Market Positioning and Pricing Analysis A&P BUILDING 55 S State Ave Indianapolis, IN 46201
NON- E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E Non-Endorsements Marcus & Millichap 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 Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, 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. Disclaimer THIS IS A BROKER PRICE OPINION OR COMPARATIVE MARKET ANALYSIS OF VALUE AND SHOULD NOT BE CONSIDERED AN APPRAISAL. This information has been secured from sources we believe to be reliable, but we make no representations or warranties, express or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. 2018 Marcus & Millichap. All rights reserved. A&P BUILDING Indianapolis, IN ACT ID Z0260176 2
P R E S E N T E D B Y Joseph DiSalvo First Vice President Investments Director - National Office and Industrial Properties Group Indianapolis Office Tel: (317) 218-5334 Fax: (317) 218-5310 joseph.disalvo@marcusmillichap.com License: IN RB14051407 3
TABLE OF CONTENTS SECTION INVESTMENT OVERVIEW 01 Offering Summary Regional Map Local Map Aerial Photo FINANCIAL ANALYSIS 02 Tenant Summary Lease Expiration Summary Operating Statement Notes Pricing Detail Acquisition Financing MARKET OVERVIEW 03 Market Analysis Demographic Analysis 4
INVESTMENT OVERVIEW 5
EXECUTIVE SUMMARY OFFERING SUMMARY THE OFFERING Property A&P Building Property Address 55 S State Ave, Indianapolis, IN Assessors Parcel Number 49-10-07-181-004.000-101 Zoning CBD-Special SITE DESCRIPTION Number of Floors Three (3) Year Built/Renovated 1935/2015 Rentable Square Feet 133,507 Ownership Fee Simple Lot Size 9.42 Acres Topography Flat Parking 150 + Outdoor Storage Lot Foundation Framing Exterior CONSTRUCTION Concrete Slab Steel Framing w/ Load Bearing CMU Walls Masonry Parking Surface Asphalt Flat Roof Clad w/ Ballasted EPDM, Roof Mechanically Fastened EPDM and BUR Systems Docks Fifty-Four (54) Ceiling Height 18 HVAC Power MECHANICAL Electric and Gas Furnace (split system) & Condenser (split system) 4,000-Amp, 277/480-Volt, Three-Phase, Four-Wire Reported VITAL DATA CURRENT Price $3,034,000 CAP Rate 9.47% Down Payment 30% / $910,200 Net Operating Income $287,430 Loan Type Financed Pre Tax Cash Flow 12.03% / $109,507 Interest Rate / Amortization 5.15% / 25 Years Total Return Before Taxes 16.34% / $148,700 Price/SF $22.73 EXPENSES CURRENT $/SF Real Estate Taxes $69,447 $0.52 Insurance $15,905 $0.12 CAM/Utilties $286,672 $2.15 Management Fees $34,708 $0.26 Total Expenses $426,469 $3.05 # 6
EXTERIOR PROPERTY PHOTOS 7
INVESTMENT OVERVIEW OFFERING SUMMARY Marcus & Millichap is pleased to present the A&P Building, a three-story, 133,507 square foot multi-tenant industrial / office / cold storage facility located at 55 South State Street on the east side of downtown Indianapolis just south of East Washington Street. The A&P Building is situated on over 9.42 acres and features executive offices on the third floor, larger office and storage areas on the second floor, dry warehouse and cold storage on the first floor, and additional land for development or outdoor storage. The Property is located along South State Street between East Washington Street and East Southeastern Avenue and less than one mile east of the Interstate-70 and Interstate 65 connecting downtown Indianapolis to the rest of the city and state. The A&P Building is unique opportunity that is comprised of office, warehouse, cold storage, some self-storage units, and outdoor storage on three levels of an incredibly well built and well maintained, 133,507 square foot building situated on over nine acres in the downtown area of Indianapolis. The building was originally built in 1935 as a hub for a local grocery chain and has been renovated and repurposed as a business incubator on the east side of downtown. The property has historically been over 90 percent occupied by smaller tenants on shorter term leases at low rental rates, hence the asking price of under $23 per square foot while still providing a CAP rate north of 9 percent. The Subject Property is a very rare opportunity to own an asset that has stable cash flow paid by a large number of diverse tenants at very low rents. Established and successful property management is in place and would remain post-closing, providing a Buyer with additional stability and passivity in the investment. With a large number of diverse tenants, upside potential in the below-market rents, incredibly low price per square foot, and an excellent location just east of the Central Business District of Indianapolis, the A&P Building should prove to be a very lucrative investment for the sophisticate investor. INVESTMENT HIGHLIGHTS Three Story 160,042 Square Foot, Multi-Tenant Warehouse/Office Building Over 90 Percent Occupied by a Large Number of Diverse Tenants at Very Low Rents Under $20 per Square Foot Located Just East of Downtown Indianapolis just off East Washington Street Within Immediate Proximity of Interstate 70 and Interstate 65 8
INTERIOR PROPERTY PHOTOS 9
AERIAL PHOTO 10
AERIAL PHOTO 11
LOCAL MAP 12
REGIONAL MAP 13
FINANCIAL ANALYSIS 14
OPERATING STATEMENT FINANCIAL ANALYSIS 15
TENANT SUMMARY FINANCIAL ANALYSIS 16
TENANT SUMMARY FINANCIAL ANALYSIS 17
TENANT SUMMARY FINANCIAL ANALYSIS 18
TENANT SUMMARY FINANCIAL ANALYSIS 19
TENANT SUMMARY FINANCIAL ANALYSIS *Tenant Summary based on Seller Rent Roller from 4/24/18. This is subject to change on a monthly-basis 20
MARKET OVERVIEW 21
INDIANAPOLIS OVERVIEW MARKET OVERVIEW The Indianapolis metro houses the state capitol and is a growing tech hub. Situated in central Indiana, the market consists of 11 counties: Marion, Johnson, Hamilton, Boone, Hendricks, Morgan, Hancock, Shelby, Brown, Putnam and Madison. The metro lacks formidable development barriers, except for the several rivers and creeks that traverse the region. Marion County is home to Indianapolis, which contains a population of approximately 859,200 people. Carmel in Hamilton County is the second most populous with more than 91,000 residents. A large portion of the surrounding counties are rural, offering builders ample land for residential and commercial development. Population growth is primarily concentrated to the northern suburbs and west of the city. METRO HIGHLIGHTS PREMIER DISTRIBUTION HUB Around 50 percent of the U.S. population lies within a one-day drive of Indianapolis, making it a center for the transportation of goods. MAJOR HEALTH SCIENCES CENTER Eli Lilly & Co., Roche Diagnostics Corp. and Covance Inc. maintain operations in the region, among other major health-related employers. LOW COST OF DOING BUSINESS Indianapolis costs are far below national averages, attracting businesses and residents to the area. 1
MARKET OVERVIEW ECONOMY Indianapolis economy has diversified from manufacturing into a variety of other industries, including a growing tech sector underpinned by Salesforce.com. The metro is one of the key health-sciences centers in the nation, anchored by several pharmaceutical and life-sciences companies including Ely Lilly and Roche Diagnostics. The metro is accessible to a large portion of the nation in one day by ground or air, making the region a burgeoning logistics and distribution hub. Annual GMP growth rate tops the national level, a trend that is set to persist next year. MAJOR AREA EMPLOYERS Eli Lilly & Co. Indiana University Health Rolls-Royce Corp. Community Health Cummins Kroger IUPUI FedEx Roche Diagnostics Finish Line * Forecast SHARE OF 2017 TOTAL EMPLOYMENT 9% MANUFACTURING 15% PROFESSIONAL AND BUSINESS SERVICES 12% 10% 7% GOVERNMENT LEISURE AND HOSPITALITY FINANCIAL ACTIVITIES 21% TRADE, TRANSPORTATION AND UTILITIES 5% CONSTRUCTION + 15% EDUCATION AND HEALTH SERVICES 1% INFORMATION 4% OTHER SERVICES 2
MARKET OVERVIEW DEMOGRAPHICS The metro is expected to add nearly 118,100 people through 2022, which will result in the formation of nearly 52,000 households, generating demand for housing. A median home price below the national level has produced a homeownership rate of 65 percent, which is slightly above the national rate of 64 percent. Roughly 31 percent of people age 25 and older hold bachelor s degrees; among those residents, 11 percent also have earned a graduate or professional degree. SPORTS 2017 Population by Age 7% 0-4 YEARS 21% 5-19 YEARS 6% 20-24 YEARS 28% 25-44 YEARS 26% 45-64 YEARS 13% 65+ YEARS EDUCATION 2017 POPULATION: 2M Growth 2017-2022*: 5.8% 2017 HOUSEHOLDS: 779K Growth 2017-2022*: 6.7% 2017 MEDIAN AGE: 36.4 U.S. Median: 37.8 2017 MEDIAN HOUSEHOLD INCOME: $55,600 U.S. Median: $56,300 QUALITY OF LIFE Indianapolis offers residents many big-city amenities in an affordable, small-town atmosphere. The city is home to several high-profile auto races, including the Indianapolis 500 and Brickyard 400. Races are hosted at the Indianapolis Motor Speedway and the Lucas Oil Raceway at Indianapolis. The metro has two major league sports teams: the Indianapolis Colts (NFL) and the Indiana Pacers (NBA). The area also has a vibrant cultural and arts scene, with more than 200 art galleries and dealers, the Indianapolis Symphony Orchestra and a variety museums, including the Eiteljorg Museum of American Indians and Western Art. Additionally, the Children s Museum of Indianapolis is one of the largest children s museums in the world. ARTS & ENTERTAINMENT * Forecast Sources: Marcus & Millichap Research Services; BLS; Bureau of Economic Analysis; Experian; Fortune; Moody s Analytics; U.S. Census Bureau 3
MARKET OVERVIEW INDIANAPOLIS METRO AREA Speculative Development Draws Yield-Driven Investors to Southwestern Suburbs Expanding workforce contributes to elevated completions. With lower industrial rents than the majority of Upper Midwest metros, Indianapolis remains an attractive option for companies seeking space in a major Midwestern city. The market s status as a strong regional distribution hub, along with this year s robust household growth, makes the industrial sector enticing as businesses attempt to bring their product closer to the region s most populated centers. Favorable trends encourage developers to record another year of heightened deliveries, half of which will be speculative space. Submarkets adjacent to Indianapolis International Airport gain the most inventory as half of this year s completion total is located in this area, including the metro s largest project slated for delivery. The 708,000-square-foot facility, which is part of bulk distribution park AllPoints Midwest, provides access to air freight and rail service. The suburb of Whitestown also registers notable construction activity, headlined by a 410,000-square-foot expansion at Fishback Creek Business Park. As development remains intensified, the metro posts a vacancy uptick for the second straight year while attempting to adjust to the influx of supply. Assets close to urban core provide local buyers options. Favorable yields and near-cycle-high rents draw investors searching for value-add investments to central Indiana. Class C warehouses near the city center, particularly those located along Southeastern Avenue, garner interest from buyers seeking space in the $1 million to $5 million price tranche. These properties can net cap rates in the low-8 percent realm and offer investors renovation opportunities to become more competitive with upgraded space in neighboring submarkets. Institutional investors look to deploy capital in newer assets near Indianapolis International Airport where initial yields sit in the high-5 to low-6 percent span. * Forecast Sources: CoStar Group, Inc.; Real Capital Analytics 25
MARKET OVERVIEW INDIANAPOLIS METRO AREA 2018 Market Forecast NIPI Rank 23, down 6 places Rising vacancy and tempered rent growth contribute to Indianapolis six-slot dive. Employment up 2.4% Employers will generate 25,500 new positions this year, following last year s sum of 17,500 jobs. Construction 4.1 million sq. ft. Although the pace of development slows this year, Indianapolis has reported the completion of at least 3.5 million square feet each year since 2013. In 2017, the metro delivered 6.3 million square feet. Vacancy up 40 bps This year vacancy will rise to 6.5 percent. Last year, vacancy ascended 140 basis points. Rent up 1.3% The average asking rent will increase in 2018 following a year of rent depreciation. This year s price climbs to $3.87 per square foot. Investment Investors will continue to focus capital into value-add opportunities located near downtown and in inner-ring suburbs. Northern, outer-ring suburbs also receive buyer interest as population growth and commercial development intensify in these parts. * Forecast Sources: CoStar Group, Inc.; Real Capital Analytics 26
PROPERTY A&P BUILDING NAME Created on April 2018 POPULATION 1 Miles 3 Miles 5 Miles 2022 Projection Total Population 16,165 109,544 247,000 2017 Estimate Total Population 17,191 112,778 253,021 2010 Census Total Population 16,490 107,037 241,182 2000 Census Total Population 20,043 120,978 269,594 Daytime Population 2017 Estimate 19,856 184,316 389,425 HOUSEHOLDS 1 Miles 3 Miles 5 Miles 2022 Projection Total Households 5,415 46,516 102,444 2017 Estimate Total Households 5,699 46,691 102,819 Average (Mean) Household Size 2.68 2.29 2.36 2010 Census Total Households 5,575 44,078 98,077 2000 Census Total Households 7,040 48,472 108,332 MARKETING DEMOGRAPHICS TEAM HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles 2017 Estimate $200,000 or More 1.00% 1.65% 1.22% $150,000 - $199,000 1.03% 1.97% 1.68% $100,000 - $149,000 4.14% 5.11% 5.25% $75,000 - $99,999 5.72% 7.40% 7.56% $50,000 - $74,999 13.65% 14.78% 15.17% $35,000 - $49,999 12.58% 14.12% 15.18% $25,000 - $34,999 15.89% 12.95% 13.85% $15,000 - $24,999 15.67% 15.46% 15.86% Under $15,000 30.33% 26.57% 24.21% Average Household Income $40,248 $46,757 $45,691 Median Household Income $27,408 $30,943 $31,917 Per Capita Income $13,749 $19,900 $18,970 POPULATION PROFILE 1 Miles 3 Miles 5 Miles Population By Age 2017 Estimate Total Population 17,191 112,778 253,021 Under 20 25.80% 23.79% 25.89% 20 to 34 Years 26.90% 27.56% 24.99% 35 to 39 Years 7.82% 7.16% 6.50% 40 to 49 Years 13.46% 13.02% 12.47% 50 to 64 Years 18.08% 18.80% 18.93% Age 65+ 7.96% 9.66% 11.24% Median Age 33.40 34.14 34.39 Population 25+ by Education Level 2017 Estimate Population Age 25+ 11,417 76,656 167,162 Elementary (0-8) 6.55% 4.57% 4.71% Some High School (9-11) 23.30% 18.09% 17.11% High School Graduate (12) 30.89% 31.59% 33.94% Some College (13-15) 14.76% 17.73% 19.01% Associate Degree Only 5.09% 5.71% 6.06% Bachelors Degree Only 10.82% 12.44% 11.27% Graduate Degree 6.63% 8.37% 6.52% Time Travel to Work Average Travel Time in Minutes 24 24 24 Source: 2017 Experian 27
PROPERTY A&P BUILDING NAME MARKETING DEMOGRAPHICS TEAM Population In 2017, the population in your selected geography is 253,021. The population has changed by -6.15% since 2000. It is estimated that the population in your area will be 247,000.00 five years from now, which represents a change of -2.38% from the current year. The current population is 49.67% male and 50.33% female. The median age of the population in your area is 34.39, compare this to the US average which is 37.83. The population density in your area is 3,216.95 people per square mile. Race and Ethnicity The current year racial makeup of your selected area is as follows: 55.03% White, 33.66% Black, 0.04% Native American and 1.54% Asian/Pacific Islander. Compare these to US averages which are: 70.42% White, 12.85% Black, 0.19% Native American and 5.53% Asian/Pacific Islander. People of Hispanic origin are counted independently of race. People of Hispanic origin make up 10.09% of the current year population in your selected area. Compare this to the US average of 17.88%. Households There are currently 102,819 households in your selected geography. The number of households has changed by -5.09% since 2000. It is estimated that the number of households in your area will be 102,444 five years from now, which represents a change of -0.36% from the current year. The average household size in your area is 2.36 persons. Housing The median housing value in your area was $81,947 in 2017, compare this to the US average of $193,953. In 2000, there were 57,130 owner occupied housing units in your area and there were 51,202 renter occupied housing units in your area. The median rent at the time was $416. Income In 2017, the median household income for your selected geography is $31,917, compare this to the US average which is currently $56,286. The median household income for your area has changed by 7.86% since 2000. It is estimated that the median household income in your area will be $36,188 five years from now, which represents a change of 13.38% from the current year. Employment In 2017, there are 257,067 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed that 49.39% of employees are employed in white-collar occupations in this geography, and 50.58% are employed in blue-collar occupations. In 2017, unemployment in this area is 7.33%. In 2000, the average time traveled to work was 24.00 minutes. The current year per capita income in your area is $18,970, compare this to the US average, which is $30,982. The current year average household income in your area is $45,691, compare this to the US average which is $81,217. Source: 2017 Experian 28
8 DEMOGRAPHICS 29
P R E S E N T E D B Y Joseph DiSalvo First Vice President Investments Director - National Office and Industrial Properties Group Indianapolis Office Tel: (317) 218-5334 Fax: (317) 218-5310 joseph.disalvo@marcusmillichap.com License: IN RB14051407 www.marcusmillichap.com 30