COMMERCENTRE DRIVE · 2019-04-09 · Associates, Inc. - Irvine Commercial Real Estate Services (“Broker”). This Memorandum was prepared by the Broker based on information supplied

Investment Opportunity in Lake Forest

OFFERING MEMORANDUM

25381C O M M E R C E N T R E D R I V E

DISCLAIMER

This Confidential Offering Memorandum (this “Memorandum”) is being delivered subject to the terms of the Confidentiality Agreement signed by you (the “Confidentiality Agreement”) and constitutes part of the evaluation material. It is being given to you for the sole purpose of evaluating the possible acquisition of 25381 Commercentre Dr, Lake Forest, California (“Property”), and is not to be used for any other purpose or made available to any other party without the prior written consent of the Owner or Lee & Associates, Inc. - Irvine Commercial Real Estate Services (“Broker”).

This Memorandum was prepared by the Broker based on information supplied by the Owner and the Broker. It contains selected information about the Property and the real estate market but does not contain all the information necessary to evaluate the acquisition of the Property. The financial projections contained herein (or in any other evaluation material) are for general reference only. They are based on assumptions relating to the general economy and local competition, among other factors. Accordingly, actual results may vary materially from such projections. Various documents have been summarized herein to facilitate your review; these summaries are not intended to be a comprehensive statement of the terms or a legal analysis of such documents.

While the information contained in this Memorandum or any other evaluation material is believed to be reliable, neither Broker nor Owner guarantees its accuracy or completeness. Because of the foregoing and since the Property will be sold on an “AS IS,” “WHERE IS” basis, a prospective purchaser must make its own independent investigations, projections, and conclusions regarding the acquisition of the Property without reliance on this Memorandum or any other evaluation material. Although additional evaluation material (why may include engineering, environmental or other reports) may be provided to qualified parties as marketing information, prospective purchasers should seek advice from their own attorneys, accountants and engineering/environmental experts.

Owner expressly reserves the right, at its sole discretion, to reject any offer to purchase the Property or to terminate any negotiations with any party at any time with or without written notice. Owner shall have no legal commitment or obligations to any prospective purchaser until a written sale agreement has been fully executed, delivered and approved by Owner and any conditions to Owner’s obligations hereunder have been satisfied or waived. Owner has retained Broker as its exclusive broker and will be responsible for any commission due to Broker in connection with a sale of the Property pursuant to separate agreement. Broker is not authorized to make any representation or agreement on behalf of Owner. Each prospective purchaser will be responsible for any claims or commissions by any other broker in connection with a sale of the Property if such claims arise from acts of such prospective purchaser or its broker.

This Memorandum is the property of Owner and Broker and may be used only by parties approved by Owner and Broker. No portion of this Memorandum may be copied or otherwise reproduced or disclosed to anyone except as permitted under the Confidentiality Agreement.

I N V E S T M E N T A D V I S O R S KURT BRUGGEMAN, CCIMSenior Vice PresidentCalBRE 01264501

[email protected]

ADAM WICKERSenior Vice PresidentCalBRE 01225873

[email protected]

Lee & Associates, Inc. - Irvine9838 Research Drive

Irvine, California 92618

lee-associates.com | lee-cmg.com

TABLE OFCONTENTS

TABLE OFCONTENTS

25381C O M M E R C E N T R E D R I V EL A K E F O R E S T, C A L I F O R N I A

Executive Summary 1Property Description 2

Tenant Information 3Area Overview 4

Financial Analysis

Sale Comparables

56

E X E C U T I V ES U M M A R Y

1

25381C O M M E R C E N T R E D R I V E O F F E R I N G M E M O R A N D U M

Address25381 Commercentre Dr

Lake Forest, CA

Offering Price $5,750,000

Pro-Forma Year 1 NOI $359,217

Pro-Forma CAP Rate 6.25%

Lease Type Full Service Gross

Number of Stories Two (2) Story Office

Elevator Served

Net Rentable Building Area ±20,592 SF

*Part of Six (6) Building Office Project: The Park

E X E C U T I V E S U M M A R Y

Glenwood Dr.

9

STABLE CASH FLOW

±80% of the building has new 5 year leases in place that will

provide stable and increasing cash flow over the near term.

CAMPUS SETTING

Well-appointed campus setting, featuring generous onsite amenities, well-decorated common areas, exceptional glass line with hillside views, and frontage on Bake Parkway.

FLEXIBLE FLOOR PLATES

Highly versatile floor plates can efficiently accommodate various space requirements, further enhancing the stability of future cash flows.

MULTI-TENANT OFFICE

In general, multi-tenant office lowers investor risk by having a mix of smaller tenants and this building is set up to have up to 4+ tenants with corridors on each floor allowing suite sizes from 1,000 to 10,000 SF.

BELOW MARKET RENTS

25381 Commercentre has rents slightly below market, allowing the investor to reposition the building to create additional income and upside in value in the future.

BELOW REPLACEMENT COST

25381 Commercentre has approximately 20,592 RSF and will sell significantly below replacement costs of approximately $400 per SF or $8.2M.

I N V E S T M E N T H I G H L I G H T S


11

220 restaurants

79 banks and ATMs

13 hotels

58 grocery stores

251 health & fitness

centers

Surrounding World-Class Retail and Entertainment

1 Irvine Spectrum Entertainment Center 4.6 miles

2 Orange County Great Park 2.3 miles

3 Foothill Ranch Towne Center 2.1 miles

Within 3 miles from the property:

P R O P E R T YD E S C R I P T I O N

2


Address25381 Commercentre DrLake Forest, CA 92630

County Orange

Parcel Number 623-091-01

Number of Stories Two (2)

Occupancy ±80%, (4,188 RSF VACANT)

Rentable Building Area ±20,592 SF

Year Built 1999

Parking4:1,000 | There is parking for ±90 vehicles in the common area.

Zoning LI

Exterior WallsConcrete Tilt-Up Panels with Glass Set in Metal Framing

P R O P E R T Y D E S C R I P T I O N

Roof Built-Up Composition (Original)

Doors

The exterior main entry doors are glass storefronts set in metal framing. Interior doors are a mix of solid-core and hollow-core wood set in metal framing.

HVAC Roof-Mounted HVAC Units with 2018 Overhaul.

RestroomsThere are 2 sets of men’s and women’s restrooms.

Fire Life Safety Systems

The fire protection systems consist of a wet pipe sprinkler system, building-mounted fire extinguishers, pull stations, illuminated exit signs. Fire sprinklers are located throughout all the building.

15

P A R C E L P L A N

P R O P E R T Y S I T E P L A N


P R O P E R T Y F L O O R P L A N

FIR

ST

FL

OO

R

SE

CO

ND

FL

OO

R

SERVER

RECEP

T E N A N TI N F O R M A T I O N

3


T E N A N T S U M M A R Y

VerifPointverifpoint.com

VerifPoint is a leading Credentials Verification Organization (CVO) based in Lake Forest, California. Our mission is to consistently provide the most affordable, timely, and accurate healthcare practitioner information. We assist our clients with all facets of the practice, all leading back to income generation for your practice. Additionally, VerifPoint acquired Credentialing Solutions, LLC in 2007. This expanded the data credentialing services VerifPoint offers in areas such as hospital credentialing and additional medical credentialing services.

VerifPoint’s vision is to be the leading service provider for medical credentialing and provider enrollment by providing optimum and best system solutions which are fully adaptable to meet the special needs of clients while keeping pace with the ever-changing needs of technology and the health care industry.

Our team understands that building a strong establishment on the clinical side is vital before marketing providers/medical groups to potential patients and alluding physicians. This is where our proficiency has profited our clients. We have the capability to assist our clients in numerous facets of the practice, all circling back to income generation.

21

T E N A N T S U M M A R Y C O N T .

Healthy Buildings® indoor air quality programs build value into our clients’ assets, retaining and attracting tenants and employees, improving productivity, reducing liability, and branding them in the marketplace as sustainability leaders. Energy benchmarking, audits and commissioning services ensure our clients’ buildings are running with minimum operating costs and maximum NOI. Healthy Buildings has built a formidable reputation as the go-to specialists for technical LEED credits, helping building owners and LEED consultants alike ensure a smooth pathway to LEED certification. And our water savings programs are revolutionizing water use in buildings, often without expensive china replacements.

Our business minded approach to sustainability extends to our own company, where we practice the same philosophy in our own facilities through our in-house sustainability initiative.

Healthy Buildingshealthybuildings.com

A R E AO V E R V I E W

4


12

Bake Parkway

Alton Parkway

Irvine Boulevard

Commercentre Driv

e

Bake Parkway

NEWPORT BEACH

IRVINE CENTRAL BUSINESS DISTRICT

AND MORE ...

IRVINE TRANSPORTATION CENTER

ORANGE COUNTY GREAT PARK REDEVELOPMENT PROJECTPrivate-Public partnership to

redevelop the former 4,682-acre Marine Corps Air Station

El Toro site:•9,500 homes ($4+ Billion)

•1,300-acre multi-purpose sports ($1+ Billion)

•1+MSF of commercial construction

ENCANTO BY MERITAGE HOMES52 newly-built

single-family homes

25

Alto

n Pa

rkw

ay

3 Lake Forest Drive

Bake Parkway

Comm

erce

ntre D

rive

Bake Parkway

FOOTHILLRANCH

PORTOLA HILLS RANCHO SANTA MARGARITA

FOOTHILL PLAZA RETAIL CENTER

AND MORE ...

FOOTHILL TOWNE CENTER

Master-planned community of +/-2,379 new luxury homes with resort-style

amenities and more than 20 acres of park space.

TOLL BROTHERS PARKSIDE NEW HOMES

Lake Forest newest master-planned community

of 195 luxury homes with resort-style amenities


The City of Lake Forest is located within the beautiful Saddleback Valley, in the heart of South Orange County. The city incorporated in 1991 includes the master-planned communities of Foothill Ranch and Portola Hills. From it’s roots as an agricultural community best known for it’s eucalyptus trees, the city has developed into one of the best master-planned communities in the United States.

Lake Forest has the charm of a small community with the convenience of a large metropolitan city. The city offers well-planned neighborhoods that are safe and beautiful, as well as an idyllic landscape that includes lush green hills, groves of eucalyptus trees and lakes. Lake Forest is adjacent to the I-5 and 405 intersection and the Foothill and Eastern Transportation Corridors, which provide easy access to Los Angeles, San Diego, and the Inland Empire.

L A K E F O R E S T O V E R V I E W

P O P U L A T I O N

8 3 , 3 5 5

$ 1 2 6 , 8 7 2

1 7 , 9 1 9

2 . 0 1 %

5 7 8 , 9 2 7

3 7 , 8 2 8

2 0 1 6 A V G .H O U S E H O L D I N C O M E

M E D I A NH O U S E H O L D V A L U E

C O L L E G E E D U C A T E D

G R O W T H

E M P L O Y E E S

27

5

405

405

5

5

74

241

241

133

73

73

55

55

57

22

1

1

133

W 1st St

Euclid St

West St

W 17th St 17th St

E Chapman Ave

Hew

es St

N TustinSt

E 16th St

Irvine Ave

S antia

go D

r

Fair Dr

W Warner Ave

Irvine Center Dr

Irvine Blvd

Alton Pkwy

Bake Pkwy

Lake F

orest D

rEl T

oro

RdSanta Margarita Pkwy

Alicia Pkwy

Los Alisos Blv

d

Ridge Rte Dr

Barranca Pkwy

Main St

Univ ersity Dr

Turtle Rock Dr

San Joaquin Hills Transportation Corridor

Garden Grove

Costa Mesa

NewportBeach

Santa Ana

Irvine

Orange

Fountain Valley

Tustin

North Tustin

LagunaWoods

Rancho SantaMargarita

Mission Viejo

Aliso Viejo

WillowStaging Area

Ronald WCaspers

WildernessPark

O’NeillRegional Park

Lake Forest

Orange CountyGreat Park

Santiago Peak

Whiting RanchWilderness

Park

LimestoneCanyon

Regional Park

Regional Pk

John WayneAirport

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F I N A N C I A LA N A L Y S I S

5


F I N A N C I A L O V E R V I E W

GLOBAL F INANCIAL ASSUMPTIONS

Analysis PeriodAnalysis Start DateTerm

July 1, 201910 Year

Area Measures & OccupancyTotal Net Rentable AreaOccupancy at Analysis Start

20,592 100%

Annual Growth RatesConsumer Price Index (CPI)Other Income Growth RateOperating ExpensesProperty TaxesMarket Rent Growth

3.0% 3.0% 3.0% 2.0% Detailed at Right

Allowances & ReservesVacancy AllowanceCredit LossCapital Reserves (Initial Year Value)

5.0%[1]

0.00% $0.10 PSF/Yr

Expenses

Operating Expense Source/2019 ActualsReal Estate Taxes Reassessed

CY2018 + 3% No [2]

Vacant Space Leasing

Occupancy & AbsorptionProjected Vacant SF as of 6/30/2019Current Vacant SF as of 3/31/2019Percentage Vacant as of 7/1/2019Absorption Period

04,188

0%3-6 Months

Financial Terms2019 Monthly Market RentRent AdjustmentLease Term (Months)Expense Reimbursement TypeRent AbatementTenant Improvements ($ per RSF)Leasing Commissions

$2.45 FS6 3.00% Annually

60Full Service Gross/Base Year

2 Months$10.00

6.0%

31


SECOND GENERATION LEASING

Market Rent Assumption MLA #1Year 1 (July-2019 to June-2020) $2.45

Year 2 (July-2019 to June-2020) $2.52

Year 3 (July-2019 to June-2020) $2.60

Year 4 (July-2019 to June-2020) $2.68

Year 5 (July-2019 to June-2020) $2.76

Year 6 (July-2019 to June-2020) $2.84

Year 7 (July-2019 to June-2020) $2.92

Year 8 (July-2019 to June-2020) $3.01

Year 9 (July-2019 to June-2020) $3.10

Year 10 (July-2019 to June-2020) $3.20

Market Rent Growth MLA #1Year 1 (July-2019 to June-2020) Not App.

Year 2 (July-2019 to June-2020) 3.0%

Year 3 (July-2019 to June-2020) 3.0%

Year 4 (July-2019 to June-2020) 3.0%

Year 5 (July-2019 to June-2020) 3.0%

Year 6 (July-2019 to June-2020) 3.0%

Year 7 (July-2019 to June-2020) 3.0%

Year 8 (July-2019 to June-2020) 3.0%

Year 9 (July-2019 to June-2020) 3.0%

Year 10(July-2019 to June-2020) 3.0%

Lease Term (Months) 60

Contractual Rent Increases 3%

Reimbursement Type FSG over BY

Retention Ratio 75.0%

Free Rent (# of Months)

New Tenant 4.00

Renewal 2.00

Weighted Average 2.50

TI Allowance PSF

New Tenant $15.00

Renewal $7.50

Weighted Average $9.38

Leasing Commissions

New Tenant 6.0%

Renewal 4.0%

Weighted Average 4.5%

Downtime

New Tenant 4 Months

Weighted Average 1 Month

33

Free Rent (# of Months)

New Tenant 4.00

Renewal 2.00

Weighted Average 2.50

TI Allowance PSF

New Tenant $15.00

Renewal $7.50

Weighted Average $9.38

Leasing Commissions

New Tenant 6.0%

Renewal 4.0%

Weighted Average 4.5%

Downtime

New Tenant 4 Months

Weighted Average 1 Month

CASH FLOW PROJECTIONS

For the Years Ending Year 1Jun-2020

Year 2Jun-2021

Year 3Jun-2022

Year 4Jun-2023

Year 5Jun-2024

Year 6Jun-2025

Year 7Jun-2026

Year 8Jun-2027

Rental Revenue

Potential Base Rent 586,037 603,618 621,726 645,870 664,910 701,484 721,130 742,764

Absorption & Turnover Vacancy 0 0 0 -11,212 0 -46,591 0 0

Free Rent 0 0 0 -28,030 0 -116,477 0 0

Scheduled Base Rent 586,037 603,618 621,726 606,628 664,910 538,415 721,130 742,764

TOTAL POTENTIAL GROSS REVENUE 586,037 603,618 621,726 606,628 664,910 538,415 721,130 742,764

Other Tenant Revenue

Total Expense Recoveries 0 5,505 11,168 13,536 19,414 2,245 7,999 13,918

Potential Gross Revenue 586,037 609,123 632,894 620,163 684,323 540,660 729,130 756,682

Vacancy & Credit Loss

Total Vacancy & Credit Loss [1] -29,590 -30,465 -25,092 -26,359 -16,792 -17,893 -36,465 -30,146

Effective Gross Revenue 556,446 578,659 607,802 593,804 667,531 522,767 692,665 726,536

Operating Expenses [2]

Fire Life Safety / Security Property Management Fee Janitorial / Cleaning Repairs & Maint. Utilities Real Estate Taxes [3] Insurance Association Dues

8,7378,000

33,24812,35549,42041,1542,727

41,588

8,9998,240

34,24512,72650,90341,9772,809

42,836

9,2698,487

35,27313,10752,43042,8172,893

44,121

9,5478,742

35,93113,50153,36243,6732,980

45,444

9,8349,004

37,42113,90655,62344,5463,069

46,808

10,1299,274

36,88014,32354,62945,437

3,16148,212

10,4329,552

39,70014,75359,01046,346

3,25649,658

10,7459,839

40,89115,19560,78047,273

3,35451,148

TOTAL OPERATING EXPENSES 197,229 202,734 208,397 213,179 220,210 222,046 232,708 239,226

NET OPERATING INCOME 359,217 375,924 399,406 380,625 447,321 300,721 459,957 487,311

Leasing Costs

Tenant Improvements 0 0 0 42,903 0 178,282 0 0

Leasing Commissions 0 0 0 30,883 0 128,332 0 0

TOTAL LEASING COSTS 0 0 0 73,786 0 306,614 0 0

Capital Expenditures

Structural Reserves 2,059 2,121 2,185 2,250 2,318 2,387 2,459 2,533

Total Capital Expenditures 2,059 2,121 2,185 2,250 2,318 2,387 2,459 2,533

TOTAL LEASING & CAPITAL COSTS 2,059 2,121 2,185 76,036 2,318 309,001 2,459 2,533

Cash Flow Before Debt Service 357,158 373,803 397,221 304,589 445,003 -8,280 457,498 484,778

NOTES[1] General Vacancy Loss factor includes losses attributable to vacant lease-up, rollover downtime and fixturing downtime.

[2] Real estate taxes have not been reassessed. The figures included in our analysis reflect the 2017-18 property tax bills. Each investor should make their own assumption regarding impact, if any, a sale has upon property taxes moving forward. Please note further that some existing tenants have Proposition 13 property tax protection.

[3] Initial year estimates were based upon the CY2018 actuals, and some current estimats from 2019. Subsequent years have been adjusted by 3% for inflation.


25381 COMMERCENTRE RENT ROLL

Suite TenantSq. Ft.

Lease Term Current Base Rent Future Rent IncreasesBase Year Amount

Market RateComments

Start Expire $/Mo $/SF/Mo Date $/Mo $/SF/Mo

1 100 New Tenant 4,188 TBD TBD TBD TBD TBD TBD TBD 2020 $2.45 FSG Suite Available Now

2 150Healthy Buildings

5,976 1/1/2020 $13,446 $2.25

$2.32 $2.39$2.46$2.53

2020 $2.45 FSG Renewal negotiations underway.

3 200 VerifPoint 10,428 7/1/2019 6/30/2024 $25,549 $2.45

$2.52 $2.60$2.68$2.76

2019 $2.45 FSGNew 5 year lease to commence at the close of escrow.

Total Sq. Ft. 20,592

35

S A L EC O M P A R A B L E S

6


Property Address Bldg SFYear Built

Sale Date Sale PricePrice PSF

CAP Rate

Buyer Seller

1.27372 Aliso Creek Rd.Aliso Viejo, CA

14,037 2001 2/6/2019 $4,500,000 $321 6.18% Gary Mark The O’Donnell Group

2.2 Corporate ParkIrvine, CA

43,373 1987 1/15/2019 $13,601,000 $314 - Linda Rombaut Nikken, INc.

3.145 ColumbiaAliso Viejo, CA

27,000 1991 12/20/2018 $8,750,000 $324 - Compass Bible Churchlxys Intergrated Circuits Div A

4.25371 Commercentre DrLake Forest, CA

37,090 1999 10/1/2018 $11,698,000 $315 6.57% Yibin Yuan Harbor Associates, LLC

5.2 Wrigley AveIrvine, CA

15,502 1986 8/3182018 $5,285,000 $341 - T Miller Corp HPC

6.35 JourneyAliso Viejo, CA

19,526 1990 5/7/2018 $5,400,000 $277 - Ning ZhouSoka Gakkai International - USA

7. 9685 Research Dr 30,143 2006 4/26/2018 $11,500,000 $382 - Zein E Obagi Paragon

8.300 Goddard WayIrvine, CA

12,088 2001 4/13/2018 $3,989,040 $330 - Hold Fast Vapors Sonenshine Family Trust

9.9 Corporate ParkIrvine, CA

22,988 1985 3/6/2018 $7,016,520 $305 -Kelemen Caamano Investments

PS Business Parks, Inc.

10.3631 S Harbor BlvdSanta Ana, CA

23,982 1986 2/23/2018 $6,490,893 $271 - Pacshore PartnersThe Blackstone Group LP

S A L E C O M P A R A B L E S

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I N V E S T M E N T A D V I S O R S KURT BRUGGEMAN, CCIMSenior Vice PresidentCalBRE 01264501

[email protected]

ADAM WICKERSenior Vice PresidentCalBRE 01225873

[email protected]

Lee & Associates, Inc. - Irvine9838 Research Drive

Irvine, California 92618

lee-associates.com | lee-cmg.com

Investment Opportunity in Lake Forest

OFFERING MEMORANDUM


Documents

COMMERCENTRE DRIVE · 2019-04-09 · Associates, Inc. - Irvine Commercial Real Estate Services (“Broker”). This Memorandum was prepared by the Broker based on information supplied