1.0.investment presentation columbus (1)

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1.0.investment presentation columbus (1)

  1. 1. INVESTMENT PRESENTATIONConversion of a former K-Mart Retail Facility3784-3800 West Broad Street, Columbus, Ohio 43228Class A Climate ControlledSelf-Storage Retail ConversionRedevelopment and Adaptive Reuse Business PlanPRESENTED BYDAVID FRANK(818) 887-9797dfrank@dealpointmerrill.comSTERLING McGREGOR(949) 246-9399smcgregor@dealpointmerrill.com©2012 Dealpoint Merrill. The information contained herein is confidential and remains the property of Dealpoint Merrill, LLC, and may not be reproduced or distributed withoutthe express written consent of Dealpoint Merrill, LLC. DealPoint Merrill, LLC obtained the information contained herein from the applicant and from other sources, and makes nowarranties or representations as to the correctness thereof. As a condition of the use of these materials, any prospective lender or investor agrees to conduct negotiationsdirectly through Dealpoint Merrill, LLC and to perform its own due diligence.
  2. 2. Investment Presentation, Columbus, OhioEnclosed please find our investment presentation for the acquisition and redevelopment of the abovereferenced property into a Class A climate controlled self-storage property.Our niche is the acquisition and redevelopment of retail shopping centers into climate controlled “supercenters” complete with service amenities. We believe this strategy is more conservative than new development,eliminates entitlement risk and provides prompt cash flow in proven locations with existing high visibility andtraffic at acquisition prices substantially below new construction. Below is a brief description of the property andinvestment terms.Property Description: National Road Plaza is a retail community center built in 1997. The property consists of109,000 ft.² with 87,000 SF of vacant in-line shops. The property is located on 15 acreswith 460 surface parking spaces printing a ratio of 6.01 per 1,000 square feet. Theproperty has a dedicated turn lane, pylon sign, and signalized intersection. A new $400million casino and hotel will be built across the street. We believe the new casino will beparking constrained.Business Plan: We may have two alternative uses for the property. 1) Option 1: We intend to venturethe parking field with the casino since we know the casino is under parked. The RV parkwill provide additional casino overflow parking for longer term RV users consisting ofboth patrons and employees. The back building may be used for self-storage. 2) Option 2:convert the “dark big box” into Class “A” quality climate controlled “super center” self-storage with onsite profit centers such as: rv/boat storage, commercial and retail self-storage, business center and overnight shipping, truck rentals and moving supply saleshoused within a storm proof facility. We anticipate ground leasing or selling one or moreretail fast food restaurant tenants on the street frontage.Loan Type: Interest only construction and improvement loan with a mini-perm feature. The loan willbe used for redevelopment of the property, onsite upgrades as enumerated in ourconstruction budget. Sponsor will self-perform on construction.Holding Period: Two to Five YearsExhibits: Company Brochure and Business PlanInvestment Snapshot:Sincerely,DEALPOINT MERRILL, LLCTotal Project Costs 100% 4,414,300$Improvement Loan 62% 2,750,000$Cash Investment 38% 1,664,300$Total Estimated Project Profits [net sales proceeds + cash flow - 5 year holding period] 6,448,250$Total Annual Returns 97.49%Average Annual Project Cash on Cash Returns 30.95%2
  3. 3. Investment Presentation, Columbus, OhioConversion of a former K-Mart Retail Facility3784-3800 West Broad Street, Columbus, Ohio 43228PROFORMA RETURNSTARGETED RETURN: 20% to 30% leveraged annual returns.TARGETED CASH FLOW: 6.0% to 10.0% per yearTARGET HOLDING PERIOD: Five years, but may range from four (4) to seven (7) years based on market.EXIT STRATEGY: Refinancing, sale and or rollup into public offering.INVESTOR REPORTING: Quarterly. Annual K-1’s. Audited financialsDISTRIBUTIONS: Return of capital, 8.0% preferred return; thereafter, investor waterfallOBJECTIVES: Refinance when feasible (est. year 3) and return 100% of investor capitalPROFORMA ANNUAL RETURNS: 98%+ forecasted total annual returnsPROFORMA CASH FLOW: Average 30%+ per year. Paid monthly based on available cash flowPREFERRED RETURN: 8.0% preferred return with investor waterfall per separate letter agreementTAX SHELTERED CASH FLOW: Estimated at 75%+ of investment capitalTHIS INVESTMENT PRESENTATION TERM SHEET MUST BE READ IN CONJUNCTION WITH THE BUSINESS PLAN,PROFORMA UNDERWRITING, RISK DISCLOSURE AND DUE DILIGENCE MATERIALS IN ORDER TO UNDERSTANDFULLY ALL OF THE IMPLICATIONS AND RISKS OF THIS INVESTMENT. FOR ACCREDITED INVESTORS ONLY.3
  4. 4. Investment Presentation, Columbus, OhioINVESTMENT SUMMARYColumbus, the state capital and largest city in the state of Ohio is a fast-growing, major American city with apopulation of 780,000, making it the fourth most populous state capital in the country. The Greater metropolitanarea population is 1,836,000. The city has a strong economy that is not dependent on any one industry. Itsleading employers include government agencies and manufacturers of transportation equipment, textiles, metalsand consumer goods. Columbus is home to the worlds largest private research and development foundation, theBattelle Memorial Institute; Chemical Abstracts Service, the worlds largest clearinghouse of chemicalinformation; Net Jets, the worlds largest fractional ownership jet aircraft fleet; and The Ohio State University, thenations largest campus. In 2012, Columbus was ranked in Business Weeks 50 best cities in America.fDi Magazine ranked the city no. 3 in the U.S. for cities of the future.National Road Plaza is a former K–Mart retail community center built in 1997. The property consists of 109,000ft.² with 87,000 SF of vacant in-line shops. The property is located on 15 acres with 460 surface parking spacesprinting a ratio of 6.01 per 1,000 square feet. The property has a dedicated turn lane, pylon sign, and signalizedintersection. A new $400 million casino and hotel will be built across the street and the property is adjacent to aregional mall. We believe the new casino will be parking constrained based on lot size.4
  5. 5. Investment Presentation, Columbus, OhioBUSINESS PLANThis property may have two viable alternative business plans:Option 1: We propose to venture the parking field with the casino since we know the casino is under parked. TheRV park will provide additional casino overflow parking for longer term RV users consisting of both patrons andemployees. The back building may be used for Class A self-storage. While the property can support higherdensity, we believe about 500 stalls is practical for the site. Anticipated rents are about $25 per day; generating$4.5 million at full capacity; practically, we would assume a 50% overall occupancy generating about half thisamount. NO RV PARK RENTS ARE FORECASTED IN OUR PROJECTIONS.Option 2: The business plan is to convert the “dark big box” into Class “A” quality climate controlled “supercenter” self-storage property with onsite profit centers such as: rv/boat storage, commercial and retail self-storage, store front retail, office/warehouse incubator space, business center and overnight shipping, utilitypayments [UPS store concept with private mail boxes], truck rentals and moving supply sales housed within astorm proof facility.If feasible, we will redevelop the parking fields and street frontage by adding non-climate storage, a high volumeretail pad (i.e. fast food, specialty retail, car wash, gas station and/or mini-mart), as well as, increasing trafficvisibility by designing well-conceived directional and marquee street signage. Monetization of excess land isgenerally completed in the second phase of our redevelopment plan.As a means of risk management, we intend to synchronize the redevelopment in two phases. Our model providesfor a 50% build out of self-storage upon acquisition which can be completed in 90 to 120 days; thereafter, weseason the asset during a 12 month lease up allowance; then complete the final build out of self-storage basedon market demand. Typically, our final phase can be completed at the same price point as our initial constructioncosts. Pad tenant are acquired during phase one.The forecasted returns are significantly higher because we intend to ground lease the pad space to national retailtenants who will build their own buildings. Additionally, this strategy lowers the terminal cap rate; increasing thevalue of the property because the capitalized value of credit leases is more valuable than shop leases.5
  6. 6. Investment Presentation, Columbus, OhioINVESTMENT HIGHLIGHTSWe believe the subject property represents a significant investment opportunity for a number of compellingreasons, some of which are highlighted in more detail below: Up to 2 additional pad buildings. Additional pads can be built along the retail frontage Strategically located. The property the property is strategically located across the street from a soon tobe built $400 million casino and hotel which is parking constrained. There are $8 million in new roadimprovements to support the casino and another $80 million for interstate 270 improvements. Strong Traffic. The casino anticipates 10,000 patrons per day plus another 2,000 employees. Market Demand and Market Positioning. We believe that there is significant market demand for qualityself-storage facilities. There is virtually no climate-controlled storage in the subject’s market area. Pricingclimate-controlled storage at rates comparable to non-climate-controlled storage will enable the subjectproperty to be the market leader in terms of occupancy and rents. Strong Market Area and Demand Drivers. The property located in an area with strong fundamentaldemographics, both in terms of population and average/median income. In addition, the economicfundamentals within the region are stable, with a favorable outlook. We are located west of I-470 withover 140,000 in our trade area. Prominent Retail Signage and Traffic Visibility. The property is located in a strong retail corridor withstrong traffic patterns and street visibility. Low Price per Square Foot Purchase Price to replacement cost. Our price PSF represents an acquisitioncost that is exponentially lower than replacement cost in addition to the excess land. Value Added Redevelopment. The business plan is to convert the subject property into a Class A self-storage climate controlled property. In addition, the property will feature RV, boat, and other climate andnon-climate storage options. There will also be complementary retail uses at the subject property as well. Addition of an RV Park. The addition of a 500 unit RV park is alternative option which we have whichmay augment our forecasted cash flows.6
  7. 7. Investment Presentation, Columbus, OhioProposed redevelopment plat for the casino and adjoining mall.Casino and Westland Mall freeway location adjacent to the subject property7
  8. 8. Investment Presentation, Columbus, OhioSOURCES AND USESPROFORMA OPERATIONS AND INVESTMENT RETURNS3784-3800 West Broad Street, Columbus, Ohio 43228Executive Financial Summary One PadProperty Features:Total gross square feet 109,180Net rentable square feet [includes outside storage] 122,828Number of units 1,017Average unit size 121 SFHolding Period 5 YearsAverage Proforma Rents 0.72$ Average Climate Controlled 10x10 Rent --> $0.90Capital Structure: Sources and Uses PSFImputed Equity with capital and operating reserves 38% 1,664,300 $15.24Pad Sales/Excess Land 0% 0 $0.00Construction/Permanent Loan 62% 2,750,000 $25.19Total Sources 100% 4,414,300 $40.43Price 44% 1,957,750 $17.93Construction Costs 56% 2,456,551 $22.50Total Uses 100% 4,414,301 $40.43Going in Cap Rate [stabilization] 16.50%Columbus Casino Super Center (ADAPTIVE REUSE)Proforma Operations Year 1 Year 2 Year 3 Year 4 Year 5Revenues 470,169 967,338 992,805 1,021,780 1,051,623Less: Operating Expenses 177,995 282,433 287,566 293,423 299,410Equals: Net Operating Income 292,174 684,905 705,239 728,356 752,212Less: Debt Service - - 187,370 187,370 187,370Debt Service Coverage Ratio - - 3.76 3.89 4.01Equals: Net Cash Flow 287,174 679,905 512,769 535,784 559,536Annual Investor/Project Cash Flow 287,174 679,905 512,769 535,784 559,536Annual Cash on Cash Distributions as a % 17.3% 40.9% 30.8% 32.2% 466.3%Proforma ReturnsAverage Annual Cash on Cash Returns (1) 30.95%Total Annual Returns 97.49%In Place Market Value 3,895,647 9,312,061 9,583,187 9,891,416 10,209,500Two years of debt service is included in the construction costs Approximate Tax Shelter ---> 76.91%8
  9. 9. Investment Presentation, Columbus, OhioASSUMPTIONS AND UNDERWRITINGFINANCIAL ANALYSISFinancial AnalysisYear 1 2 3 4 5Break Even Occupancy Formula --> DS + EXP/EGI 29.20% 47.84% 47.05% 46.29%Debt Service Coverage Ratio Formula --> NOI/DS 0.00% 0.00% 376.39% 388.73% 401.46%Loan Constant --> 10.62% 24.91% 26.00% 27.23% 28.54%Loan to Total Cost --> 62.30% 62.30% 61.46% 60.60% 59.71%Forecasted Loan Interest Rate 5.50% 5.50% 5.50% 5.50% 5.50%Developer Cap Rate --> Formula --> NOI/Total Cost 6.62% 15.52% 15.98% 16.50% 17.04%Loan Amount --> 2,750,000 2,750,000 2,712,955 2,674,903 2,635,951Market Value ---> Formula --> NOI/Cap Rate 3,895,647 9,132,061 9,403,187 9,711,416 10,029,5007.50% <-- Cap RateLoan to Market Value --> 30.11% 28.85% 27.54% 26.28%Operating Assumptions: Year 1 Year 2 Year 3 Year 4 Year 5Annual Occupancy 42% 84% 85% 85% 85%Rent growth 5 yr. Avg ---> 1.50% 0.00% 0.00% 1.50% 3.00% 3.00%Expense growth 0.00% 0.00% 2.00% 2.00% 2.00%Operating Expenses as a % of EGI 38% 29% 29% 29% 28%Capital Structure Ratios: Year 1 Year 2 Year 3 Year 4 Year 5Break even occupancy 29.20% 47.84% 47.05% 46.29%Debt service coverage ratios 0.00% 0.00% 376.39% 388.73% 401.46%Loan Underwriting: Year 1 Year 2 Year 3 Year 4 Year 5 Year 6Net Operating Income - Pad 0 27,000 27,000 27,000 27,000 27,000Capitalized Value Cap Rate --> 5.00% 0 540,000 540,000 540,000 540,000 540,000Net Operating Income - Storage 292,174 657,905 678,239 701,356 725,212 749,831"In Place" Market Value: 3,895,647 8,772,061 9,043,187 9,351,416 9,669,500 9,997,745Total Market Value Cap Rate --> 7.50% 3,895,647 9,312,061 9,583,187 9,891,416 10,209,500 10,537,745Loan to Value: 0.00% 31.35% 30.41% 29.41% 28.44% 27.51%9
  10. 10. Investment Presentation, Columbus, OhioPROFORMA ELEVATION RENDERINGS and SITE PLANDEALPOINT MERRILL: About UsBased in Los Angeles since 1985, The Merrill Group of Companies, has established an enviable track record ofsuccess with a scope of operations encompassing development and construction for its own account, third partyasset and property management, as well as, court appointment receivership and commercial loan workoutstrategies and negotiation services to solve complex issues for property owners and investors.DealPoint Merrill, a subsidiary of The Merrill Group of Companies, is an owner and operator of “value added”retail conversions and build to suit properties, student housing, self-storage and non-performing notes, as wellas, a sponsor of real estate investment offerings.We invite you to learn more about us. Please visit our website at: www.dealpointmerrill.com.10

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