493100 t5realestate, ppd sales presentation-5 · ppd is a leading global contract research...

PPD Office & Laboratory Building 3230 Deming Way | Middleton, WI

Asking Price – $6,680,000

2015 NOI - $465,739

Building Size – 32,425 sf

Site Size – 3.2 acres

Year Built – 2000

Renovation Date – 2013

Lease Expiration –October, 2023

Class A office & laboratory facility

Global pharmaceutical contract research company

9-year remaining lease term with annual escalators

Strong, diverse bio-tech marketplace in greater Madison area

Excellent passive real estate investment with attractive immediate yield

Investment Sale

T5 Real Esate Solutions LLC is pleased to offer for sale the Pharmaceutical Product Development (PPD) Building located at 3230 Deming Way in Middleton, WI. The office/research facility is subject to a net lease with PPD reflecting 9+ years of remaining term and 2% annual escalators.

THE OFFERING

OVERVIEW

INVESTMENT HIGHLIGHTS


DISCLAIMERThe information contained in this marketing brochure (“Materials”) is proprietary and confidential. It is intended to be reviewed only by the person or entity receiving the Materials from T5 Real Estate Solutions LLC (“Agent”). The Materials are intended to be used for the sole purpose of preliminary evaluation of the subject property (“Property”) for potential purchase.

The Materials have been prepared to provide unverified summary financial, property, and market information to a prospective purchaser to enable it to establish a preliminary level of interest in potential purchase of the Property. The Materials are not to be considered fact. The information contained in the Materials is not a substitute for thorough investigation of the financial, physical, and market conditions relating to the Property.

The information contained in the Materials has been obtained by Agent from sources believed to be reliable; however, no representation or warranty is made regarding the accuracy or completeness of the Materials. Agent makes no representation or warranty regarding the Property, including but not limited to income, expenses, or financial performance (past, present, or future); size, square footage, condition, or quality of the land and improvements; presence or absence of contaminating substances (PCB’s, asbestos, mold, etc.); compliance with laws and regulations (local, state, and federal); or, financial condition or business prospects of any tenant (tenants’ intentions regarding continued occupancy, payment of rent, etc). A prospective purchaser must independently investigate and verify all of the information set forth in the Materials. A prospective purchaser is solely responsible for any and all costs and expenses incurred in reviewing the Materials and/or investigating and evaluating the Property.

By receiving the Materials you are agreeing to the Confidentiality and Disclaimer set forth herein.

The sale of the property is being exclusively facilitated by T5 Real Estate Solutions LLC. Thank you for considering this investment opportunity. For additional information please contact:

OFFERING PROCEDURES

Terms of Sale

ASKING PRICE: $6,680,000

TERMS: The properties are being sold on an as is, where is basis, without structural, economic or environmental warranties.

PROPERTY TOURS: All property tours must be coordinated by T5 Real Estate Solutions LLC. Please call the contact indicated below to arrange a tour.

SALE COSTS: Rent, CAM expenses, real estate taxes and closing costs will be prorated on the day of closing in accordance with customary practice for real estate transfers in Dane County. Seller shall be responsible for paying the State of Wisconsin transfer taxes, equal to $3.00 per $1,000 in value.

DEBT: The property is being offered free and clear of any mortgage financing.


Contact Information

Timothy Carey, PrincipalT5 Real Estate Solutions LLC

[email protected]

INVESTMENT HIGHLIGHTSThe Offering

The PPD Building is a pharmaceutical office and laboratory facility located within the Middleton Corporate Center in Middleton (suburban Madison), Wisconsin. The facility is leased to PPD Development LLC through October, 2023.

The building is comprised of a 32,425 square foot office/laboratory facility. The building was built in 2000 and extensively renovated (interior and exterior) in 2013.

Stable investment opportunity with strong current yield and upside through annual rent escalations and renewal probability.

Price – $6,680,000 Cap Rate – 7.0%

Tenant / LeasePPD Development LLC is a wholly-owned subsidiary of Pharmaceutical Product Development, Inc. The company is a global contract research organization providing drug discovery, development, lifecycle management and laboratory services to clients including pharmaceutical, biotechnology, medical device, academic and government organizations.

PPD was taken private in December 2011 through an all-cash acquisition valued at $3.9 billion.

In its last year as a public company (2011), PPD reported revenue of $2 billion and net income of $257 million.

The PPD lease has 9 + years remaining (10/31/23 expiration) and 2% annual rent escalations.

Real EstateThe property is located within the desirable suburb of Middleton on the western edge of Madison. Excellent transportation linkages exist through access to the West Beltline Highway. Proximity to housing stock, retail and services bodes well for PPD employee retention and recruitment, as well as re-tenanting the building if vacated by PPD.

Significant capital was expended in 2013 by the landlord (exterior skin replacement) and PPD (office renovations, lab installation and considerable equipment purchases).

Area StrengthsThe greater Madison area has become a hotbed for the life science sector and has produced an array of ground breaking discoveries in biosciences and biotechnology.

Major biotech companies with a significant presence in the area include Cellular Dynamics, Lucigen, Promega, Luminex, Roche NimbleGen, Inc., Covance, and GE Health Care.

The Madison Region’s life sciences sector is driven largely by UW-Madison, which ranks 4th nationwide in federal research funds with over $1 billion in expenditures, more than half of which is spent directly in life sciences.

Middleton is home to many major employers in the area including American Girl, TDS Telephone & Data Systems, Spectrum Brands, Electronic Theater Controls, NSI West Bend Insurance, and Capitol Indemnity

Unemployment rate in Dane County is only 3.8%, the lowest of any county in the State.


INVESTMENT OFFERING

Location

Lot Size

3230 Deming Way, Middleton, Wisconsin

3.2 Acres

The PPD building consists of 32,425 square foot, single-story facility comprised of a mix of class A office and laboratory/research space. The building was constructed in 2000 and underwent considerable exterior and interior improvements in 2013 in conjunction with PPD’s 10-year lease extension. Over the past 12 months PPD has approximately $4 million in interior build-out and approximately $10 million in laboratory-related equipment. The building is a steel-framed structure with masonry and EIFS exterior and a ballasted, rubber-membrane roof.

Improvements

The facility is leased to PPD Development LLC, a wholly owned subsidiary of Pharmaceutical Product Development, Inc., which does not guarantee the lease. The current net rent is $461,375 and is scheduled to increase 2.0% in January, 2015 and each year thereafter. PPD is responsible for utilities, real estate taxes, insurance, and all building and grounds repairs and maintenance, except roof and structural maintenance. The lease contains two 5-year options to extend.

Lease

Annual Rent Period Annual Rent Per Sq. Ft.

2014 $461,375 $14.23 2015 $470,603 $14.51

Annual Escalator: 2.0%

Purchase Price $6,680,000


PROPERTY DESCRIPTION

Address3230 Deming Way, Middleton, WI

Site Size3.2 Acres

32,425 square feetBuilding Size

2000

Building Age

Single-story, steel-framed with masonry and EIFS exterior and ballasted membrane roof

Construction

122 paved stallsParking

Loading CapacityOne exterior loading dock

Packaged roof-mounted gas-fired forced air heating and cooling units, as well as two nitrogen cooling towers.

Mechanicals

Building FinishOffice: 40%

Laboratory & Support: 60%

1200 amp service for office space

Electrical

1600 amp service for laboratory1000 kw back-up generator (owned by PPD)

YesSprinkler

PDD; Planned Development DistrictZoning


TENANCYPPD is a leading global contract research organization providing drug discovery, development, lifecycle management and laboratory services. Its clients and partners include pharmaceutical, biotechnology, medical device, academic and government organizations. With offices in 46 countries and approximately 13,000 professionals worldwide, PPD applies innovative technologies, therapeutic expertise and a commitment to quality to help clients and partners accelerate the delivery of safe and effective therapeutics and maximize the returns on their R&D investments.

In December 2011, PPD was taken private by affiliates of the Carlyle Group and Hellman & Friedman in an all-cash transaction valued at $3.9 billion. The lease does not include a provision to obtain financial statements from the tenant. We have obtained summary financial statements for PPD from Bloomberg for the periods 2004-2011. For YE 2011, the statements show revenue of $2 billion with net income of $ 257 million.

Clinical Development ServicesProviding comprehensive product development and post-approval services for biopharmaceuticals and devices

Phase I clinical trial services

Full service Phase II-IIIb clinical studies for multinational regulatory submissions

Therapeutic and specialty expertise with dedicated project teams

Post-approval services, including epidemiology; pharmacoepidemiology and health outcomes; risk management and REMS; safety surveillance studies; real world outcomes studies; medical information; safety; registries; and observational studies

Clinical data management and information solutions, including consulting and proprietary software tools to speed collection, analysis and data reporting

Consulting ServicesDelivering scientific expertise and global resources to ensure successful execution of development programs

Product DevelopmentAdaptive Trial DesignRare Diseases

BiosimilarsPediatricsCardiovascular Outcomes

Laboratory ServicesProviding comprehensive lab services that increase speed and precision to accelerate decision makingBioanalytical Labs

Central Labs

cGMP labs

Vaccines and biologics lab

Discovery InnovationInnovative approaches to improve discovery science

BioDuro, A PPD Company X-Chem, Inc.


Therapeutic Areas

Cardiovascular

Critical Care

Experience across a broad range indications and an investigator network of more than 6,000 cardiologists.

Deep understanding of the unique nature of critical care environments, coupled with access to our network of investigators around the globe.

Experience with dermatology trials ranging from small Phase I studies involving healthy volunteers to large, global, multi-center Phase III trials.

Dermatology

PPD’s dental pain research clinic in Austin, Texas conducts clinical trials for acute dental pain using the impacted third molar model.

Dental Pain Research

Expedited recruitment, international regulatory expertise and operational teams trained in endocrine / metabolic indications.

Endocrine & Metabolic

More than 800 clinical development professionals worldwide with experience in gastroenterology protocols.

Gastroenterology

Hematology Oncology

Immunology

Extensive knowledge of hematology and oncology research, vast capabilities and experience with feasibility studies and a large investigator network.

PPD’s immunology team is led by a board-certified rheumatologist and has experience in a variety of immunology areas.

PPD has vast experience and expertise in infectious diseases studies, combined with a large investigator network and microbiology labs.

Infectious Diseases

Expertise in nearly 40 psychiatric and neurological disorders, and clinically trained neuroscience teams led by scientists and clinicians with extensive neuroscience experience.

Neuroscience

Expertise in ophthalmic research, experience with therapeutic-specific ophthalmic vendors and in international network of experienced investigative sites.

Ophthalmology

Experience in conducting Phase I-IV respiratory clinical trials, ranging from a single protocol to full development across a broad range of respiratory indications.

Respiratory


PPD History

July 1985

January 1996

Fred Eshelman, Pharm.D., founds PPD as a one-person consulting firm based in his home in Maryland.

PPD issues its initial public stock offering, and its common stock begins trading on Nasdaq under the symbol PPDI.

Through several acquisitions, PPD becomes the first company in the outsourcing industry to add drug discovery services to its portfolio.

May 1997

The company gains a platform growth in the global central lab arena by acquiring U.S. and European clinical laboratories that specialize in measuring lipids, lipoproteins and other important factors in metabolic diseases.

February 2002

Growing demand for drug development services in the Asia Pacific region lead to the acquisition of an Asian-based contract research organization (CRO) with extensive experience in managing pan-Asian clinical trials to international good clinical practice (GCP) standards.

June 2002

April 2005

July 2005

PPD relocates its Phase I clinic and Phase I-III central lab to a new state-of-the-art facility in Austin, Texas. Twice the size of the previous operations, the facility capitalizes on PPD’s strengths in conducting first-in-man studies, definitive cardiac safety monitoring and complex, procedure-intensive trials.

The National Institute of Allergy and Infectious Diseases (NIAID) awards PPD a five-year contract in which PPD provides direct labor support to help manage clinical research efforts in AIDS treatment and prevention in eight world regions.

In strategic collaboration with Merck & Co., PPD acquires Merck’s vaccines and biologics infrastructure, broadens its therapeutic expertise and significantly expands its existing relationship with the pharmaceutical company.

December 2008

The acquisition of Excel PharmaStudies, the market leader and one of China’s largest CROs, significantly expands PPD’s presence in China.

October 2009

The acquisition of PPD by affiliates of the Carlyle Group and affiliates of Hellman & Friedman in an all-cash transaction valued at approximately $3.9 billion is complete.

December 2011

Clinical research sites globally rank PPD no.1 for reputation among all CROs in CenterWatch’s 2013 Global Investigative Site Relationship Survey. PPD also ranks second on investigative sites’ evaluation of their clinical trial relationships with CROs. Overall, PPD ranks among the top three CROs on all 36 relationship attributes included in the survey.

May 2013



Lease Abstract

Tenant

General Information

PPD Development LLC, a wholly owned subsidiary of Pharmaceutical Product Development, Inc.

BuildingRentable Area% of Total BuildingLease Commencement Lease ExpirationExpansion OptionsExtension OptionsTermination OptionCurrent Net Rental Rate

3230 Deming Way32,425 RSF

100%November 1, 2000October 31, 2023

NoYesNo

$14.23

Lease DateMarch 10, 2000June 30, 2002January 14, 2005October 31, 2007March 12, 2013

1st Amendment (expand to 21,042 sf)2nd Amendment (expand to 22,725 sf)3rd Amendment (expand to 32,425 sf)4th Amendment (extend term to 2023 and convert to NNN lease)

Rentable Area32,425 Square Feet

Term130 months

Base Rent

Period1/1/14 - 12/31/141/1/15 - 12/31/151/1/16 - 12/31/161/1/17 - 12/31/171/1/18 - 12/31/181/1/19 - 12/31/191/1/20 - 12/31/201/1/21 - 12/31/211/1/22 - 12/31/221/1/23 - 12/31/23

Rent PSF$14.23$14.51$14.80$15.10$15.40$15.71$16.02$16.34$16.67$17.00

Total Rent $461,375$470,603$480,015$489,615$499,407$509,396$519,584$529,975$540,575$551,386

Base Rent Schedule

Tenant’s Pro Rate Share100%

Additional RentThis is a NN lease; tenant is responsible and directly pays for all expenses relating to repairs and maintenance and utilities of the property and premises and reimburses landlord for costs related to real estate taxes insurance and window washing, except those items that are landlord responsibilities.


Landlord Responsibilit ies

Assignment / Subletting

Subordination

Landlord Insurance

Tenant Insurance

Estoppel Certificate

Damage / Destruction

Expansion Options

Termination Options

Renewal Options

Security Deposit

Landlord is responsible for the maintenance and repair of the roof, foundations, exterior walls, exterior windows, and exterior skin of the building, the roof drainage system and structural portions of the building.

Landlord consent required.

The lease is subordinate at any present or future mortgage.

Fire and casualty coverage equal to replacement cost; general liability coverage of $1 mm per occurrence related to property damage, and $2 mm related to personal injury or death; and coverage as reasonably required by landlord and prudent for similar income-producing property. Cost of Landlord’s insurance is reimbursed by Tenant.

Fire and casualty coverage equal to replacement cost of Tenant Improvements made by Tenant; and general liability coverage of $1 mm per occurrence related to property damage, and $2 mm related to personal injury or death. Tenant insurance policies shall name Landlord and Landlord’s mortgagee as additional insureds.

None

None

None

Two options to extend for five (5) years each within 180 days notice, upon same terms and conditions.

Required by tenant within 15 days request

If the premises is damaged or rendered untenantable and Landlord can repair within 120 days, Landlord shall complete repairs. If repairs cannot be completed within 120 days, either party may cancel the lease. Rent shall abate during reconstruction. The landlord may cancel the lease if (i) more than thirty percent (30%) of the premises or building is damaged and the landlord decides not to repair and restore the premises or building; (ii) any mortgage of the Building shall not allow adequate insurance proceeds for repair and restoration; (iii) the damage is not covered by Landlord’s insurance required by this lease; or (iv) the lease is in the last twelve (12) months of its term.

F INANCIAL ANALYSIS


Summary Analysis

Purchase PriceNOICap Rate Building SizePrice Per SF

$6,680,000$465,739

7.0%32,425

$206

Proforma Economics

Rental Income

2015 2017 2020 2023

$470,603 $489,615 $519,584 $551,386

Expenses

CAM/Taxes/InsuranceRoof/Structure Reserve

NNN$4,864

NNN$5,061

NNN$5,370

NNN$5,699

Net Operating Income $465,739 $484,554 $514,214 $545,687

Implied Cap Rate 7.0% 7.3% 7.7% 8.2%

Financing Assumptions

Loan Amount @ 65% LTVInterest RateAmorizationAnnual Payment

$4,342,0004.00%

25$275,024

$4,046,7184.00%

23$275,024

$3,557,1314.00%

20$275,024

$3,005,2334.00%

17$275,024

Net Cash FlowCash-On-Cash Yield

$190,7158.16%

$209,5308.96%

$239,19010.23%

$270,66311.58%

PROPERTY PHOTO


Middleton - West Madison Sub-Market Aerial

PROPERTY PHOTO


Neighborhood Aerial


DEMOGRAPHIC & INCOME PROFILE

Summary2013 2018

PopulationHouseholds

Owner Occupied Housing UnitsRenter Occupied Housing Units

Median Age

3 Mile Radius 5 Mile Radius2013 2018

32,51714,6008,7335,86740.9

34,39215,4829,4306,05240.8

73,42534,20717,53516,67438.8

77,06035,99818,70217,296

38.6

Households By Income

$35,000 - 49,999$50,000 - 74,999$75,000 - 99,999

$100,000 - 149,999$150,000 - 199,999

$200,000 +

13.2%15.8%12.4%17.9%8.7%11.2%

9.2%13.7%17.1%23.1%11.4%11.0%

15.5%16.4%10.5%15.6%6.6%8.7%

11.8%14.9%14.3%20.2%9.1%9.2%

Median Household IncomeAverage Household Income

Per Capita Income

$75,322$110,219$49,434

$91,922$122,705$57,824

$59,714$95,152$44,664

$78,805$113,155$53,282

493100 t5realestate, ppd sales presentation-5 · ppd is a leading global contract research...

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