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For sale 505 & 515 North Arrowhead Ave San Bernardino California 92401
Steve Economos Executive Vice President
+1 949 885 2911 [email protected]
License #01159994
Geoff DeWolf Senior Vice President
+1 949 885 2909 [email protected]
License #01319312 www.socalcommercialproperties.com
© 2015 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of Jones Lang LaSalle. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.
Summary and highlights..……………………….…………..3
Aerials and maps…………….....…………………..………..7
Sale comps……...…….....……………………...………….12
Inland Empire overview.……………………………………13
Table of contents
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Summ
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Property description Two office buildings totaling ±55,362s.f. located in historic downtown San Bernardino. Situated within walking distance of City Hall, the County government center, the 14-story State office building, and the new $350-million 12-story State courthouse. 505 N Arrowhead is five stories, elevator served, 39,904 square feet, and is 44% occupied. 515 N Arrowhead is two stories, elevator served, 15,458 square feet, and is vacant.
Property size ±55,362 square feet
Sale price / cap rate $2,735,000 (±$49 per square foot)
Current occupancy 44% occupied (blended occupancy of both buildings)
Current NOI (with only 44% occupancy) At just 44% occupancy, the Net Operating Income is still positive at $28,779
Pro forma cap rate (filling the vacant building) 10.3% pro forma cap rate by stabilizing the building at 90% occupancy at a low rate of just $0.85/sf FSG
Year built 1959 (515 N Arrowhead) and 1961 (505 N Arrowhead)
Parking / Acreage Estimated 3.3 stalls per 1,000 square feet – all surface stalls / 2.51 acres
Property summary
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Property highlights
Inland Empire job & population growth. San Bernardino and salaries continue to grow in San Bernardino’s key industry areas. According to Forbes Magazine’s “2013 Best Places for Business,” San Bernardino ranked above Los Angeles in terms of job growth and was ranked in the top 25% of all metro areas compared to 2012-2013 year. Over the last eight years, 10,000 jobs have been added within a five-mile radius of the Downtown San Bernardino area, attracting employers such as Amazon, Hewett-Packard, Michelin, Kohl’s, Pep Boys, Mattel, and Stater Bros. Markets. As of 2014, San Bernardino’s population is 2,156,651 people. Since 2000, the county has seen a population growth of 7.34%. Over the longer-term forecast, the Inland Empire will experience greater growth than the coastal counties, due largely to the availability of land at a lower cost. Between 2011 and 2016, the population is expected to increase by 13.4%. The population growth rate is much higher than the state’s average of 9.99% and the national average rate of 9.71%. Immediate upside in filling vacancy. At just 44% occupancy the in-place Net Operating Income is still positive at $28,779. If we assume that the building is stabilized at 90% occupancy at a very reasonable lease rate of $0.85/sf FSG (for 25,541 sf of vacant space), this translates into a pro forma cap rate of 10.3%.
Historic Downtown Location. 505 & 515 N Arrowhead Ave is located in the core of San Bernardino’s downtown. Downtown is home to City Hall, the County government center, the 14-story State office building, and the new $350-million 12-story State courthouse. 15,000 – 20,000 people work downtown every day! Additionally, downtown is home to the legendary California Theatre of Performing Arts, built in 1928 and the site of Will Rogers final stage appearance. Next door to the California Theater is Regal Entertainment Group’s new 14-screen state-of-the-art cinema complex that is now among the top 100 performing cinemas in the company’s worldwide chain. Numerous restaurants and banks are within walking distance including the 5,000-seat San Manuel Stadium, home of professional baseball’s Inland Empire 66ers. Additional nearby attractions include the San Manuel Amphitheater just 13 miles away and Lake Arrowhead and Big Bear Lake are just 25 miles and 41 miles away, respectively. Dynamic New Downtown Projects. Over the next few years, downtown San Bernardino will experience an unprecedented boost by three dynamic major projects. The first is the redevelopment of the nearby 43-acre Carousel Mall, a city owned project currently being marketed to developers across the nation. The second is the San Bernardino Regional Transit Center (SB Transit Center). Likely to be completed within 18 months, the $128-million SB Transit Center will provide multi-modal access to the downtown area through both local and regional public transit systems. Lastly, Loma Linda University’s exciting Gateway College. is the nation’s first program where medical school professors, doctors, high school students and high school grads will interact in a real-world clinic treating patients. This cutting-edge program will bring some of the brightest minds in the region to downtown San Bernardino.
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Financial highlights – NOI still positive at just 44% occupancy
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$304,104 Gross Income for 24,285 sf (44%) of occupancy ($25,342 current rent annualized)($27,264) Maintenance (first half of 2015 annualized)($16,250) Repair (first half of 2015 annualized)($20,400) Janitorial Expenses (first half of 2015 annualized)($5,006) Elevator Inspection & Repair (first half of 2015 annualized)($3,634) Telephone (first half of 2015 annualized)($4,440) Gardening (first half of 2015 annualized)($352) Locksmith (first half of 2015 annualized)
($9,123) Management Fee (based on a market-standard 3% of Gross Income Estimate)($8,814) Security Services (first half of 2015 annualized)($11,808) Insurance Expenses (first half of 2015 annualized)
($829) Pest Control (first half of 2015 annualized)($4,614) Gas (first half of 2015 annualized)
($119,168) Water and Power (from 2014 - captures the whole year including summer)($4,397) Legal & Professional (first half of 2015 annualized)($3,400) CA State Income Tax (first half of 2015 annualized)
($35,826) Property Taxes ($2,735,000 price and tax rate of 1.3099%)
$28,779 Net Operating Income
$2,735,000 Price$49 Per Square Foot
Financial highlights – 10.3% pro forma cap rate for a stabilized building at 90% occupancy
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$304,104 Gross Income for 24,285 sf (44%) of occupancy ($25,342 current rent annualized)$260,518 Pro Forma Income (25,541 sf leased - stabilizing the asset at 90% - at only $0.85/sf)($27,264) Maintenance (first half of 2015 annualized)($16,250) Repair (first half of 2015 annualized)($20,400) Janitorial Expenses (first half of 2015 annualized)($5,006) Elevator Inspection & Repair (first half of 2015 annualized)($3,634) Telephone (first half of 2015 annualized)($4,440) Gardening (first half of 2015 annualized)($352) Locksmith (first half of 2015 annualized)
($16,939) Management Fee (based on a market-standard 3% of Income Estimate)($8,814) Security Services (first half of 2015 annualized)($11,808) Insurance Expenses (first half of 2015 annualized)
($829) Pest Control (first half of 2015 annualized)($4,614) Gas (first half of 2015 annualized)
($119,168) Water and Power (from 2014 - captures the whole year including summer)($4,397) Legal & Professional (first half of 2015 annualized)($3,400) CA State Income Tax (first half of 2015 annualized)
($35,826) Property Taxes ($2,735,000 price and tax rate of 1.3099%)
$281,481 Pro Forma Net Operating Income
$2,735,000 Price$49 Per Square Foot
10.3% Pro Forma Cap Rate
Aeria
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Future Loma Linda “Gateway College”
505 - 515 N Arrowhead Ave
San Bernardino
215 Carouse Mall
SB Transit Center
San Manuel Stadium
Secombe Lake
5th Street
7th Street
6th Street
W 4th Street
W 3rd Street
N Waterm
an Avenue
N Mountain View Avenue
N Sierra Way
N Rialto Avenue
W 2nd Street
N E Street
N Arrowhead Avenue
N D Street
N G Street
N H Street
City Hall
State of California District Offices Regal San
Bernardino Stadium 14 & RPX
State of California Employment Development Dept.
San Bernardino County Courts
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San Bernardino Int. Airport
Downtown San Bernardino
505 - 515 N Arrowhead Ave
San Bernardino
60
79
66
215
210
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Downtown Riverside
Lake Arrowhead
Big Bear Lake
Aeria
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Lodging
1. All Star Lodge 2. First Hotel International 3. Leisure Inn & Suites
Banks
1. Wells Fargo 2. Chase 3. Bank of America
Dining
1. Tempe House 2. Jack in the Box 3. Amapola Rico Taco 4. Las Conchitas Restaurant 5. Subway 6. In-N-Out Burger
Amenities map
Attractions
1. Carousel Mall 2. San Bernardino Metrolink 3. San Manuel Stadium
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4
1 2
3
1
3
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505 - 515 N Arrowhead Ave
San Bernardino
5 6 5th Street
7th Street
6th Street
W 3rd Street
N Waterm
an Avenue
N Sierra Way
N Sierra Way
N Rialto Avenue
W 2nd Street N E Street
N Arrowhead Avenue
N D Street
N G Street
N H Street
Aeria
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Aeria
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Parcel map
Subject Property
Office building 568 N. Mountain View Avenue
Apartments 149 W. 6th Street
Office building 555-599 N. Arrowhead Avenue
Donna Villa Apartments 246 5th Street
Office building 524 N. Mountain View Avenue
505 N. Arrowhead Avenue
515 N. Arrowhead Avenue
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Address
505 & 515 N Arrowhead Ave, San Bernardino
Building parcel numbers / acres
135-091-60 / 0.3214 135-091-57 / 0.6772
Parking parcel numbers / acres*
135-091-26 / 0.3788 135-091-58 / 0.3444 135-091-65 / 0.2342 135-091-46 / 0.551
Total acres 2.51
Parcel map
Aeria
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505 N Arrowhead Ave APN: 135-091-60 Acres: 0.3214
515 N Arrowhead Ave APN: 135-091-57 Acres: 0.6772
Parking APN: 135-091-46 Acres: 0.551
Parking APN: 135-091-58 Acres: 0.3444
Parking APN: 135-091-26 Acres: 0.3788
Parking APN: 135-091-65 Acres: 0.2342
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Sale comps
Sale
Comp
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Property Sale Date Size Price
PSF Jones Lang LaSalle market / deal insight
330 N D Street San Bernardino
Nov 2014 49,300 s.f.
$3,950,000 $80
This asset was 65% occupied at the time of sale and traded at a reported 7.30% pro forma cap rate.
By comparsion, 505-515 N Arrowhead has a pro forma cap rate of
10.3% so is clearly priced to sell.
230-280 N Riverside Ave
Rialto
Mar 2015 15,624 s.f.
$1,050,000 $67
This asset sold 93% occupied for a cap rate of 8.4%.
With a pro forma cap rate of 10.3%, 505-515 N Arrowhead is a strong value.
Inland Empire overview
Fox Theatre
Demographics 2015 Inland Empire California
2015 Population 4,394,256 37,905,036
2015 Households 1,342,690 12,770,627
2015 Median Household Income $54,127 $61,094
Household Income $100K+ 24% 28.2%
2014 Housing – Owner Occupied 43.6% 55.9%
College Degree or Above 19.6% 38%
Median Age 35.9 35.4
The Inland Empire is home to over 4 million people and is recognized by the U.S. Census Bureau as the 13th most populous metropolitan area in the United States, and the third post populous in the State of California.
City Hall Inl
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Inlan
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Employment
Since 2011, the unemployment rate in the Inland Empire has been steadily declining. Between August and September 2014, local government added 3,300 jobs. Trade, transportation, and utilities were the largest contributor to job growth over the course of the 2013-2014 year, with 9,800 new jobs added.
Source: Orange County Business Journal Book of Lists
Top 5 private companies in Riverside & San Bernardino Counties
Company Employment Revenue
Slater Bros Holdings, Inc 6,902 $3,610,000
Prime Health Care Services 2,500 $5,600,000
Esri (Environmental Systems Research Institution) 1,950 $794,000,000
Epic Management, L.P. 1,183 $104,600,000
Riverside Medical Clinic 840 $63,600,000
From 2012 - 2017, the annual employment growth rate is expected to average 2.3%, while average salaries are forecasted to increase 0.4% per year.
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Lake Arrowhead
Regal San Bernardino Stadium 14 & RPX
California Theatre of Performing Arts
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*Data in the chart above is from Q2 2015
11.0% Total vacancy
62,426 YTD net absorption (s.f.)
1.4% Q1 – Q2 rent growth
373,439 Total under construction (s.f.)
Inland Empire office insight
Rent growth remains steady
At the end of the second quarter, vacancy rates in the Inland Empire were at 11.0%. As of Q2 2015, the largest lease signings included a 29,150 square foot lease signed by AirMethods, 25,631 square feet signed by York Risk Services, and 12,393 square
Local economy has continued to grow stronger
The Inland Empire witnessed an unprecedented amount of leasing volume in 2013 and 2014 and continues to ride the wave of positive momentum. Year-to-date net absorption figures from the fourth
quarter of 2014 were at 272,567 million square feet, which is a 0.8% increase from the previous quarter. These incremental increases indicate continued growth in the year ahead of us.
feet signed by the County of San Bernardino. Average quoted asking rental rates for available office space in Q2 experienced a 1.4% increase from Q1.
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Inland Empire office insight
Total vacancy rate
7.9% 6.9% 7.3%
10.3%
15.2% 16.2%
15.6% 14.6%
13.7% 12.3% 12.0% 11.9% 11.5% 11.2% 10.9% 11.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20141q
20142q
20143q
20144q
20151q
20152q
Vacancy rates
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$20.41 $21.79 $23.88 $25.21 $23.86
$21.70 $21.09 $19.41 $18.41 $18.92 $18.72 $18.81 $18.87 $19.53 $19.34 $19.62
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20141q
20142q
20143q
20144q
20151q
20152q
Direct average asking rate ($/psf)
(500,000)
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
1q
2014
2q
2014
3q
2014
4q
2015
1q
2015
2q
Total net absorption (s.f.) Inland Empire office insight
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JLL 4 Park Plaza Suite 900 Irvine California 92614 tel +1 949 885 2900 fax +1 949 885 2901 jll.com/orange-county
Steve Economos Executive Vice President tel +1 949 885 2911 mobile +1 949 466 4882 [email protected] Lic #: 01159994
Geoffrey S. DeWolf, LEED AP Senior Vice President tel +1 949 885 2909 mobile +1 949 500 6654 [email protected] Lic #: 01319312
