21 ATTACHMENT 11 - Laserfiche WebLink

Ms. Emily Wagner October 2007 Page 2 of 6 We have estimated that 13% of the Proposed Store's total sales will originate from areas outside the defined trade area. The site's location away from Interstates 680 and 580 will limit the ability of the site to attract stronger sales from beyond the defined trade area. It should be noted that although we did not discount first year sales for maturity, it has been our experience that even with the presence of sister units, first year sales could be as much as 80% to 90% of mature sales while customers in the trade area learn to shop the Proposed Store. Fourth year sales would be fully mature. Following a sales transfer impact of 15% on the sister Home Depot unit, net new sales to The Home Depot would be approximately $20.0 million dollars, which according to my experience is sufficient to proceed with the opening of the Proposed Store. We do not know the current financial requirements of The Home Depot; in the past net new sales in the $20 million range would justify the deployment of a new store. It should be noted however, that the actual financials related to the property and this particular deal are unknown and the financial hurdle required by The Home Depot could vary. As far as the Johnson Drive store and its operating future, it is our opinion that it would be highly unlikely that The Home Depot would close this unit. Despite the impact from Lowe's and from the Proposed Store, the projected annual sales are $32.8 million and, therefore, are still considered good. The Johnson Drive Home Depot is strategically positioned to serve southern San Ramon, all of Dublin, and northern Pleasanton. Moreover, with the opening of the Dublin Lowe's, The Home Depot would not want to give up market share in this portion of the Tri-Valley. A relocation of the Johnson Drive store to the Proposed Store site is also unlikely, as the Dublin Lowe's would then be better positioned to capture southern San Ramon, Dublin, and north Pleasanton. Assumptions ^ An opening date in late 2008, so that 2009 is the first full year of operation. ^ The store will be 140,000 square feet including the garden center. ^ First year sales are mature sales. ^ Inflation is estimated at 3.0% throughout the forecast. ^ Households will increase as estimated in this report. ^ Competition will remain unchanged throughout the forecast period. ^ The site will be developed with excellent site characteristics. Trade Area The trade area defined for the Proposed Store encompasses the entire City of Pleasanton, a portion of Livermore, and Sunol. The trade area is limited to the north by the Johnson Drive sister store and the Dublin Lowe's. To the east, increasing distance from the site and a shift in shopping orientation to the Livermore Home Depot truncate the trade area in this direction. Declining household densities prevent further trade area extension to the south and west. Attached is a map of the trade area and identified census tracts within the defined area (Exhibit A-1). Methodology We have used a combination of home improvement expenditure potential to estimate market share along with sales penetrations by household to estimate projected sales. The home improvement expenditure potential estimate is created by analyzing the California taxable sales for per capita dollar amounts spent on lumber and building materials and hardware stores and indexing that with consumer buying power data supplied by Claritas Data Services. In this particular case the total