8220000 sEattlE incomE poRtfolio

Transcription

seattle income portfolio
7.1% Cap • 100% leased
$8,220,000
Vision Quest
• 93% of Income Secure
Through 2021
• High-Visibility, 5-Corner
Location
Sport and Fitness
• International Credit,
Leased Through 2025
• 2.59-Acre Future
Development Site
• Tenant Since 1987 &
Leased Through 2/2017
• Best Hard Corner in
Submarket
Exclusively Represented By:
Matthew Hinrichs
206.445.7663
mhinrichs@orioncp.com
Dan Foster
206.445.7662
dfoster@orioncp.com
David Butler
206.445.7665
dbutler@orioncp.com
Scott Clements
206.445.7664
sclements@orioncp.com
TABLE OF CONTENTS
1 Executive Summary
2 Edmonds Retail
3 Shoreline Commercial
4 White Center Retail
5 Financial Analysis
6 Offering Guidelines
4 11 First Avenue South • Suite 610 • Seattle, WA 98104 • 206.734.4100 • www.orioncp.com
Seattle income portfolio
1
Executive Summary
The Offering
ORION Commercial Partners, LLC, as exclusive
representative, is pleased to present the
opportunity to acquire a 3-property portfolio
consisting of 100% leased buildings with
strong credit tenants and a diversified rent roll.
Furthermore, because the three properties
require little to no capital reinvestment,
an investor could reasonably expect a 14%
levered return on a 7-year hold. In summary,
the DSA Seattle Portfolio offers incredibly
stable income streams and fundamentally
solid bricks in dense communities throughout
one of the most vibrant cities in the nation.
White Center and Edmonds communities. In Shoreline,
a recent major fire line upgrade to the site unlocks a
large-scale MUP development plan to be developed
over the next few housing cycles.
Diverse Tenant Mix & Below-Market Rents
Each property leads its respective submarket
for quality of tenants and hard corner or major
thoroughfare locations. Each asset also protects
the investors downside through significantly belowmarket rents used for capitalization and valuation, as
well as pricing below the cost of new construction.
Besides a large percentage of national credit tenants,
the current ownership has drawn national and
local market operators to its portfolio, established a
wide diversity of industries, and staggered all lease
expirations to minimize rollover risk. Approximately
two thirds of all income is secured by good credit and/
or personal guarantees through the year 2021.
About the Seller
Development Services of America, a wholly-owned
subsidiary of Services Group of America, has managed
these 3 assets, as well as overseeing the development
and management of an additional 3.4 million square
feet of space in 140 different properties located
primarily in the West and Midwest U.S.
Financial Summary
For sale at $8,220,000
Yield Enhancement Opportunities
Finally, unique opportunities to enhance yields exist
at each property. Excess land areas and signage
opportunities on the best hard corners exist in the
In-place NOI of $584,315 or 7.1% cap rate
7-year IRR of 14% (pro-forma)
Nearly 70% of income secured through 2021
Minimal capital reinvestment exposure
3
1
Executive Summary
Puget Sound Retail Overview
Retail vacancy is steadily dropping after peaking in
2010, and rental rates continue to rise. The blended
NNN rental rate across this 3-property portfolio is
$10.08/SF — 45% below current average retail market
rents indicated below.


Vacancy
Over the past several years, the Seattle retail market
has seen an overall decrease in the vacancy rate, with
the rate most recently dropping from 6.0% in the third
quarter 2011 to 5.8% in the current quarter.
Rental Rates
Average quoted asking rental rates in the Seattle/
Puget Sound retail market are down over previous
quarter levels, but up from their levels four quarters
ago. Quoted rents ended the second quarter 2012 at
$17.87 NNN per square foot per year. That compares
to $17.37 per square foot at the end of the third quarter
2011. This represents and 2.80% increase from four
quarters ago.

Vacancy
Existing
Inventory
# Blds
Total GLA
Direct SF
79
4,898,068
84,915
84,915
1.7%
5,097
$32.75
Belltown/Denny Regrade
156
2,334,923
64,340
67,552
2.9%
1,203
$18.96
Lake Union
136
1,679,742
61,790
61,790
3.7%
(7,468)
$22.13
Market
Seattle CBD
Total SF
YTD Net
Vac % Absorption
Quoted
Rates
This copyrighted report contains research licensed to ORION Commercial Partners - 566293.
Northgate/N Seattle
522
6,115,056
239,169
240,469
3.9%
(2,857)
$18.50 S Seattle
645
5,669,807
248,288
250,041
4.4%
18,861
$18.33 Edmonds/Lynnwood
573
11,047,130
523,440
534,097
4.8%
55,981
$18.00 Bothell/Kenmore
361
4,160,697
232,542
237,968
5.7%
43,602
$19.12
Mill Creek/Woodinville
258
3,941,893
226,474
227,374
5.8%
(17,921)
$24.05
Kent Valley
346
3,857,022
218,324
225,188
5.8%
20,915
$15.63
519
7,366,636
463,001
463,001
6.3%
101,811
$14.30
N Snohomish County
4
2
Edmonds Retail
Property Overview
4801 Main St.—Edmonds, WA 98020
Tenant History
Strong tenants with ample remaining lease term
Vision Quest
•
Tenants are experienced operators, each with 10+
locations across the region
•
Fitness and food retail concepts have a history of
success in the project
•
The majority of commuters between Downtown
Edmonds and I-5 pass this center daily, making it
an ideally located amenity for those who want to
exercise and grab a coffee on the way to work or
on the way home
This location has been a successful fitness center since
1999 when Mieko’s Fitness opened. Mieko’s Fitness
sold to Vision Quest in 2011. As the Puget Sound’s
leading local fitness and personal training concept,
Vision Quest operates 10 centers in Seattle and the
surrounding areas.
High visibility corner in a growing bedroom
community
•
New roundabout slated to begin construction in
Summer 2013 will improve aesthetics and increase
desirability of the junction
•
New development possibility to take advantage of
excess under-utilized land
•
Potential to increase rental income to market rate
with minimal facelift/upgrades
Caffe Ladro
Caffe Ladro has been serving premium coffee and
homemade baked goods for nearly 18 years. With 13
locations throughout the greater Seattle area, Caffe
Ladro has become an institution in the region. This
location has served as their presence for the Edmonds
market since 2004.
Edmonds
Tenant
Caffe Ladro
Tenant SF
NNN
Rent/Annum
$/SF/Yr
Tenant
Since
Expiration
Bumps
1,200
$13,104
$10.92
2004
9/30/2014
N/A
Vision Quest
16,304
$180,936
$11.10
2011
5/31/2021
CPI annually + $1/SF
beginning 6/16
Project Total
17,504
$194,040
5
2
Edmonds Retail
Market Overview
Retail vacancy in the Edmonds submarket is currently
below 5%, with $18.00/SF average quoted rates.
This positions Vision Quest and Caffe Ladro rents
well below market at $11.12/RSF and $10.92/RSF
respectively.
Edmonds is a stable bedroom community to Seattle
known for its strong schools, low crime rates, local
amenities including public beaches, and overall
quality of life. It is a quiet retreat from the hustle and
bustle of Seattle and benefitting from its location
midway between Seattle CBD and Boeing’s growing
employment centers and leading generation airplane
assembly plants to the north.
Population
1 Mile
3 Mile
5 Mile
2010 Total Pop:
14,998
114,920
226,155
Pop Growth
2010-2015:
2.30%
3.00%
3.90%
Average Age:
40.00
40.10
39.40
6,391
47,686
89,946
Households
2010 Total
Households:
Median
Household Inc:
$64,193 $65,369 $70,624
Caffe Ladro
Vision Quest
Boeing: 12 mi
Downtown
Edmonds
Subject
Seattle CBD: 17 mi
Roundabout to begin
construction Summer 2013
6
3
Shoreline Commercial
Property Profile
16325 5th Ave NE—Shoreline, WA 98155
Tenant History
International credit tenant with new 12-year lease
Veolia Transportation
•
Veolia’s high credit, long term lease provides
stable coupon and easy management
•
Veolia contract to service King County buses
extends throughout the lease term
•
Cell tower income is in a desirable location for
Sprint due to area coverage
Veolia is the largest private provider of transportation
services on the continent, with more than 200 contracts
to coordinate bus, rail, taxi and shuttle services in more
than 30 cities across the U.S. The company generates
$8.2 billion of the parent company’s $48 billion annual
revenue.
Located on an attractive, high capacity boulevard
•
Large site with 3 street frontages
•
Within walking distance of the most active mass
transit corridor in the greater Pacific Northwest
Combination of excess land area, accessible location,
and significantly below market rents create a
multitude of long term redevelopment opportunities
•
See long term development concepts on Page 9;
property has a city-approved MUP for maximum
density
•
Brand new renovation includes massive fire
water line upgrade, allowing future dense vertical
development on site
•
Subplatting can support future pad development
Veolia recently selected this site after an exhaustive
region-wide search due to its uniquely large land area
and the functionality of this flexible building for large
vehicle maintenance.
While Veolia is choosing to use the facility as a
commercial/industrial property, the asset retains its
inherently retail characteristics which allow it to be
re-converted into shopping and entertainment center,
consistent with its past use.
Shoreline
Tenant
Veolia Transportation
Sprint Cell Tower
Project Total
Tenant SF
NNN
Rent/Annum
$/SF/Yr
24,020
$211,728*
$8.81*
N/A
$18,000
N/A
24,020
$229,729
Tenant
Since
2012
Expiration
Bumps
12/31/2024
3% annually
1/31/14
none
*Rent level to be confirmed following landlord’s expansion of water line for fire safety. Should landlord not spend all
$375,000 allowance to expand water line, then rent may decrease slightly via a straight line amortization of unspent
allowance. Pricing on this asset can be correspondingly decreased to maintain capitalization rate.
7
3
Market Overview
Retail vacancy is currently 3.9%, with average quoted
rates of $18.50. The Veolia starting rental rate is
$8.81/SF, which is commensurate with the general
commercial use. This creates potential to buy for
redevelopment to higher and better uses, supported
by area demographics and the center’s retail operating
history.
Shoreline is an up-and-coming north Seattle
neighborhood providing high quality housing at
reasonable prices. As a safe area with ready access
to the downtown core from I-5, Highway 99, and all of
the region’s mass transit lines, Shoreline has recently
benefitted from an upsurge in young, affluent whitecollar in-migration. New families are replacing the
older generation and gentrifying the neighborhoods,
improving housing stock and boosting image at a
rapid pace. The City of Shoreline has become the
region’s most aggressive municipality over the last
decade in terms of cultivation of better lifestyle
amenity, streetscape and local business.
Population
1 Mile
3 Mile
5 Mile
2011 Total Pop:
15,788
128,438
309,557
Pop Growth
2011-2016:
3.50%
4.80%
4.70%
2011 Total
Households:
6,062
56,095
133,088
HH Growth
2011-2016:
4.10%
5.30%
4.90%
$64,618
$55,559
$60,702
Households
Median Household
Inc:
8
3
Long Term Development Concepts
Mixed Use Retail & Townhome
Present Use
112,791 SF lot,
priced at $27/SF
Townhome
Apartment
9
3
Shoreline & Link Light Rail
I-5 Corridor
The Sound Transit Board decided in 2011 that I-5,
as opposed to SR-99, is the right corridor to study
based on ridership, travel times, service levels and
cost.
1 mi
Shoreline Asset
1 mi
In April 2012, the Board identified route and
station options that will be studied in more detail
as part of the environmental review process. The
environmental study will identify the potential
benefits and impacts associated with building
the route and stations at the following locations
along I-5: NE 130th St., NE 145th St., NE 155th St.,
NE 185th St., 236th St. SW, 220th St. SW, and the
Lynnwood Transit Center.
Project benefits
Sound Transit is preparing to extend light rail from
Northgate to Lynnwood via Shoreline, which voters
approved as part of the Sound Transit 2 Plan in 2008.
The Lynnwood Link Extension Project will connect to
and build on the Link light rail line that opened for service
between downtown Seattle and Sea-Tac Airport in 2009.
The target opening for services is 2023.
For further information, visit SoundTransit.org
•
Shoreline asset benefits from being the
largest land parcel located within 1 mile of
both the 185th St and 145 St stations
•
Proximity of the asset to proposed light
rail, combined with planned expansion of
fire suppression water line, support dense
redevelopment opportunity
•
Frequent, reliable service to the University
of Washington, downtown Seattle and other
regional destinations
10
4
White Center Retail
Property Profile
9627 17th Ave SW—Seattle, WA 98106
Tenant History
100% leased with logical operators for submarket
O’Reilly Auto Parts
•
Anchor/master tenant (O’Reilly) has long
occupancy history and master leases entire
building
•
Well maintained building with new paint and
asphalt sealcoat/stripe
O’Reilly is a publicly traded company with more then
3,000 stores in 38 states, with a market cap of nearly
$11 billion. They originally leased the White Center
location as CSK Auto in 1987 at above-market rates.
They have continued to master lease the entire facility
since then.
High visibility corner with good signage and underutilized land area present inexpensive opportunities
to enhance income
•
Pad development or drive through coffee pad on
Roxbury possible
•
Rehabilitation of sign can increase traffic through
the center
Sub-Tenant
Highline Medical
Highline Medical Group was founded in 1986 and is
affiliated with Highline Medical Center. Their 14 clinics,
which are located throughout Southwest King County,
provide physical exams, acute illness care, chronic
illness management, and women’s health care.
White Center
Tenant
Tenant SF
NNN
Rent/Annum
$/SF/Yr
O’Reilly
16,452
$192,294
$11.69
Project Total
16,452
$192,294
$11.69
Tenant Since
1987
Expiration
2/28/17
Bumps
CPI annually, not
to exceed 2%
*Inquire about awning replacement alternatives
11
4
White Center Retail
Market Overview
Retail vacancy is 4.4% with average quoted rates of
$18.33/SF. This places O’Reilly below market at $11.69/
SF/year and presents the opportunity for the future
landlord to enhance income by disbanding O’Reilly’s
master lease on the center and entering into a direct
relationship with other tenants.
White Center is an area of workforce housing close to
the manufacturing and aerospace ground zero for the
Pacific Northwest. As a distinct neighborhood within
the City of Seattle, it benefits from easy traffic patterns
to and from the major employment districts, as well
as an affordable cost of living within the increasingly
expensive Seattle metropolitan area.
Population
1 Mile
3 Mile
5 Mile
2011 Total Pop:
21,220
101,135
240,145
Pop Growth
2011-2016:
7.50%
4.70%
5.10%
2011 Total
Households:
8,218
39,786
93,544
HH Growth
2011-2016:
7.20%
4.60%
4.90%
Households
Median Household
Inc:
Avg Household
Size:
$45,313 $52,079
1.50
1.60
$52,414
1.50
17th Ave SW — 12,850 cars daily
SW Roxbury St — 15,781 cars daily
12
5
Financial Analysis
Tenant List
Vision Quest
Sport and Fitness
Vision Quest; 10-year lease
The Puget Sound’s leading fitness operator with 10
locations in Seattle and the surrounding areas
Veolia; 12-year lease
The largest private provider of transportation services
on the continent, with more than 200 contracts to
coordinate bus, rail, taxi and shuttle services in more
than 30 cities across the U.S. The company generates
$8.2 billion of the parent company’s $48 billion annual
revenue.
Caffe Ladro; 10-year lease
One of Seattle’s premiere coffee shops, Caffe Ladro
opened in Queen Anne in 1994 and has 13 locations in
Seattle and the surrounding areas.
O’Reilly Auto Parts; tenant since 1987
Publicly traded company with more then 3,000 stores in
38 states with a market cap of nearly $11 billion.
13
5
Financial Analysis
Projected Cash Flow
Year 1
Dec-2013
____________
For the Years Ending
Gross Revenue
Potential Rental Revenue 1
Absorption & Turnover Vacancy
Base Rent Abatements
$604,976
Scheduled Base Rental Revenue
Expense Reimbursement Revenue
Miscellaneous Revenue
Total Gross Revenue
General Vacancy
Effective Gross Revenue
Operating Expenses
Reimbursable Expenses
Total Operating Expenses 1
Net Operating Income
Debt Service 2
Principal Payments
Interest Payments
Origination Points & Fees
Total Debt Service
Year 2
Dec-2014
____________
Year 3
Dec-2015
____________
$618,694
(1,125)
____________
604,976
169,415
18,000
____________
792,391
(38,720)
____________
753,671
____________
____________
617,569
173,984
18,000
____________
809,553
(38,508)
____________
771,045
____________
$635,631
(1,159)
(869)
____________
633,603
179,050
18,000
____________
830,653
(39,532)
____________
791,121
____________
169 356
169,356
____________
169,356
____________
584,315
____________
174 174
174,174
____________
174,174
____________
596,871
____________
179 248
179,248
____________
179,248
____________
611,873
____________
109,259
219,705
49,320
____________
378,284
____________
114,278
214,685
____________
328,963
____________
Leasing & Capital Costs
Tenant Improvements
Leasing Commissions
____________
____________
____________
$206,031
============
____________
$267,908
============
Total Leasing & Capital Costs
Cash Flow After Debt Service
But Before Taxes
119,528
209,436
____________
328,964
____________
3,183
5,434
____________
8,617
____________
$274,292
============
Year 4
Dec-2016
____________
$662,095
Year 5
Dec-2017
____________
Year 6
Dec-2018
____________
____________
662,095
185,087
18,000
____________
865,182
(42,359)
____________
822,823
____________
$690,105
(36,077)
(13,529)
____________
640,499
180,983
18,000
____________
839,482
(30,880)
____________
808,602
____________
____________
708,628
196,612
18,000
____________
923,240
(45,262)
____________
877,978
____________
____________
727,694
202,370
18,000
____________
948,064
(46,504)
____________
901,560
____________
185 024
185,024
____________
185,024
____________
637,799
____________
188 629
188,629
____________
188,629
____________
619,973
____________
196 543
196,543
____________
196,543
____________
681,435
____________
202 302
202,302
____________
202,302
____________
699,258
____________
125,019
203,944
____________
328,963
____________
____________
____________
$308,836
============
$708,628
Year 7
Dec-2019
____________
130,763
198,201
____________
328,964
____________
46,292
82,951
____________
129,243
____________
$161,766
============
136,770
192,194
$727,694
143,053
185,911
____________
328,964
____________
____________
328,964
____________
____________
____________
____________
$352,471
============
____________
$370,294
============
1 Assumes 3% inflation for CPI and expenses
2 Loan assumptions per David Schaffer, Vice President—Melvin Mark Capital Group: 60% LTV, 4.5% interest, 25 year amortization
14
5
Financial Analysis
Sources & Uses
For the Years Ending
Sources Of Capital
Net Operating Gains
Debt Funding Proceeds
Initial Equity
q y Contribution
Net Proceeds from Sale 3
Total Sources Of Capital
Uses Of Capital
p
Property Purchase Price
Total Debt Service
Tenant Improvements
Leasing Commissions
Retirement & Penalties
Defined Uses Of Capital
p
Cash Flow Distributions
Total Uses Of Capital
Year 1
Dec-2013
____________
$584,315
4,932,000
3,288,000
____________
$8,804,315
============
$8,220,000
378,284
Year 2
Dec-2014
____________
$596,871
____________
$596,871
============
328,963
Year 3
Dec-2015
____________
$611,873
____________
$611,873
============
328,964
3,183
5,434
Year 4
Dec-2016
____________
$637,799
____________
$637,799
============
328,963
Year 5
Dec-2017
____________
Year 6
Dec-2018
____________
$619,973
____________
$619,973
============
$681,435
____________
$681,435
============
328,964
46,292
82,951
328,964
Year 7
Dec-2019
____________
$699,258
9,401,395
____________
$10,100,653
============
328,964
____________
8,598,284
,
,
____________
206,031
____________
$8,804,315
============
____________
328,963
,
____________
267,908
____________
$596,871
============
____________
337,581
,
____________
274,292
____________
$611,873
============
____________
328,963
,
____________
308,836
____________
$637,799
============
____________
458,207
,
____________
161,766
____________
$619,973
============
____________
328,964
,
____________
352,471
____________
$681,435
============
4,053,328
____________
4,382,292
,
,
____________
5,718,361
____________
$10,100,653
============
7.11%
7.11%
7.11%
7.26%
7.26%
7.26%
7.34%
7.44%
7.34%
7.76%
7.75%
7.76%
5.97%
7.42%
5.97%
8.29%
8.15%
8.29%
8.51%
8.37%
8.51%
6.27%
8.15%
8.34%
9.39%
4.92%
10.72%
11.26%
Unleveraged Cash On Cash Return
Cash to Purchase Price
NOI to Book Value
Cash to Purchase Price & Costs
Leveraged Cash On Cash Return
Cash to Initial Equity
Unleveraged Annual IRR
Leveraged Annual IRR
8.97%
14.00%
3 Residual cap rate equal to ingoing, less closing costs.
15
6
Offering Guidelines
Disclaimer and Offering Guidelines
This Investment Offering Memorandum has been
prepared by ORION Commercial Partners, LLC
(Broker) for use by a limited number of parties, and
does not purport to provide a necessarily accurate
summary of the Property or any of the documents
related thereto, nor does it purport to be all-inclusive
or to contain all of the information which prospective
purchasers may need or desire. All projections have
been developed by Broker and are based upon
assumptions relating to the general economy,
competition and other factors beyond the control
of Seller, and therefore are subject to variation. No
representation is made by Seller or Broker as to
the accuracy or completeness of the information
contained herein, and nothing contained herein is,
or shall be relied on as, a promise or representation
as to the future performance of the Property. Seller
and its officers, members and employees disclaim
any responsibility for inaccuracies, and expect
prospective purchasers to exercise independent
due diligence in verifying all such information.
The Investment Offering Memorandum is being
provided to a prospective purchaser merely so that
such prospective purchaser may select potential
purchase candidates to pursue and such purchaser
shall conduct and rely on its own due diligence and
projections thereafter. Further, Broker, Seller and
its officers, members and employees, disclaim any
and all liability for representations and warranties,
expressed and implied, contained in, or for omission
from, the Investment Offering Memorandum, or any
other written or oral communication transmitted
or made available to the recipient. The Investment
Offering Memorandum does not constitute a
representation that the business or affairs of the
Property or Seller since the date of preparation
of the Investment Offering Memorandum have
remained the same. Analysis and verification of the
information contained in the Investment Offering
Memorandum is solely the responsibility of the
prospective purchaser.
Seller and Broker each expressly reserve the right, at
their sole discretion, to reject any or all expressions
of interest or offer regarding the Property, and/
or terminate discussions with any entity at any
time with or without notice. Seller shall have no
legal commitment or obligations to any entity
reviewing the Investment Offering Memorandum,
or making an offer to purchase the Property, unless
and until such offer is approved by Seller, a written
agreement for the purchase of the Property has
been fully executed, delivered and approved by
Seller and its legal counsel, and any conditions to
Seller’s obligations there under have been satisfied
and waived.
16
6
3
Offering Guidelines
This Investment Offering Memorandum and the contents,
except such information, which is a matter of public
record or is provided in sources available to the public,
are of a confidential nature. By accepting the Investment
Offering Memorandum, you agree that you will hold
and treat it in the strictest confidence, that you will not
photocopy or duplicate it, that you will not disclose the
Investment Offering Memorandum or any of the contents
to any other entity (except to outside advisors retained
by you if necessary, for your determination of whether
or not to make a proposal and from whom you have
obtained an agreement of confidentiality) without the
prior written authorization of Seller or Broker, and that
you will not use the Investment Offering Memorandum or
any of the contents in any fashion or manner detrimental
to the interest of Seller or Broker.
The Seller will prepare the purchase and sale agreement
to be used in this transaction. The Seller reserves the right
to accept or reject any offer at any time and reserves the
right to remove the property from the market at any time
for any reason without notice.
Offering Guidelines
Seller shall respond to offers as received and shall enter
into negotiations at will.
Exclusively Represented By:
Matthew Hinrichs
206.445.7663
206.852.3325
mhinrichs@orioncp.com
Dan Foster
206.445.7662
425.260.4260
dfoster@orioncp.com
David Butler
206.445.7665
425.890.7919
dbutler@orioncp.com
Scott Clements
206.445.7664
206.793.1074
sclements@orioncp.com
17

8220000 sEattlE incomE poRtfolio

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