GOVERNOR EXECUTIVE CENTRE E XEC U T I V E S UMMARY & GOVERNOR PARK PLAZA GOVERNOR EXECUTIVE CENTRE & GOVERNOR PARK PLAZA Holliday Fenoglio Fowler, L.P., acting by and through Holliday GP Corp., a real estate broker licensed with the California Department of Real Estate, License Number 01385740 ( HFF ) 1
EXECUTIVE SUMMARY OFFERING SUMMARY HFF, L.P., as exclusive advisor, is pleased to present to qualified investors the opportunity to purchase, individually or together as a portfolio, the 100% fee simple interest in Governor Executive Centre and Governor Park Plaza (collectively, the Properties or Portfolio ). At 90.4% leased, the Portfolio consists of two institutional quality office campuses encompassing four buildings, totaling 260,421 rentable square feet. The Portfolio offers durable in-place cash flow from the University of California, San Diego (Moody s: Aa2), which occupies over 50% of the Portfolio and features a weighted average remaining lease term of nearly 7 years. Additionally, the Properties offer significant upside potential through the implementation of various amenity enhancements and the ability to increase in-place rents upon rollover, which are 17.0% below market. Strategically located within the boundaries of Interstates 5, 805 and State Highway 52, commonly referred to as The Golden Triangle, the Portfolio is situated in one of the most desirable, high-growth areas of San Diego. Governor Executive Centre and Governor Park Plaza can be acquired individually or as a single Portfolio. The Portfolio is 90.4% leased with 50.6% credit tenancy in UCSD (Moody s: Aa2). In-place rents for the Portfolio are 17.0% below market rents. ADDRESS GOVERNOR PARK PLAZA PORTFOLIO 6165/6256 Greenwich Dr. San Diego, CA 92122 6333/6363 Greenwich Dr. San Diego, CA 92122 6165/6256/6333/6363 Greenwich Dr. San Diego, CA 92122 348-850-04, 05 348-031-20-00 348-031-20 & 348-850-04, 05 NET RENTABLE AREA (IN-PLACE) 152,487 107,939 260,426 NET RENTABLE AREA (BOMA) 152,482 107,939 260,421 91.8% 88.4% 90.4% 3.6 years 6.8 years 4.9 years 48.1% 54.0% 50.6% 4.7 years 9.4 years 6.8 years ASSESSORS PARCEL # PERCENTAGE LEASED WTD. AVG. REMAINING LEASE TERM PERCENTAGE LEASED TO UCSD WTD. AVG. REMAINING LEASE TERM FOR UCSD NUMBER OF STORIES YEAR BUILT PARKING RATIO LAND AREA 2 GOVERNOR EXECUTIVE CENTRE 3&5 2 2, 3 & 5 1988 & 1989 1986 1988 4.1 per 1,000 USF 4.5 per 1,000 USF 4.3 per 1,000 USF 5.35 acres / 233,153 SF 7.12 acres / 310,275 SF 12.48 acres / 543,428 SF PACIFIC OCEAN TROLLEY FUTURE BLUE LINE EXTENSION FROM DOWNTOWN UCSD SCHOOL OF MEDICINE COSTA VERDE SHOPPING CENTER ($230M+ renovation planned) LA JOLLA UNIVERSITY SQUARE SHOPPING CENTER GOLDEN TRIANGLE AT A GLANCE ±14M SF of Commercial Property 50,000+ Full time residents 20,000+ Housing Units 80,000+ Daytime Population 2.26M SF of Retail Amenities 1,117 Hotel Rooms 80+ Restaurants
GOVERNOR EXECUTIVE CENTRE & GOVERNOR PARK PLAZA DEMOGRAPHIC INFORMATION DEL MAR SCRIPPS RESEARCH INSTITUTE DEL MAR HEIGHTS TORREY PINES SORRENTO MESA 1 MILE 3 MILE 5 MILE 2020 Population Projection 8,344 106,837 273,349 2015 Population Estimate 8,097 101,353 262,161 Proj. Population Growth 2015-2020 3.05% 5.41% 4.27% Population Growth 2010-2015 2.51% 5.78% 4.12% 2015 Average Household Income $101,124 $81,793 $90,285 Bachelor s Degree Or Higher 1,668 20,295 49,774 Source: CoStar UTC SHOPPING CENTER UTC ($1B renovation underway) GOVERNOR PARK PLAZA GR EEN WI CH M SHOREHA GOVE RNOR DR PL DR MCAS MIRAMAR GOVERNOR EXECUTIVE CENTRE INFILL SUBMARKET WITH LIMITED POTENTIAL FOR NEW OFFICE SUPPLY The last remaining office development parcel in the Governor Park submarket was constructed over 15 years ago. There are 4 remaining vacant commercial land parcels totaling just 14.3 acres in the entire Golden Triangle market, restricting the potential for new office development. 3
INVESTMENT HIGHLIGHTS Governor Executive Centre Governor Park Plaza 4
GOVERNOR EXECUTIVE CENTRE & GOVERNOR PARK PLAZA LONG TERM CREDIT TENANCY In excess of 50% of the Portfolio s net rentable area is leased to credit tenant UCSD (Moody s: Aa2) with a weighted average remaining lease term of 6.8 years. STRONG IN-PLACE CASH FLOW WITH SIGNIFICANT UPSIDE POTENTIAL The Portfolio offers durable in-place cash flow from credit tenancy (50.6% of NRA) and an overall weighted average remaining lease term of 4.9 years, in addition to substantial value growth potential via in-place rents that are 17.0% below market. UC SAN DIEGO AT A GLANCE Gross In-Place Rent (Upon Expiration) vs. Market Rent Attracted an average of $1 billion in research funding each year over the last five years Total revenues were $3.8 billion for fiscal year-end 2014, representing a 128% rise since 2011 Rent (PSF/Mos.) $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $3.77 $3.53 $3.76 $3.23 $2.91 $2.85 $3.08 $3.07 $3.05 $2.49 $2.50 $2.45 $2.63 $2.65 31.8% 18.8% 22.4% 2.1% 6.3% 9.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% RSF Expiring Total assets were $6.5 billion for fiscal year-end 2014, representing an increase of 15.5% over 2013 % RSF Expiring Weighted Average In-Place Rent Weighted Average Market Rent Ranked #1 best hospital in San Diego Ranked #8 best public university in the U.S. Spun off 650-plus companies CORE EXIT STRATEGY As UCSD continues to expand its space requirement, focusing on Governor Park for its administrative office functions, Governor Executive Centre and Governor Park Plaza are the ideal candidates for future UCSD expansion space. By increasing the amount of long-term credit tenancy in the Properties over time, an investor can reasonably project a core sale upon exit. 5
INVESTMENT HIGHLIGHTS DEMONSTRATED LONG-TERM UCSD COMMITMENT UCSD, which occupies over 50% of the Portfolio NRA, has identified the Governor Park submarket as the main location for its administrative and extension functions in San Diego. 1903 FOUNDED Marine Biological Assoc. of San Diego 1959 MOVE TO LA JOLLA 1966 UCSD BEGINS operating 1st University Hospital Since mid-2015, UCSD has expanded into over 130,000 square feet of space in the Governor Park submarket to occupy a total of 216,517 square feet (25.2% of the submarket), committing to long-term leases in all instances. 1960 UCSD OFFICIALLY ESTABLISHED 1968 UCSD PURCHASES 130 acres of land in La Jolla The class A image, superior accessibility, freeway visibility of Governor Park, as well is its proximity to UCSD s main campus, clinical and research divisions in UTC and Torrey Pines, make it the ideal location for UCSD s administrative and extension operations. 6200 GREENWICH DR SIZE EXEC. DATE 70,987 SF Nov-15 UCSD has proven itself as a worldwide leader in research and medical innovation by continuing to offer the best in class research, cancer, trauma, and hospital centers. The ongoing expansion arises new employment opportunities, coupled with new office and developmental real estate demand. 216,517 SF OF LEASES SIGNED BY UCSD SINCE 2009 IN GOVERNOR PARK (±25% OF THE TOTAL SUBMARKET) 6
GOVERNOR EXECUTIVE CENTRE & GOVERNOR PARK PLAZA 1990 1ST OFFICE SPACE signed in La Jolla 2001 CAMPUS OPENING 6th and final college opens 2011 RESEARCH MEDICAL CENTER OPENING 345,000 SF OF PURCHASED & LEASED SPACE IN SAN DIEGO SINCE 2015 1976-1978 FOUNDED First Cancer & Trauma Centers founded 2011 LEASE SIGNED Signs first substantial size lease of nearly 50,000 SF at Gov. Exec. Centre 2016 29,000 DIRECT JOBS attributed to UCSD reputable companies 2ND LARGEST EMPLOYER IN SAN DIEGO COUNTY 29,986 FULL/PART TIME EMPLOYEES 5060 SHOREHAM PL 1 ST FOR 6 STRAIGHT YEARS SIZE EXEC. DATE 13,871 SF Jan-09 SIZE 6333/6363 GREENWICH DR EXEC. DATE 24,405 SF Sep-11 33,854 SF * Jan-16 IN THE NATION LEADING RESEARCH, CIVIC ENGAGEMENT & SOCIAL MOBILITY *UCSD sublease with Verizon 6256 GREENWICH DR SIZE EXEC. DATE 49,819 SF Nov-10 5,948 SF Apr-15 17,633 SF Jun-15 10 YEAR GROWTH IN ENROLLMENT 34,000 ENROLLMENT 7
INVESTMENT HIGHLIGHTS ABILITY TO ENHANCE VALUE THROUGH ADDITIONAL IMPROVEMENTS AND AMENITIES Companies are demanding a new type of workplace, emphasizing employee satisfaction and retention of talent. Governor Executive Centre and Governor Park Plaza both offer an exceptional opportunity to enhance the common areas and project amenities. 1 2 3 ENHANCE EXTERIOR COMMON AREAS Add outdoor lounge area, providing free wifi access, coffee stands, and graband-go food options. Enhance exteriors with modernized landscaping. NEW BUILDING TOP SIGNAGE Establish a new brand identity for the Properties, taking advantage of the heavy traffic count on I-805. ACTIVE AMENITY ENHANCEMENT Upgrade amenities around the existing tennis courts. Potential to upgrade to a state-of-the-art outdoor fitness complex. 1 3 1 8 2
GOVERNOR EXECUTIVE CENTRE & GOVERNOR PARK PLAZA PROMINENT IDENTITY Governor Executive Centre enjoys unparalleled visibility from Interstate 805, which accommodates 200,000 cars per day. Governor Park Plaza also provides exceptional freeway visibility directly translating into highly valued signage rights for tenants at both Properties. SUPERIOR FREEWAY ACCESSIBILITY Situated at the corner of Interstate 805 and State Highway 52, both Governor Executive Centre and Governor Park Plaza offer superior freeway access to tenants compared to the surrounding submarkets of UTC, Sorrento Mesa and Kearny Mesa. 200,000 VEHICLES PER DAY 9
INVESTMENT HIGHLIGHTS PROXIMITY TO AMENITIES The Properties benefit from of over 1.7 million SF of nearby retail amenities, with an additional 750,000 SF expected to be delivered between 2017 and 2020 with the completion of the $1 billion Westfield UTC Mall renovation and Costa Verde Center redevelopment. TRACK RECORD OF OUTPERFORMING THE MARKET Governor Executive Centre and Governor Park Plaza have historically outperformed the average submarket occupancy. Over the past five years these projects have outpaced the market occupancy by 708 bps and 323 bps, respectively. Occupancy % 100% 90% 80% 70% 60% 50% 40% 30% 20% SUBJECT PROPERTIES VS. SUBMARKET - HISTORICAL OCCUPANCY Governor Park Submarket Governor Park Plaza Governor Executive Centre Governor Executive Centre: Outperformed 5-yr avg. market occupancy by 708 bps Governor Park Plaza: Outperformed 5-yr avg. market occupancy by 323 bps GOLDEN TRIANGLE RESTAURANTS & CAFÉS Ahi Sushi & Grill Aladdin Mediterranean Amardeen Mediterranean Appollonia Greek Bistro Arby s Bombay Coast Bottega Italiana Buga Korean Barbecue Café Japengo California Pizza Kitchen Carmen s Mexican Food Carls Jr. Charley s Chipotle Continent Deli Corner Bakery Craft Pizza Daphne s Denny s Di-Chan Thai Restaurant Dino s Gyros Draft Republic Eddy M s Edo Sushi Einstein Bagels El Cotixan Elijah s Deli Eureka! Burger Fin s Five Guys Flame Broiler Fleming s Steakhouse Green Light Café Havana Grill Hi Thai Humphrey s La Jolla Grill Indian Express Restaurant Islands Izakaya Kanpai Jersey Mike s Kebab Grill King s Bistro Ki Sushi Leucadia Pizzeria & Italian L&L Hawaiian BBQ Lemonade Little Sheep Mongolian Lolita s Taco Shop Lorna s Italian Kitchen Los Pueblos Mexican Matsugawa Sushi McDonald s Melting Pot Micheline s Pita House Mom & Dom s Pizza Mongrill Niban Japanese Noodles & Company Nordstrom Café Nozomi On a Roll Outback Steakhouse Outcast Grill Panda County Restaurant Panda Express Papa Chito s Mexican Food Papa John s Pizza PF Chang s Pho La Jolla Pho T Cali Porter s Pub Ramen Yamada Red O Red Robin Regents Pizzeria Rock Bottom Brewery Round Table Pizza Roy s Royal India Express Rubio s Sammy s Pizza Santorini Greek Sarku Japan Schlotzsky s Seasons 52 Shogun Sipz Vegetarian Sorrentino s Pizza Souplantation Specialty s Café St. Tropez Bistro Star Anise Thai Starbucks StoneOven Submarina Subway Surf Brothers Tender Greens Thai Kitchen Tony s Giant Pizzeria Torrey Pints Troy s Family Restaurant Truluck s Un Mundo Mexican Grill Veggie Grill Wendy s Which-Wich GOLDEN TRIANGLE AMENITIES SHOPS Abercrombie & Fitch Anthropologie Apple Banana Republic Best Buy Bristol Farms Crate & Barrel CVS DSW Shoes Express Foot Locker Forever 21 Free People Gap Guess Hollister J. Crew Justice Lucky Brand Lululemon Macy s Men s Warehouse Michael Kors Nordstrom Pottery Barn Pirch Ralph s Restoration Hardware Sears Sports Chalet Staples Tesla Trader Joe s US Post Office Victoria s Secret White House Black Market Whole Foods Williams-Sonoma World Market LODGING Radisson Hotel La Jolla Hyatt Regency La Jolla San Diego Marriott La Jolla ENTERTAINMENT AMC Theater ArcLight Cinemas La Jolla Playhouse Landmark Theatres 10
GOVERNOR EXECUTIVE CENTRE & GOVERNOR PARK PLAZA Governor Executive Centre and Governor Park Plaza represent a rare opportunity to acquire institutional quality office assets with durable in-place income and exceptional future upside potential, at approximately 75% of replacement cost. SURROUNDING INSTITUTIONAL OWNERSHIP (GOVERNOR PARK & UTC) The Golden Triangle has long been regarded as one of the most desired San Diego locations by institutional investors due to its central location, corporate tenant demand, abundance of amenities and historically sound fundamentals. INSTITUTIONAL QUALITY OFFICE ASSETS Both Governor Executive Centre and Governor Park Plaza have been meticulously maintained to the highest standards, having benefited from a long history of institutional ownership. Both Properties have been owned and operated exclusively by institutional owners since inception. SIGNIFICANT BARRIERS TO ENTRY The Golden Triangle area, due to its high land cost and lack of available sites for development, presents substantial barriers to entry for new development. With rents still significantly below levels that would justify new construction, an owner of the Portfolio is protected against new competing product. PACIFIC OCEAN THE GOLDEN TRIANGLE GOVERNOR EXECUTIVE CENTRE & GOVERNOR PARK PLAZA DISCOUNT TO REPLACEMENT COST Governor Executive Centre and Governor Park Plaza present a unique opportunity to acquire two institutional quality assets at approximately 75% of replacement cost. 11
GOVERNOR EXECUTIVE CENTRE & GOVERNOR PARK PLAZA INVESTMENT ADVISORS NICK PSYLLOS Senior Managing Director npsyllos@hfflp.com 858.812.2352 CA Lic. #00788060 RYAN GALLAGHER Senior Managing Director rgallagher@hfflp.com 949.798.4100 CA Lic. # 01269918 NICK FRASCO Director nfrasco@hfflp.com 858.812.2354 CA Lic. # 01819400 MICHAEL LEGGETT Senior Managing Director mleggett@hfflp.com 415.276.6924 CA Lic. # 01056334 KARA MATHIS, CFA Senior Real Estate Analyst kmathis@hfflp.com 858.242.6220 CA Lic. #01924947 TIM GEIMAN Director tgeiman@hfflp.com 949.798.4109 CA Lic. #01921744 DEBT ADVISORS ALDON COLE Senior Managing Director acole@hfflp.com 858.812.2344 CA Lic. # 01457351 ZACK HOLDERMAN Director zholderman@hfflp.com 858.812.2350 CA Lic. # 01434957 MARKET LEASING ADVISORS CHRISTOPHER HIGH Senior Managing Director chris.high@ngkf.com 858.875.3604 CA Lic. # 01734544 STEVE BRUCE Senior Managing Director steve.bruce@ngkf.com 858.875.3605 CA Lic. # 01455744 HFF has been engaged by the owner of the property [properties] to market it [them] for sale. Information concerning the property [properties] described herein has been obtained from sources other than HFF, and neither Owner nor HFF, nor their respective equity holders, officers, employees and agents makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Any and all reference to age, square footage, income, expenses and any other property specific information are approximate. Any opinions, assumptions, or estimates contained herein are projections only and used for illustrative purposes and may be based on assumptions or due diligence criteria different from that used by a purchaser, and HFF, its partners, officers, employees and agents disclaim any liability that may be based upon or related to the information contained herein. Prospective purchasers should conduct their own independent investigation and rely on those results. The information contained herein is subject to change.