Marketing Package_3760 4TH AVE_SAN DIEGO_92103(v1).docx Titan Pacific Group, Inc. Real Estate Sales & Investments Lic. 01521873 949.464.7639 office www.titanpac.com Omid Yousofi Principal Partner & Realtor Lic. 01702974 858.232.5712 mobile [email protected]Offering Memorandum for the Subject Property located at: 3760 4 th Avenue, San Diego 92103 Situated a few miles north of San Diego’s bustling downtown core, Hillcrest is a vibrant uptown neighborhood that stands as San Diego’s LGBT central hub, offering visitors a plethora of bars, restaurants, coffee houses, boutiques and unique thrift stores. Hillcrest is one of San Diego’s most urban and mature neighborhoods with no vacant land for new development. The primary thoroughfares of Hillcrest are University Ave. and Washington Street (east-west), along with Robinson Avenue; and listed in order from east to west are the north-south running avenues of Sixth, Fifth, and Fourth. The Fifth Avenue stretch between Robinson and Washington is considered the heart of Hillcrest. The specific Hillcrest neighborhood where the Subject Property is located is bordered to the north by Robinson Avenue, to the west by Third Avenue, to the east by Fifth Avenue, and to the south by Pennsylvania Avenue. This lay of the land is provided only for the sake of definition, because the unique and mature character of the 92103 neighborhood means that Hillcrest blends into the surrounding neighborhoods of Mission Hills to the west, University Heights to the east, and Banker’s Hill to the south (beyond which you will find downtown San Diego’s Gaslamp Quarter). Situated one-block north of Robinson Avenue is University Avenue, where locals and visitors find a colorful mix of ethnically diverse restaurants, nightclubs and acclaimed wine bars. The University Avenue stretch is also home to furniture stores, distinctive boutiques and the Uptown District shopping plaza. The avenue leads into the neighborhood’s “village” area designated by the historic, neon “Hillcrest” sign. On intersecting Fifth Avenue (recall, one block east of Fourth Avenue where the Subject Property is located, you will discover a concentration of new and established restaurants as well as a few dessert-centric eateries. The area is also home to vintage clothing shops, book outlets and the multiplex Landmark Cinemas for taking in independent and foreign films.
Offering Memorandum for the Subject Property located at: 3760 4th Avenue, San Diego 92103
Situated a few miles north of San Diego’s bustling downtown core, Hillcrest is a vibrant uptown neighborhood that stands as San Diego’s LGBT central hub, offering visitors a plethora of bars, restaurants, coffee houses, boutiques and unique thrift stores. Hillcrest is one of San Diego’s most urban and mature neighborhoods with no vacant land for new development.
The primary thoroughfares of Hillcrest are University Ave. and Washington Street (east-west), along with Robinson Avenue; and listed in order from east to west are the north-south running avenues of Sixth, Fifth, and Fourth. The Fifth Avenue stretch between Robinson and Washington is considered the heart of Hillcrest. The specific Hillcrest neighborhood where the Subject Property is located is bordered to the north by Robinson Avenue, to the west by Third Avenue, to the east by Fifth Avenue, and to the south by Pennsylvania Avenue. This lay of the land is provided only for the sake of definition, because the unique and mature character of the 92103 neighborhood means that Hillcrest blends into the surrounding neighborhoods of Mission Hills to the west, University Heights to the east, and Banker’s Hill to the south (beyond which you will find downtown San Diego’s Gaslamp Quarter). Situated one-block north of Robinson Avenue is University Avenue, where locals and visitors find a colorful mix of ethnically diverse restaurants, nightclubs and acclaimed wine bars. The University Avenue stretch is also home to furniture stores, distinctive boutiques and the Uptown District shopping plaza. The avenue leads into the neighborhood’s “village” area designated by the historic, neon “Hillcrest” sign. On intersecting Fifth Avenue (recall, one block east of Fourth Avenue where the Subject Property is located, you will discover a concentration of new and established restaurants as well as a few dessert-centric eateries. The area is also home to vintage clothing shops, book outlets and the multiplex Landmark Cinemas for taking in independent and foreign films.
Offering Memorandum for the Subject Property located at: 3760 4th Avenue, San Diego 92103 Page 2 October 31, 2018
All information has been taken from sources deemed to be reliable, however, prospective buyers / investors shall be responsible for its own due diligence, which includes verifying all the assumptions and information contained within this Offering Package.
EXECUTIVE SUMMARY The Property, which is situated in a prime Hillcrest location is listed for $1,699,000 and is comprised of an existing two-story commercial office building on a 6,751 square foot lot. All future projects in Hillcrest will be a redevelopment of existing properties. Class C office space in the immediate area surrounding the Subject Property ranges between $18.87 $/SQFT/Yr (net of expenses) to $35.30 $/SQFT/Yr (net of expenses), with midpoint lease rates at $23.78 $/SQFT/Yr (net of expenses). Hillcrest also has some of the highest price per foot apartment rentals in San Diego County. Newer project in Hillcrest boast apartment rents well in excess of $3.00 per foot (1-bed, 2-bed, and 3-bed; and around $5.00 per foot for micro-studios). Therefore, the Subject Property is ideal for Buy and Hold investment (Scenario 1 below) and also for investors interested in the acquisition, design, development, construction, and ultimate disposition (Scenario 2 below). Reference Photos
Neighboring project: Construction of a new 6-story limited service hotel (24 keys) with 1-residential penthouse unit, & shop; removal of the existing structure with the exception of the North & South side walls with Ground floor shell (future restaurant).
Offering Memorandum for the Subject Property located at: 3760 4th Avenue, San Diego 92103 Page 3 October 31, 2018
All information has been taken from sources deemed to be reliable, however, prospective buyers / investors shall be responsible for its own due diligence, which includes verifying all the assumptions and information contained within this Offering Package.
Offering Memorandum for the Subject Property located at: 3760 4th Avenue, San Diego 92103 Page 4 October 31, 2018
All information has been taken from sources deemed to be reliable, however, prospective buyers / investors shall be responsible for its own due diligence, which includes verifying all the assumptions and information contained within this Offering Package.
Offering Memorandum for the Subject Property located at: 3760 4th Avenue, San Diego 92103 Page 5 October 31, 2018
All information has been taken from sources deemed to be reliable, however, prospective buyers / investors shall be responsible for its own due diligence, which includes verifying all the assumptions and information contained within this Offering Package.
SALES COMPARISON
SCENARIO 1 – BUY & HOLD
The comps shown below are all Class C office buildings within a specific geographic location close to the Subject Property. As shown on Table 1 (Lease Comps) below, there were three different categories of lease terms for the comps: (1) Full Service; (2) NNN; and (3) Modified Gross. In order to normalize the analysis, rental income received for Full Service leases has been reduced by 30% to cover expenses, and rental income received for Modified Gross comps have been reduced by 15% to cover expenses. Table 1 – Lease Comps
Offering Memorandum for the Subject Property located at: 3760 4th Avenue, San Diego 92103 Page 6 October 31, 2018
All information has been taken from sources deemed to be reliable, however, prospective buyers / investors shall be responsible for its own due diligence, which includes verifying all the assumptions and information contained within this Offering Package.
The result of this analysis is that the average $/SQFT/Month lease rate for Class C office space in that area is equal to $1.98 per square foot (net of expenses). The investment metrics based on this income figure are shown in Table 2 (Rental Property Income/Expense Analysis) below. Table 2 – Rental Property Income/Expense Analysis
Table 3 below assumes disposition of the asset after a 5-year hold period. Table 3 – Disposition After 5-year Hold
Offering Memorandum for the Subject Property located at: 3760 4th Avenue, San Diego 92103 Page 7 October 31, 2018
All information has been taken from sources deemed to be reliable, however, prospective buyers / investors shall be responsible for its own due diligence, which includes verifying all the assumptions and information contained within this Offering Package.
SCENARIO 2 – DEVELOPMENT Once acquired, development activities could commence to replace the existing office building with a seven (7) story above-grade + one (1) floor subterranean (for parking) Mixed Use (commercial-residential) building totaling 36-units comprised of eleven (11) residential dwelling units (DU’s) and twenty-five (25) single room occupancy (“SRO”) units (the “Project”).
Property Overview Acquisition Price: $1,699,888
Address: 3760 4th Avenue, San Diego, CA 92103
Neighborhood: Hillcrest
Lot Size: 6,751 square feet
Existing Building Size: 4,200 square feet
Existing Structures: 2-story commercial office building
Walk-Score: 91 “Walker’s Paradise” (daily errands do not require a car)
Transit Score: 53 “Good Transit” (many nearby public transportation options)
Bike Score: 60 “Bikeable” (flat as a pancake, minimal bike lanes)
Zoning: CC 3-8 “Community Commercial”
Construction of the Development Project in this Offering Memorandum is envisioned as follows: Five (5) floors of Type IIIA (wood-framed) construction over two (2) floors of Type IA (concrete) podium construction over about one (1) subterranean floor of Type IA (concrete). The subterranean floor would be all parking. The ground floor would likely be a mix of SRO’s, Lobby and a few parking stalls. Floors 2-7 would be Apartments and SRO’s. The viability of the conceptual structure and all info contained herein should be confirmed by the Buyer (see Figure 1 – Building Wall Section).
DEVELOPMENT NOTES DENSITY (BASE) 11 DU's (6751 sqft / 600 sqft)
DENSITY (AFFORDABLE BONUS) Increase residential density from Base Density of 11 DU’s by 50% (additional 6 DU's) to Total Residential Density = 17 Dwelling Units if Affordable Housing Bonus were to be utilized (comprised of 15 Market Rent Units & 2 Affordable Units). Note however, that: Affordable Housing Density Bonus has not been factored into our analysis and is therefore provided only for reference since it is an available scenario that we are electing not to pursue after determining that the project’s financials are preferable without the Affordable Housing Density Bonus.
ZONING PARAMETERS Commercial Zoning allows SRO'S as additional commercial suites can be built on site and are only limited by FAR
HEIGHT LIMIT & SETBACKS 100 ft height limitation (13 ft minimum ground-floor height if commercial on ground-floor); 10 ft minimum setback requirement all around (except that 30% of the frontage can have zero setback)
FAR
Increase allowable FAR per Table 131.0530 From Base FAR of 2.0 + Bonus Residential FAR of 2.5 = 4.5 TOTAL FAR
Reduce Visibility Area per 113.0273(a) to allow for Building Encroachment into Street Corner Visibility Area
Remove Off-Setting Plane Requirements per 131.0554(a) and Table 13-05F
Remove Requirement for Prohibit of Residential Uses & Residential Parking on the Ground Floor in the front 30-ft of the lot per 131.0540(C)(1) Parking Requirements
Residential Parking Required = 0.5 Spaces per bedroom = 23 (bedrooms) x 0.5 = 12 spaces
Commercial Parking Required for Alley Access = 1 Space per 10 feet of Alley Frontage, Minus One Space = (50-ft/10-ft) = (5-1) = 4 Spaces (per SDMC Chapter 14 Sec. 142.0540 'Exceptions to Parking Regulations for Nonresidential Uses' Table 142-05H. TOTAL PARKING REQUIRED = 16; TOTAL PARKING PROVIDED = 16
Pre-leasing activities could begin shortly before completion of construction with full lease-up taking place within six (6) months of construction completion, and ultimate disposition of the to-be-developed asset is contemplated to take place following a one-year lease stabilization period (4 years from acquisition to ultimate disposition of the asset).
Offering Memorandum for the Subject Property located at: 3760 4th Avenue, San Diego 92103 Page 8 October 31, 2018
All information has been taken from sources deemed to be reliable, however, prospective buyers / investors shall be responsible for its own due diligence, which includes verifying all the assumptions and information contained within this Offering Package.
Figure 1: Building Wall Section
RENTAL COMPS AFTER DEVELOPMENT
Offering Memorandum for the Subject Property located at: 3760 4th Avenue, San Diego 92103 Page 9 October 31, 2018
All information has been taken from sources deemed to be reliable, however, prospective buyers / investors shall be responsible for its own due diligence, which includes verifying all the assumptions and information contained within this Offering Package.
