Offering Memorandum CHILD SUPPORT ENFORCEMENT (CSE) HEADQUARTERS, STATE OF KENTUCKY 730 Schenkel Lane Frankfort, KY 40601
NON-ENDORSEMENT AND DISCLAIMER NOTICE 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. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. Â 2017 Marcus & Millichap. All rights reserved. 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. Frankfort, KY ACT ID Y0360182
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 INVESTMENT OVERVIEW 01 Offering Summary Location Overview Regional and Local Map Aerial Photo FINANCIAL ANALYSIS 02 Acquisition Financing MARKET OVERVIEW Demographic Analysis 03
INVESTMENT OVERVIEW 5
OFFERINGSUMMARY SUMMARY OFFERING EXECUTIVE SUMMARY OFFERING SUMMARY Price $1,710,000 Net Operating Income $151,284 Capitalization Rate Current 8.85% Price / SF $70.97 EMPLOYER Rent / SF $7.71 Health & Fmly Svcs KY Cab For 3,610 Lease Type Modified Gross Kentucky Department Highways 2,000 Gross Leasable Area 24,094 SF Department of Education 1,000 Year Built / Renovated 1977* Kentucky State Indvdual Lstngs 800 Lot Size 1.56 acre(s) Transportation Cabinet KY 506 Road & Rail Services Inc 455 Attorney Generals Office 450 Kentucky Department of Labor 447 Kentucky Department Education 442 Office Labor-Mgmt Relation 438 Health Service Office 400 Health Systems Development Off 400 FINANCING Down Payment All Cash Net Cash Flow 8.85% / $151,284 Cash on Cash Return *The tenant reimburses the landlord for alterations. 8.85% MAJOR EMPLOYERS # OF EMPLOYEES * DEMOGRAPHICS 1-Miles 3-Miles 5-Miles 2016 Estimate Pop 6,586 24,899 37,072 2016 Census Pop 6,553 24,701 36,803 2016 Estimate HH 2,851 10,750 15,886 2016 Census HH 2,814 10,601 15,684 Median HH Income $45,879 $44,324 $46,265 Per Capita Income $26,444 $25,923 $27,184 Average HH Income $60,135 $58,695 $62,328 * # of Employees based on 5 mile radius # 6
INVESTMENT OVERVIEW OFFERING SUMMARY Marcus & Millichap is pleased to present Kentucky Child Support Enforcement Agency Headquarters, a single tenant office building guaranteed by The Commonwealth (State) of Kentucky which has a Moody s credit rating of Aa3 / Stable. The Subject property is a build-to-suit for the Commonwealth of Kentucky which has been a tenant since 1979. The 25,160 square-foot building boasts high quality brick construction including a Duralast vinyl membrane roof still under warranty and custom aluminum with baked on enamel (as opposed to spray painted) gutters and flashing. The landlord is responsible for maintenance of the interior of the building such as repainting and retaining an in place elevator maintenance contract; and replacements such as carpeting every several years. The carpeting throughout the building was replaced in 2014. The current owner utilizes a property maintenance company that will be made available to the buyer. The tenant pays for alterations and also maintains the exterior of the building including landscaping, ice, snow, and trash removal. The tenant pays three month s rent at a time, in advance. The subject parcel is 1.56 +/- acres and is situated just off State Route 421 on Schenkel Lane in Frankfort with excellent visibility from the street and ample parking. The surrounding neighborhood is a mix of retail, office and light industrial along with dense single and multi-family housing. Frankfort is the Capitol of Kentucky and is the seat of Franklin County. Frankfort is home to numerous state agency headquarters in addition to the subject property. The city is part of the world famous Kentucky Bourbon Trail and is home to several bourbon distilleries and storage facilities. Frankfort is located between Louisville and Lexington Kentucky with easy access to transportation including highways and airports. INVESTMENT HIGHLIGHTS Single Tenant Net Leased Opportunity: 100% Occupied by the State of Kentucky Child Support Enforcement Headquarters Long Term Tenancy: Build-to-Suit for The State of Kentucky and Tenanted by The State of Kentucky for the Past Forty Years High Quality Construction The Tenant Maintains the Exterior of the Property Including Landscaping, Ice, Snow and Trash and Reimburses for Alterations The Landlord Maintains the Interior of the Building Below Market Rent Per Square Foot #7
TENANT PROFILES The Commonwealth of Kentucky - Child Support Enforcement (CSE) Within the state agency known as the Kentucky Cabinet for Health and Family Services is a department called the Department for Income Support. Child Support Enforcement (CSE) is a part of the Income Support Department. CSE was established to enforce state and federal laws regarding child support. General Information Tenant Name The Commonwealth of Kentucky - Child Support Enforcement (CSE) Website chfs.ky.gov CSE performs a number of critical child support enforcement functions. It uses an administrative (non-judicial) process to locate parents who've disappeared, establish parentage (paternity) of children born to unmarried couples, trace parental sources of property and income, establish and modify child and medical support obligations, and enforce child and medical support obligations. CSE also reviews existing orders to decide whether they should be modified. Parent Company The Commonwealth of Kentucky (Guarantor) Headquartered Frankfort, KY Rentable Square Feet 25,160 SF Percentage of RBA 100.00% Lease Commencement 7/1/1977 CSE acts as a clearinghouse for payments. Paying parents enter their payments on the Kentucky Child Support Interactive Website. This prevents parents from having to write checks to each other or argue about money. CSE tracks the payments, making sure accounts are up to date. Then the funds are released to the receiving parent through a debit card or direct deposit. Lease Expiration 6/30/2020 No. of Locations Multiple, Subject is Headquarters Location Finally, CSE can apply enforcement measures when paying parents aren t meeting their child support obligations. However, some CSE offices may be overloaded with a high number of cases, so receiving parents might find that it s in their best interest to locate a private lawyer or legal aid attorney who can go to court and ask a judge to help enforce a child support order and encourage a delinquent parent to pay. In some circumstances, this can be more effective than waiting for CSE to act. 128
PROPERTY CHILD SUPPORT NAMEENFORCEMENT - STATE OF KENTUCKY LOCATION TENANT SUMMARY OVERVIEW PRICING VALUATION MATRIX PRICING AND AND VALUATION MATRIX 730 Schenkel Lane, Frankfort, KY 40601 Forty Years of Continuous Tenancy Build-to-Suit for The State of Kentucky Below Market Rent Headquarters Location Frankfort is the State Capitol of Kentucky High Quality Construction Well Maintained Property Tenant Responsibilities Include Landscaping, Trash, Snow, Ice The Tenant Reimburses for Alterations In Place Property Maintenance Company Frankfort is a Part of the World Famous Bourbon Trail The tenant, Child Support Enforcement, provides assistance to parents with minor children seeking financial support from a noncustodial parent. CLOSE PROXIMITY TO: 9#
PROPERTY CHILD SUPPORT NAMEENFORCEMENT - STATE OF KENTUCKY LOCATION TENANT SUMMARY OVERVIEW PRICING AND VALUATION MATRIX REGIONAL AND LOCAL MAP PRICING AND VALUATION MATRIX 730 Schenkel Lane, Frankfort, KY 40601 10#
AERIAL PHOTO 11
AERIAL PHOTO 12
SITE AERIAL PHOTO 13
PROPERTY PHOTO Build-to-Suit for the Commonwealth of Kentucky 12 14
FINANCIAL ANALYSIS 15
OFFERINGSUMMARY SUMMARY OFFERING PROPERTY SUMMARY # 16
MARKET OVERVIEW 17
PROPERTY NAMEENFORCEMENT - STATE OF KENTUCKY CHILD SUPPORT LOCATION TENANT SUMMARY OVERVIEW PRICING VALUATION MATRIX DEMOGRAPHICS PRICING AND AND VALUATION MATRIX MARKETING TEAM CREATED ON AUGUST 29, 2017 1 Miles 3 Miles 5 Miles 2021 Projection 6,578 25,153 37,686 2016 Estimate 6,586 24,899 37,072 2010 Census 6,553 24,701 36,803 2000 Census 6,556 24,632 35,898 Average $60,135 $58,695 $62,328 Median $45,879 $44,324 $46,265 Per Capita $26,444 $25,923 $27,184 2021 Projection 2,869 10,930 16,256 2016 Estimate 2,851 10,750 15,886 2010 Census 2,814 10,601 15,684 2000 Census 2,773 10,652 15,434 $147,103 $143,185 $151,807 7,399 33,290 52,990 5.71% 6.13% 5.50% 20 19 19 80.07% POPULATION INCOME HOUSEHOLDS HOUSING 2016 EMPLOYMENT 2016 Daytime Population 2016 Unemployment 2016 Median Time Traveled RACE & ETHNICITY White 75.23% 77.55% Native American 0.05% 0.03% 0.03% African American 17.12% 15.74% 13.45% 1.43% 1.50% 1.87% Asian/Pacific Islander Source: 2015 Experian 18#
About Kentucky Why Kentucky? With some of the nation s lowest industrial electricity costs, aggressive and effective incentive programs, an ideal location and an unsurpassed quality of life, Kentucky has become a top location choice for globally competitive enterprises. And now that Kentucky is a Right-to-Work state, Kentucky has become even more attractive. Many of the world s most successful companies have already discovered that Kentucky is a great place to build their business. The commonwealth is home to thousands of domestic companies, as well as nearly 500 international firms representing 34 nations. Kentucky s aggressive efforts to create a pro-business climate have not gone unnoticed, resulting in the creation of more than 16,000 manufacturing, service and technology jobs in 2016, and over $3.1 billion in new investment. And thanks to a pro-business governor and legislature, even more business-friendly changes are on the way. Kentucky has become a top location choice for globally competitive enterprises. Low Business Costs - It s less expensive to operate a business in Kentucky. Multiple studies show the state has below average business costs for both domestic and international companies. Kentucky also is among the best states in terms of labor costs and overall business climate. Among the more significant location factors having a direct influence on bottom-line costs is the annual capital that must be committed to utility consumption. Kentucky has the lowest cost of electricity in the industrial sector among states east of the Mississippi River and among the lowest nationwide averaging 20 percent less than the national average. Kentucky s competitive tax climate favors corporate investment. The commonwealth ranks as one of the most business-friendly states in the country for new firms and corporate headquarters. Location, Location, Location! Nature and nurture combined to make Kentucky a logistical paradise. Located at the center of a 34-state distribution area in the eastern United States, Kentucky s location advantage facilitates the distribution of goods and materials to a massive industrial and consumer market. Kentucky s borders are within a day s drive of over 65 percent of the nation s population, personal income and manufacturing establishments. Source: http://www.thinkkentucky.com 19
PRESENTED BY Aaron Johnson Broker Louisville Office Tel: (502) 329-5920 Fax: (502) 329-5910 Aaron.Johnson@marcusmillichap.com License: KY 60872 www.marcusmillichap.com