Square Mile Capital — Retail Advisory & Market Positioning

Assignment Overview — What It Is

Square Mile Capital engaged Cornerstone to deliver an independent retail valuation and underwriting opinion for 615 Tenth Avenue, a seven-story mixed-use development in Midtown West. The asset included 34,903 SF of ground-floor and lower-level retail anchored by a pre-leased 28,090 SF Target.

Mandate: Validate developer rent assumptions, assess trade-area feasibility, and quantify sustainable value prior to Square Mile finalizing a loan investment.

Result: Delivered a 26-page institutional underwriting report within 14 days, providing rent verification, absorption logic, and risk exposure analysis that enabled Square Mile to avoid a mispriced financing commitment.

Client Objectives — Why It Mattered

Square Mile sought a third-party advisory opinion to test the accuracy of the developer’s blended rent projections—$180+ PSF, a figure materially inconsistent with actual Midtown West retail performance.

The client required:

• A defensible market rent baseline
• Independent validation of absorption timing, TI exposure, and tenant mix feasibility
• A risk-adjusted underwriting model supported by verified—not speculative—market data
• A fast, institutional-grade deliverable before capital deployment

The assignment hinged on establishing the true economic viability of the retail component, especially given the project’s reliance on the Target lease for valuation.

Market Realities — What We Were Solving For

Asset-Level Constraints

• Developer projections materially overstated achievable rents
• Venting, infrastructure, and depth limitations impacting inline tenant demand
• Ground-floor configuration favoring necessity retail over aspirational merchandising

Trade-Area Constraints

• Highly variable retail performance across Ninth–Eleventh Avenues
• Limited transparency of comparable rents within the Special Clinton District
• Inconsistent absorption timelines around new developments west of Ninth Avenue

Risk Profile

• Valuation distortion
• Debt-service coverage vulnerability
• Long-term income sustainability risks tied to unsupported rent assumptions

Advisory Strategy — How We Solved It

We applied a disciplined underwriting framework built around data verification, market calibration, and precision modeling:

• Conducted a full retail audit across Ninth, Tenth, and Eleventh Avenues (40th–56th Streets)
• Compiled 72 active listings and 20 closed transactions to establish real-time rent comparables
• Modeled rent absorption scenarios, TI ranges, tenant credit implications, and retail depth utilization
• Calibrated achievable rent bands for Target and inline units using demographic, mobility, and competitive supply analytics
• Validated assumptions through direct broker outreach and proprietary market intelligence

Findings established true blended rent feasibility of $85–$100 PSF—a 35–45% variance from developer projections.

Execution — What We Did

The engagement required institutional accuracy under compressed timing:

• Completed all fieldwork, comparable verification, and financial modeling within 14 days
• Validated lease terms and deal structures through direct market sourcing
• Built a rent-sensitivity model illustrating sustainable performance ranges
• Delivered a 26-page underwriting & market report including:
  • Rent calibration
  • Tenant mix feasibility
  • Income sustainability analysis
  • Absorption timelines
  • Capital exposure risk

The findings were presented directly to Square Mile’s underwriting and investment committee.

Results — What Happened

• Developer projections confirmed 35–45% above achievable market levels
• Verified rent bands:
  • $85–$100 PSF blended for Target
  • $120–$150 PSF for inline retail
• Identified absorption risks, TI requirements, and valuation gaps
• Delivered empirical evidence enabling Square Mile to decline participation in the financing
• Preserved investor capital and prevented a mispriced loan-to-value exposure

Impact — Why It Worked

The analysis provided Square Mile with a clear, data-driven understanding of true retail earning power, allowing the firm to avoid a structurally unsound investment.

Key impacts included:

• Accurate valuation grounded in verified market behavior
• Early identification of rent overstatement and income-sustainability risk
• Capital preservation through disciplined underwriting
• Reinforcement of Cornerstone as a trusted fiduciary advisor delivering front-end risk mitigation before capital allocation

The engagement demonstrated how institutional advisory rigor protects investor capital and prevents exposure to mispriced retail assumptions.