OFFERING MEMORANDUM 11200 Pacific Avenue S, Tacoma, WA Grocery Anchored Retail Investment Tacoma, WA
Table of Contents 01 Investment Summary 02 Financial Analysis 03 04 Tenant Profiles Location & Market Overview Contact Information Erik Swanson eswanson@kiddermathews.com 206.296.9628 Mike King mking@kiddermathews.com 206.296.9624 Brian Engelking briane@kiddermathews.com 253.722.1418 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 Kidder Mathews and should not be made available to any other person or entity without the written consent of Kidder Mathews. 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. Kidder Mathews 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, current or past tax payments, 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, Kidder Mathews has not verified, and will not verify, any of the information contained herein, nor has Kidder Mathews 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. This information has been secured from sources we believe to be reliable. We make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Recipient of this report must verify the information and bears all risk for any inaccuracies. kiddermathews.com
01 Investment Summary
The Offering Pacific Square is a 51,111 square foot neighborhood retail center anchored by a busy QFC Grocery. The offering provides an opportunity to acquire a 97% leased grocery anchored retail center. Low average rents have attributed to the center s stability with over 81% of the space leased by the same tenants since 2004. QFC, which has anchored the center since 1977, has consistently increased sales in this location. Other national tenants include: Rent-a-Center, ATI Physical Therapy, Little Caesers, and Liberty Tax. The center is situated on a 4.5 acre lot at a signalized intersection on Pacific Avenue in Parkland, Washington. The property is located immediately south of the State Route 512 interchange at the northwest corner of 112th & Pacific Avenue. In close proximity to Joint Base Lewis-McChord and Pacific Lutheran University campus. Investment Summary Offering Price Cap Rate Occupancy Price per SF Year Built $6,500,000 7.39% 97% $127 1972 Building Size 51,111 SF KIDDER MATHEWS OFFERING MEMORANDUM 4
TRAFFIC 40,000 vehicles per day OCCUPANCY 97% leased INVESTMENT HIGHLIGHTS GROCERY ANCHORED RETAIL CENTER Pacific Square is a 51,111 square foot neighborhood retail center anchored by a busy QFC Grocery. STRONG NATIONAL TENANTS Tenants include QFC (Kroger), Rent-a-Center, ATI Physical Therapy, Little Caesers, and Liberty Tax. STABLE CASH FLOW Seasoned tenants provide stable cash flow. Currently, 97.4% occupied. EXCELLENT ACCESS & VISIBILITY Combined traffic counts at the intersection exceed 40,000 cars per day and access to State Route 512 is less than a 1/4 mile. HIGH TRAFFIC RETAIL TRADE AREA Parkland is located 8 miles south of Tacoma, on the main route to nearby Mt.Rainier. It is an unincorporated suburb of the City of Tacoma and is home to Pacific Lutheran University (PLU). PLU is home to approximately 3,500 full time students KIDDER MATHEWS OFFERING MEMORANDUM 5
PROPERTY SUMMARY Property Pacific Square Land Area 4.55 Acres Address 11102-11200 Pacific Avenue S Tacoma, WA Land SF 198,158 SF Zoning CMUD - Pierce County Net Rentable Area ±51,111 SF Year Built 1972, 1975 Gross Building Area ±54,236 SF County Pierce KIDDER MATHEWS OFFERING MEMORANDUM 6
Location Aerial 75,000 DAILY Pacific Avenue S 40,699 DAILY 11,000 DAILY 112th Street S C Street S KIDDER MATHEWS OFFERING MEMORANDUM 7
Site Plan EXISTING RETAIL EXISTING BLDG (NAP) (NAP) PAD BLDG EXISTING BLDG (NAP) 40,000 ADT PACIFIC AVENUE KIDDER MATHEWS OFFERING MEMORANDUM 8
02 Financial Analysis
PRICE $6,500,00 CAP RATE 7.39% OCCUPANCY 97% PRICE PER SF $127 RENT ROLL TENANT SIZE % GLA MONTHLY RENT ANNUAL RENT ANNUAL RENT PSF LEASE TYPE OCCUPANCY DATE CURRENT TERM END RENEWAL OPTIONS NOTES GROCERY ANCHOR QFC 30,740 60.13% $18,750.00 $225,000.00 $7.32 NNN 1977 12/31/19 2-5 Year at FMV ±$400 PSF sales/2015 STRIP RETAIL Sho May Hair Design 1,350 2.64% $1,800.00 $21,600.00 $16.00 NNN 2004 04/30/19 N/A Edward Jones 1,250 2.45% $1,875.00 $22,500.00 $18.00 NNN 2009 09/30/19 1-5 Year at FMV Little Caesars 1,513 2.96% $2,333.00 $27,996.00 $18.50 NNN 2008 12/31/17 N/A Vana Nails 918 1.80% $1,501.67 $18,020.00 $19.63 NNN 2006 10/31/16 1-3 Year at FMV ATI Physical Therapy 2,850 5.58% $3,591.45 $43,097.40 $15.12 NNN 1998 01/31/19 N/A Rent-a-Center 3,966 7.76% $4,627.00 $55,524.00 $14.00 NNN 2015 06/18/20 2-5 Year Vacant 1,534 3.00% $0.00 $0.00 Liberty Tax 1,000 1.96% $1,667.00 $20,004.00 $20.00 NNN 2015 04/30/21 3% annual increases 10/17 PAD BUILDING Mazatlan Building 4,750 9.29% $6,927.08 $83,125.00 $17.50 NNN 1990 04/30/15 N/A MTM - Can renew Parkland Cleaners 1,250 2.45% $2,154.17 $25,850.00 $20.68 NNN 1990 11/30/19 N/A Right to Relocate Tenant GROSS LEASABLE AREA 51,121 $45,226.37 $542,716 $16.68 OTHER INCOME TENANT ANNUAL RENT CURRENT TERM END RENEWAL OPTIONS NOTES Pylon Sign Rental $1,800 Verizon Cell Tower $18,600 07/31/17 5-5 year option Auto Renewals $20,400 KIDDER MATHEWS OFFERING MEMORANDUM 10
YEAR 1 OWNERSHIP JUL-16 AUG-16 SEP-16 OCT-16 NOV-16 DEC-16 JAN-17 FEB-17 MAR-17 APR-17 MAY-17 JUN-17 TOTAL QFC $18,750.00 $18,750.00 $18,750.00 $18,750.00 $18,750.00 $18,750.00 $18,750.00 $18,750.00 $18,750.00 $18,750.00 $18,750.00 $18,750.00 $225,000.00 Sho May Hair Design $1,800.00 $1,800.00 $1,800.00 $1,800.00 $1,800.00 $1,800.00 $1,800.00 $1,800.00 $1,800.00 $1,800.00 $1,800.00 $1,800.00 $21,600.00 Edward Jones $1,875.00 $1,875.00 $1,875.00 $1,875.00 $1,875.00 $1,875.00 $1,875.00 $1,875.00 $1,875.00 $1,875.00 $1,875.00 $1,875.00 $22,500.00 Little Caesars $2,333.00 $2,333.00 $2,333.00 $2,333.00 $2,333.00 $2,333.00 $2,396.00 $2,396.00 $2,396.00 $2,396.00 $2,396.00 $2,396.00 $28,374.00 Vana Nails $1,501.67 $1,501.67 $1,501.67 $1,501.67 $1,501.67 $1,501.67 $1,501.67 $1,501.67 $1,501.67 $1,501.67 $1,501.67 $1,501.67 $18,020.00 ATI Physical Therapy $3,591.45 $3,591.45 $3,591.45 $3,591.45 $3,591.45 $3,591.45 $3,591.45 $3,591.45 $3,591.45 $3,591.45 $3,591.45 $3,591.45 $43,097.40 Rent-a-Center $4,627.00 $4,627.00 $4,627.00 $4,627.00 $4,627.00 $4,627.00 $4,627.00 $4,627.00 $4,627.00 $4,627.00 $4,627.00 $4,627.00 $55,524.00 Vacant $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Liberty Tax $1,667.00 $1,667.00 $1,667.00 $1,667.00 $1,667.00 $1,667.00 $1,667.00 $1,667.00 $1,667.00 $1,667.00 $1,667.00 $1,667.00 $20,004.00 Mazatlan $6,927.08 $6,927.08 $6,927.08 $6,927.08 $6,927.08 $6,927.08 $6,927.08 $6,927.08 $6,927.08 $6,927.08 $6,927.08 $6,927.08 $83,125.00 Parkland Cleaners $2,154.17 $2,154.17 $2,154.17 $2,154.17 $2,154.17 $2,154.17 $2,154.17 $2,154.17 $2,154.17 $2,154.17 $2,154.17 $2,154.17 $25,850.00 Year 1 Total Income $543,094 KIDDER MATHEWS OFFERING MEMORANDUM 11
OPERATING EXPENSES PER SF % OF EXPENSES % OF RENT INCOME Property Taxes $74,430 $1.46 30.74% 9.86% Insurance $9,500 $0.19 3.92% 1.26% Property Management $30,000 $0.59 12.39% 3.97% Common Area Maintenance (CAM) $128,182 $2.51 52.94% 16.98% Utilities (Garbage/Water/Sewer) $31,250 $0.61 12.91% 4.14% Security $42,432 $0.83 17.53% 5.62% Accounting/Professional Fees $8,500 $0.17 3.51% 1.13% Parking Lot $9,500 $0.19 3.92% 1.26% Garbage $4,000 $0.08 1.65% 0.53% Repairs $32,500 $0.64 13.42% 4.30% TOTAL OPERATING EXPENSES $242,112 $4.74 OPERATING EXPENSE RECAPTURE TENANT TOTAL SIZE QFC $99,905 30,740 Sho May Hair Design $6,370 1,350 Edward Jones $5,898 1,250 Little Caesars $7,139 1,513 Vana Nails $4,512 918 ATI Physical Therapy $13,447 2,850 Rent-a-Center $18,712 3,966 Vacant $0 1,324 Liberty Tax $5,662 1,200 Mazatlan $22,411 4,750 Parkland Cleaners $5,898 1,250 OPERATING EXPENSE RECAPTURE $189,954 KIDDER MATHEWS OFFERING MEMORANDUM 12
ACTUAL OPERATING INCOME Scheduled Rent $542,716 $10.62 + Expense Recapture $189,954 $3.72 + Other Income (1) $20,400 $0.40 + Year 1 Ownership Rent Increases $378 $0.01 = Scheduled Gross Income $753,448 $14.74 - Vacancy & Credit Loss (2) $25,617 -$0.50 = Effective Gross Income $727,831 $14.24 - Operating Expenses $242,112 -$4.74 - Structural Reserves (3) $5,112 -$0.10 NET OPERATING INCOME $480,607 $9.40 1) Pylon sign and Verzion cell tower income 2) 5% Vacancy Factor = 3.4% Vacancy Factor + 2.6% Actual Vacancy 3) $0.10/SF Structural Reserves OFFERING PRICE CAP RATE BUILDING PRICE / SF OCCUPANCY $6,500,000 7.39% $127 97% KIDDER MATHEWS OFFERING MEMORANDUM 13
PROPOSED FINANCING Price $6,500,000 Down Payment $1,625,000 Loan To Value (LTV) 75% New Loan Amount $4,875,000 Interest Rate 4.00% Amortization 25 Debt Coverage Ratio 1.56 Current Net Operating Income $480,607 Annual Debt Service ($308,785) Cash Flow After Debt Service $171,823 LEVERAGED CASH ON CASH RETURN 10.57% Principal Reduction $115,894 Return with Principal Reduction $287,716 TOTAL RETURN ON EQUITY 17.71% POTENTIAL LOAN TERMS BANK LIFE INSURANCE CO Loan to Value 70% LTV 65% LTV Amortization 15-30 Years 25 Years Term 5-10 Years 7-10 Years Rate Range 4.60% - 5.50% 4.25% - 5.25% Recourse Full Full to Partial Holdbacks Leasing Fees None KIDDER MATHEWS OFFERING MEMORANDUM 14
03 Tenant Profiles
QUALITY FOOD CENTER Quality Food Centers is a supermarket chain based in Bellevue, Washingon with 64 stores in Washington and Oregon. The parent compay of QFC is Kroger Co. Kroger is one of the world s largest grocery retailers, with fiscal 2014 sales of $108.5 billion. The Kroger Co. Family of Stores spans many states with store formats that include grocery and multi-department stores, discount, convenience stores and jewelry stores. We operate under nearly two dozen banners, all of which share the same belief in building strong local ties and brand loyalty with our customers. KIDDER MATHEWS OFFERING MEMORANDUM 16
LITTLE CAESARS Little Caesars is the third largest pizza chain in the United States. Little Caesars has a history of industry firsts: two-for-one pizza deal later known as Pizza!Pizza!, and then created a conveyor oven specially designed to bake pizza quickly and consistently to keep up with customer demand. The chain built stores where pizza was never served before, such as in sports arenas, college dormitories, and military bases.little Caesars introduced Crazy Bread, which became a standard accompaniment to pizza and was mimicked by other pizza chains. Little Caesars also broke the status quo by making pizzas ready when customers walk in, with no need to call ahead or wait in line, with the launch of its HOT-N- READY pizza offer.local ties and brand loyalty with our customers. KIDDER MATHEWS OFFERING MEMORANDUM 17
EDWARD JONES Edward Jones is a decidedly different kind of investment firm. Their mission is to help individuals reach their serious, long-term financial goals. Founded in 1922, we are a full-service brokerage firm and a private partnership a structure that gives them the independence to make long-term decisions that are in the best interests of their clients and associates, without the pressures publicly traded companies face to meet short-term earnings forecasts. Edward Jones has more than 12,000 financial advisors located in more than 11,000 offices around the country. KIDDER MATHEWS OFFERING MEMORANDUM 18
ATI PHYSICAL THERAPY Leading the industry, ATI has built a differentiated platform in therapy that is focused on our patients. With exceptional, patient-centered care, trusted expertise and remarkable outcomes, our goal is to exceed customers expectations every day, in every clinic. ATI is a nationally-recognized rehabilitation provider, specializing in research-based physical therapy, workers compensation rehab, employer worksite solutions, sports medicine, home health, and a variety of specialty therapies. ATI continues to focus on exceeding customer expectations in over 550 clinics and 19 states nationwide, a cornerstone of the company s mission statement, and in the hearts and minds of every employee, every day. Source: www.atipt.com/about-ati KIDDER MATHEWS OFFERING MEMORANDUM 19
RENT-A-CENTER In the 1960s, Ernie Talley owned a retail company in Wichita, Kan. He saw many hardworking customers who either did not have the cash to purchase goods for their homes or who had been turned down for credit. Seeing them leave empty-handed gave him an idea to rent used merchandise with an option to own it. The idea soon caught on with consumers. Talley opened the first rentto-own store, Mr. T s TV Rental, in Tulsa, Okla., offering new and pre-leased products. A concept, born out of the desire to serve the needs of customers who lacked the cash or financing to buy the products they wanted and needed, has today grown into a $6.7 billion dollar industry serving millions of customers. KIDDER MATHEWS OFFERING MEMORANDUM 20
LIBERTY TAX Every year, Americans are faced with the prospect of tax return preparation. Although many will try to go it alone, every year more turn to a tax consultant like Liberty Tax. Our goal is to provide the feeling of a personal tax consultant alongside the security, confidence, and protection that a large company can provide. Liberty Tax continues to firmly establish its growing presence and increasing market share in the personal income tax industry. There are over 4,300 Liberty Tax Service offices operating in the United States and Canada, where we operate as Liberty Tax Service Canada. Liberty Tax Service started in Canada on September 1, 1997 when CEO John Hewitt acquired a Canadian tax franchisor, U&R Tax Depot. In 1998, the company became Liberty Tax Service and opened 5 offices in the United States. Liberty Tax Service is headquartered in Virginia Beach, Virginia and continues to expand, offering personal income tax service and more in an ever-growing list of locations nationwide. KIDDER MATHEWS OFFERING MEMORANDUM 21
04 Location & Market Overview
Location Overview Tacoma Lakewood Puyallup AREA HIGHLIGHTS Pacific Square is a QFC grocery anchored neighborhood retail center located in Parkland, a suburb of Tacoma, Washington. Parkland is located 8 miles south of Tacoma, on the main route to nearby Mt. Rainier. It is an unincorporated suburb of the City of Tacoma and is home to Pacific Lutheran University (PLU). The population of Parkland is approximately 36,000. KIDDER MATHEWS OFFERING MEMORANDUM 23
Location Overview TACOMA OVERVIEW Tacoma is a destination place with the amenities of a big city and the charm of a small town. A dynamic exciting locale, Tacoma is poised to embrace the future. Tacoma s local economy has grown over the last several decades. With an international port, a uniquely pro-business environment and some of the most livable neighborhoods in the Puget Sound area, Tacoma is home to a range of companies that compete in today s global landscape. Tacoma is located on Puget Sound s majestic Commencement Bay, 18 miles south of the Seattle-Tacoma International Airport. Tacoma serves as a gateway to the Pacific Rim and the rest of the world. A diverse, progressive, international city, Tacoma sits within the Pacific Standard Time Zone which enables its businesses to work with Europe first thing in the morning and Asia in the late afternoon. Tacoma was incorporated in 1884 and became known as the City of Destiny when it was designated as the terminus of the Northern Pacific Railroad. Today, Today has grown into a city with a diverse population of approimately 200,000 residents. MILITARY GROWTH When Ft. Lewis Army Base and McChord Airforce Base combined into Joint Base Lewis-McChord on January 31, 2010, the base became the largest military installation on the west coast of the United States with more than 415,000 acres, including Yakima Training Center in central Washington. It will support a population, on-base and in neighboring communities, of more than 125,000 people including military personnel, families, civilian and contract employees, and retirees and their families. MILITARY ECONOMIC IMPACT TO THE AREA The military creates a stable source of employment and tax revenue for the local economies. In a 2004 report the Washington State Office of Financial Management found that Joint Base Lewis-McChord directly and indirectly account for over 74,000 jobs in Pierce County and over 87,000 statewide. The total impacts in terms of labor earnings sum to nearly $2.9 billion within Pierce County (about 30 percent of the county total wage disbursements) and nearly $3.4 billion statewide. PORT OF TACOMA The Port of Tacoma is a major center for container cargo, bulk, breakbulk, autos and heavy-lift cargo. Created by Pierce County citizens in 1918, the Port of Tacoma has become one of the largest container ports in North America and one of the top 50 in the world. Located on Commencement Bay, a natural deep-water harbor in South Puget Sound, the Port is ideally situated for creating jobs through Pacific Rim trade. The Port encompasses about 2,400 acres of land on the Tacoma Tideflats. Port facilities include marine terminals, on-dock rail yards, cargo-handling equipment, and industrial property with warehouses, docks and other amenities available to lease or develop. In 2011, the Port handled 1.5 million containers, contributing nearly $35 billion in international trade and an estimated $3 billion in trade to Alaska. Port activities account for more than 43,000 jobs in Pierce County and 113,000 jobs in Washington State. Port activities contibute more than $90 million each year in state and local taxes. KIDDER MATHEWS OFFERING MEMORANDUM 24
Market Overview SEATTLE 46 MINUTES Renton Vashon Island Kent PUGET SOUND SEA-TAC 34 MINUTES Auburn Tacoma Puyallup OLYMPIA 26 MINUTES KIDDER MATHEWS OFFERING MEMORANDUM 25
Market Overview MAJOR EMPLOYERS IN THE AREA Organization Employees Industry 1. US Joint Base Lewis McChord 66,054 Military 2. Local Public Schools 13,408 Education 3. Multicare Health System 6,904 Healthcare 4. Washington State 6,455 Government 5. Franciscan Health System 5,338 Healthcare 6. Pierce County Government 2,979 Government 7. WA State Higher Eduation 2,566 Education 8. Fred Meyer Stores 2,560 Retail & Distribution 9. State Farm Insurance 2,206 Insurance 10. City of Tacoma 2,078 Government 11 Emerald Queen Casino 2,061 Gaming 12. The Boeing Company 1,670 Aerospace Manufacturing 13. US Postal Service 1,464 Government 14. Tacoma Public Utilities 1,334 Utility Services 15. Walmart 1,304 Retail 16. Safeway Stores, Inc. 1,297 Retail 17. Costco 1,205 Retail 18. YMCA of Tacoma 1,057 Fitness & Recreation 19. Comcast Cable 1,046 Media 20. Puyallup Tribe 981 Government 21. Longshore Labor Union 944 Union 22. Pierce Transit 835 Transit 23. Milgard Manufacturing, Inc. 818 Manufacturing 24. Group Health Cooperative 733 Healthcare 25. Amazon 700 Distribution 26. Pacific Lutheran University 695 Education 27. Home Depot 692 Retail 28. University of Puget Sound 667 Education 29. Recreational Equipment, Inc. 624 Retail & Distribution 30. Goodwill Industries 620 Non-profit 5-MILE TRADE AREA DEMOGRAPHICS Population (2010) Average Household Income (2010) Estimated Population (2020) 105,021 $41,660 121,103 1 MILE 3 MILES 5 MILES KIDDER MATHEWS OFFERING MEMORANDUM 26
Contact Information Erik Swanson eswanson@kiddermathews.com 206.296.9628 Mike King mking@kiddermathews.com 206.296.9624 Brian Engelking briane@kiddermathews.com 253.722.1418 Kidder Mathews 601 Union Street, Suite 4720 Seattle, WA 98101 kiddermathews.com