CLEARFIELD RETAIL CENTER Offering Memorandum
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CLEARFIELD RETAIL CENTER Clearfield, Utah OFFICES NATIONWIDE www.marcusmillichap.com
analysis MARKET AND PROPERTY ANALYSIS
Executive Summary CLEARFIELD RETAIL CENTER 600 South State Street Clearfield, UT 84015 Offering Summary Offering Price $1,205,000 Total Gross Leasable Area (GLA) 9,296 SF Price/SF $129.63 Cap Rate - Current 3.82% Cap Rate - Pro Forma 8.42% Year Built 2000 Lot Size 0.64 Acres Major Tenants TENANT GLA % of GLA LEASE EXP Cricket Wireless 1,800 SF 19% 11/30/2019 Heartsong Spay/Neuter 1,500 SF 16% 7/31/2018 H&R Block 1,500 SF 16% 4/30/2018 Vacant 4,496 SF 48% N/A Investment Highlights Anchored by 39,000 SF Kent s Market Grocery Excellent Upside Opportunity with 48% Vacancy Combined Traffic Counts in Excess of 30,075 75 Free Surface Parking Spaces; 8 stalls per 1000 SF Nearby Tenants Include Family Dollar, First National Bank, Kent s Market, & Tai pan Trading Population of 187,809 within a 5-Mile Radius Annualized Operating Data INCOME CURRENT PRO FORMA Base Rent / Occupied Space $58,647 $58,647 Base Rent / Vacant Space at Market Rents $49,456 $49,456 Gross Potential Rent $108,103 $108,103 Expense Reimbursments $25,170 $25,170 Gross Potential Income $133,273 $133,273 Vacancy/Uncollected CAM $62,056 5% / $6,664 Effective Gross Income $71,217 $126,609 Total Expenses $25,170 $25,170 Net Operating Income $46,047 $101,439 5
Financial Summary INCOME APPROACH Gross Potential Rent $108,103 Add: CAM (Taxes, Insurance, Etc.) $25,170 TOTAL GROSS POTENTIAL INCOME $133,273 (Less) Vacancy 5.00% / $6,663.64 EFFECTIVE GROSS INCOME $126,609 EXPENSES: CAM (Taxes, Insurance, Etc.) 19.88% / ($25,170) TOTAL EXPENSES 19.88% / ($25,170) NET OPERATING INCOME (PRO FORMA) $101,439 Long Term Debt Service $48,224 Net Cash Flow after Debt Service $53,215 PRO FORMA MARKET VALUE - INCOME CAPITALIZATION APPROACH: Cap Rate PRO FORMA MARKET VALUE (INCOME) 7.00% $1,449,130 PRICE ADJUSTMENTS FOR VACANCY & LEASING EXPENSES Leasing Agent Commission $8,902 Tenant Improvement Costs $89,920 Rent & CAM Loss - (9 Months) $46,542 Developer Time & Risk Factor $98,766 TOTAL PRICE REDUCTION $244,130 ACTUAL MARKET VALUE AFTER VACANCY & LEASING EXPENSES $1,205,000 FINANCING - LONG-TERM LOAN Loan Amount $723,000 Interest Rate 4.50% Interest Constant 6.67% Amortization Period 25 Years Annual Debt Service ($48,224) Monthly Mortgage Payment ($4,019) Loan to Value Ratio 60% Debt Coverage Ratio 2.10 INVESTMENT ANALYSIS Cash Required (Down Payment) $482,000 Percent Down 40% Annual Cash Flow $53,215 Cash on Cash (Equity Dividend Rate) 11.04% SALES COMPARISON APPROACH Value / Price $1,205,000 Price/SF $129.63 Building Square Footage 9,296 6
Rent Roll TENANT NAME TYPE & SUITE NUMBER LEASE DATES & TERM FLOOR SF BLDG SHARE RATE & AMOUNT PER YEAR CHANGES ON CHANGES TO EXPENSES REIMBURSED Cricket Wireless Suite 1 1,800 SF 12/1/2017 $21,234.00 12/1/2015-11/30/2019 19.36% $20,202.00 12/1/2018 $21,774.00 $4,860.00 NNN Heartsong Spay/Neuter Suite 2 1,500 SF 8/1/2016-7/31/2018 16.14% $14,445.00 8/1/2017 $14,445.00 $3,510.00 NNN H & R Block Suite 3 1,500 SF 5/1/2016-4/30/2018 16.14% $24,000.00 N/A N/A $4,200.00 NNN Vacant Suite 4 4,496 SF 48.36% $49,456.00 N/A N/A $12,600.00 NNN Total Occupied 4,800 SF / 51.64% $58,647.00 $57,453.00 $12,600.00 Total Vacant 4,496 SF / 48.36% $49,456.00 $12,570.00 Total 9,296 SF / 100% $108,103.00 $57,453.00 $25,170.00 LEASE TYPE 7
Lease Expiration Schedule Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 For The Year Ending JAN-2016 JAN-2017 JAN-2018 JAN-2019 JAN-2020 JAN-2021 JAN-2022 JAN-2023 JAN-2024 JAN-2025 Tenants Expiring Heartsong Spay/ Neuter Clinic H & R Block Cricket Wireless Total Number of Tenants 2 1 Total Square Feet 3,000 1,800 Total Percentage 32.3% 19.4% Cumulative Percentage 32.3% 51.6% 50% 2 45% Total Project Square Footage 40% 35% 30% 25% 20% 15% 1 Number of Tenants 10% 5% 0% Jan 2016 0% Jan 2017 0% Jan 2018 32% Jan 2019 19% Jan 2020 0% Jan 2021 0% Jan 2022 0% Jan 2023 0% Jan 2024 0% Jan 2025 0% 0 Percentage of SF Expiring Number of Tenants Expiring Cumulative % of SF Expiring Any projections, opinions, assumptions or estimates used here within are for example purposes only and do not represent the current or future performance of the property. 8
Tenant and Lease Summaries Cricket Wireless Lease Commencement 12/1/2015 Lease Expiration 11/30/2019 Gross Leasable Area Original Term 1,800 SF 4 Years Pro Rata Share of Project 19% Headquartered Atlanta, Georgia No. of Locations 3800+ Website https://www.cricketwireless.com Cricket Wireless is a prepaid wireless service provider in the United States. Headquartered in Atlanta, GA, they offer voice, text, and data plans at competitive prices. In July of 2013, AT&T Inc. agreed to buy Cricket Wireless parent company, Leap Wireless, for $1.2 billion and was finalized in April of 2014. Cricket now has over 3800 stores covering customers across the United States. Lease Summary Lease Years Annual Rent Monthly Rent Annual Rent/SF 12/1/2015-11/30/16 $20,202.00 $1,684 $11.28 12/1/2016-11/30/2017 $20,694.00 $1,725 $11.52 12/1/2017-11/30/2018 $21,234.00 $1,770 $11.76 12/1/2018-11/30/2019 $21,774.00 $1,815 $12.12 9
Tenant and Lease Summaries Heartsong Spay/Neuter Clinic Lease Commencement 8/1/2016 Lease Expiration 7/31/2018 Gross Leasable Area Original Term 1,500 SF 2 Years Pro Rata Share of Project 16% Headquartered No. of Locations Website Heartsong Spay Neuter Clinic s mission is to provide high quality, low cost spays and neuters to stop the killing of our nations surplus pet population. The clinic was founded by Loretta & Erik Emmons who originally started a 501(c) 3 non profit rescue but realized it wasn t doing enough to save the many lives of pets in their own country. They came up with a better way to ebb the tide of pet overpopulation. Heartsong already has 3 locations in the United States including Utah, Georgia, & South Carolina with more stores opening and franchise opportunities available. N/A N/A www.heartsongspayneuter.com Lease Summary Lease Years Annual Rent Monthly Rent Annual Rent/SF 8/1/2016-7/31/2017 $14,444.76 $1,204 $9.60 8/1/2017-7/31/2018 $14,733.00 $1,228 $9.84 10
Tenant and Lease Summaries H & R Block Lease Commencement 8/1/2016 Lease Expiration 7/31/2018 Gross Leasable Area Original Term 1,500 SF 2 Years Pro Rata Share of Project 16% Headquartered Kansas City, MO No. of Locations 12,000 Website www.hrblock.com H & R Block is a tax preparation company in North America, Austrailia, Brazil and India. The Kansas City-based company also offers banking, payroll, personal finance and buisness consulting services. Founded in 1955 by brothers Henry W. Bloch & Richard Bloch, Block now operates approximately 12,000 stores worldwide and employs over 90,000 tax preparers. Revenue in 2015 was $3.1 billion with total equity at $1.8 billion as of 2015. In January 2016, H & R Block launched Block Advisors, a service that provides year-round consumer tax preparation. Lease Summary Lease Years Annual Rent Monthly Rent Annual Rent/SF 5/1/2016-4/30/2018 $24,000.00 $2,000 $15.96 11
Investment Overview The Clearfield Retail Center is located at 600 S State Street in Clearfield, Utah. The subject is a 9,296 square foot multi-tenant retail building on a parcel totaling 0.64 acres. The existing tenants include Cricket Wireless, Heartsong Spay/Neuter Clinic, and H & R Block. The property is primely positioned in Clearfield anchored by Kent s Market and is just minutes away from Hill Air Force Base, the sixth-largest employer in the state of Utah. Centrally located between State Street & 700 south, Clearfield Retail Center has great visability with traffic counts exceeding 30,000 combined AADT. This strong mix of local and national tenants in the center contribute to the retail corridor in which the subject is located. Nearby retailers include Family Dollar, America First Credit Union, 7-Eleven, First National Bank, American Title Loans, Pizza Hut, Maverik Gas Station, AutoZone, & Tai pan Trading, a 102,000 SF Home Goods Super Store. With traffic counts over 154,990 AADT, Exit 334 off Interstate-15 funnels traffic directly down 700 South toward the retail center less than one-mile away. Clearfield is located just 28 miles north of downtown Salt Lake City. It was ranked #2 among the most livable cities in the U.S. by Forbes 2010. Clearfield was one of the last cities to be built in Utah, and population in the city boomed with the development of Hill Air Force Base in the 1940 s. Nearby attractions include Hill Aerospace Museum, Antelope Island State Park, Pioneer Village, and Great Salt Lake State Park. Utah has been rated by Forbes as the best state for business for the past three years, and has had a pro-business climate that offers a low tax rate, low energy costs, and a 4.65 percent unemployment rate. Utah s economy expanded by two percent per year from 2008-2013, the fourth highest growth rate in the country. 12
Regional Map Subject Property 13
Local Map Subject Property 14
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Retail Market Subject Property North Davis Junior High School Clearfield High School 16
Location Overview The Ogden-Clearfield metro of northern Utah, located between the Wasatch Mountains and the Great Salt Lake, consists of Weber, Davis and Morgan counties. The Ogden and Weber rivers traverse the area, flowing into the Great Salt Lake. The metro contains approximately 635,300 residents, with Ogden as the largest city. Strategically located for highway, rail and air access, Ogden sits at the crossroads of the CANAMEX shipping corridor, with Interstates 15 and 84 intersecting in the city. Ogden-Hinckley Airport is the second-largest airport in Utah, and Salt Lake City International Airport is 35 miles south. Ogden is located along the transcontinental railroad system and remains a national hub for east-west rail traffic. The Utah Transit Authority offers commuter rail and bus service throughout the Wasatch Front. Ogden s roots in the railroad industry have expanded into military and manufacturing. Hill Air Force Base, home of the Ogden Air Logistics Center, is a major driver of the economy as the area s largest employer. The center offers engineering and logistics management for aircrafts worldwide. Another significant location in the metro is the redeveloped Business Depot Ogden, which provides 6.5 million square feet of industrial and office space to tenants including Lofthouse Cookies, ICON Fitness and Kenco Logistic Services. The expanding local economy will help push population growth to an annual average of 1.4 percent for the next five years. The median household income, currently $67,000 per year, is roughly $10,900 above the U.S. median and will exceed $76,000 in 2019. Share of Total Employment Metro Employment: 239,300 Government 21% Trade, Transportation & Utilities 18% Manufacturing 13% Professional and Business Services 12% Construction 7% Financial Activities 4% Other Services 3% Information 1% Major Employers HIll Air Force Base U.S. Government Lifetime Products Inc. Weber State University Lagoon Corp. Inc. Ogden Regional Medical Center McKay-Dee Hospital Parker Hannifin Corp. Convergys Autoliv 17
Demographic Summary POPULATION 1-MILE 3-MILES 5-MILES 2000 Population 11,036 62,917 136,072 2010 Population 11,215 81,030 178,010 2014 Population 11,629 84,907 187,809 2019 Population 11,548 92,127 204,428 HOUSEHOLDS 1-MILE 3-MILES 5-MILES 2000 Households 3,596 19,716 41,905 2010 Households 3,646 24,977 54,893 2014 Households 3,812 26,283 58,116 2019 Households 3,816 28,442 63,214 2014 Average HH Size 2.83 3.17 3.21 2014 Daytime Population 6,044 31,923 52,769 2000 Owner Occupied Housing Units 40.44% 59.49% 70.98% 2000 Renter Occupied Housing Units 54.09% 35.25% 24.74% 2000 Vacant 5.46% 5.26% 4.28% 2014 Owner Occupied Housing Units 40.16% 65.11% 73.00% 2014 Renter Occupied Housing Units 59.84% 34.89% 27.00% 2014 Vacant 8.20% 4.53% 3.37% 2019 Owner Occupied Housing Units 40.14% 66.21% 73.52% 2019 Renter Occupied Housing Units 59.86% 33.79% 26.48% 2019 Vacant 8.53% 4.34% 3.19% INCOME 1-MILE 3-MILES 5-MILES $0 - $ 14,999 13.4% 8.4% 6.5% $15,000 - $24,999 13.1% 7.5% 6.7% $25,000 - $34,999 12.4% 10.2% 8.7% $35,000 - $49,999 17.8% 15.1% 14.6% $50,000 - $74,999 23.7% 24.4% 24.6% $75,000 - $99,999 9.8% 17.2% 18.2% $100,000 - $124,999 5.8% 9.4% 10.5% $125,000 - $149,999 1.8% 3.8% 5.0% $150,000 - $200,000 1.4% 2.8% 3.5% $200,000 to $249,999 0.3% 0.5% 0.7% $250,000 + 0.4% 0.9% 1.0% 2014 Median HH Income $44,467 $58,734 $63,459 2014 Per Capita Income $17,464 $21,229 $22,821 2014 Average HH Income $52,024 $67,739 $73,262 18
Demographic Summary Geography: 5 Miles Population In 2014, the population in your selected geography is 187,808. The population has changed by 38.02% since 2000. It is estimated that the population in your area will be 204,427 five years from now, which represents a change of 8.84% from the current year. The current population is 50.45% male and 49.54% female. The median age of the population in your area is 28.9, compare this to the Entire US average which is 37.3. The population density in your area is 2,387.09 people per square mile. Households There are currently 58,115 households in your selected geography. The number of households has changed by 38.68% since 2000. It is estimated that the number of households in your area will be 63,213 five years from now, which represents a change of 8.77% from the current year. The average household size in your area is 3.20 persons. Income In 2014, the median household income for your selected geography is $63,458, compare this to the Entire US average which is currently $51,972. The median household income for your area has changed by 31.24% since 2000. It is estimated that the median household income in your area will be $72,055 five years from now, which represents a change of 13.54% from the current year. Race and Ethnicity The current year racial makeup of your selected area is as follows: 86.46% White, 1.71% African American, 0.50% Native American and 2.22% Asian/ Pacific Islander. Compare these to U.S. averages which are: 71.60% White, 12.70% African American, 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 12.04% of the current year population in your selected area. Compare this to the U.S. average of 17.13%. Housing In 2000, there were 31,072 owner occupied housing units in your area and there were 10,832 renter occupied housing units in your area. The median rent at the time was $549. Employment In 2014, there are 52,768 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed that 59.72% of employees are employed in white-collar occupations in this geography, and 40.30% are employed in blue-collar occupations. In 2014, unemployment in this area is 4.24%. In 2000, the average time traveled to work was 25.2 minutes. The current year per capita income in your area is $22,820, compare this to the Entire US average, which is $28,599. The current year average household income in your area is $73,261, compare this to the Entire US average which is $74,533. Demographic data 2015 by Experian/Applied Geographic Solutions. 19
CLEARFIELD RETAIL CENTER Clearfield, Utah OFFICES NATIONWIDE www.marcusmillichap.com