offering memorandum - loopnet...2010 census hh 12,520 82,834 202,858 median hh income $45,470...

5841-43 EL CAJON BLVDSan Diego, CA 92115

Offering Memorandum

1

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 DisclaimerThe 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 andshould 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, unverifiedinformation 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 duediligence 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, thefuture 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 orasbestos, 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 anytenant'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 bereliable; however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding thesematters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures toverify all of the information set forth herein. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2018 Marcus & Millichap. All rights reserved.

Non-Endorsement NoticeMarcus & 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 orname 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.

5841 EL CAJON BLVDSan Diego, CAACT ID ZAA0090471

2

TABLE OF CONTENTS

SECTION

INVESTMENT OVERVIEW 01Offering Summary

Regional Map

Local Map

Aerial Photo

Property Photos

FINANCIAL ANALYSIS 02Rent Roll Summary Multifamily

Rent Roll Summary Commercial

Pricing Detail

Acquisition Financing

MARKET COMPARABLES 03Sales Comparables

Rent Comparables

MARKET OVERVIEW 04Market Analysis

Demographic Analysis

5841-43 EL CAJON BLVD

3


4

INVESTMENT

OVERVIEW


#

EXECUTIVE SUMMARY

OFFERING SUMMARY

VITAL DATA

CURRENT YEAR 1

Price $3,000,000 CAP Rate 5.07% 5.23%

Down Payment 31% / $930,000 Net Operating Income $152,033 $156,980

Loan Amount $2,070,000 Net Cash Flow After Debt Service 2.81% / $26,172 3.35% / $31,120

Loan Type Proposed New Total Return 6.40% / $59,566 7.10% / $66,047

Interest Rate / Amortization 4.5% / 30 Years

Total Rentable SF 7,577

Price/SF $395.94

Year Built 1972

5

UNIT MIX

UNIT COUNT UNIT TYPE AVG. SF

CURRENT AVG. RENTS

AVG. RENTS/SF

MONTHLY INCOME

POTENTIAL RENTS

AVG. RENTS/SF

MONTHLYINCOME

8 2 Bdr 1 Bath 700 $1,795 $2.56 $14,360 $1,850 $2.64 $14,800

SUITE COUNT TYPE TOTAL GLA CURRENT RENT RANGE

CURRENT MONTHLY INCOME

PRO FORMA MONTHLY INCOME

1 Retail 1,977 $3,800 - $3,800 $3,800 $3,800

MAJOR EMPLOYERS

EMPLOYER # OF EMPLOYEES

B B S I 5,003

Naval Medical Center 4,250

Kaiser Permanente 3,146

Elite Show Services Inc 3,123

Sdsu 3,000

Trust Employee ADM & MGT 2,500

Midland Credit Management 1,805

Grossmont Hospital Corporation 1,740

Innovtive Emplyee Slutions Inc 1,500

Tegp Inc 1,500

World Famous San Diego Zoo 1,500

San Diego Zoo 1,200

DEMOGRAPHICS

1-Miles 3-Miles 5-Miles

2018 Estimate Pop 38,365 241,987 586,685

2010 Census Pop 35,403 227,317 551,273

2018 Estimate HH 13,768 88,989 217,474

2010 Census HH 12,520 82,834 202,858

Median HH Income $45,470 $49,819 $57,541

Per Capita Income $25,722 $26,906 $29,486

Average HH Income $67,098 $72,172 $78,942


OFFERING SUMMARY

Mixed-Use Property w/Turn Key Apartment Renovations

Ideal Unit Mix, Comprised Entirely of 2 Bedroom / 1 Bath Units

New Ductless Split-Level AC Systems and Washers/Dryers in Each Unit

Modern Flooring, Tile Work, Stone Counter Tops, and Stainless-Steel Appliances

Free Standing Single Tenant Building w/Direct Frontage on El Cajon Boulevard

Extremely Valuable Long-Term Billboard Lease

INVESTMENT HIGHLIGHTS

Marcus & Millichap is pleased to present 5841-43 El Cajon Boulevard, a mixed-use multi-family and freestanding commercial property located in busy Mid-City San Diego,

California. Constructed in 1972 and situated on one parcel covering 0.50 acres, the property consists of a two story 8-unit multi-family building comprised entirely of all

two bedroom / one bath apartments, a 1,977 sq. ft. freestanding single tenant commercial building, and an extremely valuable billboard.

Turn-key apartment renovations were recently completed and feature in-unit washers and dryers, ductless split-level air conditioning and heat, modern flooring, new

kitchen cabinets, stone countertops, custom tile bathrooms, full stainless-steel kitchen appliance packages, and luxury fixtures and finishes throughout each apartment.

The apartment property also features new double pane windows, patio sliding doors, private patios, assigned off-street parking and custom wood privacy lattice

throughout the exterior.

The freestanding single tenant building fronts El Cajon Boulevard, a major east-west thoroughfare with a high traffic count. It is a high visibility location near San Diego

State University in the bustling College Area Business District. The commercial building is subject to a five-year modified gross (MG) lease with over three and half years

remaining on the initial term. The tenant is responsible for Utilities, Trash, and Maintenance & Repairs. The lease provides for increases occurring in the two, five-year and

two, three-year option periods that remain.

Being that billboard advertising rates are determined by daily impressions - the number of people who see the billboard every day, the billboard that is located on the

subject property is of significant value. The billboard is situated in one of the most densely populated urban neighborhoods in all of San Diego County and serves one of

the most heavily trafficked thoroughfares spanning east to west from Hillcrest to La Mesa. With new billboards becoming increasingly regulated, effectively diminishing any

new competition, existing billboard owners should continue to experience increased demand in form of higher lease rates.

INVESTMENT OVERVIEW

6

OFFERING SUMMARY


7

COLLEGE AREA BUSINESS DISTRICT MAP

REGIONAL MAP


8

LOCAL MAP


9

12


10

PROPERTY PHOTOS

12


11

PROPERTY PHOTOS

PROPERTY PHOTOS


12


13

FINANCIAL

ANALYSIS

FINANCIAL ANALYSIS


RENT ROLL SUMMARY

14

FINANCIAL ANALYSIS


PRICING DETAIL

15

NOTES

MARCUS & MILLICHAP CAPITAL CORPORATION CAPABILITIESMMCC—our fully integrated, dedicated financing arm—is committed to providing superior capital market expertise, precisely managed execution, and unparalleled access to capital sources providing the most competitive rates and terms.

We leverage our prominent capital market relationships with commercial banks, life insurance companies, CMBS, private and public debt/equity funds, Fannie Mae, Freddie Mac and HUD to provide our clients with the greatest range of financing options.

Our dedicated, knowledgeable experts understand the challenges of financingand work tirelessly to resolve all potential issues to the benefit of our clients.

National platform operating

within the firm’s brokerage

offices

$6.24 billion billion total

national volume in 2018

Access to more capital sources than any other firm in the industry

Optimum financing solutions to enhance value

Our ability to enhance buyer pool by expanding finance options

Our ability to enhance seller control

• Through buyer qualification support

• Our ability to manage buyers finance expectations

• Ability to monitor and manage buyer/lender progress, insuring timely, predictable closings

• By relying on a world class set of debt/equity sources and presenting a tightly underwritten credit file

WHY MMCC?

Closed 1,678 debt and equity

financings in 2018

ACQUISITION FINANCING


16


17

MARKET

COMPARABLES


SALES COMPARABLES MAP

18

5841-43 EL CAJON BLVD(SUBJECT)

3866 36th St

New Talmadge Apartment Homes

4233-4247 Euclid Ave

4246 42nd Street

4353 Dawson Avenue

Trojan Apartments

62nd Street Apartments

Kensington Mixed-Use

Adams Ave Mixed Use

SALES COMPARABLES

1

2

3

4

5

7

8

6

9

PROPERTY NAME

MARKETING TEAM

5841 EL CAJON BLVD

SALES COMPARABLES

rentpropertyname1

rentpropertyaddress1

rentpropertyname1


rentpropertyname1


19

SALES COMPARABLES

Tenants Type

Offering Price $3,000,000 8 2 Bdr 1 Bath

Price/SF $395.94 1 Retail

CAP Rate 5.07% 1 Billboard

Year Built 1972

Total Apartment Units 8

Total Commercial Suites 1

5841 EL CAJON BLVD5841 El Cajon Blvd, San Diego, CA, 92115

1

Units Unit Type

Close Of Escrow: 4/19/2019 8 2 Bdr 1 Bath

Sales Price: $2,190,000

Price/Unit: $273,750

Price/SF: $365.00

CAP Rate: 5.40%

GRM: 12.70

Total No. of Units: 8

Year Built: 1950

3866 36TH ST3866 36th St, San Diego, CA, 92104

Units Unit Type

Close Of Escrow: 12/14/2018 3 Studio 1 Bath

Sales Price: $4,000,000 10 2 Bdr 1 Bath

Price/Unit: $266,667 2 3 Bdr 1 Bath

Price/SF: $325.20

CAP Rate: 5.00%

GRM: 11.90


Year Built: 1959

2

NEW TALMADGE APARTMENT HOMES4082 51st St, San Diego, CA, 92105

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


20

SALES COMPARABLES

Units Unit Type




Price/SF: $326.76

CAP Rate: 5.61%

GRM: 12.00


Year Built: 1957

3

4233-4247 EUCLID AVE4233 Euclid Ave, San Diego, CA, 92115

4

Units Unit Type



Price/Unit: $250,714 2 2 Bdr 2 Bath

Price/SF: $356.35 1 3 Bdr 1 Bath

CAP Rate: 4.83%

GRM: 13.40


Year Built: 1989

4246 42ND STREET4246 42nd St, San Diego, CA, 92105

Units Unit Type




Price/SF: $315.12

CAP Rate: 3.47%


Year Built: 2016

5

4353 DAWSON AVENUE4353 Dawson Ave, San Diego, CA, 92115

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1


rentpropertyname1

rentpropertyaddress1 rentpropertyaddress1

21

SALES COMPARABLES

Units Unit Type




Price/SF: $378.69

CAP Rate: 5.14%

GRM: 12.70


Year Built: 1965

6

TROJAN APARTMENTS5005 Trojan Ave, San Diego, CA, 92115

7

Units Unit Type


Sales Price: $1,530,000


Price/SF: $306.49

CAP Rate: 5.38%

GRM: 15.33


Year Built: 1958

62ND STREET APARTMENTS4625 62nd St, San Diego, CA, 92115

Tenants Type

Close Of Escrow 6/29/2018 1 0 Bdr 1 Bath

Sales Price $5,525,000 6 1 Bdr 1 Bath

Price/SF $392.85 1 2 Bdr 1 Bath

CAP Rate 4.71% 1 3 Bdr 1 Bath

Year Built 1940 8 Retail

Total Apartment Units 9 1 Retail

Total Commercial Suites 9

8

NOTES8 Retail Suites 500-1,560 Sq. Ft.1 Freestanding Retail 2,816 Sq. Ft.

KENSINGTON MIXED-USE4100 Adams Ave, San Diego, CA, 92116

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


22

SALES COMPARABLES

Close Of Escrow 3/29/2019

Sales Price $1,300,000

Price/SF $386.10

Year Built 1926

9

ADAMS AVE MIXED USE3502 Adams Ave, San Diego, CA, 92116

8


RENT COMPARABLES MAP

5841-43 EL CAJON BLVD(SUBJECT)

The Euclid Avenue Manor

4173-75 Altadena Ave

5170 Orange Avenue

Adelaide Gardens

4531-4533 54th Street

7102 El Cajon Blvd

4800 Art St

4650 College Ave

Plaza Center

4

7

8

9

11

20

12

14

15

16

17

13

18

10

4

7

8

9

1

2

3

5

6

23

PROPERTY NAME

MARKETING TEAM


RENT COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


24

Type Tenant Avg. SF Avg. Monthly Rent Rent/SF

2 Bdr 1 Bath 8 700 $1,795 $2.56

Total/Avg. 8 700

Retail 1 1,977 $3,800 $23.07


YEAR BUILT: 1958

1

Unit Type Units SF Rent Rent/SF

Studio 1 Bath 2 400 $1,295 $3.24

1 Bdr 1 Bath 1 550 $1,449 $2.63

2 Bdr 1 Bath 10 790 $1,795 $2.27

Total/Avg. 13 712 $1,691 $2.38

THE EUCLID AVENUE MANOR4153 Euclid Ave, San Diego, CA, 92105

2

YEAR BUILT: 1965


2 Bdr 2 Bath 1 1,250 $1,950 $1.56

2 Bdr 1 Bath 4 770 $1,730 $2.25

Total/Avg. 5 866 $1,774 $2.05

4173-75 ALTADENA AVE4173 Altadena Ave, San Diego, CA, 92105

PROPERTY NAME

MARKETING TEAM


RENT COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


25

YEAR BUILT: 1995

3


2 Bdr 2 Bath 8 843 $1,895 $2.25

Total/Avg. 8 843 $1,895 $2.25

5170 ORANGE AVENUE5170 Orange Ave, San Diego, CA, 92115

YEAR BUILT: 1958

4


1 Bdr 1 Bath 4 650 $1,500 $2.31

2 Bdr 1 Bath 26 875 $1,895 $2.17

3 Bdr 2 Bath 2 1,100 $2,195 $2.00

Total/Avg. 32 861 $1,864 $2.17

ADELAIDE GARDENS5510 Adelaide Ave, San Diego, CA, 92115

5

YEAR BUILT: 1950


2 Bdr 1 Bath 1 550 $1,445 $2.63

2 Bdr 1 Bath 2 800 $1,745 $2.18

3 Bdr 1 Bath 1 700 $1,845 $2.64

Total/Avg. 4 713 $1,695 $2.38

4531-4533 54TH STREET4531-4533 54th Street, San Diego, CA, 92115

PROPERTY NAME

MARKETING TEAM


RENT COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


26

YEAR BUILT: 1985

Total GLA Available SF Asking Rent/SF

2,969 SF 2,969 SF $21.00

6

NOTESSF Leased: 2,969Sign Date: Nov 2018Rent: $21.00 NNN


YEAR BUILT: 1985


21,979 SF 5,850 SF $20.40

7

NOTESSF Leased: 5,850Sign Date: Sep 2018Rent: $19.20 NNNEscalations: 3% Annual

4800 ART ST4800 Art St, San Diego, CA, 92115

YEAR BUILT: 1960


1,760 SF 1,300 SF $25.80

8

NOTESSF Leased: 1,300Sign Date: Jun 2018Rent: $25.80 MG

4650 COLLEGE AVE4650 College Ave, San Diego, CA, 92115

PROPERTY NAME

MARKETING TEAM


RENT COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


27

YEAR BUILT: 1960


10,181 SF 1,100 SF $27.24

9

NOTESSF Leased: 1,100Sign Date: Mar 2018Rent: $28.32 MG

PLAZA CENTER 5961 El Cajon Blvd, San Diego, CA, 92115


28

MARKET

OVERVIEW

MARKET OVERVIEW

SAN DIEGOOVERVIEW

29

The San Diego-Carlsbad metro is located in the southwestern portionof the state of California. Composed of San Diego County, it sitsadjacent to the Mexican border, extending north to the southern edgeof Orange County and Riverside County. From west to east, it issituated between the Pacific Ocean and Imperial County.

San Diego is the most populous city in the county with 1.4 millionresidents, followed by Chula Vista with 270,000 and Oceanside with180,000 people. A diverse economic base includes military, finance,tourism and real estate. Employment in these industries coupled with astrong retail base draw many job seekers to the region.

MARKET OVERVIEW

METRO HIGHLIGHTS

WHITE-COLLAR JOBSThe professional and business services sector accounts for a larger share of total employment than the U.S. average.

POPULATION GROWTHA gain of approximately 109,000 residents in the metro over the next five years will increase the need for basic health and education services.

HIGHLY AFFLUENT POPULATIONSan Diego’s median household income of $72,200 per year is well above the national median.


MARKET OVERVIEW

ECONOMY The San Diego metro is maintaining economic growth. Gross Metro Product (GMP) grew

4.2 percent last year versus 3.1 percent for the nation. The U.S. Department of Defense has a significant impact on the local economy. The largest

employer in the county is the U.S. Navy at the Naval Base Coronado, which includes the North Island Naval Air Station. Camp Pendleton is also a sizable employer.

Tech firms are proliferating. Major technology and research companies include Leidos, General Dynamics NASSCO, Qualcomm and BAE Systems.

SHARE OF 2018 TOTAL EMPLOYMENT

MAJOR AREA EMPLOYERS

Djo Global

General Dynamics Nassco

Kaiser Permanente

Palomar Medical Center

Scripps Health

Rady Children's Hospital

Seaworld Entertainment

Sharp Memorial Hospital

Sony Electronics Inc.

Qualcomm * Forecast

30

MANUFACTURING8%

GOVERNMENT

HEALTH SERVICESEDUCATION AND

+OTHER SERVICES

4%

LEISURE AND HOSPITALITY FINANCIAL ACTIVITIES

15%AND UTILITIES

TRADE, TRANSPORTATION CONSTRUCTION

PROFESSIONAL ANDBUSINESS SERVICES

2%INFORMATION

17%

5%

17% 13% 5%

14%


MARKET OVERVIEW

DEMOGRAPHICS

SPORTS

EDUCATION

ARTS & ENTERTAINMENT

The metro population consists of almost 3.3 million people and will expand to 3.5 million residents through 2023. During this time, 58,000 households will be added.

A median home price of $609,000 is more than double the U.S. median, resulting in a homeownership rate of 53 percent, which is below the national rate of 64 percent.

Residents are more educated than the nation. Roughly 36 percent of the people age 25 and older have a bachelor’s degree, compared with 30 percent for the U.S.

San Diego is California’s oldest community. A large harbor, miles of beaches and

exceptional weather attract businesses, residents and tourists. San Diego still houses a

number of buildings and facilities from its past, including two missions, Old Town San

Diego, Balboa Park and the Hotel del Coronado. San Diego County has grown into a

sophisticated, urban region. Its downtown area has undergone a renaissance in the past

decade or so. Petco Park, home of the San Diego Padres, spurred redevelopment that

spread to the mid-city communities and attracted residents to the urban core. San

Diego’s major tourist attractions include the San Diego Zoo, San Diego Wild Animal Park,

SeaWorld San Diego and Legoland.

* ForecastSources: Marcus & Millichap Research Services; BLS; Bureau of Economic Analysis; Experian; Fortune; Moody’s Analytics; U.S. Census Bureau

QUALITY OF LIFE

31


2018 Population by Age

0-4 YEARS

6%5-19 YEARS

18%20-24 YEARS

8%25-44 YEARS

29%45-64 YEARS

24%65+ YEARS

13%

35.72018

MEDIAN AGE:

U.S. Median:

38.0

$72,200 2018 MEDIAN

HOUSEHOLD INCOME:

U.S. Median:

$58,800

3.3M2018

POPULATION:

Growth2018-2023*:

3.3%

1.2M2018

HOUSEHOLDS:

4.9%

Growth2018-2023*:


32

SAN DIEGO METRO AREA

Unwavering Tenant Demand Pacing Aggressive Development Pipeline

Steady job growth and elevated home prices drive tight rental market. In the last five years, 17,900

new apartments were delivered in San Diego County, yet vacancy has remained below 4 percent. This

trend of elevated construction and limited unit availability persists in 2019, as more than 3,200 rentals

are completed and vacancy remains near a cycle-low level. Steady job creation represents one of the

driving factors that maintains strong apartment demand, with life science, tech and defense firms in

need of additional IT, human resources and accounting professionals. Employment growth within the

professional services sector has driven steady income growth, but home prices have outpaced

income gains. Over the past year, the gap between a mortgage payment and average monthly rent

widened by $500, limiting housing options for many households. Moving forward, a high

concentration of completions in the city of San Diego should appeal to urban professionals. At the

same time, demand for rentals in more affordable areas of the county will likely outpace construction,

causing vacancies in these areas to tighten.

Moderately priced assets with upside potential still highly sought. Vacancy in the metro’s Class B and

C sectors sits at cycle-low levels, warranting robust investor interest for these complexes this year.

Buyers remain focused on value options that offer upside potential. This includes post-1970-built,

Class B assets along Interstate 8 west of Qualcomm Stadium. These complexes provide investors

first-year yields in the high-3 to low-4 percent range. Neighborhoods just north of Downtown San

Diego attract a mixed pool of Class B and C buyers who accept low-3 to low-4 percent initial cap

rates for properties near primary thoroughfares that boast dining and shopping options with the

opportunity to raise rents through renovations. Private high-net-worth investors targeting secondary

markets east of Interstate 15 off Interstate 8 expect to achieve at least a 50 basis point higher yield

than the core markets mentioned above.

* Estimate; ** Forecast; Through 3Q; Trailing 12-month averageSources: Marcus & Millichap Research Services; BLS; CoStar Group, Inc.


33


2019 Market Forecast

Hiring activity by health and defense-related firms drive the steady rate of

employment growth this year to 23,000 jobs.

Annual delivery volume remains heightened for a fifth straight year. Of those

rentals, more than 2,000 are completed in the city of San Diego, with half of

those finalized in downtown.

Availability rises nominally this year to 3.7 percent as vacancy across all

asset classes remains at or near cycle-low levels.

Tight vacancy and strong home price appreciation enable the metro’s

average effective rent to rise by more than 4 percent for a seventh

consecutive year, reaching $2,095 per month.

San Diego’s beach communities near Interstate 8 remains a prime target for

investors, even with sub-3 percent initial returns for smaller Class C

complexes.

* Estimate; ** ForecastSources: CoStar Group, Inc.; RealPage, Inc.; Real Capital Analytics

Employment

up 1.5%

Construction

3,220 units

Vacancy

up 10 bps

Rent

up 4.3%

Investment

34

Metro’s largest submarket claims lowest vacancy rate. Diverse job growth over thepast two years, steered by an influx of professional service-related positions, hasboosted the rate of household formation in San Diego County while also bolsteringincomes and in turn fueling consumer spending. These factors have influencedretailers to absorb nearly 1.9 million square feet over the 24-month span, reducingmetro vacancy to its lowest point this cycle. Entering the second half, available spaceis sparse in Central San Diego, home to 30 percent of the county’s retail supply. Thesubmarket is slated to welcome just 58,000 square feet of new space in 2018,allowing the metro vacancy to remain extremely limited for the foreseeable future.Additionally, the area’s minimal development pipeline should prompt a rise inrenovation projects moving forward.

Small-scale developments bode well for vacancy, marketed rent growth. The averageproject finalized in 2018 comprises approximately 10,000 square feet, with only fourcompletions totaling more than 20,000 square feet. This lack of larger-scale deliveriesallows absorption to keep pace with construction, holding the metro’s vacancy ratebelow 4 percent this year. A minimal construction pipeline beyond 2018 suggests aprolonged period of tight vacancy should be on the horizon, prompting the averageasking rent to return to the previous cycle’s peak.

• Persistent job creation coupled with tight vacancy throughout the county haslocal and Southern California-based investors eager to acquire San Diegoretail properties. An expanding buyer pool and stout average price growthrecently prompted an uptick in listings volume, translating to a 33 percentrise in transaction activity during the past 12 months. The multi-tenantsegment recorded a noteworthy rise in deal flow, with centers frequentlytrading at high-4 to high-5 percent cap rates.

• Average pricing in the metro reached $428 per square foot over the pastyear, driven by higher-valued neighborhood and strip center tradescombined with a healthy number of single-tenant assets that sold for at least$1,000 per square foot.

• Pre-1990-built properties in the city of San Diego, where 15 to 20 percent ofrentable space is vacant, attract upside-seeking buyers. The metro’sshrinking development pipeline suggests these investors can fill empty floorplans at higher asking rents.

Retail 2018 OutlookTightest Market in Southern CaliforniaBenefits From Shrinking Pipeline


545,000 sq. ft.will be completed

2.4% increasein asking rents

10 basis pointincrease in vacancy

Construction:

The average asking rent rises to $24.83 persquare foot in 2018, trailing the previouscycle’s peak marketed rent by less than $1per square foot.

Vacancy rises 10 basis points to 3.8 percentas net absorption of 382,000 square feetholds availability below 4 percent for asecond consecutive year.

* Cap rates trailing 12 months through 2Q18; 10-Year Treasury up to June 29.Sources: CoStar Group, Inc.; Real Capital Analytics

This year, construction declines from the663,000 square feet brought on in 2017.Deliveries larger than 100,000 square feetare nonexistent in 2018.

Vacancy:

Rents:

Investment Trends


35

• San Diego organizations created 24,700 positions during the past 12 months, cutting unemployment 70 basis points to a historically low 3.3 percent in June.

• The professional and business services sector added 10,800 positions over the past year. Three additional industries each bolstered payrolls by at least 4,000 jobs during the period.

EMPLOYMENT

• Deliveries rose marginally during the last four quarters, driven by a 251,000-square-foot expansion of Westfield UTC, along with a new Nordstrom, also at the mall.

• Approximately 484,000 square feet of retail space is slated for completion during the second half of 2018. An additional 54,000 square feet is under construction and pinned for 2019 finalization.

CONSTRUCTION

• Net absorption of nearly 700,000 square feet of space contracted vacancy by 20 basis points to 3.7 percent, the lowest rate since late 2007.

• The I-15 Corridor submarket posted the largest decline in vacancy, falling 180 basis points to 3.4 percent amid a lack of new supply. North San Diego was the only submarket to record an increase in availability.

VACANCY

• The average asking rent adjusted minimally over the past year falling to $24.31 per square foot in June. South Bay posted a gain of 10 percent, raising the submarket’s average marketed rate to $23.52 per square foot.

• Overall, average asking rents in the single- and multi-tenant sectors both dipped slightly over the past year, by 0.2 percent and 1.1 percent, respectively.

RENTS


decrease in the average asking rent Y-O-Y

0.5%basis point decrease in vacancy Y-O-Y20square feet completedY-O-Y

567,000increase in total employment Y-O-Y1.7%

* Forecast

2Q18 - 12-Month Trend


36

Property Values Surge, Cap Rates Hold Amid Tight Vacancy,Lack of Larger Developments

Outlook: The high volume of recent andupcoming apartment deliveries inDowntown San Diego attracts more retailinvestors to smaller, core-located multi-tenant properties.

VacancyRate

Y-O-YBasisPoint

ChangeSubmarket

AskingRent

Y-O-Y%Change

Submarket Trends

Lowest Vacancy Rates 2Q18

Sales Trends


• Multi-Tenant: Transaction volume spiked by more than 40 percent during the past 12months, supported by a host of $2 million to $5 million closings. This increase wasaccompanied by a 10 percent rise in the average price per square foot to $406.

• Single-Tenant: Transaction volume was roughly unchanged, while the average priceper square foot on closed deals rose 9.2 percent to $445, aided by higher-pricedrestaurants and freestanding properties.

* Trailing 12 months through 2Q18 over previous time period.Pricing trend sources: CoStar Group, Inc.; Real Capital Analytics

Central San Diego 2.8% -20 $24.83 -3.9%

East County 2.9% -20 $20.05 0.8%

I-15 Corridor 3.4% -180 $33.72 -3.7%

South Bay 3.9% -40 $23.52 10.0%

North County 4.5% -60 $20.79 0.6%

North San Diego 5.7% 180 $32.86 -5.0%

Overall Metro 3.7% -20 $24.31 -0.5%


* Forecast **2017-2022

37



• Fed raises benchmark rate, plans for additional increases. The Federal Reserve recentlyincreased the federal funds rate by 25 basis points, lifting the overnight lending rate to 2percent at the conclusion of its September meeting. The Fed noted inflation has broadlyreached its target, while household spending and corporate investment remain robust. TheFed indicated an additional rate hike this year and projects as many as three increases in2019.

• Lending costs rise alongside Fed rate increase. As the Fed lifts rates, lenders have beentightening margins to compete for loans. Despite these efforts, borrowing costs remain on anupward trajectory, which is tightening returns and pushing some investors to seek greateryields in secondary markets. However, though buyers may try to push back on pricing due toincreased loan costs, some sellers remain convinced that the strong economy and sturdy NOIperformance substantiate aggressive pricing and a widening expectation gap is the result. Ifinterest rates rapidly surge upward, this gap could quickly widen, slowing transaction activity.

• The capital markets environment remains competitive. As the Fed tightens policy, globalinvestors have been acquiring Treasurys in order to capture a considerable yield premium,keeping the 10-year Treasury near 3 percent. Portfolio lenders are providing debt for retailassets, with leverage typically capped at 60 to 65 percent. The sector has becomeincreasingly nuanced, with deals more scrutinized due to e-commerce competition. Ten-yearloan structures will range between 4.95 and 5.25 percent, depending on tenancy, location andsponsorship. Continued consumer spending underpins U.S. growth, supporting retail demandand driving a 10-basis-point decline in vacancy to 4.9 percent this year.

Through Sept. 26Sources: CoStar Group, Inc.; Real Capital Analytics

Capital Markets

PROPERTY NAME

MARKETING TEAM


DEMOGRAPHICS

Source: © 2018 Experian

Created on June 2019

POPULATION 1 Miles 3 Miles 5 Miles 2023 Projection

Total Population 38,106 239,827 586,132

2018 Estimate


2010 Census


2000 Census


Daytime Population

2018 Estimate 59,903 225,811 491,036

HOUSEHOLDS 1 Miles 3 Miles 5 Miles 2023 Projection

Total Households 13,822 90,004 221,812

2018 Estimate


Average (Mean) Household Size 2.51 2.63 2.62

2010 Census


2000 Census


Growth 2015-2020 0.39% 1.14% 1.99%

HOUSING UNITS 1 Miles 3 Miles 5 Miles Occupied Units

2023 Projection 13,822 90,004 221,812

2018 Estimate 14,066 90,067 219,993

Owner Occupied 4,463 34,304 90,513

Renter Occupied 9,305 54,684 126,961

Vacant 298 1,078 2,519

Persons In Units

2018 Estimate Total Occupied Units 13,768 88,989 217,474

1 Person Units 31.12% 29.40% 29.77%

2 Person Units 30.52% 29.57% 30.23%

3 Person Units 15.96% 15.46% 14.86%

4 Person Units 11.60% 12.28% 11.67%

5 Person Units 5.56% 6.81% 6.72%

6+ Person Units 5.24% 6.48% 6.75%

HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles 2018 Estimate

$200,000 or More 3.31% 4.08% 4.43%

$150,000 - $199,000 3.83% 4.34% 5.36%

$100,000 - $149,000 12.92% 12.51% 14.59%

$75,000 - $99,999 11.17% 12.36% 13.83%

$50,000 - $74,999 15.75% 16.56% 17.68%

$35,000 - $49,999 12.42% 14.02% 13.32%

$25,000 - $34,999 10.64% 10.41% 9.30%

$15,000 - $24,999 12.72% 11.78% 10.05%

Under $15,000 17.23% 13.95% 11.43%

Average Household Income $67,098 $72,172 $78,942

Median Household Income $45,470 $49,819 $57,541

Per Capita Income $25,722 $26,906 $29,486

POPULATION PROFILE 1 Miles 3 Miles 5 Miles Population By Age

2018 Estimate Total Population 38,365 241,987 586,685

Under 20 26.26% 25.77% 24.65%

20 to 34 Years 35.07% 27.32% 27.00%

35 to 39 Years 6.47% 7.37% 7.72%

40 to 49 Years 10.21% 12.41% 12.54%

50 to 64 Years 12.46% 15.72% 16.45%

Age 65+ 9.53% 11.39% 11.64%

Median Age 28.25 33.06 34.04

Population 25+ by Education Level

2018 Estimate Population Age 25+ 22,026 157,226 395,318

Elementary (0-8) 6.53% 7.33% 6.44%

Some High School (9-11) 8.80% 9.35% 8.39%

High School Graduate (12) 20.03% 21.86% 20.51%

Some College (13-15) 22.54% 23.20% 23.95%

Associate Degree Only 6.95% 7.17% 7.92%

Bachelors Degree Only 20.78% 17.91% 19.69%

Graduate Degree 10.75% 9.80% 10.59%

Population by Gender

2018 Estimate Total Population 38,365 241,987 586,685

Male Population 49.91% 49.36% 49.51%

Female Population 50.09% 50.64% 50.49%

38

IncomeIn 2018, the median household income for your selected geography is$45,470, compare this to the US average which is currently $58,754.The median household income for your area has changed by 50.87%since 2000. It is estimated that the median household income in yourarea will be $51,485 five years from now, which represents a changeof 13.23% from the current year.

The current year per capita income in your area is $25,722, comparethis to the US average, which is $32,356. The current year averagehousehold income in your area is $67,098, compare this to the USaverage which is $84,609.

PopulationIn 2018, the population in your selected geography is 38,365. Thepopulation has changed by 8.13% since 2000. It is estimated that thepopulation in your area will be 38,106.00 five years from now, whichrepresents a change of -0.68% from the current year. The currentpopulation is 49.91% male and 50.09% female. The median age ofthe population in your area is 28.25, compare this to the US averagewhich is 37.95. The population density in your area is 12,213.69people per square mile.

HouseholdsThere are currently 13,768 households in your selected geography.The number of households has changed by 6.40% since 2000. It isestimated that the number of households in your area will be 13,822five years from now, which represents a change of 0.39% from thecurrent year. The average household size in your area is 2.51 persons.

EmploymentIn 2018, there are 10,156 employees in your selected area, this is alsoknown as the daytime population. The 2000 Census revealed that62.22% of employees are employed in white-collar occupations inthis geography, and 38.20% are employed in blue-collar occupations.In 2018, unemployment in this area is 6.06%. In 2000, the averagetime traveled to work was 28.00 minutes.

Race and EthnicityThe current year racial makeup of your selected area is as follows:53.11% White, 11.68% Black, 0.31% Native American and 15.14%Asian/Pacific Islander. Compare these to US averages which are:70.20% White, 12.89% Black, 0.19% Native American and 5.59%Asian/Pacific Islander. People of Hispanic origin are countedindependently of race.

People of Hispanic origin make up 31.04% of the current yearpopulation in your selected area. Compare this to the US average of18.01%.

PROPERTY NAME

MARKETING TEAM


HousingThe median housing value in your area was $407,401 in 2018,compare this to the US average of $201,842. In 2000, there were4,652 owner occupied housing units in your area and there were8,289 renter occupied housing units in your area. The median rent atthe time was $633.

Source: © 2018 Experian

DEMOGRAPHICS

39

8


DEMOGRAPHICS

40

Slide Number 1Slide Number 2Slide Number 3Slide Number 4Slide Number 5Slide Number 6Slide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Slide Number 13Slide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18Slide Number 19Slide Number 20Slide Number 21Slide Number 22Slide Number 23Slide Number 24Slide Number 25Slide Number 26Slide Number 27Slide Number 28Slide Number 29Slide Number 30Slide Number 31Slide Number 32Slide Number 33Slide Number 34Slide Number 35Slide Number 36Slide Number 37Slide Number 38Slide Number 39Slide Number 40

offering memorandum - loopnet...2010 census hh 12,520 82,834 202,858 median hh income $45,470...

Documents