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OFFERING MEMORANDUM 20 TW ALEXANDER DRIVE FINAL
20 TW ALEXANDER
This Offering Memorandum is intended solely for your use to determine whether you wish to express an interest in 20 TW Alexander Drive in Durham, NC. Disclaimer. Although information has been obtained from sources deemed reliable, JLL and/or JLL representatives, brokers or agents make no guarantees as to the accuracy of the information contained herein, and offer the Property without express or implied warranties of any kind. The Property may be withdrawn without notice. If the recipient of this information has signed a confidentiality agreement regarding this matter, this information is subject to the terms of that agreement. JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316.0 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $53.6 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
For more information, please contact: Pam Michael Executive Vice President 919.424.8173 [email protected] Bill Sandridge Managing Director 919.424.8174 [email protected]
2
EXECUTIVE SUMMARY
4
PROPERTY PROFILE
6
LOCATION OVERVIEW
11
MARKET OVERVIEW
15
LAB INVESTMENT SALE ENVIRONMENT
24 3
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY INVESTMENT SUMMARY
INVESTMENT HIGHLIGHTS
JLL is pleased to present an investment opportunity at 20 TW Alexander Drive, Research Triangle Park, North Carolina, a 163,171 square foot multi-story Office / R&D building. This building is situated on approximately 41.548 acres.
• Easy access to I-40 and Highway 147 • Frontage on TW Alexander and East Cornwallis Road at a signalized intersection • 36,579 square feet of existing lab space of which approximately 67% is Analytical Lab • 341 parking spaces • Region ranks 1st in country for Bachelor Degrees • Market demand for lab space • Eat-in cafeteria • Fitness center
Located in the world renowned Research Triangle Park, a home to 200 global companies across 7,000 acres of prime real estate, 20 TW Alexander sits in the heart of the Triangle with convenience to the Raleigh-Durham International Airport (9.1 miles).
20 TW ALEXANDER
5
PROPERTY PROFILE
PROPERTY PROFILE
PROPERTY DESCRIPTION SITE Address:
20 TW Alexander Drive
Jurisdiction:
City of Durham, Durham County
Acreage:
41.548
Survey Plat:
Durham County BK 138 / Page 97
Parcel Ref No:
157255
Landscaping:
Corporate Campus Setting
Irrigation:
Yes
ZONING:
SRP (Science Research Park) by City of Durham
PARKING
341 spaces; 9 handicap accessible
ADJACENT 15.843 ACRE PARCEL
BUILDING Year Built:
1998
Square Footage:
163,171
Construction Type:
Fireproofed structural steel
Building Depths:
Main lab floor is approximately 204 ft. 4 in (W) by 397 ft. (L) with a 10 ft. service corridor between each lab wing, measuring 97 ft. 2 in. (W) by 397 ft. (L).
Clear Heights:
16’ for labs on ground & first levels; 14’8” for labs on second floor level; service corridor first floor level 17’3” to bottom of steel & ground floor service corridor 14’7” to bottom of steel
Entrances:
Eight (8)
Dock Doors:
Two (2) dock high door available
7
PROPERTY PROFILE
PROPERTY DESCRIPTION ROOF Construction:
• •
Warranty:
10 years, August 31, 2008
Access:
Internal stairway by employee entrance
Sarnafil Roof Installed in 1998
UTILITIES Water:
City of Durham
Sewer:
City of Durham
Electric:
Duke Energy
Natural Gas:
PSNC Energy
PLUMBING
Back Flow preventer
ELECTRICAL
• •
Two (2) 4000 amp main service entrances 1500KVA and 2000KVA Transformers (227/480V 3 Phase)
HVAC
One (1) 1,000-ton & Two (2) 385-ton chillers; One (1) Boiler (original). Chillers original but 1000 Ton and one of small units recently refurbished. All use HCFC refrigerants.
GENERATOR
1865KVA Generator
LIFE SAFTEY
Sprinkler systems. Wet, dry and chemical.
OFFICE
39,487 SF traditional office
LAB
• • •
6,356 SF Biology 24,648 SF Analytical 5,575 SF Chemistry
• • • •
Fitness Center On-site cafeteria Large training room Well-appointed office and meeting spaces
ADDITIONAL
8
PROPERTY PROFILE
PROPERTY DESCRIPTION OPERATING EXPENSES 2012
2013
2014
Electric
$527,304.72
$472,202.93
$453,599.16
Natural Gas
$236,630.25
$244,520.78
$229,123.22
Water/Sewer
$96,592.74
$87,229.22
$85,617.31
Total Maintenance
$142,011
$105,702
$395,682
PIN
Land Value
Building Value
Total Value
0739-04-71-0057
$3,013,560
$18,109,138
$21,122,698
0739-04-61-1589
$864,600
$
$864,600
0739-04-61-0215
$107,300
$
$107,300
0739-04-61-3009
$84,400
$
$84,400
TOTAL
$4,069,860
$18,109,138
$22,178,998
2015 TAX VALUE
9
Ground Floor
20 TW ALEXANDER DRIVE 163,171 square feet 10
First Floor
20 TW ALEXANDER DRIVE 163,171 square feet 11
Second Floor
20 TW ALEXANDER DRIVE 163,171 square feet 12
LOCATION OVERVIEW
20 TW ALEXANDER
S MIAMI BLVD. AMENITIES
HIGHWAY 55 AMENITIES
14
LOCATION OVERVIEW
AMENITIES HIGHWAY 55 DINING Aladdin's Eatery Applebee’s Azitra Authentic Indian Fare Bob Evans Brasa Brazilian Steakhouse Brizz Wood-Fired Pizza Bruegger’s Bagels Caribou Coffee Carolina Ale House Champa Thai & Sushi Chili’s Grill & Bar Cold Stone Creamery Dairy Queen – Orange Julius Elevation Burger Firewurst Flame Kabob FujiSan Japanese Steakhouse Gigi’s Cupcakes Greek Fiesta Hayashi-Ya Japanese Restaurant Hibachi 101 Jason’s Deli Johnny Carino’s Country Italian Lime Fresh Mexican Grill Longhorn Steakhouse Maggie Moo’s Ice Cream & Treatery McDonald’s Moe’s Southwest Grill Noodles & Company O’Charley’s Panera Bread Red Robin Gourmet Burgers Slice of NY Starbucks
SOUTH MIAMI BOULEVARD Subway The Rocky Mountain Chocolate Factory Which Wich? Wild Wind Cafe SHOPPING Barnes & Noble Best Buy BJ’s Wholesale Club Dicks Sporting Goods GNC Goodwill Hallmark Homegoods Kay Jewelers Mattress Warehouse Men’s Warehouse Michael’s Party City PetSmart Pier 1 Imports Ross Dress for Less
BB&T Blo Hair Salon Brier Creek Cleaners Brier Creek Dental Studio European Wax Center Eye Care Associates Great Clips Main Pedi Nail Spa Massage Envy Plant Beach Tanning Spa Salon Blu Skin Sense Day Spa Sprint The UPS Store T-Mobile Verizon Wireless
HOTELS Embassy Suites Hampton Inn & Suites
DINING Arby’s Bojangles’ Burger King Cilantro Mediterranean Grill Fortune Asian Bistro Jake’s Wayback Burgers Jimmy John’s McDonald’s Mez Contemporary Mexican Page Road Grill Randy’s Pizza Starbucks Wendy’s Wok ‘n Grill
SHOPPING Office Depot Sam’s Club Walmart Supercenter
SERVICES
Rack Room Shoes Staples Target T.J. Maxx Total Wine & More Walmart Supercenter
Atlantic Tire & Service BB&T Bright Horizons Coastal Federal Credit Union FedEx Office Fitness Connection Great Clips QD Nails & Spa State Employees Credit Union Verizon Wireless
SERVICES
HOTELS
Advance Tailors Bank of America
Holiday Inn Express & Suites Homewood Suites Sheraton Hotel & Convention Center Springhill Suites Wingate by Wyndham
Candlewood Suites Extended Stay America 15
RTP / RDU SUBMARKET The Research Triangle Park (RTP); home to more than 200 global companies, fosters a culture of scientific advancement and competitive excellence. Centrally located between Duke University in Durham, North Carolina State University in Raleigh and The University of North Carolina at Chapel Hill, the submarket is home to a dynamic employment base. In additional, adjacency to the Raleigh-Durham International Airport adds to the attractiveness of this submarket’s location. As such, this submarket is one of the largest in the Triangle metro, accounting for 13% of the market’s total office square feet. As in other submarkets in Raleigh-Durham, much of the inventory in this submarket is low-rise or mid-rise with large footprints. However, in the RTP, most of the buildings and tenant are large: 60% of buildings are larger than 100,000 square feet, nearly 100 office-occupying tenants have a footprint greater than 25,000 square feet and approximately 40% of the buildings are occupied by a single tenant. As the most significant employment core in Raleigh, the RTP is a sprawling 7,000-acre campus housing more than 39,000 employees, according to the Research Triangle Foundation of North Carolina. The RTP strictly requires the buildings within its boundaries to be primarily research and development space, so only a small share of office space actually exists within the RTP proper. Nortel Networks, Cisco, IBM, BASF and Quintiles are some its globally recognized tenant list. However, this submarket has been a serious magnet for office users seeking close proximity to the global, heavy-hitting technology and pharmaceutical players.
16
LOCATION OVERVIEW
LOCATION OVERVIEW
MARKET OVERVIEW
MARKET OVERVIEW
MARKET OVERVIEW Inventory
Rent growth since Q1 2014
11,525,665 s.f.
2.4%
17.1%
$20.78 Full Service
7,906,240 s.f.
3.6%
14.8%
$11.97 NNN
13,806,847 s.f.
7.8%
5.7%
$4.97 NNN
Office*
44,185,719 s.f.
2.8%
13.4%
$21.49 Full Service
Flex**
20,970,202 s.f.
3.1%
12.4%
$10.54 NNN
Warehouse**
67,910,545 s.f.
1.8%
8.3%
$3.61 NNN
Overall Vacancy
Average asking rent
RTP / RDU SUBMARKET Office Flex Warehouse ALL SUBMARKETS
*Data includes office properties over 15,000 s.f.; excludes all owner user s and medical office **Data includes properties over 15,000 s.f.; excludes all owner users
1 2 RALEIGH-DURHAM SUBMARKETS 1. 2. 3. 4. 5. 6.
North Durham Downtown Durham South Durham RTP / RDU Cary Southwest Wake County
7. West Raleigh 8. Downtown Raleigh 9. Glenwood / Creedmoor 10. Six Forks / Falls of Neuse 11. Route 1 12. Eastern Raleigh
3
10
9
11
4 20 TW ALEXANDER
5
7
8
12
6 18
MARKET OVERVIEW
MARKET OVERVIEW Educational Attainment: Bachelor’s Degree Index
Employment Growth (2014 - 2019) 20% NYC
15%
Boston San Diego
15% 7%
7% Raleigh
120
Raleigh
6%
5%
5%
San Diego
Boston
NYC
0% US Average Indianapolis
133 157
Indianapolis
116
US Average
100 0
Wage Index
100
120
108 99
101
90
Funds ($ Millions)
117
120
100
50
75
100
125
150
$600
3,000
$500
2,500
$400
2,000
$300 1,500
$200
1,000
$100
80 US Average Indianapolis
Raleigh
175
International Company Investment
130
110
25
San Diego
Boston
NYC
$0
500 2010
2011
2012
2013
19
Jobs
10% 5%
117
MARKET OVERVIEW
MARKET OVERVIEW | RTP/RDU SUBMARKET Map Legend Boundary of RTP proper Influencing Office Park Future Development Site 2,000
10,000
Major Employer Site 20 TW Alexander Drive
1,300
5,500
1,600
2,400
2015 Demographics (Radius search from 4117 Emperor)
3-Mile Radius
5-Mile Radius
10-Mile Radius
Population
19,194
92,254
475,194
Median Age
32.6
34.0
35.0
Total Households
8,244
39,465
195,249
Median Household Income
$74,604
$76,292
$63,515
Average Household Income
$97,618
$103,578
$89,785
65.4%
64.3%
55.4%
% of College Educated Workforce
Current conditions – market and submarket RTP / RDU lab
Non-CBD Raleigh-Durham
Peaking market
Rising market
Falling market Bottoming market
Tenant leverage
Landlord leverage
1,148
20
Strong demand for lab and R&D space across the country has helped large life science companies power a disproportionate amount of officemarket growth recently, with absorption occurring
2.9 TIMES FASTER IN RALEIGH-DURHAM than the greater United States.
MARKET OVERVIEW
MARKET OVERVIEW | LIFE SCIENCES RALEIGH-DURHAM MARKET OVERVIEW The Raleigh-Durham life sciences cluster is familiarly called the Research Triangle Region due to the geographic nexus of the area’s three leading research institutions: Duke University, North Carolina State University and The University of North Carolina at Chapel Hill. Squarely in the center of the region is the Research Triangle Park (RTP), a 7,000-acre center of research created by the state to help bring R&D talent to the region.
Facilities scorecard Supply
Raleigh-Durham
Rentable lab stock
The Triangle’s rich talent pool, stable socioeconomic structure, proximity to universities and high quality of life has attracted some of the big names from the life sciences sector to the region. Agro-biotech firms have displayed strong growth in the past few years. The region is already home to four of the top five ag-tech companies including Syngenta, Bayer CropScience, BASF and Monsanto.
Direct vacancy (Change year-over-year)
RESEARCH TRIANGLE PARK
Pricing
A majority of the lab spaces tracked in the Triangle is owner-occupied and include manufacturing space devoted to pharmaceutical, biological or medical device & instrument manufacturing. There is a two-tier lab market with modern lab facilities leasing in the $22.00 to $28.00 (NNN) per-square-foot range and dated lab facilities, roughly 10 to 25 years in age, leasing in the $17.00 to $20.00 (NNN) per-square-foot range. The existing supply pipeline of quality lab space is fast diminishing, as there is a strong demand of technologically advanced space. Firms looking to add additional lab space will most likely need to approach local developers to create a build-to-suit facility. Given the current demand for lab space, opportunistic developers are redeveloping older assets to add wet lab space. The asking rents of some of these newer facilities range from the mid to high $30's (NNN) persquare-foot.
Average asking rent (NNN) (Change year-over-year)
The biggest challenge that this industry continues to face is the lack of funding for Research and Development. The economic recession has by and large not affected the big firms located in the Triangle; however, the funding environment has suffered a major setback. In the private sector, this has forced companies to look for creative solutions to secure funding, specifically crowd funding. Over the past 12 months, multiple firms announced their decision to go public by filing for IPOs. Triangle firms have taken advantage of the improving stock market conditions and have raised money via IPOs to support long-stalled projects. As the economy improves, investors are also looking to invest in firms that have strong growth potential. NephroGenex, INC Research, PRA Health, Scynexis and Argos Therapeutics are some of the Triangle firms that filed for IPOs last year. As the landscape of the life sciences industry continues to change, we expect firms directly and indirectly connected to this sector to grow in the region. We expect to see more mergers and acquisitions, which will likely lead to real estate consolidations. As a mature, established cluster, the Raleigh-Durham area has the necessary infrastructure in place to support the life sciences industry. From a pure numbers standpoint, the region ranks behind other established clusters in science and engineering graduates and R&D capital as a percentage of state GDP. However, given the deep rooted presence of top industry companies, a favorable living environment that attracts out-of-state professionals and ample public/private interest groups in the area, the market has more than enough resources to sustain the growing needs of the industry.
9.9 M s.f. 14.4% +2.5 %
# of large blocks over 100,000 s.f.
2 0 s.f.
Under construction (s.f.)
$18.93 p.s.f. +6.4%
**Supply includes office, industrial and flex buildings with lab Average asking rent is based on current availabilities in the market
MERZ NORTH AMERICA 6501 Six Forks Road Six Forks / Falls of Neuse 60,000 s.f. Class A Relocation
701 W Main Street (The Chesterfield) Downtown Durham 284,000 s.f. available Class A *under renovation
PATHEON 4815 Emperor Blvd RTP / RDU 30,865 s.f. Class B Expansion
ARGOS THERAPEUTICS 1733 TW Alexander Drive RTP / RDU 97,500 s.f. Class A *investing $57 million in new bio manufacturing plant Activity key:
Leasing
Underconstruction
Largeblocksofspace
22
Life Sciences manufacturing supply: Major lab supply:
Clusters of manufacturing space devoted to pharmaceutical, biological or medical device & instrument manufacturing
Emerging lab supply:
Clusters of established lab stock with longtime industry presence
Areas with limited lab stock today that are poised for growth
Economic scorecard Workforce
Total life sciences
% life sciences to private employment
Growth
Employment
27,012
4.6%
1.2%
813
2.0%
5.2%
Total life sciences
% to total U.S.
VC funding
$262.6 M
3.1%
NIH funding
$893.1 M
4.0%
Innovation
Total life sciences
% to all patent classes
303
17.6%
Establishments Orange County
Funding
North Durham
85
6 Forks Falls of Neuse
Downtown Durham South Durham
20 TW ALEXANDER
Route 1
Patents
Glenwood / Creedmoor
*includes data from 2013-2014
RTP/RDU
Life sciences employment composition
40
Cary
West Raleigh
5%
Downtown Raleigh
440
Life sciences employment: 45% 27,012 7%
Pharma & medicine manufacturing
non-lab using
28%
East Raleigh
Electromedical instrument manufacturing Medical equipment & supplies manufacturing
7%
Testing laboratories
lab using
8%
Research & development Medical & diagnostic laboratories
Historical life sciences employment
Life sciences patents by classification
Life sciences employment
30,000
% life sciences vs. total private employment
5.0%
1%
4.8%
25,000 20,000
4.4%
15,000
4.2%
10,000
4.0%
5,000
3.8% 3.6%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Medical equipment & instruments
34%
4.6%
2001
MARKET OVERVIEW
MARKET OVERVIEW | LIFE SCIENCES
65%
Life sciences patents: 303
Pharmaceuticals & biotechnology
Crop science
2012
23
9000 Development Drive
North Carolina Technical Park
Newcastle North
PROPERTY:
9000 Development Drive Morrisville, NC
PROPERTY:
1101 Hamlin Road Durham, NC
PROPERTY:
SELLER:
Synthon Pharmaceuticals
SELLER:
ICON International
SELLER:
BUYER:
Novozymes North America
BUYER:
RENTABLE SF: PRICE: PRICE PSF: CLASS: DATE: SUBMARKET: COMMENTS:
30,500 $5,100,000 $167 B December 2014 RTP / RDU Owner-user sale
RENTABLE SF: PRICE: PRICE PSF: CLASS: DATE: SUBMARKET: COMMENTS:
MARKET OVERVIEW
SALES COMPARABLES
Easton & Associates 341,298 (5 properties) $16,250,000 $48 B August 2014 North Durham Portfolio consisting of industrial manufacturing and office buildings
BUYER: RENTABLE SF: PRICE: PRICE PSF: CLASS:
1035 Swabia Court Durham, NC Rubenstein Partners, L.P. Capital Square Holdings LLC 112,340 $14,500,000 $129 B
DATE:
March 2014
SUBMARKET:
RTP / RDU
COMMENTS:
100% leased to Reichhold at time of sale 24
Imperial Center R&D Portfolio
PROPERTY: SELLER:
Keystone Tech III
4222-4301 Emperor Blvd. Durham, NC
Crown Realty & Development, Inc.
BUYER:
Longfellow Real Estate Partners
RENTABLE SF: PRICE: PRICE PSF: CLASS: DATE: SUBMARKET: COMMENTS:
188,191 $23,616,556 $125 B February 2014 RTP / RDU ~76% leased at time of sale
PROPERTY: SELLER:
University Place IV
407 Davis Drive Morrisville, NC Guggenheim Real Estate LLC
PROPERTY: SELLER: BUYER:
RENTABLE SF:
RENTABLE SF:
PRICE PSF: CLASS: DATE: SUBMARKET: COMMENTS:
81,956 $19,445,000 $237 A September 2013 RTP / RDU ~100% leased at time of sale
4611 University Drive Durham, NC
GRA Durham Associates LTD LLC
BUYER: Alexandria Real Estate Equities, Inc.
PRICE:
MARKET OVERVIEW
SALES COMPARABLES
PRICE: PRICE PSF: CLASS: DATE: SUBMARKET: COMMENTS:
Blue Cross Blue Shield NC 100,000 (2 properties) $10,000,000 $100 B May 2013 South Durham Purchase for redevelopment
25
LAB INVESTMENT SALE ENVIRONMENT
LAB INVESTMENT
LAB INVESTMENT SALE ENVIRONMENT
8%
1% 2% REIT Equity Fund 56%
33%
Corporate/User Institutional Private
Investment sale volumes (in millions of $)
LAB PROPERTY BUYER COMPOSITION (IN $), LAST 6 QUARTERS $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Alexandria RE Equities
Senior Housing Props Tr
DivcoWest
DivcoWest
Facebook
Principal Real Estate Investors
Starwood Capital Group
Legacy Partners
HCP, Inc
LAB PROPERTY BUYER COMPOSITION (IN SF), LAST 6 QUARTERS
8% 12%
33%
REIT Equity Fund Corporate/User Institutional
23%
Private 24%
Source: JLL Research
Square feet transacted (in thousands)
1,200 1,000 800 600 400 200 0 Senior Housing Props Tr
HCP, Inc
Starwood Capital Group
27
LAB INVESTMENT
LAB INVESTMENT SALE ENVIRONMENT PRICINGS PREMIUMS FOR ASSETS IN INVESTMENT SALES $1,200
Average asset pricing ($ p.s.f.)
$1,000 $800 $600 $400 $200 $0
Office, Stabilized
Lab, Stabilized
INVESTORS PAYING PREMIUM FOR VACANCY IN HIGH GROWTH LAB MARKETS 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
Source: JLL Research
12.6% 9.3% 6.8%
6.0%
6.0%
5.8%
0.0%
Average vacancy, traded lab assets (%)
0.0%
Office vacancy (%)
28
20 TW ALEXANDER
For more information, please contact: Pam Michael Bill Sandridge Executive Vice President Managing Director 919.424.8173 919.424.8174 [email protected] [email protected]
5420 WADE PARK BLVD | RALEIGH, NC | www.jll.com/raleigh-durham
OFFERING MEMORANDUM 20 TW ALEXANDER DRIVE FINAL
20 TW ALEXANDER
This Offering Memorandum is intended solely for your use to determine whether you wish to express an interest in 20 TW Alexander Drive in Durham, NC. Disclaimer. Although information has been obtained from sources deemed reliable, JLL and/or JLL representatives, brokers or agents make no guarantees as to the accuracy of the information contained herein, and offer the Property without express or implied warranties of any kind. The Property may be withdrawn without notice. If the recipient of this information has signed a confidentiality agreement regarding this matter, this information is subject to the terms of that agreement. JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316.0 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $53.6 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
For more information, please contact: Pam Michael Executive Vice President 919.424.8173 [email protected] Bill Sandridge Managing Director 919.424.8174 [email protected]
2
EXECUTIVE SUMMARY
4
PROPERTY PROFILE
6
LOCATION OVERVIEW
11
MARKET OVERVIEW
15
LAB INVESTMENT SALE ENVIRONMENT
24 3
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY INVESTMENT SUMMARY
INVESTMENT HIGHLIGHTS
JLL is pleased to present an investment opportunity at 20 TW Alexander Drive, Research Triangle Park, North Carolina, a 163,171 square foot multi-story Office / R&D building. This building is situated on approximately 41.548 acres.
• Easy access to I-40 and Highway 147 • Frontage on TW Alexander and East Cornwallis Road at a signalized intersection • 36,579 square feet of existing lab space of which approximately 67% is Analytical Lab • 341 parking spaces • Region ranks 1st in country for Bachelor Degrees • Market demand for lab space • Eat-in cafeteria • Fitness center
Located in the world renowned Research Triangle Park, a home to 200 global companies across 7,000 acres of prime real estate, 20 TW Alexander sits in the heart of the Triangle with convenience to the Raleigh-Durham International Airport (9.1 miles).
20 TW ALEXANDER
5
PROPERTY PROFILE
PROPERTY PROFILE
PROPERTY DESCRIPTION SITE Address:
20 TW Alexander Drive
Jurisdiction:
City of Durham, Durham County
Acreage:
41.548
Survey Plat:
Durham County BK 138 / Page 97
Parcel Ref No:
157255
Landscaping:
Corporate Campus Setting
Irrigation:
Yes
ZONING:
SRP (Science Research Park) by City of Durham
PARKING
341 spaces; 9 handicap accessible
ADJACENT 15.843 ACRE PARCEL
BUILDING Year Built:
1998
Square Footage:
163,171
Construction Type:
Fireproofed structural steel
Building Depths:
Main lab floor is approximately 204 ft. 4 in (W) by 397 ft. (L) with a 10 ft. service corridor between each lab wing, measuring 97 ft. 2 in. (W) by 397 ft. (L).
Clear Heights:
16’ for labs on ground & first levels; 14’8” for labs on second floor level; service corridor first floor level 17’3” to bottom of steel & ground floor service corridor 14’7” to bottom of steel
Entrances:
Eight (8)
Dock Doors:
Two (2) dock high door available
7
PROPERTY PROFILE
PROPERTY DESCRIPTION ROOF Construction:
• •
Warranty:
10 years, August 31, 2008
Access:
Internal stairway by employee entrance
Sarnafil Roof Installed in 1998
UTILITIES Water:
City of Durham
Sewer:
City of Durham
Electric:
Duke Energy
Natural Gas:
PSNC Energy
PLUMBING
Back Flow preventer
ELECTRICAL
• •
Two (2) 4000 amp main service entrances 1500KVA and 2000KVA Transformers (227/480V 3 Phase)
HVAC
One (1) 1,000-ton & Two (2) 385-ton chillers; One (1) Boiler (original). Chillers original but 1000 Ton and one of small units recently refurbished. All use HCFC refrigerants.
GENERATOR
1865KVA Generator
LIFE SAFTEY
Sprinkler systems. Wet, dry and chemical.
OFFICE
39,487 SF traditional office
LAB
• • •
6,356 SF Biology 24,648 SF Analytical 5,575 SF Chemistry
• • • •
Fitness Center On-site cafeteria Large training room Well-appointed office and meeting spaces
ADDITIONAL
8
PROPERTY PROFILE
PROPERTY DESCRIPTION OPERATING EXPENSES 2012
2013
2014
Electric
$527,304.72
$472,202.93
$453,599.16
Natural Gas
$236,630.25
$244,520.78
$229,123.22
Water/Sewer
$96,592.74
$87,229.22
$85,617.31
Total Maintenance
$142,011
$105,702
$395,682
PIN
Land Value
Building Value
Total Value
0739-04-71-0057
$3,013,560
$18,109,138
$21,122,698
0739-04-61-1589
$864,600
$
$864,600
0739-04-61-0215
$107,300
$
$107,300
0739-04-61-3009
$84,400
$
$84,400
TOTAL
$4,069,860
$18,109,138
$22,178,998
2015 TAX VALUE
9
Ground Floor
20 TW ALEXANDER DRIVE 163,171 square feet 10
First Floor
20 TW ALEXANDER DRIVE 163,171 square feet 11
Second Floor
20 TW ALEXANDER DRIVE 163,171 square feet 12
LOCATION OVERVIEW
20 TW ALEXANDER
S MIAMI BLVD. AMENITIES
HIGHWAY 55 AMENITIES
14
LOCATION OVERVIEW
AMENITIES HIGHWAY 55 DINING Aladdin's Eatery Applebee’s Azitra Authentic Indian Fare Bob Evans Brasa Brazilian Steakhouse Brizz Wood-Fired Pizza Bruegger’s Bagels Caribou Coffee Carolina Ale House Champa Thai & Sushi Chili’s Grill & Bar Cold Stone Creamery Dairy Queen – Orange Julius Elevation Burger Firewurst Flame Kabob FujiSan Japanese Steakhouse Gigi’s Cupcakes Greek Fiesta Hayashi-Ya Japanese Restaurant Hibachi 101 Jason’s Deli Johnny Carino’s Country Italian Lime Fresh Mexican Grill Longhorn Steakhouse Maggie Moo’s Ice Cream & Treatery McDonald’s Moe’s Southwest Grill Noodles & Company O’Charley’s Panera Bread Red Robin Gourmet Burgers Slice of NY Starbucks
SOUTH MIAMI BOULEVARD Subway The Rocky Mountain Chocolate Factory Which Wich? Wild Wind Cafe SHOPPING Barnes & Noble Best Buy BJ’s Wholesale Club Dicks Sporting Goods GNC Goodwill Hallmark Homegoods Kay Jewelers Mattress Warehouse Men’s Warehouse Michael’s Party City PetSmart Pier 1 Imports Ross Dress for Less
BB&T Blo Hair Salon Brier Creek Cleaners Brier Creek Dental Studio European Wax Center Eye Care Associates Great Clips Main Pedi Nail Spa Massage Envy Plant Beach Tanning Spa Salon Blu Skin Sense Day Spa Sprint The UPS Store T-Mobile Verizon Wireless
HOTELS Embassy Suites Hampton Inn & Suites
DINING Arby’s Bojangles’ Burger King Cilantro Mediterranean Grill Fortune Asian Bistro Jake’s Wayback Burgers Jimmy John’s McDonald’s Mez Contemporary Mexican Page Road Grill Randy’s Pizza Starbucks Wendy’s Wok ‘n Grill
SHOPPING Office Depot Sam’s Club Walmart Supercenter
SERVICES
Rack Room Shoes Staples Target T.J. Maxx Total Wine & More Walmart Supercenter
Atlantic Tire & Service BB&T Bright Horizons Coastal Federal Credit Union FedEx Office Fitness Connection Great Clips QD Nails & Spa State Employees Credit Union Verizon Wireless
SERVICES
HOTELS
Advance Tailors Bank of America
Holiday Inn Express & Suites Homewood Suites Sheraton Hotel & Convention Center Springhill Suites Wingate by Wyndham
Candlewood Suites Extended Stay America 15
RTP / RDU SUBMARKET The Research Triangle Park (RTP); home to more than 200 global companies, fosters a culture of scientific advancement and competitive excellence. Centrally located between Duke University in Durham, North Carolina State University in Raleigh and The University of North Carolina at Chapel Hill, the submarket is home to a dynamic employment base. In additional, adjacency to the Raleigh-Durham International Airport adds to the attractiveness of this submarket’s location. As such, this submarket is one of the largest in the Triangle metro, accounting for 13% of the market’s total office square feet. As in other submarkets in Raleigh-Durham, much of the inventory in this submarket is low-rise or mid-rise with large footprints. However, in the RTP, most of the buildings and tenant are large: 60% of buildings are larger than 100,000 square feet, nearly 100 office-occupying tenants have a footprint greater than 25,000 square feet and approximately 40% of the buildings are occupied by a single tenant. As the most significant employment core in Raleigh, the RTP is a sprawling 7,000-acre campus housing more than 39,000 employees, according to the Research Triangle Foundation of North Carolina. The RTP strictly requires the buildings within its boundaries to be primarily research and development space, so only a small share of office space actually exists within the RTP proper. Nortel Networks, Cisco, IBM, BASF and Quintiles are some its globally recognized tenant list. However, this submarket has been a serious magnet for office users seeking close proximity to the global, heavy-hitting technology and pharmaceutical players.
16
LOCATION OVERVIEW
LOCATION OVERVIEW
MARKET OVERVIEW
MARKET OVERVIEW
MARKET OVERVIEW Inventory
Rent growth since Q1 2014
11,525,665 s.f.
2.4%
17.1%
$20.78 Full Service
7,906,240 s.f.
3.6%
14.8%
$11.97 NNN
13,806,847 s.f.
7.8%
5.7%
$4.97 NNN
Office*
44,185,719 s.f.
2.8%
13.4%
$21.49 Full Service
Flex**
20,970,202 s.f.
3.1%
12.4%
$10.54 NNN
Warehouse**
67,910,545 s.f.
1.8%
8.3%
$3.61 NNN
Overall Vacancy
Average asking rent
RTP / RDU SUBMARKET Office Flex Warehouse ALL SUBMARKETS
*Data includes office properties over 15,000 s.f.; excludes all owner user s and medical office **Data includes properties over 15,000 s.f.; excludes all owner users
1 2 RALEIGH-DURHAM SUBMARKETS 1. 2. 3. 4. 5. 6.
North Durham Downtown Durham South Durham RTP / RDU Cary Southwest Wake County
7. West Raleigh 8. Downtown Raleigh 9. Glenwood / Creedmoor 10. Six Forks / Falls of Neuse 11. Route 1 12. Eastern Raleigh
3
10
9
11
4 20 TW ALEXANDER
5
7
8
12
6 18
MARKET OVERVIEW
MARKET OVERVIEW Educational Attainment: Bachelor’s Degree Index
Employment Growth (2014 - 2019) 20% NYC
15%
Boston San Diego
15% 7%
7% Raleigh
120
Raleigh
6%
5%
5%
San Diego
Boston
NYC
0% US Average Indianapolis
133 157
Indianapolis
116
US Average
100 0
Wage Index
100
120
108 99
101
90
Funds ($ Millions)
117
120
100
50
75
100
125
150
$600
3,000
$500
2,500
$400
2,000
$300 1,500
$200
1,000
$100
80 US Average Indianapolis
Raleigh
175
International Company Investment
130
110
25
San Diego
Boston
NYC
$0
500 2010
2011
2012
2013
19
Jobs
10% 5%
117
MARKET OVERVIEW
MARKET OVERVIEW | RTP/RDU SUBMARKET Map Legend Boundary of RTP proper Influencing Office Park Future Development Site 2,000
10,000
Major Employer Site 20 TW Alexander Drive
1,300
5,500
1,600
2,400
2015 Demographics (Radius search from 4117 Emperor)
3-Mile Radius
5-Mile Radius
10-Mile Radius
Population
19,194
92,254
475,194
Median Age
32.6
34.0
35.0
Total Households
8,244
39,465
195,249
Median Household Income
$74,604
$76,292
$63,515
Average Household Income
$97,618
$103,578
$89,785
65.4%
64.3%
55.4%
% of College Educated Workforce
Current conditions – market and submarket RTP / RDU lab
Non-CBD Raleigh-Durham
Peaking market
Rising market
Falling market Bottoming market
Tenant leverage
Landlord leverage
1,148
20
Strong demand for lab and R&D space across the country has helped large life science companies power a disproportionate amount of officemarket growth recently, with absorption occurring
2.9 TIMES FASTER IN RALEIGH-DURHAM than the greater United States.
MARKET OVERVIEW
MARKET OVERVIEW | LIFE SCIENCES RALEIGH-DURHAM MARKET OVERVIEW The Raleigh-Durham life sciences cluster is familiarly called the Research Triangle Region due to the geographic nexus of the area’s three leading research institutions: Duke University, North Carolina State University and The University of North Carolina at Chapel Hill. Squarely in the center of the region is the Research Triangle Park (RTP), a 7,000-acre center of research created by the state to help bring R&D talent to the region.
Facilities scorecard Supply
Raleigh-Durham
Rentable lab stock
The Triangle’s rich talent pool, stable socioeconomic structure, proximity to universities and high quality of life has attracted some of the big names from the life sciences sector to the region. Agro-biotech firms have displayed strong growth in the past few years. The region is already home to four of the top five ag-tech companies including Syngenta, Bayer CropScience, BASF and Monsanto.
Direct vacancy (Change year-over-year)
RESEARCH TRIANGLE PARK
Pricing
A majority of the lab spaces tracked in the Triangle is owner-occupied and include manufacturing space devoted to pharmaceutical, biological or medical device & instrument manufacturing. There is a two-tier lab market with modern lab facilities leasing in the $22.00 to $28.00 (NNN) per-square-foot range and dated lab facilities, roughly 10 to 25 years in age, leasing in the $17.00 to $20.00 (NNN) per-square-foot range. The existing supply pipeline of quality lab space is fast diminishing, as there is a strong demand of technologically advanced space. Firms looking to add additional lab space will most likely need to approach local developers to create a build-to-suit facility. Given the current demand for lab space, opportunistic developers are redeveloping older assets to add wet lab space. The asking rents of some of these newer facilities range from the mid to high $30's (NNN) persquare-foot.
Average asking rent (NNN) (Change year-over-year)
The biggest challenge that this industry continues to face is the lack of funding for Research and Development. The economic recession has by and large not affected the big firms located in the Triangle; however, the funding environment has suffered a major setback. In the private sector, this has forced companies to look for creative solutions to secure funding, specifically crowd funding. Over the past 12 months, multiple firms announced their decision to go public by filing for IPOs. Triangle firms have taken advantage of the improving stock market conditions and have raised money via IPOs to support long-stalled projects. As the economy improves, investors are also looking to invest in firms that have strong growth potential. NephroGenex, INC Research, PRA Health, Scynexis and Argos Therapeutics are some of the Triangle firms that filed for IPOs last year. As the landscape of the life sciences industry continues to change, we expect firms directly and indirectly connected to this sector to grow in the region. We expect to see more mergers and acquisitions, which will likely lead to real estate consolidations. As a mature, established cluster, the Raleigh-Durham area has the necessary infrastructure in place to support the life sciences industry. From a pure numbers standpoint, the region ranks behind other established clusters in science and engineering graduates and R&D capital as a percentage of state GDP. However, given the deep rooted presence of top industry companies, a favorable living environment that attracts out-of-state professionals and ample public/private interest groups in the area, the market has more than enough resources to sustain the growing needs of the industry.
9.9 M s.f. 14.4% +2.5 %
# of large blocks over 100,000 s.f.
2 0 s.f.
Under construction (s.f.)
$18.93 p.s.f. +6.4%
**Supply includes office, industrial and flex buildings with lab Average asking rent is based on current availabilities in the market
MERZ NORTH AMERICA 6501 Six Forks Road Six Forks / Falls of Neuse 60,000 s.f. Class A Relocation
701 W Main Street (The Chesterfield) Downtown Durham 284,000 s.f. available Class A *under renovation
PATHEON 4815 Emperor Blvd RTP / RDU 30,865 s.f. Class B Expansion
ARGOS THERAPEUTICS 1733 TW Alexander Drive RTP / RDU 97,500 s.f. Class A *investing $57 million in new bio manufacturing plant Activity key:
Leasing
Underconstruction
Largeblocksofspace
22
Life Sciences manufacturing supply: Major lab supply:
Clusters of manufacturing space devoted to pharmaceutical, biological or medical device & instrument manufacturing
Emerging lab supply:
Clusters of established lab stock with longtime industry presence
Areas with limited lab stock today that are poised for growth
Economic scorecard Workforce
Total life sciences
% life sciences to private employment
Growth
Employment
27,012
4.6%
1.2%
813
2.0%
5.2%
Total life sciences
% to total U.S.
VC funding
$262.6 M
3.1%
NIH funding
$893.1 M
4.0%
Innovation
Total life sciences
% to all patent classes
303
17.6%
Establishments Orange County
Funding
North Durham
85
6 Forks Falls of Neuse
Downtown Durham South Durham
20 TW ALEXANDER
Route 1
Patents
Glenwood / Creedmoor
*includes data from 2013-2014
RTP/RDU
Life sciences employment composition
40
Cary
West Raleigh
5%
Downtown Raleigh
440
Life sciences employment: 45% 27,012 7%
Pharma & medicine manufacturing
non-lab using
28%
East Raleigh
Electromedical instrument manufacturing Medical equipment & supplies manufacturing
7%
Testing laboratories
lab using
8%
Research & development Medical & diagnostic laboratories
Historical life sciences employment
Life sciences patents by classification
Life sciences employment
30,000
% life sciences vs. total private employment
5.0%
1%
4.8%
25,000 20,000
4.4%
15,000
4.2%
10,000
4.0%
5,000
3.8% 3.6%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Medical equipment & instruments
34%
4.6%
2001
MARKET OVERVIEW
MARKET OVERVIEW | LIFE SCIENCES
65%
Life sciences patents: 303
Pharmaceuticals & biotechnology
Crop science
2012
23
9000 Development Drive
North Carolina Technical Park
Newcastle North
PROPERTY:
9000 Development Drive Morrisville, NC
PROPERTY:
1101 Hamlin Road Durham, NC
PROPERTY:
SELLER:
Synthon Pharmaceuticals
SELLER:
ICON International
SELLER:
BUYER:
Novozymes North America
BUYER:
RENTABLE SF: PRICE: PRICE PSF: CLASS: DATE: SUBMARKET: COMMENTS:
30,500 $5,100,000 $167 B December 2014 RTP / RDU Owner-user sale
RENTABLE SF: PRICE: PRICE PSF: CLASS: DATE: SUBMARKET: COMMENTS:
MARKET OVERVIEW
SALES COMPARABLES
Easton & Associates 341,298 (5 properties) $16,250,000 $48 B August 2014 North Durham Portfolio consisting of industrial manufacturing and office buildings
BUYER: RENTABLE SF: PRICE: PRICE PSF: CLASS:
1035 Swabia Court Durham, NC Rubenstein Partners, L.P. Capital Square Holdings LLC 112,340 $14,500,000 $129 B
DATE:
March 2014
SUBMARKET:
RTP / RDU
COMMENTS:
100% leased to Reichhold at time of sale 24
Imperial Center R&D Portfolio
PROPERTY: SELLER:
Keystone Tech III
4222-4301 Emperor Blvd. Durham, NC
Crown Realty & Development, Inc.
BUYER:
Longfellow Real Estate Partners
RENTABLE SF: PRICE: PRICE PSF: CLASS: DATE: SUBMARKET: COMMENTS:
188,191 $23,616,556 $125 B February 2014 RTP / RDU ~76% leased at time of sale
PROPERTY: SELLER:
University Place IV
407 Davis Drive Morrisville, NC Guggenheim Real Estate LLC
PROPERTY: SELLER: BUYER:
RENTABLE SF:
RENTABLE SF:
PRICE PSF: CLASS: DATE: SUBMARKET: COMMENTS:
81,956 $19,445,000 $237 A September 2013 RTP / RDU ~100% leased at time of sale
4611 University Drive Durham, NC
GRA Durham Associates LTD LLC
BUYER: Alexandria Real Estate Equities, Inc.
PRICE:
MARKET OVERVIEW
SALES COMPARABLES
PRICE: PRICE PSF: CLASS: DATE: SUBMARKET: COMMENTS:
Blue Cross Blue Shield NC 100,000 (2 properties) $10,000,000 $100 B May 2013 South Durham Purchase for redevelopment
25
LAB INVESTMENT SALE ENVIRONMENT
LAB INVESTMENT
LAB INVESTMENT SALE ENVIRONMENT
8%
1% 2% REIT Equity Fund 56%
33%
Corporate/User Institutional Private
Investment sale volumes (in millions of $)
LAB PROPERTY BUYER COMPOSITION (IN $), LAST 6 QUARTERS $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Alexandria RE Equities
Senior Housing Props Tr
DivcoWest
DivcoWest
Principal Real Estate Investors
Starwood Capital Group
Legacy Partners
HCP, Inc
LAB PROPERTY BUYER COMPOSITION (IN SF), LAST 6 QUARTERS
8% 12%
33%
REIT Equity Fund Corporate/User Institutional
23%
Private 24%
Source: JLL Research
Square feet transacted (in thousands)
1,200 1,000 800 600 400 200 0 Senior Housing Props Tr
HCP, Inc
Starwood Capital Group
27
LAB INVESTMENT
LAB INVESTMENT SALE ENVIRONMENT PRICINGS PREMIUMS FOR ASSETS IN INVESTMENT SALES $1,200
Average asset pricing ($ p.s.f.)
$1,000 $800 $600 $400 $200 $0
Office, Stabilized
Lab, Stabilized
INVESTORS PAYING PREMIUM FOR VACANCY IN HIGH GROWTH LAB MARKETS 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
Source: JLL Research
12.6% 9.3% 6.8%
6.0%
6.0%
5.8%
0.0%
Average vacancy, traded lab assets (%)
0.0%
Office vacancy (%)
28
20 TW ALEXANDER
For more information, please contact: Pam Michael Bill Sandridge Executive Vice President Managing Director 919.424.8173 919.424.8174 [email protected] [email protected]
5420 WADE PARK BLVD | RALEIGH, NC | www.jll.com/raleigh-durham
