WV GCLA Repositioning Report

GCLA Repositioning Report

December 2010

Prepared By:

Vahak Agojian, WV Director of Global Real Estate

1

Introduction

My name is Vahak Agojian and I am the Director of Global Real Estate for World Vision, who reports directly to Tony Moniaga, Partnership Leader for Global Real Estate and Corporate Services. My responsibility is to ensure that I maximize value and mitigate risk for World Vision globally by providing asset management real estate services. Those services include consulting, leasing, acquisition, disposition, construction and improvement projects for existing WV assets and for future WV projects.

Purpose of the Report

The purpose of the report is to provide information for everyone who is interested in understanding the scope of the GCLA Repositioning Project which consisted of three phases of due diligence.

The GCLA Repositioning strategy was first introduced to me on October 5, 2010 in order to determine if there is a “value added” opportunity that would allow GCLA to reposition the two buildings it currently owns through disposition, and to identify acquisition opportunities through leasing or purchase of other properties along the 210 freeway corridor going east from WV’s current location (commonly known as 800 & 840 West Chestnut in the city of Monrovia).

The alternative was to analyze and determine what “value added” improvements could be made to the current property in order to achieve a higher and efficient better use of these buildings.

In order to obtain this information, I implemented and completed a three phase due diligence process consisting of owner/user decision analysis, market feasibility analysis, and financial feasibility analysis. This purpose of this report is to identify the best opportunities for World Vision and to assist us in the decision making process .

2

Assumptions used for Analysis

The following information was obtained from a department head survey that was administered on November 5, 2010. The purpose was to capture basic information that is necessary to determine space needs for all departments, and to determine whether or not the GCLA staff count will shrink, stay the same, or grow over the next 3-5 years. Therefore, the following assumptions were used as the basis for this report.

• Global Center Los Angeles will continue to exist under this current structure that includes a staff of approximately 202 employees for at least the next 3-5 years.

• Collectively within all departments there will be slight growth of less than 2% annually.

• 20% of the staff will continue to work from home at least 2 days a week

• GCLA will continue to have 295 visitors annually.

• 62% of those visitors will work here and stay a week.

Repositioning Options & Scenarios

A. Sell existing property and buy new office building

B. Sell existing property and lease new office building

C. Hold and add 20,000 SF to the 800 building and after the completion of construction lease out or sell the 840 building

D. Demo and rebuild the 840 building and after completion of construction lease or sell the 800 building

E. Hold and remodel 800 & 840 buildings

F. Hold and Do Nothing

3

800 & 840 Sale & Lease Values & Property Characteristics

PER SQUARE FOOT: $213.65 TO $220.82 PSF (OWNER/USER) OR $170.04 TO $194.33 PSF (INVESTOR) INDICATED MARKET VALUE: $13,828,215 TO $14,291,830 (OWNER/USER) OR $11,005,481 TO $12,577,693 (INVESTOR) RECOMMENDED ASKING PRICE: $15,533,520 ($240.00 PSF) MARKETING TIME: 6 TO 12 MONTHS TARGET BUYERS: 800WCHESTNUT – MEDIUM SIZE OFFICE USERS IN PASADENA, GLENDALE, ARCADIA AND MONROVIA; IDEAL FOR A REGIONAL CORPORATE HQ, INSURANCE COMPANY, OR BACK OFFICE USE. 840WCHESTNUT – COULD ATTRACT SIMILAR OFFICE USERS TO 800, BUT WILL ALSO ATTRACT ATTENTION FROM TECH/FLEX USERS ASSOCIATED WITH JPL AND CALTECH.

Combined Lease Value for 800 & 840

PER SQUARE FOOT: 800WCHESTNUT – $15.00 PSF, NNN / $22.00 PSF, FSG* 840WCHESTNUT - $13.80 PSF, NNN / $21.00 PSF, FSG RECOMMENDED ASKING PRICE: 800WCHESTNUT – $17.00 PSF, NNN / $24.00 PSF, FSG 840WCHESTNUT - $15.00 PSF, NNN / $22.20 PSF, FSG MARKETING TIME: 9-18 MONTHS TARGET TENANTS: 800WCHESTNUT – MEDIUM SIZE OFFICE TENANTS IN PASADENA, GLENDALE, ARCADIA AND MONROVIA; IDEAL FOR A REGIONAL CORPORATE HQ, INSURANCE COMPANY, OR BACK OFFICE USE. 840WCHESTNUT – COULD ATTRACT SIMILAR OFFICE TENANTS TO 800, BUT WILL ALSO ATTRACT ATTENTION FROM TECH/FLEX TENANTS ASSOCIATED WITH JPL , CALTECH AND CITY OF HOPE.

Property Description

CAMPUS SIZE/SF: 64,723 SF SITUATED ON 5 PARCELS CONSISTING OF 3.5 ACRES 800WCHESTNUT 28,000SF (2-STORY) & 840WCHESTNUT 36,723SF (2-STORY) YEAR BUILT: 800WCHESTNUT 1982 & 840WCHESTNUT 1977 OFFICE AREA/ SF: 800WCHESTNUT 1ST FLOOR: 14,000SF 2ND FLOOR: 14,000SF & 840WCHESTNUT 1ST FLOOR: 24,400SF 2ND FLOOR 12,323SF WAREHOUSE AREA/ SF 800WCHESTNUT NONE & 840WCHESTNUT 7,000SF CEILING CLEARANCE: 24’ (840WCHESTNUT) PARKING: 178 SPACES / 3 PER 1,000SF LOADING: 800WCHESTNUT DH: 0 GL: 0 & 840WCHESTNUT DH:1 GL:0

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800 Chestnut

840 Chestnut

5

Aerial Photo of GCLA

Parcel Map

6

Monrovia staff drive time study

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Due Diligence Process & Data Gathering

A. User Decision Analysis

Various methodologies used for data gathering such as surveys, department head meetings, research and analysis to understand WV’s needs and space requirements.

Department Head Survey Summary

• GCLA Full Time Staff Members = 202

• Projected Staff Growth 3-5 yrs.= <2%

• 20 % of staff working from home = 42 @ 1.4 days/wk

• Visitors = 295 per year

– 75% of our departments host visitors

– 11% of those visitors stay 3 days or less

– 62% stay a week

– 27% stay longer than a week

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Department Head Survey Matrix

Gov pc 1 pc2 pc3 pc4 pv5 pc6 pc7 pc8 PC9 IT LEGAL CC FPNAAuditTRES HEACOMM sp OE Sec P REVGSCM VFI Civ M CS Glb op

Dan Reb Reb Reb Reb CindyCindyCindyCindyCindy Tim Lars SteveFrank Kat Lars Kate chris eeg Ian Ian Ger Scott Ian Tony Dirk

GCLA FT Staff Members 5 4 4 2 3 2 9 1 3 16 40 7 6 9 10 7 13 12 3 6 2 3 9 12 1 11 2 202 202Dept. Grow N Y N N N Y Y Y N N N N N Y N Y N N N N N N Y N N Y N 29%Dept. Shrink N N N N N N N N N N N N N N N N N Y N N N N N N N N N 96%Dept. Stay the Same Y N Y Y Y N N N Y Y Y Y Y N Y N Y N Y Y Y Y N Y Y N Y 67%Projected # Staff 3-5 yrs 5 6 4 2 3 3 11 2 3 16 40 7 6 13 10 10 13 11 3 6 2 1 10 12 1 12 2 214 <2% Annual# of People that work HM 2 0 4 0 0 2 0 1 3 1 5 0 0 0 7 4 0 5 2 2 0 0 3 0 0 1 0 42 42

# Days Per week 1 0 1 0 0 2 0 1 2 5 2 0 0 0 2 2 0 2 2 5 0 0 1 0 0 2 0 30 1.4Can Work HM 5 days WK N N N N N N N N N N N N N N N N N N N Y N N N N N N N N 4%# Guests Per Year 6 3 6 0 0 1 10 5 8 2 25 0 5 2 21 0 50 9 20 10 1 1 5 1 0 4 100 295 295Length of Stay Days 0 0 0 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0 0 0 3 9 3Weeks 2 1 1 0 0 0 1 1 2 2 1 0 1 1 1 0 1 2 0 1 1 2 0 0 0 1 0 22 1.3Months 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 3 0 0 0 4 1

P&C1 Professional Development Program P&C2 Business Partners

P&C3 Operations

P&C4 Payroll

P&C5 Chief people officer

P&C6 staffing Solutions

P&C7 Leadership development

P&C8 Org Development

P&C9 Total Rewards & People Sys.

75% Of our Depts Get Visitors

11% of those stay 3 days or less

62% stay a week

27% Stay longer than a week

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Conference Room Usage

Month/Year Total # of Reservations Total # of Hours

Oct 09 562 2,009

Nov 09 519 1,859

Dec 09 469 1,966

Jan 10 528 N/A

Feb 10 494 N/A

Mar 10 681 N/A

Apr 10 571 N/A

May 10 558 N/A

Jun 10 572 N/A

Jul 10 523 1,289

Aug 10 543 1,272

Sep 10 519 1,343

Note: Due to the IT database upgrade in January 2010, the summary of total hours was no longer available. Corp Svcs. worked with the IT department to include the information back into the database which became effective 7/2010.

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B. Market Feasibility

Conducted market feasibility studies, toured properties, met with various brokers to obtain information regarding availability, suitability, and market conditions etc. within a specific geographic area.

Boundary Map

Other Properties that were under Consideration

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C. Financial Feasibility

Financial Feasibility NPV Snapshot

Buy Via Verde

Buy Haven Rancho

Lease Via Verde

New Construction 840 EOY "A" Cash Flows

EOY "B" Cash Flows

EOY "C" Cash Flows

EOY "D" Cash Flows

0 ($5,227,500.00)

0 ($4,692,000.00)

0 ($403,400.00)

0 ($10,195,000.00) 1 ($1,073,776.00)

1 ($1,003,833.00)

1 ($921,254.00)

1 ($373,245.00)

2 ($1,081,596.00)

2 ($1,011,653.00)

2 ($1,240,015.00)

2 ($380,710.00) 3 ($1,089,573.00)

3 ($1,019,473.00)

3 ($1,271,927.00)

3 ($388,175.00)

4 ($1,097,708.00)

4 ($1,027,293.00)

4 ($1,304,690.00)

4 ($395,640.00) 5 ($1,106,007.00)

5 ($1,035,113.00)

5 ($1,338,328.00)

5 ($403,105.00)

6 ($1,114,472.00)

6 ($1,042,933.00)

6 ($1,372,866.00)

6 ($410,570.00) 7 ($1,123,106.00)

7 ($1,050,753.00)

7 ($1,408,327.00)

7 ($418,035.00)

8 ($1,131,912.00)

8 ($1,058,573.00)

8 ($1,444,737.00)

8 ($425,500.00) 9 ($1,140,895.00)

9 ($1,066,393.00)

9 ($1,482,124.00)

9 ($432,965.00)

10 ($1,150,057.00)

10 ($1,074,213.00)

10 ($1,520,512.00)

10 ($440,430.00) NPV

= ($13,779,465.45)

NPV = ($12,690,851.35)

NPV = ($10,518,273.12)

NPV = ($13,313,381.49)

CA $7,772,500.00

CA $8,308,000.00

CA $12,596,600.00

CA $5,790,400.00

After Sale of 800

Add 20,000 SF to 800 & Lease out 840 Building

Remodel 800 & 840

Hold and do Nothing EOY "E" Cash Flows EOY "E1" Cash Flows

EOY "F" Cash Flows

EOY "G" Cash Flows

0 ($3,368,123.00) 0 ($1,092,000.00)

0 ($2,273,500.00)

0 ($373,245.00) 1 ($373,245.00) 1 $546,383.00

1 ($373,245.00)

1 ($380,710.00)

2 ($380,710.00) 2 $565,232.00

2 ($380,710.00)

2 ($388,175.00) 3 ($388,175.00) 3 $584,697.00

3 ($388,175.00)

3 ($395,640.00)

4 ($395,640.00) 4 $604,795.00

4 ($395,640.00)

4 ($403,105.00) 5 ($403,105.00) 5 $625,547.00

5 ($403,105.00)

5 ($410,570.00)

6 ($410,570.00) 6 $646,975.00

6 ($410,570.00)

6 ($418,035.00) 7 ($418,035.00) 7 $669,098.00

7 ($418,035.00)

7 ($425,500.00)

8 ($425,500.00) 8 $691,939.00

8 ($425,500.00)

8 ($432,965.00) 9 ($432,965.00) 9 $715,521.00

9 ($432,965.00)

9 ($440,430.00)

10 ($440,430.00) 10 $739,867.00

10 ($440,430.00)

10 ($447,895.00) NPV

= ($6,486,504.49) NPV

= $3,775,903.97

NPV = ($5,391,881.49)

NPV = ($3,549,269.24)

CA $7,238,000.00 diff. ($2,710,600.52)

CA $0.00

CA $0.00 After Sale of 840

5% DR used on all scenarios to determine NPV CA= Cash Available

EOY= End of Year NPV=Net Present Value

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Options and Scenarios

Sell existing property and buy new office building:

This scenario is to sell the existing 800 & 840 buildings and use part of the proceeds from the sale to PURCHASE a new property of like kind for a lesser value.

A. 180 E. Via Verde San Dimas, CA B. 8656 Haven Rancho Cucamonga, CA

A. Via Verde San Dimas

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Pros

• Newer building built 2002

• Seller financing available

• Will be paid off in 10 yrs. Based on assumptions used.

• Good freeway visibility with signage opportunities

• All Herman Miller furniture is included in the Sale

• Easy freeway access and in close proximity to the 10,210,57,71 freeways

• Abundant Parking 4.4 /1000 ratio

• Benefits of ownership and property tax exemptions for non profit

Cons

• 5 million dollar down payment required for purchase

• Higher negative NPV for yrs. 1-10

• IT infrastructure costs estimated 850k

• Will increase the commute for 51% of the staff

• All hotels and eateries are 2miles away in three directions. Almost 4 miles away in one direction

• Does not have a warehouse

• Inferior location to the Monrovia Site

• Deal is subject to the sale of the Monrovia site and may not be available

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15

16

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CoStar Property® - Enlarge Image

http://property2.costar.com/...%202nd%20Floor-%202nd%20Floor&psDesc=2nd Floor, 34,966 SF&psPID=D371D64D5D8D0B0E8CA96B74A6F80DAC[10/15/2010 12:36:10 PM]

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Aerial Photo of the San Dimas Area

Closest hotel and eating establishment to the north, east, south are 2 miles away and 4 miles away from the west.

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B. Haven in Rancho Cucamonga

Pros


• Distressed Asset

• Great value at $6.5 million /$105.00 per SF

• Sublet opportunities to generate income to offset expenses for unused space

• Better NPV for years 11-20


• Benefits of ownership and property tax exemptions for non profit

Cons

• In Escrow

• 4.5 million dollar down payment required for purchase

• Warm shell, TI & IT costs will be approximately 2.7 million




• Inferior location to the Monrovia

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Sell existing property and lease new office building:

This scenario is to sell the existing 800 & 840 buildings and use part of the proceeds from the sale to LEASE a new property of like kind 5-10 year term with options to extend.

A. 180 E. Via Verde San Dimas, CA

Pros


• Will require only 400k initial outlay

• Better NPV for years 1-10

• Landlord will provide $1 million for tenant improvements

• Landlord will provide 5 months of rent abatement

• Good freeway visibility with signage opportunities

• All Herman Miller furniture is included in the lease

• Easy freeway access and in close proximity to the 10,210,57,71 freeways


Cons

• IT infrastructure costs estimated 850k


• All hotels and eateries are 2 miles away in three directions. Almost 4 miles away in one direction


• Very high negative NPV’s for years 11-20 and not suitable for long term leases above 10 yrs.


• No property tax exemptions as a lessee.

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Hold and add 20,000 SF to the 800 building and after the completion of construction lease out or sell the 840 building:

This scenario is a large capital project that will allow the entire staff to work out of a single office. It would require the staff in the 800 building to temporarily move to the 840 building, work from home, or leasing a 15,000 SF office may be necessary during the time of construction. Once the building project is completed the entire staff would relocate into the 800 building and the 840 building can be leased or sold. Lease 840 scenario will generate income to offset expenses of both buildings with positive cash flow over the long term. The Sale of 840 scenario will not generate residual income, but it will offset the construction expense associated with adding the 20,000 SF of the 800 building.

Pros

• 48,000 SF Facility would house the entire staff.

• Selling 840 would leave proceeds that would offset the cost of construction.

• Leasing 840 Would be the highest and best return on investment over a 20 year holding period

• Property tax base would increase slightly as opposed to a new purchase

• Remain in the same prime location

• IT and TI build out costs are substantially less than relocating into new space

Cons

• 9-12 months of construction

• Staff has to telecommute or temporary office space has to be secured.

• Entitlements may take 6-9 months

• Selling or Leasing 840 may take longer than expected and increase the timelines of recouping costs.

• CUP or variance may be required for parking

• Difficult to obtain construction financing in this market

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Cost of Improving the 800 Building

Only input the white fields that apply Square TI Paid to Remain to

Required Input Field Feet Cost/SF Budget date be paid

BUILDINGS

Total Square Feet 20,000 $ 4,000,000.00

Number of Staff Members 100 SF.PER PERSON Cost Per Person

Subtotal SF 20,000 200 $ 33,680.00

TOTAL COSTS $ 168.40 $ 3,368,000.00

Over/Under 2000 $ 632,000.00

Soft Costs

Architecture & Engineering $ 3.25 $ 65,000.00

Insurance $ 0.30 $ 6,000.00

Development Fees $ 7.00 $ 140,000.00

Legal $ 0.75 $ 15,000.00

Developer's Profit $ 17.50 $ 350,000.00

Construction Loan Carrying Costs $ 12.85 $ 257,000.00

1 Yr.Temporary Office Lease

$ 18.00 $ 360,000.00

5% Contingency $ 8.75 $ 175,000.00

Hard Costs $ - $ -

Shell Construction $ 70.00 $ 1,400,000.00

Tenant Improvements/IT $ 30.00 $ 600,000.00

Sub Garage $ - $ -

Other $ - $ -

Other $ - $ -

Tenant Improvement Costs Total $ 168.40 $ 3,368,000.00

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Cash Flow Analysis

Projected cash flow for leasing out the 840 building to a tenant.

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Demo and rebuild the 840 building and after completion of construction lease or sell the 800 building:

This scenario is a large capital project that will allow the entire staff to work out of a single office. It would require the staff in the 840 building to temporarily move to the 800 building, work from home, or leasing a 15,000 SF office may be necessary during the time of construction. Once the building project is completed the entire staff would relocate into the 840 building and the 800 building can be leased or sold. Lease 800 scenario will generate income to offset expenses of both buildings with positive cash flow over the long term. The Sale of 800 scenario will not generate residual income, but it will offset the construction expense associated with rebuilding 840.

Pros

• 50,000 SF brand new custom construction

• Facility would house the entire staff.

• Selling 800 would leave proceeds that would offset the cost of construction.

• Leasing 800 Would be the highest and best return on investment over a 20 year holding period

• Property tax base would increase slightly as opposed to a new purchase


Cons

• 10 million initial outlay for construction costs

• Maybe difficult to obtain financing under current market conditions



• Entitlements may take 6-9 months

• Selling or Leasing 800 may take longer than expected and increase the timelines of recouping costs.

• CUP or variance may be required

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Cost Breakdown for Rebuilding 840



BUILDINGS



Subtotal SF 50,000 227 $ 46,340.91

TOTAL COSTS $ 203.90 $ 10,195,000.00

Over/Under 10400 $ 105,000.00

Soft Costs

Architecture & Engineering $ 3.60 $ 180,000.00

Insurance $ 0.30 $ 15,000.00

Development Fees $ 8.50 $ 425,000.00

Legal $ 0.90 $ 45,000.00

Developer's Profit $ 19.00 $ 950,000.00

Construction Loan Carrying Costs Deferred $ 11.40 $ 570,000.00

1 Yr.Temporary Office Lease 15,000 SF $ 7.20 $ 360,000.00

5% Contingency $ 9.00 $ 450,000.00

Hard Costs $ - $ -

Shell Construction $80 SF $ 80.00 $ 4,000,000.00

Tenant Improvements / IT $45 SF $ 45.00 $ 2,250,000.00

Sub Garage $19 SF $ 19.00 $ 950,000.00

Other $ - $ -

Other $ - $ -


26

Projected cash flow of leasing out the 800 Building to a tenant.

27

Hold and remodel 800 & 840 buildings:

Carry on business as usual and make minimal cosmetic improvements like paint, new carpet, and updated furniture and fixtures without doing any major structural enhancements to both of the buildings.

Pros

• Cosmetic improvements will enhance the look of the offices

• Costs less than the other scenarios

• Does not allow for sublet opportunities as a way to generate income

• Property tax base would not increase


• Buildings operating expenses stay low

Cons

• Staff will continue to work out of both buildings


• Staff has to telecommute or temporary office space has to be secured during construction.

• To occupy two buildings is not an efficient use of the space

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Cost Breakdown for remodeling 800 & 840



BUILDINGS



Subtotal SF 41,000 186 $ 10,334.09

TOTAL COSTS $ 55.45 $ 2,273,500.00

Over/Under 1400 $ 326,500.00

Soft Costs

Design & Space Planning $ 1.24 $ 51,000.00

Insurance $ 0.09 $ 3,500.00

Permit Fees $ 0.10 $ 4,000.00

Legal $ 0.12 $ 5,000.00

Vendor's Profit $ 4.88 $ 200,000.00

Construction Loan Carrying Costs $ - $ -

1 Yr.Temporary Office Lease $ 8.78 $ 360,000.00

5% Contingency $ 2.44 $ 100,000.00

Hard Costs $ - $ -

Shell Construction $ - $ -

Tenant Improvements $30 SF $ 37.80 $ 1,550,000.00

Sub Garage $ - $ -

Other $ - $ -

Other $ - $ -


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Hold and Do Nothing:

Carry on business as usual without incurring large expense and re-evaluate in 3-5 years. Department needs should be addressed in this scenario and a revised space plan should be implemented in order to maximize the use of the office space with minimal costs.

Pros

• Cosmetic improvements will enhance the look of the offices

• Costs less than the other scenarios

• Does not allow for sublet opportunities as a way to generate income

• Property tax base would not increase


• Buildings operating expenses stay low

Cons

• Staff will continue to work out of both buildings



• To occupy two buildings is not an efficient use of the space

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Time Line

December 7, 2010: A presentation will be made at the all staff meeting, and the staff will have an opportunity to ask questions. The staff will also have December 13, 2010 to provide comments, concerns and suggestions. The information gathered will be used by the RE Committee making a recommendation. Concurrently, the departments will be meeting among themselves to identify their specific needs and will submit their proposals by January 7, 2011

December 13, 2010: All suggestions by the staff will be turned in.

December 14, 2010: RE Committee meets to review the project and should have a final recommendation sometime between December 15-23, 2010.

January 7, 2011: Final Decision

January 12-21: I’ll be away celebrating at home with baby number 3.

January 24, 2011: Start action items based on decision

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Documents

WV GCLA Repositioning Report