GS MORTGAGE SECS CORP II COM MORT PAS THR CER SRS 1998 GL 11 - 8-K - 19970722 - EXHIBIT_99
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COMPLETE APPRAISAL OF
REAL PROPERTY
Downtown Plaza
211 East Ocean Boulevard
Long Beach, California 90802
Cushman & Wakefield of California, Inc. CUSHMAN &
555 South Flower Street, Suite 4200 WAKEFIELD(R)
Los Angeles, CA 90071-2418 A ROCKEFELLER GROUP COMPANY
Tel: (213) 955-5100
Fax: (213) 627-4044
August 12, 1996
Mr. Dan Kesich
GMAC COMMERCIAL MORTGAGE CORPORATION
650 Dresher Road
Horsham, PA 19044-8015
RE: Appraisal of Real Property
Downtown Plaza
211 East Ocean Boulevard
Long Beach, California 90802
Dear Mr. Kesich:
Enclosed are two final copies of the appraisal referenced above.
If you have any comments, please do not hesitate to call me at
(213) 955-6493.
Sincerely,
CUSHMAN & WAKEFIELD OF CALIFORNIA, INC.
James W. Myers, MAI
Senior Director
Valuation Advisory Services
Enclosure(s)
JWM/jkm
COVRLTR.DOC
COMPLETE APPRAISAL OF
REAL PROPERTY
Downtown Plaza
211 East Ocean Boulevard
Long Beach, California 90802
IN A SUMMARY REPORT
As of August 1, 1996
Prepared For:
GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, PA 19044~-8015
Prepared By:
Cushman & Wakefield of California, Inc.
Valuation Advisory Services
555 South Flower Street, 42nd Floor
Los Angeles, California 90071
Cushman & Wakefield of Caffornia, Inc. CUSHMAN &
555 South Flower Street, Suite 4200 WAKEFIELD(R)
Los Angeles, CA 90071-2418 A ROCKEFELLER GROUP COMPANY
Tel: (213) 955~-5100
Fax: (213) 627~-4044
RE: Appraisal of Real Property
Downtown Plaza
211 East Ocean Boulevard
Long Beach, California 90802
Dear Ms. Tsuya:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of California, Inc. is pleased to transmit our summary
report estimating the market value of the leased fee estate in the referenced
property.
As specified in the Letter of Engagement, the value opinion reported below
is qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report.
This is a complete appraisal prepared in accordance with the Uniform
Standards of Professional Appraisal Practice (USPAP) of The Appraisal Institute.
The results of the appraisal are being conveyed in a Summary report according to
our agreement. Because this is a summary report, the level of detail of
presentation is less than that found in a self-contained report.
This report was prepared for GMAC Commercial Mortgage Corporation and it
is intended only for the specified use of said Client. It may not be distributed
to or relied upon by other persons or entities without written permission of the
Appraiser.
The property was inspected by and the report was prepared by Miles Loo, Jr.
and James W. Myers, MAI.
As a result of our analysis, we have formed an opinion that the market
value of the leased fee estate in the subject property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of August
1, 1996 was:
EIGHT MILLION DOLLARS
$8,000,000
Ms. Avis Tsuya
Page 2
August 5, 1996
The preceding estimate of market value are based upon a forecasted
marketing period of approximately 12 months, which we believe (through a review
of recent office building sale activity, as well as with conversations with
local office/investment brokers) is reasonably representative for this product
type.
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF CALIFORNIA, INC.
/s/Miles Loo, Jr. /s/James W. Myers
Miles Loo, Jr. James W. Myers, MAI
Appraiser Senior Director
Valuation Advisory Services Valuation Advisory Services
Provisional Real Estate Appraiser Certified General Real Estate Appraiser
License No.: AP023313 License No.: AG002662
Property Name: Downtown Plaza
Location:
Office Parcel: Northeast corner of East Ocean Boulevard
and The Promenade North. The street
address is 211 East Ocean Boulevard,
Long Beach, Los Angeles County,
California.
Parking Parcel: North side of Seaside Way extending
from Locust Avenue to Collins Way.
Assessor's Parcel Number:
Office Parcel: 7280-029-024
Parking Parcel: 7278-007-041, 042, 043, and 044
Interest Appraised: Leased fee estate
Date of Value: August 5, 1996
Date of Inspections: August 5, 1996
Ownership: WMP Real Estate Limited, a Delaware
limited partnership
Land Area:
Office Parcel: 42,160 square feet (0.97 acres) per
Assessor's Maps
Parking Parcel: 29,110 square feet (0.67 acres) per
Assessor's Maps
1995-96 Property Assessment
Office ParcelParking Parcel
---------------------------
Land: $1,714,600 $1,135,400
Building: 6,461,000 29,000
---------- ----------
Total: $8,175,600 $1,164,400
1995-96 Estimated Ad Valorem Taxes: $89,757 $11,780
Zoning:
Office: CB, Commercial Business
Parking Parcel: PD-6 (subarea 7), Downtown Shoreline &
Planned
Highest and Best Use
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
Summary Of Salient Facts And Conclusions
================================================================================
If Vacant: Commercial development, such as a
single tenant or multi-tenant office
building; however, current market
conditions are not conducive to
speculative, multi-tenant office
development at the present time,
thus a holding period would be
required before development of this
type would likely occur.
As Improved: As developed, with a multi-tenant,
office building.
Improvements
Type: Six-story class "B" office building
over two levels of subterranean
parking.
Year Built: 1982
Area 100,146+/- RSF
Condition: Average
Operating Data and Forecasts
Current Occupancy: 92.8%
Forecasted First Year Occupancy
(Fiscal Year 1997): 93%
Forecasted Average Occupancy: 8.4%
Average Annual Rental Rate $14.86 annually per square foot
Forecasted: $16.20 annually per square foot
Operating Expenses
Last Full Year (1995): $8.82 per net rentable square foot
Budget (1996): $8.02 per net rentable square foot
Forecasted (1997 FY): $8.37 per net rentable square foot
Value Indicators
Sales Comparison Approach: $9,000,000 ($89.87 per square foot of
net rentable area)
Income Approach: $7,600,000 ($75.89) per square foot of
net rentable area)
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
Summary Of Salient Facts And Conclusions
--------------------------------------------------------------------------------
Discounted Cash Flow Assumptions
Market Rental Growth Rate
1996: 3.5% percent
Thereafter: 3.5% percent
Expense Growth Rates
Utilities: 3.5% percent
All others: 3.5% percent
Credit Loss Allowance: 5.0% percent
Projected Term of Future Leases: 5 years
Vacancy Between Tenants 2 months (after weighting)
Renewal Probability: 65%
Tenant Improvements
New Tenants: $12.50 per square foot
Renewal Tenants: $5.00 per square foot
Terminal Capitalization Rate: 10.5%
Cost of Sale at Reversion: 2.0%
Discount Rate: 12.0%
Value Conclusion
As Is Value Estimate: $8,000,000
Resulting Indicators
Going-in Capitalization Rate
(Overall Capitalization Rate): 10.8%
Price Per Square Foot
(Net Rentable Area): $79.88
Estimated Marketing Time: 12 months
Special Assumption: Please refer to the complete list of
assumptions and limiting conditions
included at the end of this report.
1) We have not deducted costs for
capital work currently in progress or
required in the future for ADA
compliance.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
TABLE OF CONTENTS
Page
PHOTOGRAPHS OF THE SUBJECT PROPERTY ...........................................1
INTRODUCTION ..................................................................8
Identification of Property ..................................................8
Property Ownership and Recent History .......................................8
Purpose and Function of the Appraisal .......................................8
Extent of the Appraisal Process .............................................8
Date of Value and Property Inspection .......................................9
Property Rights Appraised ...................................................9
Definitions of Value, Interest Appraised, and Other Pertinent Terms .........9
Legal Description ..........................................................11
NEIGHBORHOOD ANALYSIS ........................................................12
Location and Boundaries ....................................................12
Immediate Surroundings .....................................................12
Access and Transportation ..................................................13
Employment .................................................................13
Naval Property Reuse .......................................................14
Aviation / Aerospace Industry ..............................................14
Queensway Bay Plan .........................................................14
Port of Long Beach .........................................................14
Conclusion .................................................................15
LOS ANGELES OFFICE MARKET ANALYSIS ...........................................16
Office Market Analysis .....................................................16
Los Angeles County Office Market Overview ..................................16
Employment .................................................................21
Services ...................................................................22
LOS ANGELES SOUTH OFFICE MARKET ANALYSIS .....................................26
Los Angeles South Office Market ............................................26
Long Beach Market ..........................................................26
Direct Competition .........................................................28
Conclusions ................................................................28
PROPERTY DESCRIPTION .........................................................29
Site Description ...........................................................29
Improvements Description ...................................................29
REAL PROPERTY TAXES AND ASSESSMENTS ..........................................30
ZONING .......................................................................31
HIGHEST AND BEST USE .........................................................32
SALES COMPARISON APPROACH ....................................................34
Methodology ................................................................34
INCOME APPROACH ..............................................................37
Methodology ................................................................37
Potential Gross Income .....................................................37
Operating Expenses .........................................................41
CUSHMAN &
WAKEFIELD(R)
VALUATION ADVISORY SERVICES
Table Of Contents
Capitalization .............................................................42
Derivation of Discount Rate ................................................43
RECONCILIATION AND FINAL ESTIMATE OF VALUE ...................................46
ASSUMPTIONS AND LIMITING CONDITIONS ..........................................47
CERTIFICATION OF APPRAISAL ...................................................49
ADDENDA ......................................................................50
Legal Description
Copy of Floor Plans
Project Assumptions and Analysis
Cushman & Wakefield Investor Survey
Qualifications of Miles Loo, Jr.
Qualifications of James W. Myers, MAI
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
INTRODUCTION
Identification of Property
The subject property consists of two non-contiguous parcels improved with
an office building and related parking and site improvements ("The Office
Parcel") and a surface parking lot ("The Parking Parcel"). The Office Parcel
contains 42,160 square feet of land area, and is improved with a 1982-built
Class "B" six-story office building containing 100,146 square feet of rentable
area. These improvements, known as Downtown Plaza, are located at the northeast
corner of East Ocean Boulevard and The Promenade North in the downtown portion
of the City of Long Beach. The street address is 211 East Ocean Boulevard. Based
on the rent roll provided for our review the property is currently 92.8 percent
leased overall, including a second floor lease for a tenant signed but not yet
in occupancy.
The subject property also includes a non-contiguous "Parking Parcel"
located about two blocks southeasterly of the Office Parcel, on the north side
of Seaside Way extending from Locust Avenue to Collins Way. This parcel contains
29,110 square feet according to Assessors maps. The parcel is improved with a
surface parking lot containing 79 marked spaces. The parking lot is leased to
the adjacent hotel (Breakers Hotel) for a term through September 30, 2000
(subject to termination option for "up to" 29 spaces).
The Los Angeles County Assessor's office identifies the subject as parcel
numbers 7280-029-024 (The Office Parcel) and 7278-007-041,042,043, and 044
(The Parking Parcel).
Property Ownership and Recent History
According to a grant deed dated June 27, 1996 the ownership in the subject
property was transferred from WHC-ONE Investors, L.P. to WMP Real Estate
Limited Partnership. This ownership transfer appears to have involved related
parties, and to have been based on an allocated value of approximately
$9,200,000 in conjunction with an allocation based on a "....certain
Distribution and Contribution Agreement" which included other properties.
According to Assessor's information the grantor in the June 27, 1996 transfer
acquired the property in a trustee sale involving multiple properties in August,
1994. No allocation or sales price was available, and we are not aware of any
other sales or marketing efforts involving the property during the past three
years.
Purpose and Function of the Appraisal
The purpose of the appraisal is to provide an estimate of market value of
the leased fee estate in the property. The function of this report is to assist
GMAC Commercial Mortgage Corporation in an evaluation of the property for loan
underwriting purposes.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the property with the property manager and building engineer;
o Reviewed leases and rent rolls relating to the current subject
tenancies.
o Reviewed a detailed history of the income and expenses and a budget
forecast for 1996, including the budget for planned capital
expenditures and repairs;
o Conducted market research into occupancies, asking rents, and operation
expenses at competing buildings including interviews with on-site
managers and a review of our own data base;
o Conducted market inquiries into recent sales of similar building to
ascertain the sales prices per-square foot and capitalization rates.
This process involved telephone interviews with sellers, buyers and/or
participating brokers; and
o Prepared Sales Comparison and Income Approaches to vale. The Cost
Approach was not used.
Date of Value and Property Inspection
The date of value is August 1, 1996, with our date of our last inspection
being the same.
Property Rights Appraised
We valued the leased fee estate, which in a legal conveyance through sale
represent the fee simple title, subject to the existing encumbrances, i.e., the
tenant leases, etc., in the improvements and corresponding land area.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
The most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in what
they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that A reasonable time is allowed for exposure in the open market.
Exposure time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the market value on the effective
date of the appraisal. Exposure time is presumed to precede the effective
date of the appraisal.
Based upon the available sales data in the marketplace, as well as our
discussions six to nine months would appear to have been reasonably
appropriate for the subject property as the date of valuation.
Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Third Edition (1993), published by The Appraisal Institute, are
as follows:
Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate, subject
only to the limitations imposed by the governmental powers of taxation,
eminent domain, police power, and escheat.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the leased
fee owner) and the leased fee are specified by contract terms contained
within the lease.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing, and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
value at a specified yield rate. DCF analysis can be applied with any yield
capitalization technique and may be performed on either a lease-by-lease or
aggregate basis.
Legal Description
A complete legal description of the property is included in the Addenda.
A general legal description is included below.
Office Parcel
"Parcel A" - Lots 4, 6, 8, 10, 12, 13, 14 and portion of lot 2 in block 112
of Long Beach Townsite, in the city of Long Beach, as shown in Map Book 19,
Pages 91, et seq.; "Parcel B" - Lots 15, 16, 17 and 18 in block 112 of Long
Beach Townsite, in the city of Long Beach, as shown in Map Book 19, Pages 91, et
seq.; and "Parcel C" - Lots 7, 8, 9, 10, 11, 12, 13 and 14 in block B of Ocean
Pier Tract, in the city of Long Beach as shown in Map Book 5, Page 135, as filed
in the Office of County Recorder of Los Angeles County.
Parking Parcel
Lots 7, 8, 9, 10, 11, 12, 13 and 14 in block "L" of Ocean Pier Tract, in
the city of Long Beach, in the county of Los Angeles, State of California, as
per map recorded in Book 5, Page 135 of maps, in the office of the county
recorder of said county together with those portions of Marine Way 20 feet wide
vacated and Seaside Way a portion of which is vacated.
The subject property is located in the southwestem portion of Los Angeles
County in the state's fifth largest city, City of Long Beach. The City of Long
Beach is part of a larger region known as the South Bay, an area which
encompasses approximately 300 square miles of generally densely populated cities
and/or communities. The South Bay region is generally bordered to the west and
south by the Pacific Ocean, to the north by the Century Freeway (I-105), and to
the east by the San Gabriel River Freeway (I-605). The South Bay region
encompasses all of southern Los Angeles County and a portion of northwestern
Orange County. Major cities within the South Bay area based on residential
population include Carson, Hawthorne, Lakewood, Long Beach, Redondo Beach, and
Torrance.
Centrally located in the southerly portion is the City of Long Beach, which
is situated in the southern portion of the larger South Bay area, it is bordered
to the west by the Communities of San Pedro and Wilmington, to the north by the
cites of Carson, Cerritos, and Lakewood, to the east by the City of Seal Beach,
and to the south by the Pacific Ocean. The surrounding land uses in the
subject's immediate vicinity include commercial service, retail, hotel and
residential development, and the local area is generally fully developed.
Immediate Surroundings
Ocean Boulevard is an important commercial and traffic corridor in the Long
Beach area. It includes high-rise commercial development and provides access in
an east/west direction from the Long Beach Freeway (I-710). Across the street
from the "office parcel", on the south side of Ocean Boulevard and west of
Locust Avenue, is the 180 Building, a 12-story 1982-built Class "B" office
building containing approximately 200,028 square feet. Just east of The 180
Building is the 13-story Breakers Hotel. To the west of the 180 Building is the
former Jergen's Trust site which is currently offered for sale or lease as a
residential development site. Farther west, at 110 East Ocean Boulevard, is a
14-story, 1950-built commercial building. North of Ocean Boulevard and next to
the subject on the east side is Home Savings Tower, a 10-story 103,000 square
foot office building. Further east is the Shoreline Square, consisting of
417,000 square feet with 21 stories and built in 1989. This complex also
includes a 462-room high-rise Sheraton Hotel.
Slightly north of the subject property is First Street, which contains
central bus stops for the city of Long Beach and Metro Rail Blue Line, a light
rail system extending approximately 22 miles from downtown Long Beach and
downtown Los Angeles. The subject property faces the bus and train stations,
which results in significant transient activity. This street provides no access
for vehicular traffic, except to buses, trains and pedestrian traffic. As a
result, this is viewed as somewhat of a detriment to the subject's ground floor
bank space facing First Street.
Bordering the subject property to the west is The Promenade North, a
pedestrian walkway, which extends from the Long Beach Convention Center
facilities and the Hyatt Regency Hotel to the south of Long Beach Plaza, a
regional shopping center to the north of the subject. The Promenade North is
dedicated to widths varying from 68 to 80 feet and is well-landscaped with
several park benches. It provides the subject with the visibility of a corner
parcel from eastbound traffic on Ocean Boulevard, but does not benefit from full
street corner exposure. Immediately west of the Promenade North is the high-rise
Renaissance Hotel which faces Ocean Boulevard.
The City of Long Beach has very good access to outlying areas by way of the
regional freeway network, the Metro Rail Blue Line, and local surface streets.
The San Diego Freeway traverses the northern portion of the city in an east/west
direction and provides access to several freeways in the South Bay region. Long
Beach is bordered to the west by the Long Beach Freeway, which provides access
in a northerly direction to the central portion of the South Bay and further
north to Pasadena. The San Gabriel River Freeway provides access in a northerly
direction from the southeastern portion of Long Beach to central Los Angeles
County.
The Metro Rail Blue Line is a light rail system which extends for
approximately 22 miles between downtown Long Beach and downtown Los Angeles. The
Blue Line opened in mid 1990 and presently operates 22 stations, with a future
extension of the line from downtown Los Angeles to Pasadena presently being
planned. Ridership on the Blue Line has increased from an average of 19,000
riders per day in the line's first year of operation to an estimated 33,000
riders per day / 12,000,000 annually in calendar year 1996. The Blue Line
originates near the intersection of Long Beach Boulevard and Ocean Boulevard in
the Long Beach Civic Center area, approximately one block west of the subject
property, and extends in a northerly direction along Long Beach Boulevard to
Pacific Coast Highway.
Major surface streets in the City of Long Beach in a north/south direction
include Atlantic Avenue, Long Beach Boulevard, and Cherry Avenue. Important
surface streets in an east/west direction through the city include Ocean
Boulevard, Anaheim Street, and Pacific Coast Highway, which changes direction
from east/west to north/south with Lakewood Boulevard at Traffic Circle
approximately four miles northeast of the subject property.
Employment
Information provided by the City of Long Beach Economic Development
Department indicates that the major employers within the city are as follows:
Employer # of Employees
-------- --------------
McDonnell Douglas 18,700
Long Beach Unified School District 6,500
City of Long Beach 5,750
Long Beach Memorial Medical Center 4,000
California State Univ., Long Beach 4,000
U.S. Postal Service 2,200
St. Mary Medical Center 2,200
Southern California Edison 1,700
Recent growth in the communications, entertainment, transportation,
aerospace and environmental services sectors is the result of the state and
local tax incentive and improvement programs, such as the State Enterprise Zone,
Los Angeles Revitalization Zone, and city= sponsored business loan programs to
help attract and retain businesses. Continuing efforts should result in job
growth and business opportunities in years to come.
Following the 1991 announcement of the U.S. Navy base closure, Long Beach
created a plan that called for the development of more than 400-acres of former
Navy property. The reuse plan presents unique opportunities that emphasizes job
creation and economic revitalization. The table below summarizes how the four
parcels being returned will be restored and sustain economic growth.
===================================================================================================================================
Existing Property Available New Property Usage Projected Job
Acreage Opportunities
Naval Station 197 Port Of Long Beach 2,735
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3 Multi-service center for the homeless 10
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Naval Hospital 70 1,000,000 SF Super volume retail center, 3,000
"Long Beach Towne Center"
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Naval Housing 62 Long Beach Unified School District high 200
school and middle school
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17 Job Corps Training Center 300
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32 CSULB Research & Training Center and 3,000
Long Beach Business Incubator
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18 Transitional housing for homeless persons 30
-----------------------------------------------------------------------------------------------------------------------------------
5 Educational, training facilities for homeless To be determined
persons
-----------------------------------------------------------------------------------------------------------------------------------
1 Child care for homeless persons To be determined
===================================================================================================================================
Aviation / Aerospace Industry
As the local aviation and aerospace industry is expected to make a comeback
over the next several years, one of the more important employers in the Long
Beach area is McDonnell Douglas/Douglas Aircraft, which is a commercial aircraft
and defense related facility in Long Beach. The Douglas Aircraft division is
involved in the development and manufacture of commercial aircraft and announced
in the third quarter of 1995 that it would begin on the MD-11 fuselage and
MD-95 production programs at the company's facilities in Long Beach. The City of
Long Beach and State of California led "Red Team" worked side-by-side with
Douglas executives, labor leaders and other business development partners in
bringing to Long Beach 1,500 to 2,000 new jobs.
Queensway Bay Plan
After the fallout of the proposal submitted by The Walt Disney Company in
1991 to develop a theme park on much of the land along the downtown Long Beach
waterfront, Long Beach planned an aggressive strategy to rejuvenate its downtown
core and convention center, called the Queensway Bay Plan. Long Beach has
already invested more than $200 million since 1992 to build a $750 million
310-acre waterfront development that will include a world class aquarium,
stores, restaurants, entertainment and marina facilities. As Phase I of four is
already under way, which includes several of the infrastructure improvements and
construction of the Long Beach Aquarium of the Pacific to be completed by
1997-98, Long Beach is expecting to generate about 3,500 additional jobs and
inject more than $275 million a year into the Long Beach economy.
Port of Long Beach
The strong growth in international trade has kept the Port of Long Beach as
the nation's number one container port for the past two years. Recognized as the
Gateway to the Pacific Rim,
both imports and exports generate an estimated $3 billion in wages and $430
million in local and state taxes last year. As this year's volume and value of
exports are highly expected to rise, and to accommodate for future growth, the
Port is in the midst of a five-year, $1.3 billion improvement plan. This plan
will include the construction of new terminal facilities, roads and railways on
200-acres soon to be acquired from the U.S. Navy as a result of the closure of
the more than 400-acre Long Beach Naval Station. On-site improvements at the
Port of Long Beach are expected to generate 5,500 new direct and indirect jobs
over the next several years, and the construction of the Alameda Corridor should
generate more than 10,000 construction related jobs over the next six years,
with a nationwide minimum of 70,000 permanent new jobs created within a decade
of building the Corridor.
Conclusion
As the city of Long Beach aggressively restructures its economy to achieve
greater diversity, it is quickly becoming a major Southern California shopping,
dining and entertainment destination. Hotel occupancy increased 17% last year in
Long Beach's hospitality market and expected growth in 1996 is 3%, with that
level building over the next few years. And with the help of several new large
developments, including the planned 1,000,000 square foot retail center and
revitalization of three existing shopping centers, the city will provide
thousands of jobs as well as new and exciting shopping opportunities over the
next couple of years. As a result, the Downtown Plaza will most likely benefit
from these economic stimuli.
Los Angeles County
MARKET & SUBMARKET STATISTICS
End Of the 1st Quarter of 1996
Direct Overall Net
Number Direct Vacancy Overall Vacancy Absorption Wtd. Avg.
Market/Submarket Inventory of Bldgs Availabilities Rate Availability Rate 1st Qtr Ytd 1996 Rental Rate
====================================================================================================================================
CENTRAL LOS ANGELES 56,716,565 274 13,154,140 23.2% 14,234,656 25.1% (308,448) (308,448) $18.60
------------------------------------------------------------------------------------------------------------------------------------
1 Downtown Los Angeles 36,568,896 110 7,507,819 20.5% 8,353,162 22.8% (183,462) (183,462) $19.46
2 Mid-Wilshire Corridor 13,363,443 77 4,006,947 30.0% 4,210,795 31.5% (38,939) (38,939) $17.07
3 San Gabriel Valley 6,785,226 87 1,639,374 24.2% 1,670,699 24.6% (86,047) (86,047) $18.40
====================================================================================================================================
WEST LOS ANGELES 40,278,865 316 6,893,279 17.1% 7,838,972 19.5% (229,422) (229,422) $23.08
------------------------------------------------------------------------------------------------------------------------------------
4 Hollywood/West Hollywood 3,874,934 45 819,328 21.1% 824,000 21.3% (99,518) (99,518) $18.34
5 Beverly Hills/ Century City 14,351,740 89 2,390,018 16.7% 2,571,444 17.9% (49,875) (49,875) $24.48
6 Westwood/West Los Angeles 17,304,111 139 2,951,755 17.1% 3,626,577 21.0% (27,667) (27,667) $24.60
7 Marina Area/Culver City 4,748,080 43 732,178 15.4% 816,951 17.2% (52,362) (52,362) $17.64
====================================================================================================================================
SOUTH LOS ANGELES 30,505,628 251 5,995,240 19.0% 6,878,096 22.5% (392,838) (392,838) $16.92
------------------------------------------------------------------------------------------------------------------------------------
8 LAX/EI Segundo 13,515,551 86 2,805,167 20.8% 3,607,250 26.7% (325,166) (325,166) $15.48
9 Torrance 7,144,480 79 1,430,572 20.0% 1,483,151 20.8% 47,241 47,241 $17.88
10 Long Beach 9,845,597 86 1,759,501 17.9% 1,787,695 18.2% (114,913) (114,913) $18.60
====================================================================================================================================
NORTH LOS ANGELES 39,608,321 474 5,367,245 13.6% 6,594,785 16.6% 163,131 163,131 $19.82
------------------------------------------------------------------------------------------------------------------------------------
11 Simi/Conejo Valley 4,568,138 89 523,217 11.5% 852,257 18.7% (8,680) (8,680) $17.76
12 West Valley 8,680,098 99 1,595,634 18.4% 1,921,043 22.1% (138,093) (138,093) $19.32
13 Central Valley 8,555,670 113 1,443,787 16.9% 1,612,712 18.8% 81,177 81,177 $19.32
14 East Valley (including 17,804,415 173 1,804,607 10.1% 2,208,773 12.4% 228,727 228,727 $21.25
Pasadena)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL 167,109,379 1,315 31,409,904 18.8% 35,546,509 21.3% (767,577) (767,577) $19.47
====================================================================================================================================
MARKET SIZE COMPARISON CHART
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[The table below was presented as a pie chart in the printed material.]
Area %
---- ---
North 24%
Central 34%
West 24%
South 18%
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[DATA POINTS TO BE SUPPLIED]
AVAILIBILITIES BAR CHART
[GRAPHIC OMITTED]
[DATA POINTS TO BE SUPPLIED]
MARKET WEIGHTED AVERAGE RENTAL RATE COMPARISON CHART
LOS ANGELES OFFICE MARKET ANALYSIS
Office Market Analysis
Los Angeles County Office Market Overview
Supply and Tenant Demand
According to Cushman & Wakefield's first-quarter, 1996 surveys the combined
Los Angeles County office market contained a total inventory of 167,109,379
square feet. This figure excludes owner user, medical, and government office
buildings.
The accompanying exhibit provides a statistical overview of the office
inventory for Los Angeles County, including a breakdown by markets. The markets
included in the sectors used in this report are summarized below.
Sector Markets
Los Angeles Central/Downtown: Downtown Los Angeles
Mid-Wilshire Corridor
San Gabriel Valley
Los Angeles West: Hollywood/West Hollywood
Beverly Hills/Century City
Westwood/West L.A./Santa Monica
Marina Area/Culver City
Los Angeles South Bay: El Segundo/LAX
Long Beach
Torrance
Los Angeles North: Simi/Conejo Valleys
West San Fernando Valley
Central San Fernando Valley
East San Fernando Valley/Tri-Cities
Each market within the larger markets is comprised of a series of
submarkets. Although the markets and individual office markets compete to
varying degrees on a larger scale for the Los Angeles County tenant base, each
market is characterized independently in general terms by a typical targeted
tenant or industry type. The table below presents a general overview of the
tenant base for the markets.
Los Angeles Office Market Analysis
================================================================================
Sector Tenant Base
Los Angeles Central/Downtown Financial
Legal
Telecommunications
Energy
Accounting
Real Estate
Govemment/Quasi-Govemment
Los Angeles West: Legal
Accounting
Entertainment
Insurance
Real Estate
Financial Services
Advertising
Los Angeles South: Aerospace
High-Tech
Research & Development
Los Angeles North: Entertainment
Insurance
Legal
Accounting
Engineering
Considerable duplication exists within the office tenant base for the Los
Angeles County office markets. However, the office markets maintain separate
identities in terms of the primary tenancies and relative prestige and
corresponding relative rental rate structures for comparable buildings within
the separate markets. Legal and accounting firms provide considerable tenant
demand within each of the markets, for example, but the type and focus of these
professional firms is directed toward the business base within the sector.
Downtown Los Angeles law and accounting firms consist primarily of larger
national or regional firms oriented toward corporations and government for
example, while westside Los Angeles firms typically are smaller and specialize
in a particular field, such as entertainment law.
Historical Office Development
Fundamental shifts occurred in the greater Los Angeles office market during
the past decade. The most significant changes include the exodus of major
insurance companies and corporations from the Mid-Wilshire District to more
suburban locations such as Warner Center and Glendale during the 1980s, and the
movement of some entertainment firms from Hollywood and Beverly Hills to areas
such as Burbank (North Los Angeles), Woodland Hills/Warner Center (North Los
Angeles), or Culver City and Santa Monica (West Los
* - Including Miracle Mile, Pasadena and Pasadena East
** - excluding Miracle Mile
*** - Without Tri-Cities
ANNUAL OFFICE BUILDING CONSTRUCTION TREND LINE
LOS ANGELES COUNTY
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[DATA POINTS TO BE SUPPLIED]
Los Angeles Office Market Analysis
Angeles). These shifts have involved relocations within the Los Angeles County
marketplace, and most of the current markets have emerged as separate, viable
office locations during the past decade. The established Los Angeles County
office markets as of 1980 consisted of downtown Los Angeles, the Mid-Wilshire
sector, Pasadena, Beverly Hills, Century City, and the Ventura Boulevard
corridor in the San Fernando Valley. Approximately 55% of the total existing
office development in Los Angeles County has been completed during the period
since 1982.
A number of the current major office markets or submarkets were effectively
created during roughly the past decade. Most of the development in the following
markets (total current supply in parenthesis) has been completed since 1980:
Warner Center (5,325,021 square feet) Burbank/Universal City (5,517,729 square
feet), Glendale (5,052,071 square feet), Brentwood (3,254,337 square feet),
Culver City/Westchester (3,643,649 square feet), and Long Beach (7,419,205
square feet). Much of the development in the Glendale, Burbank, Culver City, and
downtown Long Beach office markets was assisted to varying degrees by government
agencies, including redevelopment agencies. Significant assistance (political
and/or financial) by government agencies has also increased the office
development in previously established markets such as downtown Los Angeles and
Pasadena. Prior to about 1980 several of these alternative office locations
either did not exist or the available supply in the market was not sufficient to
represent serious competition for the established office markets. The existence
of a number of alternative office market locations within the Los Angeles basin
is a significant consideration in analyzing historical vacancy and rental trends
in the individual markets prior to 1982 for the purpose of projecting future
performance.
Future Competitive Supply
Future competitive office development in the Los Angeles County markets is
restricted by two primary factors: 1) economic conditions - the current
financial infallibility of most new development and the absence of available
financing for office development of new office properties; and 2) political
conditions - the governmental restrictions limiting new development. Although
the economic factors limiting development, which are based on lending
restrictions and economic infallibility under current leasing conditions and
effective rental rates, represent the primary reason for limited new development
in the recent, past and near future, the political constraints on new
development as the most significant factor limiting new competitive office
supply in a number of the markets and market for the long term.
1) Economic Constraints
Market rental rates in Los Angeles County submarkets are currently below
(to varying degrees) the levels required to justify new Class A office
development. The current (1st Quarter 1996) weighted average asking rental rate
for all direct office space availabilities in Los Angeles County is $19.48
per-square-foot annually, full service gross. The individual markets have
weighted average rental rates (asking) from $15.48 to $24.60 per-square-foot.
New construction costs for mid to high-rise office buildings vary by market
location and underlying land cost. The relative strength of the markets in terms
of tenant demand and the
SUMMARY OF DEVELOPMENT CONSTRAINTS (POLITICAL)
LOS ANGELES AREA OFFICE MARKETS
Location Development Control
Suburban North
Burbank Specific Plan
San Fernando Valley Specific Plan
Ventura Boulevard Specific Plan/Proposition U
Warner Center Specific Plan
Westside
Park Mile Specific Plan
Miracle Mile Interim Control Ordinance
Beverly Hills Restrictive Zoning
Westwood Specific Plan
Brentwood Proposition U/Specific Plan
West Los Angeles Proposition U
Santa Monica Restrictive Zoning/Specific Plan
Century City Specific Plan
Los Angeles Office Market Analysis
"spread" between the rents required support new development and the current
market rental levels in the various markets fluctuates considerably, but
virtually no new speculative office construction has occurred in Los Angeles
County markets since 1992. Refer to accompanying exhibit for historical
construction activity since 1980.
2) Political Constraints
Other than the downtown market and the South Los Angeles market area,
nearly every sector of the City of Los Angeles and adjacent suburban cities with
a meaningful office market has implemented restrictions on new development, tied
to political factors, traffic mitigation and other infrastructure issues. These
restrictions will negatively impact the political feasibility of significant
amounts of new office construction under any future economic office market
scenario. The accompanying exhibit summarizes Los Angeles area markets with
meaningful political constraints on development currently in place or pending.
The specific plans are based on automobile "trips" (costs associated with
traffic mitigation costs) or other criteria (typically tied to infrastructure).
The political influence of the homeowners groups, which typically have active
slow- or no-growth philosophies toward new development, is strong and has
increased considerably during the past decade.
In addition to typical zoning and planning issues, new development of
significant size and scope within specific plan areas will require substantial
additional entitlement fees to be paid prior to approval for new development.
The fees are usually based on the anticipated new traffic generated by a
proposed project, and the costs are assessed based on square footage and use.
The "prime' westside markets, including Westwood, Century City, Brentwood, and
Santa Monica have substantial fees for new development, as does the Miracle Mile
District, and the Ventura Boulevard corridor of the San Fernando Valley
(including Encino and Woodland Hills).
The most significant political constraint on new competitive office supply
in the City of Los Angeles markets has been Proposition "U", which was passed in
1986 and down-zoned all Height District I properties in the City of Los Angeles.
Known also as Ordinance No. 161684, Proposition "U" amended the zoning code for
all areas of the City of Los Angeles to include height district designations
ranging from 1 to 4, with much of the city downzoned to height district No. 1.
Properties within this designation are limited to a maximum of 3 stories or 45
feet in height. The 'wave" in new high-rise construction during the latter
portion of the last decade (the 1980's) was in part accelerated by developers
and lenders who hurried high-rise office developments through the planning and
development stages before the sites were downzoned. Properties in the downtown
Los Angeles market area are not within this height classification, but most
other areas of the City have been impacted, including West Los Angeles and the
Ventura Boulevard corridor of the San Fernando Valley. The portions of the City
most directly effected by Proposition U and the specific plans summarized on the
chart are generally the most affluent, prestigious residential areas, and office
buildings in these locations have typically commanded some of the highest rental
rates in the County. These areas also experienced some of the greatest levels of
new development during the previous decade (1980's). The concerns of the
surrounding residential communities over the
increasing traffic and the decline in the overall quality of life has led to the
formation of a number of politically influential homeowners groups that can be
described as actively anti-development. Although there are some political and
governmental controls on future development in the downtown market area, the
number of projects currently entitled for development or win the pipeline" for
approval is substantial, and the surrounding residential base is not as
organized, active, or apparently as influential as the more affluent communities
situated in the west and north Los Angeles County markets.
Probable Future Development Activity
As discussed above the economic and political constraints on new office
development have resulted in virtually no new office construction in Los Angeles
County markets since 1992. The "spread' between current market rental rates and
the rents required to justify new development varies from submarket to
submarket. The highest rental rates in the county are currently achieved in the
"Tri-Cities" markets and the 'prime' westside Los Angeles markets. While there
are several potential speculative office development parcels in these markets,
new multi-tenant development appears to be two or more years in the future.
Owner-user projects such as the proposed Dreamworks animation facility in
Glendale or "redevelopment' projects such as the former Lockheed "Skunkworks"
facility in Burbank for a major entertainment industry tenant are expected to
commence during the second half of 1996. Build-to-suit activity for Dreamworks
studios and related businesses in the Playa Vista area of west Los Angeles and
Glendale may occur during 1997-1998. In terms of speculative office development
potential, however, several potential office sites in prime locations have
remained vacant for a number of years due to market conditions, and market
rental 'spikes" will be required before new speculative office development can
occur.
Vacancy
The landlord-direct vacancy rate for Los Angeles County office markets was
18.8 percent, based on 31,409,904 square feet available for lease at the end of
1st quarter, 1996. Our review of the data on a submarket by submarket basis
indicates there are isolated submarkets that experienced considerably lower
direct vacancy levels than the countywide figure, such as Universal City and the
Burbank Media District. Most markets within Los Angeles County, with the
exception of the Tri-Cities area, have direct vacancy rates above 15 percent,
and several have current direct vacancy levels in the range of 20 percent. The
previous Los Angeles County Office Market Statistics chart illustrates the
vacancy breakdown by sector.
Including sublease availabilities the overall Los Angeles County office
market vacancy level was 21.3 percent as of 1st quarter, 1996, which compares
with 21.0 percent as of year-end, 1995. The overall vacancy level is down from
unchanged from the 21.8 percent overall vacancy level at the end of 1994. The
sublease marketplace became a more important component of the overall office
leasing market during the first few years of this decade, particularly within
the downtown Los Angeles market, as the national economic recession and other
factors led to business consolidation and mergers. Many types of businesses were
affected, including major law and accounting firms, aerospace firms, high-tech
firms, energy firms, telecommunications companies, financial services firms,
insurance companies, and
Los Angeles County
================================================================================
Including L.A. Central/Downtown Excluding L.A. Central/Downtown
Vacancy Rates Vacancy Rates
Year Quarter Direct Sublease Overall Direct Sublease Overall
================================================================================
Vacancy Ratio Bar Graph
Excluding Los Angeles Central/Downtown Overall Vacancy Rate
[GRAPHIC OMITTED]
[DATA POINTS TO BE SUPPLIED]
Los Angeles Office Market Analysis
banks and savings and loans. The oversupply of office space during the first
portion of this decade led to additional sublease availabilities as developers
assumed existing tenant obligations for space in other buildings prior to the
termination of the tenant's previous lease. Although sublease space was
previously a secondary competitive marketplace for short-term lease requirements
or tenants with questionable credit ratings, a few office markets in Los Angeles
County have sublease markets that compete effectively with landlord direct
space, which in turn applies additional downward pressure on rents for direct
office space. As shown the exhibit, "Office Market Vacancy Trends", the overall
Los Angeles County market has experienced a slow, gradual improvement in direct
and sublease vacancy levels during the period from fourth quarter, 1992 through
year-end, 1995.
Near-Term Vacancy Trends
The Los Angeles Central office sector, which includes the "distressed"
downtown and Mid-Wilshire areas, experienced negative net absorption of 711,752
square feet during 1995. The total Los Angeles County net absorption during 1995
was positive 272,154 square feet including the impact of the negative absorption
in the Central Los Angeles sector. Excluding Los Angeles Central, the remainder
of the county (the West, South, and North markets) experienced positive
absorption of 983,906 square feet for an inventory of 116,707,590 square feet.
The chart shows the potential for a continued, gradual decrease in vacancy
levels for the three markets of the county (excluding the Central sector). As
vacancy levels decline overall and within the most desirable submarkets, rental
rates for office space in these markets should logically increase.
The Los Angeles Central Sector, which includes downtown Los Angeles and the
Mid-Wilshire corridor, have experienced generally higher vacancy levels and
lower absorption during the past several years than the remainder of the county.
The historical vacancy trends exhibit includes a column which adjusts the
inventory and availabilities as of year-end 1991 through 1995 to exclude the Los
Angeles Central sector.
Employment
The chart on an accompanying page summarizes the employment base for the
six major counties in the Southern California area. Los Angeles County had an
average total employment of 4,979,800 positions in 1995, which accounted for 53
percent of the total employment within the six-county area. The most significant
employment markets in the county include services (36.2 percent),
wholesale/retail trade (20.0 percent), and manufacturing (14.6 percent). Los
Angeles County has a notably higher percentage of employment within the services
and manufacturing markets as compared to the other major counties in Southern
California, which reflects the important concentration of film, television, and
musical production/distribution companies in the region as well as the ongoing
work by major aerospace/defense companies in the Los Angeles area.
From 1990 to 1995, Los Angeles County endured a 7.5 percent decline in
total employment, due in large part to the decrease of 18.8 percent in the
manufacturing sector which reflected the consolidation within the
aerospace/defense industry. Of the six major counties in Southern California,
only Los Angeles and Orange Counties suffered a decline in total employment over
this five-year period. The U.S. Labor Department reported the January 1996
national unemployment rate at 5.5 percent, which was essentially unchanged from
the year prior level of 5.4 percent. On a statewide basis, the unemployment rate
of 8.3 percent for California was generally unchanged from the January 1995
level of 8.2 percent. The unemployment rate in Los Angeles County was 8.2
percent in January 1996, which is notably decreased from the year prior level
and which continues the downward trend in the unemployment rate for the county
over the past 12 to 18 months. Regional economists project that the unemployment
rate on a countywide basis will continue to decline over the next few years. The
anticipated decline in the unemployment rate is based on the fact that the
downsizing by major aerospace/defense companies has been largely completed and
the growth in the services sector is expected to continue over the next several
years.
Total employment in Los Angeles County is projected by Woods & Poole to
increase at a compound rate of 0.45 percent per year from 1995 to 2000, which is
notably improved from the past few years but lags the projected employment
growth for the other major counties in Southern California. However, the
forecasted employment growth by Woods & Poole for Los Angeles County is fairly
conservative in comparison to recent projections by the California Employment
Development Department and the Los Angeles County Economic Development
Corporation. Each of these organizations has forecast job growth for Los Angeles
County in the range of 2.0 to 2.5 percent during 1996, with growth during the
period from 1995 to 2000 expected to outpace the national average employment
growth rate.
Services
The services sector has shown the only significant growth in terms of total
employment from 1990 to 1995 in Los Angeles County and Southern California as a
whole. The services sector includes entertainment, healthcare, business
services, lodging, and personal services. Within the services sector, the
entertainment industry has experienced significant growth over the past few
years, both in terms of the worldwide demand for television/film product and the
level of employment. The entertainment industry has emerged as a growing source
of relatively high wage employment within the Los Angeles area and has surpassed
the defense industry in terms of countywide employment. A November 1995 report
by the California Employment Development Department indicated that the total
countywide employment in the entertainment industry is estimated at 147,500
jobs, which is increased by nearly 12.5 percent from the July 1994 level of
employment. A similar report by the California Department of Finance estimated
the entertainment industry employment figure at 172,000 positions. The disparity
in the reported entertainment employment figures provided by these two agencies
reflects the different methodologies used in collecting the employment data.
However, both sources of data support the very significant growth within this
industry and its increasing role as a catalyst for economic growth in the Los
Angeles area.
The local entertainment industry has recently been investing in new
production facilities in the Hollywood area, West Los Angeles, and the Cities of
Glendale and Burbank in an effort to meet the growing demand for multi-media
products and services. Such leading companies as Walt Disney Company and NBC
Studios in Burbank, MCA in Universal City, Sony Pictures in Culver City, and the
recently formed Dreamworks headed by Steven Spielberg, Jeffrey Katzenberg, and
David Geffen are creating multi-media divisions which will increase the demand
for computer/high technology-oriented positions in the Los Angeles area. The
level of entertainment employment is expected to increase due to the strong
international demand for film product and the ongoing evolution of the cable
television industry.
The second largest category of employment within the services sector is the
health services segment. The field of healthcare has been one of the more stable
industry segments in terms of employment changes over the past few years. The
Los Angeles area is home to some of the most advanced medical and medical
teaching facilities in the country, including Cedars-Sinai Medical Center, the
City of Hope, and the University of Southern California and the University of
California at Los Angeles schools of medicine. Reports by industry experts
suggest that the Los Angeles area has an overcapacity of local hospital
facilities, which will result in more consolidation within the industry and/or
the closure of underperforming hospitals over the next few years. However, the
impact on total employment within the county stemming from the anticipated
consolidations is uncertain at the present time.
Employment growth within the services sector is forecast by the Southern
California Association of Governments (SCAG) to be relatively strong from 1995
to 2000. SCAG forecasts the services segment of the employment base to increase
at a compound rate of 3.8 percent per year from 1995 to 2000 for Los Angeles
County, which compares favorably to the projected growth for the total
countywide employment base of 1.6 percent per year from 1995 to 2000. Within the
services sector, the motion picture industry is projected to grow at a compound
rate of 7.7 percent per year from 1995 to 2000, and the business services
segment is projected to grow at a compound rate of 5.2 percent per year from
1995 to 2000. However, the finance, insurance and real estate sector (FIRE),
which is a separate employment category from the services sector, is projected
to grow at a more modest pace of 0.8 percent per year (compounded) from 1995 to
2000.
Gross Leasing Activity
Cushman & Wakefield defines gross leasing activity as the sum of all
completed leasing transactions including subleasing but excluding renewals. The
accompanying graph illustrates the pattern in net absorption and gross leasing
activity for the combined Los Angeles County office marketplace on a annual
basis since 1990. Over the past six years (1990 through 1995), gross leasing
activity has been relatively stable on an annual basis, averaging approximately
18 million square feet. The leasing activity includes assumed leases and other
factors, and does not represent fLeA absorption, which is one indication of new
demand.
Los Angeles County Office Space
--------------------------------------------------------------------------------
1989 to 1995
--------------------------------------------------------------------------------
Year NOA (sqft) % Decrease
---- ---------- ----------
1990 8,258,928
1991 2,261,311 -72.6%
1992 (5,207) -100.2%
1993 (248,158) 4665.9%
1994 (997,235) 301.9%
1995 272,154 -127.3%
================================================================================
Total 9,541,793
================================================================================
Annual Average 1,590,299
Historical Net Office Absorption
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\
[DATA POINTS TO BE SUPPLIED]
Los Angeles Office Market Analysis
OFFICE MARKET
Net Absorption Trends
Los Angeles County
================================================================================
Including Los Angeles Excluding Los Angeles
Central / Downtown Central / Downtown
Net Absorption (SF) Net Absorption (SF)
Year YTD YTD
========= ================== ===================
1991 2,261,311 882,518
--------- ------------------ -------------------
1992 (5,207) 251,057
--------- ------------------ -------------------
1993 (248,158) 55,268
--------- ------------------ -------------------
1994 (997,235) 234,566
--------- ------------------ -------------------
1995 272,154 983,906
========= ================== ===================
Net Absorption Bar Chart
Excluding Los Angeles Central/Downtown
Cushman & Wakefield calculates net absorption based on net change in
directly occupied office space. The chart on the accompanying page summarizes
the annual trends in net office absorption for Los Angeles County during the
period 1991 through 1995. A graph compares net office absorption with the gross
leasing activity summarized previously. Net absorption declined sharply from
1990 to 1992, from positive absorption of 2.3 million square feet in 1991 to
negative absorption in 1992. Following negative absorption in 1993 and 1994
county-wide net absorption increased to 272,154 square feet during 1995. The Los
Angeles Central office markets posted substantial negative net absorption from
1992 to 1995. Excluding Los Angeles Central, the three remaining areas (West,
North and South County), experienced positive net absorption of 983,906 square
feet during 1995.
The net absorption figures discussed above are based on the net change in
direct occupied office space. This calculation does not include changes in the
sublease availabilities. The current (1st quarter 1996) sublease availabilities
in Los Angeles County total 4,136,605 square feet, or 11.6 percent of the Los
Angeles County available (for lease) office supply. Although several submarkets
have substantial sublease availabilities, the downtown Los Angeles Central
Business District represents the greatest single component of this supply, with
approximately 845,000 square feet or 20 percent of the countywide sublease
space. The LAX/El Segundo market also has significant sublease availabilities.
As noted previously, however, the sublease supply has decreased gradually from
3.6 percent at the end of fourth quarter, 1991 to 2.3 percent at the end of
1995.
The chart below shows the cumulative oversupply of office space added to
the Los Angeles County office market since 1990.
================================================================================
SF SF SF
Year New Construction Net Absorption Oversupply
--------------------------------------------------------------------------------
1990 6,690,483 8,258,928 (1,568,445)
--------------------------------------------------------------------------------
1991 7,977,729 2,261,311 5,716,418
--------------------------------------------------------------------------------
1992 1,897,805 (5,207) 1,903,012
--------------------------------------------------------------------------------
1993 0 (248,158) 248,158
--------------------------------------------------------------------------------
1994 0 (997,235) 997,235
--------------------------------------------------------------------------------
1995 180,700 272,154 (91,454)
--------------------------------------------------------------------------------
Totals 16,746,717 9,541,793 7,204,924
The commercial office real estate market in Los Angeles has experienced a
significant transformation during roughly the past 20-year period. Los Angeles
has grown from a regional (southern California) business center to a financial
center for the western United States and the international focus for trade and
financial relations with the Pacific Rim countries. The factors influencing this
transformation include global, national, and regional trends and events.
The national and regional economic recession during the period from roughly
the third quarter, 1990 through 1993 exacerbated the oversupply conditions
established during the past decade. The historically strong net new demand for
office space declined significantly, with most office markets experiencing flat
or negative office space absorption during the past few years. Financing for new
speculative developments was virtually unavailable, but new development
continued to 1992 based upon previous construction lending commitments. About 1
0 million square feet of new office supply was completed during 1991 and 1992.
Several submarkets in Los Angeles County office market provided signs of
recovery during 1993 and 1994, and have continued to tighten during 1995,
particularly the Tri-Cities and prime westside markets. The level of office
building investment activity increased substantially during the past 24 months
in Los Angeles County. Many submarkets experienced declining direct and overall
vacancy rates during 1994 and 1995. Gross leasing activity remained stable on a
countywide basis, and all markets excluding the Los Angeles Central Sector
experienced positive absorption during 1995. On a submarket by submarket basis
several individual markets appear to be steadily improving and may experience
relatively strong absorption, occupancy and value increases in the near future.
As shown in previous charts, the Los Angeles County office market,
particularly when the poorly-performing Central sector is isolated from the
remainder of the county, has exhibited positive absorption during 1995 and
appears positioned for a continued, stable improvement in occupancy levels. The
employment growth in several markets, particularly the entertainment industry
including the film and recording industries), has enabled several submarkets to
outperform the county as a whole during the past several years. The submarkets
which have most directly benefited from the growth of the entertainment industry
include Burbank and Glendale in the North Los Angeles sector, and the westside
markets of Beverly Hills, the Miracle Mile, Century City, Santa Monica, West Los
Angeles, and Culver City. The office locations adjacent to these submarkets and
Class "B" buildings in these submarkets have benefited from "overflow" demand
from entertainment industry tenants, and have also attracted tenants from other
businesses who have been driven from Class A buildings in the prime submarkets
by higher rental rates.
Los Angeles South
MARKET & SUBMARKET STATISTICS
End of the 2nd Quarter of 1996
Direct Overall
Number Direct Vacancy Overall Vacancy Net Absorption Wtd. Avg.
Market/Submarket Inventory of Bldgs Availabilities Rate Availability Rate 2nd Qtr YTD 1996 Rental Rate
====================================================================================================================================
LAX / EL SEGUNDO 13,669,986 88 3,076,644 22.5% 3,726,440 27.3% (203,256) (502,797) $15.72
------------------------------------------------------------------------------------------------------------------------------------
1 Los Angeles Airport 4,206,225 20 1,254,826 29.8% 1,270,077 30.2% (6,552) (62,751) $13.32
2 El Segundo 9,463,761 68 1,821,818 19.3% 2,456,363 26.0% (196,704) (440,046) $17.52
====================================================================================================================================
TORRANCE 7,144,480 79 1,472,752 20.8% 1,532,089 21.4% (53,165) (5,628) $17.28
------------------------------------------------------------------------------------------------------------------------------------
3 190th Street Corridor 3,222,161 31 790,293 24.5% 827,622 25.7% 10,081 37,028 $16.56
4 Central Torrance 3,572,017 45 663,108 18.6% 685,116 19.2% (62,287) (46,086) $18.00
5 San Pedro 350,302 3 19,351 5.5% 19,351 5.5% (959) 3,430 $19.68
====================================================================================================================================
LONG BEACH 9,845,597 86 1,671,040 17.0% 1,720,190 17.5% 79,330 (33,074) $18.60
------------------------------------------------------------------------------------------------------------------------------------
6 Long Beach Freeway 2,053,676 18 262,986 12.8% 275,084 13.4% 1,421 (34,333) $16.92
7 North Long Beach 1,020,608 13 239,948 23.5% 239,948 23.5% (12,669) (18,959) $14.88
8 Downtown Long Beach 3,820,393 20 946,073 24.8% 978,476 25.6% 72,686 44,546 $20.16
9 Long Beach Marina 457,018 6 69,381 15.2% 69,381 15.2% 1,442 (14,732) $19.56
10 Cerritos 2,493,902 29 152,652 6.1% 157,301 6.3% 16,450 (9,596) $16.80
------------------------------------------------------------------------------------------------------------------------------------
TOTAL 30,660,063 253 6,220,436 20.3% 6,978,719 22.8% (177,091) (541,499) $16.92
====================================================================================================================================
========================================================== ==========================================================
Market Size Comparison Chart Availibilities Bar Graph
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[DATA POINTS TO BE SUPPLIED]
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Submarket Weighted Average Rental Rate Comparison Chart
[GRAPHIC OMITTED -- BAR CHART]
[DATA POINTS TO BE SUPPLIED]
====================================================================================================================================
LOS ANGELES SOUTH OFFICE MARKET ANALYSIS
Los Angeles South Office Market
The Los Angeles South office market encompasses three market areas located
primarily in the South Bay area of Los Angeles County. The Los Angeles South
office sector is the smallest of the four office markets in Los Angeles County,
behind the Central Los Angeles, West Los Angeles, and Los Angeles North markets,
respectively. The Los Angeles South sector is comprised of three markets: El
Segundo, Torrance, and Long Beach. The individual submarkets that comprise the
overall Los Angeles South market exhibit a wide range in construction quality,
location, tenant based, and corresponding rental rates. The chart on the
accompanying page summarizes the Los Angeles South office sector and the
submarkets in this area.
The Los Angeles South office market contained 30,660,063 square feet of
Class A and B space, excluding owner/user, medical and government buildings. The
office development in the Los Angeles South market is concentrated in three
major areas or Sectors: LAX/El Segundo, Torrance, and Long Beach. The individual
submarkets that comprise the overall competitive office market are
differentiated according to access, market perception, tenant appeal and
improvement quality, and rental rates.
As of the second quarter 1996, the Los Angeles South office market
exhibited a direct vacancy rate of 20.3 percent. The direct vacancy rate, which
does not include sublease availabilities, is generally higher with the direct
vacancy rate for the larger Los Angeles County office market of 18.8 percent as
of end of first quarter, 1996. The overall vacancy rate for the Los Angeles
South market, which includes both direct and sublease availabilities, was 22.8
percent as of second quarter, 1996. The overall vacancy rate for the Los Angeles
South market is above the corresponding figure of 21.3 percent for the Los
Angeles County office market.
The more significant office markets in the Los Angeles South area, in terms
of the quality and amount of office product, include El Segundo, LAX (Los
Angeles International Airport), Central Torrance, the 190th Street Corridor, and
Downtown Long Beach. The El Segundo submarket, which is situated immediately
south of and adjacent to the LAX submarket, contains a significant concentration
of high technology, aerospace/defense, and business service companies. The
office product in this submarket ranges from multi-building business parks to
high-rise space. The Downtown Long Beach submarket contains an important
concentration of accounting, legal, and investment firms, which have been
attracted to this submarket by the high quality product in the downtown area as
well as the growing volume of international trade and related business generated
by the Port of Los Angeles and the Port of Long Beach.
Long Beach Market
The Long Beach office market contains a total of 9,845,597 square feet of
office space or 32 percent of the office product in the Los Angeles South
sector. As indicated on a preceding chart, Downtown Long Beach, with 3,820,393
square feet of rentable office area, is the largest
MARKET & SUBMARKET STATISTICS
End Of the 2nd Quarter of 1996
Direct Overall Wtd. Avg.
Number Direct Vacancy Overall Vacancy Net Absorption Rental
Market/Submarket Inventory of Bldgs Availabilities Rate Availabilities Rate 2nd Qtr YTD 1996 Rate
====================================================================================================================================
LONG BEACH 9,845,597 86 1,671,040 17.0% 1,720,190 17.5% 79,330 (33,074) $18.60
------------------------------------------------------------------------------------------------------------------------------------
Long Beach Freeway 2,053,676 18 262,986 12.8% 275,084 13.4% 1,421 (34,333) $16.92
North Long Beach 1,020,608 13 239,948 23.5% 239,948 23.5% (12,669) (18,959) $14.88
Downtown Long Beach 3,820,393 20 946,073 24.8% 978,476 25.6% 72,686 44,546 $20.16
Long Beach Marina 457,018 6 69,381 15.2% 69,381 15.2% 1,442 (14,732) $19.56
Cerritos 2,493,902 29 152,652 6.1% 157,301 6.3% 16,450 (9,596) $16.80
Submarket Comparison Chart Availabilities Bar Graph
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
[DATA POINTS TO BE SUPPLIED]
Long Beach Freeway 21%
North Long Beach 10%
Downtown Long Beach 39%
Long Beach Marina 5%
Cerritos 25%
Los Angeles South Office Market
submarket within the Long Beach area as it accounts for approximately 39 percent
of the office space in the Long Beach area.
As of the second quarter 1996, direct and sublease availabilities in the
Long Beach market totaled 1,720,190 square feet for an overall vacancy rate of
17.5 percent. The overall vacancy rate for the Long Beach area was notably lower
than the overall vacancy rate for the Los Angeles South market (22.8 percent).
Within the Los Angeles South market, overall vacancy levels ranged from a low of
17.5 percent in the Long Beach market to a high of 30.2 percent in the El
Segundo market. The recent vacancy rate for the Long Beach market is
significantly influenced by the supply of space which is available on a direct
or sublease basis in the Downtown Long Beach submarket. Downtown Long Beach has
an overall vacancy rate Of 25.6 percent and the total space available within
this submarket accounts for 57 percent Of the total direct and sublease
availabilities in the Long Beach market and 14 percent of the available space in
the Los Angeles South office market.
Within the Long Beach market, weighted average asking rental rates range
from a low of $14.88 per square foot per year (FSG) in North Long Beach to a
high of $20.16 per square foot per year (FSG) in Downtown Long Beach. The
overall weighted average rental rate for the Long Beach market is $18.60
per-square-foot-per year (FSG), which is the highest weighted average asking
rental rate of the three markets within the Los Angeles South sector.
The table below summarizes the trend in weighted average asking rental
rates on a per square foot basis for both Class A and B office space within the
Long Beach sector.
Long Beach Market
Weighted Average Rental Rates
Annual PSF
1993* 1995* 1996* % Change
----- ----- ----- --------
Long Beach Market $20.16 $18.72 $18.60 -7.1%
----------------- ------ ------ ------ -----
- Long Beach Freeway $20.52 $18.48 $16.92 -9.9%
- North Long Beach $18.00 $15.00 $14.88 -16.7%
- Downtown Long Beach $21.84 $19.92 $20.16 -8.8%
- Long Beach Marina $17.16 $18.96 $18.56 +10.5%
- Cerritos* $15.84 $16.80 $16.80 +6.1%
* Data is as of the second quarter 1993 and the fourth quarter 1995, and
second quarter 1996.
The chart above illustrates the change in asking rental rates in the Long
Beach market over the course of the ten quarters through year-end 1995, as well
as the three-year period through second quarter, 1996. The overall decrease of
7.1 percent through 1995 is largely attributable to the decline in asking rents
in the Downtown Long Beach area, since this
RENTAL AND OCCUPANCY SURVEY 2nd Quarter 1996
Long Beach Downtown
Competitive Office Buildings
===========================================================================================================================
Building Information Available Space (SF) Overall
Item Building Name No. of Area Avg. Flr. Year Availibity
No. / Location Class Stores (SF) Area (SF) Built Floor(s) Direct Sublease (SF)
===========================================================================================================================
L-1 100 Broadway Building B 6 193,390 32,232 1987 Ground 2,490 0
100 Broadway 2-6 34,681 0 Total
---- ------ -
37,171 0 37,171
---------------------------------------------------------------------------------------------------------------------------
L-2 Harbor Bank Building B 6 109,000 18,167 1982 Ground 0 0
11 Golden Shore Avenue 2-5 38,517 0 Total
---- ------ -
38,517 0 38,517
---------------------------------------------------------------------------------------------------------------------------
L-3 Catalina Landing B 4 275,000 68,750 1985 Ground 32,672 0
310-340 Golden Shore 2-4 57,407 0 Total
Avenue ---- ------ -
90,079 0 90,079
---------------------------------------------------------------------------------------------------------------------------
L-4 World Trade Center A 27 436,692 16,174 1988 Ground 11,495 0
One World Trade Center 2-26 64,395 5,122 Total
---- ------ -----
75,890 5,122 81,012
---------------------------------------------------------------------------------------------------------------------------
L-5 Landmark Square A 24 413,000 17,208 1991 Ground 8,754 1,177
111 West Ocean Boulevard 3-24 69,919 4,982 Total
---- ------ -----
78,673 6,159 84,832
---------------------------------------------------------------------------------------------------------------------------
L-6 The 180 Building B 12 200,028 16,669 1982 Ground 19,681 0
180 East Ocean Boulevard 2-12 163,760 0 Total
---- ------- -
183,441 0 183,441
---------------------------------------------------------------------------------------------------------------------------
L-7 Home Savings Building B 10 103,000 10,300 1982 Ground 18,464 0
249 East Ocean Boulevard 2-9 21,875 0 Total
---- ------ -
40,339 0 40,339
---------------------------------------------------------------------------------------------------------------------------
L-8 Shoreline Square A 21 417,000 19,857 1988 Ground 0 0
301 East Ocean Boulevard 2-10 62,025 0 Total
---- ------ -
62,025 0 62,025
---------------------------------------------------------------------------------------------------------------------------
L-9 American Savings Building B 10 127,991 12,799 1984 Mezz 7,960 0
401 East Ocean Boulevard 3-10 69,838 0 Total
---- ------ -
77,796 0 77,798
---------------------------------------------------------------------------------------------------------------------------
L-10 Sumitomo Tower Building B 18 163,264 9,070 1968 Ground 0 0
444 West ocean Boulevard 5-17 60,910 0 Total
---- ------ -
60,910 0 60,901
---------------------------------------------------------------------------------------------------------------------------
L-11 Oceangate Tower B 12 202,000 16,833 1971 Plaza/Lob 18,784 0
100 oceangate Avenue 4-11 21,451 0 Total
---- ------ -
40,235 0 40,235
---------------------------------------------------------------------------------------------------------------------------
L-12 Arco Center A 14 220,625 15,759 1983 Ground 0 4,630
200 Oceangate Avenue 2-15 44,091 0 Total
---- ------ ------
44,091 4,630 48,721
---------------------------------------------------------------------------------------------------------------------------
L-13 Arco Center A 14 218,296 15,593 1968 Ground 898 0
300 Oceangate Avenue 5-17 28,038 0 Total
---- ------ -
28,038 0 28,936
---------------------------------------------------------------------------------------------------------------------------
L-14 Union Bank Building B 14 157,683 11,263 1975 Ground 0 0
400 Oceangate Avenue 2-11 9,765 7,661 Total
---- ------ ------
9,765 7,661 17,426
---------------------------------------------------------------------------------------------------------------------------
L-15 One Golden Shore B 2 32,246 16,123 1977 Ground 0 0
One Golden Shore 0 0 0 Total
---- ------ -
0 0 0
===========================================================================================================================
MARKET SUB-TOTALS 194 3,269,217 16,852 867,861 23,572 891,433
===========================================================================================================================
Subj. Downtown Plaza B 6 100,146 16,691 1982 Ground 0 0
211 East Ocean Boulevard 3-4 7,185 0 Total
---- ------ -
7,185 0 7,185
===========================================================================================================================
MARKET TOTALS 200 3,369,363 16,847 875,046 23,572 898,618
===========================================================================================================================
================================================================================
Quoted Occupancy Parking
Item Building Name Annual Rent Lease Ratio Ratio/
No. / Location PSF PSF Type (Incl.SL) 1,000 SF
================================================================================
L-1 100 Broadway Building $20.40 - $20.40 FSG 80.8% 2.50
100 Broadway $20.40 - $20.40 FSG
--------------------------------------------------------------------------------
L-2 Harbor Bank Building 64.7% 3.70
11 Golden Shore Avenue $18.60 - $18.60 FSG
--------------------------------------------------------------------------------
L-3 Catalina Landing $16.80 - $16.80 FSG 67.2% 3.50
310-340 Golden Shore $16.80 - $16.80 FSG
Avenue
--------------------------------------------------------------------------------
L-4 World Trade Center $21.00 - $21.00 FSG 81.4% 2.80
One World Trade Center $18.60 - $24.00 FSG
--------------------------------------------------------------------------------
L-5 Landmark Square $19.20 - $22.20 FSG 79.5% 3.30
111 West Ocean Boulevard $19.20 - $22.20 FSG
--------------------------------------------------------------------------------
L-6 The 180 Building $21.00 - $23.40 FSG 8.3% 4.00
180 East Ocean Boulevard $21.00 - $23.40 FSG
--------------------------------------------------------------------------------
L-7 Home Savings Building $22.20 - $22.20 FSG 60.8% 3.00
249 East Ocean Boulevard $16.20 - $18.00 FSG
--------------------------------------------------------------------------------
L-8 Shoreline Square 85.1% 2.50
301 East Ocean Boulevard $25.20 - $30.00 FSG
--------------------------------------------------------------------------------
L-9 American Savings Building $15.00 - $18.60 FSG 39.2% 2.70
401 East Ocean Boulevard $15.00 - $18.60 FSG
--------------------------------------------------------------------------------
L-10 Sumitomo Tower Building 62.7% 3.50
444 West ocean Boulevard $16.20 - $17.40 FSG
--------------------------------------------------------------------------------
L-11 Oceangate Tower $16.80 -- $18.60 FSG 80.1% 3.00
100 oceangate Avenue $16.80 $18.60 FSG
--------------------------------------------------------------------------------
L-12 Arco Center $16.80 -- $16.80 FSG 77.9% 3.00
200 Oceangate Avenue $21.96 $22.92 FSG
--------------------------------------------------------------------------------
L-13 Arco Center $21.96 -- $24.00 FSG 86.7% 3.00
300 Oceangate Avenue $21.96 $24.00 FSG
--------------------------------------------------------------------------------
L-14 Union Bank Building 85.9% 2.20
400 Oceangate Avenue $16.20 - $18.60 FSG
--------------------------------------------------------------------------------
L-15 One Golden Shore 100.0% 4.40
One Golden Shore
================================================================================
MARKET SUB-TOTALS 72.7%
================================================================================
Subj. Downtown Plaza 92.8% 3.20
211 East Ocean Boulevard $16.20 - $16.20 FSG
================================================================================
MARKET TOTALS 73.3%
================================================================================
OFFICE BUILDING ACTIVITY CHART
DOWNTOWN LONG BEACH
[GRAPHIC OMITTED]
[DATA POINTS TO BE SUPPLIED]
Los Angeles South Office Market
submarket comprises approximately 57 percent of the total available space
(direct and sublease) in the Long Beach area. Three of the five submarkets;
within the Long Beach office market experienced declines in the weighted average
asking rental rate from second quarter 1993 to fourth quarter 1995, with the
most significant decrease on a percentage basis occurring in the North Long
Beach submarket. The Long Beach Marina and Cerritos submarkets posted increases
in the range of six to ten percent in the weighted average asking rental rate
from 1993 to 1995.
Absorption and Vacancy Trends
The accompanying exhibits summarize the direct and overall (including
sublease availabilities) vacancy trends for the submarkets comprising the Long
Beach office market from year-end 1992 through second quarter, 1996, as well as
the historical net absorption for the same period. Although performance by
submarket varies, the data shows a steady trend in declining overall and direct
availabilities since 1992. The combination of modest but stable net absorption
and the absence of new construction has resulted in a decline in vacancy levels
in the Long Beach market from 22.6 percent to 17.0 percent from year-end 1992 to
second quarter, 1996 (direct vacancy) and from 23.6 percent to 17.5 percent
(overall vacancy).
Direct Competition
The subject is located along the Ocean Boulevard corridor, which is the
prime office location in the downtown Long Beach submarket. The accompanying
exhibit summarizes the current occupancy and rental profile for the 15
competitive Class A and B office buildings in this neighborhood. The buildings
range in height from two to 27 stories and in size from approximately 32,000
square feet to 436,000 square feet. Excluding the subject the combined overall
(including sublease space) occupancy level is 72.7 percent for a total inventory
of about 3,270,000 square feet. Excluding mezzanine space the quoted asking
rental rates for available space ranges from $16.20 to $30.00 per-square-foot
annually full service gross, with the predominate range from $16.20 to $22.20.
Conclusions
The subject's downtown Long Beach market has lagged the general Los Angeles
County office market recovery which has begun during the past two years. The
subject's market and other submarkets in the Long Beach area have experienced a
slow, stable improvement in occupancy levels, however, due to continued positive
net absorption and no new construction. The current significant "spread" between
market rental rates and the rental rates required to justify new development
continue to delay any new development, particularly in the downtown Long Beach
submarket for the foreseeable future. The level of investment activity in this
market and other Los Angeles County office markets has accelerated significantly
during the past 12 months, driven by both the availability of capital and by the
trends in vacancy rates.
The subject includes two non-contiguous parcels: the "Office Parcel" and
the "Parking Parcel". The Office Parcel contains 42,160 square feet of land
area, and is located at the northeast corner of East Ocean Boulevard and The
Promenade North in the downtown portion of the City of Long Beach. The site is
generally rectangular in shape, and the topography is also generally level
The property also includes a non-contiguous "Parking Parcel" located about
two blocks southeasterly of the Office Parcel, on the north side of Seaside Way
extending from Locust Avenue to Collins Way. This parcel contains 29,110 square
feet according to Assessors maps. The parcel is improved with a surface parking
lot containing 79 marked spaces. The parking lot is leased to the adjacent hotel
(Breakers Hotel) for a term through September 30, 2000 (subject to termination
option for "up to" 29 spaces). This parcel is generally level, but slopes
slightly downward to the south.
We have assumed that the soil's load-bearing capacity is sufficient to
support the existing structures. All essential utilities including electricity,
water, sewer, and telephone are currently serving the site.
According to The Los Angeles County Flood Atlas, Community Panel No. 060136
0020 B, effective September 15, 1993, the subject property is situated in Zone C
and does not require flood insurance.
Improvements Description
The subject "Office Parcel" is improved with a 1982-built Class "B"
six-story office building containing 100,146 square feet of rentable area, based
on the "remeasured" area shown on the rent roll provided for our review. The "as
leased" area is 98,362 rentable square feet. The improvements, known as Downtown
Plaza, are of Class "B" construction, with reinforced concrete frame and glass
curtain walls. The building is constructed over a two-level subterranean garage
containing approximately 295 marked spaces (including approximately 205 tandem
spaces and 90 single spaces). The floorplates are somewhat triangular in shape,
and are "terraced", with upper floor balconies providing southerly-facing views
for many suites. There are three elevators serving the parking levels and six
office floors.
Capital Issues
The subject does not comply with current ADA code requirements, and
upgrades were in progress as of the date of our property inspection. It is our
understanding based on verbal information provided by the property manager and a
review of limited budget data that approximately $420,000 has been budgeted for
capital work for ADA compliance, common area upgrades including painting and
lobby renovation, exterior and interior painting, roof repair, and mechanical
system upgrades. We have not reviewed detailed budgets and it is our
understanding these improvements are projected to be completed by year-end 1996.
We have not deducted for remaining capital costs, and recommend an inspection of
the property be made by qualified experts to determine the level of code
compliance and the cost of any remaining improvements.
The current method of taxation of real property in California is mandated
by Proposition 13, under which real estate taxes were reduced to one percent of
the property's full market value as of the 1975/76 fiscal year, plus any voter
approved bond indebtedness. The assessor's assessment of market value is limited
to a maximum two percent annual increase, unless the property is transferred or
there is substantial new construction. In either of these two events, the
property is reappraised to current market value, usually as evidenced by the
sales price and/or the construction cost.
Assessed value is not an accurate reflection of market value, and it is not
particularly sensitive to economic fluctuations in market value. Assessed value
is the figure which is put on the Assessor's roll and is the basis upon which
the property tax is charged to property owners. The Proposition 13 Property Tax
initiative received very strong support from the general public as resistance to
property increases continue. It is unlikely that the basic premises of this law
will be changed in the near future.
Tax Rates
The 1995/96 tax rate for the land and improvements in Tax Rate Area 05542
is 1.011677% percent and is based upon $100 of assessed values.
Tax Assessment
Following is the subject's total current assessment:
1995/96 Property Assessment Summary
Office Parcel Parking Parcel Totals
--------------------------------------------------------------------------------
Land $1,714,600 $1,135,400 $2,500,000
Building $6,461,000 $29,000 $6,490,000
--------------------------------------------------------------------------------
Total $8,175,600 $1,164,400 $8,990,000
================================================================================
Direct Assessments
Following is an itemized list of current direct assessments for the subject
property:
========================================================
Direct Assessments
========================================================
1995/96
--------------------------------------------------------
Long Beach LDSCP $ 438.25
L.A. County Flood Control $ 379.03
MWD Water Stand-by Chart No. 8 $ 12.16
County Sanitation District No. 3 $5,735.28
L.A. County Park Districts $ 481.34
--------------------------------------------------------
Total $7,046.06
========================================================
The tax rate and the direct assessments appear to be
in line with the rates and assessments in the competitive
market area. Current annual taxes are estimated at
approximately $102,000.
DOWNTOWN SHORELINE
SUBAREAS
Planned Development Ordinance: PD-6
LONG BEACH CITY, CA
ZONING
Office Parcel
The office parcel is zoned city of Long Beach CB, Commercial Business. This
zone was created for the Central Business district to preserve and enhance the
downtown area's role as the center of commerce, culture and civic life for the
city and surrounding communities. The city recognizes this district as being
unique in its intensity and diversity of use, its contribution to the history,
culture and image of the city, and its aesthetic and architectural significance.
Under the current municipal code, parking requirements for general office
use are four parking spaces per 1,000 square feet of gross usable floor area up
to 20,000 square feet plus two spaces per 1,000 square feet of gross building
area thereafter. Requirements for retail banking is six stalls per 1,000 square
feet of gross retail banking area plus four spaces per 1,000 square feet of
gross office area.
This zoning classification requires the minimum lot size to be no less than
10,000 SF and establishes no maximum building height.
The first story uses, in addition to the requirements and standards of this
zoning regulation, is restricted to retail, personal service, restaurant, tavern
or theater entrances, as well as other building entrances, lobbies, plazas or
driveways. The permitted uses shall occupy the entire street frontage of ground
floors. No other uses shall occupy this area.
Parking Parcel
The parking parcel is zoned city of Long Beach PD-6 (subarea 7), Downtown
Shoreline Planned Development District. The area within the Plan boundary
contains both public and private property, with some existing major land uses,
but with significant undeveloped and underdeveloped property. This Plan is
intended to coordinate future public and private improvements in a mixed
land-use concept.
The subarea wherein the parking parcel lies contains an office building and
the Breakers Hotel (designated by the City as a cultural landmark). Permitted
uses within this subarea are restricted to residential, hotel, or an office with
hotel or residential uses occupying not less than one-third land area of this
subarea. Special design features are required for any new developments between
the Jergins Trust Site and the Breakers Hotel. These features must include a
coordinated theme for the entire entrance area for the full length of the
Promenade South, create visual and physical linkage between the Ocean Boulevard
downtown area and the shoreline, and the Ocean Boulevard park strip between
Locust and Pine shall be designed to emphasize the Promenade entrance.
Subarea 7 parking requirements for new construction shall provide parking
spaces as required for new development, but must be enclosed and located below
Ocean Boulevard level. Office building parking shall be available for public use
on evenings and weekends. Office uses may lease Convention Center parking for
usual business requirements. The reuse of existing buildings shall maintain its
current parking requirements.
The highest and best use must be (1). legally permissible, (2) physically
possible, (3) financially feasible, and (4) maximally productive. The size,
shape, and physical attributes of the site are considered sufficient to
accommodate most forms of development. Given the existing office zoning and the
surrounding development (which consists of a relatively equal mixture of office,
retail, hotel, industrial, and vacant land), some type of commercial use would
be most compatible with surrounding development. Further, as discussed in the
Office Market Analysis section of this report, the downtown Long Beach office
submarket has continued its recovery with a year-end 1995 overall occupancy
level of approximately 72.7 percent. Direct weighted average rental rates for
this type of space represent the highest rates in the Long Beach market area at
$19.92 per square foot (including all classes of space). Therefore, it is our
opinion the highest and best use of the site is for some type of office
development as of a future date when new construction becomes economically
justified.
Highest and Best Use, As Improved
As noted in the Property Description section of this report, the subject
site is improved with a six-story, 100,146 square foot (NRA) office building and
related site improvements. Constructed in 1982, the project is in average
condition. Further, the design and layout are considered to be adequate for its
current use.
The office submarket in which the subject competes is stable with
increasing occupancy levels and rental rates. It is our opinion that the highest
and best use of this site, as improved, is for continued use as a Class "B"
office building.
Appraisers typically use three approaches in valuing real property: the
Cost Approach, the Income Approach, and the Sales Comparison Approach. The type
and age of the property and the quantity and quality of data affect the
applicability of each approach in a specific appraisal situation.
The principle of substitution that forms the basis for the Cost Approach
holds that "no prudent person will pay more for a property than the amount with
which he can obtain, by purchase of a site and construction of a building, a
property of equal desirability and utility."
The Cost Approach has historically been a reasonably reliable indicator of
value for new, legally conforming office buildings in the Los Angeles market
area. It is not particularly relevant in the traditional sense for this
appraisal, however. External, or economic conditions have rendered the
indication from this approach essentially meaningless. This situation has
delayed the timeframe for new construction to such a degree that the principle
of substitution, which is based on the price an investor would pay to acquire a
site and construct a building of similar utility without undue delay, is no
longer a possible scenario. The investors in this type of property report that a
basic criterion for evaluating a potential purchase is that the price paid must
be below the estimated replacement cost of the property. The basis for this
criterion is the perception that new development is economically infeasible at
current rental rates and vacancy levels. The profit component, which is the
incentive for new development, at the minimum has been removed from the market.
We have accordingly not used a Cost Approach in this appraisal.
The Sales Comparison Approach involved a search for recent sales of
comparable improved properties and an analysis of the data as it relates to the
subject property.
In the Income Approach we estimated the subject's capacity to produce
income through an analysis of the defined office market. An estimated value for
the subject property was derived through a computerized Discounted Cash Flow
Analysis and Direct Capitalization.
We concluded the appraisal process by reviewing each of the applicable
approaches to value. We considered the type and reliability of data and the
applicability of each approach. Finally, we reconciled the two approaches and
estimated the final value.
SUMMARY OF COMPARABLE OFFICE BUILDINGS SALES AND MARKETING ACTIVITY
====================================================================================================================================
Improvements Sales Price
Item Property Name/Location Date of Sale Year No. of Rentable Occupancy Total PSF OAR
No Built Stories Area at Sale
====================================================================================================================================
I-1a 100 West Broadway 7/96 1986 6 194,087 84% $20,200,000 $104.08 14.1%
Long Beach, CA (above
market
rents)
@ 84% occ.
------------------------------------------------------------------------------------------------------------------------------------
I-1b 100 West Broadway 7/95 1986 6 194,087 78% $14,000,000 12.0%
Long Beach, CA (note $72.13
purchase)
------------------------------------------------------------------------------------------------------------------------------------
I-2 Sumitomo Bank Building 6/96 1968 15 (tower) 178,886 68% $9,200,000 $48.55 13.6%
444 West Ocean Blvd. 1 (annex) 10,600 @ 68% occ.
Long Beach, CA --------
189,486
------------------------------------------------------------------------------------------------------------------------------------
I-3a Park Tower 3/96 1981 7 112,777 75% $7,200,000 $63.84 8.0%
5150 East Pacific Coast Hwy. @ 75% occ.
Long Beach, CA
------------------------------------------------------------------------------------------------------------------------------------
I-3b Park Tower 4/94 1981 7 112,777 50% $5,600,000 $49.65 6.3%
5150 East Pacific Coast Hwy. @ 50% occ.
Long Beach, CA
------------------------------------------------------------------------------------------------------------------------------------
I-4 Allstate Building Current 1982 12 199,366 9% $14,000,000 $70.22 N/A
180 East Ocean Blvd. Escrow asking (9% leased)
Long Beach, CA
$12,000,000 $60.19 Pro-forma
reported 95% OAR
escrow 19.6%
price
------------------------------------------------------------------------------------------------------------------------------------
I-5a L'Opera Building Current 1910 6 65,538 100% $5,350,000 $81.63 10.0%
101-115 Pine Ave. Escrow asking @ 100% occ.
Long Beach, CA 1988/1996
remodeled
------------------------------------------------------------------------------------------------------------------------------------
I-5b L'Opera Building 6/95 1910 6 65,538 60% $3,500,000 $53.40 N/A
101-15 Pine Ave.
Long Beach, CA 1988/1996
remodeled
------------------------------------------------------------------------------------------------------------------------------------
I-6 New Wilshire 11/95 1986 16 203,934 78% $21,450,000 $105.18 10.3%
6100 Wilshire Blvd. @ 78% occ.
Los Angeles, CA
------------------------------------------------------------------------------------------------------------------------------------
Subject Downtown Plaza -- 1982 6 100,146 93% -- -- --
211 East Ocean Blvd.
Long Beach, CA
====================================================================================================================================
SALES COMPARISON APPROACH
Methodology
In the Sales Comparison Approach, we estimated the value of the subject by
comparing it with similar, recently sold properties in the surrounding or
competing area. Inherent in this approach is the principle of substitution,
which holds that when a property is replaceable in the market, its value tends
to be set at the cost of acquiring an equally desirable substitute property,
assuming that no costly delay is encountered in making the substitution.
By analyzing sales that qualify as arms-length transactions between willing
and knowledgeable buyers and sellers, we can identify value and price trends.
The sold properties must be comparable to the subject in physical, locational,
and economic characteristics. The basic steps of this approach are:
1. Research recent, relevant property sales and current offerings
throughout the competitive area;
2. Select and analyze those properties considered most similar to the
subject, giving consideration to the time of sale, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional or locational factors;
3. Reducing the sales price to common units of comparison, such as price
per-square-foot of building area;
4. Make appropriate adjustments between the comparable properties and the
property appraised;
5. Identify sales which include favorable financing and calculate the
cash equivalent price;
6. Interpret the adjusted sales data and draw a logical value conclusion.
The most widely-used and market-oriented units of comparison for office
properties is the sales price per-square-foot of building area. All comparable
sales have been analyzed on this basis.
Cushman & Wakefield tracks office building transactions in Los Angeles
County involving sales or arm's length "creative" acquisitions of properties in
excess of 50,000 square feet. The table below summarizes the activity in this
category during the past three years.
Los Angeles County Office Building Transactions
Greater Than 50,000 SF
No. Of Aggregate Average
Year Transactions Sales Price Price/Sale.
---- ------------ ------------ -------------
1993 35 $480 million $13.7 million
1994 38 $305 million $8.0 million
1995 44 $840 million $19.1 million
The sales activity during each year included a wide cross section of
buildings in terms of quality, size, tenancy, and market location. The pace and
average pricing for transactions during
1995 demonstrated a substantial increase above the two prior years, which
accurately reflects the growth in the number of well-capitalized investors
interested in Los Angeles County office product.
The subject is a well-leased, average quality mid-rise office building in
an average Los Angeles County office market location. The level of market
activity involving office properties has increased significantly during the past
year, and several office buildings in the subject's downtown Long Beach market
have recently transferred ownership or are currently in escrow. The comparable
office building sales and marketing activity we considered for comparison with
the subject are summarized on the accompanying exhibit. The data includes four
closed sales and two current escrows, as well as the two more dated "re-sales"
of two of the current items. The data includes four properties located in the
subject's directly competitive downtown Long Beach office market (items I-1,
I-2, I-4, and I-5), a property in a more peripheral Long Beach office location
(I-5) and an office building located in the Miracle Mile district of the City of
Los Angeles (I- 6). The data was selected based on comparability in one or more
of the following criteria: 1) location; 2) leasing status; 3) improvement
quality and age; 4) size of the asset and total magnitude (in terms of dollars)
of the transaction; 5) investor profile; and 5) occupancy at sale.
As shown on the chart two of the data items (I-1 and I-5) represent recent
or pending re-sales of assets acquired by the current sellers during the past 12
months. The current investment market for office properties in Los Angeles
County has increased in terms of the number of transactions due to the
increasing influx of capital, and the well-capitalized local investors who
acquired properties earlier in the recovery period are now selling the assets
(typically following additional lease up or capital upgrades) at a premium to
buyers higher up in the "investment food chain'. We have accordingly focused the
sales analysis on the most recent activity.
The price per-square-foot of rentable area represents the most reliable
method for estimating a value for the subject based on the Sales Comparison
Approach. The analysis and adjustments we considered is briefly described below.
Property Rights Conveyed
Each of the data items involved similar leased fee ownership positions as
the subject. Item I-1 also includes an additional "parking parcel" which
generates additional revenue through a lease to third party ownership.
Seller Financing/Cash Equivalency
Each of the data items involves "cash-to-the-seller' acquisitions, and no
adjustment for seller financing is warranted.
Conditions of Sale
No unusual seller motivations were uncovered which would suggest the
purchase prices were impacted by non-market conditions.
Location
As noted above five of the size data items are located in the subjects Long
Beach market, and four of these items are located within a few blocks of the
subject. Items I-1 and I-5 are
located directly north of the subject property. Item I-6 is situated in a
submarket with a comparable vacancy level and slightly higher market rental
rates than downtown Long Beach.
Improvement Quality
The subject is superior to I-2,I-4, and I-5, generally similar to I-3, and
inferior to I-1 and I-6 in terms of quality.
Occupancy at Sale
The subject is generally similar or superior to most of the comparable data
items in terms of leasing profile at the time of sale.
Conclusions
The subject is most similar overall to I-1, which sold during July, 1996.
This property is nearly identical in terms of location, although the subject has
superior views, and is slightly superior in terms of quality. We concluded below
the rounded $104 per-square-foot price for this sale for the subject, at $90
per-square-foot of rentable area.
100,146 SF x $90 PSF = $9,013,140
Rounded value by Sales Comparison Approach: $9,000,000
ROLLOVER EXPOSURE
Downtown Plaza
211 East Ocean Long Beach, CA
====================================================================================================================================
Rollover Occupied Percentage Expiry Cumulative Rollover
Year Suite Tenant Area (SF)* of Building Date SQFT Percent
------------------------------------------------------------------------------------------------------------------------------------
1996 310 Eagle Pacific Insurance 7,560 7.5% Nov-96
------------------------------------------------------------------------------------------------------------------------------------
7,560 7.5% 7,560 7.5%
------------------------------------------------------------------------------------------------------------------------------------
1997 0 0.0%
------------------------------------------------------------------------------------------------------------------------------------
0 0.0% 0 0.0%
------------------------------------------------------------------------------------------------------------------------------------
1998 405 Pacific Crane Maint. 2,453 2.4% May-98
360 Compass Productions 2,873 2.9% Jul-98
------------------------------------------------------------------------------------------------------------------------------------
5,326 5.3% 12,886 12.9%
------------------------------------------------------------------------------------------------------------------------------------
1999 500 City of Long Beach 14,992 15.0% Dec-99
------------------------------------------------------------------------------------------------------------------------------------
14,992 15.0% 27,878 27.8%
------------------------------------------------------------------------------------------------------------------------------------
2000 102 The Designory 3,492 3.5% Jan-00
600 The Designory 24,963 24.9% Jan-00
------------------------------------------------------------------------------------------------------------------------------------
28,455 28.4% 56,333 56.3%
------------------------------------------------------------------------------------------------------------------------------------
2001 400 La Torracca & Goettsch 11,182 11.2% Jan-01
200 Corporate Offices 17,717 17.7% Aug-01
------------------------------------------------------------------------------------------------------------------------------------
28,899 28.9% 85,232 85.1%
------------------------------------------------------------------------------------------------------------------------------------
2003 101 Coast Federal Savings 7,729 7.7% Mar-03
------------------------------------------------------------------------------------------------------------------------------------
7,729 7.7% 92,961 92.8%
------------------------------------------------------------------------------------------------------------------------------------
Combined vacant space 7,185
------------------------------------------------------------------------------------------------------------------------------------
Total Building NRA (SF): 101,146 Cumulative Rollover: 100.0%
====================================================================================================================================
[GRAPHIC OMITTED -- BAR CHART SHOWING ABOVE ROLLOVER PERCENTAGES BY YEAR]
---------------------------
* Based on remeasured area
INCOME APPROACH
Methodology
The Income Approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of 'anticipation" underlies this approach in that investors recognize
the relationship between an asset's income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated, and the most appropriate capitalization method must
be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash-flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash-flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
In our opinion both the direct capitalization and the discounted cash flow
are appropriate methods for estimating the value of subject property. We
accordingly have utilized both methods within the Income Approach.
Potential Gross Income
Subject Occupancy Profile
The exhibits on the accompanying pages include rent roll data, a stacking
plan, and a lease expiration summary (Rollover) for the subject property. The
exhibits were prepared by Cushman & Wakefield based on leases and data provided
by the property management.
The subject is currently 92.8 percent leased based on the "remeasured"
rentable building area. There are currently eight tenants, including one tenant
with multiple suites (The Designory) and a tenant with a signed lease but not
yet in occupancy. The tenants range in size from 2,444 square feet to 28,066
square feet. Current rental rates range from $7.80 to $33.85 per-square-foot
annually, full service gross, with a weighted average rent of $14.86. The low
end of this range corresponds to the initial rent for the executive suite tenant
currently improving its space, while the upper end of the rental rate range
corresponds to Coast Federal, which has a ground floor retail bank branch and
prominent building signage. The predominant rental range for current tenants is
from about $15 to $16 per-square-foot.
Four major tenants have premises greater than 1 0,000 square feet, as
summarized below.
Remeasure Lease % of Total
Tenant Area Leased (SF) Expiration NRA
------ ---------------- ---------- ---
The Designory 28,455 1/2000 28.4%
Esprit Jones 17,717 8/2001 17.7%
City of Long Beach 14,992 12/1999 15.0%
La Torrance 11,182 1/2001 11.2%
The "Esprit Jones" tenant in suite 200 is an executive suite business which
has succeeded the previous executive suite operation previously controlled
(subject to a management agreement) by the landlord. The tenant is currently
improving its premises, and the lease commencement is projected as August 24,
1996. The tenant also operates approximately six other executive suite
businesses in the south bay area.
Rollover Profile
The accompanying exhibit summarizes the re-leasing exposure from current
leases. The lease expirations during the first three years of the holding period
totals 20,446 square feet, or 20.4 percent of the total rentable area. The major
tenant expires in January, 2000. The subjects rollover profile is relatively
favorable in comparison with other properties in this market.
Assumptions Regarding the Existing Leases
With the exception of the previously noted changes, our analysis
specifically assumes the existing tenants will remain in the property and
continue paying rent under the terms of their leases. Information provided by
management indicates that no tenants are currently in default and the tenant
base generally appears to be stable.
Estimate of Current Market Rent
According to our research the current quoted rental rate for the available
subject space on the third and fourth floors is $16.20 per-square-foot annually,
full service gross. The tenant improvement allowance is "negotiable" but
typically new tenants receive up to $15 per-square-foot in build-out allowance.
We based market rent estimates for the subject property on our
investigations of competitive buildings in the market, including a comparison of
quoted rental rates and concessions for available space, discussions with
leasing brokers active in this market, and a review of recently signed leases
for space in the subject and competitive properties. The exhibit on the
accompanying page summarizes a rental and occupancy survey of 16 competitive
downtown Long Beach office properties with a combined rentable area of
approximately 3.27 million square feet. The Class A buildings have a current
quoted rental rate range from $16.80 to $30.00 per-square-foot annually, full
service gross, with a predominant range from about $21.00 to $24.00
per-square-foot. Buildings in the subject's class B category exhibit a range in
rental rates from $15.00 to $23.40 per-square-foot, with most rents in the range
from $16.20 to $20.40 per-square-foot. Some leases include relatively minimal
free rent concessions, but most are structured on an "effective" basis,
typically flat for three to five-year terms. The tenant improvement allowances
vary, depending upon the condition of the existing premises and the requirements
of the tenant.
RENTAL AND OCCUPANCY SURVEY 2nd Quarter 1996
Long Beach Downtown
Competitive Office Buildings
==================================================================================================================================
Building Information
Avg.Flr. Overall
Item Building Name/ No. of Area Area Year Available Space (SF) Availability
No. Location Class Stories (SF) (SF) Built Floor(s) Direct Sublease (SF)
==================================================================================================================================
L-1 100 Broadway Building B 6 193,390 32,232 1967 Ground 2,490 0
100 Broadway 2-6 34,681 0 Total
---- ------- ------
37,171 0 37,171
----------------------------------------------------------------------------------------------------------------------------------
L-2 Harbor Bank Building B 6 109,000 18,167 1982 Ground 0 0
11 Golden Shore Avenue 2-5 38,517 0 Total
---- ------- ------
38,517 0 38,517
----------------------------------------------------------------------------------------------------------------------------------
L-3 Catalina Landing B 4 275,000 68,750 1985 Ground 32,672 0
310-340 Golden Shore Avenue 2-4 57,407 0 Total
---- ------- ------
90,079 0 90,079
----------------------------------------------------------------------------------------------------------------------------------
L-4 World Trade Center A 27 436,692 16,174 1988 Ground 11,495 0
One World Trade Center 2-26 64,395 5,122 Total
---- ------- ------
75,890 5,122 81,012
----------------------------------------------------------------------------------------------------------------------------------
L-5 Landmark Square A 24 413,000 17,208 1991 Ground 8,754 1,177
111 West Ocean Boulevard 3-24 69,919 4,962 Total
---- ------- ------
78,673 6,159 84,832
----------------------------------------------------------------------------------------------------------------------------------
L-6 The 180 Building
180 East Ocean Boulevard B 12 200,028 16,669 1982 Ground 19,681 0
2-12 163,760 0 Total
---- ------- ------
183,441 0 183,441
----------------------------------------------------------------------------------------------------------------------------------
L-7 Home Savings Building B 10 103,000 10,300 1982 Ground 18,464 0
249 East Ocean Boulevard 2-9 21,875 0 Total
---- ------- ------
40,339 0 40,339
----------------------------------------------------------------------------------------------------------------------------------
L-8 Shoreline Square A 21 417,000 19,857 1988 Ground 0 0
301 East Ocean Boulevard 2-10 62,025 0 Total
---- ------- ------
62,025 0 62,025
----------------------------------------------------------------------------------------------------------------------------------
L-9 American Savings Building B 10 127,991 12,799 1964 Mezz 7,960 0
401 East Ocean Boulevard 3-10 69,838 0 Total
---- ------- ------
77,798 0 77,798
----------------------------------------------------------------------------------------------------------------------------------
L-10 Sumitomo Tower Building B 18 163,264 9,070 1968 Ground 0 0
444 West Ocean Boulevard 5-17 60,901 0 Total
---- ------- ------
60,901 0 60,901
----------------------------------------------------------------------------------------------------------------------------------
L-11 Oceangate Tower B 12 202,000 16,833 1971 Plaza/Lob 18,784 0
100 Oceangate Avenue 4-11 21,451 0 Total
---- ------- ------
40,235 0 40,235
----------------------------------------------------------------------------------------------------------------------------------
L-12 Arco Center A 14 220,625 15,759 1983 Ground 0 4,630
200 Oceangate Avenue 2-15 44,091 0 Total
---- ------- ------
44,091 4,630 48,721
----------------------------------------------------------------------------------------------------------------------------------
L-13 Arco Center A 14 218,298 15,593 1968 Ground 898 0
300 Oceangate Avenue 5-17 28,038 0 Total
---- ------- ------
28,936 0 28,936
----------------------------------------------------------------------------------------------------------------------------------
L-14 Union Bank Building B 14 157,683 11,263 1975 Ground 0 0
400 Oceangate Avenue 2-11 9,765 7,661 Total
---- ------- ------
9,765 7,661 17,426
----------------------------------------------------------------------------------------------------------------------------------
L-15 One Golden Shore B 2 32,246 16,123 1977 Ground 0 0
One Golden Shore 0 0 0 Total
---- ------- ------
0 0 0
----------------------------------------------------------------------------------------------------------------------------------
MARKET SUB-TOTALS 194 3,269,217 16,852 867,861 23,572 891,433
==================================================================================================================================
Subj. Downtown Plaza B 6 100,146 16,691 1982 Ground 0 0
211 East Ocean Boulevard 3-4 7,185 0 Total
---- ------- ------
7,185 0 7,185
----------------------------------------------------------------------------------------------------------------------------------
MARKET TOTALS 200 3,369,363 16,847 875,046 23,572 898,618
==================================================================================================================================
========================================================================================================
Quoted Occupancy Parking
Item Building Name/ Annual Rent Lease Ratio Ratio/
No. Location PSF PSF Type (Incl. SL) 1,000 SF
========================================================================================================
L-1 100 Broadway Building $20.40 - $20.40 FSG 80.8% 2.50
100 Broadway $20.40 - $20.40 FSG
--------------------------------------------------------------------------------------------------------
L-2 Harbor Bank Building 64.7% 3.70
11 Golden Shore Avenue $18.60 - $18.60 FSG
--------------------------------------------------------------------------------------------------------
L-3 Catalina Landing $16.80 - $16.80 FSG 67.2% 3.50
310-340 Golden Shore Avenue $16.80 - $16.80 FSG
--------------------------------------------------------------------------------------------------------
L-4 World Trade Center $21.00 - $21.00 FSG 81.4% 2.80
One World Trade Center $18.60 - $24.00 FSG
--------------------------------------------------------------------------------------------------------
L-5 Landmark Square $19.20 - $22.20 FSG 79.5% 3.30
111 West Ocean Boulevard $19.20 - $22.20 FSG
--------------------------------------------------------------------------------------------------------
L-6 The 180 Building
180 East Ocean Boulevard $21.00 - $23.40 FSG 8.3% 4.00
$21.00 - $23.40
--------------------------------------------------------------------------------------------------------
L-7 Home Savings Building $22.20 - $22.20 FSG 60.8 3.00
249 East Ocean Boulevard $16.20 - $18.00 FSG
--------------------------------------------------------------------------------------------------------
L-8 Shoreline Square FSG 85.1% 2.50
301 East Ocean Boulevard $25.20 - $30.00 FSG
--------------------------------------------------------------------------------------------------------
L-9 American Savings Building $15.00 - $18.60 FSG 39.2% 2.70
401 East Ocean Boulevard $15.00 - $18.60
--------------------------------------------------------------------------------------------------------
L-10 Sumitomo Tower Building 62.7% 3.50
444 West Ocean Boulevard $16.20 - $17.40 FSG
--------------------------------------------------------------------------------------------------------
L-11 Oceangate Tower $16.80 - $18.60 FSG 80.1% 3.00
100 Oceangate Avenue $16.80 - $18.60 FSG
--------------------------------------------------------------------------------------------------------
L-12 Arco Center $16.80 - $16.80 FSG 77.9% 3.00
200 Oceangate Avenue $21.96 - $22.92 FSG
--------------------------------------------------------------------------------------------------------
L-13 Arco Center $21.96 - $24.00 FSG 86.7% 3.00
300 Oceangate Avenue $21.96 - $24.00 FSG
--------------------------------------------------------------------------------------------------------
L-14 Union Bank Building 88.9% 2.20
400 Oceangate Avenue $16.20 - $18.60 FSG
--------------------------------------------------------------------------------------------------------
L-15 One Golden Shore 100.0% 4.40
One Golden Shore
--------------------------------------------------------------------------------------------------------
MARKET SUB-TOTALS 72.7%
========================================================================================================
Subj. Downtown Plaza 92.8% 3.20
211 East Ocean Boulevard $16.20 - $16.20 FSG
--------------------------------------------------------------------------------------------------------
MARKET TOTALS 73.3%
========================================================================================================
Office Building Activity Chart
[GRAPHIC OMITTED -- COMBINATION LINE AND BAR GRAPH SHOWING
OCCUPANCY RATION IN COMPARISON WITH THE NUMBER OF STORIES]
Income Approach
Most second generation leases include tenant allowances from about $5 to $20
per-square-foot. An example of a recent lease in a directly competitive building
is summarized below.
Property: 401 E. Ocean Blvd.
Floor: 7
Date of Lease: 6/96
Size of Premises: 5,000 SF
Tenant: Barwill Agencies
Term: 5 Years
Annual PSF Rent: $14.40 Full Service, Flat for Term
Free Rent: 2 months
Tenant Allowance: $8 PSF
Effective Rent: $13.92 PSF
Recent subject leasing activity is summarized below.
Tenant: Esprit Jones (new tenant)
Floor: 2
Date of Lease: 6/96
Size of Premises: 16,797 SF
Term: 5 Years
Annual PSF Rent: $7.80 Full Service
Adjustments
Mos 7-12: $12.00
Mos. 13-24: $13.80
Mos. 25-36: $15.00
Mos. 37-48: $15.60
Mos. 49-60: $18.00
Free Rent: 2 months
Tenant Allowance: $15 PSF
Effective Rent: $14.07 PSF (5 years)
Income Approach
================================================================================
Tenant: La Torrance et al (renewal)
Floor: 4
Date of Lease: 5/95
Size of Premises: 11,698 SF
Term: 6 Years
Annual PSF Rent: $16.80 Full Service
Adjustments
Mos 25-48: $18.00
Mos. 49-72: $20.16
Free Rent: None
Tenant Allowance: $5 PSF
Effective Rent: $18.32 PSF (6 years)
Tenant: Pacific Crane (renewal)
Floor 4
Date of Lease- 5/95
Size of Premises: 2,444 SF
Term: 3 Years
Annual PSF Rent: $15.00 Full Service
Adjustments
Mos 19-36: $16.20
Free Rent: None
Tenant Allowance: $2.64 PSF
Effective Rent: $15.60 PSF (3 years)
Achievable market rental rates for the subject will vary based on the
length of the lease term. the floor level and views, the size and credit rating
of the tenant, and the required concessions from the landlord. Based on our
analysis of the data we concluded the following "typical" market rent and
concession package for the subject property.
FSG Mos. Per Rentable SF
Annual Rent Free Tenant Improvements
Lease Term Initial PSF Adjustments Rent New Renew
---------- ----------- ----------- ---- --- -----
5 Years $16.20 Flat None $12.50 $5
Parking Revenue
The subject parking revenues for 1995 and year-to-date 1996 are summarized
on the accompanying exhibit. As noted on the exhibit the available data suggests
the 1995 figures may not represent full-year information. We projected parking
revenue based on the most recent actual data (year-to-date 1996) and estimated
$1.70 per-square-foot annually based on occupied area. We estimated parking
expenses at $40,000 annually (in 1996 dollars).
Downtown Plaza
1993-1996 Historical & Budgeted Operating Expense Statements
Total Net Rentable Area (sf): 100,146
================================================================================
Year End 1995 1996 Budget
STATEMENTS Total PSF Total PSF
================================================================================
REVENUE
Base Rent $1,263,177 $12.61 $1,284,662 $12.83
Expense Reimbursements 90,969 0.91 50,805 0.51
Parking Income 90,085 0.90 183,916 1.84
Miscellaneous Income 1,510 0.02 41,712 0.42
--------------------------------------------------------------------------------
Total Revenue 1,445,741 14.44 1,561,095 15.59
--------------------------------------------------------------------------------
OPERATING EXPENSES
Reimbursable
Utilities $244,056 2.44 $261,500 $2.61
Cleaning 64,913 0.65 73,800 0.74
Repair & Maintenance 105,044 1.05 97,220 0.97
Administration 88,723 0.89 122,724 1.23
General Building 16,961 0.17 34,350 0.34
Security 38,348 0.38 25,381 0.25
Management Fees 28,645 0.29 31,222 0.31
Insurance 38,673 0.39 53,691 0.54
--------------------------------------------------------------------------------
Sub-Total (reimbursable) $625,363 $6.24 $699,888 $6.99
--------------------------------------------------------------------------------
Non-Reimbursable $9,429 $0.09 $2,020 $0.02
--------------------------------------------------------------------------------
Sub-Total (non-reimbursable) 634,793 $6.34 $701,908 $7.01
--------------------------------------------------------------------------------
Real Property Taxes $248,964 $2.49 $100,852 $1.01
--------------------------------------------------------------------------------
Total Expenses $888,757 $8.82 $802,760 $8.02
================================================================================
================================================================================
NET OPERATING INCOME (NOI) $561,984 $5.61 $758,335 $7.57
================================================================================
Net Operating Income
Expense Chart Trends Chart
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
[DATA POINTS TO BE SUPPLIED] [DATA POINTS TO BE SUPPLIED]
EXPENSE CATEGORIES
Utilities Electricity, gas, water/sewage
Cleaning Janitorial
Repair & Maintenance Grounds maintenance and repairs & maintenance
Administration On-site office, general admin., payroll & burden,
advertising & marketing, and property tax service
fee
General Building Supplies, equipment, trash removal, window cleaning
& exterminating
Security Building security
Management Fees Management fees
Insurance Property insurance
Non-Reimbursable Non-Reimbursable
Real Property Taxes Real estate taxes
--------------------------------------------------------------------------------
Income Approach
Other Income
The subject Parking Parcel is leased to the adjacent Breakers Hotel for a
term through September, 2000. The lease rate is $44 per space per month (79
spaces) for the first year of the term (through 1996), with an increase to $50
per space beginning the second year of the lease. We modeled this lease based on
the current terms, or a rounded $40,000 annually during 1996, and assumed a 3.5%
annual increase throughout the holding period.
Vacancy and Collection Loss
Both the investor and the appraiser are primarily interested in the cash
revenue that an income property is likely to produce annually over a specified
period of time rather than what it could produce if it were always 100 percent
occupied and all the tenants were actually paying their rent in full and on
time. It is normally a prudent practice to expect some income loss, either in
the form of actual vacancy or in the form of turnover, non-payment, or slow
payment of rent.
The subject is currently 92.8 percent leased, and the current tenant
profile has a relatively favorable lease expiration schedule. As discussed in
the Market Analysis, the subject's Long Beach office submarkets; have shown a
stable pattern of declining vacancy levels over the past several years, and no
new competitive buildings are expected to be completed in the near future. Based
on the current subject occupancy level and the improving market conditions, we
projected global vacancy and collection loss (against all revenues) of 5.0% and
an additional lag vacancy between leases of 6 months for 5-year lease terms.
Based on the 65% renewal probability assumption the indicated (rounded) weighted
vacancy between leases is 2 months.
Operating Expenses
The historical and budgeted expenses for the subject for the period 1995
(actual) and 1996 (budgeted) are summarized on an accompanying exhibit. The
summary was prepared by Cushman & Wakefield based on statements provided by the
property management.
We analyzed the historical and budgeted data as well as comparable expense
data for other downtown Long Beach office buildings. Our expense conclusions for
the property, expressed in 1996 dollars, are summarized below.
We converted the net operating income into a value indication by means of
discounted cash-flow analysis and direct capitalization.
Discounted Cash Flow Analysis
By forecasting the anticipated income stream and discounting future value
at reversion to current value, the capitalization process can be applied to
derive a value that the investor would pay to receive that particular income
stream.
Investors in office buildings typically make a forecast of net operating
income and cash flow over a period of time ranging from five to 15 years. This
projection is used to determine a purchase price justified by the degree of risk
inherent in the proposed investment.
We modeled the following specific assumptions within the cash flow model.
1) Holding Period - We modeled an 11-year holding period on a fiscal
year basis beginning August 1, 1996. We extended the typical 10-year
period by one year based on the future rollover pattern, which results
in "non-stabilized" releasing during the 11th year.
2) Income Projections - Existing tenants were modeled according to the
terms of the leases. Absorption tenants and future speculative
rollover tenants were modeled according to the market rent and
concession conclusions presented previously. These conclusions are
restated below.
FSG Mos. Per Rentable SF
Annual Rent Free Tenant Improvements
Lease Term Initial PSF Adjustments Rent New Renew
---------- ----------- ----------- ---- --- -----
5 Years $16.20 Flat None $12.50 $5
3) Vacancy and Collection - We modeled a combination of "global" vacancy
and collection, and lag vacancy between leases. The assumptions are
summarized below.
Global Vacancy and Collection - We modeled an overall 5%
deduction against revenues throughout the projection period.
Lag Vacancy - We modeled lag vacancy between leases based on an
assumed 6 months vacancy between 5-year terms. These projections
were weighted by the 65% renewal probability assumption, which
results in a weighted deduction of 2 months between 5-year terms.
5) Renewal Probability - We assumed a 65% renewal probability for all
tenants.
6) Leasing Commissions - This expense was modeled at 6% for 5-year
leases. Renewing tenants were modeled with one-half commission.
7) Reversion - The reversion price was calculated by applying a 10.5%
overall capitalization rate to the 11th year's net operating income.
Following a deduction for a 2.0% cost of sale, the reversion price was
added to the previous year's net cash flow prior to discounting.
We used the ProJect and Excel cash flow programs to simulate the projected
operating characteristics for the subject property under the preceding
assumptions. The cash flow and value table are on an accompanying page, and
additional detail is included in the Addenda.
Derivation of Discount Rate
The accompanying exhibit entitled "Comparative Analysis of U.S. Treasuries
and REITs" provides an overview of the alternative marketplaces for capital
investment during the period from June, 1995 through May, 1996. The graph and
accompanying data show that equity REIT yields are not necessarily sensitive to
changes in interest rates. Although yields for intermediate Treasuries increased
by nearly 50 basis points during the 12-month period, yields for equity REITs
(on average) decreased by 30 basis points during the same period. Investor
concerns of higher inflation can increase Treasury yield requirements, but the
real estate market can represent a "hedge" against inflation due to pricing
increases. The yields for REITs are below levels required for single asset real
estate investments, however, due (in part) to liquidity issues and the diversity
and management levels of multi-property portfolios.
The most recently published Cushman & Wakefield survey of investors' return
requirements was published in Winter, 1995, and a copy is included in the
Addenda. The Summer, 1996 survey has been completed but is not yet published. A
copy of the return requirements reported by investors for the 1996 survey is
also included in the Addenda. We reviewed current reported return requirements
for a cross section of retail and office investors. The data is summarized in
the following chart.
Weighted Average Ranges
Property Type Category(l) Going-in Cap Rates IRRs
CBD Office Class A-Leased 9.3%-9.8% 11.8%-12.3%
Suburban Office Class A-Leased 8.8%-9.6% 11.2%-11.7%
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues.
We concluded within the range bracketed by the respondents for the Class B
asset categories, with most emphasis to the low end of the range for the
suburban "leased asset" category, which considers the subject's percent
occupancy level, and estimated a 12.0 percent discount rate is appropriate for
the subject cash flow projections. This conclusion results in the following
value indication for the property:
Discounted Cash Flow Conclusion: $7,500,000
Direct Capitalization
In the direct capitalization method we estimated a value by dividing the
subject's net operating income by an overall capitalization rate. This overall
rate (OAR) is selected based on our analysis of market sales and reported
requirements from the category of investor most representative of the buyers for
this asset. The overall rate is calculated by dividing the net operating income
from the sales by their respective sales prices.
The chart below summarizes the overall rates for the comparable sales data
presented in the Sales Comparison Approach.
A significant portion of the variation in overall rates can be attributed
to the differences in occupancy levels and the proformas used as the basis for
capitalization, as well as the relationship between market and contract rental
rates.
We concluded a 10.0 percent overall capitalization rate is appropriate for
the subject. As shown on the accompanying exhibit the resulting rounded value
indication by direct capitalization is $7,700,000.
Income Approach Conclusion
The $7,700,000 indication by direct capitalization compares with the
discounted cash flow conclusion of $7,500,000. Each method is relevant for a
property of this type, and we concluded at $7,600,000 for the property by the
Income Approach.
Value indications for the subject property by the Approaches to Value are
indicated as follows:
Cost Approach Not Used
Sales Comparison Approach $9,000,000
Income Approach $7,600,000
In the reconciliation, each approach to value is considered in order to
determine the reliability of the data in each and to weigh which approach best
represents the actions of typical users and investors in the market.
The Sales Comparison Approach is based on the principle of substitution
which implies that a prudent person will not pay more to buy or rent a property
than it would cost to buy a comparable substitute property. In this approach,
the subject property was compared with six office building sales or escrows. We
analyzed the sales using the sales price per square foot. Although various
dissimilarities between the sales and the subject were noted, the general
analysis is believed to provide reasonable support for our value conclusion. As
such, the Sales Comparison Approach is afforded appropriate weight in the final
conclusion.
The Income Approach is based upon investor expectations for the income
stream generated by an income producing property. After estimating gross income,
deductions were made for vacancy and collection losses, and variable, fixed and
other expenses. The resulting net operating income was then converted into an
indication of value by means of discounted cash flow model, and direct
capitalization.
Since investment properties are generally bought and sold based upon their
income generating ability, all sources of pertinent data were carefully
researched. It is our opinion that the Income Approach is the most reliable
indicator of the value of the subject since the intent of our analysis was to
mirror investor expectations.
Therefore, giving primary weight to the indication of value via the Income
Approach, but recognizing the validity of the Sales Comparison Approach and the
comparability of the data, we have formed an opinion that the market value of
the leased fee estate in the referenced property, subject to the assumptions,
limiting conditions, certifications, and definitions, as of August 5, 1996, was:
Appraisal means the appraisal report and opinion of value stated therein; or the
letter opinion of value, to which these Assumptions and Limiting Conditions are
annexed.
Property means the subject of the Appraisal.
C&W means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
Appraiser(s) means the employee(s) of C&W who prepared and signed the Appraisal.
The Appraisal has been made subject to the following assumptions and limiting
conditions:
1) No opinion is intended to be expressed and no responsibility is assumed for
the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2) The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for the
accuracy or completeness of such information, including the correctness of
estimates, opinions, dimensions, sketches, exhibits and factual matters.
3) The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4) The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person other
than the party to whom it is addressed or for purposes other than that for
which it was prepared. No part of the Appraisal shall be conveyed to the
public through advertising, or used in any sales or promotional material
without C&W's prior written consent. Reference to the Appraisal Institute
or to the MAI designation is prohibited.
5) Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
6) The Appraisal assumes (a) responsible ownership and competent management of
the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for arranging
for engineering studies that may be required to discover them); (c) full
compliance with all applicable federal, state and local zoning and
environmental regulations and laws, unless noncompliance is stated, defined
and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental
consents have been or can be obtained and renewed for any use on which the
value estimate contained in the Appraisal is based.
7) The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8) The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser assumes no responsibility for the authenticity or completeness of
lease information provided by others. C&W recommends that legal advice be
obtained regarding the interpretation of lease provisions and the
contractual rights of parties.
9) The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10) Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
11) Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the Property. C&W
recommends that an expert in this field be employed.
We certify that, to the best of our knowledge and belief:
1) James W. Myers and Miles Loo have inspected the property, James W.
Myers, MAI, have reviewed the report and concur with the findings
contained herein.
2) The statements of fact contained in this report are true and correct.
3) The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are our
personal, unbiased professional analyses, opinions, and conclusions.
4) We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5) Our compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event. The
appraisal assignment was not based on a requested minimum valuation, a
specific valuation or the approval of a loan.
6) No one provided significant professional assistance to the persons
signing this report.
7) Our analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the
Code of Professional Ethics and the Standards of Professional
Appraisal Practice of the Appraisal Institute.
8) The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9) As of the date of this report, James W. Myers, MAI, has completed the
requirements of the continuing education program of the Appraisal
Institute.
/s/ Miles Loo, Jr.
Miles Loo, Jr.
Los Angeles Valuation Advisory Services
/s/ James W. Myers
James W. Myers, MAI
Senior Director
Los Angeles Valuation Advisory Services
Certification No. AG002662
TENANT SQUARE FEET BEGIN DATE END DATE
--------------------------------------- ----------- ---------- --------
1 - SUITE 101 COAST FED SAVINGS 6,154 4/1983 3/2003
2 - SUITE 102 THE DESIGNORY 3,492 5/1996 1/2000
3 - SUITE 200 ESPIRIT JONES 16,797 9/1996 8/2001
4 - SUITE 310 EAGLE PACIFIC INS 7,730 4/1989 11/1996
5 - SUITE 360 COMPASS PRODUCT. 2,919 7/1991 7/1998
6 - SUITE 400 LA TORRACA & GOE.. 11,698 2/1995 1/2001
7 - SUITE 405 PACIFIC CRANE 2,444 6/1995 5/1998
8 - SUITE 500 CITY OF LONG BCH 15,369 1/1995 12/1999
9 - SUITE 600 THE DESIGNORY 24,574 2/1995 1/2000
10 - SUITE varies LEASE-UP (5-yr) 1,796 10/1996 9/2001
11 - SUITE varies REP 01 OF TEN #10 1,796 1/1997 12/2001
12 - SUITE varies REP 02 OF TEN #10 1,796 4/1997 3/2002
13 - SUITE varies REP 03 OF TEN #10 1,797 7/1997 6/2002
-----------
13 TENANTS 98,362
===========
TENANT SQUARE FEET BEGIN DATE END DATE
--------------------------------------- ----------- ---------- --------
1 - 5-Yr Tenant
2 - SUITE 102 THE DESIGNORY 3,492 5/1996 1/2000
3 - SUITE 200 ESPIRIT JONES 16,797 9/1996 8/2001
4 - SUITE 310 EAGLE PACIFIC INS 7,730 4/1989 11/1996
5 - SUITE 360 COMPASS PRODUCT. 2,919 7/1991 7/1998
6 - SUITE 400 LA TORRACA & GOE.. 11,698 2/1995 1/2001
7 - SUITE 405 PACIFIC CRANE 2,444 6/1995 5/1998
8 - SUITE 500 CITY OF LONG BCH 15,369 1/1995 12/1999
9 - SUITE 600 THE DESIGNORY 24,574 2/1995 1/2000
10 - SUITE varies LEASE-UP (5-yr) 1,796 10/1996 9/2001
11 - SUITE varies REP 01 OF TEN #10 1,796 1/1997 12/2001
12 - SUITE varies REP 02 OF TEN #10 1,796 4/1997 3/2002
13 - SUITE varies REP 03 OF TEN #10 1,797 7/1997 6/2002
-----------
12 TENANTS 92,208
DOWNTOWN PLAZA
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
BUILDING PROLOGUE
LEASEHOLD ANALYSIS OF DOWNTOWN PLAZA BEGINNING 8/1996
??R 15 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
DESCRIBED AS Net rentable area
1996 VALUE - 100,146
THEREAFTER - CONSTANT
OCCA
DESCRIBED AS Occupied area
1996 VALUE - 78,620
1997 VALUE - 96,370
1998 VALUE - 97,468
1999 VALUE - 96,362
2000 VALUE - 91,123
2001 VALUE - 93,314
2002 VALUE - 96,176
2003 VALUE - 94,391
2004 VALUE - 98,362
2005 VALUE - 91,123
2006 VALUE - 93,463
2007 VALUE - 96,026
2008 VALUE - 97,711
2009 VALUE - 98,119
2010 VALUE - 91,123
THEREAFTER - CONSTANT
GROWTH RATES
RNTG
DESCRIBED AS Market growth rate
1996 VALUE - 3.50
THEREAFTER - CONSTANT
CPIG
DESCRIBED AS Consumer price index growth rate
RTXR
DESCRIBED AS Real estate tax rate
1996 VALUE - 1.00
THEREAFTER - GROWING AT GROWTH RATE EXPG
PKIR
DESCRIBED AS Parking income rate
1996 VALUE - 1.70
THEREAFTER - GROWING AT GROWTH RATE MKTG
RSVR
DESCRIBED AS Reserve allowance rate
1996 VALUE 0.15
THEREAFTER - GROWING AT GROWTH RATE CPIG
PKXR
DESCRIBED AS Parking expense rate
1996 VALUE - 0.40
THEREAFTER - GROWING AT GROWTH RATE EXPG
MISCELLANEOUS INCOMES
PARKING INCOME
MARKET RATE PKIR MULTIPLIED BY AREA MEASURE OCCA
OTHER INCOME
1996 VALUE - 40,000
THEREAFTER - GROWING AT GROWTH RATE MKTG
EXPENSES
FIXED UTILITIES , REFERRED TO AS FUTX
DESCRIBED AS Fixed utility expenses
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE FUTR MULTIPLIED BY AREA MEASURE NRA
VARIABLE UTILITIES, REFERRED TO AS VUTX
DESCRIBED AS Variable utility expenses
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE VUTR MULTIPLIED BY AREA MEASURE OCCA
FIXED CLEANING , REFERRED TO AS FCLX
DESCRIBED AS Fixed cleaning expenses
CHARGED AGAINST NET OPERATING INCOME
VARIABLE CLEANING, REFERRED TO AS VCLX
DESCRIBED AS Variable cleaning expenses
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE VCLR MULTIPLIED BY AREA MEASURE OCCA
REPAIRS & MAINTNCE, REFERRED TO AS R&M
DESCRIBED AS Repairs & maintenance expenses
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE R&MR MULTIPLIED BY AREA MEASURE NRA
ADMINISTRATION , REFERRED TO AS ADMX
DESCRIBED AS Administration expenses
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE ADMR MULTIPLIED BY AREA MEASURE NRA
GENERAL BUILDING , REFERRED TO AS GBLX
DESCRIBED AS General building expenses
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE GBLR MULTIPLIED BY AREA MEASURE NRA
MANAGEMENT FEE , REFERRED TO AS MFEX
DESCRIBED AS Management fee expenses
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE MGTR MULTIPLIED BY AREA MEASURE NRA
INSURANCE , REFERRED TO AS INSX
DESCRIBED AS Property insurance expenses
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE INSR MULTIPLIED BY AREA MEASURE NRA
REAL ESTATE TAXES , REFERRED TO AS RTXX
DESCRIBED AS Real estate tax expenses
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE RTXR MULTIPLIED BY AREA MEASURE NRA
EXPNSE RECOVERIES , REFERRED TO AS REC
DESCRIBED AS Total operating expense recoveries
??? INFORMATIONAL EXPENSE
+ 100.0% OF FUTX+100.0% OF VUTX
+ 100.0% OF FCLX+100.0% OF VCLX
+ 100.0% OF R&MX+100.0% OF ADHX
+ 100.0% OF GBLX+100.0% OF MFEX
+ 100.0% OF INSX+100.0% OF RTXX
+ 100.0% OF PKXX
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 6.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 6.33% 1.00
NOV 6.33% 1.00
DEC 8.33% 1.00
------- -------
RENTALS 100.00% 12.00
GLOBAL RECOVERIES
EXPNSE RECOVERIES , REFERRED TO AS BSYR
DESCRIBED AS Base year recoveries
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
EXPNSE RECOVERIES , REFERRED TO AS 1995
DESCRIBED AS 1995 recoveries
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 774,779
DESCRIBED AS 1994 recoveries
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 907,789
EXPNSE RECOVERIES , REFERRED TO AS 1993
DESCRIBED AS 1993 recoveries
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASS AMOUNT OF 810,882
EXPNSE RECOVERIES , REFERRED TO AS 1992
DESCRIBED AS 1992 recoveries
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 804,788
EXPNSE RECOVERIES , REFERRED TO AS 1991
DESCRIBED AS 1991 recoveries
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 760,975
EXPNSE RECOVERIES , REFERRED TO AS 1990
DESCRIBED AS 1990 recoveries
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 774,920
TENANT PROLOGUE
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
EXPNSE RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE CM5W
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TI5W
RENEWAL PAYOUT: CASHED OUT
--------------------------------------------------------------------------------
# 2 - SUITE varies , 10-YR RETAIL
LEASE DATES: 10/1996 TO 9/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,000
PRIMARY CODE: 2 - 10-Yr Tenant
SECONDARY CODE: 3 - Retail
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKTR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
EXPNSE RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE CMlW
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TI1N
RENEWAL PAYOUT: CASHED OUT
# 3 - SUITE varies , 5-YR OFFICE
LEASE DATES: 10/1996 TO 9/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,000
PRIMARY CODE: 1 - 5-Yr Tenant
SECONDARY CODE: 4 - Office
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
EXPNSE RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE CM5W
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TI5W
RENEWAL PAYOUT: CASHED OUT
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