Executive Summary
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Executive Summary Holliday Fenoglio Fowler, L.P. (“HFF”) is an Illinois licensed real estate broker ONE PARKWAY NORTH INVESTMENT OVERVIEW Holliday Fenoglio Fowler, L.P. (“HFF”) is pleased to present One Parkway North (the “Property” or “One Parkway”), a rare opportunity for investors to acquire a core asset in Chicago’s prestigious North Shore. One Parkway North is a 273,934 rentable square foot (“RSF”), five-story Class A building that is the cornerstone of the Parkway North Center office campus, one of Chicago’s premier office campuses. The Property serves as the global headquarters for Essendant (NASDAQ: ESND, 72.5% of the GLA), a Fortune 500 company with 2016 revenues of $5.4 billion. Essendant recently recommitted to the Property by extending their lease through October 2027, with over 10 years remaining, which contributes to the Property’s overall weighted average lease term of 9.2 years. Located adjacent to the Tri-State Tollway, the Property enjoys excellent visibility and access to the surrounding North Shore as well as the CBD and greater Chicago metropolitan area. The asset’s proximity to decision makers in the North Shore and easy access to Chicago’s vast labor pool in the North and West, coupled with Lake County’s low taxes, create the perfect environment for a corporate headquarters location, evidenced by Caterpillar’s recent announcement of their headquarter relocation to Deerfield. Including Caterpillar, of the 34 Fortune 500 companies that are headquartered in the Chicago area, 24 of them are located in the suburbs, and 16 are located in the North Suburban submarket, specifically Abbott Laboratories, Abbvie, Allstate, Anixter, Baxter, Caterpillar, CDW, Discover Financial, Essendant, Illinois Tool Works, Mondelez International, Packaging Corp of America, Tenneco, W.W. Grainger and Walgreens. In addition, One Parkway North is located proximate to a number of other corporate headquarters such as AonHewitt, Astellas, Caremark, Hospira, and Takeda Pharmaceuticals. One Parkway North provides the opportunity for an investor to acquire a core Class A office asset with a highly secure income stream in a strategic corporate headquarter location in Chicago’s prestigious North Shore. 2 KEY INVESTMENT HIGHLIGHTS KEY PROPERTY STATISTICS BUILDING ADDRESS One Parkway North Blvd, Deerfield, IL Anchor Tenant and Guaranteed Income Stability Anchor tenant, Fortune 500 company Essendant, Inc. (formerly known as United Stationers) with revenues of $5.4 billion in 2016, leases 198,730 RSF (72.5% of the gross building area) and recently renewed their lease for an additional 11 year term through October 2027 with no termination option. RENTABLE AREA 273,934 RSF Long term cash flow is guaranteed as the Property’s weighted average lease term is an impressively high 9.2 years. LAND SITE 11.22 acres (488,743 SF) Upside with Competitive Basis at Substantial Discount to Replacement Cost The lack of new supply in the North Suburban submarket will provide One Parkway North significant room for rents to continue improving in the near 92.7% PERCENT LEASED future. Built to the highest standard of Class A office developments, One Parkway’s replacement cost today would be in excess of $360 per rentable square foot requiring net rents of $33.00 per rentable square foot (60% above the current market rent for the Property). STORIES 5 DATE COMPLETED/RENOVATED 1988 / 2016 One-of-a-Kind Location One Parkway North provides direct access to the Tri-State and Edens Expressway, along with tremendous visibility to the 155,000 vehicles passing TYPICAL FLOOR PLATE 57,000 RSF the Property on a daily basis providing tremendous signage opportunities. In addition, the Property is proximate to two (2) Metra stations, connecting One Parkway to the surrounding suburbs, the Chicago CBD, O’Hare International Airport, and two other regional airports. PARKING 934 SPACES (3.64 / 1,000 RSF) North Suburban Submarket and Lake County Address WEIGHTED AVERAGE LEASE TERM 9.2 Years The North Suburban submarket routinely outperforms the surrounding areas in occupancy rate, net rents and leasing velocity due to the area’s reputation as Chicago’s premier office market and the premier destination for corporate headquarters and biotech companies. The Lake County address is of further appeal because of the lower tax rates compared to Cook County. Caterpillar, a Fortune 500 (#59) company, recently announced the relocation of their corporate headquarters to approximately 100,000 RSF to Deerfield, which is indicative of the area’s appeal. Parkway North Center: Best-in-Class Office Park One Parkway North is part of the master-planned, TOBY award-winning office campus known as Parkway North Center. The campus features a Marriott Suites hotel, Bright Horizons daycare center, state-of-the-art LifeStart fitness center, three Pace bus stops, three on-site dining options, Starbucks kiosk, and an adjacent luxury apartment community. The desirability of the office campus is evidenced by the tenant roster, which includes the headquarters of Fortune 500 company Mondelez, CF Industries, Walgreens, GCG Financial, Aerotek, Meridian Group and many others. Immediate Access to Class A Amenities One Parkway North benefits from an on-site food service, heated executive parking, a newly renovated atrium, and brand new in-building fitness center. Within a 5 to 10 minute drive of the Property, there are over 50 restaurants, 8 hotels, 11 banks, 9 retail/shopping centers (including Northbrook Court), a Whole Foods and 2 Metra Stations. This vibrant atmosphere leads to strong tenant retention at One Parkway North. Institutionally Maintained through Extensive Capital Improvement Current ownership recently completed a fitness center and renovated the building atrium and on-site food service, in addition to several building upgrades performed in the last year. The total cost of capital improvements completed since acquisition in 2015 (inclusive of the anticipated cost of a BAS capital project) is equal to $3.9 million. Skilled Labor Pool and North Shore Location One Parkway North’s access to a deep labor pool in the surrounding areas is another advantage of the Property’s North Shore location. Within one mile of One Parkway, 75.4% of residents have obtained a Bachelor’s degree or higher, the average annual household income is $228,860 and the median housing value is $597,054. Many decision makers and executives live in the surrounding areas which is another reason why corporate businesses want to be in this submarket. ONE PARKWAY NORTH 3 ONE PARKWAY NORTH Dedicated Anchor Tenant with Credit Quality Income Stability Essendant (NASDAQ: ESND), the Property’s anchor tenant, is a publicly-traded Fortune 500 company that recently of the gross building area). The tenant has a ROFO on all remaining space in the building and does not have an option memorialized their long term commitment to the Property with a lease extension through October 2027. Formerly to terminate, creating the ideal environment for Essendant to increase their footprint within the Property. Essendant’s known as United Stationers Supply Company, Essendant is a leading national wholesale distributor of workplace anchor tenancy will provide significant stabilized cash flow to an investor looking for a core income stream. essentials, and has been headquartered at the building since 2005. Essendant leases 198,730 RSF (72.5% Summary of Primary Tenants Leased SF % Share (1) Current Net Rent/RSF Current Market Rent/RSF % Above / Below Market Expires Remaining Term Credit Rating (2) ESSENDANT 198,730 72.5% $18.00 $19.00 -5.26% Oct-27 10.2 yrs NA FRIEDMAN CORPORATION 15,687 5.7% $18.29 $19.00 -3.74% Apr-20 2.7 yrs Fitch: BBB- AJILON PROFESSIONAL STAFFING 6,257 2.3% $19.00 $19.00 0.00% Feb-24 6.5 yrs S&P: BBB+; Moody's: Baa1 RIGHT MANAGEMENT 4,458 1.6% $19.67 $19.00 3.53% Sep-18 1.1 yrs S&P: BBB; Moody's: Baa1 ORTHONET SERVICES 3,238 1.2% $19.14 $19.00 0.74% Aug-18 1.0 yrs NA HENKEL CORPORATION (3) 3,210 1.2% $19.00 $19.00 0.00% Feb-23 5.4 yrs S&P/Fitch: A; Moody’s: A2 BDM INVESTMENTS 1,578 0.6% $19.10 $19.00 0.53% Oct-20 3.2 yrs NA TOTAL / WEIGHTED AVERAGE LEASE TERM 233,158 85.1% -4.66% 9.2 yrs (1) % Share is based on Future BOMA Building Siize of 273,934 RSF. (2) Credit Ratings for Friedman, Right Management and Henkel Corporation are reflective of their respective parent companies, Constellation Software, ManpowerGroup and Henkel AG & Company, KGaA. Credit rating for Ajilon is reflective of its Guarantor, Adecco. (3) Henkel is in lease for a 65 month term with a targeted commencement date of 10/1/17. 4 Institutionally Maintained Through Extensive Capital Investment The Property has been maintained and managed to the highest institutional standards with current and recent ownership investing in significant capital projects. To date, ownership has completed $3.6 million of capital improvements to the building systems and aesthetics, and are in the process of completing a BAS capital project. Current ownership’s total capital investment, inclusive of the anticipated costs for the BAS project, is $3.9 million. These capital projects include the installation of a brand-new fitness center, a renovation of the atrium, improvements to the on-site food service, modernization of elevators, and HVAC upgrades. In addition, the restrooms on multi-tenant floors have also been upgraded. Upside with Competitive Basis at Substantial Discount to Replacement Cost The Property provides investors the opportunity to acquire a Class A office building at a substantial discount to replacement cost, providing a competitive basis for years to come. Built to the highest standard of office developments, and institutionally owned and maintained, the cost to replicate the asset today in its superior North Shore location would be in excess of $360 per square foot.