1. Joseph D. Wallace ABCN… the missing piece

2. Joseph D. Wallace New Center Expansion: Growing Right from Wrong How to Think About, Structure and Achieve Your Plan

3. Joseph D. Wallace Discussion Framework  Growth: what a concept!  Growth Approach: A framework –Right Time –Right Place –Right Structure  Guiding Principles

4. Joseph D. Wallace Growth  Q. What is the one thing that defines the most successful businesses?  Q. What is the one thing that destroys most successful businesses?  Q. What do mountain climbing and business centers have in common?

5. Joseph D. Wallace Growth  A. Growth  A. Growth (ill-timed, ill-financed, poorly executed)  A. Practiced by fierce individualists with an intriguing fatality pattern

6. Joseph D. Wallace Growth Assessment  Grown in last 12 months? –At all? –> 10%? –> 20%? –>30%?

7. Joseph D. Wallace Growth Assessment  Plan to grow more in the next 12 months than they have in the last 12? –More –Less –About the same

8. Joseph D. Wallace Growth Assessment  If the market is a like being at a traffic light, the color of the light is: –Green! (Step on it) –Red! (hard stop!) –Yellow

9. Joseph D. Wallace Characteristics of Successful Growth  Extraordinarily well-timed  Programmatic not sporadic  Long term in nature, not short term  Incrementally expands market  Within financial reach  Within operational reach  Never important enough to jeopardize existing strengths  By design, not by accident

10. Joseph D. Wallace Characteristics of Successful Growth “It ain’t the deals I lost that caused the problem…was the deals I won”

11. Joseph D. Wallace A conceptual framework…  Money management decision hierarchy Cycle = Industry = Company = Right Time Right Place Right Deal & Structure

12. Joseph D. Wallace Right Time  Use your existing information  Have an opinion about where you are in the cycle  What is happening to real supply?  Know your leading indicators

13. Joseph D. Wallace Right Time  Understand your tolerance for risk  Recognize that the greatest returns are the reward for taking the greatest risks  Be prepared to invest when you are least comfortable

14. Joseph D. Wallace Right Time—Rule of Thumb The market is a lot like driving in rush hour—the periods of significant acceleration and deceleration are short but critical. Look for rapid acceleration immediately after rapid deceleration and vice versa; most of the time traffic just coasts slowly.

15. Joseph D. Wallace Right Place  Understand the place of place  It’s the one decision you are stuck with  Never let the right deal supercede the right place  Never let the right place supercede the right time

16. Joseph D. Wallace Right Place—Rule of Thumb Poor center managers can make great locations money losers Great center managers can make poor locations money winners The top 10% centers have both Investment in a top 10% location still isn’t worth it if you invest in front of the cliff

17. Joseph D. Wallace Right Deal & Structure  Hundreds of deal considerations  More options about basic deal structure  Industry structure and past experiences are changing the menu of options and core business model  Eighteen years out of 20, price is not the most important term

18. Joseph D. Wallace Right Deal & Structure DEAL Expansion Flexibility Contraction Flexibility Operational Compatibility Competitive Protection Price

19. Joseph D. Wallace Right Deal and Structure  Traditional leases (long term, fixed rent, options to extend) are still widely used  Lease hybrids are becoming increasingly popular  Hosted models are increasingly available and attractive

20. Joseph D. Wallace Right Deal—Traditional Pro’s Widely available Little description required More upside in good times Con’s Operating leverage leads to financial volatility Volatility can be hazardous Capital requirements are usually significant More downside in bad times Description: typical long-term fixed rate contracts; guarantees often required;

21. Joseph D. Wallace Right Deal—Hybrid Pro’s Can significantly shift risk Creates a ‘partnership’ with LL that can deliver other benefits Lower volatility Improves downside performance Con’s Limited availability Structural issues in the R/E markets Less upside in good times Sometimes hard to obtain concessions up front Description: sets a fixed rate lower than market level; in exchange operator shares upside with owner. (retail lease structure)

22. Joseph D. Wallace Right Deal—Hosted Pro’s Changes risks Creates sales options based on cycle Least volatility Con’s Market acceptance in US Structural issues in the R/E markets Capital requirements Limitations re: product type Timing to build Description: owned buildings in partnership with LL or owned by center operator; no “rent”; just opportunity cost of funds

23. Joseph D. Wallace Growth: Guiding Principles  Don’t be afraid

24. Joseph D. Wallace Growth: Guiding Principles  Don’t be reckless

25. Joseph D. Wallace Growth: Guiding Principles  Don’t bet more than you can afford to lose

26. Joseph D. Wallace Growth: Guiding Principles  Great investor- operators run toward burning buildings

27. Joseph D. Wallace Guiding Principles  If your timing is right and you feel good about the location decision, be creative with deal structure to mitigate your risk

28. Joseph D. Wallace Thank You Q & A How to Think About, Structure and Achieve Your Plan

29. Joseph D. Wallace ABCN… the missing piece