OFFERING MEMORANDUM - LoopNet · 2017-07-26 · new homes. This includes Trilogy at The Polo Club...

TOWN & COUNTRY SOUTH Indio, CA

OFFERING MEMORANDUM

N O N - E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E

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. TOWN & COUNTRY SOUTH Indio, CA ACT ID Y0080082

TABLE OF CONTENTS

SECTION

INVESTMENT OVERVIEW 01 Offering Summary Regional Map Local Map Aerial Photo FINANCIAL ANALYSIS 02 Tenant Summary Lease Expiration Chart Operating Statement Notes Pricing Detail Acquisition Financing MARKET COMPARABLES 03 Comparables Comparable Shopping Centers MARKET OVERVIEW 04 Market Analysis Demographic Analysis

TOWN & COUNTRY SOUTH


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INVESTMENT

OVERVIEW


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EXECUTIVE SUMMARY OFFERING SUMMARY

MAJOR EMPLOYERS

EMPLOYER # OF EMPLOYEES

Fantasy Springs Resort Casino 1,200

Pga West By Wldorf Astoria MGT 900

John F Knnedy Mem Hosp Emrgncy 650

Spotlight 29 Casino 600

Indio Medical Offices 593

Fantasy Spring Resort Casino 520

Cabinet Supply 510

Cabazon Band Mission Indians 500

County of Riverside 471

Walmart 426

Southern California Regional 393

Target 377

DEMOGRAPHICS

1-Miles 3-Miles 5-Miles

2016 Estimate Pop 21,324 96,354 174,866

2010 Census Pop 19,873 89,265 161,101

2016 Estimate HH 6,543 28,936 55,042

2010 Census HH 6,087 26,841 50,699

Median HH Income $43,394 $52,765 $53,920

Per Capita Income $19,036 $22,843 $24,979

Average HH Income $60,699 $75,420 $78,995

VITAL DATA YEAR 1 YEAR 2 Price $6,300,000 CAP Rate 6.87% 7.74%

Loan Amount $4,410,000 Net Operating Income $432,921 $487,445

Loan Type Proposed New Net Cash Flow After Debt Service 5.23% / $133,816 7.36% / $188,340

Interest Rate / Amortization 4.50% / 30 Years Total Return 9.65% / $246,861 12.01% / $307,157 Gross Leasable Area (GLA) 37,230 SF Price/SF $169.22 Current Occupancy 89.69% Year Built / Renovated 1983 Lot Size 2.99 acre(s)

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MAJOR TENANTS TENANT GLA LEASE EXPIRATION LEASE TYPE

Lab Corp of America 2,900 1/31/2021 NNN

Hair Phix 1,080 1/31/2020 NNN

Time Warner Cable 4,436 1/31/2021 NNN

Oasis Rehabilitation 4,500 6/30/2018 NNN


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OFFERING SUMMARY

Value - Add Opportunity

Strong mix of retail and medical tenants

Tenant mix is impervious to the impact of E-Commerce

INVESTMENT HIGHLIGHTS

Marcus & Millichap Investment Real Estate Services is pleased to offer for sale Town & Country neighborhood center in Indio, California. Town & Country consist of a three single-story buildings totaling 37,230 square feet. The center is easy to find and near a growing medical community. Town & Country offers a unique mix of medical and retail tenants blending with the synergy in the immediate trade area. Located within a few miles are John K. Kennedy Hospital, Kaiser Medical Offices and the upcoming Loma Linda University Children's Hospital. The existing corporate medical tenants such as InterDent - Gentle Dental and Lab Corp of America are household names. Coupled with the Refuge Pregnancy Center, Oasis Rehabilitation Center and Marivics Scrubs & More add to the medical component and desirability of Town & Country South. Time Warner Cable, a hair salon, insurance and a dance studio provide the nice mix of traditional retail uses. Street visibility to the enter center is strong, with prominent monument signage adjacent to Doctor Carreon Boulevard. The center offers parking immediately in front of the premises as well to the rear, making it easier for the elderly and families with children. With the nearby increases in housing (1,939 new homes and a 90 unit apartment complex), new opportunities will arise to service a growing demand, creating a great leasing opportunity to fill the remaining 26 percent of vacancy with long term tenants.

INVESTMENT OVERVIEW

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OFFERING SUMMARY PROPERTY OVERVIEW

Indio is a city in Riverside County and is the largest city in the Coachella Valley. Indio lies 23 miles east of Palm Springs, 77 miles east of Riverside and 127 miles east of Los Angeles. Indio has been one of Southern California's most important agricultural regions and a magnet of job opportunities for newcomers. The Riverside/San Bernardino metro has one of the largest economies in the Unites States. Indio has become knows as the City of Festivals attracting 1.4 million tourist every year resulting in a economic impact of $212 million for Indio. Some of the more notes festivals in Coachella Valley are Stagecoach Country Music Festival, Coachella Valley Music & Arts Festival, Date Festival, Kennel Club Dog Show, Cabazon Indian Powwow, International Tamale Festival, National Sunshine Horse Show, BNP Paribas Tennis Open, and Golf's FCG World Championships. The population is growing and housing within a 5 miles radius of Town & Country has expanded with over 1,939 new homes. This includes Trilogy at The Polo Club by Shea Homes, Four Seasons at Terra Lago by K. Hovnanian's, Hacienda Pointe by D.R. Horton, Palazzo at Shadow Hill and Desert Trace by Woodside Homes. Within .25 miles there are plans to build a 90 unit multi-family complex. A half mile to the east is one of three hospitals in the Coachella Valley with one of the state's busiest maternity ward. Two miles to north plans to open a pediatric urgent care to serve over 135,000 Children.

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PROPERTY SUMMARY OFFERING SUMMARY

PROPOSED FINANCING

First Trust Deed

Loan Amount $4,410,000

Loan Type Proposed New

Interest Rate 4.50%

Amortization 30 Years

Loan Term 30 Years

Loan to Value 60%

Debt Coverage Ratio 1.61

THE OFFERING

Property Town & Country South

Price $6,300,000

Property Address 81-577 Doctor Carreon Blvd.,Building A - D,Indio,CA

SITE DESCRIPTION

Year Built/Renovated 1983

Gross Leasable Area 37230

Ownership Fee Simple

Lot Size 2.99 acre(s)

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REGIONAL MAP


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Town & Country

LOCAL MAP


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Town & Country

AERIAL PHOTO


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Town & Country


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FINANCIAL

ANALYSIS

FINANCIAL ANALYSIS


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TENANT SUMMARY

FINANCIAL ANALYSIS


PRICING DETAIL

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FINANCIAL ANALYSIS


OPERATING STATEMENT

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TENANT PROFILES


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InterDent Inc. - Gentle Dental

Interdent brands include Gentle Dental, Smile Keepers Dental, Blue Oak Dental and Capitol

Dental. Operating a multi-site practice and covering several states. InterDent provided support

services to over 200 affiliated dental offices employing more than 450 dentists. The affiliated

offices benefit from professional management, economies of scale, superior information systems,

and specialization. InterDent's network delivers comprehensive dentistry to over one million

patients annually.

General Information

Tenant Name InterDent Inc. - Gentle Dental

Website www.interdent.com

Headquartered California

Rentable Square Feet 4,490 SF

Lease Commencement 7/1/2004

Lease Expiration 6/30/2019

No. of Locations 1

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TENANT PROFILE


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Lab Corp of America

General Information

Tenant Name Lab Corp of America

Website labcorp.com

Headquartered Burlington, NC



LabCorp provides leasing-edge medical laboratory tests and services through a

national network of primary clinical laboratories and specialty testing laboratories.

LabCorp processes tests on approximately 500,000 specimens each day and

helping 220,000 clients with 50,000 employees. Lab Corp also operates the National

Genetics Institute in Los Angeles, California. Laboratory Corporation of America

Holdings is listed on the New York Stock Exchange (NYSE) under ticker symbol LH.

Time Warner Cable

General Information

Tenant Name Time Warner Cable



Time Warner Cable, Bright House Networks and Charter Communications are now

one company and will become known as Spectrum. They are the fastest growing TV,

Internet and voice provider in the United States. Providing services to over 25 million

customers in 41 states, making Spectrum the third largest pay television company in

the United States.

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TENANT PROFILE


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Marivics Scrubs & More

General Information

Tenant Name Marivics Scrubs & More

Website www.marivicscrubs.com

Headquartered Indio




No. of Locations 2

Marivics Scrubs & More is approaching their 13th year at Town & Country South. By

providing brand name antibacterial scrubs to the large medical community

surrounding the Town & Country. In addition to this location Marivics Scrubs & More

offers online orders, catalog orders and a second location in Palm Desert. Marivics

Scrubs & More has become a part of the community and dedicates a portion of their

sale proceeds towards scholarships for high school students graduating in the local

area.

Refuge Pregnancy Center

General Information

Tenant Name Refuge Pregnancy Center

Website www.refugepregnancycenter.org




Refuge Pregnancy Center is a non-profit, non denominational 501(c)3 organization.

A faith based agency helping girls and women through education, support and

assistance. They offer free pregnancy test, prenatal education, parenting classes,

childbirth classes and breastfeeding education and support.

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TENANT PROFILE


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Oasis Community Rehabilitation Services

General Information

Tenant Name Oasis Community Rehabilitation Services

Website www.starsinc.com




No. of Locations 1

Oasis Integrated Services and Recovery Center (ISRC) is a full service partnership

providing individual and group counseling, case management, medication

management, crisis intervention and job counseling. The agency offers many

services and community based support such as Oasis Mentoring Program, Families

and Schools Together (FAST), National Alliance on Mental Illness (NAMI) and Oasis

Vocational Center, receiving accreditation from the Commission on Accreditation of

Rehabilitation Facilities.


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MARKET

COMPARABLES

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SALES COMPARABLES MAP

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TOWN & COUNTRY SOUTH (SUBJECT)

San Luis Rey Plaza

82462 Highway 111

46845 Monroe Street

SALES COMPARABLES

1

2

3

PROPERTY NAME

MARKETING TEAM


COMPARABLES

rentpropertyname1

rentpropertyaddress1

rentpropertyname1


rentpropertyname1


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SALES COMPARABLES

Annual Per SF Income $638,146 $17.14

Expenses $205,225 $5.51

NOI $432,921 $11.62

Occupancy 89.69%

TOWN & COUNTRY 81-577 DOCTOR CARREON BLVD., INDIO, CA, 92201

Tenants Lease Type Asking Price: $6,300,000 Lab Corp of America NNN

Price/SF: $169.22 Hair Phix NNN

CAP Rate: 6.87% Time Warner Cable NNN

Year Built: 1983 Oasis Rehabilitaion NNN

Oasis Rehabilitation NNN

1

SAN LUIS REY PLAZA 73745 EL PASEO, PALM DESERT, CA, 92260

Annual Per SF Income $1,038,965 $30.69

Expenses $241,428 $7.13

NOI $737,083 $21.77

Occupancy 89%

Close Of Escrow: 11/18/2016

Days On Market: 78

Sales Price: $11,857,500

Price/SF: $350.26

CAP Rate: 6.22%

Year Built: 1981

2

82462 HIGHWAY 111 82462 HIGHWAY 111, INDIO, CA, 92201

NOTES All cash transaction with 85% vacancy.

Close Of Escrow: 9/30/2016

Days On Market: 7

Sales Price: $4,300,000

Price/SF: $81.70

Year Built: 1972

PROPERTY NAME

MARKETING TEAM


COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


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SALES COMPARABLES

46845 MONROE STREET, INDIO, CA, 92201

NOTES This site is located by the heavily trafficked intersection of Monroe Street and Dr. Carreon Boulevard with immediate proximity to Highway 111, and is surrounded by national retail including In-N-Out Burger, Starbucks, Regal Cinemas, McDonalds, Carl' s Jr., Food 4 Less, and many others. Additionally, the property is across the street from key healthcare services including the 119-bed John F. Kennedy Hospital and Kaiser Permanente Medical Center. This location is also just north of Indian Palms Country Club and Resort, and the Coachella Valley Music and Arts Festival location.

46845 MONROE STREET

3

Close of Escrow 6/30/2016

Days On Market 134

Sales Price $4,606,000

Rentable SF 10,590

Price/SF $434.94

CAP Rate 5.75%

Year Built 1997

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COMPARABLE SHOPPING CENTERS

TOWN & COUNTRY SOUTH (SUBJECT)

81863 Doctor Carreon Blvd

81701 Highway 111

81953 US Highway 111

Desert Courtyards

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7

8

9

11

20

12

14

15

16

17

13

18

10

4

1

2

3

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PROPERTY NAME

MARKETING TEAM



TOWN & COUNTRY

81-577 DOCTOR CARREON BLVD., INDIO, CA, 92201

TOWN & COUNTRY


TOWN & COUNTRY


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MAJOR TENANTS

Lab Corp of America

Hair Phix

Time Warner Cable

Oasis Rehabilitaion

Total GLA Available SF Asking Rent/SF

37,230 SF 3,840 SF $12

YEAR BUILT: 1983

TOWN & COUNTRY 81-577 DOCTOR CARREON BLVD., INDIO, CA, 92201

YEAR BUILT: 2007


14,722 SF 1,293 SF $17

81863 DOCTOR CARREON BLVD 81863 DOCTOR CARREON BLVD, INDIO, CA, 92201

1

YEAR BUILT: 2000


8,000 SF 8,000 SF $18

81701 HIGHWAY 111 81701 HIGHWAY 111, INDIO, CA, 92201

2

PROPERTY NAME

MARKETING TEAM



81953 US HIGHWAY 111

81953 US HIGHWAY 111, INDIO, CA, 92201





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YEAR BUILT: 1996


4,668 SF 1,600 SF $15

81953 US HIGHWAY 111 81953 US HIGHWAY 111, INDIO, CA, 92201

3

YEAR BUILT: 208


6,900 SF 1,300 SF $17

DESERT COURTYARDS 46900 MONROE ST, INDIO, CA, 92201

4


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MARKET

OVERVIEW

MARKET OVERVIEW

Riverside-San Bernardino Counties

Market Highlights Strategic location Near LAX and Ontario International airports and ports in Long Beach and Los Angeles, Riverside-San

Bernardino has vast air, rail and interstate systems.

Dominant industrial market The metro is one of the nation’s leading industrial markets in terms of sales, construction and absorption.

Strong demographic trends Jobs, colleges, new home construction and more affordable housing will draw 372,600 new residents to

the Inland Empire by 2020.

Growing distribution market Many Fortune 500 companies have massive distribution centers in the area. Available land allows for

further development.

RIVERSIDE-SAN BERNARDINO

The Riverside-San Bernardino metro, also referred to as the Inland Empire, is a 28,000-square-mile region in Southern California composed of San Bernardino and Riverside counties. Valleys in the southwestern portion of the region, adjacent to Los Angeles, Orange County and San Diego County, are the most populous in the metro. These areas abut the San Bernardino and San Jacinto mountains, behind which lies the high desert area of Victorville/Barstow to the north and the low-desert Coachella, home of Palm Springs, to the east.

Geography


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MARKET OVERVIEW

Riverside-San Bernardino features three interstate freeways, I-10, I-215 and I-15, that form a triangle around one of the region’s core growth centers. Additionally, the completion of the 210 freeway extension made commuting to and from Rialto and San Bernardino considerably easier. The Riverside-San Bernardino metro has two major airports: Ontario International and Palm Springs International. The region also has a cargo-dedicated facility, the Southern California Logistics Airport, located just north of Victorville in the High Desert. Two rail lines serve Riverside-San Bernardino, and the region boasts one of the largest and most modern intermodal facilities in the nation. Amtrak provides passenger rail service, and MetroLink connects the area to Orange County and Los Angeles. Local transit agencies run bus service throughout the area.

Infrastructure

The Riverside-San Bernardino Metro is: 60 miles from Los Angeles 100 miles from San Diego 113 miles from Tijuana 400 miles from San Francisco

Airports Ontario International Palm Springs International 33 smaller airports

Major Roadways Interstates 10, 15 and 215 Highways 60, 71, 91 and 210

Rail Freight – BNSF and Union Pacific Passenger – Amtrak Commuter – MetroLink

The Riverside-San Bernardino metro contains a population of more than 4.4 million. The largest city is Riverside with 319,500 residents, followed by San Bernardino. Although population growth has slowed compared with the previous five years, the metro's population is still expected to increase by 1.3 percent annually through 2020, well above the national figure.

Metro

Largest Cities in Metro by Population Riverside 319,500

San Bernardino 216,700

Moreno Valley 204,500

Fontana 203,000

Rancho Cucamonga 171,700

Ontario 169,000

* Forecast Sources: Marcus & Millichap Research Services; U.S. Census Bureau; Experian



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MARKET OVERVIEW

The Riverside-San Bernardino metro has one of the largest economies in the United States. While the region’s economic expansion has been fueled by a number of factors, robust population growth has been the primary demand driver. High home prices throughout much of Southern California leave residents seeking more affordable options in the Inland Empire. The resulting increase in population will continue to heighten the need for housing, retail goods, personal services and government services. There has also been exceptional growth in wholesale trade and warehousing as the area is an important distribution hub for the Southwest. Riverside-San Bernardino is the premier location in the Los Angeles Basin for new distribution facilities. This is because of its large pool of experienced workers, relatively inexpensive land and highly efficient intermodal transportation system that reduces

the cost of both aggregating and distributing shipments. Amazon and Deckers have huge warehouses in the region, and growth in the distribution industry is expected to impact all other sectors. During the past year, the Riverside-San Bernardino metro recorded higher industrial absorption than most other industrial markets in the state. The distribution system also benefits two major cargo airports: Ontario International and the Southern California Logistics Airport in Victorville.

Economy

* Forecast Sources: Marcus & Millichap Research Services; Bureau of Economic Analysis; Moody's Analytics; U.S. Census Bureau; CoStar Group, Inc.



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MARKET OVERVIEW

The Riverside-San Bernardino metro employment base contains more than 1.3 million workers, and new jobs are projected to be generated at an annual average pace of 1.7 percent through the next five years, above the national growth rate of 1.3 percent. Traditionally, area residents who relocated from neighboring Los Angeles County or Orange County continued to commute to these markets for work. In recent years though, a rise in commercial development in the Inland Empire has generated more local jobs. As such, the job pool is becoming increasingly diverse, and many of the metro’s population-serving industries are growing. The metro’s infrastructure and proximity to the Los Angeles and Long Beach ports attract companies seeking West Coast distribution hubs. As a result, the trade, transportation and utilities sector accounts for 24 percent of all metro jobs. Given the prevalence of military installations and numerous cities and municipalities in the region, the government sector makes up another 17 percent of total employment and is poised to grow by 0.3 percent annually throughout 2020. Education and health services is another large sector, with 201,300 employees, equaling 15 percent of the workforce. Employment in this segment is expected to grow 3.9 percent annually during the coming five years. Construction will also expand at 3.9 percent annually in that time. Additionally, freeway improvements providing easier access to the eastern part of the metro and cities, including Moreno Valley, Palm Springs and Palm Desert, should promote healthy employment growth as companies move into these areas in the years ahead.

Labor

* Forecast Sources: Marcus & Millichap Research Services; BLS; Moody’s Analytics



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MARKET OVERVIEW

Government entities account for some of the largest employers in the region, including Fort Irwin and March Air Reserve Base. As the base downsized, unused land was transformed into the March Inland Port, a 350-acre aviation-based industrial business park. March Inland Port Airport is a public joint-use airport and its 13,000-foot runway is one of the longest runways on the West Coast. Another significant employer is Ontario International Airport. The facility provides thousands of jobs at the airport and more than 50,000 indirect, off-site positions. Strong growth will continue at the airport, given the limits to expansion placed on neighboring airports in Los Angeles and Orange counties. Major healthcare providers such as Loma Linda University Medical Center and Kaiser Permanente also provide a big portion of the region’s jobs. Demand for medical services is projected to rise rapidly in the coming years because of the area’s increasing population and the baby-boomer generation’s move into its retirement years. While Riverside-San Bernardino has a significant share of large employers, the majority of companies are small. This emphasis on small firms encourages innovation and flexibility and is positive for the area’s long-term outlook, as most of the growth taking place in the economy is occurring in the small-business sector.

Employers

Major Employers San Bernardino County

Riverside County

Stater Bros.

Loma Linda University Medical Center

Kaiser Permanente

Wal-Mart Stores Inc.

University of California, Riverside

Fort Irwin

Ontario International Airport

March Air Reserve Base

* Forecast Sources: Marcus & Millichap Research Services; BLS; Moody's Analytics; Experian



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MARKET OVERVIEW

The Riverside-San Bernardino metro consists of nearly 1.4 million households and more than 4.4 million residents, making it one of the largest metropolitan areas in the nation. While expansion will slow from earlier in the decade, the Inland Empire is still on pace to grow 1.3 percent per year during the next five years, above the national rate of 0.8 percent annually. This population gain is driving new housing construction. The majority of recent population growth in the area was due to in-migration rather than natural increases. Factors fueling in-migration include the strong local economy, relatively affordable housing, large parcels of developable land and a lack of available land in Los Angeles County. The median existing home price in Riverside-San Bernardino, at $299,700, also remains much lower than medians in adjacent counties, allowing 63 percent of households to afford to own their home. Residents are becoming more educated, as more than 50 percent of the metro’s adults have at least some college education, and almost 20 percent of those ages 25 and older have attained a bachelor’s degree or higher. Increasing education levels have helped to raise household earnings in the metro. The median household income rests at $56,100 per year, on par with the national median.

Demographics


* Forecast Sources: Marcus & Millichap Research Services; Moody's Analytics; U.S. Census Bureau


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MARKET OVERVIEW

Riverside-San Bernardino offers a diversity of landscapes, including the palm-tree-lined and pool-studded Coachella Valley, the mountain communities of Big Bear and Lake Arrowhead, the rolling hills and wineries of Temecula Valley and the suburban communities of the West San Bernardino Valley and Moreno Valley. A temperate climate offers moderate winters, warm summers and generally low humidity. One of the greatest draws of the metro is relatively affordable housing. The median home price in Riverside-San Bernardino is nearly 40 percent lower than in Los Angeles County and nearly 60 percent less than in Orange County. The Inland Empire provides a number of cultural opportunities, including the Riverside Metropolitan Museum, the Mission Inn Museum and the Museum of History and Art in Ontario. The California Theatre of Performing Arts in San Bernardino stages a number of performances through the year, as does the refurbished Fox Center for the Performing Arts. The Riverside County Philharmonic provides classical music concerts throughout the area. Shopping opportunities are plentiful no matter where you live in the metro, as are parks and golf courses. The region features an impressive offering of more than 20 college campuses, including nine community colleges, two California State University campuses and the University of California, Riverside.

* Forecast Sources: Marcus & Millichap Research Services; National Association of Realtors; Moody’s Analytics; U.S. Census Bureau

Quality of Life



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MARKET OVERVIEW

2016 Retail Forecast

Construction: Advancing retail sales and strong demographics will drive up construction this year. Builders are forecast to complete approximately 1 million square feet of retail space in 2016, after completing 721,000 square feet the previous year.

Vacancy: After increasing 10 basis points in 2015, the vacancy rate will drop 50 basis points this year to 8.9 percent as net absorption exceeds 1.6 million square feet of retail space.

Rents: As vacancy continues to tighten across the Inland Empire, the average asking rent will increase 1.9 percent in 2016 to $16.30 per square foot of retail space. In the previous annual period, asking rent inched up 0.8 percent.

Employment: After hiring 47,800 workers in 2015, Inland Empire employers are expected to create 43,000 jobs this year, expanding the employment base 3.1 percent. Many companies are planning to further expand in the metro, including UPS and Amazon.


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RIVERSIDE-SAN BERNARDINO METRO AREA

Climbing Retail Sales Draw Investors Inland

Strong demographics support retail sales; tenant demand tightens vacancy and boosts construction. A lower cost of living and the relatively close proximity to the employment hubs of Los Angeles and Orange County are spurring population growth in Riverside-San Bernardino and driving up retail sales. High home prices and climbing rents have also encouraged many households to move to the metro from other Southern California markets. In particular, millennials are flocking to the Inland Empire, comprising nearly 30 percent of the new growth as they seek out relatively affordable housing costs. This expanding consumer base has increased retail sales, sparking demand for retail space. As a result, builders have ramped up construction, focusing on necessity retailers as many fast-food establishments, drugstores and supermarkets break ground. The South Riverside area, specifically, is garnering interest from many national tenants. Wal-Mart, Marshalls and Rite Aid are among the many retailers leasing up available space. Despite a spike in construction this year, high absorption will improve vacancy and place upward pressure on rents.

Tightening operations and favorable demographic trends intensify the bidding environment. Strong market fundamentals are driving many California retail buyers who want to diversify their portfolios to the Inland Empire. Transaction velocity continues to surge in the metro, as investors snatch up a large majority of single-tenant properties with cap rates in the mid-5 percent range. In particular, fast-food chains and restaurants are growing in popularity, as evidenced by a rise in sales. These assets typically exchange hands at first-year yields between the high-4 and low-6 percent range. Additionally, several buyers are seeking to blend their portfolios with multi-tenant assets renting at or below market rates. However, limited listings will push some buyers to consider well-located, lower-occupied properties that can be filled with credit-worthy tenants for value-add opportunities. Overall, multi-tenant properties across the metro changed hands with average cap rates in the low-6 percent span, with assets in ideal locations trading up to 100 basis points less.

increase in total employment

1 million

3.1%

sq. ft. will be completed

basis point decrease in vacancy

50

1.9% increase in asking rents

MARKET OVERVIEW

Economy

Construction

* Forecast Sources: Marcus & Millichap Research Services; CoStar Group, Inc.

* Forecast Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; Economy.com


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Over the year ending in June, Inland Empire employers increased hiring by 3.3 percent with the addition of 44,000 jobs. This dropped the unemployment rate 80 basis points to 5.7 percent during the same time period. In the previous year, nearly 58,000 jobs were created.

Employment gains over the last four quarters were particularly strong in the construction sector, rising 5.1 percent with 4,400 jobs. The trade, transportation and utilities sector created the most jobs overall, increasing payrolls by 14,200 workers.

The growing employment base has driven up retail sales over the prior 12-month period. Average retail sales advanced 2.8 percent during this time, after jumping 5.2 percent the prior year.

Outlook: As companies continue to move and expand in the metro, the employment base will increase 3.1 percent this year as 43,000 jobs are created. In 2015, employers hired 47,800 workers.

In the last 12 months ending at midyear, developers completed more than 677,000 square feet of retail space. The majority of space was located in eastern San Bernardino and southern locations within Riverside. In the prior year, 687,000 square feet was constructed.

More than 400,000 square feet of retail space is currently underway with delivery dates scheduled through 2017. Approximately 60 percent of this development will be single-tenant assets in the Inland Empire East submarket.

One of the largest projects under construction is the Town Center Marketplace in the city of Menifee. The project will sit on 12 acres and contain about 90,000 square feet of retail space. Signed tenants include a Buffalo Wild Wings, Rubio’s and Sonic.

Outlook: High demand for retail space is expected to increase completions to 1 million square feet in 2016. The previous year, builders delivered nearly 721,000 square feet of retail space.

MARKET OVERVIEW

Vacancy

Rents

* Forecast Sources: Sources: Marcus & Millichap Research Services; CoStar Group, Inc.

* Forecast Sources: Marcus & Millichap Research Services; CoStar Group Inc.


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During the year ending in June, the vacancy rate for retail space fell 10 basis points to 9.2 percent as new space leased up. In the prior annual period, vacancy fell 30 basis points.

Assets in the western portion of San Bernardino and Riverside had vacancy in the high-6 percent range ending the second quarter of 2016. Retail properties near the Ontario International Airport registered vacancy in the high-5 percent area.

The vacancy rate for multi-tenant assets in the Inland Empire fell 10 basis points over the last four quarters to 9.8 percent. In the prior year, vacancy declined 40 basis points.

Outlook: Despite a rise in construction this year, the growing demand for retail space will trim the vacancy rate 50 basis points to 8.9 percent. In 2015, vacancy ticked up 10 basis point.

The average asking rent fell slightly, by 0.1 percent, during the last four quarters ending at midyear to $15.94 per square foot. During the previous year, asking rent inched up 0.3 percent.

Marketwide, asking rent was higher than average at the end of the second quarter of 2016 in the city of Riverside and within Coachella Valley. It stood in the high-$16 per square foot range. More affordable rents could be found in the eastern and northern parts of San Bernardino between $12 to $13 per square foot.

Over the last 12 months, average asking rent edged up 0.8 percent for single-tenant assets to $15.98 per square foot. On the other hand, rent for multi-tenant properties fell 2.2 percent to $15.83 per square foot.

Outlook: After the average rent nudged up 0.8 percent in 2015, tightening vacancy will further increase asking rent 1.9 percent this year to $16.30 per square foot.


MARKET OVERVIEW

Single-Tenant Sales Trends**

Multi-Tenant Sales Trends**

** Trailing 12-month period through 2Q Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics

** Trailing 12-month period through 2Q Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics


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Trading in multi-tenant assets increased by approximately 11 percent during the last 12 months as properties in Riverside gained popularity. In the previous year, transaction velocity rose 20 percent.

As more buyers snatched up multi-tenant assets during the last four quarters, the average price lifted 9 percent to $250 per square foot. Neighborhood centers were more affordable, averaging around $170 per square foot.

The average first-year yield compressed 60 basis points during the year ending in the second quarter to the low-6 percent range. Properties in Riverside and the western portion of San Bernardino traded with cap rates in the low- to high-5 percent range during the same time period.

Outlook: Many buyers from other Southern California metros will seek assets in the Inland Empire to further add yield to their portfolios as returns compress in their home markets.

Interest in single-tenant assets is growing in the Inland Empire as transaction velocity jumped more than 20 percent during the last four quarters ending at midyear. Nearly 50 percent of the sales occurred in the San Bernardino area. In the prior annual period, the number of transactions ticked up 5 percent.

Increased demand drove the average price up 9 percent over the last 12 months to $375 per square foot. Several fast-food establishments sold at prices double this average. Single-tenant properties within Riverside were more affordable, averaging around $320 per square foot.

First-year returns fell 40 basis points over the year ending in June to the high-5 percent range. Assets near the airport traded with cap rates in the mid-4 to low-5 percent range, while properties in Riverside and Coachella Valley changed hands with cap rates in the high-5 to low-6 percent span.

Outlook: Strong net absorption and an overall rise in rents will further entice single-tenant buyers to the Inland Empire. Demand will remain strong in fast-food chains and restaurant establishments.


MARKET OVERVIEW

Capital Markets

Local Highlights


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Global capital markets have remained stable over the past few weeks, even as Brexit and the continued devaluation of the Chinese yuan have induced bouts of volatility into stock and bond markets. Meanwhile, U.S. economic data has proved resilient, with increases in retail sales and steady hiring supporting a measured pace of growth. Additionally, higher bond prices have lowered prospective yields, boosting the appeal of commercial real estate.

As the current economic cycle has continued, retail vacancy descended to 5.8 percent by the end of the second quarter. A focus on net-leased construction for pre-leased tenants and mixed-use developments has limited development activity in relation to prior cycles, supporting robust increases in average asking rents. Builders will deliver 46 million square feet of retail space this year, with more than two-thirds of new supply slated as single-tenant structures. This environment will sponsor a fourth straight year of average asking rent growth, with advancement projected to exceed inflation over the same period.

Capital markets remain highly competitive, with a broad assortment of fixed-rate products available through commercial banks, life-insurance companies and CMBS lenders. Loans are generally offered at terms up to 10 years at maximum leverage of 65 to 75 percent. For 10-year terms, rates will typically reside in the high-3 to mid-4 percent range, depending on leverage and underwriting criteria. Floating bridge loans and financing for repositionings are typically underwritten with LTVs above 80 percent, while pricing at 300 basis points above Libor for recourse deals and extending to 470 basis points above Libor for non-recourse transactions.

The city of Moreno Valley has approved the construction of a large warehouse named The World Logistics Center. The 40 million-square-foot center will be one of the largest warehouse complexes in the United States. The World Logistics Center is forecast to bring nearly 20,000 jobs to the area and serve as a catalyst for new housing and retail construction.

Hiring continues to remain healthy across the Inland Empire. UPS has announced plans to add nearly 500 jobs to its location at the LA/Ontario International Airport over the next five years. The company recently completed construction on a 416,000-square-foot building to keep pace with the growing demand for e-commerce. Additionally, Amazon is planning on opening a new fulfilment center in the city of San Bernardino. This development will bring approximately 1,000 jobs to the area.

A new 50,000-square-foot shopping center is under construction in the area of Rancho Cucamonga in the Inland Empire West submarket. The development, named Epicentre Rancho Cucamonga, is expected to be delivered in the fourth quarter of 2016 and will be located at one of the busiest intersections in the community.

PROPERTY NAME

MARKETING TEAM


DEMOGRAPHICS

Source: © 2016 Experian

Created on March 2017

POPULATION 1 Miles 3 Miles 5 Miles 2021 Projection

Total Population 22,468 108,759 198,308 2016 Estimate

Total Population 21,324 96,354 174,866 2010 Census

Total Population 19,873 89,265 161,101 2000 Census

Total Population 16,939 61,858 106,859 Current Daytime Population

2016 Estimate 17,202 83,044 146,325 HOUSEHOLDS 1 Miles 3 Miles 5 Miles 2021 Projection

Total Households 6,931 32,983 62,889 2016 Estimate

Total Households 6,543 28,936 55,042 Average (Mean) Household Size 3.28 3.23 3.10

2010 Census Total Households 6,087 26,841 50,699

2000 Census Total Households 5,219 17,783 32,593

Occupied Units 2021 Projection 6,931 32,983 62,889 2016 Estimate 7,605 34,289 69,260

HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles 2016 Estimate

$150,000 or More 3.51% 7.18% 7.79% $100,000 - $149,000 9.08% 12.03% 12.65% $75,000 - $99,999 10.02% 11.49% 11.68% $50,000 - $74,999 20.69% 19.61% 19.07% $35,000 - $49,999 16.52% 13.59% 13.23% Under $35,000 38.99% 34.12% 33.48%

Average Household Income $60,699 $75,420 $78,995 Median Household Income $43,394 $52,765 $53,920 Per Capita Income $19,036 $22,843 $24,979

HOUSEHOLDS BY EXPENDITURE 1 Miles 3 Miles 5 Miles Total Average Household Retail Expenditure $61,157 $66,794 $67,148 Consumer Expenditure Top 10 Categories

Housing $19,421 $20,536 $20,668 Shelter $13,138 $13,576 $13,606 Transportation $9,565 $10,401 $10,440 Food $6,806 $7,209 $7,228 Personal Insurance and Pensions $5,059 $5,804 $5,828 Health Care $3,378 $4,000 $4,132 Utilities $3,190 $3,402 $3,418 Entertainment $2,305 $2,598 $2,643 Apparel $1,711 $1,755 $1,746 Household Furnishings and Equipment $1,307 $1,458 $1,474

POPULATION PROFILE 1 Miles 3 Miles 5 Miles Population By Age

2016 Estimate Total Population 21,324 96,354 174,866 Under 20 33.10% 31.65% 30.47% 20 to 34 Years 24.40% 20.99% 20.75% 35 to 39 Years 6.92% 6.44% 6.16% 40 to 49 Years 12.12% 12.26% 11.67% 50 to 64 Years 13.77% 15.35% 15.86% Age 65+ 9.67% 13.31% 15.11% Median Age 29.99 33.08 34.10

Population 25+ by Education Level 2016 Estimate Population Age 25+ 12,432 58,958 109,525 Elementary (0-8) 13.76% 11.75% 11.30% Some High School (9-11) 16.12% 14.48% 13.62% High School Graduate (12) 27.12% 25.66% 24.70% Some College (13-15) 22.88% 22.38% 22.84% Associate Degree Only 6.38% 6.42% 6.22% Bachelors Degree Only 7.00% 10.82% 12.34% Graduate Degree 4.23% 6.21% 6.94%

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Income In 2016, the median household income for your selected geography is $43,394, compare this to the US average which is currently $54,505. The median household income for your area has changed by 20.87% since 2000. It is estimated that the median household income in your area will be $51,154 five years from now, which represents a change of 17.88% from the current year. The current year per capita income in your area is $19,036, compare this to the US average, which is $29,962. The current year average household income in your area is $60,699, compare this to the US average which is $78,425.

Population In 2016, the population in your selected geography is 21,324. The population has changed by 25.89% since 2000. It is estimated that the population in your area will be 22,468.00 five years from now, which represents a change of 5.36% from the current year. The current population is 49.32% male and 50.68% female. The median age of the population in your area is 29.99, compare this to the US average which is 37.68. The population density in your area is 6,787.11 people per square mile.

Households There are currently 6,543 households in your selected geography. The number of households has changed by 25.37% since 2000. It is estimated that the number of households in your area will be 6,931 five years from now, which represents a change of 5.93% from the current year. The average household size in your area is 3.28 persons.

Employment In 2016, there are 5,678 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed that 43.85% of employees are employed in white-collar occupations in this geography, and 56.47% are employed in blue-collar occupations. In 2016, unemployment in this area is 6.90%. In 2000, the average time traveled to work was 22.00 minutes.

Race and Ethnicity The current year racial makeup of your selected area is as follows: 53.75% White, 3.09% Black, 0.03% Native American and 1.78% Asian/Pacific Islander. Compare these to US averages which are: 70.77% White, 12.80% Black, 0.19% Native American and 5.36% Asian/Pacific Islander. People of Hispanic origin are counted independently of race. People of Hispanic origin make up 80.10% of the current year population in your selected area. Compare this to the US average of 17.65%.

PROPERTY NAME

MARKETING TEAM


Housing The median housing value in your area was $185,615 in 2016, compare this to the US average of $187,181. In 2000, there were 2,632 owner occupied housing units in your area and there were 2,586 renter occupied housing units in your area. The median rent at the time was $543.

Source: © 2016 Experian

DEMOGRAPHICS

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OFFERING MEMORANDUM - LoopNet · 2017-07-26 · new homes. This includes Trilogy at The Polo Club...

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