H A M P T O N V I R G I N I A
N o. 01 EXECUTIVE SUMMARY investment highlights EXECUTIVE SUMMARY 4
NETCENTER 5
EXECUTIVE SUMMARY 6
EXECUTIVE SUMMARY INVESTMENT SUMMARY NETCENTER STRATEGICALLY LOCATED, VALUE-ADD INVESTMENT OPPORTUNITY Holliday Fenoglio Fowler, L.P. acting by and through Holliday GP Corp. a Virginia licensed real estate broker ( HFF ) has been retained as the exclusive sales representative for NetCenter ("the property"), a 557,753 square foot, institutional-quality office building located in Hampton, Virginia. Ideally positioned in the center of the flourishing Hampton Roads market, the portfolio is 58.8% leased to a creditworthy tenant roster including notable companies such as Verizon (Moody s: Baa1), AMSEC (NYSE: HII), and Maximus (Moody s: MMS). With a center-of-the-market location, NetCenter benefits from unprecedented regional connectivity and a growing amenity-base, positioning the asset as an ideal office destination for users supporting the thriving military hub in Hampton Roads. Moreover, NetCenter offers an impressive parking ratio, efficient floor plates, and convenient access to mass transit, presenting investors with diverse functionality and an opportunity to position the asset as a premier location for large call center users in the Hampton Roads market. This value-add investment opportunity offers exceptional in-place yields and immediate upside potential as prospective investors have the chance to capitalize on NetCenter's strong leasing momentum, boasting more than 128,600 square feet of new leases signed in the past year. Moreover, NetCenter offers the opportunity to acquire an institutional asset on 36.786 acres at an incredible discount to replacement cost in one of Hampton Roads premier submarkets, the Oyster Point submarket. This acquisition opportunity is positioned to benefit from the attractive economic outlook of the region as increased defense spending under the current administration will directly support the local economy and bolster the strengthening market fundamentals in the Hampton Roads office market. Given the positive economic outlook of the Hampton Roads market and NetCenter s ideal position in the premier Oyster Point submarket, prospective investors are poised to capitalize on this exceptional investment offering as demand for well-located office product continues to grow. ADDRESS 5200 West Mercury Blvd Hampton, VA 23605 RSF 557,753 YEAR BUILT 1974 YEAR RENOVATED 1997, 2002 WALT 4.70 OCCUPANCY 58.8% NETCENTER 7
WHY NETCENTER EXCEPTIONAL IN-PLACE YIELDS Investors have the opportunity to cash flow 107.5% of equity out of the investment in the first 5 years VERIZON AMSEC, INC HUNTINGTON INGALLS, INC NOTABLE TENANTS 3.5% 23.2% 40.6% 24.1% 16.1% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 107.5% OF EQUITY IN YEARS 1-5 557,753 SQUARE FEET OFFICE INVESTMENT GRADE CREDIT WITH ATTRACTIVE TERM 64% of occupied space is leased to investment grade tenants whose WALT is 5.16 years Company SF % of Lease SF Credit Rating Public Information Expiration Remaining Term Verizon Services 123,026 37.5% Moody's: Baa1 NYSE: VZ 6/25/2022 4.0 AMSEC, LLC 64,761 19.8% Moody's: Ba1 NYSE: HII 5/31/2026 7.9 Huntington Ingalls, Inc. 17,359 5.3% Moody's: Ba1 NYSE: HII 3/31/2019 0.8 General Services Administration 3,989 1.2% Moody's: Aaa - 6/30/2026 8.0 Total Investment Grade SF 209,135 63.8% WALT: 5.16 years 64% OF OCCUPIED SPACE IS LEASED TO INVESTMENT GRADE TENANTS EXCEPTIONAL RETENTION AND ORGANIC GROWTH Most tenants utilize NetCenter for critical operations (call centers, training facilities, corporate support, etc.) investing significant capital in the space resulting in long-term tenancy and driving considerable organic expansions at the Property THE PREMIER OFFICE DESTINATION FOR LARGE USERS IN HAMPTON, VA Offering highly efficient floor plates, a market-leading parking ratio, call center infrastructure (dual feeds and fiber), and convenient access to mass transit, NetCenter is the ideal destination for large users in the Hampton Roads market EXECUTIVE SUMMARY 8 5.16 YEARS WEIGHTED AVERAGE LEASE TERM REMAINING FOR INVESTMENT GRADE TENANTS
CREDITWORTHY TENANT ROSTER ANCHORED BY HAMPTON ROADS CORE INDUSTRIES NetCenter features an attractive tenant roster anchored by publicly traded, creditworthy tenants with strong ties to the Hampton Roads area. Notable tenants include Verizon (Moody s: Baa1), AMSEC (NYSE: HII), Maximus (NYSE: MMS), and Huntington Ingalls (NYSE: HII). The asset contains a number of well-established national and international firms many of which hold a long-standing tenancy at NetCenter. Most notably, Verizon (Moody s: Baa1) and AMSEC (NYSE: HII) have more than 42 years of combined tenancy at the asset. Representing some of Hampton Roads core industries, the asset is heavily leased to the military/ defense, technology, and government services sectors, which support the region s military hub. An impressive 64% of occupied space is leased to creditworthy tenants whose average remaining lease term is approximately 5.1 years. TENANT MAKEUP BY INDUSTRY 12% 3% TECHNOLOGY/COMMUNICATIONS (38%) 38% MILITARY/DEFENSE (26%) GOVERNMENT SERVICES (21%) FINANCIAL SERVICES (12%) 21% RETAIL (3%) 26% NETCENTER 9
STRATEGIC MILITARY HUB POISED FOR CONTINUED GROWTH Hampton Roads has a long-standing reputation as one of the country s largest military hubs. With more than ten regional military installations representing every branch of the military, the area employs more than 142,000 active-duty and reserve personnel. As the country s second largest military hub (behind only Washington D.C.), the area attracts unprecedented capital investment, receiving more than $19.1 billion in direct investment from the Department of Defense in 2016. The Hampton Roads MSA is home to the world s largest naval base, Naval Station Norfolk, located 25 minutes from NetCenter. This flourishing military hub draws a number of industries to the region including logistics, technology, healthcare, and government services. These core industries represent 84% of NetCenter s current tenant roster. The region s economic outlook is extremely attractive as the country s new administration proposed a 10% increase in defense spending (approximately $54 billion), which will directly benefit the Hampton Roads economy and its primary industries. EXECUTIVE SUMMARY 10
DYNAMIC INVESTMENT OPPORTUNITY ATTRACTIVE STABILITY WITH SIGNIFICANT UPSIDE POTENTIAL Currently 58.8% occupied, NetCenter provides investors with a unique dynamic of attractive long-term stability coupled with immediate upside leasing potential. The tenant roster boasts a weighted average remaining lease term of 4.7 years, offering stable cash flow and exceptional in-place returns for prospective investors. Largely supporting the military/defense industries of the Hampton Roads economy, the tenant roster is highly resistant to market fluctuations further strengthening the stability of the offering as tenants are poised for long-term success under the federal budget s proposal for increased defense spending. Investors have the opportunity to capitalize on remarkable positive leasing momentum at NetCenter. In the last year alone, current ownership leased 101,073 SF of new space and executed 32,575 SF of expansions. This tremendous leasing activity outpaced the total net absorption in the Oyster Point submarket and accounted for 19% of Hampton Roads positive net absorption in 2017. INSTITUTIONALLY MAINTAINED OFFICE ASSET WITH VALUE ENHANCEMENT OPPORTUNITY NetCenter is an institutionally maintained asset that consistently attracts new tenants and retains existing tenants. As evidenced by the diverse workforce and recent leasing momentum at NetCenter, tenants greatly value the institutional quality of the asset, on-site amenities, and a center-of-the-market location. The asset provides an outstanding 5.04 parking spaces per thousand square feet, positioning NetCenter as a premier destination for large users, call centers, and tenants with parking requirements. Prospective investors have the opportunity to gain this highly sought after competitive advantage in the Hampton Roads office market and attract a broad range of tenants to the asset. NetCenter offers an attractive on-site amenity package with two restaurants and a fitness center. Investors have an additional value enhancement opportunity to strengthen the amenity base and attract additional leasing momentum to the property. DIVERSE FUNCTIONALITY WITH VALUE-ADD REPOSITIONING OPPORTUNITY NetCenter features 557,785 SF of institutionally maintained space with 137,192 SF of readily available space that prospective investors have the opportunity to immediately capitalize on through near-term leasing activity. With highly efficient floor plates, an exceptional parking ratio, call center infrastructure (dual feeds and fiber), and convenient access to mass transit, NetCenter is an ideal destination for large call center users. Prospective investors have the opportunity to position the asset as the premier call center destination in the Hampton Roads market and rapidly fill the remaining vacancy at the property through leasing activity with large call center users. NETCENTER 11
STRATEGICALLY LOCATED WITH PREMIER REGIONAL CONNECTIVITY, A GROWING AMENITY BASE, AND A TALENTED WORKFORCE NetCenter is strategically located at the geographic center of the Hampton Roads market, offering convenient access to Interstate 64 (2 mi), the region s major east-west thoroughfare. Access to this major highway offers seamless connectivity to the entire MSA including Newport News (5 mi), Hampton (6 mi), and the Newport News/Williamsburg International Airport (17 mi). NetCenter benefits from close proximity to the primary economic drivers in the area such as the Port of Virginia, Naval Station Norfolk, and a number of military installations in the surrounding area. With an ideal center-of-the-market location, NetCenter benefits from a growing amenity base in the immediately surrounding area. NetCenter enjoys convenient access to nearly 6.5 million SF of retail amenities within a 5-mile radius, including the Peninsula Town Center and Coliseum Crossing Shopping Center, which offer a Starbucks, Chipotle, Outback Steakhouse, Five Guys, CineBistro, Subway, Jason s Deli, Applebee s, Chick-fil-A, and Target. Other nearby amenities located within 10 minutes of the asset include Rite Aid, Food Lion, Exxon, Walmart, Wawa, McDonald's, Taco Bell, Pizza Hut, Dunkin Donuts, and Starbucks, among others. Given the strong economic performance of the Hampton Roads market, the region attracts a strong employment base to support the flourishing military hub and diverse range of industries entering the market. Employers are attracted to the area as a well-educated population and a large concentration of highly skilled former military personnel support the regional economy. NetCenter's key tenant industries, including military/defense and call center employers, are directly supported by the strong Hampton Roads employment base. HAMPTON NEWPORT NEWS DOWNTOWN NEWPORT NEWS SUBMARKET LANGLEY AIR FORCE BASE HAMPTON ROADS CENTER SUBMARKET DISCOUNT TO REPLACEMENT COST OPPORTUNITY TO ACQUIRE SIGNIFICANT CRITICAL MASS WELL BELOW REPLACEMENT COST The ability to acquire office assets in the Hampton Roads market has become increasingly competitive as the area benefits from increased military funding and a growing logistics sector. Access to 36.786 acres with 557,753 SF of institutionally maintained office space located in the center of the Hampton Roads market is a unique prospect for investors. With an exceptional discount to replacement cost, investors are presented with an incredible opportunity to invest at an attractive basis, in turn, driving significant bottom line growth. RITE AID EXECUTIVE SUMMARY 12
NAVAL STATION NORFOLK NEWPORT NEWS MARINE TERMINAL JAMES RIVER NEWPORT NEWS RAILYARD JAMES RIVER BRIDGE FOOD LION DUNKIN DONUTS WALMART W MERCURY BLVD WAWA NEWMARKET PLAZA SHOPPING CENTER MCDONALD'S TACO BELL PIZZA HUT STARBUCKS (SCHEDULED OPENING IN 3 MONTHS) SEARS NETCENTER NEWPORT NEWS OYSTER POINT SUBMARKET NETCENTER 13
INVESTMENT FLEXIBILITY NetCenter consists of one multi-tenant office building situated on 36.786 acres of land and is well-positioned to accommodate a range of small, mid-size, and large users. The asset sits on four separate tax parcels providing a future investor with the flexibility to finance or sell the assets individually. Investment flexibility in an offering of this size allows potential investors to acquire significant critical mass while maintaining various value-add strategies that will drive pricing in the event of a sale. Moreover, investors have the optionality to develop the currently undeveloped land or sell off portions of the offering thus reducing their basis and bolstering cash flows. TAX PARCEL 3002529 1.154 ACRES TAX PARCEL 13004015 10.066 ACRES TAX PARCEL 13004013 24.896 ACRES TAX PARCEL 13004158 0.67 ACRES EXECUTIVE SUMMARY 14
REGIONAL MAP ATLANTIC OCEAN NEWPORT NEWS NETCENTER HAMPTON SMITHFIELD VIRGINIA BEACH NORFOLK NETCENTER 15
investment advisors CHRIS LINGERFELT Director 704.526.2808 clingerfelt@hfflp.com ZACK DROZDA Director 704.526.2812 zdrozda@hfflp.com SCOT HUMPHREY Senior Director 919.573.4641 shumphrey@hfflp.com RYAN CLUTTER Senior Managing Director 704.526.2805 rclutter@hfflp.com STEPHEN CONLEY Executive Managing Director sconley@hfflp.com analysts WILLIAM MORRIS Real Estate Analyst 704.526.2825 wmorris@hfflp.com WILLIAM MANN Real Estate Analyst 704.526.2843 wmann@hfflp.com debt + structured finance ROGER EDWARDS Senior Director 919.573.4647 redwards@hfflp.com ATLANTA AUSTIN BOSTON CAROLINAS CHICAGO DENVER DALLAS FLORHAM PARK (NJ) HARTFORD HOUSTON INDIANAPOLIS LOS ANGELES MIAMI NEW YORK ORANGE COUNTY (CA) ORLANDO PHILADELPHIA PHOENIX PITTSBURGH PORTLAND (OR) SAN DIEGO SAN FRANCISCO TAMPA WASHINGTON, DC LONDON, UK 201 NORTH TRYON STREET SUITE 1400 CHARLOTTE, NORTH CAROLINA 28202 4242 SIX FORKS ROAD SUITE 876 RALEIGH, NORTH CAROLINA 27609 EXECUTIVE SUMMARY 56