WV GCLA Repositioning Report
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Transcript of WV GCLA Repositioning Report
GCLA Repositioning Report
December 2010
Prepared By:
Vahak Agojian, WV Director of Global Real Estate
1
Introduction
My name is Vahak Agojian and I am the Director of Global Real Estate for World Vision, who reports directly to Tony Moniaga, Partnership Leader for Global Real Estate and Corporate Services. My responsibility is to ensure that I maximize value and mitigate risk for World Vision globally by providing asset management real estate services. Those services include consulting, leasing, acquisition, disposition, construction and improvement projects for existing WV assets and for future WV projects.
Purpose of the Report
The purpose of the report is to provide information for everyone who is interested in understanding the scope of the GCLA Repositioning Project which consisted of three phases of due diligence.
The GCLA Repositioning strategy was first introduced to me on October 5, 2010 in order to determine if there is a “value added” opportunity that would allow GCLA to reposition the two buildings it currently owns through disposition, and to identify acquisition opportunities through leasing or purchase of other properties along the 210 freeway corridor going east from WV’s current location (commonly known as 800 & 840 West Chestnut in the city of Monrovia).
The alternative was to analyze and determine what “value added” improvements could be made to the current property in order to achieve a higher and efficient better use of these buildings.
In order to obtain this information, I implemented and completed a three phase due diligence process consisting of owner/user decision analysis, market feasibility analysis, and financial feasibility analysis. This purpose of this report is to identify the best opportunities for World Vision and to assist us in the decision making process .
2
Assumptions used for Analysis
The following information was obtained from a department head survey that was administered on November 5, 2010. The purpose was to capture basic information that is necessary to determine space needs for all departments, and to determine whether or not the GCLA staff count will shrink, stay the same, or grow over the next 3-5 years. Therefore, the following assumptions were used as the basis for this report.
• Global Center Los Angeles will continue to exist under this current structure that includes a staff of approximately 202 employees for at least the next 3-5 years.
• Collectively within all departments there will be slight growth of less than 2% annually.
• 20% of the staff will continue to work from home at least 2 days a week
• GCLA will continue to have 295 visitors annually.
• 62% of those visitors will work here and stay a week.
Repositioning Options & Scenarios
A. Sell existing property and buy new office building
B. Sell existing property and lease new office building
C. Hold and add 20,000 SF to the 800 building and after the completion of construction lease out or sell the 840 building
D. Demo and rebuild the 840 building and after completion of construction lease or sell the 800 building
E. Hold and remodel 800 & 840 buildings
F. Hold and Do Nothing
3
800 & 840 Sale & Lease Values & Property Characteristics
PER SQUARE FOOT: $213.65 TO $220.82 PSF (OWNER/USER) OR $170.04 TO $194.33 PSF (INVESTOR) INDICATED MARKET VALUE: $13,828,215 TO $14,291,830 (OWNER/USER) OR $11,005,481 TO $12,577,693 (INVESTOR) RECOMMENDED ASKING PRICE: $15,533,520 ($240.00 PSF) MARKETING TIME: 6 TO 12 MONTHS TARGET BUYERS: 800WCHESTNUT – MEDIUM SIZE OFFICE USERS IN PASADENA, GLENDALE, ARCADIA AND MONROVIA; IDEAL FOR A REGIONAL CORPORATE HQ, INSURANCE COMPANY, OR BACK OFFICE USE. 840WCHESTNUT – COULD ATTRACT SIMILAR OFFICE USERS TO 800, BUT WILL ALSO ATTRACT ATTENTION FROM TECH/FLEX USERS ASSOCIATED WITH JPL AND CALTECH.
Combined Lease Value for 800 & 840
PER SQUARE FOOT: 800WCHESTNUT – $15.00 PSF, NNN / $22.00 PSF, FSG* 840WCHESTNUT - $13.80 PSF, NNN / $21.00 PSF, FSG RECOMMENDED ASKING PRICE: 800WCHESTNUT – $17.00 PSF, NNN / $24.00 PSF, FSG 840WCHESTNUT - $15.00 PSF, NNN / $22.20 PSF, FSG MARKETING TIME: 9-18 MONTHS TARGET TENANTS: 800WCHESTNUT – MEDIUM SIZE OFFICE TENANTS IN PASADENA, GLENDALE, ARCADIA AND MONROVIA; IDEAL FOR A REGIONAL CORPORATE HQ, INSURANCE COMPANY, OR BACK OFFICE USE. 840WCHESTNUT – COULD ATTRACT SIMILAR OFFICE TENANTS TO 800, BUT WILL ALSO ATTRACT ATTENTION FROM TECH/FLEX TENANTS ASSOCIATED WITH JPL , CALTECH AND CITY OF HOPE.
Property Description
CAMPUS SIZE/SF: 64,723 SF SITUATED ON 5 PARCELS CONSISTING OF 3.5 ACRES 800WCHESTNUT 28,000SF (2-STORY) & 840WCHESTNUT 36,723SF (2-STORY) YEAR BUILT: 800WCHESTNUT 1982 & 840WCHESTNUT 1977 OFFICE AREA/ SF: 800WCHESTNUT 1ST FLOOR: 14,000SF 2ND FLOOR: 14,000SF & 840WCHESTNUT 1ST FLOOR: 24,400SF 2ND FLOOR 12,323SF WAREHOUSE AREA/ SF 800WCHESTNUT NONE & 840WCHESTNUT 7,000SF CEILING CLEARANCE: 24’ (840WCHESTNUT) PARKING: 178 SPACES / 3 PER 1,000SF LOADING: 800WCHESTNUT DH: 0 GL: 0 & 840WCHESTNUT DH:1 GL:0
4
Due Diligence Process & Data Gathering
A. User Decision Analysis
Various methodologies used for data gathering such as surveys, department head meetings, research and analysis to understand WV’s needs and space requirements.
Department Head Survey Summary
• GCLA Full Time Staff Members = 202
• Projected Staff Growth 3-5 yrs.= <2%
• 20 % of staff working from home = 42 @ 1.4 days/wk
• Visitors = 295 per year
– 75% of our departments host visitors
– 11% of those visitors stay 3 days or less
– 62% stay a week
– 27% stay longer than a week
8
Department Head Survey Matrix
Gov pc 1 pc2 pc3 pc4 pv5 pc6 pc7 pc8 PC9 IT LEGAL CC FPNAAuditTRES HEACOMM sp OE Sec P REVGSCM VFI Civ M CS Glb op
Dan Reb Reb Reb Reb CindyCindyCindyCindyCindy Tim Lars SteveFrank Kat Lars Kate chris eeg Ian Ian Ger Scott Ian Tony Dirk
GCLA FT Staff Members 5 4 4 2 3 2 9 1 3 16 40 7 6 9 10 7 13 12 3 6 2 3 9 12 1 11 2 202 202Dept. Grow N Y N N N Y Y Y N N N N N Y N Y N N N N N N Y N N Y N 29%Dept. Shrink N N N N N N N N N N N N N N N N N Y N N N N N N N N N 96%Dept. Stay the Same Y N Y Y Y N N N Y Y Y Y Y N Y N Y N Y Y Y Y N Y Y N Y 67%Projected # Staff 3-5 yrs 5 6 4 2 3 3 11 2 3 16 40 7 6 13 10 10 13 11 3 6 2 1 10 12 1 12 2 214 <2% Annual# of People that work HM 2 0 4 0 0 2 0 1 3 1 5 0 0 0 7 4 0 5 2 2 0 0 3 0 0 1 0 42 42
# Days Per week 1 0 1 0 0 2 0 1 2 5 2 0 0 0 2 2 0 2 2 5 0 0 1 0 0 2 0 30 1.4Can Work HM 5 days WK N N N N N N N N N N N N N N N N N N N Y N N N N N N N N 4%# Guests Per Year 6 3 6 0 0 1 10 5 8 2 25 0 5 2 21 0 50 9 20 10 1 1 5 1 0 4 100 295 295Length of Stay Days 0 0 0 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0 0 0 3 9 3Weeks 2 1 1 0 0 0 1 1 2 2 1 0 1 1 1 0 1 2 0 1 1 2 0 0 0 1 0 22 1.3Months 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 3 0 0 0 4 1
P&C1 Professional Development Program P&C2 Business Partners
P&C3 Operations
P&C4 Payroll
P&C5 Chief people officer
P&C6 staffing Solutions
P&C7 Leadership development
P&C8 Org Development
P&C9 Total Rewards & People Sys.
75% Of our Depts Get Visitors
11% of those stay 3 days or less
62% stay a week
27% Stay longer than a week
9
Conference Room Usage
Month/Year Total # of Reservations Total # of Hours
Oct 09 562 2,009
Nov 09 519 1,859
Dec 09 469 1,966
Jan 10 528 N/A
Feb 10 494 N/A
Mar 10 681 N/A
Apr 10 571 N/A
May 10 558 N/A
Jun 10 572 N/A
Jul 10 523 1,289
Aug 10 543 1,272
Sep 10 519 1,343
Note: Due to the IT database upgrade in January 2010, the summary of total hours was no longer available. Corp Svcs. worked with the IT department to include the information back into the database which became effective 7/2010.
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B. Market Feasibility
Conducted market feasibility studies, toured properties, met with various brokers to obtain information regarding availability, suitability, and market conditions etc. within a specific geographic area.
Boundary Map
Other Properties that were under Consideration
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C. Financial Feasibility
Financial Feasibility NPV Snapshot
Buy Via Verde
Buy Haven Rancho
Lease Via Verde
New Construction 840 EOY "A" Cash Flows
EOY "B" Cash Flows
EOY "C" Cash Flows
EOY "D" Cash Flows
0 ($5,227,500.00)
0 ($4,692,000.00)
0 ($403,400.00)
0 ($10,195,000.00) 1 ($1,073,776.00)
1 ($1,003,833.00)
1 ($921,254.00)
1 ($373,245.00)
2 ($1,081,596.00)
2 ($1,011,653.00)
2 ($1,240,015.00)
2 ($380,710.00) 3 ($1,089,573.00)
3 ($1,019,473.00)
3 ($1,271,927.00)
3 ($388,175.00)
4 ($1,097,708.00)
4 ($1,027,293.00)
4 ($1,304,690.00)
4 ($395,640.00) 5 ($1,106,007.00)
5 ($1,035,113.00)
5 ($1,338,328.00)
5 ($403,105.00)
6 ($1,114,472.00)
6 ($1,042,933.00)
6 ($1,372,866.00)
6 ($410,570.00) 7 ($1,123,106.00)
7 ($1,050,753.00)
7 ($1,408,327.00)
7 ($418,035.00)
8 ($1,131,912.00)
8 ($1,058,573.00)
8 ($1,444,737.00)
8 ($425,500.00) 9 ($1,140,895.00)
9 ($1,066,393.00)
9 ($1,482,124.00)
9 ($432,965.00)
10 ($1,150,057.00)
10 ($1,074,213.00)
10 ($1,520,512.00)
10 ($440,430.00) NPV
= ($13,779,465.45)
NPV = ($12,690,851.35)
NPV = ($10,518,273.12)
NPV = ($13,313,381.49)
CA $7,772,500.00
CA $8,308,000.00
CA $12,596,600.00
CA $5,790,400.00
After Sale of 800
Add 20,000 SF to 800 & Lease out 840 Building
Remodel 800 & 840
Hold and do Nothing EOY "E" Cash Flows EOY "E1" Cash Flows
EOY "F" Cash Flows
EOY "G" Cash Flows
0 ($3,368,123.00) 0 ($1,092,000.00)
0 ($2,273,500.00)
0 ($373,245.00) 1 ($373,245.00) 1 $546,383.00
1 ($373,245.00)
1 ($380,710.00)
2 ($380,710.00) 2 $565,232.00
2 ($380,710.00)
2 ($388,175.00) 3 ($388,175.00) 3 $584,697.00
3 ($388,175.00)
3 ($395,640.00)
4 ($395,640.00) 4 $604,795.00
4 ($395,640.00)
4 ($403,105.00) 5 ($403,105.00) 5 $625,547.00
5 ($403,105.00)
5 ($410,570.00)
6 ($410,570.00) 6 $646,975.00
6 ($410,570.00)
6 ($418,035.00) 7 ($418,035.00) 7 $669,098.00
7 ($418,035.00)
7 ($425,500.00)
8 ($425,500.00) 8 $691,939.00
8 ($425,500.00)
8 ($432,965.00) 9 ($432,965.00) 9 $715,521.00
9 ($432,965.00)
9 ($440,430.00)
10 ($440,430.00) 10 $739,867.00
10 ($440,430.00)
10 ($447,895.00) NPV
= ($6,486,504.49) NPV
= $3,775,903.97
NPV = ($5,391,881.49)
NPV = ($3,549,269.24)
CA $7,238,000.00 diff. ($2,710,600.52)
CA $0.00
CA $0.00 After Sale of 840
5% DR used on all scenarios to determine NPV CA= Cash Available
EOY= End of Year NPV=Net Present Value
12
Options and Scenarios
Sell existing property and buy new office building:
This scenario is to sell the existing 800 & 840 buildings and use part of the proceeds from the sale to PURCHASE a new property of like kind for a lesser value.
A. 180 E. Via Verde San Dimas, CA B. 8656 Haven Rancho Cucamonga, CA
A. Via Verde San Dimas
13
Pros
• Newer building built 2002
• Seller financing available
• Will be paid off in 10 yrs. Based on assumptions used.
• Good freeway visibility with signage opportunities
• All Herman Miller furniture is included in the Sale
• Easy freeway access and in close proximity to the 10,210,57,71 freeways
• Abundant Parking 4.4 /1000 ratio
• Benefits of ownership and property tax exemptions for non profit
Cons
• 5 million dollar down payment required for purchase
• Higher negative NPV for yrs. 1-10
• IT infrastructure costs estimated 850k
• Will increase the commute for 51% of the staff
• All hotels and eateries are 2miles away in three directions. Almost 4 miles away in one direction
• Does not have a warehouse
• Inferior location to the Monrovia Site
• Deal is subject to the sale of the Monrovia site and may not be available
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CoStar Property® - Enlarge Image
http://property2.costar.com/...%202nd%20Floor-%202nd%20Floor&psDesc=2nd Floor, 34,966 SF&psPID=D371D64D5D8D0B0E8CA96B74A6F80DAC[10/15/2010 12:36:10 PM]
18
Aerial Photo of the San Dimas Area
Closest hotel and eating establishment to the north, east, south are 2 miles away and 4 miles away from the west.
19
B. Haven in Rancho Cucamonga
Pros
• Newer building built 2008
• Distressed Asset
• Great value at $6.5 million /$105.00 per SF
• Sublet opportunities to generate income to offset expenses for unused space
• Better NPV for years 11-20
• Abundant Parking 4.4 /1000 ratio
• Benefits of ownership and property tax exemptions for non profit
Cons
• In Escrow
• 4.5 million dollar down payment required for purchase
• Warm shell, TI & IT costs will be approximately 2.7 million
• Will increase the commute for 72% of the staff
• Does not have a warehouse
• Deal is subject to the sale of the Monrovia site and may not be available
• Inferior location to the Monrovia
20
Sell existing property and lease new office building:
This scenario is to sell the existing 800 & 840 buildings and use part of the proceeds from the sale to LEASE a new property of like kind 5-10 year term with options to extend.
A. 180 E. Via Verde San Dimas, CA
Pros
• Newer building built 2002
• Will require only 400k initial outlay
• Better NPV for years 1-10
• Landlord will provide $1 million for tenant improvements
• Landlord will provide 5 months of rent abatement
• Good freeway visibility with signage opportunities
• All Herman Miller furniture is included in the lease
• Easy freeway access and in close proximity to the 10,210,57,71 freeways
• Abundant Parking 4.4 /1000 ratio
Cons
• IT infrastructure costs estimated 850k
• Will increase the commute for 26% of the staff
• All hotels and eateries are 2 miles away in three directions. Almost 4 miles away in one direction
• Does not have a warehouse
• Very high negative NPV’s for years 11-20 and not suitable for long term leases above 10 yrs.
• Deal is subject to the sale of the Monrovia site and may not be available
• No property tax exemptions as a lessee.
21
Hold and add 20,000 SF to the 800 building and after the completion of construction lease out or sell the 840 building:
This scenario is a large capital project that will allow the entire staff to work out of a single office. It would require the staff in the 800 building to temporarily move to the 840 building, work from home, or leasing a 15,000 SF office may be necessary during the time of construction. Once the building project is completed the entire staff would relocate into the 800 building and the 840 building can be leased or sold. Lease 840 scenario will generate income to offset expenses of both buildings with positive cash flow over the long term. The Sale of 840 scenario will not generate residual income, but it will offset the construction expense associated with adding the 20,000 SF of the 800 building.
Pros
• 48,000 SF Facility would house the entire staff.
• Selling 840 would leave proceeds that would offset the cost of construction.
• Leasing 840 Would be the highest and best return on investment over a 20 year holding period
• Property tax base would increase slightly as opposed to a new purchase
• Remain in the same prime location
• IT and TI build out costs are substantially less than relocating into new space
Cons
• 9-12 months of construction
• Staff has to telecommute or temporary office space has to be secured.
• Entitlements may take 6-9 months
• Selling or Leasing 840 may take longer than expected and increase the timelines of recouping costs.
• CUP or variance may be required for parking
• Difficult to obtain construction financing in this market
22
Cost of Improving the 800 Building
Only input the white fields that apply Square TI Paid to Remain to
Required Input Field Feet Cost/SF Budget date be paid
BUILDINGS
Total Square Feet 20,000 $ 4,000,000.00
Number of Staff Members 100 SF.PER PERSON Cost Per Person
Subtotal SF 20,000 200 $ 33,680.00
TOTAL COSTS $ 168.40 $ 3,368,000.00
Over/Under 2000 $ 632,000.00
Soft Costs
Architecture & Engineering $ 3.25 $ 65,000.00
Insurance $ 0.30 $ 6,000.00
Development Fees $ 7.00 $ 140,000.00
Legal $ 0.75 $ 15,000.00
Developer's Profit $ 17.50 $ 350,000.00
Construction Loan Carrying Costs $ 12.85 $ 257,000.00
1 Yr.Temporary Office Lease
$ 18.00 $ 360,000.00
5% Contingency $ 8.75 $ 175,000.00
Hard Costs $ - $ -
Shell Construction $ 70.00 $ 1,400,000.00
Tenant Improvements/IT $ 30.00 $ 600,000.00
Sub Garage $ - $ -
Other $ - $ -
Other $ - $ -
Tenant Improvement Costs Total $ 168.40 $ 3,368,000.00
23
Demo and rebuild the 840 building and after completion of construction lease or sell the 800 building:
This scenario is a large capital project that will allow the entire staff to work out of a single office. It would require the staff in the 840 building to temporarily move to the 800 building, work from home, or leasing a 15,000 SF office may be necessary during the time of construction. Once the building project is completed the entire staff would relocate into the 840 building and the 800 building can be leased or sold. Lease 800 scenario will generate income to offset expenses of both buildings with positive cash flow over the long term. The Sale of 800 scenario will not generate residual income, but it will offset the construction expense associated with rebuilding 840.
Pros
• 50,000 SF brand new custom construction
• Facility would house the entire staff.
• Selling 800 would leave proceeds that would offset the cost of construction.
• Leasing 800 Would be the highest and best return on investment over a 20 year holding period
• Property tax base would increase slightly as opposed to a new purchase
• Remain in the same prime location
Cons
• 10 million initial outlay for construction costs
• Maybe difficult to obtain financing under current market conditions
• 9-12 months of construction
• Staff has to telecommute or temporary office space has to be secured.
• Entitlements may take 6-9 months
• Selling or Leasing 800 may take longer than expected and increase the timelines of recouping costs.
• CUP or variance may be required
25
Cost Breakdown for Rebuilding 840
Only input the white fields that apply Square TI Paid to Remain to
Required Input Field Feet Cost/SF Budget date be paid
BUILDINGS
Total Square Feet 50,000 $ 10,300,000.00
Number of Staff Members 220 SF.PER PERSON Cost Per Person
Subtotal SF 50,000 227 $ 46,340.91
TOTAL COSTS $ 203.90 $ 10,195,000.00
Over/Under 10400 $ 105,000.00
Soft Costs
Architecture & Engineering $ 3.60 $ 180,000.00
Insurance $ 0.30 $ 15,000.00
Development Fees $ 8.50 $ 425,000.00
Legal $ 0.90 $ 45,000.00
Developer's Profit $ 19.00 $ 950,000.00
Construction Loan Carrying Costs Deferred $ 11.40 $ 570,000.00
1 Yr.Temporary Office Lease 15,000 SF $ 7.20 $ 360,000.00
5% Contingency $ 9.00 $ 450,000.00
Hard Costs $ - $ -
Shell Construction $80 SF $ 80.00 $ 4,000,000.00
Tenant Improvements / IT $45 SF $ 45.00 $ 2,250,000.00
Sub Garage $19 SF $ 19.00 $ 950,000.00
Other $ - $ -
Other $ - $ -
Tenant Improvement Costs Total $ 203.90 $ 10,195,000.00
26
Hold and remodel 800 & 840 buildings:
Carry on business as usual and make minimal cosmetic improvements like paint, new carpet, and updated furniture and fixtures without doing any major structural enhancements to both of the buildings.
Pros
• Cosmetic improvements will enhance the look of the offices
• Costs less than the other scenarios
• Does not allow for sublet opportunities as a way to generate income
• Property tax base would not increase
• Remain in the same prime location
• Buildings operating expenses stay low
Cons
• Staff will continue to work out of both buildings
• 6-9 months of construction
• Staff has to telecommute or temporary office space has to be secured during construction.
• To occupy two buildings is not an efficient use of the space
28
Cost Breakdown for remodeling 800 & 840
Only input the white fields that apply Square TI Paid to Remain to
Required Input Field Feet Cost/SF Budget date be paid
BUILDINGS
Total Square Feet 41,000 $ 2,600,000.00
Number of Staff Members 220 SF.PER PERSON Cost Per Person
Subtotal SF 41,000 186 $ 10,334.09
TOTAL COSTS $ 55.45 $ 2,273,500.00
Over/Under 1400 $ 326,500.00
Soft Costs
Design & Space Planning $ 1.24 $ 51,000.00
Insurance $ 0.09 $ 3,500.00
Permit Fees $ 0.10 $ 4,000.00
Legal $ 0.12 $ 5,000.00
Vendor's Profit $ 4.88 $ 200,000.00
Construction Loan Carrying Costs $ - $ -
1 Yr.Temporary Office Lease $ 8.78 $ 360,000.00
5% Contingency $ 2.44 $ 100,000.00
Hard Costs $ - $ -
Shell Construction $ - $ -
Tenant Improvements $30 SF $ 37.80 $ 1,550,000.00
Sub Garage $ - $ -
Other $ - $ -
Other $ - $ -
Tenant Improvement Costs Total $ 55.45 $ 2,273,500.00
29
Hold and Do Nothing:
Carry on business as usual without incurring large expense and re-evaluate in 3-5 years. Department needs should be addressed in this scenario and a revised space plan should be implemented in order to maximize the use of the office space with minimal costs.
Pros
• Cosmetic improvements will enhance the look of the offices
• Costs less than the other scenarios
• Does not allow for sublet opportunities as a way to generate income
• Property tax base would not increase
• Remain in the same prime location
• Buildings operating expenses stay low
Cons
• Staff will continue to work out of both buildings
• 6-9 months of construction
• Staff has to telecommute or temporary office space has to be secured.
• To occupy two buildings is not an efficient use of the space
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Time Line
December 7, 2010: A presentation will be made at the all staff meeting, and the staff will have an opportunity to ask questions. The staff will also have December 13, 2010 to provide comments, concerns and suggestions. The information gathered will be used by the RE Committee making a recommendation. Concurrently, the departments will be meeting among themselves to identify their specific needs and will submit their proposals by January 7, 2011
December 13, 2010: All suggestions by the staff will be turned in.
December 14, 2010: RE Committee meets to review the project and should have a final recommendation sometime between December 15-23, 2010.
January 7, 2011: Final Decision
January 12-21: I’ll be away celebrating at home with baby number 3.
January 24, 2011: Start action items based on decision
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