BUHL BUILDING Downtown Detroit Historic Office Building Value Add Investment Opportunity Contact info: Amar Nijjar, B.Eng MBA Chad Gemmell, MBA, LEED AP Jones Lang LaSalle EVP and Practice Lead, Debt Capital Markets Vice President, Debt Capital Markets 199 Bay Street, Suite 4610, Box 407 TEL: +1 647 992 9811 TEL: +1 416 363 8964 Toronto, Ontario, M5L 1G3 [email protected] [email protected] TEL: +1 416 304 6000 www.joneslanglasalle.ca OPPORTUNITY OVERVIEW PROJECT HIGHLIGHTS Weslan Properties Inc. has conditionally purchased Iconic and physically beautiful, historic office building with adjoining the Buhl Building, an historic, institutional quality parking structure – both in excellent structural condition. office tower and 652-stall parking structure centrally Attractive going in price – The $43 million purchase price includes located in Detroit’s dynamic central business approximately $23.5 million for the parking structure and $19.5 million for district. Weslan is seeking equity partners to invest the office tower. The office tower price allocation equates to $40 psf (gross), in one of the most iconic buildings in the Detroit representing a price less than 12% of replacement cost. marketplace, priced at $40 per gross square foot (equal to less than 12% of replacement cost), at a Value-add Play – Planned $18 million capital expenditure budget will upgrade going-in cap rate of 6.75% on in-place income. A key systems, enhance interior finishes and return the property to its original $20 million equity investment in this property is grandeur. Once such targeted improvements are quickly completed, the property projected to grow to approximately $58 million will compete with the best buildings in the marketplace. (including after-tax cash flow received) over four Leased, with Upside – The building is 70% leased with an average lease term of years. This represents an IRR to investors (net of three years. The property is ideally situated to capitalize on the increasing office fees) of 33% and an equity multiple of 2.9 times. demand sparked by the recent redevelopment boom occurring in the downtown area of the city. A/B office vacancy has fallen from 20% to 6% over the past ABOUT WESLAN five years, while leasing rates have increased about $2.00 psf annually making The Property’s acquisition, due diligence, financing, this one of the tightest office sub-markets in North America. asset management and eventual re-sale will be Detroit Office CBD Renaissance – Over last five years, Detroit CBD Class A/B managed by Weslan Properties Inc. The principal office space average net absorption (submarket size: approx. 14 million sf) has of Weslan is Ron Lanthier. Mr. Lanthier has 37 exceeded supply by almost 300,000 sf per annum. years of experience in the real estate investment, development and management business and has PROPERTY SUMMARY successfully acquired and developed well over $3 billion worth of office, industrial and multi-residential Address 535 Griswold Street, Detroit, Michigan, USA properties, and single-family land. More than half Net Rentable Area 384,424 sf of this activity has involved office product. Mr. Year Built 1924 (office), 1968 (garage) Lanthier’s full-time focus is on Southeast Michigan Number of Stories 27 and Detroit. Mr. Lanthier has direct investment Occupancy 70% (as of 4/2016) experience in the Southeast Michigan market, Market Occupancy 94% having successfully completed two acquisitions in Number of Tenants 56 2015 at a combined price of $79 million. Average Tenant Size 4,800 sf Parking 652 spaces (1.7/1,000 sf) Ford Field Comerica Greektown Park Casino Cadillac Blue Cross Tower Blue Shield One Campus Detroit Penobscot Martius The Westin Building Guardian Centre Book Building BUHL Cadillac Chrysler BUILDING House Penobscot Coleman A. Young Building Ford One Municipal Centre Randolph St Annex Building Woodward 211 W Fort Building Street Madden Building Fort Griswold St Washington Plaza Woodward Ave Crowne Plaza Washington Blvd Shelby St Hart Plaza Jefferson Ave Cobo Centre BUHL BUILDING Downtown Detroit Historic Office Building Value Add Investment Opportunity LOCATION The Buhl Building is centrally located in the Detroit CBD, with immediate access to the surrounding major thoroughfares. The Property is blocks away from the riverfront, and is ideally situated to benefit from Detroit’s on-going revitalization and future re-development. The Buhl is within easy walking distance of a significant amount of new residential development focused along Woodward Avenue, and the City’s new M-1 light rail system, which will be completed in 2017 and will terminate just one block from the Buhl Building, at Congress/Woodward. DETROIT – AMERICA’S MOST EXCITING TURNAROUND STORY JLL OFFICE CLOCK – Q1, 2016 Downtown Detroit is emerging as a vibrant live-work-play CBD and is arguably the most exciting and expansive urban renewal development in America. Local billionaires, Dan Gilbert and Mike Ilitch, have made significant new investments in the CBD. Today, downtown Detroit is a growing, dynamic market with no lack of recent success stories of new start-ups, corporate relocations, and new residents. $9 billion has been spent on real estate upgrades and development in the 7.2 square mile rejuvenation zone in lass than a decade. Billions more of additional expenditures are either under construction or in the very near-term pipeline. The new projects include entertainment facilities, hotels, residential, retail and parking. Minimal new office space is planned, resulting in a further strengthening of an already very tight “landlord’s market”. Detroit Cornerstone Macro of New York City, a top-ranked economic think tank and U.S. expert, has rated the State of Michigan’s economic growth as number one in the U.S. since the credit crisis. The unemployment rate in Michigan has dropped to 4.9% in Q1, 2016 from 16% several years earlier.5he U.S. “Big Three” auto companies’ profits have exceeded $80 billion since 2011 and are accelerating. The Southeast Michigan economy has become far more diversified over the years, with major growth in global logistics, healthcare, defence research CAPITAL STACKS Full Business Plan and manufacturing, high technology, and education. $5,000,000 Sponsor and Associates Equity (6.6%) INVESTMENT YIELD SUMMARY $2,500,000 US HistoricFederal Tax Credits (3.3%) Equity Investment $20,000,000 At Acquisition $15,000,000 Investor Equity (19.9%) Projected Cash Flow Returns $5,000,000 Sponsor and Associates Equity (10%) Year 1 $1,200,000 Year 2 $2,000,000 $15,000,000 Investor Equity (30%) Year 3 $2,000,000 Year 4 $2,000,000 $53,000,000 Senior Debt (70.2%) Net Sales Proceeds & Return of Capital $51,000,000 TOTAL CAPITAL RETURN + PROFIT $58,200,000 $30,000,000 Senior Debt (60%) IRR 33% Equity Multiple 2.9x TOTAL FINANCING: TOTAL FINANCING: CAPITAL STACK $ CAPITAL STACK $ The Buhl Building’s main tenants include: TOTAL PROGRAM COSTS: SOURCE OF FUNDS: Purchase Price $43,000,000 First Mortgage Bridge Loan $53,000,000 (office tower and parking structure) US Federal Historic Tax Credits $2,500,000 Projected Capital Improvements $18,000,000 Equity Required $20,000,000 Projected Leasing Costs $8,000,000 TOTAL FUNDING $75,500,000 Closing Costs and Working Capital $6,500,000 TOTAL CAPITAL REQUIREMENTS $75,500,000 OVERALL CAPITAL REQUIREMENTS $75,500,000 CAPITAL SUMMARY AND DISPOSITION: Capital Summary (Years 1-4): Disposition: Interior Finishes $3,300,000 Exit Year 2020 Systems Automation $1,500,000 Exit Year Cap Rate (Office Tower) 7.00% Elevator – Modernization and Upgrades $4,500,000 Exit Year NOI (estimated) $8,000,000 HVAC Upgrades $5,000,000 Selling Expense 1.5% Other $2,200,000 Residual Value $114,300,000 Parking Garage – Modernization $1,500,000 Parking Structure Value $52,500 per stall TOTAL ESTIMATED CAPITAL COSTS $18,000,000 OFFICE TOWER VALUE $208 psf (rentable) DEBT FINANCING: FEES AND TERMS: Mortgage Lender To Be Determined Weslan and Associates’ 25% of total equity Amount $53,000,000 Co-Investment LTV Approximately 70% Acquisition Fee 1.2% of purchase price Term 3 years, with two 1-year extensions Asset Management Fee 1.5% of the property’s achieved gross revenue, annually Coupon – Interest Only < 7% (estimated) Disposition Fee 0.5% of property re-sale price Performance Return Up to 8.0% IRR - 0% Over 8% IRR: 20% Contact info: Amar Nijjar, B.Eng MBA Chad Gemmell, MBA, LEED AP Jones Lang LaSalle EVP and Practice Lead, Debt Capital Markets Vice President, Debt Capital Markets 199 Bay Street, Suite 4610, Box 407 TEL: +1 647 992 9811 TEL: +1 416 363 8964 Toronto, Ontario, M5L 1G3 [email protected] [email protected] TEL: +1 416 304 6000 www.joneslanglasalle.ca This material has been prepared in good faith with due care by Jones Lang LaSalle and Weslan Properties Inc. (including its related bodies corporate), solely for the information of potential investors to assist them in deciding whether they are interested in the investment; the information does not form part of any offer or contract and is intended as a guide only; you should not rely on any material contained herein but should make independent investigations to satisfy yourselves as to the correctness of any statements or representations; all calculations, including, but not limited to dimensions, area and rent, contained in the material are based on figures provided to Jones Lang LaSalle and Weslan Properties Inc. by outside sources and have not been independently verified by Jones Lang LaSalle and Weslan Properties Inc. and therefore may not be correct; and no representation or warranty is made by Jones Lang LaSalle or Weslan Properties Inc. as to the accuracy of the material, in whole or part. Except where otherwise provided all references to rent, income or price referred to in this material are exclusive of taxes.