Mullin360 Real Estate Services, LLC
6910 East Fifth Avenue, Scottsdale Arizona USA 85251 480.443.9300 February 6th, 2025
Gina Gonzalez
Director of Economic Development & Legislative Affairs
City of Lake Elsinore
130 South Main Street
Lake Elsinore, CA 92530
Re: Mullin360 Net Growth Demand Analysis (NGDA)
Automotive Dealership Park or Cluster Opportunities
Reuse Analysis for Relocated Dealership Sites
Dear Gina Gonzalez:
Thank you for allowing us to offer our automotive retail real estate research services for Lake Elsinore in Riverside County, California. We will cover three areas as discussed previously: Mullin360 NGDA, Automotive Dealership Park or Cluster opportunities and Reuse Analysis for the relocated dealership sites. Our initial focus will be on the potential opportunities for an automotive dealership cluster or park in Lake Elsinore. The following proposal includes the scope of our analysis, expected fees and expenses, reporting and timing.
In addition, within the analysis, we will consider reuse/redevelopment opportunities for any potential existing dealership relocations (including but not limited to Lake Elsinore Chrysler, Dodge, Jeep, RAM, Aaron Chevrolet Lake Elsinore, Aaron Ford, Lake Elsinore Honda) and other targeted dealership sites in Lake Elsinore (Toyota).
Here is what we propose:
Primary Goals:
Our study will address these questions:
1) Can a significant dealership cluster or auto park be located within Lake Elsinore, based on market potential (for new and used automobile/light truck sales) and any state regulated limits between same-make dealerships or other restrictive elements? Gina Gonzalez
February 6th 2025
Automotive Real Estate 6910 East Fifth Avenue, Scottsdale Arizona USA 85251 480.443.9300 2) If yes, where should the automotive cluster/park be located to maximize sales potential and to avoid the potential for statute-backed protests from surrounding dealerships?
3) Is the targeted (Cooper) site offering up to 120 acres a legitimate location candidate? Does it offer the ingredients needed to successfully support a dealership cluster or park? If not, what other locations should be considered? 4) If the cluster/park is marketable, what is its timing? 5) Does potential cluster/park offer an immediate opportunity based on the expected demand for new- and used-vehicle sales now available to the site and the volume thresholds needed to justify a new point or relocation? 6) If the site does not offer an immediate opportunity, when is its development potential? Within the next five years? Longer?
7) What auto and light truck makes, not currently in the area (new points), will be candidates for the Lake Elsinore site?
8) What are the relocation opportunities (makes) available to a Lake Elsinore site, based on the potential for their increased demand at Lake Elsinore and the target site?
9) And importantly, will potential relocations achieve the market dynamics demanded by OEM’s (manufacturers)?
10) Will the relocation improve the make’s overall performance in the market (increased market share)? Will there be a minimal loss in sales to other makes serving the vacated dealership’s market area?
11) What are the potential new- and used-vehicle sales volumes that will be generated by potential new points and relocations at the park/cluster (at its earliest potential time for development)?
12) How will sales volumes increase over time, for the cluster/park as a whole and individual makes?
13) What are the potential tax revenue increases represented by these sales volumes and taxable service revenues at the dealerships? 14) How should the dealership cluster/park be sized and land planned, based on expected (long-term) volumes? What is the potential overall size for the cluster/park and the likely mix of lot sizes?
15) What are the redevelopment opportunities for any residual dealership sites that, proposed by the study should relocate?
Gina Gonzalez
February 6th 2025
Automotive Real Estate 6910 East Fifth Avenue, Scottsdale Arizona USA 85251 480.443.9300 a) Are their residential opportunities for these potential sites, including but not limited to, multi-family rentals, multi-family sales housing, assisted living? b) Are their commercial opportunities, including but not limited to, used auto sales, RV and trailer sales, the auto aftermarket and repair, retail, entertainment, office, warehousing?
c) What will be the basic performance metrics for these potential uses? Tenant profiles? Project size? Rents/sales prices per square foot? Absorption or fill rates? Stabilized occupancy rates?
How we will conduct our analysis:
The principal component of our analysis will be the potential for a dealership cluster or dealership park at the proposed 120-acre site.
Here is a look at the scope of our analysis:
▪Site Review and Validation
Site-specific factors that most influence the success of a dealership and a dealership cluster include.
•Arterial access, existing, planned, funded, unfunded.
•Population/household and their demographic characteristics, existing and potential.
•Retail development…existing and potential locations for regional and super- regional parks
•Employment centers, both existing and potential.
A successful dealership depends on visibility and access to primary roadways.
The dealership needs to pass the test of the dealer operating/ownership group, but also the OEM (manufacturer) that approves the proposed location. It will also depend on access to current and future population/household centers…buyers.
Proximity to primary retail is also important. Regional and super regional retail centers can function as sales catalysts for dealerships, by generating traffic and increasing the regional “pull” for auto retail and its identity. Employment centers, although not typically as important as retail, can also be catalysts. This is particularly true for the service sector of a dealership.
Using these factors, we will review the proposed site.
We will determine the site’s potential strengths and weaknesses, and factor in their impact on potential demand for vehicles and potential sales tax contributions. If the site has significant shortcoming, we may advise against its development or provide recommendations on how to work around its limitations.
Gina Gonzalez
February 6th 2025
Automotive Real Estate 6910 East Fifth Avenue, Scottsdale Arizona USA 85251 480.443.9300 ▪The Primary Market Area (PMA).
This is the next step, after we have validated the proposed site or selected an alternative site.
The PMA is the marketplace that will have the greatest impact on the potential sales volumes for dealerships. For most makes, most of their sales (new and used) will be to residents of the PMA.
The creation of the PMA will be based on acceptable distance-to-market- share ratios (the drive time that buyers will undertake).
Once a base drive-time model is established, the PMA will be reconfigured, allowing for…
Physical boundaries (mountains and waterways).
Perceived boundaries (reputations of submarkets).
Potential OEM restrictions.
The locations of retail nodes and employment nodes.
The location of other dealerships or a lack of dealerships. ▪Projections of the demand for new cars and light trucks within the defined trade area (the PMA).
We will project the demand for new cars and light trucks in the PMA for as long as needed to cover the marketing life of the dealership cluster/park. We will use a five- year average in our projections.
Our initial forecast will be of gross demand…the potential demand for new and used vehicles available to all dealerships at the selected location(s) within the PMA, as well as other dealerships throughout the broader market area.
Projections of demand will be rooted in local and regional patterns in population growth, including both increases in population and changes in demographic character – income and lifestyle.
Special attention will also be given to the interrelationship between potential demand for new housing, planned residential development, housing starts, densities and population growth.
We will in addition look at the potential impact of economic growth (employment gains by industry type locally and regionally) on population gains and consumer spending.
Gina Gonzalez
February 6th 2025
Automotive Real Estate 6910 East Fifth Avenue, Scottsdale Arizona USA 85251 480.443.9300 ▪Target Makes.
We will identify all makes available to the Lake Elsinore site that will not be subject to potential statute-based locational protests from same-make dealerships. These will be the new point opportunities. We will list those within statutory conflict.
We will also identify makes and dealerships that could be candidates for relocation. These will include dealerships that are underperforming, based on the quality of their locations or facilities.
The combination of new points and relocations will represent the target makes for our analysis.
▪Target Makes Sales Performance
We will use market shares demonstrated by makes at other existing dealerships in the area to estimate potential sales volume (new and used) that a dealership/target makes can expect to extract from the PMA.
Gross demand for a selected make in the PMA multiplied by the typical market share will yield sales at the dealership cluster/park by PMA residents for the selected make.
To create total potential sales for dealerships, including the demand by residents within and outside of the PMA, we will review the typical percentage that the PMA represents to total sales and apply the percentage to create total demand.
We expect to make three forecasts for each potential make at the auto cluster/park…low, middle and high.
The forecast will reflect variations in the factors that will power gross demand in the PMA. They will also, however, allow for potential differences in a dealership’s ownership performance.
▪Dealership Relocation Assessments
Our analysis of potential relocations will include a comparison of the point’s potential performance at its current location and at the selected relocation candidate site in Lake Elsinore.
We will show the potential sales gap between the two locations and determine if the potential increase in sales (if any) warrants the point’s relocation.
In addition to estimating new and used sales for relocating makes, we will also review the impact the relocation will have on other same-make points and other makes in the market.
Gina Gonzalez
February 6th 2025
Automotive Real Estate 6910 East Fifth Avenue, Scottsdale Arizona USA 85251 480.443.9300 Ideally, the relocation of a point will increase the overall market share for the make in the surrounding market area. In addition, ideally, the relocation will result in limited loss in new-vehicle sales to other makes in the vacated market. ▪City Tax Revenue Potential from Auto/Light Truck Sales Based on potential new and used sales volumes generated by dealerships, we will estimate the potential tax revenues generated by the auto cluster.
Our estimate will be based on …
Average transactional sales price.
Typical trade values.
Total taxable new and used sales.
Taxable portion of the service and parts revenues.
▪Auto Cluster/Park Site Planning
We will also develop advisories on site elements for future planning.
Specifically, we will estimate the total acreage and potential mix of lot sizes that potential new car/light truck dealerships represent, providing insights into the amount of land necessary to best capitalize on auto retail sales tax.
Our estimate of total acreage and lot sizes will be based on expected sales volume and the typical showroom, service and parking requirements needed to accommodate these sales.
Additionally, we will look at land requirements over time (absorption) and size lots (and potential land reserves) to reflect the make’s volume and any manufacturer’s requirements. Within this framework, we will evaluate the potential suitability of the target site.
Timing and Reporting:
We will complete a draft report within 75 days of receiving written authorization and an indication from you that an initial deposit payment has been processed for payment.
The final report will be available approximately 14 days after the draft is submitted. This report will be suitable for outside circulation.
Fee Time, Data and Travel Expenses:
•Auto Demand Analysis
Gina Gonzalez
February 6th 2025
Automotive Real Estate 6910 East Fifth Avenue, Scottsdale Arizona USA 85251 480.443.9300 •Reuse Demand Study
•Marine Demand Analysis (forthcoming under separate proposal) Automotive Retail Net Growth Demand Analysis:
We will charge $86,000 for both the draft and the final report. A deposit of $10,000.00 is required to initiate the analysis and the remaining fee will be due at the submission of our draft report detailed herein.
In addition, we will need the City to purchase raw data on new and used registrations in the surrounding market. Depending on the geographic scope required, we estimate that the needed data will cost between $13,000 ($6,500 per year for 2023 and 2024) from R. L. Polk Automotive Solutions (parent company “IHS Markit”). These data expenses will be the responsibility of the City to provide prior to any analysis as it is an essential step in starting the study.
We also expect to conduct field research (trip 1) during our analysis, to drive the trade area(s), initially meet with City representatives, review any potential site issues and evaluate the strengths and weaknesses of local and area dealerships.
We will, in addition, present our findings in person (trip 2) after the completion of our report. Fee time and expenses stemming from field research and our presentation (two trips) is included within our overall fee.
If circumstances require additional trips to meet with the City, after the completion of our study and final presentation (this often occurs as Council proposes questions or specific land owner discussions arise for development and clarifications to these audiences are necessary). These day trips will be billed at a flat day rate of $9,500 for either (Mark Jackson or Jim Mullin) plus related travel expenses. All initial Council, Staff and vested party meeting will only be in-person due to our experience in sharing the detail analysis of the findings, then meetings in Zoom/Teams will be accepted.
A cost summary is as follows:
Total Fee for analysis $86,000
Field Research/Presentation -----------
Not to Exceed Total Fee and Data Expenses. $86,000 Gina Gonzalez
February 6th 2025
Automotive Real Estate 6910 East Fifth Avenue, Scottsdale Arizona USA 85251 480.443.9300 Thank you for providing Mullin360 Real Estate Services, LLC the opportunity to provide this three-pronged proposal for insights into automotive dealership opportunities and re-use in Lake Elsinore, California.
Please sign and return with the required initial payment.
Agreed:
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Name
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Title
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Date
Sincerely,
Mullin360 Real Estate Services, LLC
6910 East Fifth Avenue,
Suite 1000
Scottsdale AZ 85251
Purchasing Department coordinator at Mullin360 Real Estate Services:
Jacque Swanson: [email protected] 480.443.9300