Vernon Hills, Illinois Executive Summary Holliday Fenoglio Fowler, L.P. ( HFF ) is an Illinois licensed real estate broker
INVESTMENT OVERVIEW Holliday Fenoglio Fowler, L.P. ( HFF ) is pleased to present Three Hawthorn Parkway ( Three Hawthorn or the Property ), a 4-story, Class A multi-tenant office building located in Vernon Hills, IL. Originally constructed in 1989, the 86,293 RSF building is 89.0% leased with a 4.6 year remaining weighted average lease term and strong demonstrated tenant commitment to the Property. Situated in the North Suburban submarket of Chicago, the Property provides exceptional access and visibility on Townline Road and is adjacent to the retail hub serving Vernon Hills and the surrounding suburbs, thereby offering a superior amenity package. Three Hawthorn, a premier boutique office asset, is a unique value add investment opportunity at an attractive basis and significant upside potential. ADDRESS CITY PROPERTY TYPE TOTAL RENTABLE AREA KEY PROPERTY STATISTICS Three Hawthorn Parkway Vernon Hills Class A Multi-Tenant Office 86,293 RSF PERCENT LEASED 89.0% STORIES 4 DATE COMPLETED / RENOVATED 1989 / 2012 AVERAGE FLOOR PLATES 21,570 RSF SLAB TO SLAB CEILING HEIGHT 12' FINISHED CEILING HEIGHT 9' PARKING SPACES 306 Spaces; 3.6 / 1,000 Ratio Includes 298 regular spaces & 8 handicapped spaces ACCESSIBILITY Ingress & egress on Hawthorn Parkway to the North and Townline Road to the South REMAINING WEIGHTED AVERAGE LEASE TERM 4.6 Yrs 2
3
Rockland Rd Immediate Access to Class A Amenities Three Hawthorn offers a unique Class A amenity package, 21 THREE HAWTHORN PARKWAY 3.5 Miles to I-94 Townline Rd 60 94 Kennedy Rd which includes a beautifully designed 2-story atrium lobby, an outdoor patio for tenant enjoyment and access to walking paths along the adjacent lakes. Most importantly, the Property sits in the epicenter of the retail hub serving Vernon Hills and the neighboring suburbs. The area immediately surrounding the Property is saturated with retail and dining options as well as several hotel and entertainment options. The 1.4 million square foot Hawthorn Mall, the Hawthorn Hills Square, the Marketplace at Vernon Hills, Target, a future Whole Foods, and numerous restaurant options in the immediate vicinity of the Property are incredibly attractive to the area s workforce. Three Hawthown is walking distance from the Hawthorn Mall and the Hawthorn Hills Square and is under a 5 minute drive from the Oak Creek Shopping Center, all on Townline Road. Furthermore, The Property is the only building on Hawthorn Parkway with direct access and excellent visibility from Route 60/Townline Road. Townline Road is a heavily trafficked eastwest throughway, which provides direct access to I-94 within 5 minutes from Three Hawthorn. 4
Executive Summary HAWTHORN HILLS SQUARE AND MARKETPLACE AT VERNON HILLS WESTFIELD HAWTHORN MALL Denny s Macy s Babies R Us Barnes & Noble Michael Kors Express JCPenney FUTURE MELLODY FARM DEVELOPMENT Whole Foods Banana Republic Bath & Body Works Carson Pirie Scott Sears GAP New York & Company Lane Bryant Victoria s Secret H&M Dave & Busters Abercrombie & Fitch AMC Theatres AMLI at Museum Gardens Dunkin Donuts IHOP PetSmart Jamba Juice Chuck E. Cheese s Dick s Sporting Goods McDonald s KFC Old Navy Potbelly Noodles & Company Michaels Olive Garden Men s Warehouse TJ Maxx Chick-fil-A Best Buy Bed Bath & Beyond Sam s Club The Home Depot Kohls DSW Jo-Ann Fabric Corner Bakery Walmart AMC Theatres Petco Toys R Us AT&T OfficeMax Bank of America Party City Jared - The Galleria of Jewelry MILWAUKEE AVENUE LEGEND U.S.P.S Dollar Tree Hobby Lobby TOW Brookdale Hawthorn Lakes Target LAKEVIEW PKWY D One Hawthorn Place Rust-Oleum Corporation HQ NLIN E ROA Holiday Inn Express Restaurant Hotel Shopping/Retail Grocery Bank PNC Bank 35-40 minutes South to Chicago Y N PKW Vernon Hills R O H T Montessori Academy HAW ADDITONAL RETAILERS TO THE WEST Walgreens Starbucks FedEx Office Buffalo Wild Wings Carter-Hoffmann Osaka Sushi Jiffy Lube Edible Arrangements Fitness Factory Outlet Blue House Korean BBQ THREE HAWTHORN PARKWAY 5 Minute Drive to I-94 Tri-State Tollway Victory Centre of Vernon Hills Vernon Plaza ASPEN DRIVE Aspen Drive Library 5
Unwavering Tenancy with A Credit Quality Income Stream The desirability of Three Hawthorn is emphasized by the quality of its unwavering tenants, many of which have called the Property home for over 10 years. Total Renal Care (Parent: DaVita; Moody's: Ba1) and Northwestern Mutual Financial Network (Guarantor: Northwestern Mutual Life Insurance; Moody's: Aaa) anchor the building and offer a credit quality income stream. Both of these tenants have executed multiple extensions and expansions since moving into the Property, which speaks to their commitment to Vernon Hills and specifically, Three Hawthorn. Total Renal Care is a subsidiary of DaVita Healthcare and Three Hawthorn is the headquarters for their Lifeline Vascular Access division. The tenant has executed 4 renewals at the Property since 2005 and recently expanded to the 2nd floor, while also occupying the full 4th floor. Similarly, Northwestern Mutual Financial Network expanded to 11,890 RSF in January 2016, while simultaneously extending its lease term for 10 years to January 2026. With the Northwestern Mutual Life Insurance guaranty, this tenant is expected to provide credit quality cash-flow for the next 10 years. Premier Boutique Office Building Ideal for Market Three Hawthorn is an ideal office building for the North Suburban submarket of Chicago, which is the strongest performing suburban market with low direct vacancy and high rental rates. The 17,700 to 23,500 RSF floor plate sizes are excellent options for full floor tenants, such as Total Renal Care. The floor plates and central core also allow for seamless multi-tenanting with convenient access from the elevator corridors. This is reflected in the fact that the average tenant size at the Property is 5,760 RSF and the most recent new tenants have ranged from 2,300 RSF to 6,000 RSF. The Property has also attracted companies looking for a regional presence, such as subsidiaries of large corporations which include Barry-Wehmiller Design Group, eloyalty and previously mentioned Total Renal Care. These tenants have regional hubs at Three Hawthorn given the Property s central location in the North Suburbs, with easy access to Chicago and a skilled labor pool. Three Hawthorn is also an exceptional location for professional or financial service firms, such as Kentco Capital Corporation and Cignus Solutions, which require smaller spaces in premier office buildings. These tenants also command a presence within the Property rather than getting lost in the rent roll of a larger building. This results in both ownership and the tenancy being equally invested in maintaining the Property s superior quality. 6
7
Upside Potential With Competitive Basis at Substantial Discount to Replacement Cost At 89.0% leased, the Property offers significant upside potential through lease up of vacant spaces. An investor can lease up an additional 6% of space to increase NOI by over 25% within 3 years. Furthermore, new construction has slowed in recent years as a result of rising construction costs and a lack of desirable office development sites; replacement costs for Class A office product are in excess of $250 per square foot. An investor has the ability to acquire the Property at a value significantly below replacement cost, providing an opportunity to achieve superior leasing performance and an appealing yield over an investor's hold period. Tremendous Recent Leasing Velocity In the past 18 months, the Property has benefited from over 35,000 RSF of leasing activity, which includes new leases, expansions and renewals. This leasing velocity accounts for 41% of the Property s GLA, with new deals having reached $13.75 NNN rents. Existing tenants such as Northwestern Mutual, Barry-Welmiller Design Group and Huntington Resource recently renewed their leases, while companies from the financial, legal and medical services industries signed new leases with 5, 7 and 10 year terms. This leasing activity has increased occupancy by over 20% from 2013 and speaks to the tremendous momentum and tenant interest, which is expected to continue at Three Hawthorn. Tenant Type Size Commencement Date Term RALPH, SCHWAB, GARTNER & SCHIEVER New 6,028 RSF Feb-17 126 months CONFIDENTIAL LOI New 2,431 RSF Apr-17 65 months COUNSELING CONNECTIONS New 2,387 RSF Sep-16 87 months NORTHWESTERN MUTUAL FINANCIAL NETWORK Renewal 11,890 RSF Feb-16 120 months Counseling Connections 8
Exceptional Quality Maintained through Pride of Development & Management The Property was developed by Hamilton Partners, who continues to maintain and manage the building. Hamilton Partners operates a 25 million square foot portfolio of office, retail, multi-family and industrial assets across the nation, grown over time through the company's expertise and excellence in operating standards. The Property has truly benefited from the pride of management that Hamilton Partners has demonstrated since the building s development. The dedicated on-site management team ensures that the quality of the building is maintained through continuous repairs and upgrades. Most recently, the loading dock was completely upgraded, interactive directories were installed and the wood paneling in the lobby was refinished. Additionally, the elevator cabs and the HVAC systems have also undergone consistent and proactive maintenance since the Property was developed. 9
CORPORATE HEADQUARTERS FORTUNE 500 HEADQUARTERS IN CHICAGO MSA 21 137 94 Buckley Rd 41 Chicago Ranking Company Fortune 500 Ranking Industry Revenues (In Millions) Location Abbott Laboratories 1 Walgreens Boots Alliance 19 Food and Drug Stores $103,444 Deerfield,IL Rockland Rd 10 2 Boeing 24 Aerospace & Defense $96,114 Chicago, IL 3 Archer Daniels Midland 41 Food Production $ 67,702 Chicago, IL 4 United Continental 80 Airlines $37,864 Chicago, IL 5 Allstate 81 Insurance $35,653 Northbrook, IL 6 Mondelez International 94 Food Consumer Products $29,636 Deerfield, IL 7 Exelon 95 Utilities: Gas and Electric $29,447 Chicago, IL 8 McDonald's 109 Food Services $25,413 Oak Brook, IL 9 Sears 111 General Merchandisers $25,146 Hoffman Estates,IL 10 US Foods Holding 122 Wholesalers: Food and Grocery $23,128 Rosemont, IL 11 AbbVie 123 Pharmaceuticals $22,859 North Chicago, IL 12 Abbott Laboratories 138 Medical Products and Equipment $20,661 Abbott Park, IL 13 Illinois Tool Works 211 Industry Machinery $13,405 Glenview, IL 14 CDW 220 Information Technology Services $12,989 Lincolnshire, IL 15 R.R. Donnelley & Sons 255 Publishing, Printing $11,257 Chicago, IL 16 Navistar International 281 Motor Vehicles and Parts $10,140 Lisle,IL 17 Discover Financial Services 283 Commercial Banking $10,002 Riverwoods, IL 18 W.W. Grainger 285 Diversified Wholesalers $9,973 Lake Forest, IL 19 Baxter International 286 Medical Products and Equipment $9,968 Deerfield, IL 20 Univar 315 Miscellaneous $8,982 Downers Grove, IL 21 Tenneco 334 Motor Vehicles and Parts $8,209 Lake Forest, IL 22 LKQ 369 Diversified Wholesalers $7,193 Chicago, IL 23 Dover 377 Industrial Machinery $7,029 Downers Grove, IL 24 Anixter International 391 Diversified Wholesalers $6,596 Glenview, IL 25 Baxalta 420 Pharmaceuticals $6,149 Bannockburn, IL 26 Jones Lang LaSalle 436 Real Estate $5,966 Chicago, IL 27 Old Republic International 442 Insurance $5,766 Chicago, IL 28 Packaging Corp of America 446 Packaging, Containers $5,742 Lake Forest, IL 29 Motorola Solutions 451 Network and Communications Equip. $5,695 Chicago, IL 30 Ingredion 456 Food Production $5,621 Westchester, IL 31 Arthur J Gallagher 471 Diversified Financials $5,392 Itasca, IL 32 Essendant 477 Wholesalers: Electronics and Office Equip $5,363 Deerfield, IL 33 Telephone & Data Systems 496 Telecommunications $5,176 Chicago, IL Source: Fortune (2016) Suburban-based Headquarters North Suburban-based Headquarters Rd 90 Baxter Credit Union Klein Tools AON Hewitt THREE HAWTHORN PARKWAY Sysmex Willow Rd 21 METRA UNION PACIFIC NORTHWEST Abbvie Rust-Oleum Golf Rd 60 American Hotel Register Co. Townline Rd Everett Rd LINCOLNSHIRE Zenith Zebra Technolgies 83 Brunswick Milwaukee Ave Lake Cook Rd WHEELING E Lake Ave METRA NORTH CENTRAL SERVICE Central Rd Oakton St CDW Kennedy Rd 294 Mannheim Hospira PCA Grainger SOLO Sauer Danfoss Sanders Rd 22 Telegraph Rd 94 Rand Rd Tenneco Packaging S Waukegan Rd 294 Skokie Hwy Everett Rd Skokie Valley Rd Half Day Rd Dundee Rd Walters Ave Willow Rd Deerpath Rd Pactiv METRA MILWAUKEE NORTH Westleigh Rd Pfingsten Rd METRA UNION PACIFIC NORT Ridge Rd Sheridan Rd DEERFIELD Deerfield Rd GLENVIEW E Lake Ave Greenwood Ave Northwest Hwy LAKE FOREST Shermer Rd Central Rd Golf Rd W Dempster St Oakton St Milwaukee Ave HIGHLAND PARK Mondelez CF Industries 41 Discover Walgreens Fortune Brands Lake Cook Rd Baxter CVS/Caremark Astellas Essendant Takeda Allstate Lehign Ave Waukegan Rd Harlem Ave N Shermer Rd Green Bay Rd NORTHBROOK Barilla PotashCorp Crate&Barrel Anixter ITW Waukegan Rd NILES LAKE COUNTY COOK COUNTY Sunset Ridge Rd Willow Rd Harms Rd 94 Sheridan Rd Tower Rd Glencoe Rd Winnetka Rd Hibbard Rd Lake Ave Old Orch Skokie Blvd W SKO
Skilled Labor Pool in Lake County and Vernon Hills The North Suburban submarket is the preferred headquarters location for companies in the biotech, pharmaceutical, advanced manufacturing, financial services and professional services industries. Due to its lower real estate taxes, Lake County offers an attractive location for businesses to grow and prosper with a significant advantage over the higher Cook County real estate taxes found in the Northwest Submarket and parts of the North Submarket. More specifically, Vernon Hills has attracted several large corporations with its highly skilled work-force, excellent business parks and numerous retail amenities. Vernon Hills serves as the headquarters for American Hotel Registry Company, Rust-Oleum and Elorac, companies with expansive real estate needs. The following table clearly highlights the superior quality of the skilled labor pool located in Vernon Hills as compared to overall Lake County, with over 60% of the population holding a bachelor s degree or higher and with an average household income of nearly $135,000. Three Hawthorn is a unique asset since it can accommodate both larger companies, such as Total Renal Care, along with businesses that service the skilled labor pool, such as Kentco Capital Corporation. VERNON HILLS - SKILLED LABOR POOL DEMOGRAPHICS 1-Mile 3-Mile 5-Mile Vernon Lake Radius Radius Radius Hills County Illinois % ATTAINING BACHELOR'S DEGREE OR HIGHER 59.0% 54.4% 58.1% 61.2% 42.5% 31.9% AVERAGE HOUSEHOLD INCOME $109,443 $129,694 $143,637 $134,750 $112,098 $81,390 MEDIAN HOUSING VALUE $254,184 $339,571 $389,838 $361,969 $263,925 $186,871 Source: Nielsen 11
Contact Information HFF Chicago 181 West Madison Suite 3900 Chicago, IL 60602 Telephone: 312.528.3650 Fax: 312.528.3651 Investment Contacts Bryan D. Rosenberg Associate Director 312.300.7282 brosenberg@hfflp.com Debt Contact Jimmy Conley Associate Director 312.980.3615 jconley@hfflp.com Patrick M. Shields Associate Director 312.528.3685 pshields@hfflp.com Jeffrey M. Bramson Senior Managing Director / Managing Broker 312.528.3687 jbramson@hfflp.com Jaime M. Fink Senior Managing Director 312.528.3683 jfink@hfflp.com Mark B. Katz Senior Managing Director 312.980.3604 mkatz@hfflp.com Navi K. Sandhu Analyst 312.980.3617 nsandhu@hfflp.com Holliday Fenoglio Fowler, L.P. (HFF) and HFF Securities L.P. (HFFS) are owned by HFF, Inc. (NYSE: HF). HFF operates out of 23 offices nationwide and is a leading provider of commercial real estate and capital markets services to the U.S. commercial real estate industry. HFF together with its affiliate HFFS offer clients a fully integrated national capital markets platform including debt placement, investment sales, equity placement, advisory services, loan sales and commercial loan servicing. For more information please visit hfflp.com or follow HFF on Twitter @HFF. HFF has been engaged by the owner of the property to market it for sale. Information concerning the property described herein has been obtained from sources other than HFF, and neither Owner nor HFF, nor their respective equity holders, officers, employees and agents makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Any and all reference to age, square footage, income, expenses and any other property specific information are approximate. Any opinions, assumptions, or estimates contained herein are projections only and used for illustrative purposes and may be based on assumptions or due diligence criteria different from that used by a purchaser, and HFF, its partners, officers, employees and agents disclaim any liability that may be based upon or related to the information contained herein. Prospective purchasers should conduct their own independent investigation and rely on those results. The information contained herein is subject to change.