AN EXCEPTIONAL REPOSITIONING OPPORTUNITY 10455 san diego, california Holliday GP Corp. ( HFF ), a California licensed real estate broker, California License #01385740
10455 INVESTMENT ADVISORY TEAM NICK FRASCO Senior Director 858.812.2354 Office nfrasco@ CA Lic. # 01819400 KARA MATHIS, CFA Senior Associate 858.242.6220 Office kmathis@ CA Lic. #01924947 NICK PSYLLOS 858.812.2352 Office npsyllos@ CA Lic. #00788060 TAYLOR BERGTHOLD Analyst 858.812.2356 Office tbergthold@ CA Lic. #02014647 MICHAEL LEGGETT 100 California St. Suite 720 San Francisco, CA 94111 415.276.6924 Office mleggett@ CA Lic. #01056334 CAPITAL MARKETS TEAM LEASING TEAM ZACK HOLDERMAN Senior Director 858.812.2350 Office zholderman@ CA Lic. #01434957 TIM WRIGHT 858.812.2341 Office twright@ CA Lic. #00947194 MICKEY MORERA Executive Vice President Kidder Mathews 12230 El Camino Real 4th Floor San Diego, CA 92130 858.369.3030 Office mmorera@kiddermathews.com CA Lic. #00950071 JOHN HUNDLEY Senior Vice President Kidder Mathews 12230 El Camino Real 4th Floor San Diego, CA 92130 858.369.3072 Office jhundley@kiddermathews.com CA Lic. #01365206 3
10455 THE OPPORTUNITY HFF, as exclusive advisor, is pleased to present the exceptional opportunity to purchase the 100% fee simple interest in 10455 Pacific Center Court (the Property ). The asset s current occupancy of 45.2%, superior physical attributes and exceptional location in one of the nation s strongest life science and technology markets make it an ideal candidate for a value-add repositioning strategy, allowing an investor to significantly enhance value in the near term. Perfectly situated in the surging Sorrento Mesa submarket, which boasts a 6.8% and 8.9% life science and R&D vacancy rate, respectively, 10455 Pacific Center Court features ample slab-to-slab heights, partial high-bay space with roll-up door access, abundant window line, and a canyon-edge orientation offering extensive views, resulting in an unparalleled opportunity to create a best-in-class high-tech campus environment. RENTABLE AREA (BOMA) RENTABLE AREA (IN-PLACE) YEAR BUILT % LEASED NO. OF FLOORS GROSS SITE AREA PARKING SPACES 92,477 SF 89,732 SF 1996 45.2% 2 7.7 AC 263 4
OPPORTUNITY AT A GLANCE Exceptional life science / creative R&D repositioning opportunity with significant value creation potential 45.2% leased / 7.8 years of lease term from existing tenant In-place rents 77% below market for life science, 22% below market for R&D Top national life science / technology hub 6.8% and 8.9% life science and R&D submarket vacancy, respectively 13.5-16.9 slab-to-slab heights, abundant window line, functional floor plates, and high-bay loading docks with roll-up door access 7.7 acre canyon-edge lot offers the ability to add outdoor amenities and create a best-in-class campus environment Opportunity to acquire institutional-quality asset at a significant discount to replacement cost 5
10455 ABILITY TO CREATE A BEST-IN-CLASS CREATIVE CAMPUS ENVIRONMENT 10455 Pacific Center Court s ideal canyon-edge location at the heart of San Diego s strongest life science and technology submarket present the ultimate opportunity to create the premier modern campus destination. Exciting enhancement opportunities include: Cutting edge interior build-outs with which to attract premier life science and creative R&D tenant requirements New front entry facade, awning and address signage establishing a revived presence and sense of arrival Outdoor workspace decks extending from the front window lines near the entry Conversion of partial high-bay, roll-up door access space into open, creative work area with glass roll-up entries Covered outdoor employee seating / break areas Exterior tenant amenity areas including bocce ball courts and other activities CURRENT BUILDING ENTRY CONDITION RENDERING FOR POTENTIAL BUILDING ENHANCEMENTS 6
Source: awningsnh.com Accelerating Market Fundamentals 13.5-16.9 Slab-to- Slab Heights Large Functional Floorplates Generous Glass Line Offering Natural Light New Lobby Renovation Picturesque Canyon Views 7
10455 T LIFE SCIENCE GLOBAL HQ 10455 TELECOMMUNICATIONS TECHNOLOGY LIFE SCIENCE MEDICAL DEVICE LIFE SCIENCE LIFE SCIENCE LIFE SCIENCE ELECOMMUNICATIONS GROWTH INDUSTRY HUB Sorrento Mesa remains the epicenter of San Diego s growth industries, with technology, life sciences and telecommunications representing a substantial presence in the submarket and helping to drive a ±9.0% year-over-year rent growth and record low life science vacancy. Source: CoStar 8
TOP TIER LIFE SCIENCE / R&D LOCATION San Diego, the nation s third largest life science market that is home to over 700 biotech companies and 80 research institutes, totals 14 million square feet of life science inventory and maintains an incredibly healthy direct vacancy rate of 6.1% as of the end of 1Q 18. 10455 Pacific Center Court is located in one of the region s bestperforming life science submarkets, Sorrento Mesa, which recorded the highest leasing activity (364,951 SF) and second highest positive net absorption (103,948 SF) of the four major life science submarkets in 2017. Moreover, Sorrento Mesa currently represents a life science direct vacancy rate of 6.8%. 6.8% direct vacancy ZERO sf under construction SAN DIEGO LIFE SCIENCE MARKETS SAN DIEGO TORREY PINES SORRENTO MESA UTC SORRENTO VALLEY TOTAL EXISTING INVENTORY 14,131,372 SF 5,544,743 SF 4,098,873 SF 3,356,785 SF 1,130,971 SF DIRECT VACANCY RATE 6.1% 3.5% 6.8% 8.7% 6.6% 2017 NET ABSORPTION 948,534 SF 72,979 SF 103,948 SF 757,190 SF 9,146 SF 2016 NET ABSORPTION 370,157 SF 124,098 SF -21,740 SF 235,245 SF 32,554 SF LEASING ACTIVITY 2018 YTD 92,842 SF 17,121 SF 7,225 SF 38,849 SF 22,715 SF LEASING ACTIVITY 2017 931,549 SF 148,325 SF 364,951 SF 333,573 SF 79,429 SF DELIVERIES (SF SINCE JANUARY 2008) 1,497,791 SF 213,539 SF 43,500 SF 1,240,752 SF 0 SF UNDER CONSTRUCTION (SF) 150,000 SF 0 SF 0 SF 150,000 SF 0 SF Source: CoStar, Q1 2018 9
10455 EXCEPTIONAL SORRENTO MESA FLEX/R&D MARKET FUNDAMENTALS Currently at 8.9% vacancy, the Sorrento Mesa flex/r&d market remains steady with vacancy averaging at or below 10% over any time period for nearly 20 years. Recent substantial investment by owners is contributing to an uptick in market rents. Over the past 12 months, asking rents increased 5.0%. The 3-yr, 5-yr and 7-yr CAGR for market rent has been 4.9%, 8.0% and 6.4%. There is no new construction on the horizon. ROBUST JOB GROWTH DRIVING MARKET DEMAND With unemployment of only 3.5% as of February 2018, San Diego s labor market is flourishing. Its unemployment rate is lower than both the state (4.3%) and nation (4.1%). Nearly every major sector experienced year-over-year job growth in February. The largest job increases in February came from professional, scientific and technical (PST) services, up 3,700 jobs. Direct Asking Rent $ $3.75 $3.50 $3.25 $3.00 $2.75 $2.50 $2.25 $2.00 $1.75 $1.50 $1.25 $1.00 $0.75 $0.50 $0.25 $0.00 35,856 SORRENTO MESA FLEX/R&D RENT, NET ABSORPTION & VACANCY 4,161 84,831 105,142-625 -34,384 87,620 69,161 Direct Vacancy % 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -49,251 3.5% unemployment rate 53,525 unique job postings Government 17.2% 2.4% year-over-year growth in total nonfarm employment 2,726 new business establishments Construction 5.5% Manufacturing 7.4% -103,966 5% 12-mo increase in asking rents -174,746 Asking Rent Direct Vacancy 514K SF leasing activity (last 12 months) Net Absorption Source: CoStar, Q1 2018 0 SF under construction Other Services 4.0% Leisure and Hosp. Services 13.3% Educ. And Health Services 14.0% E C ONO MIC DIVERSIF ICA T I O N Prof. and Bus. Services 16.1% Transportation/ Utilities 15.6% Financial Activities 5.2% Information 1.6% 10
INVESTMENT ADVISORY TEAM 10455 NICK FRASCO Senior Director 858.812.2354 Office nfrasco@ CA Lic. # 01819400 KARA MATHIS, CFA Senior Associate 858.242.6220 Office kmathis@ CA Lic. #01924947 NICK PSYLLOS 858.812.2352 Office npsyllos@ CA Lic. #00788060 TAYLOR BERGTHOLD Analyst 858.812.2356 Office tbergthold@ CA Lic. #02014647 MICHAEL LEGGETT 100 California St. Suite 720 San Francisco, CA 94111 415.276.6924 Office mleggett@ CA Lic. #01056334 CAPITAL MARKETS TEAM LEASING TEAM ZACK HOLDERMAN Senior Director 858.812.2350 Office zholderman@ CA Lic. #01434957 TIM WRIGHT 858.812.2341 Office twright@ CA Lic. #00947194 MICKEY MORERA Executive Vice President Kidder Mathews 12230 El Camino Real 4th Floor San Diego, CA 92130 858.369.3030 Office mmorera@kiddermathews.com CA Lic. #00950071 JOHN HUNDLEY Senior Vice President Kidder Mathews 12230 El Camino Real 4th Floor San Diego, CA 92130 858.369.3072 Office jhundley@kiddermathews.com CA Lic. #01365206 2018 Holliday Fenoglio Fowler, L.P., HFF Real Estate Limited (collectively, HFF ), HFF Securities L.P. and HFF Securities Limited (collectively, HFFS ) are owned by HFF, Inc. (NYSE: HF). HFF and its affiliates operate out of 26 offices and are a leading provider of commercial real estate and capital markets services to the global commercial real estate industry. HFF, together with its affiliates, offers clients a fully integrated capital markets platform including debt placement, investment advisory, equity placement, funds marketing, M&A and corporate advisory, loan sales and loan servicing. For more information please visit hfflp. com or follow HFF on Twitter @HFF. 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. Holliday Fenoglio Fowler, L.P. ( HFF ) has been engaged by the owner of the property to market it for sale. Information concerning the property described herein has been obtained from sources other than HFF; we make no representations and offer no warranties, explicit or implied, as to the accuracy or completeness of such information. Any and all references to age, square footage, income, expenses and any other property-specific information are approximate. Any assumptions, estimates or conclusions contained herein are based on professional opinion. Projections are not guided by a predictive science, but are subject to unforeseen market variables and conditions. The Buyer therefore understands and acknowledges that opinions herein are based on HFF professionals judgments predicated on past experience and formed in light of relevant data. They are used for illustrative purposes only and may be based on assumptions, or due diligence criteria, different from that employed by the Buyer. Buyers should conduct their own independent investigation and rely on those results. Information contained herein is subject to change.