Investment Opportunity

Transcription

1 Investment Opportunity Historic Warehouse in Downtown Tucson Project Summary Southwest Urban is seeking capital for the acquisition and restoration of an historic brick warehouse in downtown Tucson. The property is currently used as a commercial truck parts & repair business and is well suited for continued commercial use. The combination of the architectural and historic character along with its downtown location, makes this a desirable location for a variety business. Moderate modifications will allow the large building to be split into smaller commercial spaces as tenants lease space. I. Property Description Property address: 301 West 4th Street, Tucson, Arizona Year built: 1925 Neighborhood: Dunbar Spring Tax code (assessor): Taxes: $10, (2014 tax year) Construction: Brick with barrel vault ceilings Building size: 10,000 SF (assessor) Lot size: 34,334 SF (assessor) Building height: 22 Feet Zoning: I-3

2 II. Acquisition Details Purchase price: $ 525,000 ($ 52.50/SF) Inspection status: The property has completed Phase I and Phase II environmental reports. These investigations were critical given the historical use of the property as a warehouse, taxi service center, and most recently a repair shop. Despite the potential for major environmental concern, both reports indicate no contamination. The purchase of the property is contingent upon the Seller removing their current oil separator (used to prevent any oils from entering the soil or public sewer system) and providing proof that is was done properly and caused no environmental contamination. In addition to the more involved environmental investigation, more traditional inspections were also performed. Given the age of the property and its use there was an expectation certain components would need to be replaced and brought up to modern standards.

3 III. Proposed Project Development The existing I-3 zoning will be maintained as it allows for a wide range of commercial uses. In addition, the project falls within the COT Infill Incentive District, alleviating needs for a re-zoning for almost any use including potential conversion to residential use in the future. Several commercial tenants have already expressed interest and we are in pre-leasing discussions with brokers. The warehouse building is divided into two 5,000 square foot sections, each with 22' high barrel ceilings. The open architecture and height provide the opportunity to add loft space to increase the leasable area by at least 30%. This current configuration is excellent as it affords maximum flexibility within all the development options. All options will require the base to be in grey-shell condition to make the building leasable. Therefore, the plan will include immediately completing site improvements for access, parking and landscaping along with exterior aesthetic improvements. Roof replacement, re-opening of windows, and interior cleaning will allow the space to be shown and leased. As the space is leased the building can be demised and configured depending on the mix of tenants. Having two 5,000 square foot sections that can easily be further demised provides an optimal leasing scenario where we can market larger and smaller spaces. The initial cost for making the space clean and leasable is approximately $100,000. If further investment is needed for leas ability to tenants those costs can be financed once leases are executed and the cash flow from leases can cover the financing of the improvements. GPLET Incentives - The property is eligible for the Infill District and the Government Property Lease Excise Tax (GPLET) incentives. This relieves property owners from parking, loading, and landscaping standards, as well as certain other design requirements to allow height increases up to sixty feet in more restrictive zones, if the development supports transit and pedestrian oriented development. Developers also benefit from a streamlined Planned Area Development rezoning process. The GPLET is awarded to qualifying properties located within the Central Business District and provides up to eight years of property tax abatemen t. Project Timeline IV. Project Plan Construction period: 4 months Lease out space: 4 months (after construction period ends) *pre-leasing will occur during construction which should shorten the amount of time any vacant space remains after the space is ready for occupancy. Plan Highlights Purchase property, begin site work and building improvements (roof, HVAC, systems) Begin marketing space immediately - We have the versatility of marketing to an array of users given the flexibility of the space Upon project completion and developing an operating history, the project will be marketed for sale (3 year time-frame maximum, likely much shorter)

4 Lease rates will be approximately $12.00 per SF base. Although we anticipate to increase lease rates annually as part of (lease) contract provisions, no rate increases are included in the pro-forma analysis. Tenant leases will be triple net, meaning tenants pay a pro-rata share of taxes, insurance, and common area maintenance (CAM) expenses in addition to the lease rate. V. Capital Investment & ROI Equity Sought: $ 600,000 Investors will receive 60% of all net cash-flow throughout the ownership life of project. The capital will be used to complete the purchase of the property and cover holding costs for 1 year, including taxes, insurance and maintenance as well as soft costs for such as architectural and engineering work needed for the restoration. The actual improvement of the building to make it lease ready is financed through a development (construction) loan. The amount depends upon how the lease units are demised, three options are shown below. Marketing efforts were started early in the process and will identify the best development option based on tenants secured. The construction loan will be structured to automatically convert to permanent financing at the end of the 12-month loan term. The ownership entity will be an LLC created for the specific and sole use of this project. The managing (class A) member of the ownership entity is a partnership between Southwest Urban Development, LLC, an entity owned by Len Casebier and Adam Lundquist, who are licensed real estate agent / brokers and owners of Southwest Urban Realty and Development and Central Barrio Development, LLC, and entity owned by Hector Jimenez. Investors are class B (non-managing) members of the ownership entity, with their ownership interest based on the pro-rata share of their investment.

5 Investment Analysis Base Rental (Two 5,000 SF grey shells) Purchase Price $ 600, Rehab Cost $ 150, Total Investment $ 750, Rents (Annual) $ 120, Taxes $ 11, Insurance $ 5, Debt Service $ 12, NOI $ 92, Cash on Cash during Hold 12% Project Sale Price $ 975, Return $ 225, Cash on Cash Return 30%