OFFERING MEMORANDUM
CONFIDENTIALITY AND DISCLAIMER The information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap and should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB's or asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant s plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable; however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of the information set forth herein. NON-ENDORSEMENT NOTICE 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.
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 newly-acquired 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.
TABLE OF CONTENTS Section 1 PRICING AND FINANCIAL ANALYSIS Section 2 PROPERTY DESCRIPTION Section 3 DEMOGRAPHIC ANALYSIS
PRICING AND FINANCIAL ANALYSIS Jo-Ann Stores, Inc
PRICING AND FINANCIAL ANALYSIS FINANCIAL OVERVIEW Location 6175 South Westnedge Portage, MI 49002 Price $2,500,000 Down Payment 100% / $2,500,000 Rentable Square Feet 20,016 Price/SF $124.90 CAP Rate 6.60% Year Built /Renovated 1964/2015 Lot Size Type of Ownership Tenant Summary Tenant Trade Name Ownership Tenant Lease Guarantor Lease Type Roof and Structure Lease Term 2.298 Acres Fee Simple Jo-Ann Stores, Inc Private Corporate Store Corporate Guarantee Double Net Landlord Responsible 15 Years Lease Commencement Date 02/01/2015 Rent Commencement Date 02/01/2015 Lease Expiration Date 01/31/2030 Term Remaining on Lease Increases Options 15-Years Every 5-Years 1x5 Annualized Operating Data Rent Increases Annual Rent Monthly Rent 2015-2020 $165,000.00 $13,750.00 2020-2025 $175,000.00 $14,583.33 2025-2030 $195,000.00 $16,250.00 Remaining Option $215,000.00 $17,916.67 Base Rent ($8.24/SF) $165,000 Net Operating Income $165,000 Total Return 6.60% / $165,000 Investment Highlights Jo-Ann Recently Executed a Lease Extension - Extended to 2030 The Shopping Center Undergoing Significant Renovation - See Rendering Jo-Ann Building and Parcel is Part of a Much Larger Retail Center of Approximately 250,000 Square Feet, Anchored by Dick's Sporting Goods, Hobby Lobby, Toys R Us, Aldi (all of which leases are recent), Chuck E Cheese and Chili's Jo-Ann's Has Occupied the SIte Since 1994 Strong Performance History - Strong Store Sales Area Serves as a Hub of Destination Retail for Surrounding Communities. The City of Portage is Underway with Major Reconstruction of Westnedge Avenue and the Signalized Entry to the Property, Which is Scheduled for Completion in August 2015 1
PRICING AND FINANCIAL ANALYSIS TENANT OVERVIEW Property Name Jo-Ann Stores, Inc Property Address 6175 South Westnedge Portage, MI 49002 Property Type Net Leased Miscellaneous Rentable Square Feet 20,016 Tenant Trade Name Jo-Ann Stores, Inc Ownership Private Tenant Corporate Store Sales Volume $2.20(Bil) 2014 Net Worth $1.61(Bil) Market Value Lease Guarantor Corporate Guarantee Credit Rating #195 Forbes Largest Private Co (2014) Lease Commencement Date 02/01/2015 Rent Commencement Date 02/01/2015 Lease Expiration Date 01/31/2030 Term Remaining on Lease 15-Years Lease Type Double Net Roof and Structure Landlord Responsible Lease Term 15 Years Increases Every 5-Years Options to Renew 1x5 No. of Locations 850+ Headquartered Hudson, Ohio Web Site www.joann.com Years in the Business 72+ Years ABOUT THE TENANT Jo-Ann Stores, LLC has the fabric store market all sewn up. It's the #1 fabric retailer nationwide operating more than 850 stores in 49 states. The company sells a variety of fabrics and sewing supplies, craft materials, frames, home decorations, artificial floral items, and seasonal goods. Most of its small-format stores (averaging 15,000- square feet) are located in strip mall shopping centers and operate under the name Jo-Ann Fabrics and Craft. The company also operates large-format Jo-Ann superstores (36,000-square foot on average) and an e-commerce site, Joann.com. The company is owned by acquisitive private equity firm Leonard Green & Partners (purchased in 2011 for $1.6(Bil). Based in Ohio, the company operates fabric retail shops nationwide under the banner names Jo-Ann and Jo-Ann Fabric and Craft. Jo-Ann Stores three distribution centers are in Hudson, Ohio; Visalia, California; and Alabama. 2
PROPERTY DESCRIPTION Jo-Ann Stores, Inc
PROPERTY DESCRIPTION INVESTMENT OVERVIEW Investment Highlights Tenant Recently Executed a Lease Extension - (Extended To 2030) Site Undergoing Renovation - See Rendering Photos, Scheduled for Completion by Mid-August 2015 Jo-Ann's Remodeled the Interior of the Store in 2014 Rental Escalations Every 5-Years Plus Percentage Rents Strong Performance History - Store Sales Exceed $146 Square Foot (2014) / Rent to Sales Ratio as of January 2014 is 7-Percent (Industry Standard For Retail Success Is Anything Under 8 Percent) Area Serves as Destination Retail Hub to Portage, MI #1 Fabric Retailer in the Country Co-Anchor of Toys R Us Plaza The original Jo-Ann's lease started in 1994 and in February 2015 executed a 10-year extension followed by another extension of five-years, taking the base term of the lease through January 2030, after which they will have one five-year option remaining. The subject property is situated on a 5.98 acre shopping center known as Toys R Us Plaza which is co-anchored by Toys R Us and Chuck E. Cheese. The site is also home to Chili's (out pad), and Dick's Sporting Goods. The subject site occupies 2.298 acres of the Plaza. Tenant agrees at all times to maintain the interior, non-structural portion of the premises at its sole cost and expense. The Landlord shall be responsible for the cost of a roof replacement. Tenant installed a new HVAC system when the lease commenced and is responsible for the maintenance thereon, but in the event of substantial repair or replacement needed, then Landlord shall repair/replace at their sole cost and expense. Tenant pays all CAMs (passing through Landlord). The area serves as the region's retail destination. With over 39,875 vehicles passing in front of the site daily (KATS Transportation Study) the region is attractive to retailers. Other national retailers in the immediate area include: Verizon, Kohl's, TJMaxx, Office Max, Petco, Barnes & Nobles, Pizza Hut, Menards, the Crossroads Mall which is anchored by JC Penney, Burlington Coat Factory, IMAX Theatres, Sears and Macy's. David's Bridal, Old Navy, Bed, Bath & Beyond, Petco, babies R Us, Taco Bell, Home Depot, Applebee's, Target, Best Buy, Sam's Club, Red Lobster, Michael's and Dick's Sporting Goods are all in the immediate area. Crossroads Mall is home to over 100+ national and regional vendors including: Aldo, Banana Republic, American Eagle, Chico's, Limited, Eddie Bauer, Express, Hollister, Payless Shoes and Victoria Secret just to name a few. It is also the only enclosed regional center for 45-miles. Portage, Michigan, located in Kalamazoo County (250,000 residents in the MSA) is home to two public high schools. Pfizer has pharmaceutical manufacturing operations in Portage as well. Stryker Corporation also has a large manufacturing presence in the city and is a world wide leader in medical equipment manufacturing. FEMA Corporation, a hydraulic valve manufacturing company, also calls Portage its home. Portage is a city known for its vast array of historic parks and hiking trails. The biking trails alone cover 50 miles across and through the city limits which draws local and distant tourism to the region. 4
PROPERTY DESCRIPTION INVESTMENT OVERVIEW Infrastructure Upgrades: Major infrastructure improvements by the City are underway. Westnedge Avenue infrastructure improvements are scheduled for completion by midaugust 2015. Westnedge upgrade includes: upgrading the water main, upgrading storm drains, sidewalk improvements to meet current ADA requirements, repaving, replacing the traffic signal at the corner of Westnedge and Milham Avenue, and in the case of the subject property, grading and repaving the main drive approach so that the transition between the driveway and Westnedge is smooth. The City of Portage has dedicated $2,400,000 into the upgrades. The motivation for the City's upgrades to the immediate area is due in part to South Westnedge Avenue being a major transport facility serving the regional retail centers: an estimated market value of $84million of commercial retail facilities exists between Kilgore Road and Milham Avenue. South Westnedge Avenue is a principal gateway into the Portage community. The City projects that redevelopment activities along this segment of Westnedge Avenue will not only result in $120million of added market value to the commercial sector over the next ten years, but will also improve aesthetic character of the corridor and protect adjacent neighborhoods. The significance of the South Westnedge Avenue Corridor cannot be overstated: The strength and vitality of the South Westnedge Avenue Commercial Corridor is key for this community and for Kalamazoo County. The immediate area serves as the core of the central business area in the community and is a retail center serving southwest Michigan: More than four million square feet of commercial space is situated along the corridor, which extends from Kilgore Road to Centre Avenue. The central hub being Crossroads Mall, a nearly one million square foot regional mall (renovated in 2001), which also happens to be the only enclosed regional center within a 45mile radius. The Mall is home to a 20,000 square foot food court and also features a double decker carousel. South Westnedge Avenue connects Portage Commerce Square with neighborhoods in Portage and also in Kalamazoo and adjacent communities. It serves as one of the most important, most visible and busiest streets for business and residents in the City of Portage and for visitors from throughout Southwest Michigan. As a gateway into the community, particularly from I94, South Westnedge Avenue is a major northsouth thoroughfare that carries thousands of vehicles on a daily basis and also establishes the image of the community. 5
PROPERTY DESCRIPTION INVESTMENT OVERVIEW Retail Vacancy: The region is highly sought after by national and regional retailers, and nothing depicts this more than the very low retail vacancy rate surrounding the region. The 10-mile radius surrounding the subject site offers only 7 available spaces totalling 64,678 square feet of available "vacant" retail space, averaging $10.33 SF in requested rent. A discriminating buyer will recognize that the subject site offers upside potential in rent with the current rent below market at $8.24 SF. The region historically benefits from low retail vacancy because of the corridor being the main retail hub servicing Kalamazoo County, the City of Portage and surrounding communities. 6
PROPERTY DESCRIPTION PROPERTY SUMMARY The Offering Property Property Address Jo-Ann Stores, Inc 6175 South Westnedge Portage, MI 49002 Site Description Year Built/Renovated 1964 / 2015 Rentable Square Feet 20,016 Lot Size 2.298 Acres Type of Ownership Fee Simple 7
PROPERTY DESCRIPTION AREA MAPS Local Map Regional Map 8
CROSSROADS MALL
DEMOGRAPHIC ANALYSIS Jo-Ann Stores, Inc
DEMOGRAPHIC ANALYSIS DEMOGRAPHIC REPORT 1 Mile 3 Miles 5 Miles 2000 Population 6,583 53,932 125,553 2010 Population 6,316 53,396 126,713 2014 Population 6,482 54,581 129,730 2019 Population 6,428 55,015 132,204 2000 Households 3,182 23,024 49,624 2010 Households 3,075 23,192 51,424 2014 Households 3,163 23,789 52,911 2019 Households 3,149 24,113 54,259 2014 Average Household Size 2.13 2.29 2.31 2014 Daytime Population 7,355 28,150 66,956 2000 Owner Occupied Housing Units 45.76% 63.13% 53.91% 2000 Renter Occupied Housing Units 49.94% 32.43% 40.20% 2000 Vacant 4.30% 4.43% 5.89% 2014 Owner Occupied Housing Units 45.82% 63.51% 54.79% 2014 Renter Occupied Housing Units 54.18% 36.49% 45.21% 2014 Vacant 6.46% 5.02% 6.11% 2019 Owner Occupied Housing Units 46.09% 63.33% 54.62% 2019 Renter Occupied Housing Units 53.91% 36.67% 45.38% 2019 Vacant 6.77% 5.09% 6.08% $ 0 - $14,999 15.5% 12.6% 18.3% $ 15,000 - $24,999 18.7% 11.9% 14.0% $ 25,000 - $34,999 13.9% 11.8% 11.2% $ 35,000 - $49,999 13.8% 14.0% 12.8% $ 50,000 - $74,999 17.4% 20.4% 17.7% $ 75,000 - $99,999 9.5% 12.2% 10.8% $100,000 - $124,999 6.4% 7.3% 6.4% $125,000 - $149,999 3.0% 3.8% 3.4% $150,000 - $199,999 1.3% 2.8% 2.8% $200,000 - $249,999 0.2% 1.4% 1.1% $250,000 + 0.4% 1.9% 1.6% 2014 Median Household Income $36,634 $49,600 $42,153 2014 Per Capita Income $24,476 $29,564 $25,613 2014 Average Household Income $50,146 $67,532 $60,908 Demographic data 2012 by Experian. 11
DEMOGRAPHIC ANALYSIS POPULATION DENSITY Demographic data 2012 by Experian. Number of people living in a given area per square mile. 12
DEMOGRAPHIC ANALYSIS EMPLOYMENT DENSITY Demographic data 2012 by Experian. The number of people employed in a given area per square mile. 13
DEMOGRAPHIC ANALYSIS AVERAGE HOUSEHOLD INCOME Demographic data 2012 by Experian. Average income of all the people 15 years and older occupying a single housing unit. 14
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