Jna site

JN Andrews Site 117 Elm Avenue, Takoma Park, MD Prepared for The Potomac Conference of The Seventh Day Adventist Church

117 Elm Avenue, Takoma Park, MD

Lease or Sell Existing 2.8 acre site Considerations:

 Lease Potential  Demand for lease space  Income potential

 Sale Potential  Redevelopment potential on the site  Resale demand for this type of product

Aerial of 117 Elm Avenue

Total of 2.8 Acres of R-60 Zoned Land

SWOT Analysis Strengths, Weaknesses, Opportunities, Threats

Strengths $1M+ capital investment to address deferred maintenance and environmental issues (2011)          

Asbestos mitigation – replaced floors Window replacement throughout New HVAC system throughout physical plant New fire alarm system New fire escape stairs Electrical panel upgraded Security cameras throughout Major roof repairs Foundation repairs to address water issues New lockers and interior doors

SWOT Analysis Strengths, Weaknesses, Opportunities, Threats Opportunities  Desirable infill redevelopment potential

 Strong need for healthcare/urgent care/mental health/higher education facilities  Current Economic Development Initiatives underway  Anticipated population4.8% pop. growth by 2020 (2015 Neilson Company)  Washington Adventist University – Proximity/ Void left by Washington Adv. Hospital  Increased demand for housing and commercial retail  Neighboring home sold for over $700,000 (remodeled) 2Q 2015.  Median Age 39 years, singe with average income of $67,672 within 1 mile radius  Proximity to gateway commercial development  Proximity to public transportation Bike share system / Montgomery Co. Ride On / University of MD Shuttle

Area Development

New Hampshire Avenue Concept Plan

Ethan Allen Gateway

SWOT Analysis Strengths, Weaknesses, Opportunities, Threats

Weaknesses

 Conditional use (Special Exception) as a churchbased private school  Will limit what entity can gain certificate of occupancy as a tenant  There is no precedent for leasing this size space in Takoma Park, MD.

 Limited opportunities as a “By-Right” use

SWOT Analysis Strengths, Weaknesses, Opportunities, Threats

Threats  Redevelopment of the site will trigger new storm water management plan  Cost to rezone or obtain a new conditional use status for tenants  Time that it will take to rezone can exceed 18 months

 There are approximately 10 other schools in surrounding area, competing for students

Anticipated Lease Rate ď‚Ą While there are no true comparable leases of like properties in Takoma Park, MD. We have looked at lease rates for spaces in Takoma Park from 1/1/2014 to present.

Leases within 2 miles of 117 Elm Avenue # Deals

Asking Rent

Av. Rent

#mo. on market

Commercial Leases within 2 miles of 117 Elm Ave.

Reasonable Lease Rate  $9 PSF NNN  Tenant will be expected to pay their base rate, as well as all utility, insurance, real estate tax as additional rent.  Estimated income based on $9 PSF rate is

$333,000/year

Approach to Valuing the site Cost Approach Cost Approach – single family home sites  Estimated value for finished lots $200,000, and sales at $650,000+ (minus $50K per lot in site development)  Approximately 14 Lots of residential zoned land make up the 2.8 acres

 Assuming 14 of those sites are buildable, the value of the total acreage is $2,100,000

Approach to Valuing the site Cost Approach Cost Approach – Replacement Cost for a 37,000 SF medical/office/school building  Approximately $200 PSF to construct  37,000 SF x $200 =

$7,400,000

Approach to Valuing the site Income Approach  Income Approach – based on an assumed lease rate and capitalization rate on a 5 year or longer lease; using Capitalization rates of 5% & 8%

333,000 / 8% = $4,162,500 333,000 / 5% = $6,660,000 *Capitalization rate for long-term, stable tenant is lower reflecting less risk

Approach to valuing the site Sales Comparison  Recent Sales – There are no true comparable sales.

ď‚Ą The tax assessment values of the properties total $6,374,900. I would recommend that the list price be set at $8.5 M, as it is a rare opportunity in Takoma Park for the usable space and on site parking.

Recommendation Lease Rate $9 PSF Sale List Price $8.5M  List the property for LEASE/SALE and see which opportunities come.

The highest and Best Use is likely going to be a mixed use residential play, which will allow for Neighborhood Retail Townhomes, or Multifamily Housing Which are not “by-right” uses, thus a zoning change is anticipated.

However, there is cash flow potential in a long-term lease situation, which could be advantageous to the Potomac Conference as a revenue generator. Also, a long-term lease can be sold as an investment sale, using a capitalization rate to add value the deal.

Questions

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