MULTI-TENANT NNN LEASED OFFICE INVESTMENT · 2017-10-13 · 3 Solis, Inc. $0.00 Feb-2016 $10.20 - - - Net: Pays a full - - - Market Office, Suite: 225 1,593 $0 Mar-2016 $12.84 pro-rata

Exclusively Listed By: BRIAN GARBUTT MIA PHAMSenior Vice President Vice PresidentBRE# 01215482 BRE# 01875144949.790.3166 [email protected] [email protected]

Lee & Associates, Inc. - Irvine | 9838 Research Drive | Irvine, California | 92618 | www.lee-associates.com

MULTI-TENANT NNN LEASED OFFICE INVESTMENT940 & 942 Calle NegocioSan Clemente, California

CREATIVEOFFICE

INVESTMENT

940 & 942 Calle Negocio | San Clemente

DISCLAIMER

This Confidential Offering Memorandum (this “Memorandum”) is being delivered subject to the terms of the Confidentiality Agreement signed by you (the “Confidentiality Agree-ment”) and constitutes part of the Evaluation Material (as defined in the Confidentiality Agreement). It is being given to you for the sole purpose of evaluating the possible ac-quisition of 940 & 942 Calle Negocio, San Clemente, California (“Property”), and is not to be used for any other purpose or made available to any other party without the prior written consent of the “Owner” or Lee & Associates Commercial Brokerage (“Broker”).

This Memorandum was prepared by the Broker based on information supplied by the Owner and the Broker. It contains selected information about the Property and the real estate market but does not contain all the information necessary to evaluate the acquisi-tion of the Property. The financial projections contained herein (or in any other Evaluation Material, including any computer diskettes) are for general reference only. They are based on assumptions relating to the general economy and local competition, among other factors. Accordingly, actual results may vary materially from such projections. Vari-ous documents have been summarized herein to facilitate your review; these summaries are not intended to be a comprehensive statement of the terms or a legal analysis of such documents.

While the information contained in this Memorandum and any other Evaluation Material is believed to be reliable, neither Broker nor Owner guarantees its accuracy or com-pleteness. Because of the foregoing and since the Property will be sold on an “AS IS”, “WHERE IS” basis, a prospective purchaser must make its own independent investigations, projections, and conclusions regarding the acquisition of the Property without reliance on this Memorandum or any other Evaluation Material. Although additional Evaluation Mate-rial (which may include engineering, environmental or other reports) may be provided to qualified parties as marketing proceeds, prospective purchasers should seek advice from their own attorneys, accountants, and engineering/environmental experts.

Owner expressly reserves the right, at its sole discretion, to reject any offer to purchase the Property or to terminate any negotiations with any party at any time with or without written notice. Owner shall have no legal commitment or obligations to any prospective purchaser until a written sale agreement has been fully executed, delivered and ap-proved by Owner and any conditions to Owner’s obligations hereunder have been satis-fied or waived. Owner has retained Broker as its exclusive broker and will be responsible for any commission due to Broker in connection with a sale of the Property pursuant to separate agreement. Broker is not authorized to make any representation or agreement on behalf of Owner. Each prospective purchaser will be responsible for any claims for commissions by any other Broker in connection with a sale of the Property if such claims arise from acts of such prospective purchaser or its Broker.

This Memorandum is the property of Owner and Broker and may be used only by parties approved by Owner and Broker. No portion of this Memorandum may be copied or oth-erwise reproduced or disclosed to anyone except as permitted under the Confidentiality Agreement.

Exclusively Offered By:

BRIAN GARBUTT MIA PHAMSenior Vice President Vice PresidentBRE# 01215482 BRE# 01875144949.790.3166 [email protected] [email protected]


OFFERING SUMMARY

This offering is for a fee simple interest in a 12,451 square foot, freestanding creative office building in San Clemente, California.

PROPERTY DESCRIPTION

The property is located in the desirable beach community of San Clemente off of Avenida Pico on the 5 Freeway. The property has an in-place condominium map and the subject property consists of eight (8) condominiums.

PROPERTY HIGHLIGHTSPricing: $3,530,420 ($283 PSF)Projected First Year NOI: $187,374CAP Rate: 5.7%

LEASE DETAILS - 940 CALLE NEGOCIO

Suite 210

Tenant: Cintas, Inc.Square Feet: 1,774 SFLease Start Date: June 2013Lease Term: November 2016Monthly Rent: $1,525.64

Suite 225

Tenant: Solis, Inc.Square Feet: 1,593 SFLease Start Date: April 2013Lease Term: March 2018Monthly Rent: $1,704.51

LEASE DETAILS - 942 CALLE NEGOCIO

Suite 310/320/330/340/350

Tenant: The Surfrider FoundationSquare Feet: 7,573 SFLease Start Date: November 1, 2007Lease Term: February 29, 2021Monthly Rent: $11,283.77Increases: $0.05 PSF annual increases

Suite 300

Tenant: VacantSquare Feet: 1,511 SFProforma: $2,191.00

Property Description


BUILDING DESCRIPTION

Address: 940 Calle Negocio, Suite 210 San Clemente, CA 92673

Assessor's Parcel Number: 930-079-55

Location: San Clemente, California

Year Built: 1989 - Renovated 2011

Total Condo Area: 1,774 Sq. Ft.

Zoning: RSC-BP


Address: 940 Calle Negocio, Suite 225 San Clemente, CA 92673

Assessor's Parcel Number: 930-079-57

Location: San Clemente, California

Year Built: 1989 - Renovated 2011

Total Condo Area: 1,593 Sq. Ft.

Zoning: RSC-BP

SUITE 210±1,774 SF

SUITE 225±1,593 SF

office office conferenceroom

kitchen/server

office

office receptionreception

breakroom

server/storage

office office


BUILDING DESCRIPTION

Address: 942 Calle Negocio San Clemente, CA 92673Assessor's Parcel Number: Suite 300 - 930-079-61 Suite 310 - 930-079-62 Suite 320 - 930-079-63 Suite 330 - 930-079-64 Suite 340 - 930-079-65 Suite 350 - 930-079-66Location: San Clemente, CaliforniaParcel 1: 29,620 SF (.68 acres)Year Built: 1989Total Building Area: 9,084 Sq. Ft.Zoning: RSC-BPParking: 4:1 Ratio

Stories: One (1)Flooring: Reinforced ConcreteConstruction: CTU HVAC: Package UnitsClearance: 12 FeetPower: 2,000 Amps @ 277/488 VoltsLoading: Two (2) GL Doors



INVESTMENT HIGHLIGHTS

• Rare opportunity to purchase a multi-tenant, creative office building in South Orange County.

• 83% of the building is leased to The Surfrider Foundation for a 7-year lease. They just renewed their lease and have been in the building for seven (7) years.

• Little management as the tenants are on NNN leases and they pay for all operating expenses for the building.

• 3% annual increases in the existing lease.

• Smaller condos at 940 Calle Negocio could be renewed or sold to small owner users.

• 5.6% CAP rate on first year projected NOI.

• Tight market with an 8% vacancy rate for low-rise office and flex buildings in South Orange County and 6% in San Clemente,

• High image creative improvements make the space desirable and re-leasable at top of market rents.



TENANCY

The Surfrider Foundation USA is a U.S. 501(c) (3) grassroots non-profit environmental organi-zation that works to protect and preserve the world’s oceans, waves, and beaches. The Sur-frider Foundation largely focuses its work on such issues as water quality, beach access, beach and surf spot preservation, and sustain-ing marine and coastal ecosystems.

Headquartered in San Clemente, California, the Surfrider Foundation maintains a small staff, which work to support the organization’s network of grassroots chapters.

The current CEO is Chad Nelsen.

Their mission statement is the protection and enjoyment of oceans, waves and beaches through a powerful activist network.

The Surfrider Foundation was started in Malibu, California in 1984 by a handful of surfers to protest threats to their local surf break at Malibu Point. The organization continued on for several years as a loose ad-vocacy group until 1991, when the first chapters were founded. At that point the Surfrider Foundation transitioned into a grassroots activist or-ganization. Today the Surfrider Foundation maintains over 50,000 mem-bers and 80 chapters worldwide.

Cintas Corporation is an American company which provides specialized services to businesses of all types, primarily throughout North America. Headquartered in Cincinnati, Ohio, Cintas de-signs, manufactures and implements corporate

identity uniform programs, and provides entrance mats, restroom cleaning and supplies, tile and carpet cleaning, promotional products, first aid, safety, fire protection products and services for businesses.


BIRD'S EYE AERIAL


942 Calle Negocio

940 Calle Negocio


LOCATOR MAP



PARCEL MAP


SITE


RENT ROLL

Financial Analysis

t - 4B

Tenant Name Floor Rate & Amount CPI & Current Months Pcnt Description of Imprvmnts Commssns Sales Assumption about Type & Suite Number SqFt per Year Changes Porters' Wage to to Operating Expense Rate Rate Breakpoint subsequent terms for Lease Dates & Term Bldg Share per Month on Changes to Miscellaneous Abate Abate Reimbursements Amount Amount Overage % this tenant __________________________ ___________ _____________ _________ _________ ______________ _______ _____ __________________ __________ _________ ___________ ______________________

1 The Surfrider Foundation $17.40 Jan-2015 $17.88 - - - Net: Pays a full - - - Renew Office, Suite: 310,320,330,340,350 7,573 $131,770 Jan-2016 $0.00 pro-rata share of See assumption: Nov-2007 to Feb-2021 60.82% $1.45 Feb-2016 $18.48 all reimbursable Z2-$ 160 Months $10,981 Jan-2017 $0.00 expenses.

Feb-2017 $19.08 Jan-2018 $0.00 Feb-2018 $19.56 Jan-2019 $20.16 Jan-2020 $20.76 Jan-2021 $21.00

2 Cintas, Inc. $0.00 May-2015 $10.32 - - - Net: Pays a full - - - Market Office, Suite: 210 1,774 $0 May-2016 $10.92 pro-rata share of See assumption: Jun-2014 to Jun-2017 14.25% $0.00 all reimbursable Z2-$ 37 Months $0 expenses.

3 Solis, Inc. $0.00 Feb-2016 $10.20 - - - Net: Pays a full - - - Market Office, Suite: 225 1,593 $0 Mar-2016 $12.84 pro-rata share of See assumption: Apr-2014 to Mar-2018 12.79% $0.00 Mar-2017 $13.44 all reimbursable Z2-$ 48 Months $0 expenses.

4 VACANT $15.60 Nov-2017 $16.20 - - - Net: Pays a full $10.00 $3.00 - Market Office, Suite: 300 1,511 $23,572 Nov-2018 $16.80 pro-rata share of 6.00% See assumption: Nov-2016 to Nov-2019 12.14% $1.30 all reimbursable $15,110 $4,533 Z2-$ 37 Months $1,964 expenses.

Total Occupied SqFt 10,940 Total Available SqFt 1,511

The recipients of this cash flow analysis acknowledge that they have been made aware that an investor, buyer or seller should not purchase or sell predicated on this analysis without the advice of Financial,Tax and Legal Counsel. We make no guarantees, warranties or representations, expressed or implied, about this analysis. It is the recipient's responsibility to independently confirm its accuracy and completeness.

As of Aug-2016 for 12,451 Square Feet

Surfrider Building

940-942 Calle Negocio

San Clemente, CA

Presentation Rent Roll & Current Term Tenant Summary


TRANSACTION SUMMARY

Financial Analysis

Asking Price: $3,530,420

Terms: All cash

Projected first year NOI 8/2016 $187,374


CASH FLOW ANALYSIS

Financial Analysis

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11For the Years Ending Jul-2017 Jul-2018 Jul-2019 Jul-2020 Jul-2021 Jul-2022 Jul-2023 Jul-2024 Jul-2025 Jul-2026 Jul-2027

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________Potential Gross Revenue Base Rental Revenue $190,130 $224,319 $251,745 $264,029 $283,318 $302,208 $309,890 $313,758 $317,650 $332,154 $350,340

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ Scheduled Base Rental Revenue 190,130 224,319 251,745 264,029 283,318 302,208 309,890 313,758 317,650 332,154 350,340 Base Rental Step Revenue 89 1,472 3,492 6,116 10,493 11,493 15,777 20,226 16,718 10,493 Expense Reimbursement Revenue 88,060 93,136 95,510 97,953 100,460 103,032 105,674 108,382 111,167 114,025 151,298

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________Total Potential Gross Revenue 278,190 317,544 348,727 365,474 389,894 415,733 427,057 437,917 449,043 462,897 512,131

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________Effective Gross Revenue 278,190 317,544 348,727 365,474 389,894 415,733 427,057 437,917 449,043 462,897 512,131

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________Operating Expenses Management 9,000 9,270 9,548 9,835 10,130 10,433 10,746 11,069 11,401 11,743 12,095 Association Dues 38,076 39,218 40,395 41,607 42,855 44,141 45,465 46,829 48,234 49,681 51,171 HVAC 1,000 1,030 1,061 1,093 1,126 1,159 1,194 1,230 1,267 1,305 1,344 Insurance 2,000 2,060 2,122 2,185 2,251 2,319 2,388 2,460 2,534 2,610 2,688 Property Taxes 1.164% 40,740 41,555 42,386 43,234 44,098 44,980 45,880 46,797 47,733 48,688 84,002

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________Total Operating Expenses 90,816 93,133 95,512 97,954 100,460 103,032 105,673 108,385 111,169 114,027 151,300

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________Net Operating Income 187,374 224,411 253,215 267,520 289,434 312,701 321,384 329,532 337,874 348,870 360,831

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________Leasing & Capital Costs Tenant Improvements 25,311 9,435 9,494 42,617 11,825 10,937 11,006 56,816 13,709 Leasing Commissions 11,694 6,613 6,636 29,746 8,243 7,614 7,643 39,407 9,497

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________Total Leasing & Capital Costs 37,005 16,048 16,130 72,363 20,068 18,551 18,649 96,223 23,206

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________Cash Flow Before Debt Service $150,369 $208,363 $253,215 $251,390 $217,071 $292,633 $302,833 $329,532 $319,225 $252,647 $337,625& INCOME TAX ============ ============ ============ ============ ============ ============ ============ ============ ============ ============ ============

The recipients of this cash flow analysis acknowledge that they have been made aware that an investor, buyer or seller should not purchase or sell predicated on this analysis without the advice of Financial,Tax and Legal Counsel. We make no guarantees, warranties or representations, expressed or implied, about this analysis. It is the recipient's responsibility to independently confirm its accuracy and completeness.

In Inflated Dollars for the Fiscal Year Beginning 8/1/2016

Surfrider Building

940-942 Calle Negocio

San Clemente, CA

Schedule Of Prospective Cash Flow


FINANCIAL ANALYSIS

CASH FLOW ASSUMPTIONS:

Software: The cash flow analysis has been prepared with the assistance of ARGUS software.

Analysis Period: A 10-year discounted cash flow is prepared commencing August 1, 2016.

Square Footage: There is a total of 12,451 square feet.

Growth Rates: General operating expenses, capital expenditures, and property taxes are inflated 3% per year.


940 CALLE NEGOCIO OPERATING EXPENSES

Financial Analysis

Direct Expense Reconciliation

Project Size: 3,367

Category Budgeted Expenses1. Security $02. Cleaning $03. Management Fee $5,1004. HVAC $05. Elevator $06. Maintenance & Repairs $1,2007. Utilities $08. Parking Lot $09. Landscaping $010. Common Area Association $11,17211. Insurance $78912. Taxes $7,00413. Miscellaneous $0

TOTAL $25,265Total PSF/Mo. $0.625

942 CALLE NEGOCIO OPERATING EXPENSES

Direct Expense Reconciliation

Project Size: 9,084

Category Budgeted Expenses1. Security $02. Cleaning $03. Management Fee $5,1004. HVAC $9005. Elevator $06. Maintenance & Repairs $1,8007. Utilities $08. Parking Lot $09. Landscaping $010. Common Area Association $30,16811. Insurance $2,30012. Taxes $22,93613. Miscellaneous $0

TOTAL $63,204Total PSF/Mo. $0.580


SALE COMPARABLES

ADDRESS SIZESALE PRICE(PRICE PSF)

SALE DATE BUYER

s32332 Camino CapistranoSan Juan Capistrano, CA 92675

12,000 SF$3,990,000($3632.50)

4/16/2016 SPM-Grey Wolf, LLC

dsfdf9821 Irvine Center DriveIrvine, CA 92618 7,700 SF

$2,890,000($375.32)

11/18/2015 C & C Partnership

df9861 Irvine Center DriveIrvine CA 92618

9,920 SF$3,670,000($369.96.)

11/30/2015 KJSD Investments, LLC


ECONOMIC OVERVIEW

The industrial real estate markets showed positive signals for 2012, as the South Bay industrial real estate market had three out of four quarters of positive absorption, and a steady decline of the vacancy rate. The mar-ket indicators were positive heading into the new year. However, the delivery of new Class A product into the marketplace raised the mar-ket’s overall vacancy to 6% as the South Bay experienced (-138,961) SF of net absorption. Lee & Associates believes that the strengthening of the overall economy, the increase in access to capital across the globe, and the increase in infrastructure projects will all lead to a continued strong demand for industrial real estate in the South Bay market and a gradual decline in the vacancy rate for the 2nd Quarter.

The direct industrial vacancy rate in the South Bay marketplace increased from 4.5% in the 4th Quarter 2012 to 6% in the 1st Quarter 2013. Developers delivered over 1,000,000 SF to the South Bay over the past two quarters. One of the largest deliveries, 16325 Avalon, Carson (230,000 SF), was re-cently sold to a Teachers Annuity Plan from Trammel Crow. Consequent-ly, investors continue to flock to quality Class A projects, as the industrial demand for this product continues to be strong.

The amount of sublease space increased slightly from the previous quar-ter, as the total availability rate increased to 7.9%. Asking rents remained steady at $0.57 Net. The average sale price continued to be steady at $90 PSF as sellers and buyers expectations get more in line based upon the quality and location of the property. The South Bay industrial real estate market has one of the lowest vacancy rates in the country, as Dr. Walter Kemmsies, Chief Economist for Moffat & Nichol, discussed why this is at the 2013 Pulse of the Ports. According to Dr. Kemmsies, the Port of Long Beach moved more than 6 million TEUs in 2012, the second largest volume in the nation. Dr. Kemmsies believes this pattern will continue in 2013, with higher economic growth.

Heading into the 2nd Quarter of 2013, Lee & Associates remains optimistic that the current demand for South Bay industrial real estate will continue to be strong. Two intangibles that we are currently tracking are the con-sumption pattern changes in energy as natural gas continues to be a cheap alternative to diesel that the US produces and the “Grey Tsunami,’ or the aging US population that the government has to address as it re-lates to US budgetary policy and the deficit.

MARKET SNAPSHOT

Base Inventory: 206,357,246

Availability: 7.9%

Vacancy: 6.0%

Net Absorption: -138,961 SF

Construction Completed: 373,020 SF *Calculations are comprised of existing single and multi-tenant buildings 10,000 SF or larger. Source: Lee & Associates Los Angeles-Long Beach Office

KEY TERMS & DEFINITIONS

Base Inventory: SF of existing and under-construction buildings.

Availability: SF of available buildings, whether vacant or occupied.

Vacancy: SF of existing buildings that are vacant.

Net Absorption: SF of increased/decreased vacant available space at the end of the period.


SOUTH COUNTY OFFICE MARKET

South County encompasses Irvine Spectrum, Aliso Viejo, Laguna Beach, Laguna Hills, Mission Viejo, Rancho Santa Margarita, San Clemente, San Juan Capistrano, and some outlying Orange County Areas. South County is broken down into approximately 22 million square feet of class B office space and 6.9 million square feet of Class A office space.

South County finished 2015 with a vacancy rate of 8.6%. This submarket observed a positive net absorption of 231,624 square feet for the year. An estimated 575,044 square feet of new construction is underway with another 400,000 square feet planned.

0%

5%

10%

15%

20%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

7%

8%

14%

17% 19

%

15%

15%

13%

10%

9%

5%

15% 16

%

19%

15%

13%

11%

9%

8%

7%7%

9%

14%

18%

17%

15%

14%

11%

9% 9%

SOUTH COUNTY OFFICE VACANCY RATES

Low Rise High Rise Total

-800,000

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

865,

108

73,5

13

-371

,264

-462

,244

-392

,181

565,

769

76,8

65

494,

745

380,

850

221,

935

90,6

78

-41,

283

539,

485

-159

,887

212,

906

110,

836

155,

625

132,

865

47,3

23

9,68

9

955,

786

35,2

30 168,

221

-622

,131

-179

,275

676,

605

232,

490

627,

610

15,9

38

231,

624

SOUTH COUNTY OFFICE NET ABSORPTION

Low Rise High Rise Total


SOUTH COUNTY ASKING OFFICE RENTAL RATE CHANGES

The South County submarket has the second highest asking rates of all the submarkets with an average annual rate of $28.08 or $2.34 per month.

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

6%

-1%

-5%

-14%

-7%

-2%

-3%

6%

8% 7%

32%

-8%

-13%

-8%

-12%

1%

3%

5%

3%

7%

SOUTH COUNTY OFFICEPERCENTAGE CHANGE IN ASKING RENTAL RATES

Low Rise High Rise

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$2.4

6

$2.4

2

$2.3

0

$2.1

7

$1.8

9

$1.8

6

$1.8

0

$1.9

2

$2.0

9

$2.2

5

$3.3

6

$3.0

9

$2.6

8

$2.4

3

$2.2

4

$2.2

7

$2.3

3

$2.4

6

$2.5

4

$2.7

1

SOUTH COUNTY OFFICEAVERAGE ASKING RENTAL RATES (FSG)

Low Rise High Rise

Exclusively Listed By: BRIAN GARBUTT MIA PHAMSenior Vice President Vice PresidentBRE# 01215482 BRE# 01875144949.790.3166 [email protected] [email protected]

Lee & Associates - Irvine, Inc. | 9838 Research Drive | Irvine, California | 92618 | www.lee-associates.com

Documents

MULTI-TENANT NNN LEASED OFFICE INVESTMENT · 2017-10-13 · 3 Solis, Inc. $0.00 Feb-2016 $10.20 - - - Net: Pays a full - - - Market Office, Suite: 225 1,593 $0 Mar-2016 $12.84 pro-rata