Offering Memorandum
THE IRON HORSE 6541 US-51 • Horn Lake, MS 38637 1 NON-ENDORSEMENT AND DISCLAIMER NOTICE
Confidentiality and Disclaimer The information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap R E Inv, Svcs of Nevada Inc. (hereafter referred to as “Marcus & Millichap”) and should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB's or asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant's plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable; however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of the information set forth herein. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2018 Marcus & Millichap. All rights reserved.
SPECIAL COVID-19 NOTICE
All potential buyers are strongly advised to take advantage of their opportunities and obligations to conduct thorough due diligence and seek expert opinions as they may deem necessary, especially given the unpredictable changes resulting from the continuing COVID-19 pandemic. Marcus & Millichap has not been retained to perform, and cannot conduct, due diligence on behalf of any prospective purchaser. Marcus & Millichap’s principal expertise is in marketing investment properties and acting as intermediaries between buyers and sellers. Marcus & Millichap and its investment professionals cannot and will not act as lawyers, accountants, contractors, or engineers. All potential buyers are admonished and advised to engage other professionals on legal issues, tax, regulatory, financial, and accounting matters, and for questions involving the property’s physical condition or financial outlook. Projections and pro forma financial statements are not guarantees and, given the potential volatility created by COVID-19, all potential buyers should be comfortable with and rely solely on their own projections, analyses, and decision-making.
Non-Endorsement Notice Marcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation's logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers.
ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY. PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.
THE IRON HORSE Horn Lake, MS ACT ID ZAB0630060
Mississippi Broker of Record William M. Davis License # B-15586 2 THE IRON HORSE
TABLE OF CONTENTS
SECTION
INVESTMENT OVERVIEW 01 Offering Summary Location Overview Aerial Photo Parcel Map
FINANCIAL ANALYSIS 02 Tenant Summary Operating Statement Pricing Detail Acquisition Financing
MARKET COMPARABLES 03 Sales Comparables Comparable Shopping Centers
MARKET OVERVIEW 04
Market Analysis Demographic Analysis
3 THE IRON HORSE
INVESTMENT OVERVIEW
4 THE IRON HORSE
OFFERING SUMMARY EXECUTIVE SUMMARY
VITAL DATA PROFORMA YEAR 1 PROFORMA YEAR 2 Price $550,000 CAP Rate 9.29% 9.75% MAJOR EMPLOYERS Net Operating Down Payment 100% / $550,000 $51,069 $53,623 Income Net Cash Flow Loan Type All Cash 9.29% / $51,069 9.75% / $53,623 EMPLOYER # OF EMPLOYEES After Debt Service Gross Leasable Area (GLA) 5,139 SF Total Return 9.29% / $51,069 9.75% / $53,623 Methodist Le Bnheur Healthcare 1,237 Price/SF $107.02 Walmart 724 Current Occupancy 0% Bmh-Desoto 600 Year Built / Renovated 1992 / 2018 Express Financial Services LLC 493 Lot Size 1 acre(s) Kroger 479 Emerson Motor Company 415 Desoto Cnty Centl Maint Fcilty 400
MAJOR TENANTS ABB Installation Products Inc 300 TENANT GLA LEASE EXPIRATION LEASE TYPE Helen of Troy LP 300 McDonalds 267 Graceland Nursing Center LLC 260 American Music & Sound 250
DEMOGRAPHICS
1-Miles 3-Miles 5-Miles 2019 Estimate Pop 4,243 54,076 111,397 2010 Census Pop 4,081 50,775 104,073 2019 Estimate HH 1,587 19,637 39,986 2010 Census HH 1,536 18,540 37,540 Median HH Income $44,537 $51,187 $52,631 Per Capita Income $21,786 $22,954 $23,379 Average HH Income $58,009 $63,085 $64,977
#5 THE IRON HORSE
OFFERING SUMMARY INVESTMENT OVERVIEW
Marcus & Millichap is pleased to present The Iron Horse (Joe's Thirsty Lizard) located at 6541 Highway 51 North in Horn Lake, Mississippi. The subject property was constructed in 1992 is a vacant 5,139-square foot freestanding restaurant building on approximately one acre within one third mile (one minute) south from the corner of Goodman Road West (Highway 302) and Highway 51 North. Goodman Road experiences daily traffic counts in excess of 40,000 vehicles per day while Highway 51 experiences in excess of 24,000 vehicles per day and both provides quick direct access to Memphis International Airport by way of Interstate 55. Interstate 55 experiences in excess of 72,000 vehicles per day. This property can be used for another service if the new owner decides. The property would be considered leasing having new tenant operating under a triple-net (NNN) lease with 5 percent annual rent escalations at price of $10.50 per square foot.
INVESTMENT HIGHLIGHTS
. Excellent Accessibility . One Mile from Interstate 55 and Eight Miles from Highway 61 . Delivered Vacant . Recent Repairs and Renovations
6 THE IRON HORSE
OFFERING SUMMARY PROPERTY OVERVIEW
The Iron Horse (Joe's Thirsty Lizard) is in the Southaven-Horn Lake retail submarket. This vacant, freestanding restaurant building contains two bars, kitchen, three restroom areas, dine in areas, and outside patio area. This particular building was featured on Bar Rescue in April 2018 where the owner invested into the upkeep of the property. The Iron Horse is strategically located two blocks west of Interstate 55 along Goodman Road in Horn Lake, Mississippi.
#77 THE IRON HORSE
OFFERING SUMMARY PROPERTY SUMMARY
THE OFFERING PROPOSED FINANCING Property The Iron Horse First Trust Deed Price $550,000 Loan Type All Cash Property Address 6541 US-51, Horn Lake, MS Assessors Parcel Number 1087350000001801 Zoning COMM SITE DESCRIPTION Number of Stories 1 Year Built/Renovated 1992/2018 Gross Leasable Area 5,139 SF Ownership Fee Simple Lot Size 1 acre(s) Parking 55 Free Surface Spaces are available Parking Ratio 10/1,000 SF Access Points Front, Side (Patio Entrance), Back of Building UTILITIES Gas Tenant Pays Electric Tenant Pays Water Tenant Pays Sewer Tenant Pays Trash Tenant Pays CONSTRUCTION Foundation Slab Framing Wood Exterior Brick Parking Surface Asphalt Roof Flat MECHANICAL HVAC Electrical / Gas Fire Protection Smoke Detectors / Fire Alarms / Sprinkler System
8 PROPERTYTHE IRON HORSE NAME
PRICINGPRICING ANDANDLOCATIONLOCATION VALUATIONVALUATIONTENANT SUMMARYOVERVIEWOVERVIEW MATRIXMATRIX
6541 US-51, Horn Lake, MS 38637
CLOSE PROXIMITY TO:
# 9 THE IRON HORSE
REGIONAL MAP
10 THE IRON HORSE
LOCAL MAP
11 THE IRON HORSE
AERIAL PHOTO
12 THE IRON HORSE
AERIAL PHOTO / PARCELS
13 THE IRON HORSE
PARCEL MAP
14 THE IRON HORSE
PROPERTY PHOTOS
Marcus & Millichap closes more transactions than any other brokerage firm.
1215 THE IRON HORSE
PROPERTY PHOTO
16 THE IRON HORSE
PROPERTY PHOTO
17 THE IRON HORSE
PROPERTY PHOTO
18 THE IRON HORSE
PROPERTY PHOTO
19 THE IRON HORSE
PROPERTY PHOTO
20 THE IRON HORSE
PROPERTY PHOTO
21 THE IRON HORSE
PROPERTY PHOTO
22 THE IRON HORSE
PROPERTY PHOTO
23 THE IRON HORSE
PROPERTY PHOTO
24 THE IRON HORSE
PROPERTY PHOTO
25 THE IRON HORSE
PROPERTY PHOTO
26 THE IRON HORSE
PROPERTY PHOTO
27 THE IRON HORSE
PROPERTY PHOTO
28 THE IRON HORSE
PROPERTY PHOTO
29 THE IRON HORSE
PROPERTY PHOTO
30 THE IRON HORSE
PROPERTY PHOTO
31 THE IRON HORSE
PROPERTY PHOTO
32 THE IRON HORSE
PROPERTY PHOTO
33 THE IRON HORSE
PROPERTY PHOTO
34 THE IRON HORSE
PROPERTY PHOTO
35 THE IRON HORSE
PROPERTY PHOTO
36 THE IRON HORSE
PROPERTY PHOTO
37 THE IRON HORSE
PROPERTY PHOTOS
38 THE IRON HORSE
PROPERTY PHOTOS
39 THE IRON HORSE
PROPERTY PHOTO
40 THE IRON HORSE
PROPERTY PHOTO
41 THE IRON HORSE
PROPERTY PHOTOS
42 THE IRON HORSE
PROPERTY PHOTOS
43 THE IRON HORSE
FINANCIAL ANALYSIS
44 THE IRON HORSE
FINANCIAL ANALYSIS TENANT SUMMARY
45 THE IRON HORSE
FINANCIAL ANALYSIS OPERATING STATEMENT
46 THE IRON HORSE
FINANCIAL ANALYSIS PRICING DETAIL
47 THE IRON HORSE
TENANT PROFILE
Vacant
General Information
Tenant Name Vacant
Rentable Square Feet 5,139 SF
Percentage of RBA 100%
1248 THE IRON HORSE
MARCUS & MILLICHAP ADVANTAGE
MARCUS & MILLICHAP CAPITAL WHY MMCC? CORPORATION CAPABILITIES Optimum financing solutions to enhance value MMCC—our fully integrated, dedicated financing arm—is committed to providing superior capital market expertise, precisely managed execution, and unparalleled access to capital sources providing the most competitive rates and terms. Enhanced control through investor qualification support We leverage our prominent capital market relationships with commercial banks, life insurance companies, CMBS, private and public debt/equity funds, Fannie Mae, Freddie Mac and HUD to provide our clients with the greatest range of Enhanced control through financing options. MMCC’s ability to qualify investor finance contingencies Our dedicated, knowledgeable experts understand the challenges of financing and work tirelessly to resolve all potential issues for the benefit of our clients. Enhanced control through quickly identifying potential debt/equity sources, processing, and closing buyer’s finance alternatives
Enhanced control through Closed 1,994 National platform $ 7.18 billion Access to MMCC’s ability to monitor debt and equity operating total national more capital investor/due diligence and financings within the firm’s volume in 2019 sources than underwriting to ensure timely, in 2019 brokerage offices any other firm predictable closings in the industry
49 THE IRON HORSE
MARKET COMPARABLES
50 THE IRON HORSE
SALES COMPARABLES MAP
THE IRON HORSE (SUBJECT)
1 Multi-Property Sale
2 Dixie Rents
3 Multi-Property Sale
4 1815 Nail Rd
5 Meineke
6 Pizza Hut
SALES COMPARABLES
51 PROPERTYTHE IRON HORSE NAME
SALES COMPARABLES SALES COMPARABLES SALES COMPS AVG
Average Price Per Square Foot
$200.00
$180.00
$160.00
$140.00
$120.00 Avg. $102.82
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00 The Iron Multi-Property Dixie Rents Multi-Property 1815 Meineke Pizza Hut Horse Sale Sale-2 Nail Rd
52 PROPERTYTHE IRON HORSE NAME
SALESMARKETING COMPARABLES TEAM
SALES COMPARABLES
MULTI-PROPERTY SALE DIXIE RENTS THE IRON HORSE 3001 Goodman Rd W (Part of Multi-Property Sale), Horn Lake, 2356 W Goodman Rd, Horn Lake, MS, 38637 6541 US-51, Horn Lake, MS, 38637 MS, 38637 1 2
rentpropertyname1 rentpropertyname1 rentpropertyname1
Tenants Lease Type Tenants Lease Type Tenants Lease Type Close Of Close Of Asking Price: $550,000 10/17/2019 10/17/2018 Escrow: Escrow: Price/SF: $107.02 Sales Price: $792,851 Sales Price: $435,000 Year Built: 1992 Price/SF: $105.71 Price/SF: $51.79 Year Built: 1988 Year Built: 1994
Annual Per SF Annual Per SF rentpropertyaddress1 NOTES rentpropertyaddress1 rentpropertyaddress1 Income $54,000 $10.51 Expenses $6,380 $0.76 On October 17th, 2019, Joe Poppenheimer sold this 27,392- Expenses $2,931 $0.57 square foot retail center consisting of three buildings for NOI $51,069 $9.94 $2,440,000, or $89.08 per square foot, to Hulet Gregory of Memphis Cashflow. The sale closed with a 9.66 percent CAP rate Occupancy 100% and was in escrow for 68 days. The listing was on the market in July 2019. Financing was provided by Orion Credit Union.
Marcus & Millichap represented the seller and NAI Saig represented the buyer in this transaction. Both parties confirmed the information in this comprable is correct.
53 PROPERTYTHE IRON HORSE NAME
SALESMARKETING COMPARABLES TEAM
SALES COMPARABLES
MULTI-PROPERTY SALE 1815 NAIL RD MEINEKE 2500-2510 Goodman Rd (Part of Multi-Property Sale), Horn 1815 Nail Rd, Horn Lake, MS, 38637 1851 W Goodman Rd, Horn Lake, MS, 38637 Lake, MS, 38637 3 4 5
rentpropertyname1 rentpropertyname1 rentpropertyname1
Tenants Lease Type Tenants Lease Type Tenants Lease Type Close Of Close Of Close Of 10/17/2019 5/25/2018 12/5/2018 Escrow: Escrow: Escrow: Days On Days On Sales Price: $776,149 1291 415 Market: Market: Price/SF: $92.40 Sales Price: $375,000 Sales Price: $759,000 Year Built: 1989 Price/SF: $84.27 Price/SF: $189.75 Year Built: 2002 Year Built: 2003
rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1Annual Per SF NOTES Expenses $8,242 $2.06 On October 17th 2019 Joe Poppenheimer sold this 27,392 square foot retail center consisting of three buildings for $2,440,000, or NOTES $89.08 per square foot, to Hulet Gregory of Memphis Cashflow. The sale closed with a 9.66% CAP rate and was in escrow for 68 H L Holdings LLC sold this 4,000 SF building on December 5th, days. The listing was on the market in July 2019. Financing was 2018 for $759,000 to Daniel Zanella. Century 21 Bob Leigh & provided by Orion Credit Union. Associates represented the sellers in this transaction and Cushman and Wakefield Commercial Advisors represented the Marcus and Millichap represented the seller and NAI Saig buyers. The information in this comparable was verified by both represented the buyer in this transaction. Both parties confirmed parties. the information in this comprable is correct.
54 PROPERTYTHE IRON HORSE NAME
SALESMARKETING COMPARABLES TEAM
SALES COMPARABLES
PIZZA HUT 1631 Goodman Rd W, Horn Lake, MS, 38637
6
rentpropertyname1 rentpropertyname1 rentpropertyname1
Tenants Lease Type Close Of 6/19/2019 Pizza Hut NNN Escrow: Sales Price: $225,000 Price/SF: $92.98 Year Built: 1996
rentpropertyaddress1Annual Per SF rentpropertyaddress1 rentpropertyaddress1 Expenses $12,455 $5.15
55 THE IRON HORSE
COMPARABLE8 SHOPPING CENTERS
THE IRON HORSE (SUBJECT)
1 Horn Lake Station
2 Horn Lake
3 Building # 5
4 Southaven Towne Center
5 The Market At Southhaven
6 South Lake Centre
Bull Frog Corner Shopping 7 Center
8 South Creek Collection West
9 9180-9220 Highway 51 N
10 Desoto Bank Properties
11 Logan's Roadhouse
12 8981-8999 Highway 51 N
13
14
15
16
17
18
20
56 PROPERTYTHE IRON HORSE NAME
COMPARABLE SHOPPING CENTERS AVERAGE OCCUPANCY
100
90
80
70
60 Avg. 48.62% 50
40
30
20
10
0 The Iron Horn Lake Horn Lake Building Southaven The South Lake Bull Frog South Creek 9180-9220 Desoto Bank Logan's 8981-8999 Horse Station # 5 Towne Market At Centre Corner Collection Highway Properties Roadhouse Highway Center Southhaven Shopping West 51 N 51 N Center
57 PROPERTYTHE IRON HORSE NAME
COMPARABLE SHOPPING CENTERS AVERAGE RENT PER SQUARE FOOT
$26
$23
$21 Avg. $14
$18
$16
$13
$10
$8
$5
$3
$0 The Iron Horn Lake Horn Lake Building Southaven The South Lake Bull Frog South Creek 9180-9220 Desoto Bank Logan's 8981-8999 Horse Station # 5 Towne Market At Centre Corner Collection Highway Properties Roadhouse Highway Center Southhaven Shopping West 51 N 51 N Center
58 PROPERTYTHE IRON HORSE NAME
COMPARABLE SHOPPINGMARKETING CENTERS TEAM
HORN LAKE STATION HORN LAKE THE IRON HORSE 1750 Goodman Rd, Horn Lake, MS, 38637 2906 N Goodman Rd, Horn Lake, MS, 38637 6541 US-51, Horn Lake, MS, 38637 1 2
rentpropertyname1 rentpropertyname1 rentpropertyname1
Total GLA Available SF Asking Rent/SF Total GLA Available SF Asking Rent/SF Total GLA Available SF Asking Rent/SF 5,139 SF 0 SF $0.88 13,800 SF 6,800 SF $10.50 13,500 SF 13,120 SF $13.25
YEAR BUILT: 1992 OCCUPANCY: 50% | YEAR BUILT: 2003 OCCUPANCY: 3% | YEAR BUILT: 2006
rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1
NOTES NOTES Signage Pylon Sign, Signage
59 PROPERTYTHE IRON HORSE NAME
COMPARABLE SHOPPINGMARKETING CENTERS TEAM
BUILDING # 5 SOUTHAVEN TOWNE CENTER THE MARKET AT SOUTHHAVEN 9080-9120 Millbranch Rd, Southaven, MS, 38671 6400-6620 Towne Center Loop, Southaven, MS, 38671 151-201 Stateline Rd, Southaven, MS, 38671
3 4 5
rentpropertyname1 rentpropertyname1 rentpropertyname1
Total GLA Available SF Asking Rent/SF Total GLA Available SF Asking Rent/SF Total GLA Available SF Asking Rent/SF 15,000 SF 5,000 SF $9.60 110,517 SF 11,597 SF $22.00 52,691 SF 13,735 SF $10.00
OCCUPANCY: 67% | YEAR BUILT: 1980 OCCUPANCY: 86% | YEAR BUILT: 2005 OCCUPANCY: 77% | YEAR BUILT: 1987
rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1
NOTES NOTES NOTES Signage Banking, Dedicated Turn Lane, Freeway Visibility, Pylon Sign, Restaurant, Pylon Sign, Restaurant, Signage Signage, Signalized Intersection, Energy Star Labeled
60 PROPERTYTHE IRON HORSE NAME
COMPARABLE SHOPPINGMARKETING CENTERS TEAM
SOUTH LAKE CENTRE BULL FROG CORNER SHOPPING CENTER SOUTH CREEK COLLECTION WEST 35 Goodman Rd W, Southaven, MS, 38671 1389-1407 W Goodman Rd, Horn Lake, MS, 38637 7075 Malco Blvd, Southaven, MS, 38671
6 7 8
rentpropertyname1 rentpropertyname1 rentpropertyname1
Total GLA Available SF Asking Rent/SF Total GLA Available SF Asking Rent/SF Total GLA Available SF Asking Rent/SF 35,000 SF 7,500 SF $25.00 11,821 SF 7,442 SF $8.50 19,259 SF 5,918 SF $18.00
OCCUPANCY: 79% | YEAR BUILT: 2001 OCCUPANCY: 37% | YEAR BUILT: 1988 OCCUPANCY: 69% | YEAR BUILT: 2006
MAJOR TENANTS
Avenue
rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1
NOTES NOTES NOTES Signage Pylon Sign, Signage Pylon Sign, Signage
61 PROPERTYTHE IRON HORSE NAME
COMPARABLE SHOPPINGMARKETING CENTERS TEAM
9180-9220 HIGHWAY 51 N DESOTO BANK PROPERTIES LOGAN'S ROADHOUSE 9180-9220 Highway 51 N, Southaven, MS, 38671 1426 Nail Rd W, Horn Lake, MS, 38637 6685 Airways Blvd, Southaven, MS, 38671
9 10 11
rentpropertyname1 rentpropertyname1 rentpropertyname1
Total GLA Available SF Asking Rent/SF Total GLA Available SF Asking Rent/SF Total GLA Available SF Asking Rent/SF 9,700 SF 6,967 SF $8.21 13,800 SF 8,163 SF $15.00 8,504 SF 8,023 SF $15.00
OCCUPANCY: 28% | YEAR BUILT: 1969 OCCUPANCY: 41% | YEAR BUILT: 2006 OCCUPANCY: 6% | YEAR BUILT: 2005
rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1
NOTES NOTES NOTES Signage Signage Restaurant, Signage, Signalized Intersection
62 PROPERTYTHE IRON HORSE NAME
COMPARABLE SHOPPINGMARKETING CENTERS TEAM
8981-8999 HIGHWAY 51 N 8981-8999 Highway 51 N, Southaven, MS, 38671
12
rentpropertyname1 rentpropertyname1 rentpropertyname1
Total GLA Available SF Asking Rent/SF 10,100 SF 5,900 SF $18.50
OCCUPANCY: 42% | YEAR BUILT: 1978
rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1
NOTES Signage, Signalized Intersection
63 THE IRON HORSE
MARKET OVERVIEW
64 THE IRON HORSE
MARKET OVERVIEW MEMPHIS OVERVIEW
Often considered the home of the blues as well as the birthplace of rock ‘n’ roll, Memphis has music in its soul. The metro spans 3,000 square miles over nine counties in the states of Tennessee, Mississippi and Arkansas. The Tennessee counties include Shelby, Fayette and Tipton. Crittenden County is in Arkansas, and Tate, DeSoto, Tunica, Benton and Marshall counties are in Mississippi. The Mississippi River runs through the metro, forming the border between Tennessee and Arkansas. Other rivers flowing through the region define areas available for development. The market contains nearly 1.4 million residents and more than 951,000 reside in Shelby County. Memphis is the area’s most populous city with nearly 656,000 citizens.
METRO HIGHLIGHTS
GROWING ECONOMY A large distribution presence, favorable business climate and diversification into other industries are helping to grow the metro’s economy.
SKILLED WORKERS Memphis has a large, highly skilled logistics labor pool that helps draw companies.
AFFORDABLE COST OF LIVING The median home price in Memphis is well below the national median.
1 THE IRON HORSE
MARKET OVERVIEW
ECONOMY . The metro’s centralized location and favorable business climate, including a low tax structure and right to work status, lure companies to the region. Three Fortune 500 companies are located in Memphis: FedEx, AutoZone and International Paper. . Distribution and logistics comprise a significant portion economic activity due to the metro’s location and intermodal capabilities. The metro houses headquarters and a hub for FedEx. UPS and USPS also have major operations here and 140 freight carriers operate locally. . Other industries include manufacturing, music, film and tourism.
MAJOR AREA EMPLOYERS FedEx Corp. St. Jude Children's Research Hospital Methodist Le Bonheur Healthcare Baptist Memorial Health Care Corp. Walmart XPO Logistics Autozone First Horizon National Corp. The Kroger Co. International Paper * Forecast
SHARE OF 2019 TOTAL EMPLOYMENT
7% 15% 13% 11% 4% MANUFACTURING PROFESSIONAL AND GOVERNMENT LEISURE AND HOSPITALITY FINANCIAL ACTIVITIES BUSINESS SERVICES
27% 4% + 15% 1% 4% TRADE, TRANSPORTATION CONSTRUCTION EDUCATION AND INFORMATION OTHER SERVICES AND UTILITIES HEALTH SERVICES
2 THE IRON HORSE
MARKET OVERVIEW
DEMOGRAPHICS
. The metro is expected to add nearly 28,000 people over the next five years, resulting in the formation of approximately 14,000 households. SPORTS . A median home price of nearly $192,000 is well below the U.S. median and has allowed 61 percent of households to afford to own their home. . Roughly 26 percent of people age 25 and older hold bachelor’s degrees; among those residents, 9 percent also have earned a graduate or professional degree.
2019 Population by Age
7% 21% 7% 27% 26% 14% 0-4 YEARS 5-19 YEARS 20-24 YEARS 25-44 YEARS 45-64 YEARS 65+ YEARS EDUCATION
2019 2019 2019 2019 MEDIAN POPULATION: HOUSEHOLDS: MEDIAN AGE: HOUSEHOLD INCOME: 1.4M 510K 36.4 $52,200 Growth Growth U.S. Median: U.S. Median: 2019-2024*: 2019-2024*: 2.0% 2.7% 38.1 $60,800
QUALITY OF LIFE The “Blues City” region offers an attractive quality of life for residents and visitors. Parks and recreational options abound in the area. Local sports are represented by the NBA’s Memphis Grizzlies, and the Memphis Redbirds are the metro’s minor league baseball ARTS & ENTERTAINMENT team. The Liberty Bowl Memorial Stadium hosts the Liberty Bowl and University of Memphis football. Additionally, numerous casinos in Tunica County, Mississippi, offer gaming. Music plays an important role in the history of Memphis. Today, one can relive history by touring Graceland, the former home of Elvis Presley, visiting Sun Records or the former Stax Records, which is now the Stax Museum.
* Forecast Sources: Marcus & Millichap Research Services; BLS; Bureau of Economic Analysis; Experian; Fortune; Moody’s Analytics; U.S. Census Bureau
3 THE IRON HORSE
TENNESSEE METRO AREAS
Hiring in Prominent Metropolitan Neighborhoods Prompts Retail Retail 2019 Outlook Investment Near Employers
Y-O-Y A robust labor market boosts retail sales across Tennessee. Nashville unemployment Asking Y-O-Y Metro Vacancy BasisPoint has remained below the 3 percent mark for three consecutive years, with Knoxville and Rent Change Memphis also maintaining record-low unemployment near 3 and 4 percent. Nashville Change has led household growth across the state, reaching 2 percent in the past four quarters, outweighing the nation’s 1.2 percent average rate. Sizable employment Nashville 2.8% -60 $18.96 2.9% growth in the leisure and hospitality and professional and business services sectors has generated hefty retail demand across the metro. Retailers are moving closer to Memphis 5.1% 20 $13.50 3.5% state employers as consumers are shopping in close proximity to their work and home. Knoxville 2.9% -50 $15.55 7.0% Redevelopment projects generate supply additions. Some of these projects were triggered by FedEx and Amazon announcing large-scale projects in both downtown Investment Trends Memphis and Nashville, attracting more shoppers to the properties around them. FedEx will be expanding its presence to downtown Memphis in the spring of 2020, Nashville opening in the former Gibson Guitar Factory. Amazon has already begun its Center of • The suburban communities of Franklin, Brentwood, and Mt. Juliet are drawing Excellence for its Operations in Nashville Yards. Across the board, investors are regional and out-of-state buyers pursuing cost-effective assets in the low-6 searching for properties to break apart due to decline in big-box tenants. These assets, percent cap rate range. particularly in urban locations, are providing many opportunities for investors seeking • Downtown is popular among large grocery tenants who desire to be accessible to rehabilitation projects. Throughout the year, urban retail sites continue to provide an new luxury apartments. Whole Foods, Fresh Market and Publix are some of the alternative way to service consumers more practically. Shoppers are able to access major grocers developing in the city, creating new opportunities for buyers their retailers by foot, streamlining their shopping experience in a way that is most seeking grocery anchor tenants. effective for their lifestyle. Memphis • Established communities in east Memphis, such as Germantown, Collierville and Lakeland, are attracting out-of-state investors seeking higher yields in condensed suburban locations. • Assets near I-40 remain a favored destination for capital placement. The return on investment can be higher in these areas and pricing can be lower than properties in the city center. The Lake District in northeastern Memphis welcome approximately 300,000 square feet of new retail space this year near Canada Road. Knoxville • Property trades are prominent along I-40 and around Knoxville central business district. Average cap rate range in the 8 to 10 percent range, depending on location and tenant mix. • The Farragut submarket, along I-40, is attracting national and regional buyer interest, as retail property trades in the low-7 percent cap rate range. * Cap rates trailing 12 months through 2Q19; 10-year Treasury up to June 30 Sources: CoStar Group, Inc.; Real Capital Analytics
68 THE IRON HORSE
TENNESSEE METRO AREAS: MEMPHIS
2Q19 – 12-Month Trend
EMPLOYMENT CONSTRUCTION VACANCY RENTS
increase in total 112,000 square feet basis point increase increase in the 1.4% employment Y-O-Y completed 20 in vacancy Y-O-Y 3.4% average asking rent Y-O-Y Y-O-Y • Steady employment growth • The volume of deliveries • Net absorption turned negative • The average asking rent continued over the past year decreased during the past year during the past four quarters reached $12.89 per square foot ending in June as 9,200 jobs following the completion of triggering a slight increase in in June, following the 2.0 percent were added. Organizations roughly 320,000 square feet vacancy to 5.2 percent in June. gain recorded during the prior created 6,900 positions in the during the prior 12-month period. • The Germantown submarket yearlong period. previous four-quarter period. • The Market Row Lofts and Lake recorded one of the greatest • Rent growth was headlined by • The leisure and hospitality, and District developments will add to vacancy declines, contracting a Crittenden and Germantown professional and business completions for 2019, generating hefty 300 basis points to 4.4 counties, where the average services sectors supported close to 440,000 square feet of percent. The Collierville rates rose 64.0 percent and 18.3 overall job creation. Together mixed-use retail by the end of the submarket closely followed with percent, respectively. During the these industries added year. a 210-basis-point decline that prior year, average rents in both approximately 6,000 positions. reduced vacancy to 3.4 percent. of these submarkets had declined by more than 6 percent.
* Forecast
69 THE IRON HORSE
TENNESSEE METRO AREAS: MEMPHIS
Submarket Trends
Lowest Vacancy Rates 2Q19
Y-O-Y Asking Y-O-Y % Submarket Vacancy BasisPoint Rate Rent Change Change
Crittenden County 3.0% 90 $18.40 61.3%
Southaven/Horn Lake 3.0% -30 $14.44 10.3% * Forecast ** 2018-2023 Sales Trends Collierville 3.4% -210 $15.40 0.9% Steady Yields Draw Investors Pursuing Value-Add Opportunities Outside the City’s Core Northeast 3.7% -40 $13.63 2.6% • Multi-Tenant: The average cap rate for Memphis assets has risen 60 basis points since 2015 as investors purchased more higher-yielding assets. Transaction velocity over the past year nearly matched the record number of closings registered during the prior 12- East 4.0% 140 $14.43 -12.4% month span. • Single-Tenant: After a surge of trades during the past two years, sales activity moderated Downtown/Midtown 4.2% -60 $13.26 0.0% in the past annual period ended in June. The average price per square foot climbed 14.1 percent year over year to $433 per square foot, leveling the average cap rate to the low-6 percent band. Olive Branch 4.4% 250 $13.44 -15.4%
Outlook: Value-add opportunities attract Germantown 4.4% -300 $21.57 18.3% buyers to suburban communities containing lower-cost real estate and high South 4.8% 110 $9.52 11.1% returns on investment. Cordova 10.0% 340 $14.30 -4.3%
Overall Metro 5.2% 20 $12.89 3.4%
* Trailing 12 months through 2Q19 over previous time period ** Includes submarkets with more than 4 million square feet of inventory Sources: CoStar Group, Inc.; Real Capital Analytics
70 THE IRON HORSE
TENNESSEE METRO AREAS
Capital Markets
By DAVID G. SHILLINGTON, President, Marcus & Millichap Capital Corporation
• Fed drives rates lower, yet future policy still undecided. The Federal Reserve cut the overnight rate by 25 basis points in September, the second reduction in 50 days amid muted inflationary pressure and continued trade tensions with China. Though the rate cut supports an extension of the economic growth cycle, the market remains cautious as the Fed declined to commit to additional rate cuts through the remainder of the year. While some Fed members are advocating on further reductions, others hold a different stance, citing positive economic indicators like sound retail spending, sustained job creation and strong consumer confidence as reasons to maintain the current target rate. These factors have helped moderate recession risk, putting the 10-year Treasury back in the upper-1 percent range and above the two-year note following a yield-curve inversion in late August. While recession risk remains, the economy’s solid foundation points to continued domestic growth in the near future. Global developments including the trade war with China as well as the progression of Brexit and its potential aftermath will help determine future Fed decisions.
• Lenders shift focus to tenant blends as transforming sector opens new doors. Theevolvingnatureofthe retail sector is providing opportunities for investors and giving underwriters more confidence in the long-term outlook of retail. Lending habits remain relatively conservative; however, a wide range of financing is available for strong proposals. Underwriters are beginning to focus more on tenant mixes while emphasizing the inclusion of tenants with sustainable business models before they sponsor a deal. Active lenders include local, regional and national banks, insurance companies, debt funds and CMBS lenders. Net-leased assets and premier, mixed-use structures remain the most desirable asset types. Meanwhile, outlying malls and non-credit tenants will be heavily scrutinized and underwritten in a conservative manner. Loan-to-value (LTV) ratios are in the 60 to 70 percent range with typical debt service coverage (DSC) ratios above 1.30x depending on borrower, asset and location factors. Mezzanine and bridge loan structures have been more frequently used in this environment, with owners financing capital improvements at higher leverage ratios on short-term debt before seeking long-term financing options once their operations have been stabilized. * Trailing 12 months through 2Q19 Include sales $2.5 million and greater Sources: CoStar Group, Inc.; Real Capital Analytics
71 PROPERTYTHE IRON HORSE NAME
MARKETINGDEMOGRAPHICS TEAM Created on August 2020
POPULATION 1 Miles 3 Miles 5 Miles HOUSEHOLDS BY EXPENDITURE 1 Miles 3 Miles 5 Miles Total Average Household Retail . 2024 Projection $55,177 $59,999 $62,831 Expenditure Total Population 4,292 55,491 115,175 . Consumer Expenditure Top 10 . 2019 Estimate Categories Total Population 4,243 54,076 111,397 Housing $14,060 $15,093 $15,530 . 2010 Census Transportation $10,558 $11,681 $12,118 Total Population 4,081 50,775 104,073 Shelter $7,925 $8,500 $8,679 . 2000 Census Food $5,479 $5,931 $6,087 Total Population 3,949 42,304 84,860 Personal Insurance and Pensions $4,831 $5,528 $5,954 . Current Daytime Population Health Care $3,556 $3,991 $4,249 2019 Estimate 5,579 49,574 87,452 Utilities $3,524 $3,687 $3,835 HOUSEHOLDS 1 Miles 3 Miles 5 Miles Entertainment $2,130 $2,377 $2,494 . 2024 Projection Cash Contributions $1,557 $1,741 $1,963 Total Households 1,615 20,322 41,662 Apparel $1,190 $1,301 $1,314 . 2019 Estimate POPULATION PROFILE 1 Miles 3 Miles 5 Miles Total Households 1,587 19,637 39,986 . Population By Age Average (Mean) Household Size 2.65 2.74 2.78 2019 Estimate Total Population 4,243 54,076 111,397 . 2010 Census Under 20 29.35% 29.48% 29.38% Total Households 1,536 18,540 37,540 20 to 34 Years 25.02% 23.91% 21.75% . 2000 Census 35 to 39 Years 7.46% 7.50% 6.91% Total Households 1,551 15,561 30,336 40 to 49 Years 12.24% 12.79% 12.62% . Occupied Units 50 to 64 Years 15.04% 15.72% 17.64% 2024 Projection 1,615 20,322 41,662 Age 65+ 10.88% 10.61% 11.70% 2019 Estimate 1,646 20,742 42,752 Median Age 32.32 32.80 34.18 HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles . Population 25+ by Education Level . 2019 Estimate 2019 Estimate Population Age 25+ 2,703 34,307 71,019 $150,000 or More 3.58% 3.69% 4.50% Elementary (0-8) 2.95% 2.83% 2.60% $100,000 - $149,000 8.57% 10.17% 12.20% Some High School (9-11) 8.10% 9.37% 8.76% $75,000 - $99,999 12.91% 15.91% 15.07% High School Graduate (12) 35.47% 33.92% 32.44% $50,000 - $74,999 19.29% 21.43% 20.74% Some College (13-15) 30.32% 28.15% 27.18% $35,000 - $49,999 17.58% 17.96% 16.15% Associate Degree Only 9.28% 10.28% 10.19% Under $35,000 38.08% 30.85% 31.34% Bachelors Degree Only 10.84% 11.00% 12.57% Average Household Income $58,009 $63,085 $64,977 Graduate Degree 2.39% 3.55% 5.17% Median Household Income $44,537 $51,187 $52,631 Per Capita Income $21,786 $22,954 $23,379
Source: © 2019 Experian
72 PROPERTYTHE IRON HORSE NAME
MARKETINGDEMOGRAPHICS TEAM
Population Race and Ethnicity In 2019, the population in your selected geography is 4,243. The The current year racial makeup of your selected area is as follows: population has changed by 7.44% since 2000. It is estimated that the 49.78% White, 42.31% Black, 0.08% Native American and 1.22% population in your area will be 4,292.00 five years from now, which Asian/Pacific Islander. Compare these to US averages which are: represents a change of 1.15% from the current year. The current 70.07% White, 12.87% Black, 0.19% Native American and 5.66% population is 46.29% male and 53.71% female. The median age of Asian/Pacific Islander. People of Hispanic origin are counted the population in your area is 32.32, compare this to the US average independently of race. which is 38.08. The population density in your area is 1,350.00 people per square mile. People of Hispanic origin make up 5.79% of the current year population in your selected area. Compare this to the US average of 18.17%.
Households Housing There are currently 1,587 households in your selected geography. The The median housing value in your area was $111,368 in 2019, number of households has changed by 2.32% since 2000. It is compare this to the US average of $212,058. In 2000, there were 869 estimated that the number of households in your area will be 1,615 owner occupied housing units in your area and there were 683 renter five years from now, which represents a change of 1.76% from the occupied housing units in your area. The median rent at the time was current year. The average household size in your area is 2.65 persons. $570.
Income Employment In 2019, the median household income for your selected geography is In 2019, there are 1,595 employees in your selected area, this is also $44,537, compare this to the US average which is currently $60,811. known as the daytime population. The 2000 Census revealed that The median household income for your area has changed by 12.72% 53.01% of employees are employed in white-collar occupations in since 2000. It is estimated that the median household income in your this geography, and 44.67% are employed in blue-collar occupations. area will be $50,453 five years from now, which represents a change In 2019, unemployment in this area is 2.74%. In 2000, the average of 13.28% from the current year. time traveled to work was 25.00 minutes.
The current year per capita income in your area is $21,786, compare this to the US average, which is $33,623. The current year average household income in your area is $58,009, compare this to the US average which is $87,636.
Source: © 2019 Experian
73 THE IRON HORSE
8 DEMOGRAPHICS
74 PRESENTED BY www.MarcusMillichap.com 75