OFFERING MEMORANDUM E. CAMPBELL AVENUE, CAMPBELL, CA SITE E. CAMPBELL AVE. WINCHESTER BLVD.

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1 OFFERING MEMORANDUM E. CAMPBELL AVE E. CAMPBELL AVENUE, CAMPBELL, CA WINCHESTER BLVD. SITE CLARK STEELE LIC # MARYANNA MCSWAIN LIC # ERIK HALLGRIMSON LIC #

2 BUILDING HIGHLIGHTS OWNER / USER OFFERING MEMORANDUM E. CAMPBELL AVENUE TABLE OF CONTENTS CLARK STEELE clark.steele@cushwake.com LIC # MARYANNA MCSWAIN maryanna.mcswain@cushwake.com LIC # ERIK HALLGRIMSON erik.hallgrimson@cushwake.com LIC # Santana Row, Fifth Floor San Jose, CA P F DISCLAIMER GUIDELINES FOR SUBMITTING OFFERS BAY AREA OVERVIEW Employement Trends Multifamily Trends Multifamily Submarket Breakdown LOCAL MARKET INSIGHT Silicon Valley Retail Campbell Retail Statistics EXECUTIVE SUMMARY Property Information Site Photos Parcel Map Income Projections Amenities Map Transportation Map cushmanwakefield.com November 2017

3 DISCLAIMER Cushman & Wakefield Commercial Real Estate Services, Inc., dba Cushman & Wakefield has been engaged as exclusive advisors to st Avenue LLC (the Seller ), in connection with Seller s solicitation of offers for the purchase of E. Campbell Avenue located in Campbell, California ( The Property ). Said solicitation and potential sale to be governed by this Confidential Offering Memorandum, as it may be modified or supplemented (the Offering Memorandum ) and a purchase agreement. Prospective purchasers are advised that as part of the solicitation process, Seller will be evaluating a number of factors including the current financial qualifications of the prospective purchaser. Prospective purchasers are further advised that the Seller expressly reserves the right in its sole and absolute discretion to evaluate the terms and conditions of any offer and to reject any offer without providing a reason therefore. Further, Seller reserves the right to terminate the solicitation process at any time prior to final execution of a purchase agreement. The Property is being offered on an AS IS basis. This Offering Memorandum is furnished to prospective purchasers on a confidential basis solely for the purpose of prospective purchasers determining whether to submit an offer to purchase the Property. The information contained herein, or any other related information provided by Seller may not be reproduced or redistributed or used in whole or in part for any other purpose. No person has been authorized to give any information or to make any representation or warranty, either express or implied, other than those contained in an executed purchase agreement subject to any disclaimer or limitations set forth therein, and if given or made in any other form, such information or representation should not be relied upon. While Seller has no reason to believe that the information provided herein, or in the due diligence materials, contain any material inaccuracies, neither Seller nor any of its respective officers, directors, shareholders, owners, employees, agents, members, managers, etc., make any representations or warranties, express or implied, as to the validity, accuracy or completeness of the information provided or to be provided except as may be set forth in an executed purchase agreement, subject to any disclaimers or limitations set forth therein. Without limiting the generality of the foregoing sentence, nothing herein shall be deemed to constitute a representation, warranty or promise by Seller nor any of its respective officers, directors, shareholders, owners, employees, agents, members, managers, etc., as to the future performance of the Property or any other matters set forth herein. A prospective purchaser s sole and exclusive rights with respect to this prospective transaction, the Property, or information provided herein or in the Due Diligence Materials, shall be limited to those expressly provided in an executed purchase agreement and shall be subject to the terms thereof. In no event shall a prospective purchaser have any other claims against Seller or any of its officers, directors, shareholders, owner s employees, agents, members, managers, etc., for any damages, liability, or causes of action relating to this solicitation process or the marketing or sale of the Property. Prospective purchasers are not to construe the contents of this Offering Memorandum, any Due Diligence Materials or any prior or subsequent communications from Seller or any of its respective officers, directors, shareholders, owners, employees, agents, members, managers, etc. as legal, tax or other advice. Prior to submitting an offer, prospective purchasers should consult with their own legal counsel and personal and tax advisors to determine the consequences of an investment in the Property and arrive at an independent evaluation of such investment E. CAMPBELL AVENUE 3

4 GUIDELINES FOR SUBMITTING OFFERS All proposals shall be submitted with escrow to be opened at First American Title National Commercial Services (2755 Campus Drive, Suite 125, San Mateo, CA Attn: Shelly Siegman ). The Seller will consider only those proposals submitted at the invitation of the Seller or its exclusive advisor, Cushman & Wakefield. The Seller reserves the right to reject any or all proposals, or to withdraw this offering at any time without notice. All offers must be based on AS IS and WHERE IS condition, with NO FAULTS in the broadest sense of the term. The Seller reserves the right to choose and negotiate exclusively with any party at any time. The Seller also reserves the right to agree to any terms and conditions at Seller s sole discretion. All inquiries about this offering and the property are to be directed to Clark Steele, Maryanna McSwain or Erik Hallgrimson of Cushman & Wakefield at the address and phone numbers below: CLARK STEELE clark.steele@cushwake.com LIC # MARYANNA MCSWAIN maryanna.mcswain@cushwake.com LIC # ERIK HALLGRIMSON erik.hallgrimson@cushwake.com LIC # E. CAMPBELL AVENUE 4

5 BAY AREA OVERVIEW NORTHERN CALIFORNIA BAY AREA EMPLOYMENT & UNEMPLOYMENT TRENDS The unemployment rate in the Bay Area was 3.7% in June 2017, up from 3.6% in March and below the 4.2% one year ago. With a total labor force at 4.1 million, the region currently employs just under 4.0 million of its residents. The Bay Area continued its strong job growth momentum, adding 79,700 nonfarm jobs from a year ago. Since its unemployment peak of 11.7% in the first quarter of 2010, 699,800 jobs have been created across the region. BAY AREA JOB GROWTH TRENDS EMPLOYMENT IN MILLIONS & JOB GROWTH (%) % 3.0% ECONOMIC EXPANSION The following are select announcements from second quarter 2017: a a a a Leasing in San Francisco was driven by mid-sized deals in the second quarter though two large expansions were completed just after the close of the quarter Airbnb for 287,000 square feet (sf) and Amazon for 180,000 sf. Biotech was hot in the East Bay as Zymergen expanded by 303,000 sf in Emeryville while Exelixis expanded by 111,000 sf in Southern Alameda. The Apple spaceship, otherwise known as Apple Park, officially opened in the second quarter in Silicon Valley; it will hold approximately 12,000 employees in its 3.4 million square feet. For San Mateo County, it was about renewal/expansion leases under 100,000 sf in the second quarter including Coupa Software at 69,000 sf and IXL Learning at 67,000 sf % Q Q Q FORECAST % Labor Force (% Change) 0.8% -0.2% -0.2% Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Source: BLS.Gov YOY % Job Growth 0.0% EMPLOYMENT (% Change) 1.6% 0.3% -0.3% UNEMPLOYMENT RATE (%) 4.3% 4.2% 3.7% JOB GROWTH & UNEMPLOYMENT RATE % YOY BPS YOY Q2 employment Q2 unemployment increased by 79,700 jobs. decreased to 3.7%. Forecast is 12-month outlook OUTLOOK Total job growth has slowed across the region over the first half of 2017; that said, tech companies continue to look to add positions over the next year particularly in transit-oriented locations. Delivering by the end of this year will be Salesforce Tower in San Francisco, the tallest office building east of the Mississippi. It is expected to open at almost 100% leased. Tech companies are getting into the housing game with both Facebook and Google planning to construct affordable housing on or near their Silicon Valley campuses E. CAMPBELL AVENUE 5

6 BAY AREA OVERVIEW NORTHERN CALIFORNIA BAY AREA MULTIFAMILY TRENDS Year-over-year asking rent growth showed signs of cooling off, sliding by -1.4% to $2,639 while vacancy ticked up +10 basis points (bps) to 3.9%. Asking rent and vacancy are still forecasted to increase over the next 12 months % YOY BPS YOY Average asking rent decreased to $2,639. Vacancy increased to 3.9%. HISTORICAL & FORECASTED METRO RENT GROWTH RATES The average one-year historical asking rent growth rate decreased modestly, -1.4% from second quarter 2016 to second quarter 2017, compared to +8.9% over the previous one-year period. Both new construction and value-add properties are contributing a higher percentage of affordable housing to curb increasing rental rates. The one year projection still calls for a +3.8% increase by the end of 2017 while the five year projection is for a +20.1% increase by year-end These rates will add further stress to the nation s most expensive market. 60.0% 50.0% 40.0% BAY AREA RENT GROWTH RATES 38.9% DEVELOPMENT / INVENTORY The number of units under construction in the Bay Area is currently over 25,000. In the past 12 months, approximately 14,600 units have delivered. Over 3,100 units were built in the second quarter and more than 6,400 have been delivered year-to-date. This indicates that, while supply is robust, renter demand and demographic growth are also strong. Inventory has grown year-over-year at a rate of 2.0% and will likely reach 2.7% by the end of DEMOGRAPHIC FUNDAMENTALS The Bay Area is continuing to attract residents in a flourishing tech-boom cycle. Millenials are attracted to urban living with convenient amenities, efficient transportation and on-demand services. Residents age years making $150,000+ account for 29.6% of the population in San Francisco County and 23.6% of the population in Santa Clara County. POPULATION PERSONAL INCOME MEDIAN HOUSEHOLD INCOME 2010: 7,265, : 7,721, : 7,763, : 8,009, : $105, : $146, : $155, : $182, : $74, : $90, : $94, : $110, % 20.0% 24.0% 24.8% MULTIFAMILY FORECAST The following are Cushman & Wakefield s projections over the near term. 10.0% 0.0% -0.8% -0.2% -0.1% -1.4% -10.0% 4Q16 1Q17 2Q17 1 Year Historical 3 Year Historical 5 Year Historical 5 Year Forecast RENTS VACANCY PIPELINE % GROWTH E. CAMPBELL AVENUE 6

7 BAY AREA OVERVIEW MULTIFAMILY SUBMARKET BREAKDOWN It was a mixed bag regarding the year-over-year changes in average asking rents across the Bay Area: East Bay (+4.1%), San Mateo (+3.7%), North Bay (+3.7%), Santa Clara (+1.3%), San Francisco (-3.6%). San Francisco s housing crisis has begun to wane partially due to the spillover effect in neighboring East Bay ($2,259) and San Mateo ($2,781); rental rates in these markets are forecasted to reach $2,560 and $3,283 by Construction of roughly 29,000 units over the next five years should provide some relief to the Bay Area s housing shortage driving inventory to 482,000 units. About a third of the units are slated to be delivered by end of RENTS & VACANCY BY SUBMARKET San Francisco $3,373 San Francisco 5.01% Peninsula $2,781 South Bay 4.28% South Bay $2,515 Peninsula 3.61% East Bay $2,211 East Bay 3.09% North Bay $1,873 North Bay 2.75% Source: REIS E. CAMPBELL AVENUE 7

8 LOCAL MARKET INSIGHT SILICON VALLEY RETAIL Market Indicators Q3 16 Q3 17 % Growth (1 Year) Overall Vacancy 5.0% 4.6% -40 BPS Net Absorption (SF) 192,000-27, % Under Construction (SF) 574, , % Average Asking Rent (NNN) $29.48 $ % 12-Month Forecast SUBMARKET OVERALL VACANCY RATE OVERALL AVERAGE ASKING RENT (NNN) Campbell 4.0% $37.86 Sunnyvale/Cupertino 3.5% $36.11 Santa Clara 5.0% $26.07 Palo Alto/Mountain View/ Los Altos 3.7% $43.83 Milpitas/North San Jose 6.9% $30.26 Morgan Hill/Gilroy 5.4% $26.30 Average Asking Rent by Market (NNN) Rental Rate vs. Overall Vacancy $35 8% $50 $45 $40 $35 $30 $25 $20 $15 $43.83 $36.11 $31.25 $30.26 $26.30 $26.07 $30 $25 $20 $15 $10 $5 $ Q3 17 7% 6% 5% 4% 3% 2% 1% 0% $10 Palo Alto/ Mountain View/ Los Altos Sunnyvale/ Cupertino San Jose (DT/South)/ Campbell/ Los Gatos Milpitas/ North San Jose Morgan Hill/ Gilroy Santa Clara Asking Rent, $ PSF (NNN) Overall Vacancy Rate E. CAMPBELL AVENUE 8

9 LOCAL MARKET INSIGHT CAMPBELL RETAIL STATISTICS VACANCY 4.0% YOY RENT 2.1% GROWTH AVG. NNN ASKING RATE $37.86 YOY RENT 2.7% GROWTH E. CAMPBELL AVENUE 9

10 EXECUTIVE SUMMARY LOCAL CAMPBELL MARKET E Campbell Avenue is located in the heart of downtown Campbell. The site is a short walk to light rail and minutes away from Highway 17. From Campbell, you also have easy access to Highways 87, 280, 101 and the San Jose International Airport. Both San Jose International Airport and Downtown San Jose are only 10 minutes away. All major freeways can easily be accessed from the site along with San Tomas Expressway. These abundant transportation options offer a brief minute drive to all major destinations in the South Bay Area. MULTIFAMILY In recent years, the local Campbell market has undergone significant redevelopment in all major sectors. Nearly 300 residential units are under construction in the immediate downtown area alone with numerous other projects in the planning or construction phase. Transportation oriented development in the region continues to boom and Campbell itself is no exception. Several other developments have been announced along Bascom Avenue and Union Avenue, as residential growth in the city remains very strong. RETAIL The Retail market in Campbell remains robust with rates increasing 2.7% from this time last year to $3.16 per square foot on a monthly triple net basis. With new product coming to the market and a diminishing inventory of Class B/C retail options, rates are projected to rise further in the quarters ahead. Vacancy is holding very low at 4.0%, down from it s peak of 7.9% in As more residential development rises in the city, expect a greater concentration of retailers to continue moving into the city. Supported by a very popular downtown core and great access to transportation, Campbell s retail market is poised for continued growth. OFFICE The cities office market continues to surge and add product nearby with 177,000 SF recently completed on Creekside Way along with another 150,000 SF planned in The Pruneyard. One example of an overall uptick in investment activity throughout the city is the former fruit canning plant named The Cannery in downtown Campbell which is undergoing a significant renovation. Upon completion, the project will deliver nearly 100,000 SF of creative SOMA style space to the downtown core, adding even more support to a very strong downtown retail climate E. CAMPBELL AVENUE 10

11 PROPERTY INFORMATION BUILDING HIGHLIGHTS Downtown Campbell location 0.12 acres on two parcels Mixed-use site with residential & retail Downtown Specific Plan Zoning In-place retail lease income until 2021 Below market apartment rates Local landmark retail location Near Winchester Blvd Urban Village area 7 minute walk to Campbell Light Rail Station 15 minute walk to The Pruneyard E. CAMPBELL AVE. SITE SUMMARY Address E. Campbell Avenue, Campbell Owner st Avenue LLC Building Size Retail: ±1,563 SF / Residential: ±600 SF Lot Size: 0.12 acres (2 parcels) Year Built 1939 APN & Purchase Price - $1,700,000 Current Occupancy Fully Leased WINCHESTER BLVD. SITE E. CAMPBELL AVENUE 11

12 SITE PHOTOS E. CAMPBELL AVENUE 12

13 PARCEL MAP E. CAMPBELL AVENUE 13

14 INCOME PROJECTIONS ANNUAL RETAIL LEASE INCOME - NNN PROJECTED ANNUAL INCOME - RETAIL & RESIDENTIAL $100K $90K $80K $70K $60K $50K $40K $30K $20K $10K $ $56K $59K $61K $63K $66K $68K $71K $73K $76K $79K $100K $90K $80K $70K $60K $50K $40K $30K $20K $10K $ $71K $73K $75K $78K $80K $82K $85K $88K $91K $94K In-place Lease Income Projected Income - Option Term In-place Lease Income Projected Income - Option Term - Assumes 3% standard market increase upon renewal. - Option to renew includes 4% increases reflected in years Assumes flat in-place residential rent of $1,200/month throughout both periods E. CAMPBELL AVENUE 14

15 S 4th St S 3rd St S 1st St AMENITIES MAP mi mi 3 W Campbell Ave mi 2 Winchester Blvd N 3rd St N 2nd St N 1st St E Campbell Ave 1 E Campbell Ave PROPERTY Civic Center Dr Orchard City Dr Winchester Blvd S 2nd St Civic Center Dr mi 2.2 mi mi 7 Orchard City Dr 6 Central Ave Railway Ave 1.1 mi 1.0 mi 0.4 mi 0.8 mi 0.8 mi EAT 1. Willard Hicks 2. Opa 3. Aqui s 4. Brown Chicken Brown Cow 5. Nashmarkt 6. Liquid Bread Gastropub 7. A Bellagio Italian 8. Blueline Pizza 9. Stacks 10. Mo s Breakfast and Burger Joint 11. Tigelleria Organic Restaurant 12. La PanotiQ SEE 1. Downtown Campbell Farmer s Market 2. Ainsley House 3. Heritage Theaters 4. Campbell Historical Museum PLAY 1. Recycled Bookstore 2. Orchard Valley Coffee 3. Starbucks 4. Flights 5. Tessora s Barra De Vino 6. Khartoum STAY 1. The Doubletree Campbell 2. Bristol Hotel 3. Courtyard San Jose Campbell 4. Larkspur Landing Campbell 5. Campbell Inn 6. Residence Inn BANK 1. Bank of America 2. Bank of the West 3. Chase Bank 4. Citibank 5. Wells Fargo E. CAMPBELL AVENUE 15

16 TRANSPORTATION MAP SUNNYVALE 20 MIN. Lawrence Expy SANTA CLARA 15 MIN W Fremont Ave 85 Sunnyvale Saratoga Rd Sunnyvale Saratoga Rd CUPERTINO 10 MIN G4 DIRIDON 280 STATION 280 Saratoga Ave Lawrence Expy Stevens Creek Blvd 85 G4 Hamilton Ave PROPERTY Saratoga Ave CAMPBELL S Bascom Ave S Bascom Ave SAN JOSE INTERNATIONAL AIRPORT 10 MIN. W San Carlos St Hamilton Ave PRUNEYARD 11 MIN. VIA LIGHT RAIL Hillsdale Ave DOWNTOWN SAN JOSE 10 MIN. Almaden Expy Monterey Rd Tully Rd 101 G21 Monterey Rd Camden Rd E. CAMPBELL AVENUE 16