MARKET POSITIONING AND PRICING ANALYSIS
TABLE OF CONTENTS Section 1 PRICING AND FINANCIAL ANALYSIS Section 2 PROPERTY DESCRIPTION Section 3 RECENT SALES Section 4 ON MARKET COMPARABLES Section 5 RENT COMPARABLES Section 6 DEMOGRAPHIC ANALYSIS Section 7 MARKETING PLAN Section 8 AGENT QUALIFICATIONS Section 9 THE MARCUS & MILLICHAP ADVANTAGE
PRICING AND FINANCIAL ANALYSIS
PRICING AND FINANCIAL ANALYSIS FINANCIAL OVERVIEW Location 15 Arcade Place Newark, OH 43055 Price $700,000 Down Payment 100% / $700,000 Gross Leasable Area (GLA) 48,848 Price/SF $14.33 CAP Rate - Current 10.44% CAP Rate - Pro Forma 40.66% Lot Size 0.73 AC Year Built 1909 Annualized Operating Data Income Current Pro Forma Base Rent Occupied Space $89,337 $369,339 Vacant Space at Market Rents $280,002 $0 Gross Potential Rent $369,339 $369,339 Expense Reimbursements $12,000 $12,000 Gross Potential Income $381,339 $381,339 Vacancy/Collection Allowance 74.0% / $273,492 15% / $55,401 Effective Gross Income $107,847 $325,938 Total Expenses $34,742 $41,285 Net Operating Income $73,105 $284,653 Reserves / Replacements $2,400 $7,327 Total Return 7.48% / $52,369 41.62% / $291,369 Expenses Real Estate Taxes $5,649 $5,649 Insurance $4,108 $4,108 Water - all except Center Pub $2,640 $2,640 Trash $2,640 $2,640 Electric - all except Center Pub $8,400 $8,400 Gas - all except Center Pub $1,800 $1,800 Alarm Monitor $295 $295 Sprinkler $575 $575 Repairs $1,200 $1,200 Maintenance $4,200 $4,200 TOTAL CAM $16,470 $16,470 Management Fee (% of EGI) 3% / $3,235 3% / $9,778 TOTAL EXPENSES $34,742 $41,285 EXPENSES/SF $0.71 $0.85 1
PRICING AND FINANCIAL ANALYSIS EXPENSES Current Per SF Pro Forma Per SF Real Estate Taxes $5,649 $0.12 $5,649 $0.12 Insurance $4,108 $0.08 $4,108 $0.08 Water - all except Center Pub $2,640 $0.05 $2,640 $0.05 Trash $2,640 $0.05 $2,640 $0.05 Electric - all except Center Pub $8,400 $0.17 $8,400 $0.17 Gas - all except Center Pub $1,800 $0.04 $1,800 $0.04 Alarm Monitor $295 $0.01 $295 $0.01 Sprinkler $575 $0.01 $575 $0.01 Repairs $1,200 $0.02 $1,200 $0.02 Maintenance $4,200 $0.09 $4,200 $0.09 TOTAL CAM $16,470 $0.34 $16,470 $0.34 Management Fee (% of EGI) $3,235 $0.07 $9,778 $0.20 TOTAL EXPENSES $34,742 $0.71 $41,285 $0.85 Tenants (% OF GLA) C. OH Elderly Care: 1.86% Apartment 2: 2.05% Apartment 1: 2.05% Vacant: 2.14% E.M. Sports: 2.31% Club 2k: 2.46% Computer Warehs.: 3.15% Liz Lins Gifts: 3.22% Center Pub: 3.28% Apartment 3: 4.09% Vacant: 6.07% Remaining: 9.76% Vacant: 57.56% Comments Pro forma presumes 3% management fee 2
PRICING AND FINANCIAL ANALYSIS INCOME & EXPENSES Gross Leasable Area (GLA) 48,848 SF Base Rent Current Per SF Pro Forma Per SF Occupied Space $89,337 $5.44 $369,339 $22.48 Vacant Space at Market Rents (32,417 SF) $280,002 $8.64 $0 $0.00 GROSS POTENTIAL RENT $369,339 $7.56 $369,339 $7.56 Expense Reimbursements Church St. Suites CAM Reimbursement $12,000 $0.25 $12,000 $0.25 GROSS POTENTIAL INCOME $381,339 $7.81 $381,339 $7.81 Vacancy/Collection Allowance (% of GPR) 74.0% / $273,492 $5.60 15% / $55,401 $1.13 EFFECTIVE GROSS INCOME $107,847 $2.21 $325,938 $6.67 Total Expenses $34,742 $0.71 $41,285 $0.85 NET OPERATING INCOME $73,105 $1.50 $284,653 $5.83 Reserves / Replacements $2,400 $0.05 $7,327 $0.15 NET CASH FLOW BEFORE DEBT SERVICE $70,705 $1.45 $277,326 $5.68 3
PRICING AND FINANCIAL ANALYSIS PRICING (A) - CURRENT List Price Price $700,000 Down Payment 100% / $700,000 NET OPERATING INCOME $73,105 Cash Flow Analysis Reserves / Replacements ($2,400) Net Cash Flow Before Debt Service $70,705 Debt Service ($30,359) Net Cash Flow After Debt Service $40,346 Return % 5.76% Principal Reduction $12,023 Total Return $52,369 Total Return % 7.48% Value Indicators CAP Rate 10.44% Price/SF $14.33 4
PRICING AND FINANCIAL ANALYSIS PRICING (B) - PRO FORMA List Price Price $700,000 Down Payment 100% / $700,000 NET OPERATING INCOME $284,653 Cash Flow Analysis Reserves / Replacements ($7,327) Net Cash Flow Before Debt Service $277,326 Net Cash Flow After Debt Service $277,326 Return % 39.62% Principal Reduction $14,043 Total Return $291,369 Total Return % 41.62% Value Indicators CAP Rate 40.66% Price/SF $14.33 5
PRICING AND FINANCIAL ANALYSIS TENANT SUMMARY Suite Tenant GLA % of GLA Lease Commence Lease Expire Annual Rent Rent/ SF Changes On Changes To Expense Reimbs. Options Lease Type 6 Arcade Anx Ohio Telnet 565 1.16% 10/1/13 9/30/14 $0.00 $0.00 10/1/14 $0.00 Water, Trash M2M OO 8 Arc/Ste 100 Apartment 1 1,000 2.05% 6/1/13 5/31/14 $1,800.00 $1.80 6/1/14 $1,800.00 Trash M2M MG 8 Arc/Ste 200 Apartment 2 1,000 2.05% 9/1/13 8/31/14 $4,200.00 $4.20 9/1/14 $4,200.00 Trash M2M MG 11 Arcade Pl Tessa's Studio 900 1.84% 10/1/14 9/30/15 $1,800.00 $2.00 10/1/15 $1,800.00 Water, Trash Renew MG 13 Arcade Pl Vacant 288 0.59% $1,902.12 $6.60 $1,902.12 MG 14 Arcade Pl Forward Thinking 827 1.69% 7/1/15 12/31/15 $3,900.00 $4.72 1/1/16 $4,095.00 Water, Trash Renew MG 14.5 Arcade Pl Walker Promotions 560 1.15% 3/1/15 2/28/16 $3,900.00 $6.96 3/1/16 $3,900.00 Water, Trash None MG 15 Arcade Pl Essence of Healing 288 0.59% 8/1/15 1/31/16 $1,800.00 $6.25 $1,800.00 MG 16 Arcade Pl E.M. Sports 1,130 2.31% 1/1/15 12/31/15 $3,480.00 $3.08 1/1/16 $3,654.00 Water, Trash Renew MG 17/25 Arcade Vacant 2,965 6.07% $12,000.00 $4.05 $12,000.00 N/A 18 Arcade Pl C. OH Elderly Care 907 1.86% 10/1/14 9/30/15 $2,960.04 $3.26 10/1/15 $3,108.04 Water, Trash Renew MG 27/29 Arcade Upscale Bits 560 1.15% 4/1/15 3/31/16 $3,600.00 $6.43 $3,600.00 None MG 29 N 3rd St Liz Lins Gifts 1,574 3.22% 12/1/14 11/30/15 $6,000.00 $3.81 12/1/15 $6,000.00 None MG 33 N 3rd St Center Pub 1,600 3.28% $21,750.00 $13.59 $21,750.00 M2M OO 35 N 3rd St Club 2k 1,200 2.46% 4/1/08 8/31/10 $17,400.00 $14.50 9/1/10 $17,400.00 Water, Trash M2M NN 24 N 4th St Hodge Podge 780 1.60% 4/1/15 3/31/16 $4,500.00 $5.77 4/1/16 $7,200.00 None MG 30 N 4th St Computer Warehs. 1,540 3.15% 7/1/07 6/30/10 $8,346.96 $5.42 7/1/10 $8,346.96 Water, Trash M2M NN Future Apts. Vacant 28,118 57.56% $262,500.00 $9.34 $262,500.00 N/A 35 Arcade Pl Apartment 3 2,000 4.09% 7/1/15 12/31/15 $3,900.00 $1.95 1/1/16 $6,900.00 Trash Renew MG 4 Arcade Annex Vacant 1,046 2.14% $3,600.00 $3.44 $3,600.00 MG TOTAL VACANT 32,417 66.36% $280,002.12 $280,002.12 TOTAL OCCUPIED 16,431 33.64% $89,337.00 $95,554.00 TOTAL 48,848 100.00% $369,339.12 $375,556.12 Comments MG = Modified Gross Lease, NN = Double Net Lease, OO = Owner-Occupied, M2M = Month-to-month A majority of the MG leases feature 5% bumps annually and auto-renewals. The square footage figures are estimates, no exact numbers are on file. In June 2014 the adjacent building was demolished, which created 21 new retail parking spaces. Ohio Telnet is a fixed telecommunications installation that cannot be moved; it provides high-speed Internet benefiting the tenants. 10
PRICING AND FINANCIAL ANALYSIS LEASE EXPIRATION SUMMARY For The Year Beginning Year 1 Jul 2015 Year 2 Jul 2016 Year 3 Jul 2017 Year 4 Jul 2018 Year 5 Jul 2019 Year 6 Jul 2020 Year 7 Jul 2021 Year 8 Jul 2022 Year 9 Jul 2023 Year 10 Jul 2024 Tenant(s) Name Tessa's Studio Forward Thinking Walker Promotions Essence of Healing E.M. Sports C. OH Elderly Care Upscale Bits Liz Lins Gifts Hodge Total Number of Tenants 10 Total Square Feet 9,526 Total Percentage 19.5% Cumulative Percentage 19.5% 20% 10 18% 9 16% 8 Total Project Square Footage 14% 12% 10% 8% 6% 7 6 5 4 3 Number of Tenants 4% 2 2% 1 0% Jul 2015 20% Jul 2016 0% Jul 2017 0% Jul 2018 0% Jul 2019 0% Jul 2020 0% Jul 2021 0% Jul 2022 0% Jul 2023 0% Jul 2024 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. 11
PROPERTY DESCRIPTION
PROPERTY DESCRIPTION INVESTMENT OVERVIEW Investment Highlights Mixed-use downtown retail center surrounded by credit retailers Upside potential with 20,000 RSF of apartment/office space ready for restoration Mall has access from 3 streets & sits adjacent to Chase Bank Iron trusses & glass skylights highlight construction & detailed European design 12% cap rate provides sizeable investment return 21 new retail parking spaces created nearby in June 2014 Prime location as nearly $50MM in downtown revitalization projects scheduled in last 2 years Marcus & Millichap is pleased to present this historic indoor mall in Newark, Ohio. The Arcade is a mixed use shopping center in excess of 45,000 square feet, offering three bars and 14 total retail spaces. In addition to the 14,000 square feet of 1st floor retail space, there is approximately 20,000 rentable square feet of office and multi-family space to rent or redevelop. 2,000 of that square feet is currently occupied with apartment tenants, while the remainder is ready for restoration. That 20,000 rentable square feet is currently divided into 10 separate multi-family units, but could be made into 20 spaces depending on the configuration. Positioned in the heart of downtown Newark, this.73 acre parcel has points of ingress & egress from 3 streets. Adjacent to Chase Bank's drive through retail location and office tower, The Arcade offers immediate access to Rt. 13, the main thoroughfare to Rt. 16, 79, & I-70. Retailers in the immediate area include McDonald's, Wendy's, UDF, Mobil, Huntington Bank, PNC Bank, & H&R Block in addtion to Chase. A Huntington Bank is directly across the street, with the Licking County Courthouse nearby. Center Pub carries an NOI of $21,750/year. Club 2k is on a court-negotiated lease; several of the remaining tenants rent month-to-month to allow for movement with increasing market rates. Opened for business in 1908, the glass-enclosed roof was completed the following year, making The Arcade one of the first covered malls in the United States. With a population of over 47,000, Newark is the 20th largest city in Ohio and serves as the corporate headquarters of basket-maker Longaberger. Owens Corning Fiberglass houses its main factory in Newark, and State Farm Insurance has a regional headquarter there. 13
PROPERTY DESCRIPTION PROPERTY SUMMARY The Offering Property The Arcade Property Address 15 Arcade Place Newark, OH 43055 Assessor's Parcel Number 054-200964, 054-200970 Site Description Number of Stories 3 Year Built 1909 Gross Leasable Area (GLA) 48,848 SF Lot Size 0.73 AC Type of Ownership Fee Simple Parking 13 surface spots Construction Roof Iron trusses, skylight 14
PROPERTY DESCRIPTION PROPERTY PHOTOS 15
PROPERTY DESCRIPTION PROPERTY PHOTOS 16
PROPERTY DESCRIPTION AREA MAPS Local Map Regional Map 17
PROPERTY DESCRIPTION SITE PLAN 18
PROPERTY DESCRIPTION GIS SITE PLAN 19
PROPERTY DESCRIPTION FLOOR PLAN: 1ST FLOOR, WEST 20
PROPERTY DESCRIPTION FLOOR PLAN: 1ST FLOOR, EAST 21
PROPERTY DESCRIPTION FLOOR PLAN: 2ND FLOOR, WEST 22
PROPERTY DESCRIPTION FLOOR PLAN: 2ND FLOOR, EAST 23
PROPERTY DESCRIPTION FLOOR PLAN: 3RD FLOOR 24
PROPERTY DESCRIPTION AERIAL PHOTO 25
PROPERTY DESCRIPTION AERIAL 26
DEMOGRAPHIC ANALYSIS
DEMOGRAPHIC ANALYSIS DEMOGRAPHIC REPORT 1 Mile 3 Miles 5 Miles 2000 Population 11,611 46,330 64,815 2010 Population 11,109 46,820 67,002 2012 Population 11,250 47,174 67,546 2017 Population 11,041 47,323 68,691 2000 Households 4,760 19,159 26,072 2010 Households 4,378 19,321 27,438 2012 Households 4,444 19,503 27,708 2017 Households 4,387 19,700 28,365 2012 Average Household Size 2.48 2.37 2.40 2012 Daytime Population 6,071 18,674 28,296 2000 Median Housing Value $84,900 $87,918 $91,850 2000 Owner Occupied Housing Units 49.55% 57.27% 60.88% 2000 Renter Occupied Housing Units 41.30% 35.72% 33.96% 2000 Vacant 8.43% 6.36% 5.86% 2012 Owner Occupied Housing Units 34.96% 52.51% 57.46% 2012 Renter Occupied Housing Units 50.83% 38.05% 34.12% 2012 Vacant 14.21% 9.44% 8.42% 2017 Owner Occupied Housing Units 34.51% 52.20% 57.40% 2017 Renter Occupied Housing Units 50.61% 37.89% 33.81% 2017 Vacant 14.88% 9.91% 8.79% $ 0 - $14,999 27.4% 17.3% 15.3% $ 15,000 - $24,999 19.7% 15.2% 13.4% $ 25,000 - $34,999 14.1% 13.1% 12.4% $ 35,000 - $49,999 14.3% 15.5% 14.8% $ 50,000 - $74,999 14.9% 19.1% 19.9% $ 75,000 - $99,999 4.8% 9.5% 10.7% $100,000 - $124,999 3.3% 5.6% 6.9% $125,000 - $149,999 0.5% 2.0% 2.9% $150,000 - $199,999 0.6% 1.6% 2.0% $200,000 - $249,999 0.2% 0.4% 0.7% $250,000 + 0.3% 0.7% 1.1% 2012 Median Household Income $26,745 $39,018 $44,157 2012 Per Capita Income $14,892 $21,539 $24,055 2012 Average Household Income $37,091 $51,548 $57,966 Demographic data 2012 by Experian. 44
DEMOGRAPHIC ANALYSIS SUMMARY REPORT Geography: 5 Miles Population In 2012, the population in your selected geography was 67,546. The population has changed by 4.21% since 2000. It is estimated that the population in your area will be 68,691 five years from now, which represents a change of 1.69% from the current year. The current population is 48.0% male and 51.9% female. The median age of the population in your area is 39.0, compare this to the U.S. average which is 37. The population density in your area is 810.61 people per square mile. Households There are currently 27,708 households in your selected geography. The number of households has changed by 6.27% since 2000. It is estimated that the number of households in your area will be 28,365 five years from now, which represents a change of 2.37% from the current year. The average household size in your area is 2.39 persons. Income In 2012, the median household income for your selected geography is $44,157, compare this to the U.S. average which is currently $53,535. The median household income for your area has changed by 18.83% since 2000. It is estimated that the median household income in your area will be $49,448 five years from now, which represents a change of 11.98% from the current year. The current year per capita income in your area is $24,055, compare this to the U.S. average, which is $28,888. The current year average household income in your area is $57,966, compare this to the U.S. average which is $75,373. Race & Ethnicity The current year racial makeup of your selected area is as follows: 93.40% White, 2.93% African American, 0.31% Native American and 0.64% Asian/Pacific Islander. Compare these to U.S. averages which are: 72.20% White, 12.65% African American, 0.96% Native American and 5.01% Asian/Pacific Islander. People of Hispanic origin are counted independently of race. People of Hispanic origin make up 1.18% of the current year population in your selected area. Compare this to the U.S. average of 16.55%. Housing The median housing value in your area was $91,850 in 2000, compare this to the U.S. average of $110,781 for the same year. In 2000, there were 16,857 owner occupied housing units in your area and there were 9,403 renter occupied housing units in your area. The median rent at the time was $406. Employment In 2012, there are 28,296 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed that 53.8% of employees are employed in white-collar occupations in this geography, and 46.1% are employed in blue-collar occupations. In 2012, unemployment in this area is 5.37%. In 2000, the median time traveled to work was 16.8 minutes. Demographic data 2012 by Experian. 45
DEMOGRAPHIC ANALYSIS POPULATION DENSITY Demographic data 2012 by Experian. Number of people living in a given area per square mile. 46
DEMOGRAPHIC ANALYSIS EMPLOYMENT DENSITY Demographic data 2012 by Experian. The number of people employed in a given area per square mile. 47
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. 48
DEMOGRAPHIC ANALYSIS TOTAL CRIME RISK Crime data 2012 by Applied Geographic Solutions. Index of the relative risk of crime in a given area. 49
DEMOGRAPHIC ANALYSIS TRAFFIC COUNTS Traffic Count data 2012 by TrafficMetrix. All rights reserved. Two-way, average daily traffic volumes. * Traffic Count Estimate 50
AGENT QUALIFICATIONS
AGENT QUALIFICATIONS PROFESSIONAL QUALIFICATIONS Justin J. Fenn Member, National Retail Group INVESTMENT EXPERTISE Justin J. Fenn specializes in consulting private investors, institutions, and developers on the sale of office, retail and net lease properties. Mr. Fenn pairs his real estate experience with Marcus & Millichap's comprehensive market research, state-of-the-art software and access to the industry's largest pool of private and institutional investors to maximize value for the client. EXPERIENCE / PROFESSIONAL HISTORY Justin earned his salesperson's license in 2002, and first began selling real estate at John Fenn Realty, his father's brokerage in Bellevue, Ohio. He graduated from the University of Dayton's School of Law with a concentration in Real Property and a capstone in Commercial Real Estate Transactions. Mr. Fenn oversaw the site selection, leasing and office build-out of Plain City Pediatrics, which opened in May 2012 in Plain City, Ohio. He also has commercial office research and retail construction experience with The Superior Group, a Columbus-based electrical contractor. Mr. Fenn was elected to the Ballantrae Community Association's Master HOA Board in Dublin, where he has chaired their Architectural Review Committee since 2011. EDUCATION Miami University - B.A. English University of Dayton School of Law - J.D. PROFESSIONAL AFFILIATIONS Member of Marcus & Millichap Net Leased Properties Group (NLPG) Member of Marcus & Millichap National Retail Group (NRG) Member of Marcus & Millichap National Office & Industrial Property Group (NOIPG) 65
AGENT QUALIFICATIONS PROFESSIONAL QUALIFICATIONS Dan Yozwiak Senior Associate, Net Leased Properties Group National Retail Group INVESTMENT EXPERTISE Dan Yozwiak specializes in bringing a true value of representation to real estate investors through the disposition and acquisition of income producing properties. He is committed to helping clients create and preserve wealth by providing the best real estate investment research, advisory, and transaction services available. He has successfully advised and represented a number of high net worth individuals, private equity investors, merchant developers and institutions in the acquisition and disposition of retail shopping centers and single tenant properties. Dan has a large client base of private equity, non-institutional investors obtained through his advisory base and client first approach to brokerage. Dan's combined real estate and entrepreneurial background provides both he and his clients a unique and creative approach to problem solving and working through all of the issues and concerns involved in the buying and selling of investment real estate. EXPERIENCE / PROFESSIONAL HISTORY Mr. Yozwiak joined Marcus & Millichap after working with a Columbus based regional developer of retail and multi-family projects. His responsibilities included leasing their newest retail developments throughout the region. EDUCATION The Ohio State University, Bachelor s Degree in Business Administration with a specialization in Real Estate & Urban Analysis and a minor in Entrepreneurship from the Max Fisher School of Business. PROFESSIONAL AFFILIATIONS Member of Marcus & Millichap National Retail Group (NRG) Member of Marcus & Millichap Net Leased Properties Group (NLPG) Member of International Council of Shopping Centers 66
AGENT QUALIFICATIONS SALES HISTORY 67
AGENT QUALIFICATIONS SALES HISTORY 68
MARKET POSITIONING AND PRICING ANALYSIS Presented By: Justin J. Fenn, J.D. Associate Columbus Office Tel: (614) 360-9048 Fax: (614) 360-9810 License: OH: SAL.2002011928 Justin.Fenn@marcusmillichap.com www.marcusmillichap.com/justinjfenn Dan Yozwiak Senior Associate Columbus Office Tel: (614) 360-9036 Fax: (614) 360-9810 License: OH: SAL.2008003600 Dan.Yozwiak@marcusmillichap.com www.marcusmillichap.com/danyozwiak Offices Nationwide www.marcusmillichap.com