naiop university challenge – 2016
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NAIOP UNIVERSITY CHALLENGE – 2016
Informational Packet
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NAIOP UNIVERSITY CHALLENGE – 2016
C h a l l e n g e O v e r v i e w
Welcome to the 13th annual NAIOP Minnesota Chapter University Real Estate Challenge. We appreciate your willingness to participate and look forward to seeing your presentations. The committee has chosen Pentagon Park – South Parcel for this year’s competition. The site, recently purchased by Hillcrest Development, reflects a complex project with vast development potential. The “challenge” is to act as a development consultant to determine the most profitable, yet feasible, project. What would you choose to develop and why? The developer is looking for a creative combination of one or more uses, while also generating the highest return and greatest positive impact to the surrounding communities and stakeholders. You will still need to perform a detailed market analysis to determine the appropriate amount of each use that conforms to zoning regulations and respects site constraints, as well as generates attractive returns on the invested equity. To properly assess the site, you will need to answer the following questions:
1) What mix of product type(s) maximizes the value of the site and achieves the
highest risk-adjusted return for the developer?
2) What are the major strengths, weaknesses, opportunities and risks for this project? For the detailed financial analysis section of this project (may be included in the appendix), we would like you to include the assumptions and techniques you use to create your analysis. This will help the judges understand your case study and findings. Please keep in mind that there are multiple answers for the case question and you will be judged on your ability to support your conclusions. The written proposals will be limited to 10 pages. Outside of the proposal we also request you submit a 1-2 page executive summary that highlights the main deal points. As a real estate professional who is trying to pitch a deal to potential investors, it is important that you know how to prepare a concise presentation that can be easily followed without your audience losing interest. However, you must include enough detail to allow them to accurately understand your vision for the site as well as analyze the deal. We’ve included a list of general information that should be discussed in the proposal. We suggest that you summarize the financial highlights in the report and include more detailed financial analysis/proformas in the appendix.
1. Development plan
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2. Construction timeline 3. Budget 4. Leasing plan and schedule 5. Financing plan – debt (construction and permanent) and equity 6. Pro-forma 7. Market analysis
Please keep in mind that aside from any detailed financial analysis, any information contained in the appendices will be considered supplementary and will not be used in the overall scoring of the written proposal. In addition to the written proposal and verbal presentation, you should also be prepared to answer questions from the judges pertaining to any written statements, assumptions or conclusions included in your proposal. In addition to your proposal and executive summary, we are requesting your team select a “theme song” that will be used for your entrance at the formal event. There is also a simple bio sheet we ask each team member to complete. The bios will be circulated to the industry attendees in hopes that it will help add additional value by facilitating discussion at the reception, and ideally leading to future internships or positions. You have been provided a list of industry “experts” who have graciously volunteered their time to assist you as you work through your development proposal. These volunteers are available to help facilitate your research and answer any specific questions you may have as you continue to prepare your development proposal. Participants in the challenge will need to use the resources provided as well as their own market research to prove their findings. We want you to treat this as a real consulting assignment so it is necessary to stay within zoning, comprehensive planning, and legal guidelines when choosing what to do with the site. Please do not call the City of Edina. Any city related questions should be directed to Tom Whitlock (expert). The 2016 NAIOP University Challenge presentation is scheduled for Thursday, April 14th, 2016 at the International Market Square in Minneapolis, MN. Accordingly, 10 copies of your written case study, executive summary, theme song, and team bios will need to be submitted to the NAIOP University Challenge committee no later than Tuesday, April 5th, 2016 so that we can forward them to the judges for review. Submissions may be made electronically to [email protected] on April 5th, with hard copies to follow via overnight delivery to 3500 American Blvd W #200 - attention: Stephen Davidson. We kindly request that proposals and executive summaries submitted do not include school logos, colors or any other identifying words or symbols. We would like to ensure that the judges are able to view the presentations from an unbiased perspective. A single sheet that can be easily removed should be included with your written case study to allow the committee members to identify packets. The event format will again include pre-judging where each team will have 10 minutes to
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present their recommendation. The top three teams will present in front of the NAIOP chapter later that afternoon. Once each school has given their presentation, we will have an awards ceremony, and then a reception will be held allowing student teams to network with local industry professionals. Best of luck, and thank you for your participation! 2016 NAIOP University Challenge Committee
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S i t e I n f o r m a t i o n Aerials:
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Summary
Site Name: Pentagon Park – South Parcel
Size: Five Parcels 31-028-24-33-0010 (8.06 Acres – 351,131 SF) 31-028-24-33-0013 (.1 Acres – 4,177 SF) 31-028-24-33-0014 (1.79 Acres – 78,041 SF) 31-028-24-33-0015 (1.77 Acres – 77,094 SF) 31-028-24-33-0012 (.4 Acres – 17,400 SF) Total: 12.12 Acres – 527,843 SF
Zoning: PUD (Planned Unit Development)
Adjacent Uses: Retail, office, hotel, industrial, multi-family
Local Amenities: Local amenities include Fred Richards Park and Nine Mile Regional Trail. The South parcel of Pentagon Park is situated at the landmark intersection of Hwy 100 and I-494 in the Twin Cities. There is access to nearly unlimited area amenities, restaurants, shops and businesses. Its close proximity to metro transit and placement within the city of Edina means a highly-connected and desirable work destination.
Environmental Considerations:
Prior to demolition, asbestos was abated out of the buildings. Crushed concrete from the buildings (clean) has been placed in the subsurface/basement areas of the former building, and is available for reuse on the site. No soil or groundwater contamination concerns exist. Depth to groundwater ranges from about 6’-10’. Due to extensive organic swamp deposits of mostly peat and some clay (starting at 2’ below the surface), soils will need correcting and structures placed on geotechnical piles.
Land Cost: $50 PSF
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F i n a n c i a l A n a l y s i s
For your financial analysis pro-forma, please assume the purchase price for the site is $50 PSF. At a minimum, you will need to formulate assumptions for the following items in order to complete the financial analysis that you will provide in your case study:
1. A projected development and lease-up schedule for each phase of your project 2. Initial Net Rent Rate based on market conditions 3. Average occupancy in Year 1 based on projected lease-up period (support based on
market absorption) 4. Net rental rate for lease renewal assumptions 5. Renewal probability 6. Vacancy allowance 7. Land development costs 8. Land interest 9. Construction/hard costs 10. Construction Interest 11. Tenant Improvements - Initial 12. Tenant Improvements - Renewal 13. Tenant Improvements - Replacement/New 14. Commissions - Initial 15. Commissions - Renewal 16. Commissions - Replacement/New 17. Development/soft cost interest 18. Debt -Percent Financed 19. Interest Rate 20. Other Sources of Equity or Reduction in Capital Needs (TIF, Grants, Tax Abatement,
etc.) 21. Sale - Cap rate 22. Costs of sale 23. Pre-Debt and Post-Debt Internal Rates of Return (IRR’s)
Please support your assumptions with market research!!!
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NAIOP UNIVERSITY CHALLENGE – 2016 E x p e r t s
Planning Tom Whitlock President Damon Farber 612-332-7522 [email protected] http://damonfarber.com/
Brokerage Dan Gleason Executive Director Cushman & Wakefield/NorthMarq 952-893-8884 [email protected] www.cushwakenm.com
Tax Increment Financing Bob Strachota/Heather Burns President/Senior Public Finance and Valuation Analyst Shenehon/Shenehon 612-333-6533/612-767-9448 [email protected]/[email protected] www.shenehon.com/www.shenehon.com
Commercial Lending Gabe Philibert Senior Vice President of Business Bell State Bank & Trust 952-905-5035 [email protected] https://www.bellbanks.com/
Construction Rick Weiblen VP, Development Liberty Property Trust 952-833-5262 [email protected] https://www.libertyproperty.com/
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J u d g i n g C r i t e r i a
WRITTEN PROPOSAL CRITERIA POINTS Analysis of Market Opportunity
- Understanding of relevant market data and external influences - Appropriate sourcing
5
Highest and Best Use Analysis - Market data obtained - Product types considered - Support for product type selected
10
SWOT Analysis - Understanding of competition - Assessment of strengths and weaknesses - Differentiating factors
10
Financial Analysis - Thorough project budget (land, hard and soft costs) - Market assumptions for income and expense - Annual operating pro forma(s) for project components - Assumed capital structure - Investment return analysis
15
Development Proposal Submittal Package - Concise, complete Executive Summary - Graphic presentation - Quality of written narrative - Appropriate supporting material/exhibits
15
Demonstrated Utilization of Outside Resources
5
Total Possible Points – Written 60
PRESENTATION CRITERIA POINTS Oral Presentation
- Involvement of team members - Quality of oral presentation - Quality, relevance of supporting graphics - Creativity in presentation - Professionalism
Development Proposal Decision and Explanation (no right or wrong)
- Conveyance of core points from written Proposal - Feasibility of project - Financial model and analysis - SWOT assessment
10
20
Q & A Response - Explanatory value of answers to questions offered - Anticipatory data or information available
10
Total Possible Points – Presentation 40
TOTAL OVERALL POSSIBLE POINTS 100
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E x a m p l e B i o
You will receive a copy of this in PowerPoint, so you may simply change the pertinent information.
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