KinderCare Learnings Centers Inc

Transcription

KinderCare Learnings
Centers Inc
GLENDALE, AZ
OFFERING MEMORANDUM
GLENDALE, AZ
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.
NON-ENDORSEMENT NOTICE
Marcus & Millichap Real Estate Investment Services, Inc. (“M&M”) 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 M&M, its affiliates or
subsidiaries, or any agent, product, service, or commercial listing of M&M, 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.
GLENDALE, AZ
NET LEASED DISCLAIMER
Marcus & Millichap hereby advises all prospective purchasers of Net Leased property as follows:
The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable.
However, Marcus & Millichap has not and will not verify any of this information, nor has Marcus & Millichap
conducted any investigation regarding these matters. Marcus & Millichap makes no guarantee, warranty or
representation whatsoever about the accuracy or completeness of any information provided.
As the Buyer of a net leased property, it is the Buyer’s responsibility to independently confirm the accuracy and
completeness of all material information before completing any purchase. This Marketing Brochure is not a substitute
for your thorough due diligence investigation of this investment opportunity. Marcus & Millichap expressly denies
any obligation to conduct a due diligence examination of this Property for Buyer.
Any projections, opinions, assumptions or estimates used in this Marketing Brochure are for example only and do not
represent the current or future performance of this property. The value of a net leased property to you depends on
factors that should be evaluated by you and your tax, financial and legal advisors.
Buyer and Buyer’s tax, financial, legal, and construction advisors should conduct a careful, independent investigation of
any net leased property to determine to your satisfaction with the suitability of the property for your needs.
Like all real estate investments, this investment carries significant risks. Buyer and Buyer’s legal and financial advisors
must request and carefully review all legal and financial documents related to the property and tenant. While the
tenant’s past performance at this or other locations is an important consideration, it is not a guarantee of future success.
Similarly, the lease rate for some properties, including newly-constructed facilities or newly-acquired locations, may be
set based on a tenant’s projected sales with little or no record of actual performance, or comparable rents for the area.
Returns are not guaranteed; the tenant and any guarantors may fail to pay the lease rent or property taxes, or may fail
to comply with other material terms of the lease; cash flow may be interrupted in part or in whole due to market,
economic, environmental or other conditions. Regardless of tenant history and lease guarantees, Buyer is responsible
for conducting his/her own investigation of all matters affecting the intrinsic value of the property and the value of any
long-term lease, including the likelihood of locating a replacement tenant if the current tenant should default or
abandon the property, and the lease terms that Buyer may be able to negotiate with a potential replacement tenant
considering the location of the property, and Buyer’s legal ability to make alternate use of the property.
By accepting this Marketing Brochure you agree to release Marcus & Millichap Real Estate Investment Services
and hold it harmless from any kind of claim, cost, expense, or liability arising out of your investigation and/or
purchase of this net leased property.
TABLE OF CONTENTS
Section 1
PRICING AND FINANCIAL ANALYSIS
Section 2
PROPERTY DESCRIPTION
Section 3
RECENT SALES
Section 4
MARKET OVERVIEW
Section 5
DEMOGRAPHIC ANALYSIS
GLENDALE, AZ
GLENDALE, AZ
FINANCING
Existing Financing
Loan Type
This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to
the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any
inaccuracies. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2014 V0120483 Marcus &
Millichap. All rights reserved.
Free and Clear
1
GLENDALE, AZ
FINANCIAL OVERVIEW
Location
Annualized Operating Data
20245 North 67th Avenue
Glendale, AZ 85308
Rent Increases
Price
Down Payment
Rentable Square Feet
Price/SF
$2,395,200
100% / $2,395,200
Annual Rent
Monthly Rent
Current
$197,600.00
$16,466.67
Option 1
$221,312.00
$18,442.67
Option 2
$247,869.00
$20,655.75
10,400
$230.31
CAP Rate
8.25%
Year Built
1995
Lot Size
1.38 Acres
Type of Ownership
Fee Simple
Base Rent ($19.00/SF)
$197,600
Net Operating Income
$197,600
Total Return
8.25% / $197,600
Tenant Summary
Tenant Trade Name
Ownership
Tenant
Lease Guarantor
Lease Type
Roof and Structure
Lease Term
KinderCare
Private
Corporate Store
Corporate Guarantee
Absolute Net
Tenant Responsible
Five Years
Lease Commencement Date
07/01/2014
Rent Commencement Date
07/01/2014
Lease Expiration Date
06/30/2019
Term Remaining on Lease
5.3 Years
Increases
Option Periods
Options
Two Five-Year
FILE PHOTO
The Tenant has occupied the site since the early 1990’s, to which the original lease was scheduled to expire June 2014. Tenant has extended the lease for five years, commencing July 2014, with two five‐year options remaining thereafter.
2
GLENDALE, AZ
TENANT OVERVIEW
Property Name
Property Address
Glendale, AZ 85308
Property Type
Tenant Trade Name
Ownership
Tenant
Net Leased Child Care
10,400
KinderCare
Private
Corporate Store
Sales Volume
Est $1.45 Billion 2013
Lease Guarantor
Corporate Guarantee
Lease Commencement Date
07/01/2014
Rent Commencement Date
07/01/2014
Lease Expiration Date
06/30/2019
Term Remaining on Lease
Lease Type
Roof and Structure
Lease Term
5.3 Years
Absolute Net
Tenant Responsible
Five Years
Increases
Option Periods
Options to Renew
Two Five-Year
No. of Locations
Headquartered
Web Site
Years in the Business
Other Concepts Owned
1,980+
Portland, OR
www.KinderCare.com
40+
Knowledge Learning Corporation
In 2005, KinderCare was acquired by Knowledge Learning Corporation, a subsidiary of Knowledge Universe that concentrates on early childhood
learning and development. Following the merge, the companies now combine for a total of 1,980 childcare centers, 461 before and afterschool
programs, and 134 employer-sponsored childcare centers in 39 states including the District of Columbia. Together The National Association for the
Education of Young Children and other prestigious associations have accredited more KinderCare Learning Centers than any other private
provider. Accreditation is awarded only to high quality early childhood programs reviewed by a national commission.
3
GLENDALE, AZ
GLENDALE, AZ
INVESTMENT OVERVIEW
Investment Highlights
■ Located as an Outpad to a Safeway-Anchored Shopping Center
■ Surrounded by Dense Population of SIngle Family Residences
■ Located Directly Adjacent to a Starbucks
■ More than Six Elementary Schools are Located Within One Mile of
the Site
■ Affluent Neighborhood Where Average Household Income
Exceeds $100,000
■ Growing Region Where Population has Expanded by 20 Percent
Since 2000
KinderCare is surrounded by several densely-populated master planned communities and larger apartment complexes
at the corner of West Arrowhead Loop Road and North 67th Avenue in Glendale, Arizona, a suburb of Phoenix.
The site shares a driveway with a Safeway-anchored shopping center which has several points of ingress and egress for
ease of access from both Arrowhead Loop Road, North 67th Avenue, and the back entrance from West Beardsley Road.
Other retail in the immediate area includes Starbucks (directly adjacent to the site), McDonald's with a PlayGym,
Blockbuster Video, an AllState Insurance office, Bank of America, an Optical Site, Dunkin Donuts, Gymboree, Athena
Day Spa, and a gas station.
Just beyond the 101, which is less than one mile south of the site, are several other retail areas which are home to
Burger King, Paradise Bakery, Pei Wei Chinese, HFF Fine Foods, Chico's, and Compass Bank.
There are also six elementary schools within a one-mile radius of the site, which serve as feeders into the KinderCare for
after school childcare.
5
GLENDALE, AZ
PROPERTY SUMMARY
The Offering
Property
Property Address
Glendale, AZ 85308
Site Description
Year Built
1995
10,400
Lot Size
1.38 Acres
Type of Ownership
Fee Simple
6
GLENDALE, AZ
AREA MAPS
Local Map
Regional Map
7
This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are
approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2014 V0120483 Marcus &
AERIAL PHOTO
GLENDALE, AZ
8
RECENT SALES
GLENDALE, AZ
RECENT SALES
GLENDALE, AZ
RECENT SALES MAP
1)
2)
3)
KinderCare - Vancouver, WA
KinderCare - Woodbridge, VA
KinderCare - Plymouth, MN
10
RECENT SALES
GLENDALE, AZ
CAP RATE AND PRICE PER SQUARE FOOT
Average Cap Rate
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Subject
KinderCare
Vancouver,
WA
KinderCare
Woodbridge,
VA
KinderCare
Plymouth,
MN
Average Price per Square Foot
360.00
330.00
300.00
270.00
240.00
210.00
180.00
150.00
120.00
90.00
60.00
30.00
0.00
Subject
KinderCare
Vancouver,
WA
KinderCare
Woodbridge,
VA
KinderCare
Plymouth,
MN
11
RECENT SALES
GLENDALE, AZ
RECENT SALES
Glendale, AZ 85308
Rentable Square Feet:
10,400
Sales Price:
$2,395,200
Year Built:
1995
Down Payment:
$2,395,200
CAP Rate:
8.25%
Price/SF:
$230.31
Subject Property
KinderCare - Vancouver, WA
1
622 Southeast 117th Avenue
Vancouver, WA 98683
Close of Escrow:
03/14/2013
Sales Price:
$1,475,000
Rentable SF:
5,609
Down Payment:
100%
Year Built:
1984
CAP Rate:
7.50%
Price/SF:
$262.97
KinderCare - Woodbridge, VA
2
14050 Central Road
Woodbridge, VA 22193
Close of Escrow:
06/26/2013
Sales Price:
$3,233,300
Rentable SF:
9,963
Down Payment:
28%
Year Built:
2000
CAP Rate:
6.83%
Price/SF:
$324.53
Comments
Financing was obtained through Essex Bank.
12
RECENT SALES
GLENDALE, AZ
RECENT SALES
KinderCare - Plymouth, MN
3
15755 Rockford Road
Plymouth, MN 55446
Close of Escrow:
On Market
Sales Price:
$3,641,894
Rentable SF:
10,313
Down Payment:
100%
Year Built:
1998
CAP Rate:
8.00%
Price/SF:
$353.14
Comments
Double-net lease, has been on the market 235 days as of 3/31/2014.
13
MARKET OVERVIEW
GLENDALE, AZ
MARKET OVERVIEW
GLENDALE, AZ
PHOENIX
Market Highlights
Employment growth
■ Job increases will average more than 3 percent
annually over the next five years.
Large high-tech manufacturing base
■ Intel Corp., Motorola Inc., Honeywell and
others have large Phoenix operations.
Active tourism industry
■ Warm winters and amenities including golf
courses and resorts attract vacationers.
Geography
The Phoenix metro is hemmed in by mountains to the north and east. American Indian reservations to the east
and south limit development in those directions, leaving the southeastern corridor and western half of the metro as
the primary growth areas. The majority of land is flat or smoothly sloping, with a clay-loam base, making
development relatively easy. The area's climate is arid with hot summers and mild winters.
Phoenix-Mesa-Glendale Metro
15
MARKET OVERVIEW
GLENDALE, AZ
PHOENIX
Metro
The Phoenix metro is located within both Maricopa
and Pinal counties, and includes over 30 incorporated
and more than 30 unincorporated towns and cities.
Over the past decade, the population in the Phoenix
metro increased by more than 45 percent. The largest
city is Phoenix which encompasses around 520 square
miles, is the capital city and boasts a population of
nearly 1.5 million.
Infrastructure
During the past decade, substantial investments were
Largest Cities: Phoenix MSA
Phoenix
1,483,000
made to the metro's freeway system to accommodate
Mesa
452,800
rapid growth. Controlled access roads, such as Loops
Chandler
244,500
101 and 202 provide easy travel around the Valley.
Glendale
232,200
Scottsdale
224,400
Gilbert
214,800
Interstates are a significant factor for many distribution
and transportation operations in the metro. Interstate 10
is a major trucking route directly connecting the area to
Los Angeles and the Southeast.
The newest transportation system is the $1.4 billion
METRO light rail. The 20-mile starter segment travels
through Phoenix, Tempe and into Mesa. Future
extensions are planned for these cities and Glendale.
METRO has generated retail, residential and office
developments along the route. The PHX Sky Train will
begin to carry passengers from METRO to Phoenix Sky
2012 Estimate
Sources: Marcus & Millichap Research Services, Experian
Airports
■ Phoenix Sky Harbor International Airport
■ Phoenix-Mesa Gateway Airport
■ 11 smaller airports
Major Roadways
■ Interstates 10 and 17
■ Loop 101, Loop 202, U.S. 60, SR-51, SR-143
Rail
■ Freight - Union Pacific, BNSF
■ Commuter - METRO light rail
Harbor International Airport this year.
The Burlington Northern Santa Fe and Union Pacific
railroads provide freight rail service to the Valley.
The Phoenix MSA is:
■ 115 miles from Tucson
■ 350 miles from San Diego
■ 370 miles from Los Angeles
■ 1,060 miles from Dallas
16
MARKET OVERVIEW
GLENDALE, AZ
PHOENIX
Economy
As one of the primary beneficiaries of the massive shift
in the U.S. population from north to south, Phoenix
has had little difficulty finding workers; the challenge,
though, is attracting high-paying jobs. Phoenix claims
six Fortune 500 headquarters including: FreeportMcMoRan Copper and Gold, Republic Services,
Avnet,
PetSmart,
and
US
Airways
Group.
Construction, high-tech manufacturing, healthcare
and tourism dominate the Phoenix economy. The
local economy has strengthened since the recession,
with retail sales projected above 5 percent this year
and hotel occupancy levels rising.
High-tech manufacturing has been a powerful driver
in the local economy for two decades. The region’s
relatively low cost of doing business has encouraged
several manufacturers to remain and expand in the
area, while attracting others.
Healthcare is also a critical industry to the Phoenix
economy, with around 20 hospitals and a major
medical research center located in the metro. Also, a
new cancer center is under way at the Mayo Clinic.
Although the economic downturn slowed retail sales
and construction, the weaker dollar increased the
attractiveness of the Valley to foreign tourists and
investors. Home sales to international buyers remain
strong and new home starts are rising.
17
GLENDALE, AZ
MARKET OVERVIEW
PHOENIX
Labor
With approximately 1.8 million employees, the local labor force is one of the largest in the nation. Three trends
have supported growth over the past decade: significant expansion among high-tech industries, the aging
population and the nation’s north-to-south migration.
Phoenix’s high-tech manufacturing sector gained strength with the arrival of Motorola and Intel in the 1970s and
1980s. High-tech manufacturing employment grew from 25,000 employees in 1970 to more than 65,000 workers
at its peak at the end of 2000. The highly skilled positions offered by these companies have attracted educated
workers to the area, pushing up household income levels.
As the baby boomer generation ages into retirement, the number of "snowbirds" and vacationers to the Valley will
increase. Consequently, demand will grow for construction, leisure services, healthcare employees and retail
workers to build and service the rising number of resorts and second homes.
The long-term migration trend in the nation from north to south has been a boon for Phoenix. Workers are
drawn to the region’s favorable winter climate and relatively low cost of living. Employers, too, have taken
advantage of the metro’s lower costs by locating a large number of back-office/support centers in the area.
Although many employment sectors in Phoenix have contracted during the recession, all industries are forecast to
expand in the next five years. The education and health services sector is expected to lead growth.
18
MARKET OVERVIEW
GLENDALE, AZ
PHOENIX
Employers
Phoenix has evolved from a tourism- and resource-based
market to a major center of high-tech manufacturing and
a regional base for customer service, distribution and
professional services. While the metro has its share of
large employers, small employers provide the majority of
jobs. The resulting diversification reduces work force
volatility and encourages innovation.
The trade, transportation and utilities sector claims the
largest share of employees at 20 percent. Sky Harbor
Airport accounts for a large portion of these workers as
Major Employers
does US Airways which is based locally. The professional
and business services sector employs 16 percent. Included
in this sector are the many data center operations
throughout the valley, such as Google and eBay.
Walmart Stores Inc.
Banner Health
Raytheon
Arizona State University
Wells Fargo
Education and healthcare also have major presences in the
Valley, with 15 percent of jobs. Phoenix is home to
Banner Health, one of the largest nonprofit healthcare
systems in the country, with 20 hospitals, including eight
Intel Corp.
State of Arizona
Apollo Group
City of Phoenix
Bank of America
in Phoenix. In addition, the Mayo Clinic has a medical
research center in Scottsdale. Education employers
include Arizona State University and Apollo Group, a
for-profit education company.
With the state capital located in Phoenix and Luke Air
Force Base in the West Valley, 13 percent of employment
is in government. Employment in this sector will increase
2.7 percent annually over the coming five years.
19
MARKET OVERVIEW
GLENDALE, AZ
PHOENIX
Demographics
The Phoenix metropolitan area displayed exceptional
population growth over the past decade, posting an
annual expansion rate of 2.6 percent. At over 4.3
million inhabitants, the area ranks among the nation’s
most populated metros. The bulk of expansion comes
from net migration as opposed to natural increases.
Over the next five years, the Valley's annual
population growth will slow to 1.6 percent as the
economy and housing sector strengthen.
The median household income in the Phoenix metro
is reported at $56,900 per year, slightly higher than
the national average. Housing prices in the area have
fallen due to a soft housing market, plunging at an
annual rate of 10.9 percent in the past five years.
Falling
home
prices
will
boost
the
rate
of
homeownership, which is currently at 53.8 percent. As
the economy improves, both the median home price
and median income level are expected to rise around 4
percent annually during the next five years.
Though many retirees live or vacation in the metro,
the median age of 35.1 years is actually lower than the
national median of 37.5 years. This is partly due to a
larger household size and job growth, which has
attracted younger residents to the Valley.
20
GLENDALE, AZ
MARKET OVERVIEW
PHOENIX
Quality Of Life
Phoenix offers a lower cost of living than other metros
its size, a moderate climate, and a wide variety of
recreational and cultural activities.
The Phoenix region boasts almost 300 days of sunshine
annually, low humidity and very mild winters. In
addition to hiking, camping and boating, sports
enthusiasts can enjoy one of the most complete lineups
of major-league teams found in any city, including
teams in all four major sports. The Cactus League holds
spring training baseball throughout the Valley, and the
area has numerous golf courses and tennis courts.
Phoenix is home to the world-famous Heard Museum,
Frank Lloyd Wright’s Taliesin West, the Phoenix Art
Museum and the Musical Instrument Museum, in
addition to many other museums. Music venues
include Phoenix Symphony Hall, which houses the
Phoenix Symphony and Arizona Opera; the Orpheum
Theatre; and the Herberger Theatre Center. For those
who enjoy being outdoors, the Phoenix Zoo and Desert
Botanical Gardens are not far from the city center.
The Valley offers many institutions of higher learning,
including Arizona State University, the University of
Phoenix, Thunderbird School of Global Management,
and other private universities and community colleges.
21
GLENDALE, AZ
MARKET OVERVIEW
PHOENIX
Rental Demand Builds Momentum, Supporting Influx of Out-of-State Investors
Phoenix’s employment growth will outpace the national rate this year, supporting tighter apartment vacancies and
a fifth consecutive year of rent growth. The stronger economy continues to generate a flow of residents from
outside the metro, while greater employment opportunities will enable increased household formations as those
that moved in with friends or family find employment and move out on their own. Apartments will absorb the
majority of these formations as single-family home lending standards remain tight, making purchasing a new
home difficult for many renters. In fact, home sales of existing single-family homes have declined in the past two
years after peaking in 2011. While favorable rental demand persists, developers will step up production for the
second consecutive year. The effects of 2013’s elevated completions have registered in Scottsdale, where a recent
wave of luxury rentals pushed up vacancy into the mid-6 percent range. However, demand growth in 2014 will
reduce vacancy on a metrowide basis. Operations will tighten the greatest in the north Tempe/Arizona State
University area, where renovating properties has become increasingly prevalent as vacancies are pushed down into
the low-4 percent range.
* Estimate. ** Forecast. Sources: CoStar Group, Inc., RCA
The flow of capital from out of state and an accommodative lending environment will intensify bidding during
2014. Institutions and REITs will target the newer Class A properties, while local investors face intense
competition. Top-tier assets will trade with first-year returns in the low- to high-5 percent range, and Class B
assets will change hands nearly 100 basis points higher. Mid-century assets needing aesthetic updates will remain a
target this year, but REO deals remain few and far between.
22
GLENDALE, AZ
MARKET OVERVIEW
PHOENIX
2014 Market Outlook
■ 2014 NAI Rank: 22, Down 6 Places. Phoenix fell six spots in the index due to the market’s highly competitive
single-family market and elevated vacancy rate.
■ Employment Forecast: In 2014, metro employment will increase by 54,700 jobs, up significantly from the
41,400 jobs added last year.
■ Construction Forecast: Projects totaling 4,500 units will come online this year, the largest volume since 2009.
In 2013, 3,900 units were completed in the metro.
■ Vacancy Forecast: Vacancy will fall 30 basis points to 6.9 percent. Last year, vacancy dropped 40 basis points.
■ Rent Forecast: In 2014, effective rent growth will slow to 2.1 percent from 2.9 percent last year.
■ Investment Forecast: Investors will bid aggressively on Class A assets in prime locations, where rental demand is
steady. Class B and C assets with value-add components will also be heavily targeted.
* Estimate. ** Forecast. Sources: CoStar Group, Inc., RCA
23
MARKET OVERVIEW
GLENDALE, AZ
PHOENIX
Housing Recovery Sparks Retail Property Revival
Outsized job growth, a recovering housing market, and rising incomes will fuel space demand in the Phoenix retail
sector during 2013. Job creation continues to recover in several sectors, and a number of large employers are
expanding in the metro. General Motors, for example, will relocate its information technology center to the
Valley, while State Farm Insurance will open a regional headquarters in downtown Phoenix. The housing sector, a
primary driver of economic activity in the metro and a generator of demand for retail space, continues to recover.
Sales of existing single-family homes have increased and developers are once again building new homes, albeit at a
more modest pace than before the recession. Rising incomes will sustain home purchases and support greater
spending at home improvement stores and furnishings retailers, and also create additional daily traffic for necessity
retailers. Restaurants and bars are benefiting as well, a trend that is evident in communities across the metro. The
recovery in the metro’s economy is encouraging national chains to once again open new locations, especially in the
densely populated areas of Tempe, Chandler and Scottsdale. Local and regional inline retailers are opening new
locations in the metro, moving into space that has been vacant since the recession.
Strong demand for single-tenant net-leased properties will keep cap rates compressed in the high-7 percent range.
Investors concerned with higher yields are moving into the multi-tenant sector to target grocery-anchored
shopping centers in highly trafficked corridors, such as downtown Tempe and Scottsdale. A grocery-anchored
center in an area with strong demographics, for example, can trade at cap rates in the mid-7 percent range.
However, institutional investors will dominate the market for the few large high-quality centers that are listed for
sale this year. The growth of shopping centers in urban infill locations is putting pressure on properties in outlying
areas, where replacing tenants has become a challenge. Local buyers will target these highly vacant centers for
value-add plays, rehab the properties, and market the space at a discount to secure tenants. Investors with shortterm horizons will then sell these properties and reinvest proceeds into other assets, while long-term holders will
refinance after the property has been stabilized.
2013 Annual Retail Forecast
Employment: Metro employment will increase 3.5 percent in 2013 as employers
increase payrolls by 63,000 positions. Employers created 48,900 positions in 2012,
primarily in trade, transportation and utilities, and professional and business services.
Construction: Retail property inventory will expand a scant 0.5 percent this year, with
the completion of 447,000 square feet of shopping center space, an increase from last
year’s delivery of 333,000 square feet.
Vacancy: Shopping center vacancy will decrease 120 basis points to 14.4 percent this
year behind improving demand. Net absorption of more than 1.6 million square feet
cut vacancy 160 basis points in 2012.
Rents: This year, asking rents for shopping centers are expected to tick up 1.3 percent
to $13.55. In 2012, asking rents for available space dropped 3.3 percent to $13.38.
24
GLENDALE, AZ
MARKET OVERVIEW
PHOENIX
Economy
■ Employment in the Phoenix metro increased 2.6 percent, or by 45,900 jobs, during the past year. In the
previous 12-month period, local payrolls expanded by 41,200 positions.
■ The trade, transportation and utilities sector added nearly 8,000 new positions, while professional and business
services and construction added a large portion of new positions in the Valley in the past year, increasing
payrolls by 7,300 and 7,400 workers, respectively.
■ Retail sales have increased 29 percent since 2009, surpassing the pre-recession peak by more than 8 percent.
Increased consumer spending was fueled by expansion in the typically higher-paying professional and business
services sector.
■ Outlook: By year end, metro employment will rise 3.5 percent as payrolls increase by 63,000 positions. Jobs in
healthcare, leisure and hospitality, and professional and business services will lead job creation. In 2012, 48,900
positions were created in the Valley.
Construction
■ Over the 12 months ending in the first quarter, 853,000 square feet of total retail space was delivered, up from
503,000 square feet during the previous period. In the past year, 208,000 square feet of shopping center space
came online, surpassing the 92,000 square feet completed in the prior year.
■ During the past year, the most new space came online in the fourth quarter of 2012. Developers delivered
273,000 square feet of total retail space during the period, including the 162,000-square foot Ak-Chin
Entertainment Center in the city of Maricopa.
■ The planning pipeline consists of 4.8 million square feet of total retail space. More than one-third of the total
is proposed in the city of Phoenix, with the remainder of the space divided between Scottsdale, Chandler and
Mesa.
■ Outlook: Completions will expand metro inventory by 0.5 percent this year, with the completion of 447,000
square feet of shopping center space, an increase from last year’s delivery of 333,000 square feet.
* Forecast
25
GLENDALE, AZ
MARKET OVERVIEW
PHOENIX
Vacancy
■ Shopping center vacancy at the end of the first quarter of 2013 was 15.4 percent, marking a plunge of 160
basis points from the same time last year. As larger retailers moved into newer properties, smaller retailers are
backfilling the recently vacated spaces.
■ From the peak in mid-2011, vacancy in shopping centers has decreased 230 basis points through the first
quarter of 2013. Vacancy still remains about 500 basis points higher than pre-recession levels, however.
■ Vacancy fell 20 basis points in the first quarter this year as expanding retailers filled an additional 240,000
square feet of space.
■ Outlook: Minimal development and an increase in new store openings and retailer expansions will support a
120-basis point plunge in shopping center vacancy this year to 14.4 percent.
Rents
■ Owners of available space on the market listed asking rents for an average of $13.23 per square foot in the first
quarter 2013, a decrease of 3 percent from the previous year.
■ Rents for marketed space over the last 12 months have steadily decreased as retailers move into vacant space,
while rents for newer construction and upper-tier space has appreciated over the past four quarters.
■ The decline in rents over the past year caused revenues to decrease 1.4 percent in the last 12 months.
■ Outlook: This year, asking rents for shopping centers are expected to tick up 1.3 percent to $13.55. In 2012,
asking rents for available space declined 3.3 percent.
* Forecast
26
GLENDALE, AZ
MARKET OVERVIEW
PHOENIX
Single-Tenant Sales Trends**
■ Single-tenant transactions jumped 24 percent over the past 12 months, reflecting investor demand for assets
with stable income streams. The number of restaurants and drugstores sold rose more than 30 percent and,
collectively, accounted for nearly half of all transactions during the period.
■ The median price of properties traded in the market was $290 per square foot, down 16 percent from the
previous 12-month period. Assets net-leased to national drugstores sold for as much as $500 per square foot in
the last four quarters.
■ Average cap rates in the high-7 to low-8 percent range were unchanged from the prior year, though disparities
arose based on tenant quality and lease terms. Properties occupied by investment-grade tenants with lengthy
remaining lease terms, for example, often traded at less than 7 percent.
■ Outlook: Investors will focus on properties net-leased to national chains such as Walgreens and CVS, which
trade in the low-7 to low-8 percent range. National restaurants such as IHOP will garner attention by offering
first-year returns about 100 basis points higher.
Multi-Tenant Sales Trends**
■ Transaction velocity decreased 6 percent in the multi-tenant sector over the past 12 months. The majority of
sales came in the fourth quarter of 2012, underlining an improvement in investor outlook in the Phoenix
metro.
■ The median price of assets changing hands in the market was $130 per square foot, an increase of 67 percent
over the previous four quarters. Differences in property location, quality and performance have contributed to
a wide range in prices, while recently constructed assets in prime locations can trade well over $200 per square
foot.
■ Cap rates averaged in the mid-8 to low-9 percent range over the past year, up 60 basis points from the previous
12-month period. Top-tier, grocery-anchored properties sold at cap rates in the low-6 to mid-7 percent range,
while value-add opportunities command 100 to 200 basis points more.
■ Outlook: Grocery-anchored properties in the Phoenix metro near densely populated areas will seize the
attention of investors, keeping cap rates tight. Institutions will capture the few high-end listings that come to
market during the year.
* Forecast
** Trailing 12-Month Period
27
GLENDALE, AZ
MARKET OVERVIEW
PHOENIX
Capital Markets
■ Amid evidence that an increase in payroll taxes was crimping retail sales, shopping center vacancy nationwide
nonetheless dipped 10 basis points in the first quarter of the year to 10.7 percent. Despite the prospect of
subdued consumer spending over the remainder of 2013, space demand will far exceed completions during the
year, supporting an 80-basis point plunge in vacancy to 10.0 percent.
■ The improvement in property operations, a more competitive lending environment and favorable returns
relative to other asset classes are sustaining a healthy investment market. One-off transactions totaled more
than $6 billion in the first quarter this year, marking an increase of 9 percent from one year ago. Investors also
purchased $4.2 billion of strip centers in the first three months of 2013, a 20 percent year-over-year jump.
■ Leverage levels were virtually unchanged during the first three months of this year. Acquisition loans for multitenant assets and single-tenant net-leased properties are typically underwritten at 65 percent LTV, but can
range up to 70 percent for the highest rated assets in the strongest locations, and quality sponsorships.
■ For single-tenant net-leased assets, most capital sources are willing to consider properties occupied by noninvestment grade tenants, although top-rated tenants remain the primary target. Conduits and life companies
focus on upper-tier assets and the highest-rated tenants, while commercial banks and credit unions vie for
market share in the arena of lower-rated corporate and franchisee credits. Loans are underwritten for 10-year
terms, 25-year amortization, at rates ranging from 4 percent to 5 percent.
■ Securitized lenders and life companies continue to provide financing for purchases of anchored shopping
centers, while commercial banks are lending on unanchored properties. For unanchored assets, loans are
generally executed for three- and five-year terms and all-in rates ranging from 4.25 percent to 4.75 percent.
Local Highlights
■ Phoenix Premium Outlets in Chandler opened their doors in the second quarter with approximately 90
retailers. Tenants include Coach, Brooks Brothers, Gap, Michael Kors, Old Navy and Polo.
■ Roosevelt Point Apartments, a 326-unit, 609-bed student-housing complex, will open this summer near
Arizona State University’s downtown campus. The $52 million project will include 7,500 square feet of streetlevel retail space.
■ Dignity Health recently broke ground on the St. Joseph’s Westgate Medical Center in Glendale. Creating 200
initial jobs, the hospital will open in early 2014 and provide clinical integration with St. Joseph’s Hospital in
central Phoenix.
■ Tesco, Britain’s largest retailer by sales, will be pulling its chain of supermarkets, Fresh & Easy, out of the U.S.
market, including the 24 stores in Arizona. Currently, Tesco is entertaining the idea of a U.S. buyer for the
national chain, but no official word has emerged of an imminent transaction for Fresh & Easy.
■ Single-family home prices are on the rise as the median price of an existing residence increased 23 percent in
the last 12 months to $149,400. Additionally, the region’s median household income rose 1.7 percent to
$53,000 annually, nearly $18,000 above the amount needed to qualify for a loan on a median-priced home.
Sources: CoStar Group, Inc., Real Capital Analytics
28
GLENDALE, AZ
GLENDALE, AZ
DEMOGRAPHIC REPORT
2000 Population
2010 Population
2013 Population
2018 Population
1 Mile
14,811
15,420
15,900
16,374
3 Miles
78,884
87,303
90,402
95,876
5 Miles
213,064
245,804
255,930
274,992
2000 Households
2010 Households
2013 Households
2018 Households
5,254
6,056
6,232
6,598
27,359
32,533
33,649
36,180
78,780
94,565
98,287
106,266
2.55
2.66
2.58
3,921
27,000
61,681
$180,055
$180,055
$166,658
2000 Owner Occupied Housing Units
2000 Renter Occupied Housing Units
2000 Vacant
78.43%
12.74%
5.62%
81.42%
14.42%
5.02%
75.68%
18.46%
5.65%
2013 Vacant
63.95%
36.05%
4.84%
71.83%
28.17%
4.56%
70.34%
29.66%
6.20%
2018 Vacant
61.18%
38.82%
4.86%
70.40%
29.60%
4.50%
70.03%
29.97%
6.16%
5.8%
4.0%
5.2%
9.9%
19.1%
17.0%
15.5%
8.9%
8.9%
2.6%
3.0%
6.0%
4.9%
6.5%
12.3%
20.2%
17.2%
13.5%
7.7%
6.3%
2.4%
3.1%
7.0%
6.7%
8.3%
13.7%
20.6%
16.0%
11.6%
6.8%
5.2%
1.7%
2.4%
2013 Median Household Income
2013 Per Capita Income
$83,683
$39,639
$75,113
$35,360
$66,694
$32,641
2013 Average Household Income
$101,011
$94,641
$84,658
2013 Average Household Size
2013 Daytime Population
2000 Median Housing Value
$ 0 - $14,999
$ 15,000 - $24,999
$ 25,000 - $34,999
$ 35,000 - $49,999
$ 50,000 - $74,999
$ 75,000 - $99,999
$100,000 - $124,999
$125,000 - $149,999
$150,000 - $199,999
$200,000 - $249,999
$250,000 +
Demographic data © 2012 by Experian.
30
GLENDALE, AZ
SUMMARY REPORT
Geography: 5 Miles
Population
In 2013, the population in your selected geography was 255,930. The population has changed by 20.11% since 2000. It is estimated
that the population in your area will be 274,992 five years from now, which represents a change of 7.44% from the current year. The
current population is 48.6% male and 51.3% female. The median age of the population in your area is 40.3, compare this to the U.S.
average which is 37. The population density in your area is 3,421.15 people per square mile.
Households
There are currently 98,287 households in your selected geography. The number of households has changed by 24.76% since 2000.
It is estimated that the number of households in your area will be 106,266 five years from now, which represents a change of 8.11%
from the current year. The average household size in your area is 2.58 persons.
Income
In 2013, the median household income for your selected geography is $66,694, compare this to the U.S. average which is currently
$53,535. The median household income for your area has changed by 0.23% since 2000. It is estimated that the median household
income in your area will be $75,711 five years from now, which represents a change of 13.51% from the current year.
The current year per capita income in your area is $32,641, compare this to the U.S. average, which is $28,888. The current year
average household income in your area is $84,658, compare this to the U.S. average which is $75,373.
Race & Ethnicity
The current year racial makeup of your selected area is as follows: 85.37% White, 2.60% African American, 0.84% Native American
and 4.71% Asian/Pacific Islander. Compare these to U.S. averages which are: 72.20% White, 12.65% African American, 0.96%
Native American and 5.01% Asian/Pacific Islander.
People of Hispanic origin are counted independently of race. People of Hispanic origin make up 12.26% of the current year
population in your selected area. Compare this to the U.S. average of 16.55%.
Housing
The median housing value in your area was $166,658 in 2000, compare this to the U.S. average of $110,781 for the same year. In
2000, there were 63,192 owner occupied housing units in your area and there were 15,417 renter occupied housing units in your
area. The median rent at the time was $843.
Employment
In 2013, there are 61,681 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed
that 74.6% of employees are employed in white-collar occupations in this geography, and 25.3% are employed in blue-collar
occupations. In 2013, unemployment in this area is 3.85%. In 2000, the median time traveled to work was 27.9 minutes.
31
GLENDALE, AZ
POPULATION DENSITY
Number of people living in a given area per square mile.
32
GLENDALE, AZ
EMPLOYMENT DENSITY
The number of people employed in a given area per square mile.
33
GLENDALE, AZ
AVERAGE HOUSEHOLD INCOME
Average income of all the people 15 years and older occupying a
single housing unit.
34
GLENDALE, AZ
OFFERING MEMORANDUM
Exclusively Listed By:
Lior Regenstreif
First Vice President Investments
Encino Office
License: CA: 01267761
Tel: (818)212-2730
Fax: (818)212-2710
[email protected]
www.marcusmillichap.com/LiorRegenstreif
Donald Morrow
Broker
Marcus & Millichap
License: AZ: BR016257000
Tel: (602)687-6700
Fax: (602)687-6710
Offices Nationwide
www.MarcusMillichap.com

KinderCare Learnings Centers Inc

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