confidential offering memorandum...necessary, for your determination of whether or not to make a...

Confidential Offering Memorandum

South Perry Street Professional Office BuildingClass A Office | Medical

755 South Perry Street | Castle Rock, CO 80104

Paul CohenCommercial Real Estate AdvisorFront Range Commercial(719) 520-9500 [email protected]

Jerry KnaufCommercial Real Estate AdvisorQuantum Commercial Group(719) 590-1717 [email protected]

Nick Hier| Daniel ConnollyCommercial Real Estate AdvisorHier & Company, Inc.(303) 688-3105 [email protected]@hierandcompany.com

AFFILIATED BUSINESS DISCLOSURE & CONFIDENTIALITY AGREEMENT

This Offering Memorandum has been prepared by Brokers for use by a limitednumber of parties and has been obtained from sources believed reliable. While wedo not doubt its accuracy, we have not verified it, and make no guarantee,warranty or representation about it. It is your responsibility to confirm,independently, its accuracy and completeness. All projections have been developedby Brokers, Owner and designated sources, are based upon assumptions relatingto the general economy, competition, and other factors beyond the control ofOwner, and therefore are subject to variation. No representation is made byBrokers or Owner as to the accuracy or completeness of the information containedherein, and nothing contained herein is or shall be relied on as a promise orrepresentation as to the future performance of the property. Although theinformation contained herein is believed to be correct, Owner and its employeesdisclaim any responsibility for inaccuracies and expect prospective purchasers toexercise independent due diligence in verifying all such information. Further,Brokers, Owner and their employees disclaim any and all liability forrepresentations and warranties, expressed and implied, contained in, or foromissions from, the Offering Memorandum or any other written or oralcommunication transmitted or made available to the recipient.

The Offering Memorandum does not constitute a representation that there hasbeen no change in the business or affairs of the property or Owner since the dateof preparation of the Offering Memorandum. Analysis and verification of theinformation contained in the Offering Memorandum is solely the responsibility ofthe prospective purchaser. Additional information and an opportunity to inspect theproperty will be made available upon written request to interested and qualifiedprospective investors.

Owner and Brokers each expressly reserve the right, at their sole discretion, toreject any or all expressions of interest or offers regarding the property and/orterminate discussions with any entity

at any time with or without notice. Owner shall have no legal commitment orobligations to any entity reviewing this Offering Memorandum or making an offerto purchase the property unless and until such offer is approved by Owner, awritten agreement for the purchase of the property has been fully executed,delivered and approved by Owner and its legal counsel, and any obligations set byOwner thereunder have been satisfied or waived.

This Offering Memorandum and the contents, except such information, which is amatter of public record or is provided in sources available to the public, are of aconfidential nature. By accepting this Offering Memorandum, you agree that youwill hold and treat it in the strictest confidence, that you will not photocopy orduplicate it, that you will not disclose this Offering Memorandum or any of thecontents to any other entity (except to outside advisors retained by you, ifnecessary, for your determination of whether or not to make a proposal and fromwhom you have obtained an agreement of confidentiality) without the prior writtenauthorization of Owner or Brokers and that you will use the information in thisOffering Memorandum for the sole purpose of evaluating your interest in theproperty and you will not use the Offering Memorandum or any of the contents inany fashion or manner detrimental to the interest of Owner or Brokers. If you haveno interest in the property, please return the Offering Memorandum forthwith.

CONFIDENTIAL OFFERING MEMORANDUM

INVESTMENT HIGHLIGHTS

GREAT LOCATION AND ACCESS

LOCATION AND SURROUNDING AREA

The asset is conveniently located just east of Interstate 25 off of the PlumCreek Parkway interchange. Castle Rock is an affluent community locatedminutes south of the Denver metro area of Colorado. In addition to itssignificant current and anticipated residential growth, Castle Rockcontinues to attract new businesses and employers. Additionally, CastleRock is the county seat of Douglas County with its offices, as well as thoseof the Douglas County School District, are minutes from the subjectproperty. Some additional facts and figures regarding Castle Rock andDouglas County:

• Douglas County grew 191% between 1990 and 2000 making it thefastest growing county in the U.S. in the decade. It grew another 63%from 2000 to 2007, ranking 11th nationally.

• Douglas County is rated as the ninth highest-income counties bymedian household income.

• Castle Rock’s population changed by 19.5% from 2010 to 2016 andanother 5.1% from 2016 to 2017.

• Castle Rock is one of the 7 fastest growing cities in America, accordingto recent U.S. Census Data (May 2017).

With an expected annual growth rate of about 6% per year, it is estimatedthat the Town population will reach 100,000 by 2060.

VALUE ADD POTENTIAL

Recently signed new triple-net leases and renewals at the property willprovide a purchaser with stable income with additional upside producedfrom the leasing of the remaining vacancies.

GREAT OWNER USER OPPORTUNITY

Currently there are two vacancies of 2,963 SF and 1,600 SF available. Thiscreates great flexibility to occupy space or rework leases with the existingtenants that are rolling over. With great visibility, access, identity andparking, this property is an excellent owner-user opportunity.

NEW DEBT OPPORTUNITY

The South Perry Office is being offered “free and clear” of assumable debt,allowing a new investor an opportunity to take advantage of the currentlow interest rate lending environment.

This opportunity will provide the ultimate flexibility for a new investorseeking to maximize their returns.


PROPERTY OVERVIEW

Property Name South Perry Street Professional Office

Building

Property Address 755 South Perry Street

Castle Rock, CO 80104

County Douglas

RSF 16,649 SF

Built 1996

Acres 2.07 Acres (90,229 SF)

Zoning PD (Planned Development by Castle Rock)

Parking Ratio 87 Surface Spaces (5.2:1,000 SF)

Parcel 2505-113-09-003

The South Perry Street Professional Office Building is an office and/or medicalproperty located on the south end of Castle Rock’s bustling downtown withexcellent access to I-25.

Both of the largest tenants at the property, Castle Rock Family Physicians andImplant & Oral Surgery of Colorado, have occupied their spaces since 2002and have recently entered into renewals. Additionally, two new tenants haverecently signed five-year leases. The remaining vacancies are primeopportunities for leasing in a relatively tight office market in Downtown CastleRock and/or present an option for an owner-user.

The asset has been professionally managed during the current ownership’stenure with regular preventative maintenance being completed. Additionally,significant capital improvements to the parking lot, HVAC systems, and tenantimprovements have recently been completed of which a purchaser wouldenjoy the benefit.

CLICK HERE TO VIEW OUR DRONE VIDEO


https://vimeo.com/288643477

CONSTRUCTION DETAILS

CONSTRUCTION

Wood frame with lightweight post-and-beam steel frame construction. Theexterior walls are stucco with decorative stone facing.

WALL HEIGHT

Approximately 18 feet to top of pitched roof

FOUNDATION

Poured, reinforced concrete

STORE FRONTS/WINDOWS

Double-pane solar glass in anodized aluminum frame units

ROOF COVER

Pitched roof

ELECTRICAL

110/220 power supply

FIRE SPRINKLER SYSTEM

Wet sprinkler system

HVAC

Gas-fired, roof-mounted heating and air conditioning units servicing thebuilding

ELEVATOR

There is an elevator servicing the second floor

SKYLIGHTS

There are several skylights providing natural lighting to the second floor

INTERIOR PARTITIONING

Painted and textured drywall over wood or steel studs; some wallcoverings

LIGHTING

Recessed fluorescent lighting is typical; some flush mounted spot lightingin custom coffers

CEILING HEIGHT

Approximately 9’-6” on the main floor and vaulted ceilings on the secondfloor

FLOORING

Commercial grade carpeting, composite tile flooring and quarry tile flooring


CONFIDENTIAL OFFERING MEMORANDUM - South Perry Street Professional Office Building

RENT ROLL SUMMARY Perry Street

Software: ARGUS Ver.

15.0.0.53

Castle Rock, CO File: Perrty Street

Property Type: Office &

Retail

Portfolio: Griffis/Blessing

Date: 4/30/19

Time: 5:31 pm

Ref#: AJR

Page: 1

Presentation Rent Roll & Current Term Tenant Summary

As of May-2019 for 16,649 Square Feet

Tenant Name Floor Rate & Amount CPI & Current Months Pcnt Description of Imprvmnts Commssns Assumption about

Type & Suite Number SqFt per Year Changes Changes Porters' Wage to to Operating Expense Rate Rate subsequent terms

Lease Dates & Term Bldg Share per Month on to Miscellaneous Abate Abate Reimbursements Amount Amount for this tenant

_____________________ ___________ _____________ _________ ______ ________________ _______ _____ __________________ _________ _________ ________________

1 Castle Rock Family Physicians $0.00 Feb-2019 $19.09 - - - Net: Pays a full - - Market

Office, Suite: 100 6,801 $0 Mar-2019 $19.87 pro-rata share of See assumption:

Jun-2015 to May-2024 40.85% $0.00 Jun-2019 $20.00 all reimbursable MLA 3001

108 Months $0 Jun-2020 $20.50 expenses.

Jun-2021 $21.01

Jun-2022 $21.54

Jun-2023 $22.08

2 Speculative 200 $14.00 Sep-2020 $14.42 - - - Net: Pays a full $15.00 $4.47 Market

Office, Suite: 200 1,109 $15,526 Sep-2021 $14.85 pro-rata share of 6.00% See assumption:

Oct-2019 to Sep-2024 6.66% $1.17 Sep-2022 $15.30 all reimbursable $16,635 $4,956 MLA 200

60 Months $1,294 Sep-2023 $15.76 expenses.

Monthy

Rate

3 LifeSpring Homecare $12.00 Nov-2019 $12.00 - - - Net: Pays a full - - Market $1,845

Office, Suite: 250 1,844 $22,200 Sept-2020 $12.36 pro-rata share of See assumption: $1,899

Sept-2019 to Aug-2024 11.08% $1.00 Sept-2021 $12.73 all reimbursable MLA 250 $1,956

60 Months $1,850 Sept-2022 $13.11 expenses. $2,015

Sept-2023 $13.50 $2,075

*Note - Sept-2019-Nov-2019 based on FSG Lease Structure

4 Implant & Oral Surgery $0.00 Dec-2018 $20.55 - - - Net: Pays a full - - Market

Office, Suite: 300 2,732 $0 Dec-2019 $21.37 pro-rata share of See assumption:

Nov-2002 to Nov-2022 16.41% $0.00 Dec-2020 $22.23 all reimbursable MLA 3001

241 Months $0 Dec-2021 $23.12 expenses.

5 Americans for Propserity $17.00 Apr-2020 $17.51 - - - Net: Pays a full - - Market

Office, Suite: 400 1,600 $27,200 Apr-2021 $18.04 pro-rata share of See assumption:

May-2019 to Apr-2022 9.61% $1.42 all reimbursable MLA 400

36 Months $2,267 expenses.

6 Wayne Klassesn Agency $0.00 Jul-2018 $17.00 - - - Net: Pays a full - - Market

Office, Suite: 450 810 $0 May-2019 $17.51 pro-rata share of See assumption:

May-2018 to Jun-2023 4.87% $0.00 May-2020 $18.04 all reimbursable MLA 3001

62 Months $0 May-2021 $18.58 expenses.

May-2022 $19.13

May-2023 $19.71

7 Environmental Chemistry Services $0.00 Jan-2019 $15.00 - - - Net: Pays a full - - Market

Office, Suite: 500 1,753 $0 Aug-2019 $16.00 pro-rata share of See assumption:

Aug-2018 to Jul-2023 10.53% $0.00 Aug-2020 $17.00 all reimbursable MLA 3001

60 Months $0 Aug-2021 $17.17 expenses.

Aug-2022 $17.34

Total Occupied SqFt 13,696

Total Available SqFt 2,953


EXPIRATION SCHEDULE

As of Jun, 2019

All Tenants/ All Lease Periods

6/20/2019 10:06:24 AM

Lease Lease Expiration Remaining Expiring Building Base Base Market Rent vs. Effective Effective Effective Rent vs.

Tenants Suite Period Status Date Term Area Share % Rent Rent/SF Rent/SF Market Rent Rent/SF Market/SF Effective Market Rent

FY 2022 Expirations

5. Americans for Propserity 400 Base Contract 4/30/2022 2 Years 11 Months 1,600.00 9.61% 28,864.00 18.04 18.04 100.03% 30.17 31.10 97.01%Total FY 2022 Expirations 1,600.00 9.61% 28,864.00 18.04 18.04 100.03% 30.17 31.10 97.01%

FY 2023 Expirations

4. Implant & Oral Surgery of CO 300 Base Contract 11/30/2022 3 Years 6 Months 2,732.00 16.41% 63,153.96 23.12 18.58 124.44% 35.45 31.32 113.22%Total FY 2023 Expirations 2,732.00 16.41% 63,153.96 23.12 18.58 124.44% 35.45 31.32 113.22%

FY 2024 Expirations

6. Wayne Klassesn Agency, LLC 450 Base Contract 6/30/2023 4 Years 1 Month 810.00 4.87% 15,575.74 19.23 19.13 100.50% 31.78 32.10 99.03%7. Environmental Chemistry Servic 500 Base Contract 7/31/2023 4 Years 2 Months 1,753.00 10.53% 30,399.96 17.34 19.13 90.63% 29.93 32.13 93.15%

Total FY 2024 Expirations 2,563.00 15.39% 45,975.70 17.94 19.13 93.75% 30.51 32.12 95.00%

FY 2025 Expirations

1. Castle Rock Family Physicians 100 Base Contract 5/31/2024 5 Years 6,801.00 40.85% 150,144.00 22.08 19.71 112.02% 34.98 33.03 105.90%2. Speculative 200 200 Base Contract 9/30/2024 1,109.00 6.66% 17,477.84 15.76 19.71 79.97% 28.79 33.16 86.82%

3. LifeSpring Homecare 250 Base Contract 8/31/2024 1,844.00 11.08% 24,900.60 13.50 13.91 97.07% 26.50 27.33 96.96%


FY 2028 Expirations

4. Implant & Oral Surgery of CO 300 Market Speculative 12/31/2027 2,732.00 16.41% 50,750.61 18.58 21.54 86.26% 32.91 36.34 90.57%

5. Americans for Propserity 400 Market Speculative 5/31/2027 1,600.00 9.61% 29,722.17 18.58 21.54 86.26% 32.67 36.09 90.53%


FY 2029 Expirations

6. Wayne Klassesn Agency, LLC 450 Market Speculative 7/31/2028 810.00 4.87% 15,498.26 19.13 22.18 86.26% 33.72 37.24 90.54%

7. Environmental Chemistry Servic 500 Market Speculative 8/31/2028 1,753.00 10.53% 33,541.29 19.13 22.18 86.26% 33.76 37.28 90.55%


FY 2030 Expirations

1. Castle Rock Family Physicians 100 Market Speculative 6/30/2029 6,801.00 40.85% 134,031.79 19.71 22.85 86.26% 34.70 38.32 90.54%

2. Speculative 200 200 Market Speculative 10/31/2029 1,109.00 6.66% 21,855.79 19.71 22.85 86.26% 34.84 38.48 90.56%

3. LifeSpring Homecare 250 Market Speculative 9/30/2029 1,844.00 11.08% 25,652.42 13.91 16.13 86.26% 29.01 31.72 91.47%


Final Totals 4 Years 3 Months 16 Days

33,298.00 200.00% 641,568.43 19.27 20.14 95.64% 33.00 34.35 96.07%

* Results displayed are based on Forecast data only

* Weighted Average Leases Expiration is calculated as of report date, and weighted by area. Remaining term includes contract renewals


PROSPECTIVE CASH FLOWMay, 2019 through Apr, 2029 6/20/2019 9:55:05 AM

Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

For the Years Ending Apr-2020 Apr-2021 Apr-2022 Apr-2023 Apr-2024 Apr-2025 Apr-2026 Apr-2027 Apr-2028 Apr-2029 Total

Rental Revenue

Potential Base Rent 285,911 308,960 317,842 320,459 320,610 310,320 311,052 311,052 318,086 329,282 3,133,577Absorption & Turnover Vacancy 0 0 0 -6,706 -4,087 -15,128 0 0 -7,774 -4,738 -38,433Scheduled Base Rent 285,911 308,960 317,842 313,753 316,524 295,192 311,052 311,052 310,312 324,545 3,095,144

Total Rental Revenue 285,911 308,960 317,842 313,753 316,524 295,192 311,052 311,052 310,312 324,545 3,095,144

Other Tenant Revenue

Total Expense Recoveries 178,138 196,035 201,916 203,509 211,492 209,974 227,258 234,076 235,825 245,177 2,143,401Total Other Tenant Revenue 178,138 196,035 201,916 203,509 211,492 209,974 227,258 234,076 235,825 245,177 2,143,401

Total Tenant Revenue 464,050 504,996 519,759 517,262 528,016 505,166 538,311 545,129 546,137 569,722 5,238,545

Potential Gross Revenue 464,050 504,996 519,759 517,262 528,016 505,166 538,311 545,129 546,137 569,722 5,238,545

Vacancy & Credit Loss

Vacancy Allowance -14,296 -15,448 -15,892 -9,317 -11,944 -388 -15,553 -15,553 -8,130 -11,727 -118,246Total Vacancy & Credit Loss -14,296 -15,448 -15,892 -9,317 -11,944 -388 -15,553 -15,553 -8,130 -11,727 -118,246

Effective Gross Revenue 449,754 489,548 503,866 507,945 516,072 504,778 522,758 529,576 538,007 557,996 5,120,299

Operating Expenses

Administrative 16,795 17,299 17,818 18,353 18,903 19,470 20,054 20,656 21,276 21,914 192,539Building Maintenance 44,074 45,397 46,759 48,161 49,606 51,094 52,627 54,206 55,832 57,507 505,263Landscaping 5,313 5,472 5,636 5,805 5,979 6,159 6,344 6,534 6,730 6,932 60,903Utilities 49,397 50,879 52,405 53,978 55,597 57,265 58,983 60,752 62,575 64,452 566,282Exterior Maintenance 9,141 9,415 9,697 9,988 10,288 10,596 10,914 11,242 11,579 11,926 104,786Tax and Insurance 65,606 67,574 69,601 71,689 73,840 76,055 78,336 80,687 83,107 85,600 752,094

Total Operating Expenses 190,325 196,035 201,916 207,974 214,213 220,639 227,258 234,076 241,099 248,331 2,181,868

Net Operating Income 259,429 293,512 301,950 299,971 301,859 284,139 295,500 295,500 296,908 309,664 2,938,432

Leasing Costs

Tenant Improvements 16,635 0 0 33,136 20,193 79,153 0 0 38,414 23,409 210,939Leasing Commissions 4,956 0 0 14,485 8,827 32,677 0 0 16,792 10,233 87,970Total Leasing Costs 21,591 0 0 47,621 29,020 111,830 0 0 55,206 33,642 298,909

Capital Expenditures

Capital Reserves 1,665 1,715 1,766 1,819 1,874 1,930 1,988 2,048 2,109 2,172 19,086Total Capital Expenditures 1,665 1,715 1,766 1,819 1,874 1,930 1,988 2,048 2,109 2,172 19,086

Total Leasing & Capital Costs 23,256 1,715 1,766 49,440 30,894 113,760 1,988 2,048 57,315 35,814 317,996

Cash Flow Before Debt Service 236,173 291,798 300,184 250,531 270,965 170,379 293,512 293,452 239,593 273,850 2,620,436

Cash Flow Available for Distribution 236,173 291,798 300,184 250,531 270,965 170,379 293,512 293,452 239,593 273,850 2,620,436

TENANT PROFILES

CASTLE ROCK FAMILY PHYSICIANS (Suite 100) is a family owned

private practice dedicated to life-long outstanding healthcare for itsclients. Castle Rock Family Physicians (CRFP) is a state of the artmedical office that serves patients of all ages, from newborns toseniors and services Castle Rock and the Douglas County area.

IMPLANT & ORAL SURGERY OF COLORADO (Suite 300) has been

proudly serving Castle Rock, Colorado Springs and neighboringcommunities for over sixteen years, caring for patients experiencinga variety of teeth, jaw, and dental-facial problems. Implant and OralSurgery of Colorado is devoted to patient comfort and care, usingstate of the art procedures and equipment.

AMERICANS FOR PROSPERITY (Suite 400) is an activist organization

of 3.2 million people in 35 states who believe in the virtues ofeconomic freedom and will apply pressure to Congress to upholdthese virtues when free markets and a free society are threatened.Through broad-based grassroots outreach, Americans for Prosperity(AFP) is driving long-term solutions to the country’s biggest

problems. AFP activists engage friends and neighbors on key issuesand encourage them to take an active role in building a culture ofmutual benefit, where people succeed by helping one another.Their objectives include less regulation, lower taxes, and therestoration of American prosperity and opportunity.

WAYNE KLASSEN AGENCY, LLC - AMERICAN FAMILY INSURANCE

(Suite 450) provides a variety of insurance coverage for its clients:casualty, property, life and health within the Castle Rock andsurrounding areas.

ENVIRONMENTAL CHEMISTRY (Suite 500) is an environmental

testing laboratory that has been operating for over 20 years in theDenver metro area, assisting consulting engineers in the areas ofremediation, monitoring, and property divestment. EC performscomprehensive analytical chemistry on air, soil, and water samplesfor various agencies such as the EPA, DoD, and variousmunicipalities.


ABOUT CASTLE ROCK

FAST FACTS

While just outside the Denver metro area, Castle Rock has its own historicdowntown and economic vibrancy. Its affluent population creates a stabledemand for convenient goods and services – and a ready source of skilledworkers. The town has a broad spectrum of office parks, retail centers andcommercial properties, while still offering development opportunities inorder to meet future needs as Castle Rock’s business community grows.

Douglas County grew 191 percent between 1990 and 2000 making it thefastest growing county in the U.S. in the decade.

It grew another 63 percent from 2000 to 2007, ranking 11th nationally.

Douglas County is rated as the ninth highest-income counties by medianhousehold income.

Castle Rock’s population changed by 19.5 percent from 2010 to 2016 andanother 5.1 percent from 2016 to 2017.

Castle Rock is one of the seven fastest growing cities in America, accordingto recent U.S. Census Data (May 2017).

(Source: U.S. Census Bureau’s 2007 American Communities Survey)

RANKINGS

Douglas County and Castle Rock shine brightly on both the state andnational levels. These recognitions provide third-party affirmations thatCastle Rock is a great place to conduct business and an enjoyable place tolive.

Castle Rock was named Best Large Community for Economic Developmentby the Economic Development Council of Colorado (2010), due much inpart to the Castle Rock Economic Partnership – a unique collaborativegroup comprising the Town leadership, Castle Rock EconomicDevelopment Council, Castle Rock Chamber of Commerce and the CastleRock Downtown Alliance.

Castle Rock EDC was named the most Innovative Economic Development2016 by Rockies Venture Club.

Castle Rock’s Department of Innovation and Technology was a 2011Recipient of the 2011 CIO 100 Award, which honors 100 companies for ITexcellence. Castle Rock was one of only two municipalities recognized inNorth America. (2011)

(Information Source: https://castlerockedc.com)

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