-tenant research facility of 540,000 SF is planned to be leased by the VCU Neuroscience Department on Block D. The following table depicts the office space proposed within the development. Richmond Office Market Overview Table 7-1 Proposed Office Block SF Type A3 280,000 Multi-Tenant D 510,000 Single-Tenant Source: Capital City Development, LLC Currently, there are a total of 22 Class A buildings in downtown Richmond. Much of the downtown office market is shaped by government offices and office space related to Virginia Commonwealth University and their buildings shape the face of downtown Richmond. While almost a dozen Fortune 1,000 companies are headquartered in the Greater Richmond area, the majority of office space is middle-sized. Employers are drawn to Richmond as office spaces are much less expensive than major cities such as New York, Boston and Washington, D.C. In addition to cost savings for office space, employers can save on average of 15 percent on labor costs compared to the same major East Coast cities. A strong set of regional universities and a lower cost of living in Richmond allows employers to successfully acquire talent even at lower wages, making Richmond an increasingly attractive location for employers to locate. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 2

141 The figure below shows the current inventory of the largest office spaces in downtown Richmond. Figure 7-1 While government office space and VCU office space contribute greatly to the workforce and culture of downtown, these buildings are entities are exempt from real estate taxes. The below figure shows which real estate parcels downtown are owned by the Commonwealth of Virginia, the City of Richmond, and other public entities that do not pay taxes (i.e. Universities). Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 3

142 Figure 7-2 This map shows much of the downtown area consists of tax-exempt parcels. Only the white areas on the map are taxable. The proposed project will help this situation. The following table shows an overview of the total office supply in downtown Richmond and is broken down between class A, B and C. Table 7-2 Downtown Richmond Office Supply Building Class Overall Total SF Inventory Buildings Occupied % Vacant % A 6,771, % 9.2% B 6,758, % 6.0% C 2,938, % 3.0% Total 16,468, % 4.4% Source: CoStar Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 4

143 Class A office space is the largest category of office space in the downtown Richmond market, and includes the largest buildings. Class A does have the lowest occupancy rate, but as is evidenced by the below table, has experienced occupancy growth at a greater rate than the other classes over the past two years. The below table shows the 20 largest office buildings in downtown Richmond. Table 7-3 Richmond Office Supply - Largest Buildings by SF Property Address Class Size (SF) Opened Tenancy 700 Canal Place 701 E. Cary St. A 911,000 Proposed Single-Tenant Federal Reserve Bank of Richmond 701 E. Byrd St. A 700, Multi-Tenant West Tower - Riverfront Plaza 901 E. Byrd St. A 490, Multi-Tenant East Tower - Riverfront Plaza 951 E. Byrd St. A 461, Multi-Tenant SunTrust Center 919 E. Main St. A 460, Multi-Tenant 600 Canal Place 600 E. Canal Pl. A 450,000 U/C Single-Tenant Phillip Morris Research & Development Center 601 E. Jackson St. A 450, Single-Tenant One James Center 901 E. Cary St. A 426, Multi-Tenant Main Street Centre 600 E. Main St. A 424, Multi-Tenant One James River Plaza 701 E. Cary St. A 414, Single-Tenant Two James Center 1021 E. Cary t. A 340, Multi-Tenant Gateway Plaza 800 E. Canal St. A 330, Multi-Tenant Westrock/CoStar Building 501 S. 5th St. A 310, Multi-Tenant Average Class A 474, James Monroe Building N. 14th St. B 815, Single-Tenant The Bank of America Center 1111 E. Main St. B 513, Multi-Tenant Richmond Plaza Building 111 S. 6th St. B 383, Multi-Tenant City Hall 900 E. Broad St. B 373, Single-Tenant General Assembly Building 911 E. Broad St. B 363, Single-Tenant Eight & Main Building 707 E. Main St. B 325, Multi-Tenant Tyler Building 1300 E. Main St. B 296, Single-Tenant Average Class B 438, Average - Overall 440, Source: CoStar Other than the development of Gateway Plaza, no new large office development has occurred in recent years and the average age of the properties is more than 35 years. However, Dominion Tower and 700 Canal Place, currently under construction and proposed, respectively, will be constructed by Dominion. These towers are planned to be single-tenant, however, and therefore would not inject any new supply to other firms seeking to enter the Richmond market. Many of the buildings shown in the table above are multi-tenant properties, yet beyond the largest buildings in the market, many are single-tenant buildings for city, state and federal government, hospital facilities and Virginia Commonwealth University. While these single-tenant Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 5

144 buidlings do not provide additional space for the office market in downtown Richmond, they do house thousands of daytime employees. A portion of the single-tenant buildings are corporate headquarters, which provide high-compensation employment in the downtown area adjacent to the Project site. The below figure illustrates occupancy rates for Office classes A, B, and C in downtown Richmond. Figure 7-3 All classes of office have trended upward since Class C has maintained the strongest occupancy rates, above 95 percent since the beginning of 2017, while Class B has been nearing 95 percent and Class A surpassed 90 percent the past five quarters. A lack of large contiguous spaces in Class A multi-tenant buildings hinders the ability to attract large tenants and dampens performance of the market. The following table shows the historic office supply and performance for downtown Richmond. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 6

145 Table 7-4 Downtown Richmond Historic Class A Office Market Year Inventory SF Occupied SF Occupancy Percent Net Absorption SF Total Office Gross Rent QTD 6,771,327 6,145, % 10,122 $ Q2 6,771,327 6,135, % 48,023 $ Q1 6,771,327 6,087, % -60,197 $ Q4 6,771,327 6,148, % 9,588 $ Q3 6,771,327 6,138, % 102,094 $ Q2 6,771,327 6,036, % 10,268 $ Q1 6,771,327 6,026, % 10,435 $ Q4 6,771,327 6,015, % 100,171 $ Q3 6,771,327 5,915, % -4,991 $ Q2 6,771,327 5,920, % 12,986 $ Q1 6,771,327 5,907, % -127,148 $ Q4 6,771,327 6,034, % 56,820 $ Q3 6,771,327 5,977, % -21,690 $ Q2 6,441,327 5,999, % 34,760 $ Q1 6,441,327 5,964, % 24,806 $ Q4 6,441,327 5,939, % -15,878 $ Q3 6,441,327 5,955, % 18,861 $ Q2 6,441,327 5,936, % 110,852 $ Q1 6,441,327 5,826, % 169,976 $24.85 Source: CoStar Class A office inventory increased marginally by 330,000 square feet or five percent to nearly 6.8 million square feet since the first quarter of Delivery of the new space in the third quarter of 2015 caused a nearly five-percentage-point drop in occupancy that has still not been completely absorbed. Total occupied square feet in Class A office downtown has increased by more than 300,000 during the period, though occupancy remains below its peak during the period in the second quarter of Office gross rent per square foot decreased slightly during the period shown. The second quarter of 2014 had the highest gross rent at $24.90 per square foot. The slow absorption of the new supply inspired a 3.3 percent dip in rental rates three quarters after delivery. Rates hovered between $23 and $24 per square foot until surpassing $24 in the first quarter of Rates have remained at more than $24 since then. Overall, the lease rate of Class A office space in downtown Richmond is slowly improving, yet still catching up to performance levels experienced in 2014 and The figure below illustrates the overall gross rent per SF for Class A office space over the past six years. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 7

146 Figure 7-4 The figure above indicates that rental rates are recovering from the dip that began in early 2016, just as occupancy rates fell the year before. Absorption is occurring slowly, and as occupancy levels continue to increase rental rates will be compressed upward as the availability of space decreases. The following figure displays the occupancy rates over the past four years. Figure 7-7 Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 8

147 Occupancy rates have increased since 2016 when occupancy was nearly 87 percent. Occupancy rates in 2018 have been slightly more than 90 percent and trending upward, another indicator that additional supply could be absorbed. Building Profiles In order to add context to the office market in downtown Richmond, this section presents profiles of three of the largest buildings in the market. Presented will be the newest building, Gateway Plaza, and the two largest Class A multi-tenant buildings, the Federal Reserve Back of Richmond building and the West Tower of Riverfront Plaza. Gateway Plaza Gateway Plaza is the newest large office building to be completed in downtown Richmond. It was opened in 2015 and was the first office delivery of this size in downtown Richmond in seven years. Gateway Plaza is 19 stories tall with 330,000 rentable square feet on nearly 1.5 acres. The building also offers 619 parking spaces, which is a ratio of 1.62 spaces per 1,000 square feet. The following figure shows the Gateway Plaza. Figure 7-5 Gateway plaza is performing adequately compared to the overall market. Asking rental rates are higher than average, while vacancy is also higher than the market average. Asking rates are currently approximately $30 per square foot. Gateway Plaza has two vacant spaces, or nearly 26,000 square feet, and more than 17,000 square feet for a total of nearly 43,000 square feet or 13 percent. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 9

148 As the downtown Richmond market becomes more popular for office tenants, a wider variety of tenants and tenant sizes will be looking for space, which help fill in the smaller vacancies that exist in Gateway Plaza and many other multi-tenant buildings. Federal Reserve Bank of Richmond The Federal Reserve Bank of Richmond building was opened in 1978 and remains a Class A office building in the downtown Richmond market. It offers 700,000 rentable square feet on 26 floors and nearly eight acres, the second most of any building in downtown Richmond and the most for a Class A building. The Reserve building also offers nearly 850 parking spaces, 400 covered and the rest surface parking. The following figure shows the Federal Reserve Bank of Richmond. Figure 7-6 The Reserve building is the oldest Class A multi-tenant building in the downtown Richmond market. Despite its age, it is performing very well. There are currently no vacancies in the building, which is at least partially driven by the lower asking rents. Asking rents are approximately $21 per square foot, which is on the lower end of the spectrum in the Class A market. West Tower Riverfront Plaza The Riverfront Plaza consists of two office buildings, the East Tower and the West Tower. The West Tower is the larger of the two with more than 490,000 square feet of rentable space. It is also the newer of the two towers being completed in The West Tower is 22 stories tall and sits on 3.8 acres of land. It also offers approximately 1,150 surface parking spaces for tenants and guests. The following figure shows the West Tower of Riverfront Plaza. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 10

149 Figure 7-7 The West Tower is operating very near the average of the downtown Richmond office market. Asking rents are set at $26.50 per square foot for both Riverfront Plaza buildings. Direct vacancy in the West Tower is just more than ten percent or approximately 50,000 square feet. There is also an additional 23,000 square feet of available space for lease that is not currently vacant. Interview Feedback As part the analysis, HSP reached out to stakeholders and market experts who have a vested interest in the downtown Richmond office market. In talking with these stakeholders, HSP identified numerous trends that are summarized below: Functionally obsolete office buildings have been converted into apartment buildings, which helps reduce office supply and pushes occupancy and rates. Companies that historically would have been likely to place their offices in the suburbs are now locating downtown to attract Millennial employee talent. Examples of companies locating downtown recently include Owens and Minor, who located from the Richmond suburbs and CoStar, who set up their head research facility in the MeadWestvaco Building MCV and Virginia BioTechnology Research park have a great deal of influence on downtown office market and makeup of workforce. MCV will continue to grow. CoStar hired 600 net new employees in Richmond in 18 months. Rent growth rate is currently very strong between 2.25 percent and 3 percent. 600 Canal Place (under construction) and 700 Canal Place (proposed) are the only two office new office buildings in the downtown Richmond market. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 11

150 Implications Regional college graduates forming a Millennial workforce want to work in Richmond, a growing city in terms of population and popularity. CoStar, the real estate research firm, recently placed their research headquarters in Richmond, a strong endorsement for the office market. As a result of the increasing popularity, vacancy is decreasing and rents are rising in the Richmond Office market. Despite this popularity, only the two Dominion Towers are being developed in the area of the North of Broad project. However, one of these towers will be a single-tenant building so it will have a limited impact on the market overall. VCU also has 540,000 square feet of research office space, but again, that will be single-tenant. The office space proposed as part of the North of Broad Project will enter a strong market. As the overall office inventory continues to age, newer spaces will be well received as demand continues to rise. Class A spaces currently have the highest vacancy rate of the three classes, though the size of available spaces may be driving those higher vacancies. As more tenants with various spatial needs begin looking at downtown Richmond, these smaller spaces will fill in. Despite the vacancy in Class A office buildings downtown, rental rates have increased since Rental rates have still not caught up to the levels experienced in 2014 before trending downward through mid-2016, but the trend is moving upward despite very little delivery of new, more expensive space. The downtown Richmond office market s rise in performance and popularity has been steady, which shows that the area is gaining momentum organically. HSP believes this is a positive sign for the Project s office component coming online in a growing market that currently lacks large multi-tenant buildings with sizeable contiguous spaces. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 7 - Page 12

151 TABLE OF CONTENTS Executive Summary Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Project Profile Economic, Demographic & Tourism Analysis Arena, Event and Entertainment Market Analysis Hotel and Meetings/Convention Market Analysis Retail and Restaurant Market Analysis Residential Market Analysis Office Market Analysis Demand and Financial Projections Economic, Fiscal and Employment Impact Analysis

152 DEMAND, FINANCIAL & SPENDING PROJECTIONS Based on HSP s review of the data supplied by the Developer and City of Richmond, the local market information gathered, and other information analyzed, as well as HSP s overall experience studying all elements of the Project, HSP projected the demand and financial performance of each project component, as well as estimated the net new spending to Richmond. The demand and financial projections are discussed in the following order: Arena Arena Blues Armory Headquarters Hotel and GRCC Office Retail/Restaurant Residential The proposed 17,500-seat arena is expected to induce a significant amount of new events to the market compared to the performance of the Coliseum today. While HSP did not assume that an AHL team is actualized, the addition of a franchise to the market would have a material positive impact on the downtown and community as a whole. The model below does not assume the AHL team. The next table shows the expected event demand. Table 8-1 The arena is expected to generate 101 events by stabilization. In the first year, there is expected to be a novelty effect, as performers and shows will want to try the new facility. As a result, certain event types will start off stronger, then taper off, while other smaller events will ramp up over time. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 2

153 The next table shows the estimated attendance for these events. Table 8-2 The arena is expected to attracted nearly 800,000 attendees in most years, the majority coming for concerts and family shows. The next table shows the assumed ticket prices and rental rates for the arena. Table 8-3 The arena is assumed to generate rent by either collecting a flat fee for certain events or a percentage of ticket sales. The next table shows the estimated revenue for the arena. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 3

154 Table 8-4 The arena is expected to generate gross revenue of nearly $11 million in the first year and increase over the first ten years to $13 million. Note that concessions (which include bar and banquet catering) and merchandise are net numbers. The facility is assumed to received 35 percent of food and beverage revenue and 15 percent of merchandise revenue. The next table shows the calculation of net new daytrips and overnights to Richmond, as many events are currently occurring at the Coliseum. Table 8-5 Based on the fact that the city of Richmond only constitutes about 17.5 percent of the metro area population and the fact that many people will be coming to events from outside the metro, most of the attendees to events are expected to be from outside the city. However, because of the existing Coliseum, not all impact will be new. HSP estimates that about 16,000 new room nights and more than 275,000 daytrips will be new to Richmond. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 4

155 Blues Armory The 800-seat Blues Armory building is also expected to induce a significant amount of new events to the market and host a number of smaller non-entertainment events as well, as it is a building with several rentable spaces. The next table shows the expected event demand. Table 8-6 The Blues Armory is expected to generate 97 events by stabilization. The mix of events is expected to be varied, between comedy, music concerts, charity events and other entertainment. In addition, a number of daytime meetings and evening banquets are expected. The next table shows the estimated attendance for these events. Table 8-7 The Blues Armory is expected to be attracted approximately 40,000 attendees in most years, with no single category dominating attendance. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 5

156 The next table shows the assumed ticket prices and rental rates for the Blues Armory. Table 8-8 Similar to the arena, the facility will be available for flat rent or a percentage of ticket sales. The next table shows the estimated revenue for the Blues Armory. Table 8-9 The Blues Armory is expected to generate gross revenue of nearly $500,000 by Year 3. Note that concessions (which include bar and banquet catering) and merchandise are net numbers. The facility is assumed to received 35 percent of food and beverage revenue and 15 percent of merchandise revenue. The next table shows the calculation of net new daytrips and overnights to Richmond, as many events are currently occurring at the Coliseum. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 6

157 Table 8-10 Based on the fact that the city of Richmond only constitutes about 17.5 percent of the metro area population and the fact that many people will be coming to events from outside the metro, most of the attendees to events are expected to be from outside the city. And because the Armory is currently vacant and this will be a new venue, nearly all events and attendance are expected to be new and not cannibilzed from other local venues. This is expected to lead to more than 1,300 room nights and 20,000 daytrips. Between the new arena and Blues Armory, nearly 300,000 new daytrips are expected downtown, which will generate significant pre- and post-event spending on restaurants and other spending. Headquarters Hotel The following table shows the most recent performance of the competitive hotel market that the new hotel will be entering. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 7

158 Table 8-11 Historical Supply, Demand, Occupancy, ADR, and RevPar for Competitive Hotels Year Annual Avg. Available Rooms Available Room Nights % Change Room Nights Sold % Change % Occ. % Change ADR % Change RevPar % Change , , , $ $ , , % 414, % % $ % $ % , , % 474, % % $ % $ % , , % 512, % % $ % $ % , , % 520, % % $ % $ % 2018 YTD (June) 2, , % 270, % % $ % $ % CAGR* ( ) 7.1% 7.1% % % % % -- *Compound Annual Growth Rate Sources: Smith Travel Research, Hunden Strategic Partners The proposed Project is expected to be highest quality and largest hotel in the downtown market and will induce a significant amount of its demand. As the newest hotel, it will also have an advantage and will help the GRCC attract more and larger conventions. The next table shows the projected revenues of the proposed hotel based on a number of assumptions about the property. The figures are shown as earned (cash basis) and in nominal amounts, not discounted. PAR stands for per available room and are shown on an annual basis and POR stands for per occupied room and are shown on a per night basis. Table 8-12 Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 8

159 The property is projected to generate a total of $29 million in gross revenue in the first full year, increasing to more than $46 million in the tenth year. The primary new demand from the hotel (demand that would not be in Richmond but for this project) is the group business that is currently going to other convention destinations, however there is expected to be a strong corporate base as well. The hotel, as demonstrated, will retain a multitude of events and room nights that would have left Richmond had the hotel not been built. In addition, it will help induce and recapture currently non-existent Richmond visitors who are staying in other areas outside of Richmond. All market segments will show induced or recaptured demand. The table below shows the projected net new room nights to Richmond due to the Project. Table 8-13 HSP projects that not all of the headquarter hotel s demand will be new, but eventually as it is absorbed, all of its demand will be considered new. However, because the hotel will induce new conventions to the GRCC, other hotels will receive new demand, and this is expected to total an additional 66,000 room nights per year by stabilization. Additional daytrips will be induced to events at the GRCC, but these will be minimal compared with the new room night-inducing activies. Office Based on existing market performance, broker feedback, and conversations with property managers and other local stakeholders and the Developer, HSP projected the performance of the office development. The majority of the space will be pre-leased and most of the jobs are assumed to be new to Richmond, which will provide significant impact. The table below shows the office projections. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 9

160 Table 8-14 HSP projects that the new residential developments will reach 92 percent occupancy by The rental rate is assumed to begin at $30 triple net, however, there will still be some expenses assumed by the building, primarily to support non-leased space. Overall market value for the office component is shown at $260 million by HSP utilized 2016 Bureau of Labor Statistics data to estimate spending per household in the following categories, then adjusted the figures down for spending that would occur from employees during their five-day per week work day. These impacts are added into the new Richmond spending. Restaurant and Retail The following table shows the projected performance of the numerous retail and restaurant elements spread throughout the Project. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 10

161 Table 8-15 Based on sales per square foot assumptions determined through the market analysis, HSP projects that the restaurant and retail elements will ultimately be leased at 90 percent, but it will take several years to get to this level. The relatively low lease rate of $22 is determined by the sales per square foot and the fact that the tenants are mostly support restaurants and retail for the residential and office. HSP assumed that half of the sales would be new to Richmond. At a cap rate of ten percent, the valuation of this component is relatively low compared to others. However, without these amenities, it will be difficult to lease up the office and residential elements. Residential Market Rate The following table shows the projected performance of the market-rate apartments spread throughout the Project. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 11

162 Table 8-16 There are expected to be 2,659 units of market rate apartments and HSP has assumed that it will take several years for the 94 percent occupancy estimate to be reached. The average unit size is 892 square feet and the lease rate is expected to average $1.90 per square foot. The rate could be higher, as much as $2.60 per square foot, but HSP s estimate is relatively conservative. As residential is a strong market, including for investors, a cap rate of eight percent was assumed to determine market value. Base stabilized assumption of value is approximately $177,000 per unit. Spending from new households will accrue to Richmond from the Project. Based on Bureau of Economic Analysis statistics, spending on the major taxable categories of restaurant, retail, transportation and other will be generated from these new residents. Residential 80% of AMI The following table shows the projected performance of the 80 percent AMI (area median income) apartments developed as part of the Project. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 12

163 Table 8-17 There are expected to be 183 units of 80 percent AMI apartments and HSP has assumed that it will take several years for the 95 occupancy estimate to be reached. The average unit size is 868 square feet and the lease rate is expected to average $1.13 per square foot. Base stabilized assumption of value is approximately $84,000 per unit. Spending from new households will accrue to Richmond from the Project. Based on Bureau of Economic Analysis statistics, spending on the major taxable categories of restaurant, retail, transportation and other will be generated from these new residents. Residential 60% of AMI The following table shows the projected performance of the 60 percent AMI apartments developed as part of the Project. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 13

164 Table 8-18 There are expected to be 97 units of 60 percent AMI apartments and HSP has assumed that it will take just a few years for the 95 occupancy estimate to be reached. The average unit size is 873 square feet and the lease rate is expected to average $0.85 per square foot. Base stabilized assumption of value is approximately $50,500 per unit. Spending from new households will accrue to Richmond from the Project. Based on Bureau of Economic Analysis statistics, spending on the major taxable categories of restaurant, retail, transportation and other will be generated from these new residents. The total of all new visitor, resident and employee spending is shown in the next chapter. In addition, the market value of developments that was determined and shown above are used to determine the assessed value and incremental real estate taxes in the next chapter. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 8 - Page 14

165 TABLE OF CONTENTS Executive Summary Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Project Profile Economic, Demographic & Tourism Analysis Arena, Event and Entertainment Market Analysis Hotel and Meetings/Convention Market Analysis Retail and Restaurant Market Analysis Residential Market Analysis Office Market Analysis Demand and Financial Projections Economic, Fiscal and Employment Impact Analysis

166 ECONOMIC, FISCAL AND EMPLOYMENT IMPACT ANALYSIS HSP uses the IMPLAN input-output multiplier model, which determines the level of additional activity in the Richmond economy due to additional inputs. For example, for every dollar of direct new spending in Richmond, the IMPLAN model provides multipliers for the indirect and induced spending that will result. The net new and recaptured direct spending discussed earlier in the report is considered to be the Direct Impact. From the direct spending figures, further impact analyses will be completed. Indirect Impacts are the supply of goods and services resulting from the initial direct spending. For example, a visitor s direct expenditure on a hotel room causes the hotel to purchase linens and other items from suppliers. The portion of these hotel purchases that are within the local economy is considered an indirect economic impact. Induced Impacts embody the change in spending due to the personal expenditures by employees whose incomes are affected by direct and indirect spending. For example, a waitress at a restaurant may have more personal income as a result of the visitor s visit. The amount of the increased income that the employee spends in the area is considered an induced impact. Employment Impacts include the incremental employment provided not only onsite, but due to the spending associated with it. For example, the direct, indirect and induced impacts generate spending, support new and ongoing businesses, and ultimately result in ongoing employment for citizens. HSP will show the number of ongoing jobs supported by the project and provide the resulting income and income taxes generated. The figure below shows the logic flow for new Richmond spending and earnings impacts. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 9 Page 2

167 Figure 9-1 Flow of Impacts Direct Jobs* & Income Onsite Total Visitation & Spending Onsite - 100% of Hotel, Event, Restaurant & Retail Spending Portion of Jobs New to Richmond Portion of Spending New to Richmond - Varies depending on use Taxable New Richmond Spending Taxable New Spending - Varies depending on use New Food & Beverage, Retail Transportation, Other Spending New Lodging Spending New Supported Earnings & Jobs from New Spending * Jobs directly hired by tenants in office buildings The primary new jobs, spending and taxes from the Project are generated in two primary ways. First, there are direct new jobs and new residents onsite induced by the Project itself. The new employees are expected to primarily be working for new tenants that take up residence in Richmond or otherwise hire new Richmond employees. From that income, a portion will be spent on items in the categories of food/beverage, retail, Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 9 Page 3

168 transportation and other. For employees, the spending is somewhat minimized, as their daytime spending is limited and they may not live in Richmond. However, for new residents, approximately 28 percent of their income will become taxable local spending. This spending in these categories will ultimately support additional jobs from that new spending. Second, there are visitors to the Project visiting the companies, staying over in the hotel, attending events and eating and shopping in the restaurants and retail. A portion of this spending will be new to Richmond. The spending in these categories, including lodging, will then support ongoing jobs in Richmond. Ultimately, the new spending from new employees and visitors will combine to support new induced Richmond jobs from the new spending. Direct, Indirect and Induced Impacts The impact for the Project will be derived from driving new demand from additional visitation by day trippers and overnight stays. The following table shows the new visitors and hotel room nights generated by various components of the Project. Table 9-1 Net New Visitors and Room Nights Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Total New Daytrip Visitor Days , , , , , , , ,366 8,430,663 New Arena vs. Coliseum , , , , , , ,885 7,495,580 Blues Armory ,419 23,281 23,281 23,281 23,281 23, ,223 New GRCC Attendance ,640 5,280 7,920 13,200 13,200 13,200 13,200 13, ,860 New Hotel Room Nights 0 22,550 90, , , , , , , ,559 5,883,369 New Arena vs. Coliseum ,214 18,015 18,654 18,654 18,654 18,654 18, ,586 Blues Armory ,426 1,426 1,426 1,426 1,426 36,280 New GRCC Room Nights at Other Hotels 0 3,300 13,200 26,400 39,600 66,000 66,000 66,000 66,000 66,000 1,719,300 New Room Nights at HQ Hotel 0 19,250 77,000 96, , , , , , ,479 3,635,203 Source: Hunden Strategic Partners During the 30-year period shown, the Project will attract more than 8.4 million new daytrip visitor-days and nearly 5.9 million hotel room nights into Richmond. The vast majority, nearly 7.5 million, of daytrips will be generated by the new arena and the events hosted there, with an annual new visitation of nearly 283,000 people. Beginning in Year 5, the Blues Armory will attract upward of 10,000 day trips per year up to more than 23,000 per year every year after and including Year 7. The GRCC will also have expanded day trip attendance by between 660 and more than 13,000 per year during the period. New hotel room nights are far more impactful than day trips, typically, and the Project will generate nearly 5.9 million room nights through Year 30 within Richmond. Most of the new room nights (3.6 million) will be captured at the HQ Hotel for the GRCC, while an additional 1.7 million room nights generated by the GRCC will be captured by other hotels in Richmond. The new Arena is expected to generate nearly 500,000 room nights more than what would be generated by the Coliseum in its current condition. Lastly, the Blues Armory will generate marginal room nights with approximately 1,400 per year beginning between Year 5 and Year 10. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 9 Page 4

169 Direct Spending. The table below shows the direct net new spending due to the entire Project, based on the analysis. It includes net new spending on all categories shown from new spending, new resident spending, new employee spending and visitors spending at the arena, Blues Armory, hotel, GRCC and other elements detailed in Chapter 8 of this report. Year 1 is considered to be Table 9-2 Direct Net New/Recaptured Spending to Richmond (000s) Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Total Food & Beverage $0 $2,428 $13,008 $24,387 $37,459 $72,491 $81,962 $92,717 $104,936 $118,827 $2,291,163 Lodging $0 $3,631 $14,959 $22,447 $14,959 $42,211 $48,934 $56,727 $65,763 $76,237 $1,395,971 Retail $0 $539 $2,124 $4,697 $7,393 $12,004 $13,780 $15,822 $18,168 $20,865 $393,637 Transportation $0 $2,875 $7,933 $14,861 $20,533 $36,379 $41,336 $46,973 $53,383 $60,674 $1,168,306 Other $0 $1,134 $4,306 $9,823 $15,231 $27,994 $31,936 $36,439 $41,583 $47,459 $900,491 Total $0 $10,607 $42,328 $76,214 $95,575 $191,079 $217,949 $248,678 $283,833 $324,061 $6,149,569 Source: Hunden Strategic Partners Spending on food and beverage and rooms are the largest component of direct net new spending to Richmond, followed by transportation. Over the period, a total of more than $6.1 billion in direct net new/recaptured Richmond spending is projected from the Project. The next table shows the direct, indirect and induced spending from the Project, based on the IMPLAN multipliers for Richmond. Net New Spending Table 9-3 Direct, Indirect & Induced Net New Spending to Richmond (000s) Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Total Direct $0 $10,607 $42,328 $76,214 $95,575 $191,079 $217,949 $248,678 $283,833 $324,061 $6,149,569 Indirect $0 $3,771 $14,763 $26,613 $33,675 $66,878 $76,244 $86,949 $99,188 $113,187 $2,150,764 Induced $0 $4,212 $16,772 $30,403 $38,454 $76,503 $87,263 $99,568 $113,645 $129,753 $2,462,362 Total $0 $18,589 $73,863 $133,230 $167,704 $334,460 $381,455 $435,195 $496,666 $567,001 $10,762,695 Source: Hunden Strategic Partners The direct spending totals more than $6.1 billion over the period, while the indirect and induced spending add another $2.2 billion and nearly $2.5 billion, respectively. In total, nearly $10.8 billion in economic impact is projected over the period. The following table shows the new earnings associated with the new economic activity. Earnings are not just from new spending by visitors, but from the new employees that will be new to Richmond. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 9 Page 5

170 Table 9-4 Net New Earnings from Direct, Indirect & Induced Spending (000s) Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Total Net New Earnings From New Employees in New Offices $0 $70,039 $147,035 $193,772 $203,030 $229,709 $259,895 $294,048 $332,688 $376,406 $7,722,293 From Direct Project Spending $0 $3,606 $13,950 $25,283 $32,196 $63,397 $72,291 $82,458 $94,084 $107,383 $2,040,305 From Indirect Spending $0 $1,216 $4,740 $8,495 $10,587 $21,144 $24,116 $27,515 $31,402 $35,849 $680,568 From Induced Spending $0 $1,207 $4,908 $8,885 $11,190 $22,389 $25,542 $29,149 $33,277 $38,001 $720,688 Total $0 $76,067 $170,634 $236,434 $257,003 $336,640 $381,844 $433,170 $491,451 $557,639 $11,163,853 Source: Hunden Strategic Partners By the fifth year of operation, $257 million of new direct, indirect, and induced earnings are projected, with a total of more than $11 billion over the period. The table below shows the estimated full-time equivalent jobs created by the Project. Net New FTE Jobs Table 9-5 Net New Full-Time Equivalent Jobs from Direct, Indirect & Induced Earnings (000s) Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Average From New Employees in New Offices - 1,350 2,765 3,555 3,634 3,634 3,634 3,634 3,634 3,634 3,523 From Direct ,298 1,686 1,686 1,686 1,686 1,686 1,686 1,600 From Indirect From Induced Total - 1,681 4,029 5,832 6,597 6,997 6,986 6,983 6,986 6,983 6,638 Source: Hunden Strategic Partners New full-time equivalent jobs (FTE s) are projected to vary over the period based on the net new spending and total nearly 6,600 by the fifth year. The first line shows new jobs supported in the new office buildings, while the other jobs are shown to be new jobs generated by the new spending associated with the Project elements. Construction Impact The five-year construction of the Project will impact Richmond as spending will occur via the purchase of materials (40 percent of the budget) and the payment of labor and service providers (60 percent of the budget). Based on the population and resources located in Richmond relative to the total metropolitan area, 17.5 percent of materials and labor dollars are projected to be spent in Richmond. The net Richmond impacts are shown below for the construction impact. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 9 Page 6

171 Table 9-6 Construction Impact - Richmond Only Total Total Construction Spending 3,726, ,949, ,118, ,693,663 40,032, ,520,500 Percentage Local (Employees and Materials): 17.5% 652,186 35,866,232 85,945,672 37,746,391 7,005, ,216,088 Direct Materials Spending (40% of Construction) $ 260,874 $ 14,346,493 $ 34,378,269 $ 15,098,556 $ 2,802,243 $ 66,886,435 Indirect Spending $ 73,019 $ 4,015,583 $ 9,622,477 $ 4,226,086 $ 784,348 $ 18,721,513 Induced Spending $ 116,350 $ 6,398,536 $ 15,332,708 $ 6,733,956 $ 1,249,800 $ 29,831,350 Total $ 450,243 $ 24,760,612 $ 59,333,454 $ 26,058,599 $ 4,836,391 $ 115,439,298 Direct Labor Spending (60% of Construction) $ 391,312 $ 21,519,739 $ 51,567,403 $ 22,647,835 $ 4,203,364 $ 100,329,653 Employment (Job-Years) ,852 Source: Hunden Strategic Partners Direct materials spending in Richmond is estimated to total nearly $67 million, with induced and indirect impacts bringing the total to $115 million. The direct labor spending is approximately $100 million and would support 1,852 job-years (one job for one year). Fiscal Impacts (non-real Estate Tax) While the incremental real estate taxes are critical to the analysis, these are calculated separately and shown later in this chapters, as they are related to the TIF district. In this section, HSP calculated the net new tax impacts from the new spending in Richmond due to the Project, all of which is generated by the development of the project blocks as outlined in Chapter 1. The following table shows the non-real estate fiscal impacts from the Project. Net New Local Taxes Collected Table 9-7 Fiscal Impact - Richmond Tax Impacts from Net New Spending (000s) Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Total Sales Tax on New Taxable Spending (1.0%) $0 $77 $344 $614 $750 $1,547 $1,766 $2,017 $2,304 $2,634 $49,813 Sales Tax on Construction Materials (1.0%) $0 $5 $287 $688 $302 $0 $0 $0 $0 $0 $1,338 Meals/Restaurant Tax (7.5%) $0 $182 $976 $1,829 $2,809 $5,437 $6,147 $6,954 $7,870 $8,912 $171,837 BPOL Tax (varies) $0 $21 $85 $152 $191 $382 $436 $497 $568 $648 $12,299 Admissions Tax (7.0%) $0 $0 $0 $1,582 $3,281 $3,732 $4,326 $5,015 $5,814 $6,740 $125,752 Lodging Tax (8.0% to GRCCA) $0 $290 $1,197 $1,796 $1,197 $3,377 $3,915 $4,538 $5,261 $6,099 $111,678 Total $0 $576 $2,888 $6,660 $8,530 $14,475 $16,590 $19,022 $21,818 $25,033 $472,716 Source: Hunden Strategic Partners All of the construction, spending and earnings will accrue nearly $473 million in tax revenue for the City of Richmond or the GRCCA during the 30-year period. The largest elements of the new tax benefit are from the meals tax ($172 million), admissions tax ($126 million) and lodging tax ($112 million). Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 9 Page 7

172 Real estate taxes are excluded from this figure and are detailed in the following section of this chapter. Summary of Impacts The table on the following page shows a summary of all impacts during the 30-year period. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 9 Page 8

173 Table 9-8 Summary of 30-Year Impacts Net New Spending (millions) Direct $6,150 Indirect $2,151 Induced $2,462 Total $10,763 Net New Earnings (millions) From New Employees in New Offices $7,722 From Direct Project Spending $2,040 From Indirect Spending $681 From Induced Spending $721 Total $11,164 Net New FTE Jobs Actual From New Employees in New Offices 3,634 From Direct 1,686 From Indirect 996 From Induced 682 Total 6,997 Net New Local Taxes Collected* (millions) Sales Tax on New Taxable Spending (1.0%) $49.8 Sales Tax on Construction Materials (1.0%) $0.7 Meals/Restaurant Tax (7.5%) $171.8 BPOL Tax (varies) $12.3 Admissions Tax (7.0%) $125.8 Lodging Tax (8.0% to GRCCA) $111.7 Total $472.0 * New to City of Richmond. Incremental Real Estate Taxes Collected** (millions) Real Estate Tax $855.0 ** Impact Zone Only (millions) Total Local New Taxes Collected $1,327.0 Construction Impact (millions) New Richmond Materials Spending $66.9 New Richmond Labor Spending $100.3 Job-Years, Actual 1,852 Source: Hunden Strategic Partners Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 9 Page 9

174 The Project will generate nearly $10.8 billion in net new spending, more than $11.1 billion in net new earnings from nearly 7,000 jobs, 1,852 construction job-years and $1.327 billion in new tax revenue for the City of Richmond over the 30-year period. Of the total tax impact, $472 million is projected from new local spending-related taxes, while $855 million is projected from net new real estate taxes. The real estate tax projection is shown in the following section. Real Estate Valuations and Tax Assessments for TIF The following figure shows the TIF relative to the Project component locations and the rest of downtown Richmond. Figure 9-2 The following figure shows the TIF separated into the Primary Zone and the Secondary Zone. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 9 Page 10

175 Figure 9-3 The Primary Zone is the area surrounding the components of the Project that will be most directly and most greatly impacted by the construction, visitation, jobs and earnings, spending and real estate valuation increases. The Secondary Zone is further removed from the direct impacts of the Project, but will still experience an incremental uptick in valuation and performance due to the massive investment proposed within the TIF. The following table shows the estimated assessed real estate values of the Project s components and the estimated real estate taxes to be paid within the TIF. Richmond North of Broad / Downtown Redevelopment Project Analysis Chapter 9 Page 11