S.J. Fowler Commercial Investment Presents: Light … Jan 2008.pdfS.J. Fowler Commercial Investment...

S.J. Fowler Commercial Investment Presents:

Light Rail

Redevelopment Opportunity

5 Acres: Camelback/3rd Ave

Contact:

Lloyd Kaipainen, Associate Broker, CCIM 602-265-6617

Lois Kaipainen, Senior Advisor, 602-615-1345SJF

Camelback Road

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Light Rail Station7th Ave/Camelback

Light Rail StationCentral/Camelback

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S.J. Fowler/Real Estate Inc. DBA S.J. Fowler/GMAC Real Estate, 5060 N 40th Street, Suite 120, Phoenix AZ 85018

Do not duplicate or disclose any information contained herein without written permission from Desert Homes Property Management Corporation.

Table of Contents

The Assemblage

Light Rail

Camelback Corridor

Development Potential/TOD

Area Photos

Comps/Management

Demographics

Contact Information

Page 3

Page 4/5

Page 6

Page 7

Page 8

Page 9

Page10/11

Page 12

This assemblage includes ten contiguous parcels at the Northwest corner of CamelbackRoad and 3rd Avenue, creating a 5 acre site that is well positioned for redevelopment.The property is in a ClassAredevelopment area and is ideally situated for an infill, mixed-use, pedestrian-oriented environment. It is located directly on the new Light Rail transitroute. Light Rail construction is complete in front of the assemblage, but trains will not bein use until the remainder of the route is completed in December of 2008. Thisassemblage is situated between two Light Rail Stations, walking distance to both. TheCity has installed a new traffic signal at 3rd Avenue, allowing easy access fromCamelback Road in both directions.

The assemblage boasts approximately 600 feet of Camelback Road frontage. There isapproximately 530 feet of frontage on West Pasadena Avenue and approximately 425feet of frontage on 3rd avenue! There is also the potential for a significant gain in squarefootage if the City of Phoenix will grant an abandonment for the alley between PasadenaAvenue and Camelback Road.

The Assemblage

Camelback Road

Pasadena Avenue

3rd

Avenue



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Lot 24: Tamarack ApartmentsLot 25: Uptown ApartmentsLot 26: Arcadia ApartmentsLot 27: Marue ApartmentsLot 28: Royal Pasadena ApartmentsLots 35/34: 444 Office BuildingLots 33/32: Orleans Office BuildingLots 31/30/29: Beef Eater’s Restaurant

24 25 26 27 28

29303135/34 33/32

3

Light Rail



SJFPhoenix is following the pattern of all major cities with the construction of the Light Railand with urban renewal. Given the exponential growth in Phoenix and the massive sizeof the Metro area, Phoenix is ripe for increased density in the heart of the city. As shownin the map below, the Light Rail Station at Central & Camelback will be well within walkingdistance from the assemblage and a second station, also within walking distance, will belocated at Camelback Road and 7th Avenue.

Construction is complete on this segment of theLight Rail and this is the ideal time to build. The Light Rail route is available at thefollowing url:

The Light Rail will pass directly in front ofthe Camelback side of the assemblage.

http://www.valleymetro.org/METRO_light_rail/

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Camelback RoadCamelback Road

7th Ave & CamelbackSTATION

Population

Employees

Households

Avg. Householdincome

5,833

3,570

2,834

$51,594


Source: 2000 Census (½ mile radius or 10 min.walk from station)

Population

Employees

Households

Avg. Householdincome

3,289

9,192

1,665

$70,223

Central Ave & CamelbackSTATION

Source: 2000 Census (½ mile radius or 10 min.walk from station)

4

Light Rail (cont)



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The Light Rail will be able to carry up to 600 passengers in each three-car train. Duringpeak hours, the system is projected to carry 3,000 to 5,000 passengers per hour initially.The system will have the capacity to carry up to 12,000 people per hour, which is theequivalent of a six-lane freeway. In addition, the Light Rail will operate on a dedicatedline, will have priority at traffic signals and will travel at posted speeds. It will alsoconnect seamlessly with the current city bus transport system.

The cost of the initial 20 mile Metro line is $1.4 billion dollars, approximately 41% ofwhich will be funded by a federal grant. Six extensions to the initial line were approvedby voters in three separate transportation elections. The Regional Transportation Plancurrently includes 37 miles of future light rail extensions in Phoenix, Tempe, Mesa andGlendale. The Northwest (Glendale) segment is scheduled for completion in 2012,Mesa and Tempe segments in 2015 and additional segments through 2025 .

The most comprehensive report to date on light rail and property values was conductedin 2002 by the University of North Texas on the DART light rail system in Dallas. Thestudy found that property values near light rail stations had a 50 percent greater increasein value than comparable properties in other areas without light rail. Vacant landvalues appreciated five times faster around DART stations. One year after DARTservice began, retail sales jumped more than 12 percent in the Central Business Districtversus less than a one percent increase city-wide. A newer study by the same grouptook a different track and estimated that between 1999 and 2005, $3.3 billion dollars hasbeen spent on development and redevelopment on or near the Dart routes.

The U.S. Department of Transportation reports the potential for growth in transit zonepopulation to be 250-300% in expanding, large and new start areas. This is due tohousehold growth and the emergence of transit as a viable mode of transportation.


Connecting Cities

Rail Length

Travel Time

Operation

Frequency

Phoenix, Tempe, Mesa

20 miles total

1 hr one end to end23 min Phx. to Tempe

18-20 hrs / day7 days / week

10-15 min. wait peak20-30 min. wait off-peak

METRO Light Rail

STATISTICS

Camelback Corridor



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The assemblage is located in an affluent North Central Avenue neighborhood, NorthCentral is well known for its historic residential neighborhoods with tree-lined streets andjogging trails, local coffee shops, exclusive restaurants, first-rate public schools(Madison School District) and exclusive private schools. There are numerous offices,shops and restaurants in the immediate area along with a ten story office building at theSoutheast corner of Camelback Road and Central Avenue, M & I Bank is the majortenant. Ashopping center, anchored by Target, is located at Camelback and 7thAvenue.The property is located just a few miles West of the renowned Biltmore area at 24thStreet and Camelback Road. The assemblage is conveniently located near the SR 51and I-17, providing easy access to entertainment and employment venues throughoutthe Valley of the Sun.

This neighborhood is also a job-rich area within the thriving economy of the fifth largestcity in the United States. The mixed-use development on the site will enable the popular“live-work” style units for small business owner/operators. With soaring fuel prices andapproximately 350 new residents moving to the Phoenix area every day, the demand forurban housing has never been stronger.

Keith Mishkin, a recognized Valley expert on urban living, is called upon by analysts andeconomists for market information. He states that “People like that critical mass. It’swhat makes so many cities around the world great cities: that pedestrian lifestyle. Somuch of the architecture is the same out here. People love and appreciate architecture ofurban living...if you look at any one of those cores, particularly downtown Phoenix,Scottsdale and Tempe...that’s where you’re going to see a tremendous amount ofdensity and critical mass, and more and more people flocking to them. Retail will followthe roof tops here.” Mishkin said, “Nightlife will follow. There’s enough space to create areally great newAmerican City.”

Development



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The City of Phoenix has established a Transit-Oriented Development (TOD) OverlayDistrict to encourage a pattern of development characterized by a mix of usessurrounding a transit station, where streets have a high level of connectivity, blocks aresmall and buildings and uses cater to the pedestrian. The purpose is to make access toand from the transit station walk-able and accessible in an environment that is human-scaled and provides for a mix of compatible and complementary land uses whichfacilitate transit rider-ship. Additional information is available in a brochure published bythe City of Phoenix in conjunction with Metro Light Rail.

The parcels with Camelback Road frontage are currently zoned C-2 and used for officeand retail space and are in the Transit Overlay Plan. The parcels on Pasadena Avenueare zoned R-4 with multi-family use. All of the neighboring parcels around theassemblage have commercial or multi-family zoning with the exception of one singlefamily rental property which is located on the Southeast corner of 3rd Avenue andPasadena.

Adjoining properties to the West have already obtained density and height varianceswith no substantial opposition from neighborhood groups. While it is always necessaryto meet with neighborhood coalitions and work with the neighbors during zoningchanges, both the Councilman and the Village Planner indicated that they would expectsupport from the neighborhood groups as long as neighborhood parking and trafficconcerns are addressed in a constructive manner.

The owners are not pursuing the zoning variances to keep all options open and allow adeveloper who can design the site and the buildings according to their own marketintelligence and product strategy. The ultimate profitability will depend on the design ofthe final product. Underground parking will ensure the optimization of construction, but itdoes add to the cost of the finished product. Alternatively, spacious luxury units wouldalso be highly marketable in this outstanding location. Comparable luxury units in theBiltmore and Scottsdale Waterfront areas are commanding $600 to $1,000 per squarefoot!

Area Photos



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Medlock Historical District

M & I BankCentral & Camelback

The Marue Apartment complex

Orleans Office Building

Royal Pasadena Apts

Light Rail Tracks heading East!

Comps/Management



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The redevelopment projects, condominium conversions, new condominiums, loft andluxury townhouses of the Camelback and Central Corridor have moved swiftly; manyprojects have sold out during the reservation phase. The average sale price for newupscale urban condos and lofts was approximately $424/SF in Phoenix in 2007 withadditional revenues from parking, view premiums and custom design features. Someprojects, such as the Optima Biltmore at Camelback Road and 24th Street, sold for anaverage of $470/SF in 2007. Century Plaza, a 15 story design with 143 units, is a fewblocks farther South and priced at $475/SF. Tapestry on Central is a 280 unit complex onEncanto just off Central, with prices starting at $299/SF. Chateau on Central is a Victoriandesign with only 21 units and four stories, nearing completion with unit sizes ranging from5,100 sf to 8,200 sf, with starting prices of $318/SF. Portland Place at Central and Portland,is a ten story, 190 unit complex with prices at starting at $533/SF. The Landmark on Centralis a conversion with 238 units and 17 stories, selling at $279/SF.

Teresa Welborn is the principle investor in the assemblage. She is President of DesertHomes Property Management Corporation (DHPM) which manages most of theassemblage properties. Ms. Welborn has been a real estate investor for over 30 years.Over the last several years Ms. Welborn has purchased or led investor groups to purchase anumber of apartment communities in the Phoenix area. Ms. Welborn’s businessexperience includes management consulting and operating several small businesses.There are numerous other investors involved in the project, however Ms. Welborn has fulldecision authority for the project.

All of the parcels are occupied with excellent occupancy with the exception of the BeefEater’s Restaurant which is being offered for lease, all or part. The owners may be willing tocontinue to manage the buildings for a twelve to twenty-four month period while the newowner pursues the zoning variances. Below is an illustration of potential income.

Camelback & 3rd Avenue AssemblageProperty Income/Expense Summary Proforma

Gross Market RentsAdjusted Gross IncExpenses (40%)NOISF BuildingsSF LandZoningCurrent Occupancy

Royal Pasadena20 Units$222,000$210,910$84,360

$126,54019,22418,910

R-495%

Marue12 Units$85,680$81,396$32,558$48,8387,303

18,910R-495%

U/A36 Units$280,140$266,133$106,453$159,68028,77935,987

R-495%

Tamarack20 Units$152,400$144,780$57,912$86,86816,92815,180

R-495%

Beef Eater’sRestaurant$204,000$204,000Triple Net$204,00017,88146,590

C-2Occupied

Orleans33 Suites$210,000$199,500$79,800$119,70019,81541,000

C-295%

444 Office4 Floors

$130,500$123,975$49,590$74,38511,08930,000

C-295%

Total

$1,284,720$1,230,694$410,673$820,021121,019206,577

Note: The above financial information is designed to illustrate potential income during the entitlement/preliminary construction period.The Beef Eaters Restaurant is currently being offered for lease with attractive terms, for additional income.

Demographics



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Market Area: 5 mile radius of 400 W Camelback Road, Phoenix AZ 85013

Population:

In a five mile radius of the assemblage, the annual rate of population growth from 2007 to 2012 isexpected to be 2.08%. The 2007 population in the same five mile radius was 487,309, increasingto 540,208 by 2012. In 2000, the census count was 447,619. The rate of change from 2000 to2007 was 1.37% annually. Currently, the population is 51.8 percent mail and 48.2 percent female.

The household count in this market area has changed from163,968 in 2000 to 176,185 in 2007, achange of 1.16%. The five year projection of households is 194,790, a change of 2.03% annuallyfrom 2007. Average household size in 2007 is 2.70, compared to 2.67 in 2000. The number offamilies in 2007 was 97,256 in the market area.

In 2007, 41.8% of the 191,570 housing units in the market area are owner occupied; 50.1% arerenter occupied and 8% are vacant. In 2000 there were 177,159 housing units--44.2% owneroccupied, 48.4% renter occupied and 7.4% vacant. The rate of change in housing units since 2000is 1.08 %. Median home value in the market area was $197,655 in 2007 compared to a medianhome value of $192,285 for the US. In five years, median home value is projected to change by3.65% annually to $236,432. From 2000 to 2007, median home value changed by 11.24%annually.

Median household income in 2007 was $41.970 in this market area compared to $53,154 for all UShouseholds. Median household income is projected to be $50,059 in five years. In 2000, medianhousehold income was $32,998, compared to $23,888 in 1990.

Average household income in 2007 was $60,189 in this market area compared to $73,126 for allUS households. Average household income is projected to be $74,212 in five years. In2000,average household income was $46,800, compared to $33,343 in 1990.

Per capita income in 2007 was $22,172 in this market area compared to $27,916 for all UShouseholds. Per capita income is projected to be $27,182 in five years. In 2000,averagehousehold income was $17,512, compared to $13,790 in 1990.

Households:

Housing:

Households by Income:

Demographics (cont)



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Market Area: 5 mile radius of 400 W Camelback Road, Phoenix AZ 85013

Population by Employment:

In 2007, the total number of businesses in a 1 mile radius was 838, with 5,826 employees. In a 3mile radius there were 8,329 businesses with 61,326 employees. And in a 5 mile radius there were17,561 businesses with 164,555 employees.

In 2007, 95.6% of the civilian labor force in this market area were employed and 3.4% wereunemployed. In comparison, 93.4% of the US civilian labor force is employed and 6.6% areunemployed. In five years the rate of employment in this market area is expected to be 96% withan 4% unemployment rate, compared to the US rates of 93.9% and 6.1% respectively.

- 52.6% of the employed are in white collar jobs (compared to 60.2% nationwide)- 20.3% are in service jobs (compared to 16.5% nationwide)- 27.2% are in blue collar jobs (compared to 23.3% nationally)

In 2000, 64.8% of the market area population drive alone to work and 2.8% worked at home. Theaverage travel time to work in 2000 was 24.4 minutes compared to the US average of 25.5minutes.

In 2000, the educational attainment of the population aged 25 or older in the market area wasdistributed as follows:

- 29.5% had not earned a high school diploma (19.6% in the US)- 23.1 were high school graduates only (28.6% in the US)- 5.7% had completed anAssociates degree (6.3% in the US)- 12% had a Bachelor’s degree (15.5% in the US)- 7.5% had earned a Master’s/Professional/Doctorate Degree (8.9% in the US)

Population by Education:

The data contained in this demographics section have been reproduced with permission of ESRI/Business AnalystOnline 2007. All data contained is believed to be accurate, however SJ Fowler GMAC Real Estate nor the owners ofthis assemblage shall be held liable for any errors contained herein.



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Please direct all inquires to:

Lloyd Kaipainen PC CCIMAssociate BrokerS J Fowler/GMAC Real Estate5060 N 40th StreetPhoenix, AZ 85018Voice 602-265-6617Fax [email protected]

Please visitfor the latest developments on Light Rail construction.

http://www.valleymetro.org/METRO_light_rail/

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