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1170 E.

Van Buren

“Pop Place”
Synthesis #2 ASU MRED

Prepared by Alex Popovic


TABLE OF CONTENTS

EXECUTIVE SUMMARY …………………………………….……………………….………..2


AREA ANALYSIS ……………………………..………….…………………………………….4
SITE ANALYSIS ..…………………..…………………….…………………………………….5
MARKET ANALYSIS …………………….……………….……………………….……………6
REDEVELOPMENT OPTIONS ……………..…………….……………………….………….7
SITE PLAN AND RENDERINGS ……………………….……………………….……………8
FINANCIAL ANALYSIS .…………………….…………….……………………….…………10

Page 1
Executive Summary
Design Proposal
Pop Place is rooted in the inherent idea of history, culture and revitalizing an area that draws on a wide variety of diverse backgrounds
thereby creating a sense of place. Garfield Park and East Lake Park, two iconic Phoenix areas surround the property, which provides
abundant opportunities for developing the site.

The concept idea and proposal draws heavily on the process of gentrification while maintaining the look and feel which caters to the
surrounding demographics and the wishes of the property owner who has a passion for the arts and music.

Updating site zoning from its current C2 and C3 use to PUD is key and is in line with the city’s General Plan for mixed-use. Pop Place calls for
affordable micro-units, a mix of office and retail and preserving and revitalizing an existing 100 year old red brick building much akin to
historic SoHo NYC buildings to anchor the site with a community restaurant/bar concept in an old revitalized and historic building.

The heart of the proposal calls for mixing old with new and using innovative construction materials in the form of repurposed shipping
containers which offer a variety of benefits such as reduced construction times, rapid installation and modularity which in turn will create
a new and innovative sense of place.

The open-air adaptable plaza area provides space for artists to demonstrate their inventive and artistic spirit by giving both visitors and
residents in the surrounding area the opportunity to interact and participate in the art of food via a community feel that makes people “want to
go there.”

Four affordable shipping container apartments in the rear of the property afford transient artists coming to Phoenix to star in plays and other
performances the ability to live in cutting edge, efficient and conveniently located dwellings and they can further be rented out to corporate
AirBnB persons attending conferences one half mile away in the core of Phoenix when not being utilized for affordable “artist” housing.

Finally, the historic 100 year old building, repurposed with roof top access providing incredible views of downtown Phoenix will anchor the
entire site for local residents, downtown professionals, both young and old alike. Pop Place reimagines Phoenix’s old school feel while
incorporating modern design with innovative repurposed shipping containers to create a place people don’t want to leave.

Page 2
Financial Narrative
Pop Place core concept harnesses the power of enablement to enrich community and create value, while also providing a fun
and cool area to work and live. While the site area is relatively small at just 2/3 of an acre gross, the completed development will
culminate in four 400 SF affordable shipping units, a 5,040 SF redbrick open concept rooftop accessible building that a VIG
or Sam Fox Restaurant would welcome as a new urban anchor, or an up and coming micro-brewery would readily call home, and
4,000 SF of retail/office shipping containers offering flexibility, with a 3.3/1000 parking ratio. Modularity and ease of
implementation reduces building costs and significantly compresses construction timelines which affords the developer an
incremental development approach.

The “Stone in the Pond” idea of regional influence was a key factor in analyzing and assessing what was the highest and best use
for the property when the influence of downtown Phoenix’s proximity reaches the site. Currently two viable options provide solid
financial returns and validate proof of concept. Concept 1 approaches the build out gradually to allow surrounding development
to take root and the ripples from the “Stone in the Pond” to reach the site in the next 18-24 months. With an investment of
$900,000 at a 65% LTV utilizing the property as collateral Unlevered IRR at 32.67% and CoC multiple of 5.1X and a Levered
IRR at 51.65% and CoC multiple of 3.7X. This option is the least risky of the two and provides the strongest financial returns to
the owner.

Concept 2 builds out the entire site totaling just over 10,000 SF of leasable area with a total project cost of $1,600,000 at an
Unlevered IRR of 25.54% and CoC multiple of 3.96X and a Levered IRR of 45.64% and CoC multiple of 4.3X.

The possibility exists to get the original redbrick building designated a historic site, this may provide significant waived soft and
demolition costs from the city that would greatly impact final pro-forma numbers with better returns. The capital investment will
help develop a functional and physically obsolete site while maintaining the owners vision and creating a sense of communal
place.

Page 3
Area Analysis
The area surrounding the property within a one mile radius is a vibrant tapestry of varying demographics, income, age, professions
and interests. Down town Phoenix is less than a half mile away. Over 100,000 live within a 3 mile radius comprising over 36,000
households. Over 60% of the population is Hispanic with a relatively low household income of just over $30,000 and a median age
of 30.6 years.

Further area analysis demonstrates a neighborhood in a state of


flux and a nexus has reached the property with pioneering
developers ready and willing to build along the Van Buren St
corridor. The Garfield Park area to the north of the property is an
eclectic mix of artists and older Phoenix homes anchored by the
emerging and trend setting Roosevelt Row. While East Lake Park
an old negro neighborhood that’s over 100 years old and was
segregated at Van Buren has grown into its own self sustained
and vibrant success story with median households income higher
than average along with home prices significantly higher than the
surrounding area.

Van Buren St, named after the eight President of the United
States, Martin Van Buren, was in its heyday a bustling street that
was used by travelers working their way west during the 1930’s
to the early 1960’s. With Phoenix growing and recently becoming
the nations fifth largest city, regional influence in the area has been exerting more and more pressure on older run down areas and
neighborhoods. The light rail that was recently added one street south of the property and downtown expansion along with
Arizona State University’s growth to the south are all exerting demands for urban living thereby spawning development
opportunities in these obsolete and forgotten areas.

Page 4
Site Analysis
Located at 1170 E. Van Buren St approximately one half mile east of
downtown Phoenix, the property is comprised of 5 parcels, totaling
approximately 30,700 SF, four parcels zoned C3 and one zoned C2.
The general plan use is designated as “Mixed-Use” and is in a TOD-1
Overlay district. Currently an approximate 9,000 SF building sits in the
center of the site and is occupied by one tenant with a lease in place
until 2020 with two 5-year extensions. The property generates
approximately $100,000 gross revenues annually. Almost 43,000 cars
pass the property daily along Van Buren St. to get to downtown
Phoenix and over 100,000+ along neighboring streets around the
property.

The owner has indicated a love for the arts, music and preserving the
core building which has been added to over the years. Research has
shown that the 9,000 SF current building has an old red brick and
white mortar style building that dates back almost 100 years
approximately 1,800 SF in size (40’x45’). The site is predominantly
surrounded by other C2 and C3 businesses and to the North abutting
the property is housing zoned R5.

Across the street a 2.1 acre site zoned PUD has been scheduled to be developed by a prominent developer in Phoenix who is
planning to build 200 to 300 condominiums with ground floor retail and restaurant space. The ripples have reached the site and
immediate area from the “Stones in the pond” and gentrification of the community has begun. Gentrification a process that is
defined by 4 key events in a neighborhoods lifecycle has begun and the site sits poised toward the end of stage two whereby a
pioneering developer or event triggers key development thereby revitalizing it and creating a new place.

Page 5
Market Analysis

The Midtown/Central Phoenix market within which the


subject property lies in borders several of the most Submarket comps & likely tenants
prominent office submarkets such as Camelback Corridor,
The VIG Downtown Phoenix Sub Market
Downtown, and Midtown. Typical rent within this Property type: Restaurant
Just signed lease NW of your property
submarket, which is about 20% less than the metro $40 SF + NNN Source Nick Ault Colliers

average has driven vacancies below historical averages.

This particular submarket has considerable “market Sip Coffee & Beer
Property type: Retail
overflow influence” from the aforementioned markets and Just signed lease old town
$38 SF + NNN Source Travis Radevski (Owner)
this is impacting prices, particularly in the western portion
of the submarket bordering the downtown market. This
can be seen by some of the considerably higher rents Regus/We work type office
being achieved across several types of uses.
Property type: Office
2000 SF $20 full Service Gross

The market is in a clear state of flux because of the


increased demand being exerted from businesses and
demand for urban living located closer to places of work
and proximity to the heart of the city. A younger, more Financial market analysis for this submarket
educated demographic sees opportunity in the area
Downtown Phoenix restaurant numbers
coupled with increased speculation by developers about
the potential of development in the area are all indicators
that change is coming and soon.
Downtown Phoenix office numbers

The property currently lies within the Phoenix market and Downtown Phoenix retail numbers
the Midtown/Central Phoenix submarket. For the three
potential highest and best uses of the property i.e. micro
residential, retail/office and restaurant the data below Downtown Phoenix multifamily
highlights potential future revenue based on upcoming development and surrounding market prices.

Page 6
Development Options
Shipping Containers afford the property
owner flexibility and modularity to base
decisions utilizing an incremental
development approach i.e. develop as the
Option #1:
market evolves. Or, build the entire site out to

01
Keep property as is and do nothing
maximize highest and best use of property
and begin gentrification of the area Option #2:
immediately.

02
Incremental approach. Build
out micro units. Build 700
SF office, move current
Option #3: tenant there. Rezone and
Rezone & build out entire site,
10,640 SF mixed office/retail/multi-
family. Stabilize rents, sell 3-5 years
03 restore current building.

Development Timeline
Shipping Container value proposition

Page 7
Site Plan & Renderings

Pop Place Site Plan • 30,733 SF Gross Area

• Re-Zoned to PUD
Micro Unit Interior
400 SF
• 10,640 Total SF
Micro Living Units Leasable Area
• Parking ratio 3.3/1000

• (4) 400 SF micro unit


Community court yard
Artist Area (hacky sacks and guitars) apartments 1,600 SF
& Office/Retail
• 4,000 SF Mixed
Retail/Office

• 5,040 SF
Restaurant/Bar

We Work Office modules

Current Site

Gastro Pub Restaurant/Bar


Think VIG

Conceptual Retail Vendor

Conceptual Sip Coffee

Page 8
Pop Place Detailed Site Plan Alternate Perspective Rendering

Micro Units/Corporate Air BnB

Shipping Container
Gastro Pub/Micro Brewery Office/Retail
With Roof top patio/bar

Rooftop View From Pop Place Rendering

Page 9
Less: Tenant Improvements -$4,200.00 -$4,800.00 -$5,400.00 -$6,000.00
Total Economic NOI $92,244.00 $208,512.00 $207,912.00 $207,312.00
DCSR 2.63 6.44 6.41 2.09

Financial Analysis
UNLEVERED CASH FLOW

Real Estate Value $0.00


Closing Costs
Upfront Capx + TI + LC ($905,000)
0 Acquisition/PM Fee Fee $0
% Option #2 Financial Pro Forma (monthly)
Net Operating Income $100,644.00 Residual Land
$224,712.00 Value Options
$224,712.00 #2 and #3
$224,712.00
Homework 3
0 Sales Proceeds $0.00 $0.00 $0.00 $0.00
Sales Transaction Costs $0.00 $0.00 $0.00 Prepared by Alex Popovic
$0.00
0 Unlevered Cash Flow Synthesis #2 As Is ($905,000.00) Synthesis #2 Repurpose building/rebuild
$100,644.00 $224,712.00 $224,712.00 Synthesis #2 Complete Property Buildout
$224,712.00
Date Printed 02/08/18
Unlevered IRR General Property Information 30.51% General Property Information General Property Information
d Cash Multiple Gross Area 5.1x 30,000 SF .69 Acres Gross Area 30,000 SF .69 Acres Gross Area 30,000 SF .69 Acres
% Net Area 30,000 SF .69 Acres Net Area 30,000 SF .69 Acres Net Area 30,000 SF .69 Acres
% LEVERED CASH FLOW
6
0 Interest Building Area Calculations $0.00 Building Area Calculations
($35,012.96) ($32,353.75) ($32,442.39) Building Area Calculations
($30,577.43)
0 Principal Amortization Allowable FAR 0% $0.00 Allowable FAR $0.00 $0.00 0% $0.00 Allowable FAR
($68,703.33) 0%
Debt Service Allowable SF 9,000 SF $0.00 Allowable SF
($35,012.96) ($32,353.75) 7,340 SF ($32,442.39) Allowable SF
($99,280.76) 10,640 SF
YearPrincipal Advance / (Repayment) Building Efficiencty % 0
100%$588,250.00 1
Building Efficiencty %
($35,012.96) 2
($32,353.75) 3
90% ($32,442.39) 4
Building Efficiencty %
($30,577.43) 90%
0 Loan Repayment Total leasable area 9,000 SF 0 2018 $0.00
Total leasable area 2019 $0.00 7,000 SF2020 $0.00 2021
($68,703.33)
Total leasable area 10,000 SF
0 Lender Fees $8,958.90 $0.00 $0.00 $0.00 $0.00
0
2 Cash Flow From Debt Financing Building Costs $597,208.90 Building Costs
($70,025.92) ($64,707.50) ($64,884.78) ($198,561.51)
0 OPERATING CASH FLOWS Building Costs
0 Shell Costs $0.00 Demolition $65.00 Demolition $65.00
Levered Cash Flow ($307,791.10) $30,618.08 $160,004.50 $159,827.22 $26,150.49
Nominal NOI Structured Pkg $0.00 Pre-Construction
$96,444.00 $295,312.00 $9.00 $295,312.00 Pre-Construction
$295,312.00 $9.00
Less: Tenant
Levered IRR Improvements Surface Pkg 47% $0.00 Surface Pkg
-$4,200.00 -$4,800.00 $6.00 -$5,400.00 Surface Pkg
-$6,000.00 $6.00
Total
Cash Economic NOI
Multiple Tenanat Improvement 11.82x $0.00 $92,244.00
Tenanat Improvement $290,512.00 $12.00 $289,912.00 $289,312.00
Tenanat Improvement $12.00
Total Hard Costs (with contingency) DCSR $0.00 10% 2.63
Total Hard Costs (with contingency) 8.98 $101.20 10% 8.94 2.91
Total Hard Costs (with contingency) $101.20 10%
UNLEVERED
NET LEVERED CASH
CASH FLOW Total Soft Costs
FLOW TO EQUITY $0.00 20% Total Soft Costs (with contingency) $20.24 20% Total Soft Costs (with contingency) $20.24 20%
Total Cost/SF $0.00 Total Cost/SF $121.44 Total Cost/SF $121.44
Real
GPEstate
Asset Value
Management Fee $0.00
Total Cost $0.00 Total Cost $891,369.60 Total Cost $1,292,121.60
Closing
Cash FlowCosts
to Equity $0
Upfront Capx + TI + LC ($1,600,000)
0 Option #3 Financial Pro Forma (monthly)
Acquisition/PM
Net Fee
Lev. IRR (excl. Fee
Promote)
Property Income
Stabilized Occupancy 100%
$0 Property Income
Stabilized Occupancy 100%$306,712.00
Property Income
Stabilized Occupancy 100%
% Net Operating
Net Cash MultipleIncome $100,644.00 $306,712.00 $306,712.00
0 Sales Proceeds Gross Stabilized Rent $9.50 Gross Stabilized Rent
$0.00 $0.00 $32.00 $0.00 Gross Stabilized Rent
$0.00 $38.00
LPSales
CashTransaction
Flow Costs Rental Concession 0.00 $0.00
Rental Concession $0.00 0.00 $0.00 $0.00
Rental Concession 0.00
0 Unlevered
LimitedCash Flow
Partner Contribution Effective Gross Rent ($1,600,000.00)
$9.50 $100,644.00
Effective Gross Rent $306,712.00 $32.00 $306,712.00 $306,712.00
Effective Gross Rent $38.00
Limited Partner Distribution Expense Stop $0.95 10% Expense Stop $3.20 10% Expense Stop $3.80 10%
Unlevered
Total LPIRR
Cash Flow Net Effective Rent 24.21% $8.55 Net Effective Rent $28.80 Net Effective Rent $34.20
d Cash Multiple Net Effective Adjusted 3.96x $8.55 Net Effective Adjusted $28.80 Net Effective Adjusted $34.20
% Net Levered IRR - LP Net Operating Income $76,950.00 Net Operating Income $201,600.00 Net Operating Income $342,000.00
% LEVERED CASH
Cash Multiple - LPFLOW
6
Residual Land Value Residual Land Value Residual Land Value
0 Interest
GP Cash Flow $0.00 ($35,012.96) ($32,353.75) ($32,442.39) ($30,577.43)
0 PrincipalPartner
General Amortization
Contribution Cap Rate 8.5% $0.00 Cap Rate (Avg of all 4 uses)
$0.00 $0.00 7% $0.00 Cap Rate (Avg of all 4 uses)
($68,703.33) 7%
Debt Service
General Partner Distribution Supportable Project Cost $905,294.12 $0.00 Supportable Project Cost
($35,012.96) $2,880,000.00
($32,353.75) ($32,442.39) Supportable Project Cost
($99,280.76) $4,885,714.29
PrincipalPartner
General Advance / (Repayment) Residual Land Value
Promote $905,294.12 $588,250.00 Residual Land Value
($35,012.96) $1,988,630.40 ($32,442.39)
($32,353.75) Residual Land Value
($30,577.43) $3,593,592.69
0 Loan Repayment
Total GP Cash Flow Residual Land Value/SF Net Site $30.18 0 Residual Land Value/SF Net Site
$0.00 $0.00 $66.29 $0.00 Residual Land Value/SF Net Site
($68,703.33) $119.79
0 Lender Fees Residual Land Value/SF Leasable $100.59 $8,958.90 $0.00
Residual Land Value/SF Leasable $0.00 $284.09 $0.00 $0.00
Residual Land Value/SF Leasable $359.36
2 Cash Flow
Levered IRR -From
GP Debt Financing $597,208.90 ($70,025.92) ($64,707.50) ($64,884.78) ($198,561.51)
Cash Multiple - GP Note: I used a higher CAP rate for scenario #1 Keeping
Levered Cash Flow ($1,002,791.10) $30,618.08 $242,004.50 $241,827.22 $108,150.49
it as is due to condition of building and charging less
SELECTED METRICS
LeveredMetrics
IRR than market rate for rents in the submarket
28%
Income
Cash Multiple
Nominal NOI Yield (on Purchase Price) 5.33x
Unlevered Cash-on-Cash
NET LEVERED
Levered CashCASH
on CashFLOW
(Net)TO EQUITY

DebtGP Asset Management Fee


Metrics
Cash
DebtFlow to Equity
Coverage Ratio

Net Lev. IRR


Valuation (excl. Promote)
Metrics
Net Cash
Cost Multiple
Basis PSF Page
#REF!10 #REF! #REF! #REF!

LP Cash Flow
Limited Partner Contribution
Limited Partner Distribution
Total LP Cash Flow