ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY. PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.

Transcription

1 Big Lots! Mattoon, IL Offering Memorandum

2 NON-ENDORSEMENT NOTICE Marcus & Millichap Real Estate Investment Services, Inc. ( M&M ) is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation s logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of M&M, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of M&M, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers. ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY. PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.

3 NET LEASED DISCLAIMER Marcus & Millichap hereby advises all prospective purchasers of Net Leased property as follows: The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable. However, Marcus & Millichap has not and will not verify any of this information, nor has Marcus & Millichap conducted any investigation regarding these matters. Marcus & Millichap makes no guarantee, warranty or representation whatsoever about the accuracy or completeness of any information provided. As the Buyer of a net leased property, it is the Buyer s responsibility to independently confirm the accuracy and completeness of all material information before completing any purchase. This Marketing Brochure is not a substitute for your thorough due diligence investigation of this investment opportunity. Marcus & Millichap expressly denies any obligation to conduct a due diligence examination of this Property for Buyer. Any projections, opinions, assumptions or estimates used in this Marketing Brochure are for example only and do not represent the current or future performance of this property. The value of a net leased property to you depends on factors that should be evaluated by you and your tax, financial and legal advisors. Buyer and Buyer s tax, financial, legal, and construction advisors should conduct a careful, independent investigation of any net leased property to determine to your satisfaction with the suitability of the property for your needs. Like all real estate investments, this investment carries significant risks. Buyer and Buyer s legal and financial advisors must request and carefully review all legal and financial documents related to the property and tenant. While the tenant s past performance at this or other locations is an important consideration, it is not a guarantee of future success. Similarly, the lease rate for some properties, including newly-constructed facilities or newlyacquired locations, may be set based on a tenant s projected sales with little or no record of actual performance, or comparable rents for the area. Returns are not guaranteed; the tenant and any guarantors may fail to pay the lease rent or property taxes, or may fail to comply with other material terms of the lease; cash flow may be interrupted in part or in whole due to market, economic, environmental or other conditions. Regardless of tenant history and lease guarantees, Buyer is responsible for conducting his/her own investigation of all matters affecting the intrinsic value of the property and the value of any long-term lease, including the likelihood of locating a replacement tenant if the current tenant should default or abandon the property, and the lease terms that Buyer may be able to negotiate with a potential replacement tenant considering the location of the property, and Buyer s legal ability to make alternate use of the property. By accepting this Marketing Brochure you agree to release Marcus & Millichap Real Estate Investment Services and hold it harmless from any kind of claim, cost, expense, or liability arising out of your investigation and/or purchase of this net leased property.

4 Table of Contents Executive Summary Investment Highlights 4 Offering Summary 5 Tenant Overview 6 Property Description Property & Location Description 7 Property Summary 8 Aerial Map 9 Financial Analysis Financial Analysis 10 Notes to Financial Analysis 11 Comparables Sales Comparables 12 Market Overview Matoon Market Overview 13

5 INVESTMENT HIGHLIGHTS Investment Highlights Absolute NNN Lease - No Landlord Responsibilities Corporate Guaranteed Lease Offered at a Price Significantly Below Replacement Cost Current Rent is 17 Percent of Market Upside Potential: 32+ Percent Market Cap 5

6 OFFERING SUMMARY Offering Summary Price $1,999,000 Price per Sq. Ft. $37.20 Net Rentable Sq. Ft. 53,731 Number of Stories 1 Year Built 1973 Parcel Size 4.3 acres Cap Rate 5.38% Market Cap Rate 32+% NOI $107,462 Rent per Sq. Ft. $2.00 per year 6

7 TENANT OVERVIEW 2015 REVENUE $5.177B EMPLOYEES: 12,300 LOCATIONS: 1,400+ FOUNDED: 1967 Big Lots, Inc. is an American retail company headquartered in Columbus, Ohio, incorporated in the State of Ohio. Big Lots has over 1,400 stores in 48 states. Its department stores sell a wide variety of merchandise, including packaged food and beverages, toys, furniture, clothing, housewares, and small electronics, much of which is closed out or overstocked merchandise. Many of the items in these stores sell out quickly: in the store one day, but gone the next, with no replenishments coming. Many other items, such as foodstuffs, are stocked continually. In many cases, Big Lots uses buildings formerly occupied by other stores. When Rite Aid Inc moved many Payless Drugstores into newly designed, stand-alone buildings, Big Lots (Pic N Save) opened many new stores of its own in those newly vacant, open-air plaza storefronts. The first store in the Big Lots chain was located in the former Kroger store in the same shopping center. The Big Lots chain traces its history back to 1967 when Consolidated Stores Corporation was formed in Ohio by Sol Shenk. In 1982, Consolidated Stores Corp. opened its first closeout store, called Odd Lots, in Columbus, Ohio. In 1983, drug store chain Revco bought New Jersey closeout retailer Odd Lot Trading Co. As Consolidated s Odd Lots stores expanded from Columbus, Revco took issue with the fact that another closeout retailer was operating a chain with national aspirations that had a similar name as the Revco-owned subsidiary. Consolidated Stores Corp. agreed to limit their use of the Odd Lots name to stores located within a certain radius of Columbus. Beyond the radius, Consolidated began opening stores under the Big Lots name. Eventually, all Odd Lots stores were rebranded as Big Lots. In 1985, Consolidated Stores Corp. began trading as a separate public company on the American Stock Exchange. In 1986, Consolidated Stores Corp. switched to the New York Stock Exchange, trading under the symbol CNS. The company decided to focus on the Big Lots brand, and on May 16, 2001, Consolidated Stores Corp. changed its name to Big Lots, Inc. and its ticker symbol from CNS to BLI. By the end of 2002, Big Lots Inc. completed a nationwide conversion to the single Big Lots brand. In 2002, Big Lots Inc. bought out MacFrugals (Pic N Save) stores for $995 million in stock and converted those to the Big Lots brand. Big Lots has continued expanding by opening hundreds of new stores. Most Big Lots stores have furniture departments which sell upholstered furniture (sofas, love seats, and recliners), Serta mattresses, fully assembled and ready to assemble furniture. Some, primarily smaller, stores only carry a limited assortment of mattresses and ready to assemble furniture. 7

8 PROPERTY & INVESTMENT DESCRIPTION Property & Investment Description OFFERING: Marcus & Millichap is pleased to present Big Lots, a single-tenant retail building of approximately 53,731 square feet situated on a lot at 204 Charleston Avenue East in Mattoon, IL. The property is for sale at a fraction of reproduction price due to a significantly below market lease. ABSOLUTE NNN LEASE: The lease is absolute NNN with no landlord responsibilities, with the last option expiring 1/31/2034 and is corporately guaranteed by Big Lots Inc., a publicly traded retail company headquartered in Columbus, OH with over 1,400 stores. THE OPPORTUNITY: The current Tenant s lease rate is less than 17 percent of market rent. The worst case scenario is that Big Lots properly exercises all future lease options, the last of which expire on 1/31/2034. The current lease has a $8, (7.5 percent) rent increase scheduled for 1/31/24 which brings the investment to a 5.78 CAP RATE, a $8, (6.98 percent) rent increase scheduled for 1/31/29 which brings the investment to a 6.18 CAP RATE. The Best Case scenario would be Big Lots surrendering some, or all, of the space, which would allow the investor to achieve market rents in the $12/ft+ range. Rents at $12/ft NNN would amount to a 32+ CAP RATE. This creates security for the investor, who will be able to capture significant upside in case the tenant fails to exercise its remaining renewal options. Given these numbers one could only hope the current tenant defaults or fails to provide proper notice of future options. PROPERTY: The building & property is 100 percent leased to Big Lots. The concrete tilt building structure constructed in 1973 is in excellent structural condition with a new TPO roof (replaced by Big Lots in last 12 months) and asphalt parking lot that was resurfaced by Big Lots within the last 36 months. Big Lots has been occupying it since LOCATION: Big Lots is located on Charleston Avenue the main thoroughfare in Mattoon (16,700 cars per day) just west of Highway 57 with the major retail concentration in Mattoon IL. Major tenants nearby include Walgreens (across street), Wal-Mart, Home Depot, ALDI s, Staples, Goodwill, Dollar General, Dollar Tree McDonald s, Taco Bell, Cracker Barrel, Buffalo Wild Wings, etc, as well as four nationally flagged hotels. The Cross County Mall is located adjacent to the property and is anchored by JCPenney, Carson s and JoAnn s Fabrics. With 100 percent occupancy, Mattoon Marketplace is a recent Thompson Thrift development anchored by PetSmart, Hibbett Sports, Cato Fashions, Buffalo Wild Wings, etc, that is currently achieving rents close to $15/ft and the developer has plans for additional development of the outparcels. SHORT TERM OPPORTUNITY: There may be immediate upside in recapturing 12,500 feet of space that Big Lots pays rent on but does not currently occupy. SUMMARY INTELLIGENT INVESTING FOR THE FUTURE: LoopNet lists more than 150 single tenant retail properties For Sale under a five Cap Rate priced in excess of $1,000/ft with tenants such as; QSR Restaurants, Banks, Pharmacies, Gas Stations, etc, that have signed long term leases providing the perception of security for investors that are Risk Adverse. However, the reality is that many of these buildings are single purpose, with rents significantly above market, so if (really only when) a tenant is acquired, defaults or terminates, the rent reverts to market and the building is then worth a fraction of the $1,000/ft purchase price and there are 500+ vacant QSR s, Banks, etc, for sale on LoopNet for less than $300/ft that support this observation. So while long term leases may enhance value, the reverse is true when the lease is stripped away from the real estate and the property reverts to market rental values. The Mattoon Big Lots represents a true opportunity to buy a building with intrinsic value where the value increases by 400 percent to 500 percent when (not, if) the tenant defaults or the lease terminates as the current rent is less than 17% of market. This Big Lots in Mattoon, IL presents investors with an opportunity to acquire a well located single tenant NNN-leased asset with no landlord responsibilities and significant upside potential at a fraction of its intrinsic value. 8

9 PROPERTY SUMMARY THE OFFERING Property Property Address Assessor s Parcel Number Big Lots 204 Charleston Avenue East, Mattoon IL SITE DESCRIPTION Number of Buildings Number of Stories Number of Tenants Year Built Lot Size Topography acres Flat CONSTRUCTION Foundation Framing Exterior Roof Parking Surface Concrete Steel Concrete Tilt TPO Asphalt 9

10 PROPERTY SUMMARY Site Plan 10

11 PROPERTY SUMMARY Excess Space Floor Plan *Big Lots pays rent and maintains this space. 11

12 AERIAL MAP Aerial Map Cross County Mall Subject Property 16,700 ADT (2006) McDonald s 12

13 FINANCIAL ANALYSIS Price $1,999,000 Aprox. Net Rent Sq.Ft. 53,731 Approx Cost/Sq. Ft. $37.20 Current Cap Rate 5.38% Market Cap Rate 32.25% Age 1973 Lot Size (acres) Tenant Summary Tenant Trade Name Big Lots! Ownership Public Lease Guarantor Corporate Lease Type Absolute NNN Roof & Structure Tenant responsible Rent Commencement 11/01/1998 Term Remaining 2+ years Options Three 5 yrs. Annualized Operating Data Current Rent Market Rent Per sq. ft. Per sq. ft. Current Rent $107,462 $1.54 $644,772 $12.00 Expenses NNN NNN Net Operating Income $107,462 $644,772 Option Terms Per sq. ft. Actual Rent Seller Credit Option $107,462 $2.00 $82,948 $24,514 Option $107,462 $2.00 Option $115,522 $2.15 Option $123,581 $

14 NOTES TO FINANCIAL ANALYSIS Notes to Financial Analysis 1. Current Rent based on the fourth option in existing Lease with Big Lots. Seller will provide a credit to Buyer at closing in the amount of the difference between rent at closing and rent at The Lease is Aboslute NNN, with no Landlord Expenses. Big Lots has invested significant Capital into the roof and paving in last three years. 3. Market Rent is based on LOIs for approximately 15,000 square feet of space Big Lots is currently not using. 4. Market Rent lease rates are $12/NNN. 5. The building area of 53,731 square feet is according to the lease; Existing ALTA survey shows approximately 54,279 square feet of building. 6. Lot size of 187,918 square feet is based on ALTA Survey. Per county records, the lot size is 193,406 square feet. 14

15 SALES COMPARABLES Sales Comparables 1 Property Address COE Sale Price CAP Rates Sq. Ft. $/Sq. Ft. Circle K 1685 South Baltimore Avenue Decatur, IL For Sale $3,561, % 2,700 $1, Red Lobster 4502 East Towne Boulevard Madison, WI For Sale $8,094, % 7,500 $1, Bank of America 5983 North Lincoln Avenue Chicago, IL For Sale $6,134, % 4,983 $1, Fifth Third Bank 5501 North Avenue Chicago, IL For Sale $6,500, % 4,448 $1, Source: CoStar 15

16 SALES COMPARABLES Sales Comparables 1 Property Address COE Sale Price CAP Rates Sq. Ft. $/Sq. Ft Charleston Avenue Mattoon, IL For Sale $499,000 N/A 26,389 $18.91 for the land 2 Mattoon Marketplace 100 Dettro Drive Mattoon, IL Sold $9,643,569 N/A 73,228 $ Source: CoStar 16

17 MATOON MARKET OVERVIEW Market Overview DEMOGRAPHICS (Current Geography Selection: 20 mile radius) Population In 2014, the population in your selected geography is 85,322. The population has changed by 1.20% since It is estimated that the population in your area will be 85,965 five years from now, which represents a change of 0.75% from the current year. The current population is 48.64% male and 51.35% female. The median age of the population in your area is 35.1, compare this to the Entire US average which is The population density in your area is people per square mile. Households There are currently 33,250 households in your selected geography. The number of households has changed by 2.05% since It is estimated that the number of households in your area will be 33,584 five years from now, which represents a change of 1.00% from the current year. The average household size in your area is 2.40 persons. Income In 2014, the median household income for your selected geography is $46,107, compare this to the Entire US average which is currently $51,972. The median household income for your area has changed by 32.25% since It is estimated that the median household income in your area will be $55,990 five years from now, which represents a change of 21.43% from the current year. The current year per capita income in your area is $23,925, compare this to the Entire US average, which is $28,599. The current year average household income in your area is $59,933, compare this to the Entire US average which is $74,533. Race & Ethnicity The current year racial makeup of your selected area is as follows: 94.23% White, 2.59% Black, 0.02% Native American and 0.70% Asian/Pacific Islander. Compare these to Entire US averages which are: 71.60% White, 12.70% Black, 0.18% Native American and 5.02% Asian/Pacific Islander. People of Hispanic origin are counted independently of race. People of Hispanic origin make up 2.94% of the current year population in your selected area. Compare this to the Entire US average of 17.13%. Housing In 2000, there were 22,208 owner occupied housing units in your area and there were 10,373 renter occupied housing units in your area. The median rent at the time was $345. Employment In 2014, there are 34,747 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed that 50.46% of employees are employed in white-collar occupations in this geography, and 49.48% are employed in blue-collar occupations. In 2014, unemployment in this area is 8.62%. In 2000, the average time traveled to work was 19.6 minutes. Demographic data 2012 by Experian. 17

18 Big Lots! Mattoon, IL