pineville medical @ 521 v2
TRANSCRIPT
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PINEVILLE MEDICAL
@
FIVE TWENTY-ONE
CHARLOTTE, NC
BELK DEVELOPMENT GROUPReal Estate Development
MBAD 6159
Prepared by: Rashmi Menon, Anthony Provenzano, Mike Foster, Bo Shinn, and Sisi Yan
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Project Site
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Site Plan
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Site Analysis
• Target site is a greenfield.• Infill site with existing public infrastructure and
utility services. • Access from I-485, Highway 51, and Highway 521.• Good visibility and accessibility that will serve as a
plus for advertisement.
• The grade is high, and there may be additional cost to bring the grading down.
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Project Description• State-of-the Art Medical Office• Three Story Brick Office, Class A • Full service leasing with signage opportunities• 57,600 Square Feet with Min. of 2,200 SF
Proposed Site
CMC at Pineville
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Target Market• Customers
▫ Medical practices occupying older, Class C space.
▫ Physicians locating to Charlotte to meet growing demand.
• Our Customer Care About:▫ Strong demographics to support
medical care spending.▫ Proximity CMC-P and its
affiliations.▫ New State-of-the-art Class A
facilities.▫ Great exposure in major hospital
and retail market.
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Tenant Mix Type of Practice Office
Space (Sq. Ft)
Rental Rate
Lease Status
Floor
Rehabilitation Services 12,000 $21.50 Pre-leased 1
Outpatient Services 7,200 $24.00 Pre-leased 1
Orthopedic Services 4,000 $25.77 Available 2
Psychiatric Services 2,200 $25.77 Available 2
Pediatric Services 3,000 $25.77 Available 2
Diagnostic and Imaging 3,000 $25.77 Available 2
Laboratory Services 7,000 $24.00 Pre-leased 2
Gynecological Services 6,200 $24.75 Available 3
Primary Care Practice 8,000 $23.00 Pre-leased 3
Primary Care Practice 5,000 $24.75 Pre-leased 3
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Medical Nationwide
• The market for medical office and healthcare facilities is likely to continue to be strong in 2008 despite some recent volatility in this sector.
• In Charlotte MSA, due to the fast economic and population growth, more and more medical services are demanded in this area.
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Market analysis
• Product driven: high medical office net absorption
• Geographic Segment: high medical care demand: • a. household income larger than $50,000 • b. a relative higher education level• c: children and senior population group.
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Employment
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Demand for doctors:
• Compared with Raleigh and Greensboro, with a demography character as in Charlotte, double number of doctors will be needed.
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Office Net Absorption
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Demography
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Major Supply
• Our market analysis revealed that there is currently a large supply of medical office in the Charlotte area
• However, some of this supply is older and is facing obsolescence issues
• In addition, some of the current supply is not located near a major hospital
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Construction AssumptionsItem Assumption
Time for Construction 12 Months
Land Costs per Acre $750,000
Number of Acres 3.8
Building Square Feet (3 Stories) 57,600
Hard Costs (+5% Contingency) $108.68
Tenant Improvement Allowance $36.00
Architectural/Engineering/Permitting 3%
Leasing and Marketing 7%
Closing Costs and Other $68,220
Developer’s Fee and Overhead 2%
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Construction Cost Summary
Expense Amount Per Sqft
Hard Costs $ 6,259,680 $ 108.68
Soft Costs 1,205,840 20.93
Land Cost 2,850,000 49.48
Developer Fee 149,310 2.59
Total Construction Cost $10,464,831 $181.68
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Space Market Assumptions
• Item Assumption
Operating expense per square ft. $7.55
% of expenses eligible for Tenant Reimbursements 0.00%
Projected Stabilized Vacancy 11.50%
Growth Rate-Rents 3.00%
Growth Rate Expenses after Year 1 3.00%
Capex Percentage 0.50%
Sales Costs (sale on completed project) 3.00%
Average Lease Term (years) 10.0
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Capital Market AssumptionsConstruction Loan Assumptions
Construction Loan Interest Rate 8.0%
Construction Loan Fee 1.0%
Loan to Cost Ratio Construction Loan 75.0%
Permanent Loan Assumptions
Mortgage Interest Rate Perm Mtg 6.50%
LTV Ratio Perm Mtg 70.0%
Amortization Period Perm Mtg 20
Points/Fees Perm Mtg 1.0%
Risk Free Rate 3.93%
Expected Completed Property Cap Rate 7.75%
Terminal Cap Rate Discount 0.50%
Unlevered BT Discount Rate Development 15.05%
Unlevered BT Discount Rate Operations 10.65%
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Land Price SensitivityCurrent Scenario
NPV -$20,844
Unlevered BT IRR Development 15.05%
Land Price Reduction of 80 Basis Points
NPV $0
Unlevered BT IRR Development 15.89%
Land Price Reduction of 5 Percent
NPV $115,302
Unlevered BT IRR Development 20.53%
Land Price Reduction of 10 Percent
NPV $251,488
Unlevered BT IRR Development 25.88%
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Go / No Go ???
Wait until seller expectations drop to 5% of current value!!