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COLDWELL BANKER COMMERCIAL / BROOKS REAL ESTATE, INC. 2013 IN REVIEW & 2014 FORECAST

© 2008 Coldwell Banker Real Estate Corporation.

All Rights Reserved.

Brooks Real Estate Inc


THE MARKET: A LETTER FROM JOHN WILSON REGARDING THE COMMERCIAL REAL ESTATE MARKET

© 2008 Coldwell Banker Real Estate Corporation.

All Rights Reserved.

Brooks Real Estate Inc


COLDWELL BANKER COMMERCIAL BBROOKS REAL ESTATE, INC. 312-B Lightfoot Road Williamsburg, VA 23188

January 9, 2014

BUS (757) 585-2959 FAX (757) 345-5104 Website: www.cbcbrooks.com

To:

Poplar Creek, LLC

From:

John Wilson: Coldwell Banker Commercial / Brooks Real Estate

Attached you will find our Proposed 2014 Budget for the commercial property(s) that we have in our Commercial Lease/Management Program at Coldwell Banker Commercial/Brooks Real Estate. With the Proposed Budget your Leasing and Property Managers have provided an Overview for 2013, highlighting our accomplishments in regards to your individual property, as well as their proposed Budget for 2014. I also wanted to provide you with an overview our Program for 2013 and the upcoming year. The past several years have been difficult years for those of us that have invested in commercial real estate. As we have seen unprecedented difficulties in the business sector that have lead to sharp vacancies, a decline in rental rates, very little expansion in business presence, and in-turn a drop in the values of real estate. Along with a tightening in the banking community, it has been exceedingly difficult for those entrepreneurs in the commercial real estate world. In leasing and managing these portfolios the last seven years we have concentrated on assisting our owners in:  Focusing on the Retention of current tenants and advising on where to make adjustments when necessary.  Maintaining their properties in good standing to assure that the tenants will remain inplace while using prudence and good judgment in executing those activities that were necessary to continue a consistent and well balanced program.  Assisting our Landlords in working with the banking world to assure their loans are appropriate for the times.


 Lastly, continue with a strong leasing effort to screen and place worthy tenants into your property that are capable of paying the rent and maintain a good standing in your business centers. This last year has followed the others in assuring the strongest program profile for our owners with indexes that demonstrate our commitment to assuring the best possible results and return for our owners. The key indexes for our overall program in 2013, are: Program Occupancy Factor:

91%

Program Vacancy Factor:

8%

(With 75% of our properties currently experiencing 100% occupancy)

Program Delinquencies:

4%

Our presence and effectiveness with working and accessing local businesses to attract them to our properties in our program has been a tremendous strength in our program over the years, and in 2012 we affiliated with Coldwell Banker Commercial to assure our landlords of our abilities and effectiveness to work with and access national businesses and franchises, as well. This strategy has worked well for our landlords as we have been able to place four franchise leases into our landlords’ portfolios in 2013. And, the strength of this program continues to gain momentum. All our industry indicators are looking at 2014 as another year that the commercial real estate scenario will continue to improve. Industry journals, national forecasters, and local economic indicators point to better times. So, what we believe you can expect in 2014:  Better Occupancy Rates  Less Vacancies Rates  Steady and lessening in Delinquency Rates, and  Some expansion of local business in locations and existing square footage With that said, we will continue to focus on:  Strong retention efforts of current tenants


 Continued marketing and networking strategies in the business community and commercial real estate community to attract new and upcoming businesses to our centers.  Efficient and appropriate management strategies to assure prudent expenses that maintain properties and assure tenant satisfaction in our management program.  Explore and recruit national business and chains to the area, and to our properties.  Continue to improve our internal program to best service our owners.  Look beyond retention in some sectors to begin to accelerate rents where possible. Again, we look for 2014 to continue to improve, and will continue to examine all possibilities to lease and manage your properties to assure their optimal performance. With that said, as you all know Anna is pregnant and will be going on maternity leave sometime in the 1st quarter; therefore, beginning in January 2014 you will notice a lot more of my presence in the commercial program in regards to not only oversight, but in the everyday leasing efforts. We have some exiting new faces that will be arriving in the leadership of our Residential Brokerage, Coldwell Banker Traditions, which will allow me to devote more of my efforts and time in the commercial program. So, as we go into 2014 we are hopeful and positive of the possibilities for the New Year, and continue to be devoted to the health and performance of your portfolios. As I become more involved with the commercial program I am hoping I will see and talk to you more often. We appreciate your continued patronage in our program, and again look forward to working closely together in 2014. Sincerely,

John Wilson


YOUR PROPERTY OVERIEW: 2013 PROPERTY OVERVIEW AND 2014 PROJECTED INCOME AND PROPOSED BUDGET & EXPENSES

© 2008 Coldwell Banker Real Estate Corporation.

All Rights Reserved.

Brooks Real Estate Inc


Coldwell Banker Commercial / Brooks Real Estate 2013/2014 Overview The following is an overview of 2013 and our Proposed Forecast for 2014 for both Income and Expenses projections for your property located at 3300 Acorn Street, Williamsburg, Virginia.

2013 Highlights • • • •

74% Occupancy Factor Retention of current Tenants and new leases with credit worthy Tenants. Expenses came in under budget for the year The HVAC system on Craggy Oak was replaced and several other HVAC units throughout the property were addressed. • Property closed out with under 3% delinquency.

2014 Income Projections, prepared by Anna Lind (see enclosure) • • •

Continued retention of strong Tenants. Leasing to credit worthy Tenants. All current Tenants renew as scheduled without any escalations.

2014 Proposed Expense Budget, prepared by Robyn Williams (see enclosure) • •

$1200 was added for mulch and tree trimming Janitorial went up slightly as we established a new janitorial service at the beginning of the year. • $14,208 was placed in for Real Estate Taxes as there was an additional building added • $60,000 was recommended for the Improvement Program for wood rot, paint and seal coating of the parking lot.

We look forward to providing you with Leasing and Management Services this coming year.


Should you have any questions regarding the material provided in this package, please do not hesitate to contact us at 757-229-1507.

Very truly yours, Coldwell Banker Commercial / Brooks Real Estate

John Wilson, Managing Broker Anna Lind, Commercial Leasing Agent Robyn Williams, Commercial Property Manager Frankie Byrnes, Senior Bookkeeper Nicole Cook, Executive Assistant


2014 Income Projections Budget Income Chart Poplar Creek - 2014 Tenant Unit USPS 3301 COGENT 3300 VACANT 3300-318 VACANT 3302-102 BLUE GRACE LOGISTICS 3302-103 VACANT 3302-101 VACANT 3302-104 PSYCH 3305 VACANT 3306-101 K JONES 3306-202A ACCOUNTING 3306-102 TOANO DESIGN 3306-201 DIVERGING 3306-203 VACANT 3307 EHP 3308 RAYMOND 3309 DAV 3310 TIMESYSTEMS 3400 PRINTWELL 3401-3409 WATCHWORKS 3402-101 VACANT 3402-201 VACANT 3303 CONCRETE 3402-202 CSWCD 3402-103 VACANT 3404 VACANT 3RD FL COGENT

Total

Size Jan 1,278 902 8,404 12,298 311 707 1,135 1,050 544 311 887 887 310 167 193 883 467 608 608 740 757 845 225 175 906 972 509 452 500 551 4,111 4,642 502 560 635 948 459 692 996 903 1,200 1,323 6,400 -

34,521

27,432

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Total

902 12,298 1,050 887 193 467 608 757 175 972 452 551 4,642 560 692 903 1,323 -

902 12,298 1,050 887 193 467 608 757 175 972 452 551 4,781 560 727 943 1,323 -

902 12,298 1,050 887 193 467 608 757 175 972 452 551 4,781 560 727 943 -

902 12,298 1,050 887 193 467 608 757 175 972 452 551 4,781 560 727 943 -

902 12,298 1,050 887 193 467 608 757 175 972 452 551 4,781 560 727 943 -

902 12,298 1,050 887 275 193 467 608 757 704 175 972 452 551 4,781 560 727 943 -

902 12,544 259 1,050 311 887 275 193 467 638 757 704 175 972 452 551 4,781 588 948 727 943 1,600

902 12,544 259 589 1,050 500 311 887 275 193 467 638 757 704 175 972 452 551 4,781 588 989 948 727 943 1,389 1,600

902 12,544 259 589 1,050 500 311 887 275 203 467 638 757 704 175 1,021 452 551 4,781 588 989 948 727 943 1,389 1,600

902 12,544 259 589 1,103 500 311 887 275 203 467 638 757 704 175 1,021 452 551 4,781 588 989 948 727 943 1,389 1,600

902 12,544 259 589 1,103 500 311 887 275 203 467 638 757 704 175 1,021 452 551 4,781 588 989 948 727 943 1,389 1,600

10,824 148,802 1,295 2,357 12,705 2,000 1,555 10,644 1,650 2,349 5,604 7,448 9,084 4,225 2,100 11,815 5,421 6,615 57,099 6,860 3,955 4,740 8,650 11,239 9,526 8,000

27,432

27,647

26,324

26,324

26,324

27,303

29,125

32,592

32,651

32,703

32,703

356,560

ASSUMPTIONS: Rent Unit 3300-318 approx. 311 s.f. at $10/s.f by Aug 2014. Rent Unit 3302-102 approx. 707 s.f. at $10/s.f. by Sep 2014. Rent Unit 3302-101 approx. 544 s.f. at $10/s.f. by Sept 2014. Rent Unit 3302-104 approx. 311 s.f. at $12/s.f. by August 2014. Rent Unit 3307 approx. 845 s.f. at $10/s.f. by July 2014. Rent Unit 3303 approx. 948 s.f. at $12/s.f. by Aug 2014. Rent 3rd Fl. Cogent approx. 6,400 s.f. at $3/s.f. by August 2014. Rent 3402 - 201 approx.1,083 s.f. at $10/s.f. by Sept 2014 *** In an effort to retain Tenants long term, I recommend there is no escalation this year.

Š 2008 Coldwell Banker Real Estate Corporation.

Snap Shot Occupancy Factor: Vacancy Factor: Square Foot: Aggregate Income:

2013 (actual)

$ $

2014 (proposed)

46% 100% 54% 0% 10.84 $ 11.37 375,459.00 $ 356,560.43

All Rights Reserved.

Brooks Real Estate Inc


2014 Proposed Expense Budget Poplar Creek 2014 Proposed Budget 2012 A ctuals

2013 Proposed Budget

2013 Forecasted Actual

2014 Proposed Budget

A ssumptions

Income and Expenses Operating Revenue 4000 Rent/Leas e Incom e 4163 Interes t Incom e - OPNB Money Mkt Total Operating Income

$347,917 $4 $347,921

$375,460 $0 $375,460

$307,460 $4 $307,464

$356,560 $0

Operating Expenses 5010 Managem ent Fees 5100 Advertis ing 5150 Accounting Services 5200 Maintenance & Repair 5205 R&M Supplies 5220 Lands caping 5225 Additional Lands caping 5230 Janitorial Service 5300 Electricity 5310 Water & Sanitation 5320 Tras h Collection 5330 Natural Gas 5420 Mortgage Interes t 5422 Loan Paym ent 5440 Legal 5500 Real Estate Taxes 5510 Fees & Perm its 5520 Property Ins urance 5540 Im provem ents Total Operating Expenditure

$33,352 $78 $1,327 $14,630 $153 $13,200 $2,381 $11,802 $30,749 $5,466 $3,934 $4,979 $110,554 $10,000 $592 $10,480 $50 $15,628 $28,061 $297,415

$37,546 $0 $1,402 $20,000 $0 $13,200 $2,500 $12,000 $35,520 $7,594 $3,920 $9,500 $93,692 $76,130 $750 $10,480 $0 $13,196 $10,000 $347,430

$30,746 $0 $1,255 $22,889 $0 $13,200 $1,155 $12,917 $29,008 $3,548 $4,383 $6,117 $83,985 $85,837 $0 $14,208 $50 $13,196 $4,618 $327,112

$35,605 $0 $1,402 $15,000 $0 $13,200 $1,200 $13,980 $30,748 $3,760 $4,383 $6,190 $83,985 $85,837 $0 $14,208 $50 $13,196 $0 $322,744

$50,506

$28,030

-$19,648

$33,816

$0.00

$16,000.00

$0.00

Increase (Decrease) Net Income Owner Contribution/Draw 3020 Owner Contribution-Current Year 2013 Im provem ent Program

$356,560

$60,000.00

Š 2008 Coldwell Banker Real Estate Corporation.

Checks Recurring/preventative, HVAC No increas e reported Mulch/tree trim m ing New Janitorial Service

Additional buildings being added Received from Henders on Inc

PVH Loan on Balance Sheet

woodrot, painting, parking lot

All Rights Reserved.

Brooks Real Estate Inc


REIS REGIONAL QUARTERLY REPORT: Leader in Commercial Real Estate Market Performance Information and Analysis Publications

Š 2008 Coldwell Banker Real Estate Corporation.

All Rights Reserved.

Brooks Real Estate Inc


Observer Reis Reis Observer

October 10, 2013 NORFOLK

Metro: Norfolk/Hampton Roads

Published October 10, 2013

THE ECONOMY Dodging bullets. From potential military base closures via the Defense Base Realignment and Closure Commission (BRAC) to the federal budget sequester to the potential transfer of ships to other areas to, even more recently, the shutdown of the federal government, the local economy seems under constant threat of potential job losses in the defense-related sector. Indeed, given Hampton Roads’ major naval installations and high large federal employment numbers, employment by Government amounts to 20.3% of total non-farm employment as of August, according to data provided by the U.S. Bureau of Labor Statistics (BLS). Given the lack of substantial economic growth drivers, the spillover effects of federal job losses would be substantial. With these matters remaining unresolved and with much hanging in the balance, the recent performance of the Hampton Roads economy has been strong. According to preliminary BLS data, non-farm employment as of August was up fully 23,000 jobs (3.1%)—this in the wake of a gain of only 4,600 jobs (0.6%) over the preceding 12-month span. Job growth, meanwhile, has been broad-based. The largest numerical gain over the latest August-to-August span was the 5,400 jobs added net to the Education and Health Services sector, a gain of 5.5%. Highest in rate of growth at 13.3% representing expansion by 4,700 jobs was Mining, Logging, and Construction (mainly Construction). Notable gains are indicated as well for the Leisure and Hospitality (5,300 jobs or 5.8%) and Professional and Business Services (2,500 or 2.5%) sectors. Still, it is the Government sector with its large Federal and related employment base to which attention inevitably turns. Employment by Government overall was down 200 jobs (0.1%) August-to-August; the Federal sector lost 1,400 jobs for a decline of 2.7%. While it seems likely that accommodations by Congress will allow military employment to proceed without significant disruption while the shutdown persists and the next round of BRAC-generated base closures and related announcements has been delayed, uncertainty over the future of local bases lingers. According to an August report in Inside Business citing a third quarter forecast report by economists at Old Dominion University (ODU), “Sequestration hasn’t been as bad as it was expected to be.” “We basically dodged a bullet,” ODU economist Vinod Agarwal informed the source.

Copyright 2014 Reis, Inc.

Employment: 

The BLS reports a seasonally unadjusted unemployment rate of 6.3% in June for the Virginia Beach-Norfolk-Newport News MSA, down from 6.9% one year earlier.

Moody’s Economy.com reports a second quarter 2013 average household income of $115,783 for Norfolk. Average household incomes of $126,990 and $116,398 are reported for the top metros in the nation and South Atlantic region, respectively. Employment Growth:

Employment by Sector:

1


Observer Reis Reis Observer

October 10, 2013 NORFOLK

Metro: Norfolk/Hampton Roads

Published October 10, 2013

In addition, the ODU report described the local single-family housing market as “a bright spot.” Cited was a 25.7% increase in building permits in the first half of 2013 year-over-year along with a 34.9% increase in the value of issued permits. National Association of Realtors put the second quarter Metropolitan Statistical Area (MSA) median single-family home resale price at $200,000, up 2.6% year-over-year yet up 11.2% for the quarter alone. On the other hand, Sequestration should lead to weakening in the Tourism sector and the related hotel industry, observes ODU. OUTLOOK The Hampton Roads economy continues to dodge the bullets aimed or fired in the direction of federal employment. In May, BRAC base closure decisions were delayed; more recently the sequester proved less dangerous than feared; and earlier, the recovery from the effects of the loss of the Joint Forces Command headquarters was achieved without undue duress. Still, uncertainty remains an item for the future. That aside, growth should proceed much as it usually does in here periods of national expansion— slowly.

Copyright 2014 Reis, Inc.

2

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