644 broadway - Cypress Properties Group

644 BROADWAY
SAN FRANCISCO, CA
INVESTOR REPORT
08/31/13
985 Moraga Road, Suite 214
Lafayette, CA 94549
LEASING AND MARKETING
LEASING ACTIVITY
We have a signed Letter of Intent for the 1st and 2nd floor with China Live, LLC. The lease will be for 15
years. Rent for the 1st floor at $36.00 NNN per year is at proforma with annual increases. Rent for the 2nd
floor at $24.00 NNN is 20% above proforma. The following is an excerpt from the lessee’s website
describing the proposed business. “This will be a…ground-breaking concept for Chinese/Asian culinary arts.
Think of it as a Chinese 'Eataly', themed as an immense food emporium with live 'theatrical cooking
stations' that also serve food a la a haute food court. Upstairs, there will be a super fine-dining
establishment called Eight Tables by George Chen serving a seasonal multi-course prix fixe menu that will
be at the cutting edge of Chinese cuisine. As in the name, there will only 8 tables served each evening.”
Eataly is a successful high-end Italian themed food market and mall with locations in Italy, Japan, New York,
and soon Chicago. See Eataly.com. China Live is owned by George Chen, a successful restaurateur with
experience in San Francisco
(Shanghai 1930 and Betelnut) and Shanghai, China (Roosevelt Prime
9/1/2013
Steakhouse. See www.rooseveltsteakhouse.com) China Live has 90 days to finalize its business plan and
secure sufficient financing prior to executing a lease.
We have submitted a Letter of Intent to the San Francisco Film Society for the 3rd floor. The lease will be
for 7 years. Starting rent is below proforma, but fixed rental increases in years 2 and 3 take rent above
proforma, with annual increases thereafter. The San Francisco Film Society is a nonprofit arts
organization that presents year-round programs and events in film exhibition, media education and
filmmaker services, as well as presenting the acclaimed San Francisco Film Festival since 1957. The
following is an excerpt from the lessee’s website: “The scope of the Film Society’s work is virtually
unmatched nationwide. It annually presents more than 300 films and reaches 15,000 students through its
education program, while disbursing millions of dollars to deserving filmmakers.” One of their principal
interests at the project is the basement theater.
We continue to work with the Chinese Community Development Corporation to lease the 4th floor.
Other tenant interest includes an operator for the basement theater, and various tenants for upper floor
office.
MARKETING
Despite the good activity described above, our marketing campaign with our brokers at Cushman &
Wakefield goes into full swing after Labor Day. The 4th floor has been demo’ed and cleaned and looks
great. The 3rd floor demo will also be complete by then. As shown in the pictures in the Photo Section,
tenants can now readily imagine how their space may look. We’ve had sample single and multi-tenant floor
plans created to show how a floor can be utilized. The architect will also have renderings to show visual
concepts of a sample office space. We have had these sample layouts priced by our contractor to
demonstrate to prospective tenants what can be achieved with our tenant improvement allowance. We’ll
be holding a broker open house in early October to expose the property. We’ve installed a Leasing Banner
on the 1st floor windows that is both informative and much better looking than the prior dirty, filmed
windows. We’ve had numerous discussions with Larry Badiner who was the former Head of Planning for
San Francisco. The property sits in the Chinatown Community Business zoning district, and has some size
and use restrictions, of which we were aware. We’ve worked with Larry to understand these restrictions,
how they apply to our particular situation, and how best to navigate the “planning department” waters.
Our goal is to minimize time consuming planning review and hasten lease up of the project.
CONSTRUCTION AND OPERATIONS
CONSTRUCTION
- The demolition and removal of all existing improvements on the 4th floor has been completed, leaving a
clean, open space. We have retained only those improvements (i.e. main HVAC ducting and fire sprinkler
distribution) that may be reused. The demolition of the 3rd floor improvements commenced on August 20th
and should take two weeks to complete. The cost for this demolition is at or below proforma.
- We have prepared sample tenant layouts for marketing purposes.
- We are finalizing the calculation of all floor areas as a result of re-measuring the building.
- We are beginning the final design and cost out of all core and shell work on the tenant floors in advance
of commencing tenant improvement work once leases are signed.
- We have engaged a mechanical engineering firm to fully understand the existing mechanical systems
(HVAC, electrical, and plumbing), and to assist in the design of the replacement of the existing HVAC
system.
OPERATIONS
- We held an auction to sell as much of the remaining furniture and restaurant equipment as possible. It
was not as big a turnout as hoped for, but we made a little money and got rid of a lot of unusable stuff.
We also donated some items to neighborhood charities. All of this avoided the costs of simply paying
someone to haul it all away.
- We have hired a professional property management company to handle the day to day operational
chores at the project at our direction.
- All public services including utilities and fire and life safety monitoring services have been transferred to
the new ownership.
- We have completed a building-wide cleanup effort, cleaning bathrooms, stairwells, the theater and all
entries, and have a schedule for ongoing routine maintenance and cleaning. Have also insured that all
stairwell and emergency lighting is functional.
- We repaired a number of issues including the theater roll up door, theater sump pump, basement
sewage ejection pumps, and the freight elevator.
- We are removing all existing window film, and then pressure washing the front façade.
- We are removing all existing neon signage and Chinese characters on the front of the building.
- We are working with AT&T to bring fiber communications to the building.
PHOTOS
4th Floor Prior to Demo
9/1/2013
4th Floor During Demo
7/30/2013
4th Floor After Demo
8/15/2013
4th Floor After Demo
8/15/2013
3rd Floor Prior to Demo
3rd Floor After Demo
9/13/2013
FINANCIAL INFORMATION
Financial Performance Summary
Total Project Square Footage:
Percent Leased:
Summary of Year-To-Date
Operating Performance
YTD Actual
Revenue
$
37.42
Expenses
$
85,828.33
Net Operating Income: $
(85,790.91)
$
(144,150.18)
Debt Service
42,500
0.00%
Notes / Comments
Prepaid Other, Util Dep, Impound Accts
$
(77,455.63)
Loan payment due 9/1, paid 8/26, Impounds
A/P & Accrued Exp
$
113,269.07
Accounts payable, accrued property taxes & interest
Peferred Equity Payments
$
-
Leasing Costs
$
-
Capital Improvements
$
Owner Costs
$
Net Cash Flow Before Adjustments
$
(271,366.93)
Loan Fundings
PIK Interest Added to Principal
Expenses from above paid in escrow
Equity Refund for overpayment
$
$
$
$
477,980.70
44,992.30
12,160.97
(11,500.00)
Net Cash Flow
$
252,267.04
(77,239.28)
-
Cash From Escrow & Reserves
Cash Position & Reserves
Net Cash Position
Lender Reserves and/or Available Loan Funds
Cash $ 252,267.04
Tenant Receivables
Net A/P, Accruals & Prepaids
(35,813.44)
Prepaid Rents
Available Loan Funds (at right)
2,452,000.50
Net Available Cash $ 2,668,454.10
Leasing Holdback
Capital Improvement Holdback
$
$
1,500,000.00
952,000.50
Total Reserves and/or Loan Funds $
2,452,000.50
Loan Summary
Loan Description
Loan Commitment
Interest Terms
Current Interest Rate
Maturity Date
Loan Balance
Cohen Financial
$ 8,828,393.00
10% with a 6% payment rate and a 4% PIK Rate
10%
5/30/2016
$ 6,420,384.80
Notes/Comments
Loan Commitment includes a $1,500,000 Leasing Holdback and a $953,393 Capital Expenditure Holdback.
644 BROADWAY, LLC INVESTOR CAPITAL ACCOUNTS
CAPITAL
PREFERRED RETURN EARNED
INVESTORS
INVESTED
AND PAID
6/1/2013
For Preferred Return Only
8/31/2013
Funded
Prior Year
Revised
Preferred
Preferred
%
Capital
Preferred Return
Capital
Return
Return
Interest Investment
Undistributed
Total
Earned*
Distributed
Cypress Properties Group I, LLC
9.9%
306,000
306,000
6,866
Goldman Holdings Incorporated
32.4%
1,000,000
1,000,000
22,438
Joe K. Ling
16.2%
500,000
500,000
11,219
California Realty and Land, Inc.
2.6%
41,518
41,518
932
Lindberg Revocable Trust
16.2%
500,000
500,000
11,219
Gallagher Properties, Inc.
3.2%
100,000
100,000
2,244
Gallagher Family Living Trust
1.6%
50,000
50,000
1,122
Bruce B. Sconberg Testamentary Trust
3.2%
100,000
100,000
2,244
Rotticci Survivors Trust
3.2%
100,000
100,000
2,244
John Rotticci
3.2%
100,000
100,000
2,244
Jeffrey L. Mitchell
8.1%
250,000
250,000
5,610
Total 644 Broadway, LLC:
100.0%
3,047,518
3,047,518
68,381
CAPITAL
RETURNED
Preferred
Return
Outstanding
6,866
22,438
11,219
932
11,219
2,244
1,122
2,244
2,244
2,244
5,610
68,381
* NOTE: The Preferred Return Earned is calculated as follows:
9% Annual Preferred Return divided by 365 days, times the number of days since funding, times the amount of capital invested.
Capital
Current
Distributed Unreturned
To Date
Capital
306,000
1,000,000
500,000
41,518
500,000
100,000
50,000
100,000
100,000
100,000
250,000
3,047,518
TOTAL
OUTSTANDING
Unreturned
Capital plus
Preferred Return
Outstanding
312,866
1,022,438
511,219
42,450
511,219
102,244
51,122
102,244
102,244
102,244
255,610
3,115,899