Offering Memorandum 22 Elm Street, Worcester, Massachusetts Investment/Redevelopment Opportunity $1,400,000.00

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1 FIRST CLASS OFFICE BUILDING FOR SALE Executive Summary As exclusive sales agent, Kelleher & Sadowsky Associates, Inc. would like to introduce 22 Elm Street in Worcester, Massachusetts, a ±44,782 square foot four story professional office building. The historic building, constructed circa 1920 (City of Worcester Assessor s Department), underwent a $6 million renovation in 1988 during which the building received a new primary entrance with rich marble floors and solid polished cherry paneling along the trim and doors. Additionally, the renovation included new electrical and mechanical systems serving both the common and tenant areas. The building boasts substantial net operating income, and is very well located in the heart of downtown Worcester. Offering Memorandum 22 Elm Street, Worcester, Massachusetts Investment/Redevelopment Opportunity $1,400, Table of Contents Worcester At A Glance.2 Market Overview...4 Property Description.9 Income & Expenses. 10 Plot Plans. 13 Photos..15 Floor Plans...18

2 Worcester at a Glance All great cities share certain traits - a vibrant, undeniable energy and culture that drives their growth and characterizes their livability. They are easily accessible and welcoming to business and families alike. With strong roots in a proud past, great cities also are progressive - innovating, collaborating, busy building their own successful future. Worcester, the second largest city in New England with a population of ±184,000, offers a vibrant culture in the Heart of the Commonwealth of Massachusetts. Located just 36 miles from Boston, and in close proximity to Providence and Hartford, the city has vibrant and undeniable energy, with a high population of students and strong workforce. Worcester has a high concentration of world-class colleges and universities, including the University of Massachusetts Medical School, Worcester Polytechnic Institute, College of the Holy Cross, Clark University, Assumption College, the Massachusetts College of Pharmacy and Health Sciences and Tufts Cummings School of Veterinary Medicine. Worcester is a smart city. Students choose Worcester for its quality colleges and universities - and for the proximity to some of the world's most innovative companies. Companies choose Worcester for the students, who fuel the engine of the city's strong economy - as consumers and as industrious, inventive and energetic employees. Thirty-eight percent (38%) of all jobs in the city are in the education and medical fields. Over thirty-six percent (36%) of residents between the ages of 25 and 34 have a bachelors or post-graduate degree, placing Worcester among the leaders of all New England cities. This unusual concentration of intellectual capital and proximities to the best medical facilities and teaching hospitals - combined with a robust business community, has helped Worcester to become a world-renowned center for research and development in biotechnology and the life sciences. Page 2

3 Worcester at a Glance Worcester Population: ±184,000 Worcester Metro Population: ±913,000 Population within 50 miles: ±6 million Land Area: 38.6 square miles FY14 Area Median Family Income: ±$80,000 No. of Worcester based Businesses: ±8,800 Payroll of Worcester Employers: $4.8 billion FY16 Residential Tax Rate: $20.61 per $1,000 FY16 Commercial Tax Rate: $33.98 per $1,000 Certified Projects Designated: 50+ Downtown Office Space: 4.75 million square feet Class A Office Occupancy (2016): ±87.7% Class A Office Rents (2016): $21.01/RSF, gross (average) No. of Hotel Rooms: ±739 w/ three additional hotels planned in 2016/2017 Colleges in Greater Worcester: 13 Number of College Students: ±36,000 NIH Annual Funding ( ): ±$250M MBTA Commuter Trains to Boston: ±18 daily MBTA Passengers to Boston: 1,300 daily WRTA Annual Passenger Trips: 3.04 million Page 3

4 Market Overview Worcester is one of the regions most stable submarkets, consistently outperforming other Boston submarkets. According to the Co-Star Group ( ), the leading commercial real estate information company, the City of Worcester has an office market comprised of more than ±16.9M square feet in aggregate, of which ±1.93M square feet is considered to be Class A in nature. With significant absorption over the past several years, the most recent market survey illustrates a 6.0% vacancy rate. In comparison to other markets, Worcester has some of the lowest vacancy rates in the Commonwealth of Massachusetts, offering long-term stability, even during times of economic volatility. Of significance is the positive absorption over recent years, along with a steady increase in base rental rates. With the recent construction of the Unum building located at 1 Mercantile Street, and the new construction of 50 Prescott Street at Gateway Park, Worcester has seen an unprecedented increase in higher end rents. Not long ago Class A rents hovered around $ $20.00 per square foot, while the market has now pushed beyond $30.00 per square foot, gross, in many instances. As the economy continues to strengthen, it is anticipated that rents will continue to rise. With convenient access to a highly educated workforce, the Worcester office market is poised for growth. Page 4

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9 Property Description Address: 22 Elm Street, Worcester, MA MBLU: 03 / // Book & Page: / 101 Building Size: 44,782 SF Usable Space: 34,844 SF Condition: Above Average Year Built: Circa 1920 Stories: Four (4) including full basement Elevators: Three (3) Passenger Zoning: BG-6 Fire Protection: Sprinkle system Roof System: Ballast Utilities: Municipal Parking: Pearl-Elm Garage (±800 spaces) Approx. 20 spaces on parking deck behind building 22 Elm Street in Worcester, Massachusetts is an office building that is located in the heart of Worcester s Central Business District. The four-story, ±34,844 square foot building is located in close proximity to all major highway systems, and is surrounded by many area amenities including Mechanics Hall, The DCU Convention Center, United States Federal Courthouse, City Hall, and many restaurants, banks, and shopping destinations. Page 9

10 22 ELM STREET WORCESTER, MA PRESENTATION RENT ROLL & CURRENT TERM TENANT SUMMARY As of August 2016 Monthly Annual Annual Lease Lease Type Suite # Area Lease From Lease To Term Rent Rent Rent Per SF TENANT Fallon Community Health Plan Gross G125 1,661 5/1/1993 3/31/ Years $2, $17.50 $29,068 Fallon Community Health Plan Gross G150 2,782 11/1/2004 3/31/ Years $4, $17.50 $48,685 Hertz Investment Management Office Gross /6/ /31/ $ - $0.00 $0 Great-West Life & Annuity Gross 130 1,351 3/1/ /30/ Years $1, $17.50 $23,643 Fallon Community Health Plan Gross 300 2,302 1/1/1994 3/31/ Years $3, $17.50 $40,285 CDM Smith Inc. Gross 310 1,500 1/1/2014 6/30/ Years $2, $16.39 $24,585 Newbury Investment Partners Gross 330 1,480 10/1/2010 9/30/ Year $2, $17.39 $25,737 Feingold & Feingold Insurance Gross 400 6,500 5/1/2016 4/30/ Years $7,800 $14.40 $93,600 Fallon Community Health Plan Gross SG /1/2014 3/31/ Years $578 $6,936 Vacant G100 1,272 Vacant G Vacant 110 3,500 Vacant 150 2,567 Vacant 200 1,800 Vacant 320 2,783 Vacant 420 3,845 Totals: 34,844 $ 24,378 $292,538 Page 10

11 22 ELM STREET WORCESTER, MA PRESENTATION RENT ROLL & CURRENT TERM TENANT SUMMARY Projected Stabilized as of August 2017 Monthly Annual Annual Lease Lease Type Suite # Area Lease From Lease To Term Rent Rent Rent Per SF Tenant Improvements TENANT Fallon Community Health Plan Gross G125 1,661 5/1/1993 3/31/ Years $2, $17.50 $29,068 Fallon Community Health Plan Gross G150 2,782 11/1/2004 3/31/ Years $4, $17.50 $48,685 Hertz Investment Management Office Gross /6/ /31/ $ - $0.00 $0 Great-West Life & Annuity Gross 130 1,351 3/1/ /30/ Years $1, $17.50 $23,643 Fallon Community Health Plan Gross 300 2,302 1/1/1994 3/31/ Years $3, $17.50 $40,285 CDM Smith Inc. Gross 310 1,500 1/1/2014 6/30/ Years $2, $16.39 $24,585 Newbury Investment Partners Gross 330 1,480 10/1/2010 9/30/ Year $2, $17.39 $25,737 Feingold & Feingold Insurance Gross 400 6,500 5/1/2016 4/30/ Years $7,800 $14.40 $93,600 Fallon Community Health Plan Gross SG /1/2014 3/31/ Years $578 $6,936 Vacant* G100 1,272 N/R $0 $0.00 $0 Vacant* G $868 $12.00 $10,416 Vacant* 110 3,500 $4,958 $17.00 $59,500 Vacant* 150 2,567 $3,637 $17.00 $43,639 Vacant* 200 1,800 $2,550 $17.00 $30,600 Vacant* 320 2,783 $3,943 $17.00 $47,311 Vacant* 420 3,845 $3,845 $12.00 $46,140 Totals: 34,844 $44, $530,144 N/A N/A N/A N/A N/A N/A N/A N/A N/A $19,000 $13,000 $87,500 $51,340 $18,000 $42,000 $96,000 $326,840 Leasing Commissions on New Space 83,175 *New leases are expected to escalate at 2% per year Page 11

12 22 ELM STREET, WORCESTER, MASSACHUSETTS 22 ELM STREET WORCESTER, MASSACHUSETTS Investment Analysis Project Costs Acquisition Cost $1,400,000 Debt Terms Valuation Closing Costs $40,000 LTV 75% NOI YR 2 $ 212,794 Tenant Improvements for Future Leasing $410,000 Rate % Cap Rate YR % HVAC Capital Upgrades $200,000 Amort 25Yr Value $ 2,364,382 Total Project Cost ($2,050,000) Term 5Yr PSF $ DCSR 1.20x Actual LTV 65.03% Debt & Equity Actual LTC 75.00% 1st Mortgage $1,537,500 Debt Service ($92,365.05) Borrower Equity $512,500 Monthly ($7,697.09) $2,050,000 5 YR CASH FLOW Year 1 Year 2 Year 3 Year 4 Year 5 For the Years Ending Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 POTENTIAL GROSS REVENUE $ 292,537 $ 530,144 $ 540,747 $ 551,562 $ 562,593 Scheduled Base Rental Revenue $ 292,537 $ 530,144 $ 540,747 $ 551,562 $ 562,593 EXPENSE REIMBURSEMENT REVENUE Real Estate Tax Reimbursement $ 441 $ 450 $ 459 $ 468 $ 477 Opex Reimbursement $ 2,402 $ 2,450 $ 2,499 $ 2,549 $ 2,600 Total Reimbursement Revenue $ 2,843 $ 2,900 $ 2,958 $ 3,017 $ 3,077 TOTAL POTENTIAL GROSS REVENUE $ 295,380 $ 533,044 $ 543,705 $ 554,579 $ 565,671 Vacancy & Credit Loss (5%) ($26,652) ($27,185) ($27,729) ($28,284) EFFECTIVE GROSS REVENUE $ 295,380 $ 506,392 $ 516,520 $ 526,850 $ 537,387 EXPENSES Insurance ($8,711) ($8,885) ($9,063) ($9,244) ($9,429) Real Estate Taxes* ($43,000) ($43,860) ($44,737) ($45,632) ($46,545) Operating Expenses** ($210,000) ($214,200) ($218,484) ($222,854) ($227,311) Management Fees (5%) ($14,769) ($26,652) ($27,185) ($27,729) ($28,284) Total Expenses & Real Estate Taxes ($276,480) ($293,597) ($299,469) ($305,459) ($311,568) NET OPERATING INCOME $ 18,900 $ 212,794 $ 217,050 $ 221,391 $ 225,819 Debt Balance (1,537,500.00) (1,498,322.96) (1,457,752.51) (1,415,739.09) (1,372,231.38) Draw Princ. Pmt 39, , , , , End Balance (1,498,322.96) (1,457,752.51) (1,415,739.09) (1,372,231.38) (1,327,176.23) Debt Service ($92,365) ($92,365) ($92,365) ($92,365) ($92,365) DSCR Capital Replacement ($0.15/SF) ($5,226.60) ($5,226.60) ($5,226.60) ($5,226.60) ($5,226.60) CASH FLOW $ (78,692) $ 115,203 $ 119,459 $ 123,800 $ 128,227 Projects Revised Market Assessment from City of Worcester **Estimated at $6.00 PSF as separately operated office building * Page 12

13 Plot Plan Building Site Plan: 22 Elm Street Page 13

14 Aerial Map SUBJECT 290 Page 14

15 Aerial Map - Close Up SUBJECT Page 15

16 Property Photos Page 16

17 1st Floor Plan Page 17

18 3rd Floor Plan Page 18

19 4th Floor Plan Page 19