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20131213 Agenda revised
MIAMI BEACH Special City Commission Meeting City Hall, Commission Chambers, 3rd Floor, 1700 Convention Center Drive December 13, 2013 Mayor Philip Levine Vice-Mayor Deede Weithorn Commissioner Michael Grieco Commissioner Joy Malakoff Commissioner Micky Steinberg Commissioner Edward L. Tobin Commissioner Jonah Wolfson City Manager Jimmy Morales City Attorney Jose Smith City Clerk Rafael E. Granado Visit us at www.miamibeachfl.gov for agendas and video "streaming" of City Commission Meetings. ATTENTION ALL LOBBYISTS Chapter 2, Article VII, Division 3 of the City Code of Miami Beach entitled "Lobbyists" requires the registration of all lobbyists with the City Clerk prior to engaging in any lobbying activity with the City Commission, any City Board or Committee, or any personnel as defined in the subject Code sections. Copies of the City Code sections on lobbyists laws are available in the City Clerk's office. Questions regarding the provisions of the Ordinance should be directed to the Office of the City Attorney. Call to Order at 4:00 p.m. AGENDA C7 -Resolutions C7 AA Pursuant To Section 2.0 Of The City Charter, The City Manager Hereby Requests That A Special Meeting Of The City Commission Be Called For Friday, December 13, 2013 At 4:00 p.m. To Reconsider Item C7 AA From The December 11, 2013 City Commission Agenda. The Resolution Authorized The City Manager To Decline The Right Of First Offer Transaction, As Required Per The Terms The Ground Lease Between The City Of Miami Beach (Owner) And Pelican Investment Holdings, LLC (Tenant), Dated December 1, 1999, Involving Improvements At 1027-1041 Collins Avenue (Project); And Approved The Sale Of The Project, Subject To Satisfactory Completion By City Staff Of The City's Due Diligence, Payment By Tenant To City Of The City's Due Diligence Costs, And Payment Of The Settlement Offer The Resolution Further Authorized The City Manager And The City Clerk To Execute Any And Al Closing Documents On Behalf Of The City. (Tourism, Culture & Economic Development Department) 1 THIS PAGE INTENTIONALLY LEFT BLANK 2 ~ MIAMI BEACH City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachA.gov TO: FROM: DATE: SUBJECT: COMMISSION MEMORANDUM (EMERGEN Y MEETING} Mayor Philip Levine and Members f the City I Jimmy L. Morales, City Manager 'Ho+---.. December 13, 2013 PURSUANT TO SECTION 2.0 OF OUR CITY CHARTER, I HEREBY REQUEST THAT A SPECIAL MEETING OF THE CITY COMMISSION BE CALLED FOR FRIDAY, DECEMBER 13, 2013 AT 4:00 P.M. TO RECONSIDER THE RESOLUTION C7AA FROM THE DECEMBER 11, 2013 CITY COMMISSION AGENDA. THE RESOLUTION AUTHORIZED THE CITY MANAGER TO DECLINE THE RIGHT OF FIRST OFFER TRANSACTION, AS REQUIRED PER THE TERMS THE GROUND LEASE BETWEEN THE CITY OF MIAMI BEACH (OWNER) AND PELICAN INVESTMENT HOLDINGS, LLC (TENANT), DATED DECEMBER 1, 1999, INVOLVING IMPROVEMENTS AT 1027-1041 COLLINS AVENUE (PROJECT); AND APPROVED THE SALE OF THE PROJECT, SUBJECT TO SATISFACTORY COMPLETION BY CITY STAFF OF THE CITY'S DUE DILIGENCE, PAYMENT BY TENANT TO CITY OF THE CITY'S DUE DILIGENCE COSTS, AND PAYMENT OF THE SETTLEMENT OFFER THE RESOLUTION FURTHER AUTHORIZED THE CITY MANAGER AND THE CITY CLERK TO EXECUTE ANY AND AL CLOSING DOCUMENTS ON BEHALF OF THE CITY. Background On December 11, 2013, the City Commission adopted Resolution No. 20013-28438, whereby the Mayor and City Commission authorized the City Manager to decline, in writing, the Right of First Offer Transaction, as required pursuant to the terms of Section 36.2 of the Agreement of Lease ("Ground Lease") between City ("Owner") and Pelican Investment Holdings, LLC ("Tenanf'), dated as of December 1, 1999, involving the improvements to Property (the "Project") located at 1027 Collins Avenue, Miami Beach, Florida, and 1041 Collins Avenue, Miami Beach, Florida; the Commission further approved the Sale of the Project to the Proposed Purchaser, Jones Lang LaSalle Income Property Trust, Inc., subject to and conditioned upon City staff's successful completion of its evaluation of the Proposed Purchaser in accordance with Article 10 of the Lease (the "City's Due Diligence"); and payment to the City of its reasonable costs incurred in connection with the proposed Sale including, without limitation, reimbursement of the City's Due Diligence costs and payment of the Settlement Offer; and further authorizing the City Manager and City Clerk to execute any and all closing documents on behalf of the City. Agenda Item C7AA Date J:Z-18-1( 3 Commission Memo Sale of the Pelican Garage 1027-1041 Collins Avenue December 13, 2013 (Emergency Commission Meeting) Page 2 of2 Analysis In determining whether or not to recommend exercising the Owner's Reciprocal Right of First Refusal, the City Commission considered a comparison of the revenue stream utilizing the rates as currently charged by the City for City-owned and managed parking garages as compared to the rates currently being charged by the Tenant for this Parking Facility. The Pelican Garage Offering Memorandum sets forth the current business model for the Garage Facility, a copy of which is attached hereto and made a part hereof as Exhibit "1". The City, via applicable City ordinances, has had a longstanding position of keeping the parking rates below market for the benefit of its residents and visitors and therefore cannot compete with the income stream of a privately operated garage. The last amendment to the garage parking rates which took place in 2008 maintained the rates for short to medium stays ($1.00 per hour, up to fifteen hours, at garages within the entertainment district) with a gradual increase up to a flat rate of $20.00 for longer term stays. When analyzing the gross revenues, per parking space, for the ih Street and 161h Street City-owned garages ("City Garages") as compared with the Garage Facility, the City Garages generate approximately 53% of the gross revenues generated by the Pelican Garage Facility. It was on that basis that Staff recommended declining the right of first offer. However, if you analyze the offer, based upon the rates currently being charged by the Pelican Garage Facility (which are current market parking rates), adjusted annually by 4%, the financial impact is positive. Attached is a comparative analysis utilizing several assumptions for consideration, using data provided by the Tenant which has not been independently verified by the City, a copy of which is attached hereto as Exhibit "2". These scenarios were not presented at the December 11, 2013 Commission Meeting, as historically the City has not operated a garage facility, based upon market rates. Based upon the foregoing, the Mayor and City Commission should consider whether or not the City should purchase the Project and under what terms it should be operated. This Garage Facility is primarily used by tourists and valet for the surrounding business district. If the Mayor and City Commission are inclined to increase the parking rates, commensurate with the current market rates, then the Garage Facility would operate with a positive cash flow and the City would also gain control of the garage immediately, instead of waiting an additional 36 years. At a later time, the purchase price would likely go up and may not be as affordable as at this time. Additionally, the City would then have control over the parking rates for this garage. CONCLUSION The Administration has presented this additional information for your review and consideration and is seeking direction from the Mayor and City Commission as to how to proceed. JLM\KGB\MS\GNT Attachments: "1" -Offering Memorandum "2" -Comparative Analysis "3" -Memorandum from the December 11, 2013 Commission Meeting F:\ECOM$ALL\ASSE71RESOLUT/ONS\PELICAN GARAGE\RESOLUTIONS\COMMISS/ON MEMO SALE OF THE PELICAN GARAGE Emergency Meeting DECEMBER 13, 2013 4 -· \ .. -1.-, ~ . . ,, ' ' I • 5 PELICAN GARAGE MIAMI BEACH, FL This confidential offering memorandum, information provided in the provided Offering Materials and myHFF on-line document center (collectively, the "Offering Materials") are intended solely for the limited use by a potential purchaser ("Potential Purchaser") in considering whether to purchase the leasehold interest in the Pelican Garage (the "Property") located in Miami Beach, Florida. The Property is owned by Pelican Investment Holdings, LLC (the "Owner"). For purposes of these conditions of offering (the "Conditions of Offering), Holliday Fenoglio Fowler, L.P. ("HFF") is an agent of the Owner. The Offering Materials, which are provided subject to these Conditions of Offering, contain brief, selected information pertaining to the business and affairs of the Property. They do not, however, purport to be all-inclusive or to contain all of the information which a Potential Purchaser may desire or require. Any party in possession of the Offering Materials is bound by the Conditions of Offering. The Offering Materials contain certain documents, such as, but not limited to, rent rolls and lease abstracts that are described in summary form. The summaries do not purport to be complete nor necessarily accurate descriptions of the full documents involved. The Potential Purchaser must rely solely on its own review of the full documents. All financial projections are provided for general reference purposes only in that they are based on assumptions relating to the general economy, competition, and other factors beyond the control of the Owner and HFF. Any graphics or drawings included in the Offering Materials are included to assist the reader in visualizing the Property. HFF has made no survey of the Property, and assumes no responsibility in connection with such matters. HFF has had neither a legal review of title or development rights of the Property nor an engineering review with regard to the environmental, physical, and mechanical integrity of the Property, and no representations with respect to such matters are made hereby. Neither Owner nor any of its partners, officers, employees, or agents make any representation or warranty, express or implied, as to the accuracy or completeness of this information, and no liability of any kind whatsoever is assumed by Owner with respect thereto. The Offering Materials relating to a possible sale of the Property (the "Sale Opportunity"), which may be furnished to the Potential Purchaser by the Owner or HFF, shall continue to be the property of the Owner and HFF. The Offering Materials will be used by the Potential Purchaser and the Related Parties (as hereinafter defined) solely for the purpose of evaluating the Sale Opportunity and not for any other purpose unrelated to the Sale Opportunity, and may not be copied or duplicated without the Owner's or HFF's prior written consent and must be returned to HFF immediately upon request or when the Potential Purchaser decides not to pursue, or terminates discussion or negotiations with respect to, the Sale Opportunity or the Property. The Potential Purchaser acknowledges that the Sale Opportunity and the Offering Materials are considered confidential and proprietary information of Owner and HFF, and will not disclose the Sale Opportunity, make any Offering Materials available, or disclose any of the contents thereof, to any person without Owner's or HFF's prior written consent; provided, however, that the Sale Opportunity and the Offering Materials may be disclosed to the Potential Purchaser's partners, employees, legal counsel, advisors, institutional lenders, and other capital source(s) (collectively, the "Related Parties") as required for an evaluation of the Sale Opportunity and/or the Property, provided such Related Parties are (a) informed by the Potential Purchaser of the confidential nature of the Sale Opportunity and the Offering Materials and these Conditions of Offering and (bl directed by the Potential Purchaser to keep the Sale Opportunity, the Offering Materials, and related information strictly confidential in accordance with these Conditions of Offering. The Potential Purchaser shall be responsible for any violation of this provision by any of the Related Parties. POTENTIAL PURCHASER HEREBY AGREES TO INDEMNIFY OWNER AND HFF FROM ANY LOSS OR DAMAGE, WHICH OWNER MAY SUFFER AS A RESULT OF POTENTIAL PURCHASER'S OR ITS RELATED PARTIES' BREACH OF THESE CONDITIONS OF OFFERING. OWNER EXPRESSLY RESERVES THE RIGHT AT OWNER'S SOLE, SINGULAR, EXCLUSIVE AND ARBITRARY DISCRETION TO REJECT ANY OR ALL PROPOSALS OR EXPRESSIONS OF INTEREST IN THIS SALE OPPORTUNITY AND TO TERMINATE DISCUSSIONS WITH ANY PARTY IN CONNECTION THEREWITH AT ANY TIME WITHOUT NOTICE. THE OFFERING MATERIALS SHALL NOT BE DEEMED TO REPRESENT THE STATE OF AFFAIRS OF THE SALE OPPORTUNITY OR THE PROPERTY, OR CONSTITUTE AN INDICATION THAT THERE HAS BEEN NO CHANGE IN THE BUSINESS OR AFFAIRS OF THE SALE OPPORTUNITY OR THE PROPERTY SINCE THE DATE OF PREPARATION OF THIS INFORMATION. THE INFORMATION PROVIDED HAS BEEN GATHERED FROM SOURCES DEEMED RELIABLE. BUT THE OWNER AND HFF DO NOT WARRANT OR REPRESENT THAT THE INFORMATION IS TRUE OR CORRECT YOU ARE ADVISED TO VERIFY INFORMATION INDEPENDENTLY. The Owner reserves the right to make any change, to add, delete, or modify the information or to withdraw the Sale Opportunity from consideration at any time, without notice. 6 HFE 1450 Brickell Avenue Suite 2950 Miami, Florida 33131 Fax: (305) 448-6767 www.hfflp.com Luis Castillo Director lcastillo@hfflp.com (305) 448-5498 Marty Busekrus Director mbusekrus@hfflp.com (305) 489-5969 Jim Dockerty Managing Director jdockerty@hfflp.com (305) 421-6550 Scott Wadler Senior Analyst swadler@hfflp.com (305) 421-6542 7 • •! g 0 - 8 TH [-0 r-T l RI N c; HFF is pleased to exclusively offer for sale the leasehold interest in the Pelican Garage (the "Property" or the "Garage"}, a 329-space parking garage and retail building located within one of the highest barrier markets in the US-Miami Beach, Florida. This offering represents a rare opportunity to acquire an institutional-quality, high-volume parking facility located on Collins Avenue, just half a block from the beach and surrounded by numerous hotels, nightclubs, residential towers, retail destinations, and entertainment venues. Opportunities to acquire urban infill parking assets on Miami Beach are extremely rare and infrequently offered for sale. PROPERTY OVERVIEW Address Year Built Interest Offered Ground Lessor Site Size (SF/Acres) Parking Spaces* Retail Tenancy Retail Rentable SF Occupancy Frontage Lot Dimensions Zoning 1021-1041 Collins Avenue, Miami Beach, FL 33139 2001 Leasehold through December 2039 with one automatic 10 year renewal option City of Miami Beach 21,140 SF! 0.49 AC 329 Surf Style1 3,350 100% Collins Avenue: 151 feet 140'X151' MXE/HPD, mixed-use entertainment and historic preservation PARKING GARAGE SUMMARY 1 .l.'i'el Total Spare; Tandnn Spaas B11do.<edSf" 1 16 0 3,350 (retail) 442 (service) 2 41 4 3 .415 (attic) 3 63 15 27 4 63 15 27 5 63 15 27 6 56 9 27 Roof level 27 0 814 Total 329 58 8,129 Fl11ur A rM (SF) 18,945 18,945 18,945 18,945 18,945 18,945 16,875 129,661 'SNrf Jty!r is a rep/011al fe11a11f (/111;1:/ ! m1·11:.f111j.•l1kcr!111/ !-1;bo11/.,;1p.-..) mfb 40 locations in South 1-'!orida, Tampa Bery, the Fionda pa11ha11d/e, /!laba111a a11d A!ississippi. ~' 9 , .. 1 •. ! , f ·~ . .. ' . ,, ' . , . i' "' .. "' . ,, f .. """" • .. 1 10 ;;o "' [ "'-. 0 ::J (J'Q "Tl rn UJ ::i: 0 ::J Ii<' rn ::J '" ru s· ~-- ;::;. 0 c;;· s ~ 11 12 :f'' ·r <T r I '~ './ I ; ; { , lJ 1 ! I ' I l \ ; I , •I RAl<t GEl·ff PAilDf\l/\1 Of'fJCJRT1m1 I Y The Pelican Garage represents a rare opportunity to acquire a dominant urban infill parking facility with stable cash flow and significant value enhancement potential located in the heart of Miami Beach, one of the strongest tourist markets in the US. The dearth of existing parking garages located in Miami Beach, as well as the lack of developable land makes the Pelican Garage a "generational" investment opportunity for a prospective buyer. 5c-;.J:i_[ C>>I ! F _I}'/,. >.\ TH '· :, \ f-IC.C:,Jr (~~:01//Ti ,· F': :·-a'. 'i :i -The Property has seen consistent income growth in recent years, and currently achieves an annualized net income of roughly $1.34 million. This figure represents a nearly 35% increase over 2010 income and is projected to grow another 26% over the next five years. This type of growth is reflective of the high demand for parking in Miami Beach, and the supply-constrained nature of this market and the number of hotels under development and in need of parking. With limited parking supply in Miami Beach and demand continuing to increase for both transient and contractual revenue, the Property will be a direct beneficiary of the potential to continue to increase occupancy and income over time. $1.800.00C $1.600,000 $1.480,000 $ i .2JO,OOO $1.0JO. JOO $800.000 $GCO COO 2014 Pelican Garage Annual Net Operating Income 2015 2016 2017 2018 13 PELICAN GARAGE MIAMI BEACH, FL '.:")l_pc.:_v [:::0,·1i\JJ[ :\'IE:i'IL',\JU~. As land prices increase in Miami Beach and a boom of new hotel, residential, and commercial developments are delivered, existing lots and parking structures are increasingly being converted to alternative uses. New developments at 500 Alton Road and 1000 17th Street are collectively taking two surface lots and one garage off the market at the same time that demand is approaching an all-time high. A new owner of the Property can reap the benefits of an increasingly tight market supply by owning one of a limited number of dedicated garages in South Beach. l::P CEWER . \JCAT ON The Property is located in the heart of Miami Beach, one of the most desirable and highly trafficked destinations in the world, with ample entertainment, nightclubs, retail, and dining destinations in all directions. The Garage is located on Collins Avenue half a block from the beach and is within half a block of the heart of Ocean Drive, Espanola Way, and Lincoln Road. These addresses all provide important retail, nightlife, and entertainment venues for locals and tourists alike and are substantial demand generators for the Property at all times of the day. The Property is located within one block of the Breakwater/ Edison, Congress, Dream, Essex House, Victor, and Clevelander hotels, collectively housing 309 hotel rooms, and is also within close proximity to numerous residential and retail properties. MIAMI REACH s SIULING RFSIOENTIAL MAHKET Condo prices on South Beach have continued to recover from the recent downturn. The current average price per square foot of $694 is up 6.9% over the prior quarter, 4.8% over the prior year, and over 31% in since 2010. $750 $700 $650 $b00 $550 :S500 8 South Beach Average Condo Price PSF ~ ~ ~ ~ ~ ~ ~ $ ~ ~ ~ ~ ~·~ ~·~ ~ 4~~if~~4&if~¢4~~~~¢ :r·~ I :J-i\J,1'1 Ui'J;',L TCiuRISi'.' I !lJIJ Miami Beach is the most-visited tourist destination in greater Miami and is its prime hotel market In 2012, 42% of the 13.9 million overnight visitors to Miami-Dade County stayed on Miami Beach, nearly double the next-largest submarket of greater Miami. In addition, 65.7% of overnight visitors reported spending time in South Beach's Art Deco District, 43.5% of visitors visited the beaches and 46% visited the shops and restaurants of Lincoln Road; these are the top three tourist magnets in Greater Miami in 2013 and all are within walking distance of the Pelican Garage. The in-migration of foreign travelers and unique locational advantage, easily accessible from Europe and Latin America, has given Miami Beach an unrivaled, desirable address. The chart below shows the great popularity of Miami Beach, particularly South Beach, as a tourism market in Miami-Dade County. Overnight Visitors to Miami-Dade County, 2012 16,000.000 14.000.000: '2000000 I 10,000 000 8,000,000 I 6,000,000 --• -----•-4,000,000, 2 000,000 0 t --·~'--' Total Visi1ed Art Deco Visited Lineal~ Visited Beaches Dis1rict Road Jomn:: Grrr1trr J\lio:w1i Com'mtio11 mul T ~isitors Rm~·af-1 Miami-Dade County Overnight Visitation 2009-2012 15.000,000 : 14.000,000 I 13.000,000 12,000,000' 11.000,000 -10,000,000 -2009 2010 2011 I Srayed in M1am1 Beach 2012 14 ~v~IAMI t::E.ACI 1 CC-VtUJf-'W:.f\ I l\EN1\ISS/\f\JCE Miami, and more specifically Miami Beach, is one of the most dynamic tourism markets in North America today. The lodging market has seen incredible growth in fundamental performance over the last two years, while major developments, including the Frank Gehry-designed New World Center and future Miami Beach Convention Center are primed to completely transform Miami Beach, creating even more demand from all tourism segments. The proposed $1 billion+ expansion of the Miami Beach Convention Center will bring with it numerous new office, retail, and lodging offerings, as well as significant convention business creating a massive new demand segment for parking. '!<.. Proposed MBCC Development Rendering '~-::~·l ' ' -~·-.. ,J.o·!, . -~ ·~ ..... ~ "'"..; HFF 15 PELICAN GARAGE MIAMI BEACH, FL -Loews Mlami . Beach Opens '"'·'"'·'·=·:,,c:,':t'.': ~r ,, I •r ••+ ... -~.) '• I .. -~?--·~;~!r l~~ ~.~ ...... l. -~ ... t~ . ~ ~ ... --.:....... i. Award winning Llocoln .center mixed-use development opens on Lincoln & Alton i1 "' Adaptive reuse of historic Chase S&L Branch to accommodate Banana Republic .... t..t •r >-•'•" . , . + . r.: ;or--Victoria s Secret opens in historic Mead Building : Miami ~ach resident population 99,933 -Miami Beach overnight ll'isitors 4.3M • Historic Renovation of Ritz Carlton Lincoln Road ! -~lt-lr. '"-'"I.••· ! · l ........ -.. -:.:-::-~ ---Setai Hotet Opens Apj:ile Store opens , in historic Chrysler Building 555 Washrngto11 mixed-use property completed Historic Sony Building Renovateo . & Converted to Office Condo • lnauguaral Art Basel Show . 140,000 SF Lmcoln Plar.e offic~ building completed on the south side of Lincoln Road 16 Fontainebleau $1.0 B renovation completed ··.· Eden Roe $210 M renovation completed Lincoln Road's 50th Anniversary r Complete renovation of i 350 Lincoln mixed-use property I l~.9~, .._..~. ..,,.____.~ ...... II ----...;, ''":'.'--.. ~·' "t ... '-.. Wi--_., ... --... '-· 1111 Lincoln Road completed · Mid-2010-New $154M New World Symphony Campus completed ..... .,...,... 511 room W Hotel Opens ~--=-= j. ~~ I ~ New World Symphony Grand opening 11 2.5 Acre Lincoln Park Completed ' ? Forever 21 & H&M announce j Flagship Store Development · Miami Beach resident population is projected to be 110,000 Convention Center completes $55M renovations 550-Space Frank Gehry Designed Garage Completed $22 .4 M renovation of Miami Beach's 17.5-acre South Pointe Park Mid-2010-New World Symphony relocates administrative functions to new campus 420 Lincoln mixed-use project by Enrique Norten completed Art Basel draws 50,000 in record setting year 5th & Alton Vertical Power Center Opens HFF 17 PELICAN GARAGE MIAMI BEACH, FL MAP KEY Garage * Pelican Garage 0 E•isting Hotel Valet Contracts e New South Beach Hotels ·~11 13TH STREET GARAGE 18 \ I \ I l ; !~ ,-, r \/~; ) r·---~ I 'i t I ,_ .-L,.-I , 1 -. --, '! ,-·1 [--:-! [ Valet Contracts with New Hotels. The booming hotel market, with some of the highest occupancy and RevPAR numbers in the United States, brings opportunity for valet parking contracts with new hotels along Ocean Drive, Collins Avenue, and beyond. Several new valet contracts have been signed by the current owner, including the Edison/Breakwater Hotel, Hotel Victor, the Dream Hotel and the Wyndham Garden. However potential for new contracts also exists with the recently reopened Blue Moon, Winter Haven, and the soon-to-reopen Fairwind immediately across the street from the Property. The table and corresponding map below provides an overview of new hotel product recently completed or soon to be delivered in Miami Beach. These hotels have zero on-site parking available for guests other than valet parking. NEARBY SOUTH BEACH HOTEL DEVELOPMENT i''i11111ber Blocks fro!ll ,\-a111e Add rm ExptCted Ddirery of Rooms Property Fairwind 1000 Collins Ave Late 2014 80 0 Blue Moon 944 Collins Ave Opened Dec 2012 75 1 Winter Haven 1400 Ocean Drive Opened Dec 2012 70 5 James at Royal Palm 1545 Collins Ave Opened Dec 2012 393 5 Haddon Hall 1500 Collins Ave 2015 155 5 Gale Hotel/ 1690 Collins Ave Opened Dec 2012 114 8 Kaskades at Gale Red bury 1776 Collins Ave Fall 2013 69 9 Lennox Hotel 1900 Collins Ave Mid-2014 62 11 Total 1,018 Garage Rental Revenue Mark to Market. Given Miami's position as a rapidly transforming global gateway city and one of the largest MSA's in the nation, the Property is well-positioned to take advantage of an increase in parking rates in the coming years. The convergence of rising costs for alternative land uses, increasing development density, and attrition of existing parking lots will put upward pressure on parking rates and create a unique mark-to-market pricing opportunity for the Property. HFF Leverage Success of 1111 Lincoln Road. The redevelopment of 1111 Lincoln Road in 2010 included the construction of a now world renowned 300-space parking garage and 40,000 SF of retail space. In addition to its parking and retail uses, the success of ancillary uses at the 1111 Lincoln garage including exclusive parties and weddings demonstrates the potential to create new channels for revenue at the Property. In addition to 1111 Lincoln, utilizing rooftop and other building spaces has become more prevalent in many Miami Beach developments such as the Dream, Clevelander, Townhouse, and Perry hotels and the 605 Lincoln Office building. Alternative Value Enhancement Potential. The opportunity exists, subject to city approvals, to grow revenue over the near-term by adding signage to the garage fac;ade, expanding third-party advertising/marketing within the Property, and demising the existing retail bay to capture the premium in rent for smaller spaces. 13 19 20 ~CJEYjill Property Location The Pelican Garage is strategically located along the east side of Collins Avenue, just north of 10th Street at 1021 -1041 Collins Avenue, Miami Beach, Florida 33139, in the heart of the "Art Deco District" of South Beach. Its location one block from the beach and proximate to numerous hotels, retail, and entertainment venue affords its unique proposition. The Property caters not only to daytime beach traffic but also to nighttime restaurant, hotel, and entertainment patrons. Access and Visibility The Property is accessed from one point of ingress/egress along Collins Avenue with an additional egress point from the alleyway in the rear of the Property, a unique advantage when delivering cars to valet clients. The Property is highly visible from Collins Avenue heading north or south. Property Description Pelican Garage and Retail consists of a rectangular shaped lot containing 151 feet of frontage along Collins Avenue and a depth of 140 feet along the northern and southern boundaries. The total site size is 21,140 square feet. Access to the subject site is via the east side of Collins Avenue and a 20 toot alley to the rear of the property. The Property was built in 2001 and contains 329 parking spaces, including 27 rooftop parking spaces and 4 on-street spaces. The ground floor retail store, which contains 3,350 square feet, is currently occupied by Surf Style. an established regional client. The store includes a typical storefront glass finish along Collins Avenue. The interior improvements, which were completed by the tenant, include ceramic tile floors and painted drywall. The store has a two-story, exposed beam, ceiling height. PAR Kl NG RATES PELICAN GARAGE PARKING RATES /11/trl'al 0-1 hours 1-3 hours 3-5 hours 5-10 hours 10-24 hours Weekend Monthly Raft (S) $3 $7 $12 $15 $25 Sl 5-$25 per 12 hours depending on demand $150 for weekdays only; $250 for unlimited access 21 22 Zoning The Property is zoned MXE/HPD, a mixed use entertainment and historical preservation district ("HPD") by the City of Miami Beach, Florida. All "Art Deco" buildings are given the HPD designation by the city. The intent of the MXE district is to encourage restoration of existing structures and allow for new construction. Properties within the HPD districts are not required to provide on-site parking spaces. The Property is not historically designated by the Miami Beach historical preservation board and therefore is immune from the special requirements of the HPD designation. Conditional Use Permit The Pelican Garage is subject to a Conditional Use Permit that, among other things, delineates the quantity parking spaces that can be used for valet service. According to the modified conditional use permit dated 02/22/2011, 100 spaces within the garage are permitted to be used for valet storage. Furthermore, the pickup and drop off of sites by valet operators for storage at the Pelican Garage may not exceed a radius of 1,800 feet from the property line. A copy of this document is available on the document center. Parking Spaces The parking garage currently contains 329 spaces, including 4 on-street spaces, and includes 116 tandem spaces to be used for valet parking. Based on the current occupancy, the garage can likely accommodate additional valet contracts. There are six handicap and two baby stroller designated spaces. The remaining spaces are typically utilized by the general public or for potential valet parking overflow. Ground Lease The Property operates under a ground lease from the City of Miami Beach through Reta i I Lease The 3,350 square foot retail space is occupied by Surf Style under a triple net (NNN) lease through August 2017. Surf Style has 15 locations in Florida, 7 locations in Alabama, and 2 locations in Mississippi (www.surfstyle.com). The tenant has been in occupancy since 2001, and has one additional option to extend for five years. The tenant exercised its first option to extend its previous lease upon expiration in August 2012. The current rental rate stands at $73.51 per square foot. The rent for the remaining option is at fair market rate but no less than $277,165 annually ($82.74 PSF). Parking Management The parking garage is operated by Denison Parking, under a management agreement through June 2014. Denison Parking is an experienced operator and was selected as the exclusive parking provider to Simon Property Group (NYSE:SPG), the largest operator of indoor malls in the United States. The management agreement provides a monthly management fee of $3,000 plus and an incentive fee of 10% of revenues over budget. Denison has been operating under this contract since 2009. The contract can be cancelled by either party on 30 day written notice. Utilities Public utilities are available to the site and services are provided as follows: UTILITIES AND SERVICES Electricity Water and Sewer Police and Fire FPL City of Miami Beach City of Miami Beach December 2039 and is automatically extended for an additional 10 years. The Description of Improvements remaining term of the lease is approximately 36 years (including the option period). Base Rent under the ground lease is currently $94,080 per year plus percentage rent equal to 2.5% of the revenue from the parking garage and the base rent of the retail space. The base rent of the ground lease increases by 12% every five years and will increase again in 2016. There is a re-valuation of the rent scheduled to occur when the option is exercised in December 2039. HFF Foundation Exterior Walls/Finish Roofing Life Safety Elevators Concrete spread footings with concrete slab on grade Reinforced concrete with stucco Concrete slab parking deck Fire sprinklers as per code Two passenger elevators in the center in the building 1 7 23 PELICAN GARAGE MIAMI BEACH, FL ·j =.__ 1 '.. ·1' I;, 1,,...... .• i .. '' PARKING GARAGE REVENUES . ' ' h I~~ . ~ -:~· Parking Garage revenue is derived from three primary sources: transient, monthly, and valet services provided to surrounding hotels. The majority of the income is provided by transient and currently accounts for more than 70% of the gross parking income. Overall, the Property's net operating income has grown 10% in 2011, 7% in 2012, and is projected to grow 6% in 2013. The Property continues to increase revenue despite that fact that it infrequently reaches capacity. An ideal balance of parking rate adjustments in conjunction with the garage's occupancy will be the key towards sustained operating income growth. Monthly Parking Monthly parking will generate approximately $137,000 of gross parking revenue in 2013 and is currently derived by approximately 40 accounts totaling 147 parkers. Primarily, local residents and employees of the commercial and hospitality space nearby. Monthly parking at the Property ranges from $150 per month on weekdays only to $250 per month for unlimited access including weekends. The projection assumes $150,906 in 2014 as per Denison's forecast and grows this figure by 4.0% per annum through 2018. Daily Parking (Transient) Income Transient income will generate approximately $1,741,000 of gross parking revenue in 2013 and is derived by visitors coming to Miami Beach to enjoy its beaches, hotels, restaurants, and nightlife. Given the diversity of available activities throughout the day, both day and nighttime traffic is particularly high in the immediate vicinity. The Property's ideal, central location allows it to benefit from both day and night traffic cycles. The projection assumes strong 4.0% annual growth in transient income in 2014 as a result of rate growth and occupancy improvement. ·v ... E...• $2.000,000c $1.800,000 i $1.600,000 $1,400,0001 I $1.200,000; $:,000.000" $800,000 I %00,0DO 5400,000 $200,000 ; $0· -~ _1 2010 I 100% 80% 60% 40% 20% 0%" ----2010 Garage Revenue by Source ~-1 I.I Ltl.I_ 2011 2012 Trailing 12 Thro 2013 Annualized June 2013 Thru June •Transient/Daily '" Monthly •Valet Garage Revenue by Source -- ----------------------·---, 2011 2012 Trailing 12 Thru 2013 Annualized June 2013 Thru June •Transient/Daily •Monthly •Valet 24 Valet Parking Valet parking will generate $770.757 of gross parking revenue in 2013 and is currently derived from eight contracts with nearby hotels. Growth in valet parking income has been particularly robust with nearly 72% growth in this source of revenue since 2010. The 2013 figure reflects only partial year operation for four of the valet contracts which were signed in the second quarter of this year. These new hotels are The Wyndham, The Ocean, The Breakwater/Edison, and The Victor. They will begin in July billing in arrears, so the actual numbers will reflect the burden of the contract without the full income benefit. $1.2CO,OOO $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 Valet Parking -Historical and Proforma Revenue I I I I I I I I I I ZOW 20ll 2U12 Tra1lmg 2013 2014 2015 2016 2017 201~ 12 Montl1 Thru June The typical valet contract is structured as a fixed cost to the hotel, ranging between $23.00 and $29.00 per vehicle and may include some limited validations or concessions. The hotels currently under contract for valet services at the Pelican Garage typically mark-up the valet charge to the customer above the rate contracted with Denison. The mark-up ranges between $35 and $38 per vehicle. The per vehicle charge is a gross figure including sales tax with the hotel deducting a percentage for credit card processing and other ancillary charges. There is no other cost to the hotel and Denison is responsible for all expenses and payroll related to operating the valet stand 24 hours. Payments are made by customers directly to the hotel and remit to the garage operator every 30 days. The table that follows provides a summary of the Garage's existing hotel valet contracts. HFF VALET PARKING CONTRACT SUMMARY Hotel Property The Garden Wyndham The Ocean Hotel Victor Breakwater Essex House and Clevelander Hotels Congress Dream P1ire Per T 'chide Per Ni;;ht $23.00 plus tax $25.00 $24.00 plus tax Additional Promio11s None If owner collects more than $35.00 per day from registered guests, 50% of the excess amount is received by Operator Lease also provides 20 complimentary transient valet parking passes per month. $25.00. Reimbursement of 6.00% of Revenue to If owner collects more than $35.00 per hotel for transient (non-day from registered guests, 50% of the overnight) hotel guests. excess amount is received by Operator. $29.00 $24.00 plus tax $23.00 Hotel guests who self-park are charged $22.00 the first night and $21.00 each additional night (available May-December only). 'Group sales' valet parking is $23.00 per night (available May-December only) Hotel receives complimentary parking for 20 valet vehicles per month. Hotel currently rents 3 advertising boards in the garage and is entitled to one complimentary advertising board. Higher parking rates can be implemented for holiday and event weekends. Higher parking rates can be implemented for holiday and event weekends, but not to exceed $34.00 per day. Hotel receives $250.00 in complimentary transient valet services each month. Hotel guests entitled to 3 hours of valet parking at a flat rate of $15.00. After 3 hours, standard rates apply. Hotel can reduce the rate to $15.00 per vehicle for up to 15 events annually. 19 25 PELICAN GARAGE MIAMI BEACH, FL ·-----·-·-·f if ....: ~-··:..;_: ·-=a: .... --=..._-.:__~ --. ---·-----. I ·1' ~--_; ~~ ,_ " ,. ,, ,, ,, ,.,, " JI ~:iil:JJti .. i-··~ . fl _ _. ........... "' t f .-•11•-wwr Jc --; .,i I ••• , ___ _ lli~l•'•.!llli~ . ••• • a.-. " ~· J • .. , f •f ------,~··~ .. ------L ... ~. L~ : I I Ja"" _...,__,~, , .. r fi1 I ~ :-:--··1 ' ., ~~.,v~·~--~ ~ ------# ~· :. :;: « Rendering of Fairwind Hotel Redevelopment Across Pelican Garage 26 As noted earlier in the offering memorandum, a number of new boutique hotels along Collins Avenue have recently opened or are currently under construction. It is expected that between 2011 and 2015, more than 1,000 new hotel rooms will be added to the area's supply within a one mile radius. These hotels have zero on-site parking available for guests other than valet parking. New hotel brands at these properties include Marriott Autograph, Joie de Vivre, and King and Grove. In particular, the property immediately across from the Pelican Garage is the Fairwind Hotel, which is currently being redeveloped by the Chetrit Group into an 80+ room Art Deco hotel. This trend in the hospitality sector provides a prime opportunity for the Pelican Garage to capture new valet contract business given its proximity to these hotels and the ability to offer faster vehicle turnaround as a result. POTENTIAL HOTEL TARGETS FOR VALET CONTRACTS 1\!r1111e .· lddrrss E.".:/'rrkd De!il'm ;\'11mb<r of Rooms Fairwind 1000 Collins Ave Late-2014 80 Blue Moon 944 Collins Ave Opened Dec 2012 75 Winter Haven 1400 Ocean Drive Opened Dec 2012 70 Total 225 The majority of the hotels along Collins and Washington Avenues as well as Ocean Drive provide valet services with most parking operators utilizing the city owned facilities on the 700 block of Collins Avenue, the 500 block of Alton Road, and surface lots on 1st Street. Hotels proximate to the Pelican Garage using the latter two parking facilities for valet services experience wait times of up to an hour in peak times for each vehicle due to the distance and traffic generated in Miami Beach. The convenience provided by the proximity of the Pelican Garage combined with the clientele drawn to these new hotels provides the perfect opportunity to establish long term contracts with new hotels and negotiate higher nightly rates in line with other major MSA's across the country. Under the current operations, the Pelican Garage can easily accommodate an additional capacity from hotel contracts. The projection assumes $847,832 in 2014 as per Denison's forecast and includes a full year of operations for the new contracts. The projection then grows this figure by 8.0% per annum through 2018. HFF Retail Revenue and the South Beach Fashion & Entertainment District Surf Style is under lease through August 2017 with a fixed rent schedule currently at $73.71 per square foot. triple net and reimburses the landlord for its full pro-rata share of expenses, insurance and real estate taxes. The tenant has one remaining lease renewal option at fair market value. The projection assumes a retail market rate of $100 per square foot upon the tenant's lease renewal or expiration in 2017. The South Beach Fashion District, generally defined as the area along Collins and Washington Avenues between 5th to 10th Streets, is comprised of more than 250,000 square feet of upscale retail stores. The retail stores are supported by several parking garages, one of the most prominent being the Pelican Garage. The tenancy along the South Beach Fashion District has evolved to include high-profile international brands, top-rated restaurants, and premium boutiques that seek entry into this lucrative retail market. Since 2000, the South Beach Fashion District has gradually evolved into one of the most sought after retail corridors in the country. The district is home to flagship locations for several leading names in the fashion industry including Barney's Co-Op, A/X Armani Exchange, Ralph Lauren, Kenneth Cole, Levi's, Diesel, Adriano Goldschmied, Victoria's Secret. Sephora, MNG by Mango, Zara, Tommy Hilfiger and Guess to name a few. Recent activity in the area includes the opening of a three-story, 13,000 square foot Victoria's Secret, UGG Concept Store and the expansion of the A/X Armani Exchange store. The overall Miami Beach submarket commands the highest rents in Miami-Dade County-averaging $64.57 per square foot, triple net, as of the second quarter 2013. Average rents in the Fashion District regularly exceed $100 per square foot, triple net, with recent leases signed in the $105 per square foot triple net range. The Fashion District is able to capture a significant premium over the local market given its strong appeal and tourist traffic as well as its proximity to numerous hotel properties. ll!llllt§ii;f}i(~ "~·· <'~· '\ ' ··S:~~·· Tenants in Fashion & Entertainment District 27 PELICAN GARAGE MIAMI BEACH, FL 1 ~ , I , < I . I . '. · 1 'r· . , ··., ,_ l • c.. • . ·' l .. .) Unless otherwise noted below, all operating expenses are based on the 2014 forecast provided by Denison Parking and grown at 3% per annum. City Space Metered Rentals At each property that the owner has a contracted valet agreement, the parking operator uses city-owned, metered spaces that it leases from the City of Miami Beach to provide valet services. The cost to lease those spaces from the City of Miami Beach is $17.00 per day per metered space. The hotels typically have 2 metered spaces that are covered and designated for valet use. Due to the additional capacity in the garage, this expense is assumed to grow as the garage obtains additional hotel valet contracts. Management Fee and Management Incentive Fee Denison Parking currently manages the garage, with an agreement through June 2014. The management agreement provides a monthly management fee of $3,000 plus and an incentive fee of 10% of revenues over budget. Denison has been operating under this contract since 2009. Total management fee has ranged from 2.5-2.9% since 2010 and the project assumes 2.75% on average through 2018. Real Estate Taxes Real property assessments in Miami Dade County are based on the January 1st value of a property, with a preliminary assessment notification to the property owner during the summer. Property owners may appeal the preliminary assessment at that time. Final tax notices are forwarded to property owners during October and are payable by March 31st of the following year. The Property's 2012 real estate taxes have been paid, with no prior year real estate taxes due. The table below provides an overview of the 2012 assessments and taxes for the Property. For purposes of our financial proforma, real estate taxes are assumed to be assessed at 80% of the projected sale price of the property at the current millage rate for Miami Beach. 2012 REAL ESTATE TAXES -PELICAN PARKING GARAGE Folio S11111her 2012 /fot.r.red 1 ·a/11e M ilkir,e Ratr Total fu·a/ E<tatr ·fo.ws 02-3234-008-0221 $2,760,000 20.47 $56,497 02-3234-008-0220 $6,342,000 20.47 $129,821 Total $9,102,000 $186,318 NOTE: The 2013 pre/imin12ry tax values are now available, however f1tx bills havt not yet been issued. Ground Lease Payment Base Rent under the ground lease is currently $94,080 per year plus percentage rent equal to 2.5% of the revenue from the parking garage and the base rent of the retail space. The base rent increases by 12% every five years and will increase again in 2016. There is a re-valuation of the rent scheduled to occur when the option is exercised in December 2039. ~ ") Li.. 28 2012 OPERATING STATEMENT AND 2013 PROFORMA HISTORIC.-ll OPERATffJNS PRUFURXU OPERATIONS 2013Thru]unt: 2010 2011 2012 IIM Budget thru Dec 2014 2Jlli Z0/6 2017 2018 Monthly Parking $78,230 $76.293 $114,796 $130.310 $137,187 $150,906 $156,942 $163.220 $169,748 $176,538 Daily Parking 1,512.355 1,628,607 1,622,307 1,713,295 1,741,287 1,915,416 1,992,032 2,071,714 2,154,582 2.240,765 Valet Parking1 448,484 605,510 595,656 521,025 770,757 847,832 915,659 988.911 1,068,024 1153,466 Gross Parking Revenue2 2,039,069 2,310,410 2,332,759 2,364,630 2,649,231 2,914,154 3,064,633 3,223,845 3,392,355 3,570,770 Sales and Parking Tax (131,336) ( 151,390) (144,964) ( 144,029) (155875) (171,462) (214,524) (225,669) (237.465) (249,954) Net Parking Revenue 1,907,733 2,159,020 2,187,795 2,220,601 2,493,356 2,742,691 2,850,109 2,998,176 3,154,890 3,320,816 Opera/it~~ l~xpenses Janitorial 7,496 4,354 5,448 5,680 4,689 5.158 5,313 5,472 5,637 5,806 Liability Insurance Premiums 11,860 22,032 27,852 32,372 45,176 49,694 51,184 52,720 54,302 55,931 Repairs and Maintenance 28,433 29,961 38.270 38,575 32,094 35.304 36,363 37,454 38,577 39,735 Telephone Expense 7,791 8,051 12,783 12,543 10,519 11,571 11,919 12,276 12,644 13,024 Ticket Supplies, & Misc. 44,946 65.129 73,983 77.444 81,954 90,149 92,853 95,639 98,508 101,463 Total Payroll and benefits 508,187 626.743 566,207 489,464 644,384 708,823 730,088 751,990 774,550 797,786 Uniforms 4.158 3.589 1,150 965 l,198 1,318 1.358 1.398 1,440 1.484 Utilities 35,097 32,465 32,989 35,967 39,827 43,809 45,124 46,477 47,872 49,308 Rent-City of Miami Beach 84,000 94,080 94,080 94,080 94,080 94,080 94 080 105,370 105,370 105,370 (Ground Lease Payment) City Space (Meter) Rental3 43,424 44,127 56,358 51,551 75,011 103,584 111,690 124,100 136,510 148,920 Management Fee 55,967 62,277 62,263 59,703 72, 175 79,392 78,378 82,450 86)59 91,322 Relocating Valet Office1 (13,746) Subtotal -Operating Expenses 831,359 992,808 957,637 898,344 1,101,107 1,222,882 1,258,349 1,315,346 1,362,169 1,410,148 Net Parking Income 1,076,374 1,166,212 1,230,158 1,322,257 1,392,249 1,519,809 1,591,760 1,682,829 1,792,721 1,910,668 Gross Retail (Surf Style Mall) Revenue5 211,170 217,505 227,567 236,206 241,476 248,720 253,644 261,253 280,763 345,050 Retail CAM (Surf Style Mall) reimbursement" 26,712 30,612 36,670 36,670 36,670 67,174 69.190 71.265 73,403 75,605 Subtotal -Retail Revenue 237,882 248,117 264,237 272,876 278,146 315,894 322,834 332,519 354,166 420,655 Other Expenses Percentage Rent-City of Miami Beach 52,977 58,825 60,165 61,983 63,611 80,751 84,687 88,909 93,663 99,786 Building Insurance 39,000 87,959 84,177 85,092 85,092 86,794 89,398 92,080 94,842 97,687 Property Taxes7 2_?8,616 175,356 178,866 178,866 178,866 393,024 404,815 416,959 429,468 442,352 Subtotal -Other Expenses 320,593 322,140 323,208 325,941 327,569 560,569 578,899 597,948 617,973 639,825 Net Oe:eratin~ Income $993,663 $1,092,189 $1,171,187 $1,269,192 $1,342,826 $1,275,134 $1,335,694 $1,417,400 $1,528,914 $1,691,499 KLY,f.l.lf'Ml'l70i\.\ ! .'.tnl'..\.· 'Valet parking revence assumed to achieve above average growt11 due ta new hotel valet contracts in nego'.iat1cn or projected. ·Revenue <issump'.iocs a'e sLpported b)' h·storica NOi growth of 10% ir 2011. 7% in 20;2 and e;timared 6% in 2013 'City space rentals grow as v<ilet hotel contracts increase. 2015 assumes 18 city space rentals leased al $17.00 per ~o\' Two additional spaces each year thereafter 'V;ilet office reloe<it1on is a non-recurring expense. cRetail lease inoeased to market rent of $100 PSF upon lease expiration in 2017. 'Common Area Mairlerance for the retail space is 14% of insurance and reill estate taxes 'Property taxes assumed lo be re-assessed upon the sale of t~e property. lax re-assessment is assurPed to be 80% of lhe projected sale value at the cur•ent millage 'ale. HFF 2~ ,, 29 cl ;. ·. i ~,~ .. -... ' .. :~·.· ~· . N ~c:.~ :-~-. 30 Miami Beach Overview A seven-square mile island-city separating Biscayne Bay from the Atlantic Ocean, Miami Beach is often referred to as America's Riviera, reflecting its cosmopolitan flair and diverse international culture. Among the many attributes that make Miami Beach a world-class city include over 63 miles of water frontage, outstanding quality of life, countless cultural events and attractions, along with some of the finest dining, shopping, and nightlife anywhere. Miami Beach Parking Market Overview Miami Beach has an active parking market where demand often outstrips supply. Although some new parking structures have opened elsewhere in Miami Beach recently, notably including 1111 Lincoln Road and the 5th and Alton parking garage, the Ocean-Collins strip remains undersupplied relative to its persistently high parking demand generated by the tourists, hotel patrons, residents and shoppers. A survey of the nearby parking garages and their current parking rates is detailed in the table below. It is important to note that no private parking operator except the Pelican Garage currently exists between 5th street and 15th street. As noted in the chart below, median daily and monthly parking rates in Miami currently lag behind other comparable metropolitan markets and submarkets such as Los Angeles, San Diego, Philadelphia, and Boston. As Miami continues to develop a metropolitan core. parking rates should approach cities of similar size and significance. North America -Median Daily Parking Rate (2012) $45 $40 $35 $30 $25 $20 Sl5 SlO $5 $0 ~ i ·~ ~5 ·~ l I J I __ i~i i_ i ii i '*' i-..)• ;;." if' s-0 _.._§' .f ..... ;-1-" ..._o\ ~"'"' ~ ~· cf{! & ~~ & ';:o..e,'71 o(:o, tlO' ~"' o' ~"~ ...,o~ ~ <""' ~'< c.1' ~ 'lrrra: ( '1fif1'f'J' lrrfn7Ji1!''1'fdl 2() f ! flm·•-.1~~ Ratf' )nrif'I' HFF ~~ c:r ;;." ~ . "" o• !l..o C( ¢' ,-or # ;;." ~~· ~~ <l' e;-" 'Q _<:!' b;;.<1. ..._o?!r #-"' ;;. q ~., What is Driving Parking Costs Up? Miami's median daily and monthly parking rates are amongst the lowest compared to other major MSA's nationwide. Miami Beach, however, is currently experiencing a wave of new development specifically targeted at luxury, oceanfront residential and hotel projects and an ensuing increase in retail and residential rents, land values, and residential condominium prices. Condominium prices at select new projects in Miami Beach are at or near New York City pricing while parking rates are currently much lower. As the costs of other uses increase, these gaps will $500 $562 $500 ' $400 I $300 . $200 $100 I I $0 I North America -Median Monthly Parking Rates (2012) $533 l. l_ lJ 'i' 'i' i i ,,j o-:to" ~<::-~,"(}' ~o ~~ c:r ~~ ~ ~.,. <:§-'*' & . '<°" , , , -~ , ~ , , , -o" ~c,; .;,.~-& .,'t; ~<ti _,,.o rff ..f' ...,-<,,\"' -~~o-· c; ;f ~.,-~"' e;-" ~'ef' ~~ ..f ;-1." ef>.# 4.cf-;-1-' ""'"""~ ;J._,_o~ ~"" .r•1t1r<r. C.'11/)(,:r lmrttJrJfNmaJ !01 l f~,u*./lt~ fu1ft' 1·,,,,~I eventually have to narrow and parking rates are expected to rise sharply. In addition to the disparity between relative costs of parking and other land uses, the Property is well positioned to take advantage of Miami Beach's new wave of development. In addition to new and ongoing hotel projects such as the Fairwind, immediately in front of the property, new condominium and mixed-use developments will skew the supply-demand balance in favor of parking owners. Infill developments such as Palau at Sunset Harbor, 321 Ocean Drive, 500 Alton, and One Ocean will increase Miami Beach's luxury residential population while bringing more shops and cars onto the already dense South Beach peninsula. One of the primary consequences of the increasing development pressure has been the redevelopment of competing parking lots in South Beach; 500 Alton, for instance, will replace a surface lot and an existing parking garage with a planned mid-rise residential and retail development, and the privately-owned surface lot at 1000 17th Street is currently being replaced with an 18,000-square foot retail structure. (comment to HFF: how many parking spaces leave the market? This perhaps should be emphasized since it hugely impacts Pelican). ') c <--.1 31 PELICAN GARAGE MIAMI BEACH, FL ~ ' 32 MIAMI BEACH PARKING COMPARABLES i'\.i(/11/P I JJrt1tio11 Omzer iear Hui/I #of Spaces Retail Parkin/!, Rates Pelican Parking 1021 Collins Ave Private 2001 329 Yes Weekend Rates Vary Garage Weekday Rates 0-1 Hrs -$3.00 1-3 Hrs -$7.00 3-5 Hrs -$12.00 5-10 Hrs -$15.00 10-24 Hrs -$25.00 13th Street 13th Street & Collins Ave City of Miami 1989 286 No $1/hr up to 15 hrs or $20 max for 24 hrs; monthly access card Garage Beach $70 7th Street 7th Street & Collins Ave City of Miami 1996 646 Yes $1/hr up to 15 hrs or $20 max for 24 hrs; Garage Beach monthly access card $70 Anchor Garage 1600 Collins Ave City of Miami 1999 803 Yes $1for1st hr, $2 for 2nd hr, $6 for 3hrs, $10 up to 6 hrs, $16 Beach up to 24hrs, $10 flat rate Fri-Sun 9PM-5AM; monthly access card $100 17th Street 17th Street & Washington City of Miami N/A 1460 No $1/hr up to 6 hrs, $8 up to 7 hrs, $10 up to 8 hrs, $15 up to Garage Ave Beach 15 hrs, $20 for 24 hrs; monthly access card $70 500 Collins 5th Street & Collins Ave Private 2004 220 Yes $2 for first .5 hour, $4 for 1 hour, Garage $2/hr up to 5 hours, $24 for 24 hours, $30 Fri-Sun 555 5th Street & Washington Washington Private 2001 270 Yes $2.5 hour up to 2.5 hours, $12 for 5 hours, $24 for 24 hours Garage Ave Lincoln Place Washington Avenue & 16th Private 2001 600 Yes $2 for first hour, $4 for 2 hours, $8 for 3 hours, $12 for 6 Garage Street hours, $20 for 24 hours HFF 27 33 PELICAN GARAGE MIAMI BEACH, FL i\/: ! .: l, !'·./ F-,:;.CH ;JVlf<VI tVV Demand Drivers Miami Beach is seen as a trend-setting arts and entertainment mecca, and a shopping and cultural wonder by visitors, world travelers, celebrities and locals alike. From cafe's, clubs and shopping along South Beach's Ocean Drive, Lincoln Road, and Washington Avenue; the international hotels and restaurants of Collins Avenue and Middle Beach; to the re-emerging neighborhood in North Beach, Miami Beach offers visitors and residents a dazzling array of amenities to enjoy. Miami Beach has a myriad of demand drivers and attractions that bolster daytime population. • Miami is #3 Overseas Tourist Destination in the United States -Continued Gains in Market Share. Miami is the #3 tourist destination for overseas visitors in the United States -these visitors make significant contributions to the more than $8.8 billion in visitor expenditures made within Miami and the Beaches in 2012. Within Miami. Miami Beach and Lincoln Road in particular, command the highest percentage of visitors of all retail destinations in the entire county. From 2011 to 2012, Miami experienced a 15% increase in international visitors as it continues to appeal to a broader universe of travelers. The city continues to gain market share among its top competitors for overseas visitors as outlined below. 28 TOP 5 US CITIES FOR OVERSEAS VISITORS1 2011 2()10 2()1() 2011 2011 f.70/Jm1f Ktmk City Market /)(m T •'isitatio11 (.~!) Market Share I 7isitatioll (;\/) Chat(~" 1 New York 32.1% 8.5 33.3% 9.3 10% 2 Los Angeles 12.7% 3.3 13.1% 3.7 9% 13 Miami 11.8% 3.1 10.6% 3.0 -5% I 4 San Francisco 10.0% 2.6 10.3% 2.9 9% 5 Las Vegas 9.2% 2.4 10.0% 2.8 15% 12012 1111mhcrs to be rdm.red_f1111< 2013. • Events Draw Residents and Tourists from Near and Far. Every winter, Miami Beach hosts Art Basel, the world's largest and among its most important art shows and a cultural and social highlight of the Americas. Each year, the world's most respected art galleries convene on Miami Beach to display works from over 1,500 artists and 1,100 galleries representing 31 countries and 5 continents, with the majority of activity occurring at the 21 "satellite" art fairs occurring contemporaneously to the main Art Basel. Other significant events in the area include the acclaimed South Beach Food & Wine Festival, Miami International Film Festival, the Winter Music Conference, Miami Sleepless Nights, and the world's largest boat show. These events create substantial demand for parking throughout Miami Beach, including the Pelican Garage. • Convention Delegates Descend on Miami Beach. Located in the heart of Miami Beach, the Miami Beach Convention Center boasts over one million square feet of flexible convention space. The convention center is located two blocks north of Lincoln Road and serves as the County's primary convention facility hosting over 300 events and 800,000 delegates annually. Some of the more notable events hosted each year at the facility includes Art Basel, Miami International Boat Show, and South Florida Auto Show-all top shows within their respective industries. The City and Miami~Dade County have begun a master-planning process for a $1.2 billion renovation and expansion of the convention center district which would add an additional 320,000 square feet of event space, as well as hotel, retail, residential components as well as additional parking facilities. The project is scheduled for completion over the next five years. 34 • South Beach Cultural Renaissance. South Beach has been undergoing a major cultural renaissance that further flourished with the prestigious Art Basel festival and the recently completed, Frank Gehry-designed, New World Symphony. The foundation laid by the most important art show in the US has fueled a civic and cultural consciousness that marks a new era for the city; visionary architects such as Frank Gehry, Herzog & de Meuron, Zaha Hadid and Enrique Norten are all making their own lasting impressions on the thriving community. • Global Hotel Market. Miami is a major hotel market on a global scale. It is on par with New York, London, and Paris and other global gateway cities and a point of destination. World Class Hoteliers, with keen eyes for the future, continue to invest heavily in the Miami Beach market as they seek to position themselves in one of the most exciting tourist market in the world. As a result, Miami Beach is home to world renowned hotels and typically set the bar in terms of luxury, style and trends. Miami's strong hotel performance has given it among the highest occupancy, room rates, and RevPAR figures in the country, and with Miami Beach accounting for over 40% of Miami's hotel occupancy, many of these tourists will use garages such as the Pelican Garage. HFF • One of the Densest Communities South of New York. With over 93,500 full-time residents and over 100,000 seasonal residents enclosed on a seven square mile island, Miami Beach is one of the densest communities in the US. Moreover, Miami Beach is a top destination for the over five million South Floridians that descend on the island on a regular basis, many of whom come by car. The combination of a high resident density and substantial influxes of seasonal residents, tourists, and local visitors creates massive demand for parking in a small area. • World Class Dining. The dining scene in Miami Beach is much like the city itself: an eccentric mix of exotic adventure and upscale glamour. Lincoln Road contains some of the city's most venerable establishments while also opening the door to new food concepts. Some of the most popular drinking and dining establishments in Miami Beach include Yardbird Southern Table, Joe's Stone Crab, Prime One Twelve, Casa Tua, Barton G, Juvia, Sushi Samba Dromo, Doraku Sushi, and The Forge, all of which are within a ten minute drive and many of which are within easy walking distance of the Pelican Garage. These restaurants are an important part of the South Beach experience and many either do not have on-site parking or attract customers who wish to walk and shop Collins Avenue afterward. Both of these factors create restaurant-linked demand for parking at the Pelican Garage. L'S 35 PELICAN GARAGE MIAMI BEACH, FL Miami Beach is widely considered one of the best retail markets in the nation due to its urban in-fill nature, highly limited retail inventory, extreme barriers to entry, strong demand drivers, and impressive local and tourist traffic. The strength of the retail market is manifested in consistently low vacancy rates and steadily increasing rental rates-insulated largely from the general cyclical movements in the economy. Like most true urban markets, aggregate retail inventory has remained remarkably stable over the last decade, reflective of the Miami Beach's in-fill nature and extreme barriers to entry through development. About 711,000 square feet of new inventory has come online since 2003, and much of that figure is attributed to a single project completed in October 2009, the 180,000 square foot vertical power center Shoppes of Fifth & Alton. The constraints on supply have kept vacancy rates in the low single digits over the same period as limited rollover results in tenant prospects vying for few retail spaces as they become available. Miami Beach Retail Market 250,000 200,000 l """·-~--"' /~----~ -~-------/· ---------.. ·l 100% 95'Yc I o 90% 85% 80% 150.000 I l::::::LI -I I I I . 0 ... --··· . --. ------·----------------------75% 2003 2004 2005 200€ 2007 2008 2003 2010 2011 2012 2013 Ql -New Inventory -Occupancy s:: m :xi i5 )> z ~ m '"'ltl ""'" • Hotel -:: LF . ~ ····~ ~L--·llwej ""'lltlJS(o ~ ~ ~f -...,,:-;: ,· • • • ~. • Banaatltpublk • • ADIDAS ~-1 _· _ e _......,. . .,, a,,.,,,: ~..,, m .. · ~ 11.1-.Jii ... ~·-ALOo • c. f2 ---~ .............. p "' -"' . • -~ YI. 0 :;:-..•• <: ~ .· ..... . -. ~· • ~ ,...,._ ~ r.,i,,,. • s ~v • Vidal~ ~. . • lfKot, '"if: i~""'. ~c ¥r6VD oumne: 1hie Re/Jiii;i ~Den;,,, ,,,.!!_66 f!!!e Madden Kid~ ;,""'ltlr Center• 10/Jlmy "!lfirj; 1 t'L'rt Sta Ardeft B. -re lA'A • • Re11dentiol AMNGQ r~X2rrdFL """llllflrct&ar.t • Stores • ~n~ • STH ST ·· STHST ' 36 HFF 1450 Brickell Avenue Suite 2950 Miami, Florida 33131 Fax: (305) 448-6767 www.hfflp.com Director lcastillo@hfflp.com (305) 448-5498 Director m bu sekrus(t.Dhfflp. com (305) 489-5969 Managing Director jdockertyr;i:,hfflp.com (30'.:.J) 421-6550 Senior Analyst swadler(C11 hffl p.com (305) 421-6542 37 ACQUISITION OF PELICAN GARAGE Retain Current Market Reduce to Current City Parking Rates Parking Rates With Annual Escalation at 4% per year NPV of cash Flows afetr D/S 28,899,585 877,730 N PV of Cash Flow after D/S and Forfeited Revenues 20,743,418 (7,278,437) With Rates Frozen NPV of Cash Flows after D/S 9,359,603 (8,892,261) NPV of Cash Flow after D/S and Forfeited Revenues 1,203,436 (17,048,428) With 10% Escalation of Rates Every 10 Years NPVof Cash Flows after D/S 12,778,041 (7,183,041) NPV of Cash Flow after D/S and Forfeited Revenues 4,621,874 (15,339,208) Exhibit ''2" 38 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT PARKING RATES WITH ESCALATION Schedule Of Prospective Cash Flow Year 1 Year 2 Year 3 Year 4 For the Years Ending Oec-20t4 Dec-2015 Dec-2016 oec-2017 Patenlial Gross Revenue Base Rental Revenue $246,259 $246,259 $246,259 5275,839 Absorption & Turnover Vacancy ----- Scheduled Base Rent.al :RENenue 246,259 246,259 246,259 275,839 CPI & Other Adjustment Re¥enue Expense Reimbursement Revenue RET a 0 0 Janitorial 661 681 701 722 lrability Insurance 6,366 6,557 6-754 6,957 Property Insurance R&M 4,523 4,658 4,798 4,942 Telephone Expenses Ticket Supplies & Misc. Payroll & Benefits UnOOrms Utilities 5,612 5,780 5,954 6,133 ----- Total Reimbursement Re-.oenue 17,162 17,676 18,207 18.754 Parking Reveriue Monthly Parking 150,906 156,942 163,220 169,749 Daily Parkng L915,416 1,972,878 2,032,065 2,093,027 Valet Parking 847,832 915,659 988,911 1.068,024 Total 2,914,154 3.045,479 3,184,196 3,330,800 Total Potential Grass Revenue 3, 177,575 3,309,414 3,448,662 3,625,393 General Vacancy (161,396) (168.064) (175,104) (184,020) Effective Gros.s Revenue 3,016,179 3,141,350 3.273.558 3,441,373 Operatjng Expenses RET a 0 0 0 Janitorial 5,158 5,313 5,472 5.636 liability Insurance 49,694 51,185 52,720 54,302 Property Insurance 86.794 89,398 92,080 94,842 R&M 35,304 36,363 37,454 38,578 Telephone Expenses 11,571 11,918 12,276 12.644 Ticket Supplies & Misc. 90,149 92.853 95,639 98.508 Payroll & Bene~1S 708,823 730,088 751,990 774,550 Uniforms 1,318 1,358 1-398 1,440 UMities 43,809 45,123 46,477 47,871 Parking Management 79_392 81,774 84,227 86,754 Sales and Parking Ta:< 174,849 182.729 191,052 199,848 KTKL Payment 100,000 103,000 106,090 109,273 ----Totaf Operating Expenses 1,386,861 1,431,102 1,475,875 1.524,246 -----Net Operating Income 1,629,318 1,710,248 1,796,683 1,917,127 Leasing & Capital Costs Tenant 'mprovemen~ Leasing Corn.missions ----- Total Leasing & Cap;tal Cos1S and Other 0 0 0 Cash Flow Before Deb1 SeN1ce (22-725,000) $1,529,318 SU10,248 $1,796,683 $1,917,127 & Taxes ========= ========== :::::o;=::o:==~=== ======:=: 7.17% 7.53% 7.91% 844% Oeb1 Service 100% Financing at 4 5% for 30 years 22,500.000 ( 1.368.050) (1,368.05()) $ (1,368,050) $ (1,368,050) $ Cash FIOW' after Debt Service (225,000) 261,268 342.198 428,633 $ 549.077 $ Forfeited Potential Revenue Settlement Fee 250,000 RET Income 131,008 1:34,938 138,986 143,15il Ground Lease Base Rent Income 94,080 94,080 103,490 105.372 Ground Lease Percen1age Rent Income 79,010 82,293 85,761 90,166 Total Forfeited Potential Revenue 554,098 311,311 328,237 338,694 Total Return after Forfeited Revenue (no Oellt) $ (22,725,000) 1,075,220 1,398.937 1,468,446 1,578.43:3 Total Return after Debt ServiCo and Forfa.tod Re•e1 $ (225,0001 (292,830) 30,886 100,395 210.383 Revenue/Expense Notes Year 5 Year 6 Oec-2016 Oec-2019 ---- $335.000 $335,000 335,000 335,000 0 744 766 7,165 7,380 5,090 5.243 6,317 6,506 ----- 19,316 19,895 176,539 181,835 2,155.818 2,220,492 1,153,466 1.188,070 3,485,823 3,590,397 ----- 3,840.139 3,945,292 (194,840) (200,1831 3,645,299 3.745.109 ------ 0 a 5.805 5,9SO 55,931 57,609 97,687 100.618 39,735 40,927 13,023 13,414 101,463 104,507 797,787 821,720 1,483 1-528 49,307 50.787 89,356 92.037 209,149 215,424 112,551 115,!!27 1,573.277 1,620,478 2,072,022 2,124,631 --~ ---- $2,072,022 $2.124,63~ ========= ========= 9.12% 9-35% [1,368,050) $ ( 1 ,368,050) 703,972 $ 756,580 147,451 151,874 105,372 105,372 95,521 98,135 348,344 355,381 1,723,678 1,769.249 355,628 401.199 Valet Parking Projected lo generate $770, 757 tn 2013. Several contracts s1arted m 02 therefore HFF projects annuali.z 1OF6 39 PELICAN GARAGE PRICING ANALYSIS ··RETAIN CURRENT PARKING RATES WITH ESCALATION Schedule Of Prospective C~sh Flow Year 7 Year S Year 9 Year 10 Year11 For the Years Ending Dec-2020 Dec-2021 Dec-2022 Dec-2023 Dec-2024 -~···--~~------------~·-------- Potential Gross Revenue Base Rental Revenue 5335,000 $335,000 $364,789 $424,368 $424,368 Absorption & Turnove( Vacancy (70,728) Sche-du~d Base Rental Revenue 335,000 335,000 294,061 424,368 424,368 CPI & Othe( Adjustment Revenue 2,122 14,917 E.Jcpense Re1mbursemen1 Revenue RET 0 0 Janitorial 789 813 698 862 888 liability Insurance 7,601 7,829 6,727 8,306 8,555 Property ~nsurance R&M 5,400 5,562 4,779 5,901 6,078 Telephone Expenses Ticket, Supplies & Misc. Payroll & Benefits UnWorms Utilities 6,701 6,902 5,930 7,323 7,542 Tat.al Reimbursement Revenue 20,491 21,106 18,134 22,392 23,063 ParXing Revenue Monttily Parking 187,290 192,909 198,696 204.657 210,796 Daily Parking 2,287, 107 2,355,720 2.426,392 2,499,183 2,574,159 Valet Parking 1,223,712 1,260,424 1,298.236 1,337,183 1,377,299 Total 3,698,109 3.809.053 3,923,324 4,041,023 4,162,254 Total Potential Gross Revenue 4,053,600 4,165,159 4,235,519 4,489,905 4,624,602 General Vacancy (205,686) (211,354) (147,245) (227,780) (234.613) ----- Effecti'Je Gross Revenue 3.847,914 3,953,805 4.088.274 4,262.125 4,389,989 Operating Expenses RET 0 0 0 Ja.nitonal 6,159 6,344 6,534 6,730 6,932 Liability Insurance 59,337 61,117 62.951 64.839 6!;,785 Property lnsur.ance 103.637 106,746 109 948 113.246 116,644 R&M 42,155 43,419 44.722 46,064 47,446 Telephone Expenses 13,816 14,231 14,658 15.098 15,551) Ticket. Supplies & Misc. 107,643 110,872 114,198 117.624 121.15J Payrojl & Benefits 646.372 871.763 897.916 924.853 952.599 Uniforms 1,574 1.621 1,670 1,720 1,771 Utilities 52,310 53,880 55,496 57,161 58,876 Parking Matlagement 94.798 97,642 100,571 103,589 106,696 Sales and P•rking TaJ< 221.887 228.543 235,399 242.461 249,735 KTKL Payment 119.405 122.987 126.677 130.477 0 TO!al Operatng Expenses 1.669,093 1,719,165 1,770,740 1,823,862 1,744,187 Net Operatjng Income 2.178.821 2.234.640 2.317,534 2,438.263 2.645.802 Leasing & Capital Casis Tenant rmprovements t5,914 Leasing Commissions 79,569 Total Leasing & Cap1t.aj Costs i3nd Other 95,4a3 ----"------ Cash Flow Before Debt Service $2, 178,821 $2,234,640 $2,222.051 $2,438,263 $2,645.802 & Taxes ========= ========= =-======= ======== ======== 9.59% 9.83% 9.78% 10.73% 11.64% Debt Service 100%. Fin.ancu"lg at 4.5% for 30 ye.a rs ( 1,368,050) ( 1,3S<l,050) $ (1.368.050) $ (1,368,050) ( 1,388.050) Cash Flow after Debt Service 010.no 866,569 854,001 $ 1,070,212 1.277.752 Farleited Potential Revern.ie Settlemenl Fee RET Income 156,430 161,123 165,957 170,938 176,064 Ground Lease Base Rent Income 105,372 115,902 118,008 118,008 118,008 Ground Lea-se Per.:entage Rent income 100,828 1D3,601 107,2()3 111.635 114,665 Total ~orfeited Potential Revem.ie 362.630 380.626 391.168 400.579 408,737 Total Return after Forfeited Revenue {no Debt) 1,816,190 1,854,013 1,830,883 2.037,684 2,237,065 Total Return after Debt Service and Forfeited Revei 448,140 48fi,963 462,833 669,634 869.015 Revenue/Expense Notes Valet P.ark1ng ed $847,832 for 2014 2 OF 6 Year 12 Year 13 Dec-2025 Oec-2026 $424,368 $424,368 424.368 424,368 28,095 41,669 0 0 910 910 8,768 8,768 6,229 6.229 7,730 7,730 23,637 23.637 217,120 223,634 2.651.384 2.730.925 1.418.618 1,461,176 4,287,122 4,415.735 4.763,222 4,905,409 (241.628) (248,738) 4,521,594 4,656,671 7,140 7,354 68,788 70,852 120,143 12:>,747 48,869 50,335 16,017 16,497 124,787 128.531 981,177 1,010,612 1,824 1,879 60,642 62,461 ta9.897 113,194 257,227 264.944 0 a ----- 1,796,511 1,850.406 2,725,083 2,80€,265 ---- 0 $2,725.083 $2.806.265 ========== ======== 1199% 1235% (1,3S<l.050) $ (1.368050) 1.357,033 $ 1.438.215 181,346 t86,786 11B,008 129,81B 117,787 121.002 417,141 437.606 2.307,942 2,388,659 939,892 1,000,609 40 PELICAN GARAGE PRICING ANALYSIS ·RETAIN CURRENT PARKING RATES WITH ESCALATION Schedule Of Prospective Cash Flow Year 14 Year15 Year 16 Year 17 Year 18 For the Years Ending Dec·2027 Dec-2028 Oec-2029 Dec-2030 Dec-2031 Potential GrosS-Revenue Base Rental Revenue $435,633 $506,718 5506,718 $506,718 $506,718 Absorption & Turnover Vac¥1ey (81.993) ---------- SGhie!dlllecl Base Rental Revenue 353,64() 506,718 506,718 506,718 506,718 CPI & Other Adjustment Reve,,ue 44,385 15,202 30,859 46.986 Expense Re1mbursemenl Revenue RET 0 0 Janltori.al 758 910 910 910 910 Liability Insurance 7,307 8,768 8,768 8,768 8.768 Property Insurance R&M 5,191 6,229 6,229 6,229 6.229 Telephone Expenses Ticket, Supplies & Misc. Payroll & Benefits Uniforms Utilities 6,442 7,730 7,730 7,730 7,730 -------·-- Toi.a! Reimbursement Revenue 19,698 23,637 23.637 23,637 23,637 Parlol:mg Revenue Monlhly Parking 230,343 237,253 244,371 251.702 259,253 Daily Par1ung 2,812,853 2,897,239 2.984.156 3,073,680 3,165,891 Valet Parking 1,505,012 1,550,162 1.596,667 1,644,567 1,693.904 ---··------ T~al 4,548,208 4,684,654 4.625.194 4,969,949 5,119,048 --------- Total Potential Grass Revenue 4,965.931 5,215,009 5,370,751 5,531,163 5,696.369 General Vacancy (173,293) (264.218) (272,005) (290,026) (288,287) Effec::tive Gross Revenue 4.792,638 4,950,791 5,096,746 5.251,137 5.408.102 ---- Operating Expenses RET 0 0 0 Janitonal 7,575 7,802 6,036 6,277 8,525 Liability insurance 72.977 75,167 77,422 79,744 82,137 Property lnsufance 127.4-00 131,284 135,222 139,279 143.457 R&M 51.845 53,400 55,002 56,653 58.352 Telephone Expenses 16.992 17.502 18,027 18,568 10.125 Tickel Supplies & Misc. 132,387 136,356 140,449 144,663 149,003 Payroll & Benefits 1,040,930 1,072,158 1,104,323 1,137.453 1,171,576 Uriifo.rms 1,936 1,994 2,053 2,115 2.178 Utilities 64,335 66,265 68,253 70,301 72.410 Parking Management 116,590 120,088 123,690 127.401 131,223 Sales and Parking Tax 272,892 281,079 289,512 298, 197 307,1'3 KTKL Payment 0 0 0 0 0 ---- Total Operating E:ll'.penses 1 905.919 1,963,097 2.021.989 2,082,651 2,145,129 --·--Net Operating Income 2,8ll6,719 2,987,694 3,076,757 3, 168.486 3,262,973 ---------Leasing & Capital Costs Tenant ~mprovements 19,002 Leasing Commissions 95,010 Total Leasing & Capital Costs and Other 0 114,012 ----Cash Flow Before Debt Service $2.886,719 $2.873.682 $3,076,757 $3, 168,466 $3,262,973 & Taxes =========== =========="" ====~~!;;~:!;":;::: =:======== =====,,,=:;:;=== 12.70% 12.65% 13.54% 13.94% 14.36% Debt Service 100% Financmg at 4.5% for 30 years (1,368.050) (1,368,0SIJ) (1.368,050) s (1,368,050) ( 1,368,050) s Cash Flow after Debt Service 1,518,669 1.505,632 1,708.707 $ 1.800.436 1,894,923 $ Forfe,ted Potentia~ Revenue Settlement Fee RET Income 192,390 198,161 204,106 210,229 216.536 Ground Lease Base Rent Income 129,818 129,818 129.818 129,818 129,818 Gmund Lease Percentage Rent Income 124,596 129,784 133,298 136,917 140,644 Total Forfeited Potential Revenue 446,804 457,763 467,222 476,964 486,9~8 Total Return after 'Forfeited Revenue (no Debt) 2.439,915 2,415,919 2.609.535 2,691,522 2,775.975 Total Return after Debt Service and Forfeited Reve1 1,071,865 1,047,868 1,241.484 1,323.471 1,407,924 Revenue/Expense Notes Valet Parking 3 OF 6 Year ~9 Year 20 Dec-2032 Dec-2033 $506,719 !587,424 (97,904) 506,71 B 4Bll,520 63,598 0 910 758 8.7611 7,307 6,229 5,191 7,730 6,442 23,637 19,698 267,031 275,042 3,260,868 3,358,694 1,744,721 1,797,063 5,272,620 5,430,799 5,866,573 5,940,017 (296 796f (206.862) ---·-- 5.5f:i9,777 5.733, 135 ----- 0 S.761 9,045 84,601 87.139 147,761 152,194 60,103 61,906 19.699 20,WO 153.473 158.077 1.206,724 1.242.925 2,244 2.311 74,582 76,819 135.160 139,214 316,357 325,84/l 0 0 -----· 2.209,485 2,275,768 3,360,292 3,457,367 __ ,,, __ 22.028 110,142 132, 170 $3.360,292 $3,325,197 ;!!!!:!;!=;o;;~i::n:=o:> ;:-========= 1479% 14.63% (1,36B.050f $ ( 1.368,050) 1.992.242 1,957,147 223,032 229, 723 129,818 129,818 144,484 150,456 497,334 509,997 2,862.958 2.815.200 1.494.907 1,447.149 41 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT PARKING RATES WITH ESCALATION Schedule Of Prospective Cash Flow "A R_C US Year21 Year22 Year 23 Year 24 Year 25 For ttie Years Ending Dec-2034 Dec-2035 Dec-2036 Dec-2037 Dec-2038 ·------------ Potential Gross Revenue Base Rentar Revenue $587,425 $587,425 $587,425 $587,425 $665,393 Absorption & Turnover Vacancy (113,498) ---- Scheduled Base Rental Re...,en~e 587,425 587,425 587,425 587,425 551,895 CPI & Other lldjustmenl Revenue 14,606 32,749 51.354 70,517 12,288 Expense Reimbursement Revenue RET 0 0 Janitorial 910 910 910 910 758 Uability Insurance 8,768 8,768 8,768 8,768 7,307 Property Insurance R&M 6.229 6.229 6,229 6,229 5,191 Telephone Expenses Ticket, Suppiles & Misc. Payroll & Benefits Uniforms Utilities 7,73() 7,730 7,730 7,730 6,442 ----- Total Reimbursement Revenue 23,637 23.637 23,637 23,637 19.698 Parkin9 Revenue Monthly Parking 283.293 2\J1,792 300,545 309,562 318,848 Daily Park~ng 3,459,454 3,563,238 3,670,135 3,780.239 3,893,646 Valet Pan<i"g 1,850,974 1.906,504 1,963.699 2,022,610 2,083,288 ----- Total 5,5m,121 5,761,534 5,934,379 6,112,411 6.295,782 Total Potential Grass Reveriue 6,219,469 6,405,345 6,596,795 6,793,990 6,879,663 Generat Vacancy (314.441) (323,735) (333,307) (343, 167) (239,050) ------------ Effecti"e Gross Revenue 5,905,028 6,081,610 6.263,488 6,45G,823 6,640.613 0 perating Ex pens es RET 0 0 Janitorial 9.316 9,595 9,883 10.180 10,465 Liab11tty lnsul"ance 89,753 92,445 95,219 98,075 101.018 Properly lnsuranoe 156,760 161,462 166,306 171,295 176.434 R&M 63,763 65,676 67,646 69,675 71,766 Telephone-~penses 20,899 21,525 22,171 22.836 23,521 Tick.et, Supplies & Misc;_ 162,819 167,704 172,735 177,917 183,254 Payroll & Benen1:S 1-280.213 1,318,620 1,358,178 1,398,924 1,440,891 Uniforms 2,380 2.452 2.525 2,601 2.679 Utilities 79,124 81.498 83,943 86.461 89,055 Parking Management 143,391 147.693 152,123 156,687 161,388 Sales .and Parking Tax 335,623 345,692 356,063 386,745 377,747 KTKL Payment 0 0 0 0 Tota' 0pera1ing Expenses 2,:144,041 2,414.362 2,486,792 ~3% 2,638,238 ---- Nel Operabrig !ncome 3,560,987 3,667,248 3,776 696 3,889,427 4,002,375 ---- Leasl"g & Capital Costs Tenant Improvements 25,537 Leasing Comm1ssioJ1s 127,685 -------------- Total Leasing & Capilal Costs and 0111er 0 153.222 ----Cash Flow Before Debt Service $3,560,987 $3,667,248 $3,776,696 $3,889.427 $3,849, 153 & Taxes ========= ====:::===== ====-====== ========== ========== 15.67% Hl.14% 16.62% 1712% 16.94% Debt Service 100% Financing at 4.5% for 30 years (1.368 0501 (1.368,050) ( 1,368,050) s ( 1.368,050) $ (1,368,050) Cash Flow after Debt Service 2, 192,937 2.299, 198 $ 2,408,646 $ 2,521.377 $ 2,481,103 $ Forfeited Potential Revenue Settlemen1 Fee RET lnoome 236,615 241,713 251,025 258,556 266,312 Ground Lease Base Rent lrtcome 129,818 129,818 129,818 129,818 129,818 Ground Lease Percentage Rent Income 154,529 158,724 163,045 167,496 174,030 Total Forfeited Polential Revenue 520,962 532.255 543,888 555,870 570,160 Total Return after Forfeited RevenLJe (no Debt) 3.04D,Q25 3, 134,993 3,232,808 3,333,557 3,278,993 Total Return after Debt Service and Forfeited Revei 1,671,975 1 766,942 1,864,758 1,965,507 1.910,942 Revenue/Expense Notes Valet Parking 40F 6 Year 25 Year 27 Dec-2039 Dec-2040 ------- $680,9136 S61l0,986 680,986 fiA0,986 13,6<0 34,458 0 0 910 910 8,768 8,768 6,229 6,229 7,730 7,730 ----- n637 23,637 328,414 338.266 4,010.456 4,130,769 2,145,787 2,210, 160 6,484,657 6,679,195 7,202,900 7,418,276 (363,612) (374.381) ---- 6,839,288 7,043,895 o 0 10.800 11,124 104,048 107.170 181.727 187,179 7J.919 76,136 24,227 24,954 188,752 194,415 1,464,118 1,528,641 2.760 2,842 91,726 94,478 166.229 171,216 389,079 400,752 0 a 2,717,385 2,798.907 --·-- 4, 121,903 4,244,988 ----- ----- $4,121.903 $4,244.988 ========= ========::::::= 18.14% 18.68% (1,368,050) ( 1,368,050) 2,753,853 2,876,938 274,302 282,531 129,818 129 818 179,141 184,005 583,261 596,354 3,538.S42 3,648,634 2,170,592 2,280,584 42 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT PARKING RATES WITH ESCALATION Schedule Of Prospective Cash Flow Year 28 Year 29 Year 30 Year31 Year32 For the Years Eno1ng Dec-2041 Dec-2042 Dec-2043 Doc-2044 Oec-204.5 -·---- Potential Gross Revenue Base Rental Re11enue $680,986 $680,986 $753.295 $789,449 $789,449 Absorption & Turnover Vacancy (131 575) ---- Scheduled Base Rental Revenue 680,986 680.986 6:?1,720 789,449 789,449 CPI & Other Adjustment Revenue 55,921 78,028 28,490 11.842 35,880 Expense Reimbursement Revenue RET 0 0 0 0 Janitorial 910 910 758 910 910 Liab1~'ty Insurance 8,768 8,768 7,307 8,768 8,768 Property-1nsurance R&M 6,229 6.229 5,191 6,229 6.229 Telephone Expenses Ticket, Supplies & Misc. Pa)'<oll & Benefi1S Unfforms Utilities 7,730 7,730 6,442 7.730 7,730 ---- Total ReimtJufsement Revenue 23.637 23,637 19.698 23,637 23.637 Parking Revenue Monthly Parking 348.414 358,867 369.633 380,722 392,143 Daily Pa•k1ng 4,254,693 4.382.333 4,513.803 4.649.217 4,788,694 Valet Parking 2,276,465 2,344,759 2,415, 102 2.487.5$5 2,562,182 Total 6.879,572 7.085.959 7,298,538 7,517,494 7,743.019 ----let.al Potential Gross Revenue 7,640. 116 7,868,610 7,968,446 8.342.422 8,591,985 General Vacancy (385,473) (396,898) (276,316) (420,588) (433,067) -----Effective Gross Revenue 7,254,643 7,471,712 7,692, 130 7,921.834 8.158,918 --·-----~--- Operahrig E;icpenses RET 0 0 Janitonal 11,"'';7 11,801 12.155 12,520 12,895 liability Insurance 110,385 113,600 117,107 120,620 124,239 Property lnsLirnnce 192,795 198,578 204,536 210,672 216.992 R&M 78,420 80.773 83.100 85.692 88.263 Telephone Expenses 25,703 26,474 27,268 28,086 28.928 Ticket, Supplies & Misc. 200,247 206,254 212,442 218.815 225,380 Pa yrol1 & Benefits 1,574,501 1,621,736 1,670,388 1,720,499 1.n2,114 Uniforms 2,928 3,015 3,106 3,199 3,295 Utmties 97,312 100.232 103,239 106,336 109.526 Parking Management 176,353 181,643 167,092 192,705 198.486 Sales and Par1<ing Tax 412,774 425,158 437.912 451,050 464,581 KTKL Payment o 0 0 o 0 ---- Total Operaung Expenses 2.882,875 2.969.360 3.058.441 3,150,194 3.244.699 -----Net Operating Income 4,371, 768 4,502,352 4,633.689 4.771,640 4,914,219 ------ Leasing & Capital Casis Tenant lmproV"emenlS 29.604 Leasing Commissions 148.022 Total Leasing & Capital Costs and Other 0 177,626 0 ---- Cash Flow Before Debt SeNice $4,371,768 $4,502.352 $4,456,063 $4,771,640 $4,914,219 & Taxes ========= ======:::=== ========= ========= ========= 19.24% 19.81% 1961% 21.00% 21.62% Debt Service 100% Financing at 4.5% for 30 years (1,368,050) (1,368,050) (1,368,050) Cash Flaw after Debt Service 1.003,718 3, 134,302 $ 3.086,013 $ 4,771,640 4,914.219 Forfeited Potential Revenue Setllement Fee RET lncom& 291,007 299.737 308,729 317,991 327.531 Ground Lease Base Rent Income 129,BlS 129,818 129.816 129,818 129.018 Ground lease Percencage Rent Income 189,014 194,174 201,295 207,673 213,311 Talal Forfeited Potential Revenue 609,839 623,729 639,842 655,482 670,660 Total Return after Forfeited Revenue (no Debt) 3,761 ,929 3,870,623 3,816.221 4,116,158 4.243,559 Toial Return after Debt Service and Forfeited Revei 2.393.879 2,510,573 2.448.171 4,116,158 4,243.559 Revenue/Expense Notes Valet Parking 5 OF 6 Ye-ar33 Year34 Dec-2046 Dec-2047 $789.449 $789,449 789.449 789,449 60.640 86,143 0 910 910 8,768 8,768 6,229 6,229 7,730 7,730 23,637 23,637 403,908 416.025 4,932,355 5,080,325 2,639,047 2,718.218 7,975.310 8,214,SBa B,849,036 9,1 t3,797 (445,919} (459,157) 8,403,117 8.654.640 0 13,282 13.681 127,966 131.805 223.502 230.207 90.911 93,638 29.796 30,690 232,141 239,105 1,825,278 1,880,036 3,394 3.496 112,812 116,196 204,441 210.574 478,519 492,874 0 0 3,342,012 3,442,302 __ ,_T __ 5,061,075 5.212,338 0 S5,061 ,075 $5,212,338 ======= ========== 2227% 22.94% 5,061.075 5,212,338 337,356 347.477 129.818 129,818 219.119 225,100 686,293 702,395 4,374,782 4,5()9,943 4,374.782 4,509,943 43 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT PARKING RATES WITH ESCALATION Schedule Of Prospective Cash Flow Year35 Year36 For the Years Ending Dec-204ll Dec-2049 ----- Potent~I Gross Revenue Base Rental Revenue $852.318 $915,188 Absorption & Turnove"I' Vacancy (152,531) Scheduled Base Rental R<!'lenue 699,787 915,188 CPI & Olher Adjus1ment Revenue 49,541 9.152 Expense Reimbursement Revenue RET 0 Janitorial 758 910 Liability Insurance 7,307 8,768 Property Insurance R&M 5,191 6,229 Telephone Expenses Tfcil:et. Supplies & Mfsc, Payroll & Beneflis Uniforms Utilities 6,442 7.730 Total Reimbt.Jrsement Revenue 19,698 23,637 Parking Revenue Monthly Parking 428,506 441,361 Daily Parking 5,232,735 5.389,717 Valet Parking 2.799,765 2.883,758 Total 8.461.006 8,714,836 Total Polential Gross Revenue 9,230,032 9,662,813 General VaGancy (319,4ll7) (4136.608) Effective Gross Revenue 8,910.545 9,176,205 Operatmg &penses RET 0 Janitorial 14.091 14,514 Liability Insurance 135,759 139,832 Property lnsurC1nce 237,113 244,226 R&M 96.447 99,341 Telephone Expenses 31.611 32,559 Ticl<eL Supplies & Misc_ 246,279 253,667 Payroll & Ben eftts 1,936.437 1,994,530 Uniforms 3,601 3,709 Utilities 119,682 123,273 Parking Management 216,891 223.398 Sales and Parking Ta> 507,660 522.890 KTKL Payment 0 0 Totai 0.perating Expenses 3,545.571 3,651.939 Net Operaong Income 5,3£4,974 5,524,266 ----- Leasing & Capital Costs Tenant Improvements J.4.320 Leasing Commissions 171,598 ----- Total Leasing & Capital Costs and Other 205,918 Cash F~ow Before Debt Serv~ce $5.159.056 $5,524,266 & Taxes ===~===== =-========= 22.70% 24.31% Debt Service 100% Financing at 4_5% for 30 years Cash Flow after Debt Service 5,159,056 5,524.266 Forfeited Potential Revenue SettJement Fee RET Income 357,901 368,638 Ground Lease Base Rent ~ncorne 129.818 129,818 Ground Lease Percentage Ren1 Income 232.833 240,751 Total Forfeited Potential Revenue 720,552 739,207 Total Return aft:et Forfeited Revenue (no Debt) 4.438.504 4,785,059 Total Return after Debt Service and Forleited Revei 4.438.504 4,785,059 Revenue/Expense Notes Valet Parklng 6 OF 6 44 ··--·-·-·------- PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT PARKING RATES AND FREE2E Schedule of Prospective Cash Flow "~ R .. G l'. .s Ye.ar 1 Year 2 Year 3 Ye.ar 4 Year 5 Year 6 For the Years Ending Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019 ----------~---· - Potential Gross Revenue Base Rental Revenue $246,259 $24B,259 $246,259 $275,839 $335,000 $335,000 Absorption & T urnO'tter Vacancy ----- Scheduled Base Rental Revenue 246,259 246,259 246,259 275,839 335,000 335,000 CPI & Olher Adjustment Revenue Expense Reimbursement Revenue RET 0 JaMorial 661 681 701 722 744 766 Liability Insurance 6,366 6,557 6,754 6,957 7,165 7,380 Property Insurance R&M 4,523 4,658 4,798 4,942 5,090 5.243 Telephone Expenses Ticl<el Supplies & Misc. Payroll & Benefils Uniforms Utilities 5.612 5,780 5,954 6.133 6,317 6,506 Total Reimbursement Revenue 17, 162 17,676 18,207 tB,754 19,316 19,895 Parking Revenue Monthly Parking 150,906 150,906 150,906 150,906 150,006 150,906 Oaily Parl<lng 1,915,416 1,915.416 1,915,416 1,915,416 1,915,416 1,915.416 Valet Parking 847,632 915,659 988,911 1 ,068,024 1,153,466 1 ,188.070 ---------- Total 2,914, 154 2,981,981 3,055,233 3,134,346 3,219.788 3 254,392 ----- Total Potential Gross Revenue 3,1n,515 3,245,916 3,319,699 3,428,939 3,574,104 3,509,287 General Vacanc~ (151,396i (168.064) (175,104) (184,020) (194,840) (200,183) ----- Effect;ve Gross Revenue 3,016,179 3,077.852 3,144,595 3,244,919 3,379,264 3,409.104 ---------- Operating E11penses RET 0 0 JMl!orial 5,158 5,313 5,472 5,636 5,805 5,!lBO L1abthty lnsuran;e 49,694 51,185 52,720 54,302 55,931 57,609 Property Insurance 86,794 89.398 92,08() 94,842 97,687 100,618 R&M 35,304 36,363 37,454 3ll,578 39,735 40,927 T~ephorie E:xpenses 11,571 11.918 12,276 12,644 13,023 13.414 Ticket, Supplies & Misc_ 90,149 92,853 95,639 98,508 101,463 104.507 Payroll & Benefils 708,823 730,088 751,990 774,550 797,787 821,720 Uniforms 1,318 1,358 1,398 1,440 1,483 1,528 Utilities 40,809 45,123 46,477 47,671 49,307 50,787 Parking Management 79,392 81,774 84,227 86,754 89.356 92,037 Sales and Parking Tax 174,849 182,729 191,052 199,848 209,149 215,424 KTKL Payment 100,000 103,000 106,090 109,273 112,551 115,927 ----·- Total Operating Expenses 1,386,861 1,431,102 1,476,875 1,524,246 1,573,277 1,620,478 -·----- Net Operabng Income 1,629,318 1,646,750 1 ,667,720 1,720,673 1,805,987 1,788,626 ----------Leas,ng & Capital Cosls Tenant Improvements Leasing Comrnissions ------------- Total Leasing & Capital Costs and Olher 0 ---------·- Cash Flow Before Debi Service (22,725.000) $1,629,318 $1,64B,750 $1,667,720 $1 ,720,673 $1,805,987 $1,788,626 & Taxes =========== ==-========= ====-======-= =====-====== :::::::======== ========::::::::: 717% 7.25% 7.34% 7.57% 7.95% 7.87%. Debt Service 100% Financing at 4.5% for 30 years 22,500,000 p,360,0SOJ $ p,360,050) ( 1.368,050) (1,368,050) $ (1.368,050) $ !1 ,368,050! Cash Flow after Debt Service (225,000) 261,268 $ 278,700 299,670 352,623 $ 437,937 $ 420,575 Forfeited Potential Revenue Settlement Fee 250,000 RET 'ncorna 131,008 134,93/l t38,996 143,156 147 451 151,874 Gro1Jnd Lease Base Rent Income 94,080 94,080 103,490 105,372 105,372 105,372 Ground Lease Per-cent.age Rent Income 79,010 82,293 85,761 90,166 95,521 98,135 Total Forfeited Potetitial Revenue 554,098 311,311 328,237 338.694 348,344 355,381 Total Return after Forfeited Reve11ue(no DabtJ $ (22,725,000) 1,075,220 1,335,439 1,339,483 1,3ll1,979 1,457,643 1,433,244 Total Return after Debt Service atid Forfeited Re.,,.e· $ (225,000) (292,830) (32,612) (28,568) 13,929 89,593 65.194 Revenue/Expense Notes Valet Parking Projected to gen Mate $770,757 in 2013_ Several contracts started 1n Q2 therefore HF"F pro1eds mmua!1z 1of6 .. ,,, .. , ., .. A i\ R c 1; s .I\ ' . 45 PELICAN GARAGE PRICING ANAL \'SIS -RETAIN CURRENT PARKING RATES AND FREEZE Schedule of Prospective Cash Flow For lhe Years End~ng Potential Gross Revenue Base Rental Revenue Absorption & Turnover Vac.gncy Scheduled Base Rental Revenue CPI & Oiiier Aojustmenl Revenue Expense Reimbursement Revenue RET Janitorial Liability Insurance Property Insurance R&M Telephone Expenses Ticket Supplies & Misc. Payroll & Benefits Uniforms UtlllUes Total Reimbursement R&\t'enue ParkJng Revenue Monllily Parking Daily Parking Valet Parking Total Total Potential Grass Revenue General Vacancy Effective Gross Revenue Operating Expenses RET Janitorlal Liability Insurance Property !r.surance R&M Telephone Expenses Ticket. Supplies & Misc. Payroll & Benefits Uniforms Utilities Parking Management Sales and Parking Tax KTKL Payment Total Operating Expenses Net Operating ~ ncome Leasing & Capital Costs Tenant Improvements Leasmg Comm1s.sijons Total Leasing & Capital Costs and Oiiier Cash Flew Before Debt Se-rvice &Taxes Debt Service 100% Financing at 4.5% for 30 years Cash Flow after Debt Service Forfeited Potential Revenue Settlement Fee RET Income Ground Lease Base Rent Income Ground Lease Percentage Rent Income Total Forfeited Potential Revenue Total Return after Forfeited Revenue (no Debt) Total Return after Debt Service and Forfeited Reve. Revenue/Expense Note> Valel Parki119 Year 7 Dec-2020 $335,000 335,000 789 7.601 5.400 6,701 20.491 150,906 1,915,416 1,223,712 3.290,034 3,645,525 (205,686f 3.439.839 0 S,159 59,337 103.637 42,155 13,816 107.643 846,372 1,574 52.310 94.798 221.887 119,405 1,669,093 1.770.746 $1.770,74'> 7.79% (1,368,050) 402.695 156.430 105.372 100.828 362.630 1,408,115 40.065 ed $847.832 for 2014. Year 8 Dec-2021 $335,000 335.000 0 813 7.829 5.562 6,902 21.106 150,906 1.915.416 1,260.424 3.326.746 3.682.852 (211,354) 3,471,498 6,344 61,117 106,745 43,419 14,231 110,872 871,763 1.621 53.880 97.642 228,543 122.987 1,719.165 1,752.333 0 $1,752,333 7.71% (1,368,050) $ 384.282 s 161.123 115,902 103.601 380,625 1 .371,706 3,6S6 Year 9 Dec-2022 $3&1,789 (70.728) 294.061 0 698 6,727 4.779 5,930 18,134 150,906 1.915.416 1.298.236 3,364,5.58 3.676,753 (147,245) 3,529.508 6,534 62.951 109.948 44.722 14.658 114,198 897.916 1.670 55.496 100.571 235.399 126,677 1.770.740 1,758.768 15.914 79,569 95.483 $1.663,285 732% (1,368.050) 295.235 165.957 118.006 107.203 391,168 1.272,117 (95.933) 2 of 6 Year 10 Dec-2023 $424,368 424.368 2,122 0 862 8,306 5.901 7,323 22,392 150,906 1,915.416 1,337.183 3,403.505 3,852,357 (227,780) 3,624,607 0 6.730 64,839 113.246 46.064 15,098 117.624 924,853 1,720 57.161 103.589 242.461 130,477 1,823,862 1.800.745 0 $1,600,745 7.92% (1.368,050) 432.694 170.936 118,008 111,635 400,579 1,400.166 32,116 Year 11 Dec-2024 $424.368 424.368 14.917 0 888 8,555 6,078 7.542 23,063 150,906 1,915.416 1,377,299 3,443.621 3.905.969 (234.613) 3,671,356 0 6,932 66,785 116.644 47.446 15.550 121,153 952,599 1.771 58.878 106.696 249,735 0 1,744,187 1,927,169 0 $1,927.169 8.48% ( 1,368.050) $ 559.119 5 176.064 118.008 114.665 408.737 1,518,432 150,382 Year12 Dec-2025 $424,368 424,368 28.095 0 910 8,768 6.229 7.730 23.637 150,906 1.915.416 1.418.618 3,484,940 3,961,040 \241,628) 3,719.412 7,140 68,788 120,143 48,869 16,017 124.787 981,177 1,824 60,642 109.897 257,227 0 1.7!l6,511 1.922,901 $1.922.901 8.46% {1,368,050) $ 554.851 $ 181.346 118.008 117,737 417,141 1.505.760 137.710 Year 13 Dec-2026 $424,368 424,368 41,659 910 8,768 6,229 7,730 23,637 150,906 1,915,416 1,461, 176 3.527,498 4.017,172 \248.738) 3.768.434 7,351 70.852 123.747 50,:>35 16,497 123,531 1,010,612 1,879 62,461 113,194 264,944 0 1.850.406 1,913,028 $1.918,028 8.44% (1,368.050) 549.978 186,786 129.818 121,002 437,606 1.480.422 112.372 46 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT PARKING RATES AND FREEZE Schedule of Prospective Cash Flow For 1he Years Ending Potential Gross Revenue Base Rental Revenue AbsorpUon & Tumover Vacancy Scheduled Base Rental Revenue CPI & Other Adjustment Revenue Expense Retmbursement Revenue RET Janitorial Uability Insurance Property Insurance R&M Telephone Expenses Ticket, Supplies & Misc. Payroll & Benefits Uniforms Ulilities T olal Reimbursement Revenue Parking Revenue M<lnthly Parl<ing Daily Parl<ing Valet Parking Total Tota~ Potential Gros.s R~enue Generi31 V.ac.anc-y Effective Gress Revenue Opera~ng E><penses RET Janltoria1 Liability lnsuranco Property Insurance R&M Telephone Expenses Ticket, Supplies & Misc. Payroll & Benefits Uniforms Utilities Parking Management Sales and Parking Tax KTKL Payment Total Opera!ng Expenses Net Operating Income Leasing & Capital Casis T eilant Improvements Leasing Commissions Total Leasing & Capital Costs and 0111er Cash Flow Before Debt Service & Ta:<es Debt Service 100% Financing at 4.5% for 30 years Cash Flow after Dehl Service Forfeited Potential Revenue Settlement Fee RET Income Ground Lease Base Rent lnGome Ground Lease Percentage Rent Income Tot.al Forfei1ed Potential RE!'leoue Total Return after Forfeited Revenue (no Deb1) Total Return after Debt Service .ancl Forfeited Reve, Revenue/Expense Notes Vale1 Parking Year 14 Dec·2027 $435,633 (81,993) 353,640 44,385 758 7.3-07 5,191 6,442 19,698 150,906 1,915.416 1.505.012 3,571,3.14 3,989,057 (173.293) 3,815,764 0 7,575 12.sn 127,460 51.84S 16.992 132,387 1,040,930 1,936 64,335 116,590 272,892 1,905,919 1,900,8-15 $1,909,845 8.40% (1,368,050) s 541,795 $ 192,390 129,818 124.596 446,804 1,463,041 94,991 Year15 Dec-2028 S506,718 506,716 0 910 8,768 6,229 7,730 23,637 150,906 1,915,416 1,550,162 3,616.484 4,146,839 (264,218) 3,882,621 0 7,802 75,167 131,284 53,400 17,502 136,358 1.072, 158 1,994 66,265 120,088 281,079 0 1,963,097 1,919,524 19,002 95,010 114,012 51,805,512 7.95% [1,388,050) 437,462 198,161 129,818 129,784 457,763 1,347,749 (20,302) Year 16 Dec-2029 $506,718 506.718 15,202 t} 910 8,751l 6,229 1.no 23,637 150,906 1,915,416 1,596,667 3,662,989 4,208,546 (272,005) 3.936.541 0 8,036 77,422 135,222 55,002 18,027 140,449 1,104,323 2,053 SB,253 123,690 289.512 1,914,SS2 $1,914,552 8.42% (1,358.050) $ 546,502 $ 204,106 129,818 133,290 467,222 1.447.330 79,279 3 of 6 Year 17 Dec-2030 $506,718 506,718 30,859 t} 910 8,7513 6,229 7,730 23,637 150,906 1,915,416 1,644,567 3,710,889 4,272.103 (280,026) 3992,077 0 8,277 79,744 139,i79 56,653 18,568 144,663 1,137,453 2,115 70,301 127,401 298.197 2.002,651 1,909,426 $1,909,426 8.40% (1.368. 050) 541,376 210,229 129,818 136.917 476,964 1,432,462 64,411 Year 18 Dec-2031 5506,718 506,718 46,986 0 910 8,768 6,229 7,730 23,637 150,906 1,915,416 1,693,904 3,760.226 4,337,567 (288,287) 4,049,280 0 B.525 82,137 143,4S7 58,352 19,125 149.003 1,171,576 2,17$ 72,410 131,223 307,143 t} 2,145,129 1,904,151 0 $1,904,151 8.38% (1.368.050) 536,101 216.536 129,818 140,644 486,998 1,417,153 49,102 Yoar 19 Dec-2032 $506,716 506,718 63,598 t} 910 8,768 6,229 7,730 23,637 150,906 1,915,416 1.744,721 3,811 ,043 4,404,996 (296,796) 4,108,200 0 8.781 84,601 147,761 60,103 19,699 153.473 1,206,724 2,244 74,582 135, 160 316,357 0 2,209,485 1.890,715 $1,898, 715 B.36% (1,368.050) 530.665 223,032 129,818 144.484 497,334 1,401,381 33.330 Year 20 Oec-2033 $587,424 (97,904) 489,520 758 7,307 5,191 6.442 150,906 1,915,416 1,797,063 3,863,385 4,372,603 (206,882) 4, 165.721 9,045 87,139 152,194 61,906 20,290 1sa.on 1,242,925 2,311 76,819 139,214 325,848 0 2,275,768 1.889,953 22.028 110,142 132,170 $1,757,7133 7-74% (1.368,0501 389.nJ 229,723 129,818 150,456 509,997 1,247,786 {120,2651 47 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT PARKING RATES AND FREEZE Schedule of Prospective Cash Flow GUS Fm the Years En ding Poiential Gross Revenue Base Rental Revenue Absorption & Turnover Vacancy Scheduled Base Renlol Revenue CPI & Other Adjustment Rovenue Expense ReimtJursemenl Revenue RET Janitorial Liability Insurance Property !nsurance R&M Telephone E•penses Ticket. Supplies & MLSC Payroll & Benefits Uniforms Ut1hties Tctal Re1mburseme.nt Revenue Parking Revenue Monthly Parl<lng Dally Pari<ing V;:i!et Parking Toldl Total Potential Gross Revenue General Vacancy Effei;tive Gross Revenue Operating Expenses RET Janiton.:il Liability fnsurarice Propeny Insurance R&M Telephone Expenses Ticket, Supp,1e.s & Misc. Payroll & Beneflls Uniforms Ut11itLes Parkillg Management Sales and Parking Tax KTKL Payment Total Operabng Expenses Net Operating Income Leasing & Capildl Costs Ten ant Improvements Leasing Commissions Total Leasing & Capital Costs and Other Cash Flow Before Debt Service & T~xes Debt Service 100% Financing at 4.5% far 30 years Cash Flow after Debt Service Forfeited Potentfal Revenue Settlement Fee RET Income Ground Lease Base Rent Income Ground Lease Percentage Rent Income Tot.al Forfeited Potenliaf Revenue Total Return after Forteited Revenue (no Debt) Total Retom after Debt Service and Farleiled Reve1 Re\lem.JelExDense Notes Valet Parking Year 21 Dec-2034 $587.425 587,425 14,686 0 910 8.768 6,229 7,730 23.637 150,906 1.915,416 1,850,974 3,917,296 4,543,044 (314,441) 4,228,603 0 9,316 89,753 15$,760 63,763 20,09$ 162.819 1,2ll0,213 2.380 79,124 143,391 335,623 0 2,344.041 1,694,5$2 0 $1,884,562 8.29% ( 1.368.050) 516.512 236,615 129,018 154,529 520.~62 1,363,600 (4,450) Year 22 Dec-2035 $587,425 587.425 32,749 0 910 8,768 6,229 7,730 23,637 150,906 1,915,416 1,906,504 3.972.826 4,616,637 (323,735) 4,292,902 0 9.595 92,445 161,462 65,676 21,525 167,704 1,318,620 2,452 81 ,498 147,693 346,692 0 2,414,362 1,878,540 $1,878,540 827% (1 ,368,050) 510,490 243,713 129,818 158,724 532,255 1,348,285 (21,766) Year 23 Dec-2036 $587,425 597,425 51,354 910 8,7138 6,229 7,730 23.637 150,906 1,915,416 1,963,699 4,030,021 4,692,437 (333.307) 4,359, 130 0 9.883 95,219 166,306 67,646 22.171 172,735 1,358,173 2,525 83,943 152,123 356.063 2,486,792 1,872.338 $1,872,3313 8.24% (1.368.050) $ 504.288 $ 251,025 129,818 163,046 543,888 1 ,328,450 [39,6()0) 4 of 6 Year 24 Dec-2037 $587,425 587,425 70,517 910 8,768 6,229 7,73tl 23 637 150,906 1,915,416 2,022,610 4,088,932 4,770,511 (343.167) 4,427,344 0 10,180 98,075 171,295 69,675 22,836 177,917 1,398,924 2,601 86,461 156.687 366,745 2,561,396 1,865,948 0 $1,865,948 8.21% (1,368,050) 497.890 258,556 129,818 167,496 555,870 1,310,078 (57,972) Ye3' 25 Dec-2038 S665,393 (113,498) 551,895 12,288 0 758 7,307 5.191 6,442 19,698 150.906 1,915,416 2,083,288 4, 149,610 4,733,491 (239,050) 4,494,441 10.485 101,018 176,434 71,766 23,521 183.254 1,440,891 2,679 89,055 161,388 377,747 0 2,638.238 1,85$,203 25.537 127,685 153,222 $1,702,981 7.49% (1,368,0SO) $ 334,931 s 266,312 129,818 174.030 570.160 1, 132,821 (235,230) Year 26 Dec-2039 $680,986 680,986 13,620 910 8.76B 6,229 7,730 23,637 150.906 1,915,416 2.145,787 4212,109 4,930,35.2 (363,612) 4,566,740 0 10.800 104,048 101.727 73,919 24,227 188,752 1,4134,118 2,760 91,726 166,229 389,079 0 2,717,385 1.849.355 $1,849,355 8.14% (1,368,050) 481,3{)5 274,302 12!l,818 179,141 583,261 1.266,094 (101,956) Year 27 Dec-20-IO $680,986 6ll0,986 34,458 s1a 8,768 6,229 7,730 23,637 150,906 1,915,416 2,210,160 4,276,4132 5,015,563 (374,381) 4,641.182 11,124 107,170 187.179 76,136 24,954 194,415 1,528,641 2,842 94.478 171,216 400,752 0 2,798.907 1,842.275 $1,842,275 8.11% (1,368,050) 474,225 282,531 129,818 184,005 596,354 1,245,921 (122,129) 48 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT PARKING RATES AND FREEZE Schedule of Prospective Cash Flow For the Years Ending Potential Gross Revem.Je Base Rental Revenue Absorption & Turnover Vacancy Scheduled Base Rentar Re,,,enue CPI & Other Adjustment Revenue E:ic.pense Reimbursement Revenue RET Janiton.al Liability Insurance Property Insurance R&M Telephone Expenses Ticke~ Supplies & Misc Payroll & Benefits Uniforms Utilities Total Reimbursement Revenue Parking Revenue Montlily Parl<lng Daily Parking Valet Parking Total Total Potential Gross Revenue General Vacancy Effecti've Gross Revenue Operating Expenses RET Janitorial Liability Insurance Property lnsurarice R&M Telephone Expenses Ticket, Supplies & Misc. Payroll&. Benefits Uniforms Ut1hties ParkJng Management Sales and Parktng Tax KTKl Payment Total OperaUng Expenses Net Operating ~ncome Leasing & Capital Casts Ten.ant fmprovements leasing Commissions Total Leasing & Capital Costs and Other Cash Flow Before Debt Service & Ta,;;es Debt Service 100% Financing at 4.5% for 30 years Cash Flow after Debt ServCce Fotfe1ted Potential Revenue Settlement Fee RET Income Ground Lease Base Rent Income Ground Lease Percentage Rent lncome Total Forfeited Potential Revenue Total Return after Forfe,ted Revenue(no Debt) Total Return after Det>t Service and Forfeited Rev-e1 Revenue/Expense Notes Valet Parking Year 2B Oec-2041 S680.986 680,986 55,921 910 8,768 6,229 7,730 23,637 150,906 1,915,416 2,276,465 4,342,787 5.103,331 (385.473) 4,717,658 11,457 110,385 192,795 78.420 25,703 200,247 1,574,501 2,928 97,312 176,353 412,774 0 2,882,875 1,83-1.983 $1,834,983 S.07% (1,368,050) $ 466,933 $ 291.007 129.818 189.014 609,839 1,225,144 (142,906) Year 29 De<-2042 $680,986 680,986 78,028 0 910 8,768 6,229 7,730 23,637 150,906 1,915,416 2,344,759 4,411,001 5,193,732 (396,898) 4,796,834 0 11,801 113,696 198,578 80,773 26,474 206,254 1,621,7313 3.015 100,232 181,643 425,158 2.969,360 , ,827,474 $1,627,474 8.04~. (1,36ll,050) 459.424 299,737 129,818 194,174 623,729 1.203.745 (164 3051 Year 30 Dec-2043 $753,21l5 (131.575) 521,720 28,490 0 758 7,307 5,191 6,442 19,698 150.906 1,915,416 2,415,102 4,4131,424 5,151,332 (276,316) 4,875,016 0 12,155 117,107 204,536 83,196 27,26ll 212,442 1,670,388 3,106 103.239 187,092 437,912 0 3,058,441 1,S1D,575 29,604 148,022 177,626 $1,638,949 7.21% (1.060,050) 270.899 308,Tl9 129,818 201,295 839,842 99\1,107 (368,943) 5 of 6 Year31 Dec-2044 $789,449 789,449 11,042 0 910 8,768 6,229 7,730 23,637 150,900 1,915,416 2,487,555 4,553.877 5,378,805 (420,588) 4,958,217 12,520 120,520 210,672 65,692 28,066 218,815 1,720,499 3,199 100,336 192,705 451,050 0 3,150,194 1,808,023 7.96% 1,808,023 317,991 129.818 207,673 655,482 1,152,541 1,152,541 Year 32 Dec-2045 $789,449 789,449 35,880 0 910 8,768 6,229 1.no 23,637 150,906 1,!115,416 2,552,132 4.628,504 5,477,470 (433,067) 5,044,403 12,895 124,239 216,992 88.263 28,928 225,380 1,772,114 3,295 109,526 198,486 464,581 0 3,244,699 1,799,704 $1.799,704 7.92% 1,799,7\J4 327,531 129,818 213,311 670,680 1,129,044 1, 129,044 Year 33 Dec-2046 $789.449 789,449 60,640 91Q 8,768 S,229 7,730 23,637 150,906 1,915,416 2,639,047 4,705,369 5,579,095 (445,919) 5, 133, 176 0 13,282 127,966 223,502 90.911 29,796 232,141 1,825,278 3,394 112,812 204,441 478,519 0 3,342,042 1,791.134 $1,791,134 7.88% 1,791,134 337,356 129,818 219,119 688,293 1.104.841 1.104,841 $ Year34 Dec-2047 $789..\49 789,449 86,143 0 910 8,768 6,229 7,730 23,637 150,900 1,915,416 2,718,218 4,784,540 5.683,709 (459. 157) 5,224,612 0 13,681 131,805 230,207 93,638 30,690 239,105 1.880,036 3,496 116.196 210,574 492,874 0 3,442,302 1,782,310 51,782,310 7.84% 1.782,310 347,477 129,818 225.100 702,395 1,079,915 1,079,915 49 PELICAN GARAGE PRICING ANALYSIS· RETAIN CURRENT PARKING RATES ANO FREEZE Schedule of Prospective Cash Flow J\\ RC US For the Years Ending Potential Gross Revenue Base Rental Re11eri1JE Absorption & Tumover Vac;oncy Scheduled Base Rental Revenue CPI & Orher Adjustment Revemrn Expense Reimbursement Revenue RET Janltorlal Lrability Insurance Property Insurance R&M Telephone Expenses Tici<el. Supplies & Misc. Payroll & Benefits Urnforms UtiliUes Total Reimbursement Re11enue Parking Re\lenue Montnly Parl<lng Daily Parking Valet Parking Total Total Potent,al Gross Revenue General Vacancy Effective Gross Revenue Operabng El<penses RET Janitorial Liability Ins uram::e Property Insurance R&M Teleptiane Expenses Ticket. Supplies & Misc. Payroll & Benetit> Uniforms Utilities Parking Managemeni Sales and Parking Tax KTKL Payment Total Operating E:<penses Net Operating Income Leasing & Capilal Costs Tenant Improvements Leas~ng Commissions Total Leasing & Capttal Costs and Other Cash Flow Before Debt Service & Taxes Debt Serv~ce 100% Financing at 4. 5% fer 30 y-ears Cash Flo-wafter Debt Service Folfelled Potential Revenue Settlemen.t Fee RET Income Grou.r,d Lease Base Rent Income Ground Lease Percentage Rent Income Total Forfeited Potential Revenue Tolal Retum after Forfeited Revenue (no Debt) Total Return after Debt Service and Forfejted Revei Revenue/Expense Notes Vale I Parking $ s Year 35 Dec·2048 SS52.318 (152.531) 699,787 49,541 7513 7,307 5.191 6,442 19,698 150,906 1,915,416 2799,765 4,866.087 5,635, 113 (319,487) 5,315,626 0 14,091 135,759 237,113 96,447 31,611 246,27E 1,936.437 3.601 119.li!l2 216.891 507,660 0 3,545,571 1,770,055 34,320 171,598 205,918 $1,564,137 6.S8% 1,564,137 357,901 129,818 232,833 720,552 843.5135 843,SSS Year 36 Dec-2049 $915.108 915,188 9,152 910 8,768 6,229 7,730 23,637 150,906 1,915,416 2,883,758 4,950,080 5,696,057 (.W6,608) 5,411,449 0 14,514 139,832 244,226 99,341 32,559 253,667 1,994.530 3,700 123.2T.l 223,398 522,B90 0 3,651,939 1,759,51Q $1,759,510 7.74% 1,759,510 368,638 129,818 240,751 7'39,207 1,020,303 1,020,303 6 of 6 50 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT RATES AND ESCALATE 10% EVERY 10 VEARS Schedule of Prospective Cash Flows '.,I~;_;: .... .-A" , Year 1 Year 2 Year 3 Year 4 For the Years Ending Dec-2014 Dec-2015 Dec-2016 Dec-2017 ---~- Potential Gross Revenue Base Rental Revenue $246.259 S246,259 $246,259 $275,839 Absorption & Turnover Vacancy ----- Scheduled Base Rental Revenue 246,259 246,259 246,259 275,839 CPI & Other Adjustment Revenue Expense Reimbursement Revenue RET a 0 0 0 janitorial 661 681 701 722 Liability Insurance 6.366 6,557 6,754 6,957 Property Insurance R&M 4,523 4,658 4,798 4,942 Telephone Expenses Ticket. Supplies & Misc Payroll & Benefits Uniforms UWities 5,612 5,780 5,954 6,133 Total Re.mbursement Revenue 17,162 17,676 18,207 18.754 Parking Revenue Monthly Parking 150,906 150,906 150,906 150.906 Daily Parking 1,915,416 1,915,416 1,915,416 1,915.416 Valet Parking 847,832 915,659 988,911 1.068.024 Total 2,914, 154 2.981,981 3,055,233 3.134.346 ----Total Potential Gross Revenue 3,177,575 3,245,916 3,319,699 3.428,939 General Vacancy (161.396) (168,064) (175,104) (184,020) Effective Grass Reverue 3.016.179 3.on.852 3,144,595 3,244,919 -------Operating Expenses RET 0 a 0 0 Janitonal 5,158 5,313 5,472 5.636 Liabmty Insurance 49.694 51,185 52,720 54.302 Property Insurance 86,794 89.398 92,080 94.842 R&M 35,304 36,363 37.454 38.578 Telephone Expenses 11,571 11,918 12,276 12.644 Ticket, Supplies & Misc. 90,149 92,853 95,639 98,508 Payroll & Benefits 708,823 730,088 751.990 774,550 Uniforms 1,318 1,358 1.398 1.440 Ublibes 43,809 45,123 46.477 47,871 Parking Management 79.392 81.774 84,227 86.754 Sales and Parking Tax 174.849 182.729 191,052 199,848 KTKL Payment 100.000 103,000 106,090 109.273 --------- Total Operating Expenses 1.386,861 1,431,102 1,476.875 1,524,246 ·-·---Net Operating Income 1,629,318 1,646,750 1,667.720 1.720,673 Leasing & Capital Costs T enanl Improvements Leasing Commissions ---- Total Leasing & Capital Costs and Other 0 0 0 Cash Flow Before Debt Service $ (22,725,000) $1,629,318 $1.646,750 $1,667,720 $1,720,673 & Taxes ========== ::;;;:::::::::;;;:;;::==;;; :::::.-;:::::::;;:;;;::;;::;:;::::;::::;;;:::;: ========::::::::::: 717% 7.25% 7.34% 7.57% Debt Service 100% Financing at 4.5% fOf 30 years $ 22.500.000 $ ! 1,368, 050) (1,368.050) $ (1.368,050) $ (1,368,050) Cash Flow after Debt Service $ (225,000) $ 261.268 $ 278,700 $ 299.670 $ 352,623 FOffeited Potential Revenue Settlement Fee 250,000 RET Income 131.008 134,938 138,986 143,156 Ground Lease Base Rent lncorre 94,080 94,080 103.490 105.372 Ground Lease Percentage Rent Income 79,010 82,293 85.761 90,166 T olal Forfeited Potentia Revenue 554,098 311,311 328,237 338.694 T oral Return after Forfeited Revenue (no Debt) $ (22.725,000) 1,075,220 1,335,439 1.339.483 1,381,979 Total Re!um after Debt Serv1ce and Forfeited Revem $ (225,000) (292.830) (32,612) (28,568) 13.929 Revenue/Expense Noles Year 5 Dec-2018 $335,000 335.000 0 744 7.165 5,090 6,317 19,316 150,906 1.915,416 1.153,466 3,219.788 3,574,104 (194,840) 3,379,264 0 5,805 55,931 97,687 39,735 13,023 101,463 797,787 1,483 49,307 89,356 209,149 112,551 1,573,277 1,805.987 ---··---0 $1,805,987 =========== 7.95% (1368.050) 437.937 147,451 105,372 95,521 348,344 1,457,643 89.593 Valet Parl<ing PrOJected to generate $770,757 in 2013. Several contracts started in 02 lherefore HFF 1of7 51 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Prospective Cash Flows L. ..t J ... A .. --, Year 6 Yea-7 Year 8 Year 9 Yea-10 Year 11 For the Years Ending Dec-2019 Dec-2020 Dec-2021 Dec-2022 Dec-2023 Dec-2024 Potential Gross Revenue Base Rental Revenue $335,000 $335,000 $335,000 $364,789 $424.368 $424,368 Absorption & Turnover Vacancy (70,728) ------~ -~~--·~--------•-n-----------·- Scheduled Base Rental Revenue 335,000 335,000 335,000 294,061 424.368 424,368 CPI & Other Adjustment Revenue 2,122 14,917 Expense R"-'mbursement Revenue RET 0 0 0 0 0 0 Janitorial 766 789 813 698 862 888 Liability Insurance 7.380 7.601 7,829 6,727 8,306 8,555 Property lnsuraice R&M 5.243 5.400 5,562 4,779 5,901 6.078 Telephone Expenses Ticket, Supplies & Misc Payroll & Benefits Uniforms U!iliues 6,506 6,701 6,902 5.930 7,323 7,542 ------------------------ Total Reimbursement Revenue 19,895 20,491 21,106 18.134 22.392 23,063 Parking Revenue Monthly Parking 150,906 150,906 150,906 150.906 150,906 165,997 Daily Parking 1,915,416 1,915,416 1,915,416 1,915,416 1.915.416 2,106,958 Val et Parking 1,188,070 1,223,712 1,260,424 1,298,236 1.337.183 1,377.299 Total 3,254.392 3.290,034 3.326.746 3,364,558 3,403,505 3,650,253 Total Potential Gross Revenue 3,609,287 3,645,525 3,682,852 3,676.753 3,852.387 4,112.601 General Vacancy (200.183) (205.686) (211.354) (147,245) (227,780) (234,613) ·~--------------~---- Effective Grl>';s Revenue 3,409,104 3.439.839 3.471,498 3.529.508 3,624,607 3.877,988 Operating Expensas RET 0 0 0 0 0 0 Janitorial 5.900 6,159 6,344 6,534 6,730 6,932 Liability Insurance 57,609 59.337 61,117 62.951 64,839 66,735 Properly Insurance 100.618 103,637 106,746 109.S48 113,246 116,644 R&M 40,927 42,156 43,419 44,722 46,064 47.446 Telephone Expenses 13,414 13.816 14,231 14,658 15,098 15.550 Ticket, Supplies & Misc. 104,507 107,643 110,872 114,198 117,624 121.153 Payroll & Benefits 821.720 846.372 871.763 897.916 924.853 952,599 Uniforms 1.528 1,574 1,621 t,670 1,720 1,771 Utilities 50,787 52.310 53,880 55,496 57,161 58,876 Parking Managemenl 92,037 94.798 97,642 100,571 103,589 106,696 Sales and Parking Tax 215,424 221,887 228,543 235,399 242,461 249,735 KTKL Payment 115.927 119.405 122.987 126,677 130.477 0 ----•----------·-~-·-····---- Total Operating Eicpenses 1,620,478 1,669.093 1.719.165 1.770,740 1,823,862 1,744.187 Net Operating Income 1,788,626 1,770,746 1,752,333 1,758,768 1,800,745 2,133,801 Leasing & Capital Costs Tenant Improvements 15.914 Leasing Commissions 79.569 -------- Tolal Leasing & Capital Costs and Other a 0 0 95.483 0 0 ---- Cash Flow Before Debt Service $1,788,626 $1,770,746 $1,752,333 $1.663.285 $1.800,745 $2.133,801 & Taxes ===::;::;;::===== =========== =========== ========== ======:::::::=::::::::;::;: =======~:::=::: 7.87% 7.79% 7.71% 7.32% 7.92% 939% Debt Service 100% Financing at 4.5% for 30 years $ (1.368,050) ( 1,368,050) $ (1,368,050) $ (1,368,050) p,368.050! $ (1.368,050) Cash Flow after Debt Service $ 420.575 402.695 $ 384.282 $ 295.235 432,694 $ 765.751 F orleited Potential Revenue Settlement Fee RET Income 151,874 156,430 161,123 165.957 170,936 176,064 Ground Lease Base Rent Income 105.372 105.372 115,902 118,00B 118,008 118,008 Ground Lease Percentage Rent Income 98,135 100.828 103,601 107,203 111,635 114,665 Total F orleled Potential Revenue 355.381 362.630 380.626 391,168 400.579 408.737 Total Return after Forleited Revenue (no Debt) 1,433,244 1,408.115 1,371,706 1,272,117 1,400, 166 1,725,065 Total Return after Debt Service and Forl"-'ted Revent 65,194 40,065 3,656 (95,933) 32,116 357.014 Revenue/Expense Notes Valet Parking 'projects annualized $847,832 for 2014 2 of 7 52 PELICAN GARAGE PRICING ANALYSIS-RETAIN CURRENT RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Prospective Cash Flows A'?, G ~-s Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 For the Years Ending Dec-2025 Dec-2026 Dec-2027 Dec-2028 Dec-2029 Dec-2030 ------~---- Potential Gross Revenue Base Rental Revenue $424,368 $424,368 $435,633 $506.718 $506.718 $506.718 Absorption & Turnover Vacancy (61,993) Scheduled Base Rental Revenue 424,368 424,368 353,640 506,718 506.718 506.718 CPI & Other Adjustment Revenue 28.095 41.669 44.385 15.202 30,859 Expense Reimbursement Revenue RET a 0 0 0 0 a Janitorial 910 910 758 910 910 910 Liability Insurance 8.768 8.768 7,307 8,768 8,768 8.768 Property Insurance R&M 6.229 6.229 5.191 6,229 6,229 6.229 Telephone Expenses Ticket. Supplies & Misc. Payroll & Benefits Uniforms Ulilities 7,730 7.730 6,442 7,730 7.730 7,730 Total Reimbursement Revenue 23,637 23.637 19,698 23,637 23,637 23,637 Parl<ing Revenue Monthly Parking 165.997 165,997 165.997 165.997 165,997 165,997 Daily Parking 2,106,958 2,106,958 2,106,958 2,106,958 2,106.958 2,106,958 Valet Parking 1.418,618 1,461,176 1,505,012 1,550, 162 1,596,667 1.644.567 -----Total 3.691.572 3,734,130 3,777.966 3.823.116 3.869.621 3.917.521 Total Potential Gross Revenue 4,167,672 4,223,804 4,195.689 4.353.471 4,415.178 4,478,735 GAneral Vacancy (241.628) (248.738) (173,293) (264,218) (272.005) (280.026) Effective Gross Revenue 3,926,044 3,975,066 4,022,396 4,089,253 4.143,173 4,198.709 ----- Operating Expenses RET 0 0 0 0 0 0 Janitorial 7.140 7,354 7,575 7,802 8,036 8,277 Liability Insurance 68,788 70,852 72.977 75,167 77,422 79,744 Property Insurance 120,143 123.747 127.460 131,284 135.222 139.279 R&M 48.869 50,335 51.845 53,400 55,002 56,653 Telephone Expenses 16,017 16.497 16,992 17,502 18.027 18,568 Ticker. Supplies & Misc. 124,787 128,531 132,387 136,358 140,449 144.663 Payroll & Benefits 981,177 1,010,612 1.040.930 1,072,158 1,104,323 1,137,453 Uniforms 1,824 1.879 1,936 1,994 2.053 2.115 Utilities 60,642 62,461 64,335 66,265 68,253 70,301 Parking Management 109,897 113.194 116,590 120,088 123.690 127,401 Sales and Parking Tax 257.227 264,944 272,892 281.079 289.512 298.197 KTKL Payment 0 0 0 0 0 0 Total Operating Expenses 1,796,511 1,850,406 1,905.919 1,963,097 2,021,989 2,082,651 --------·---- Net Operating Income 2,129,533 2,124,660 2.116,477 2.126.156 2.121.184 2.116,058 ---------- Leasing & Capital Costs Tenant Improvements 19,002 Leasing Commissions 95,010 ·"·----- Total Leasing & Capital Costs and Other 0 0 0 114,012 0 Cash Flow Before Debt Service $2,129,533 $2,124,660 $2.116,477 $2,012,144 $2,121,184 $2,116,058 & Taxes ========::.:::-::: =-=-========= =========== ===:;;;:;;;;;::;;;;;;;;;;;;;;;;;; :;:;;::;::;:::;:;:;;:::;::::;:;=;;:::::;: ;;;::;;;:;::======= 9.37% 9.35% 9.31% 8.85% 9.33% 9.31% Debt Service 100% Rnancing at 4-5% for 30 years $ ( 1,368.050) $ p.368.050) $ (1,368.050) $ ! 1.368.050) $ (1.368.050) $ p.368.050) Cash Flow after Debt Service 761.483 $ 756.610 $ 748.427 $ 644,094 $ 753.134 $ 748.008 Forfeited Potential Revenue Settlement Fee RET Income 181.346 186,786 192.390 198,161 204,106 210,229 Ground Lease Base Renl Income 118,008 129.818 129,818 129,818 129,818 129,818 Ground Lease Percentage Rent lnconie 117,787 121,002 124,596 129,784 133.298 136,917 Total Forfeited Potential Revenue 417,141 437.606 446.804 457,763 467.222 476,964 Total Return afte; Forfeited Revenue (no Debt) 1,712.393 1,687,054 1,669.674 1,554,381 1,653,962 1,639,094 Total Return after Debt Service and Forfeited Revem 344,342 319.004 301,623 186,331 285.912 271.044 Revenue/Expense N°'es Valet Parking 3 of 7 53 -----·--·-------------- PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Prospective Cash Flows '"'I·'-.) '.j o1 A''', Year 18 Year 19 Year20 Year 21 Year 22 Year 23 For tl1e Years Ending Dec-2031 Dec-2032 Dec-2033 Dec-2034 Dec-2035 Dec-2036 ---~~--------- Potential Gross Revenue Base Rental Revenue $506,718 $506,718 $587.424 $5$7,425 $587.425 $587.425 Absorption & Turnover Vacancy (97,904) ----------- Scheduled Base Rental Revenue 506.718 506.718 489,520 587,425 587.425 587,425 CPI & Other Adjustment Revenue 46,986 63,598 14.686 32,749 51,354 El<pense Reimbursement Revenue RET 0 0 0 0 0 0 Janitorial 910 910 758 910 910 910 Liability Insurance 8,768 8,768 7,307 8.768 8.768 8,768 Property Insurance R&M 6,229 6.229 5,191 6.229 6,229 6,229 Telephone Expenses Ticket, Supplies & Misc. Payroll & Benefits Uniforms Utilities 7,730 7,730 6.442 7,730 7,730 7,730 ------- Total Reimbursement Revenue 23,637 23,637 19.698 23,637 23,637 23,637 Parking Revenue Monthly Parking t65,997 165,997 165,997 182,596 182,596 182,596 Daily Parl<ing 2,106,958 2. 106,958 2,106,958 2,317,653 2.317,653 2,317,653 Valet Parking 1,693,904 1,744.721 1.797,003 1,850,974 1,906,504 1,963,699 Total 3,966,858 4,017,675 4,070,017 4,351,224 4,406,754 4,463,949 ------ Total Potential Gross Revenue 4,544,199 4,611,628 4,579,235 4,976,972 5,050,565 5,126,365 General Vacancy (21!8,287) (296,796) (206,882) (314,441) (323,735) (333,307) Effective Grass Revenue 4,255,912 4,314,832 4,372,353 4,662,531 4,726,830 4,793,058 Operating Expenses RET 0 0 0 0 0 0 Janitorial 8,525 8,781 9,045 9,316 9,595 9,883 Liability Insurance 82,137 84,601 87,139 89,753 92,445 95,219 PrOflerfy Insurance 143,457 147,761 152,194 156,760 161,462 166,306 R&M 58,352 60,103 61,906 63,763 65.676 67,646 Telephone Expenses 19,125 19.699 20,290 20,899 21,525 22.171 Ticket, Supplies & Misc. 149.003 153,473 156,077 162,819 167.704 172,735 Payroll & Benefits 1,171,576 1,206.724 1,242,925 1,280,213 1,316,620 1,356,178 Uniforms 2,178 2,244 2,311 2,380 2,452 2.525 Utilities 72.410 74,582 76,819 79,124 61.498 83,943 Parking Management 131,223 135,160 139,214 143.391 147,693 152,123 Sal es and Parking Ta> 307,143 316,357 325,846 335,623 345,692 356,063 KTKL Payment 0 0 a 0 0 a Total Operating Expenses 2.145,129 2,209.485 2,275.768 2,344.041 2.414,362 2.486,792 ----- Net Oper-ating lnC<JfTle 2,110,763 2,105,347 2,096,585 2,318,490 2,312,468 2,306,266 ~------- Leasing & Capital Costs Ten ant Improvements 22.028 Leasing CommissiOllS 110,142 Total Leasing & Capital Casts and Other 0 0 132,170 0 0 0 ----- Cash Flow Before Debt Service $2, 110.783 52,105,347 $1.964.415 $2,318,490 $2.312,468 $2.306.266 & Tai<es ==-=-~~~~~~~ ::::::;::::~======= ~~~====~== ~~~=~====== =====-====== :;:::::;;;;;====:::.=== 9_293 9-26% 8-64% 10.20% 1Q_18% 10.15% Debt Service 100% Financing at 4 5% for 30 years $ p,368,050) $ ( 1,368,050) $ (1,368,050) p,368,050) (1,368,050) $ ( 1,368,050) Cash Flow after Debt Service $ 742,733 $ 737,297 $ 596,365 950.439 944.417 $ 938,215 Forfeited Potential Revenue Settlement Fee RET Income 216,536 223,032 229,723 236,615 243.713 251,025 Ground Lease Base Rent Income 129,818 129,818 129,818 129.818 129,818 129.818 Ground Lease Percentage Rent Income 140.644 144,484 150.456 154,529 158,724 163.045 Total Forfeited Potential Revenue 486,998 497.334 509,997 520,962 532,255 543,888 Total Return after Forfeited Revenue (no Debt) 1,623,785 1,608,013 1.454.418 1,797,528 1.780.212 1.762,378 Total Return after Debt Seniice and Forleited Reven1 255,735 239,963 86,368 429,477 412,162 394,327 Revenue/Expense Notes Valet Parking 4 of 7 54 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Prospective Cash Flows '~ '.; '• l A .. , - Year 24 Year 25 Year 26 Year 27 Year28 Year 29 For the Years Ending Dec-2037 Dec-2038 Dec-2039 Dec-2040 Dec-2041 Dec-2042 ----~ Potential Gross Revenue Base Rental Revenue $587.425 $<;65.393 $680,986 $680,986 $680,986 $680,986 Absorption & Turnover Vacancy (113,498) -------- Scheduled Base Rental Revenue 587.425 551,895 680,986 680,986 680,986 680,986 CPI & Other Adjustment RAvenue 70.517 12,288 13,620 34.458 55,921 78,028 Expense Reimbursement Revenue RET a 0 0 0 0 0 Janitorial 910 758 910 910 910 910 Liability Insurance 8.768 7,307 8.768 8.768 8,768 8,768 Property Insurance R&M 6.229 5,191 6.229 6,229 6,229 6,229 Telephone Expenses Ticket, Supplies & Misc. Payroll & Benefits Uniforms Utilities 7.730 6,442 7,730 7.730 7,l'JJ) 7,730 -~~"--- Total R-"mbursernent Revenue 23,637 19,698 23.637 23,637 23,637 23,637 Parking Revenue Monthly Paking 182,596 182,596 182,596 182,596 182.596 182.596 Daily Parking 2,317,653 2,317,653 2.317,653 2,317,653 2.317.653 2.317,653 Vale! Parking 2,022,610 2,083.288 2,145.787 2,210,160 2.276.465 2.344.759 ----- Total 4,522,860 4.583.538 4.646.037 4,710,410 4,776,715 4.845,009 ----~---- Total Po1ential Gross Revenue 5,204.439 5,167.419 5,364,280 5,449.491 5,537.259 5,627,660 General Vacancy (343.167) (239,050) (363.612) (374.381) (385.473) (396,898) Effective Gross Revenue 4.861.272 4,928.369 5,000,668 5.075,110 5,151.786 5,230,762 ~~--~ Operating Expenses RET 0 0 0 0 o 0 Janilorial 10,180 10.485 10,800 11,124 11,457 11.801 Liability Insurance 98,075 101,018 104,048 107,170 110,385 113.696 Prcperty Insurance 171,295 176,434 181.727 187,179 192,795 198,578 R&M 69,675 71.766 73,919 76,136 78.420 80,773 Telephone Expenses 22,836 23,521 24,227 24,954 25,703 26.474 Ticket, Supplies & Misc 177,917 183,254 188,752 194.415 200,247 206,254 Payroll & Benefits 1,398,924 1,440,891 1,484, 118 1.528.641 1.574,501 1,621,736 Unifomis 2.601 2,679 2,760 2.842 2,928 3,015 Utilities 86,461 89,055 91,726 94,478 97,312 100,232 Parking Management 156,687 161,388 166,229 171,216 176.353 181,643 Sales and Parking Tax 366,745 377.747 389,079 400.752 412,774 425,158 KTKL Payrnenl 0 0 0 0 a 0 ----------- Total Operating Expenses 2,561,396 2.638,238 2.717,385 2,798,907 2.882,875 2.969,360 Nel Operating Income 2.299,876 2,290,131 2.283,283 2,276,203 2,268,911 2,261.402 --------------- Leasing & Capital Cosls Ten ant Improvements 25.537 Leasing Commissions 127,685 ---------- Total Leasing & Capital Costs and Olher 0 153,222 0 0 Cash Flow Before Debt Service $2,299,876 $2, 136.909 $2.283,283 $2,276,203 $2,268,911 $2.261.402 & Taxes ==:::::;:::::::::::::::::::::::::: =========::::::::::::: :::::~~====~==== ===:;;;======= =========== =======;;;:;;;:;:; 10.12% 9.40% 1005% 10.02% 998% 9.95% Debt Service 100% Financing at 4.5% for '3J) years (1.368,050) $ (1,368.050) $ ( 1,368,050 ! $ ( 1,368,050) $ (1,368,050) $ (1.368,050) Cash Flow after Debt Service 931,825 $ 768,858 915,232 $ 908, 152 $ 900,860 893,351 Forfeiled Polenlial Revenue SAttlAment Fee RET Income 258,556 266.312 274,302 282,531 291.007 299,737 Ground L..ase Base Rent Income 129,818 129,818 129,818 129,818 129.818 129,818 Ground Lease Percentage Rent Income 167.496 174,030 179,141 184,005 189,014 194,174 Tola! Forfe<ted Potential Revenue 555.870 570.160 583,261 596,354 609.839 623,729 Total Return after Forfeited Revenue (no Debi) 1,744,006 1.566.748 1,700,022 1,679.849 1,659,072 rn37.673 Total Return after Debt Service and Farleited Reven< 375,956 198,698 331.972 311,799 291,022 269,623 RAvenuA/Expense Noles Valet Parking Sof7 55 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Prospective Cash Flows A" R G -s Year 30 Year 31 Year 32 Year33 Year 34 Year 35 For the Years Ending Dec-2043 Dec-2044 Dec-2045 Dec-2046 Dec-2047 Dec-2048 -----···-- Potential Gross Rev911ue Base Rental Revenue $753.295 $789.449 $789,449 $789.449 $789,449 $852.318 Absorption & Turnover Vac:ancy (131,575) (152.531) --·------- Scheduled Base Rental Revenue 621.720 789,449 789.449 789,449 789,449 699.787 CPI & Other Adjustment Revenue 28.490 11,B42 35.880 60,640 86.143 49,541 Expense Reimbur.:>ement Revenue RET Cl Cl 0 0 0 0 Janitorial 758 910 910 910 910 758 Liability lnsur~ce 7,307 8,768 8.768 8.768 8,768 7,307 Property Insurance R&M 5.191 6.229 6,229 6,229 6,229 5.191 Telephone Ei<penses Ticl<et. Supplies & Misc. Payroll & Benefits Uniforms Utilities 6,442 7,730 7,730 7,730 7,730 6.442 -------------~ Total Reimbursement Revenue 19,698 23.637 23,637 23.637 23,637 19,698 Parking Revenue Monthly Parking 182,596 200.856 200.856 200,856 200.856 200,856 Daily Parking 2.317,653 2.549.419 2.549,419 2,549.419 2.549.419 2,549,419 Valet Parking 2,415,102 2.487,555 2.562,182 2.639.047 2,718,218 2,799,765 --------- Total 4,915.352 5,237,830 5.312,457 5,389.322 5,468,493 5,550,040 Total Potential Gross Revenue 5,585.260 6,062,758 6, 161.423 6,263,048 6,367,722 6,319,066 General Vacancy (276,316) (420,588) (433,067) (445.919) (459,157) (319.487) ----------------- Effective Gross Revenue 5.308.944 5,642.170 5,728,356 5,817.129 5,908,565 5.999.579 ----- Operating Expenses RET 0 0 0 0 0 0 Jarntorial 12,155 12,520 12.895 13,282 13,681 14,091 Uability Insurance 117.107 120,620 124,239 127.966 131,805 135.759 Property Insurance 204,536 210,672 216,992 223,502 230.207 237,113 R&M 83.196 85,692 88.263 90.911 93.638 96.447 Telephone Expenses 27,268 28.086 28,928 29,796 30,690 31,611 Ticket. Supplies & Misc. 212.442 218,815 225,380 232,141 239.105 246.279 Payroll & Benefits 1,670,388 1,720,499 1,772,114 1,825.278 1.880.036 1,936.437 Uniforms 3,106 3.199 3.295 3,394 3,496 3,601 Utilities 103.239 106,336 109.526 112.812 116,196 119.682 Parking Mariagement 187,092 192,705 198,486 204,441 210,574 216.891 Sales and Parking Tax 437,912 451,050 464,581 478,519 492,874 507,660 KTKL Payment 0 0 0 0 a 0 ----·-----·-- Total Operating Expenses 3,058.441 3,150,194 3,244,699 3,342.042 3,442,302 3.545.571 ----------- Net Operating Income 2,250.503 2.491.976 2.483.657 2,475,087 2.466.263 2.454.008 -------~-~··~ Leasing & Capital Costs Tenant Improvements 29.604 34.320 Leasing Commissions 148,022 171,598 ----- Total Leasing & Capital Costs and Other 177,626 0 o 0 205.918 -------- Cash Flow Before Debt Service $2,072,877 $2.491,976 $2.483,657 $2,475,087 $2.466,263 $2.248.090 & Taxes ===~=~~ =::::-::::::::::::::::===:::: ==::::==:::::::::::;:::;:::::: =====~::::::::::::::: ~:::::::::::::::::::::::::::::::::::::= =-:::::::::::::~:::::::::=::::::::::::: 912% 10.97% 10.93% 1089% 10.85% 9.89% Debt Service 100% Financing al 4.5% for 30 years $ p .368,050) $ $ $ Cash Flow after Debt Service $ 704,826 $ 2,491,976 2.483,657 2.475,087 $ 2,466,263 $ 2.248.090 Forfeited Potential Revenue Settlement Fee RET Income 308.729 317,991 327,531 337.356 347,477 357.901 Ground Lease Base Rent Income 129,818 129,818 129,818 129,818 129,818 129,818 Ground Lease Percentage Rent Income 201,295 207,673 213.311 219,119 225. 100 232.833 Total Forleiled Potential Revenue 639.842 655,482 670.660 686.293 702.395 720.552 Total Return after Forfeited Revenue (no Debt) 1,433,035 1,836.494 1.812,997 1.788,793 1.763.868 1.527.537 Total Return after Debt Service arid Forfeited Reveni 64,984 1,836.494 1,812,997 1,788,793 1,763,868 1,527,537 Revenue/Expense Notes Valet Parking 6 of 7 56 PELICAN GARAGE PRICING ANALYSIS -RETAIN CURRENT RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Prospective Cash Flows For the Years Ending Potential Gross Revenue Base Rental Revenue Absorption & Turnover Vacancy Scheduled Base Rental Revenue CPI & Other Adjustment Revenue Expense Reimbursement Revenue RET J<lllitorial Uability Insurance Property Insurance R&M Telephone Expenses Ticket. Supplies & Misc. Payroll & Benefits Uniforms Utililjes Total Reimbursement Revenue Parking Revenue Monthly Parking D""ly Parking Valet Parking Tolal Tolal Potential Gross Revenue General Vacancy Effective Gross Revenue Operating Expenses RET Janito<ial Liab1fity Insurance Property Insurance R&M Telephone Expenses Ticket, Supplies & Misc. Payroll & Benefits Unifonms Utilities Parking Ma-iagemenl Sales and Parking Tax KT KL Payment Total Operating Expenses Net Operating Income Leasing & Capital Costs Tenant Improvements Leasing Commissions Total Leasing & Capital Costs and Other Cash Flow Before Debt Service & Taxes Debt Service 100% Financing at 4.5% for 30 yeara Cash Flow alter Debt Service Forteited Potenhal Revenue Settlement Fee RET Income Ground Lease Base Rent Income Ground Lease Percentage Rent Income Total Forfeited Potential Revenue Total Reltlm after Forfeited Revenue (no Debt) T olal Return after Debi Service and Forfeited Reven• Revenue/El<pense Notes Val et Parking Year 36 Dec-2049 $915,188 915,188 9,152 0 910 8,768 6,229 7,730 23,637 200,856 2,549.419 2,8B3,758 5.634.033 6,582,010 (486,608) 6,095.402 14,514 139,832 244,226 99,341 32,559 253,667 1,994,530 3,709 123,273 223,398 522,890 0 3,651,939 2.443.463 0 $2,443,463 10.75% 2,443,463 368,638 129,818 240,751 739,207 1,704,255 1,704,255 7 of 7 57 "AR cu s· For the Years Ending Potential Gross Revenue Base Rental Revenue Absorption & TumoverVacancy Schedulec Base Rental Ravenue CPI & Other Adjustment Revenue Ex.pense Reimbursement Revenue RET Janitorial Liability Insurance Property Insurance R&M Telephone Expenses Ticket, Suppljes & Misc. Payroll & Benefits Uniforms Utilities Total Reimbursement ReventJe Parking Revenue Monthly Parking [);lily Parking Valet Parl<ing Total Total Potential Gross Revenue Genera[ Vacancy Effective Gross Revenue Operating Expenses RET Jarntarial Liability lnsu ranee Property Insurance R&M Telephone Expenses Ticket. Supplies & Misc Payroll & Benefits Uniforms Utilities Parking Management Sales and Parking Tax KTKL Pa)"Tlent Total Operating E"penses Net Operating Income Leas,ng & Caprtal Costs and Other Tenant Improvements Leasing Commissions Total Leasing & Capital Costs and Other Cash Flow Before Debt Sel\/lce & Taxes Debt Service 100% Financing at 4.5% for 30 years Cash Flow after Debt Service Forfeited Potential Revenue Settlement Fee RET Income Ground Lease Base Rent Income Ground Lease Percentage Rant Income Total Forfeited Potential Revenue Total Return after Forfeited Reven"e (no Debt) Total Return after Debt Service and Forle~ed Reven RevenueJExpense Notes Valet Parl<ing PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES WITH ESCALATION Schedule of Prospective Cash Flow Year 1 Year 2 Year 3 Dec-2014 Dec-2015 Dec-2016 $246,259 $246,259 $245,259 ------- 246,259 246,259 246,259 a 661 681 701 6.366 6,557 6,754 4,523 4,658 4.798 5,612 5.780 5,954 17,162 17,676 18,207 75.453 78,471 8U10 957,708 986,439 1,01M33 847.832 915.659 988,911 1,880.993 1,980,569 2,086,554 2,144,414 2,244.504 2,351,020 (161,396) (188,064) (175, 104) 1.983.018 2,076,440 2. 175.916 ------ 0 0 5.158 5,313 5.472 49,694 51.185 52,720 86,794 89,398 92,080 35,304 36,363 37,454 11,571 11,918 12,276 90,149 92,853 95,639 708.823 730,088 751,990 1,318 1,358 1,398 43,809 45.123 46,477 79.392 81.774 84,227 174,849 182,729 191,052 100,000 103.000 106,090 1,386,861 1,431,102 1,476.875 596.157 645.338 699,041 -----~- 0 $ (22,725,000) $596,157 $645,338 $699,041 ===;:;=:::==::== ::;:::::======= =========== 2.62% 2.84% 3.08% $ 22.500,000 $ (1,368,050) $ (1,368,050) $ (1,368,050) $ $ (225,00D) $ (771,893) $ (722.712) $ (669,010) $ 250.000 131,008 134,938 138.986 94,013() 94,080 103,490 79,010 82.293 85,761 554.098 311.311 328.237 $ (22. 725.000) $42,059 $334.027 $370,803 $ (225,000) (1.325.991) $ (1.034,024) $ (997,247) $ Year 4 Year 5 Dec-2017 Dec-2018 $275,839 $335,000 275,839 335,000 a 0 722 744 6,957 7.165 4,942 5,090 6,133 6.317 18,754 19,316 84.875 88,270 1.046.514 1,077,909 1,068.024 1,153,456 2,199,412 2,319,645 2,494,005 2.673.961 (184,020) (194,840) 2.309.985 2,479,121 0 0 5.636 5.BOS 54,302 55,931 94,842 97.687 38,578 39.735 12,644 13,023 98,508 101,463 774.550 797.787 1,440 1,483 47,871 49,307 86.754 89,356 199.848 209,149 109,273 112,551 1.524.246 1,573,277 ------ 785.739 905.844 ----- 0 0 S785.739 $905,844 ========== :::::::::::::;;;:::==== 3.46% 3.99% i1 ,368,050) $ 11,368,050) (582.311) $ (462,207) 143,156 147,451 105,372 105,372 90,166 95,521 338.694 348.344 $447,045 $557.500 [921,005) $ (810,550) Projected to generate $770,757 in 2013. Several contracts started in 02 therefore HF 1of7 "' /\..'~ ~( c u 58 PELICAN GARAGE PRICING ANALYSIS-REDUCED RATES WITH ESCALATION Schedule of Prospective Cash Flow J\A R c us Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 For the Years Ending Dec-2019 Dec-2020 Dec-2021 Dec-2022 Dec-2023 Dec-2024 -----·-~ ---- Potential Gross Revenue Basa Rental Revenue $335,000 $335.000 $335,000 $364,789 $424,368 $424.368 Absorption & Tum over Vacancy (70,728) -------------- Scheduled Base Rental Revenue 335,000 335.000 335,000 294.001 424,368 424,368 CPI & Other Adjustment Revenue 2,122 14,917 Expense Reimbursement Revenue RET 0 0 0 Janitorial 766 789 813 698 862 888 Uability Insurance 7.380 7,601 7,829 6,727 8,306 8.555 Property Insurance R&M 5.243 5,400 5,562 4,779 5,901 6,078 Telephone Expenses Ticket, Supplies & Misc_ Payroll & Benefits Uniforms Utilities 6.506 6,701 6.902 5,930 7,323 7,542 ---- Tot.al Reimbursement Revenue 19,895 20.491 21.106 18.134 22,392 23,063 Parking Revenue Monthly Parking 90,918 93.645 96,455 99,348 102.329 105,398 Daily Parking 1,110,246 1, 143,554 1,177,860 1,213,196 1,249,592 1,287,080 Valet Parking 1.188,070 1,223,712 1,260,424 1,298,236 1.337.183 1.377.299 ---- Total 2,389,234 2,460,911 2,534,739 2,610,780 2,689,103 2,769,777 ----- Total Potential Gross Revenue 2,744, 129 2,816,402 2,890.845 2.922,975 3,137,985 3,232,125 General Vacancy (200.183) (205.686) (211,354) (147,245) (227,780) (234,613) ----~ Effective Gross Revenue 2,543,946 2,610,716 2,579,491 2,775,730 2,910,205 2,997,512 ~·-------- Operating Expenses RET 0 0 0 0 Janijorial 5,980 6.159 6,344 6.534 6,730 6,932 Liabillty Insurance 57,609 59,337 61.117 62,951 84,839 66.78S Property Insurance 100,618 103,637 106,746 109,948 113,246 116,644 R&M 40,927 42.155 43,419 44,722 46,064 47,446 Telephone Expenses 13.414 13.816 14,231 14,658 15,098 15,550 Ticket, Supplies & Misc_ 104,507 107,643 110.872 114,198 117,624 121,153 Payroll & Benefits 821,720 846,372 871,75:1 897,916 924,853 952,599 Uniforms 1,528 1,574 1,621 1.670 1,720 1,771 Utillties 50,787 52,310 53,880 55.496 57,161 58.876 PC1rk1ng Management 92,037 94,798 97,642 100,571 103,589 106,696 Sales and Parking Tax 215,424 221,887 228,543 235.399 242,461 249,735 KTKL Pa)<Tient 115,927 119.405 122.987 126.677 130,477 0 ----- Total Operating EJ<penses 1.620.478 1,669.093 1,719.165 1,770,740 1,823,862 1,744,187 Net Operating Income 923.467 941,622 960,325 1,004,990 1,086,343 1,253,325 ---------------·-- Leasing & Capital Costs and Other Tenant Improvements 15,914 Leasing Gomm1ss1ons 79,569 Tolal Leasing & Caprtal CoslS and Other 0 95,483 0 Cash Flow Before Debi Sero,ice $923.467 $941,622 $960,325 $909,507 $1,086,343 $1,253,325 & Taxes ========== = =-========= =========== =========== =====:;;:===== :;;::;::;:;;:::::;::::;;:;:;;;;:; 4.06%-4.14Q/o 4.23% 4.00% 4.78% 5.52'% Debt Service 100% Financing at 4.5% for 30 years (1,388,050) $ (1.368,050) $ {1,368,050) (1.368.050) $ p,368,050) { 1,368.050) Casti Rew after Debt Service $ (444,583) $ (426,428) $ (407,725) $ (458,543) $ (281,708) (114,726) Forfeited Potential Revenue SAlllemenl Fee RET Income 151,874 156,430 161,123 165.957 170,936 176,064 Ground Lease Base Rent Income 105,372 105,372 115,902 118.008 118,008 118.008 Ground Lease Percentage Rent Income 98.135 100,828 103,601 107,203 111,635 114,665 Total Forfeited Potential Revenue 355,381 362,630 380,626 391,168 400,579 408,737 Total Retum after Forfeiled Revenue (no Debi) $568,086 $578.992 $579,699 $518,339 $685,784 $844,588 Total Return after Debt Service and Forfe!ted Reven $ (799,965) (789,058) $ (788,352) $ (849,711) $ (682,286) $ (SZl,463) Revenue/Expense Nares Vale1 Parking F prnJects annualized $847,832 for 2014 2 of 7 ,. J\·' i ~ ( , :: 59 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES WITH ESCALATION Schedule of Prospective Cash Flow J\' R G,tJ 5· Year 12 Year 13 Year 14 Year15 Year16 Year 17 For the Years Ending Dec-2025 Dec-2026 Dec,2027 Dec-2028 Dec-2029 Dec-2030 ------ Potential Gross Revenue Base Rental Revenue $424,368 $424,368 $435,633 $506,718 $506,718 $506.718 Absorption & Turnover Vacancy (81,993) ------~ Scheduled Base Renlal Revenue 424.368 424,368 353,640 506.718 506,718 506.718 CPI & Other Adjuslmenl Revenue 28,095 41,669 44,385 15,202 30,859 Expense Reimbursement Revenue RET 0 0 Janllooal 910 910 758 910 910 910 Ltability Insurance 8,768 8,768 7,307 8,768 8,768 8,768 Property Insurance R&M 6.229 6,229 5,191 6.229 6,229 6,229 Telephone Expenses Ticket, Su~plies & Misc Payroll & Benefits Uniforms Utilities 7,730 7,730 6,442 7,730 7, 730 7,730 ----------~--- Total Reimbursement Revenue 23,637 23,637 19,698 23,637 23,637 23,637 Par'<ing Revenue Monthly P ar'<ing 108.560 111,817 115,172 118,627 122. 186 125,851 Daily Parking 1,325,692 1,365,463 1,406,427 1.448,620 1,492,078 1,536,840 Valet Parking 1,418,618 1,461,176 1,5')5,012 l,550,162 1,596,667 1,644,567 ------- Total 2,852,870 2,938,456 3,026,610 3, 117,408 3,210,931 3,307,258 ----- Tolal Potential Gross Revenue 3,328,970 3.428,130 3,444,333 3.647,763 3.756,488 3.868,472 General Vacancy (241,628) (248,738) (173,293) (264.218) (272,005) (280,026) Effective Gross Revenue 3,087,342 3,179,392 3,271,040 3,383,545 3,484,483 3,588,446 Operaling Expenses RET 0 0 0 0 0 Janilorial 7.140 7,354 7,575 7,802 8,036 8,277 liability Insurance 68,788 70,852 72,977 75,167 77,422 79,744 Property Insurance 120, 143 123,747 127,460 131,284 135,222 139,279 R&M 48,869 50,335 51 .845 53,400 55,002 56,653 Telephone Expanses 16.017 16.497 16,992 17,502 18.027 18.568 Ticket, Supplies & Misc 124,787 128,531 132,387 136,358 140,449 144,663 Payroll & Benefits 981,177 1,010,612 1,040,930 1,072,158 1, 104,323 1,137,453 Uniforms 1,824 1,879 1,936 1,994 2,053 2,115 U!ilities 60,642 62,461 64,335 66.265 66,253 70,301 Pa~ing Management 109,897 113,194 116.590 120,088 123,690 127,401 Sales and Par'<ing Tax 257,227 264,944 272,892 281,079 289,512 298, 197 KTKL Payment 0 a 0 o -----------_____ ,_ Total Operating Expenses 1,796,511 1,850.406 1,905,919 1,963,097 2,021,989 2,082.651 ------ Nat Operating Income 1,290,831 1,328,986 1.365,121 1,420,448 1,462,494 1,505,795 ---------- leasing & Capital Cosls and Other Tenant improvements 19,002 Leasing Commissions 95,010 ----- Total Leasing & Capital Costs and Other 114,012 0 ----- Cash Flow Before Debi Service 51,290.831 $1,328,986 $1,365, 121 $1,306,436 $1,462,494 $1 ,505,795 & Taxes =========== ==~~~:::=~=~= ::::::::::::::::~:::~=:::: :::==-==-===-=== ========== =========== 568% 5,85% 6.01% 5_75tt/o 6.44% 6_63% Debt Service 100% Financing at 4.5% for 30 years (1368.0501 $ !1.368,050) $ (1,368,050) $ (1.368,050) $ (1.368,050) $ (1.368,050l Cash Fl<NJ afler Debi Seo..ice (77,219) (39,065) (2,929) $ (61,614) $ 94,443 $ 137,745 Forfeited PotentiaJ Revenue Settlement Fee RET Income 181.346 186,786 192,390 198,161 204, 106 210,229 Ground lease Base Rent Income 118.008 129,BtB 129,818 129,818 129,818 129,818 Ground Lease Percentage Rent Income 117,787 121,002 124,596 129,784 133,298 136,917 Total Forfeited Potentia~ Revenue 417,141 437,606 446,804 457,763 467,222 476,964 Total Return after Forfeited RevenLie (no Debt) $873,690 $891,380 $913,317 $848,673 $995.271 $1,028,831 Totar Return after Debt Service and Forfeited Reven $ 1494,360) $ (476,671) $ (449,733) $ (519,378) $ [372,779) (339,220) Revenue/Expense Notes Valel Parking .o i\.A h' c, ' 3 of 7 ·~ 60 PELICAN GARAGE PRICING ANAlYSIS -REDUCED RATES WITH ESCALATION Schedule of Prospective Cash Flow Atf{(:.l:S' Year 18 Year 19 Yaar20 Year21 Year 22 Year23 For the Years Ending Dec·2031 Dec-2032 Dec-2033 0eC·2D34 Dec-2035 Dec-2036 ---- Potential Gross Revenue Base Rental Revenue $506,718 $506,718 $587,424 $587,425 $587,425 $587,425 Absorption & Turnover Vacancy (97,904) ·--------- Scheduled Base Rental Revenue 506,718 506,718 489,520 587,425 587,425 587,425 CPI & Other Adjustment Revenue 46,986 63.598 14,686 32,749 51.354 Expense Reimbursement Revenue RET 0 0 0 Janitorial 910 910 758 910 910 9~0 Liability Insurance 8,768 8,768 7,307 B.763 8,768 8.766 Property Insurance R&M 6.229 6,2:29 5,191 6,229 6,229 6,229 Telephone Expenses Ticket, Supplies & Misc. Payroll & Benefits Uniforms Utmties 7,730 7,730 6,442 7,730 7.730 7,730 Total Re~mbursement Revenue 23.637 23,537 19.698 23,637 23,637 23.637 Parking Revenue Monthly Parking 129,627 133,516 137,521 141,647 145,896 150,273 Daily Parking 1,582,946 1,630,434 1,679,347 1,729,727 1,7S1,619 1,S35,06B Valet Parking 1,693,904 1,744,721 1,797,063 1,850,974 1,906,504 1,963,699 Total 3,406,476 3,508,671 3,613,931 3,722,348 3.334.01S 3.949.039 ---- Total Potential Gross Revenue 3.983,817 4,102,624 4.123.149 4,348,096 4.4n.830 4,611.455 General Vacancy (288.287) (296,796) (206,882) (314,441) (323,735) (333,307) Effective Gross Revenue 3,695,530 3.805,828 3,916,267 4,033,655 4,154.095 4,278.148 Operating Expenses RET 0 0 0 0 Janitorial B,525 8.781 9,045 9.316 9,595 9,883 Liability Insurance 82,137 84,601 87,139 89,753 92.445 95.219 Property Insurance 143,457 147,761 152,194 156,760 161,462 166,306 R&M 58,352 60,103 61,906 63.763 65,676 67,646 Telephone Expenses 19,125 19,699 20.290 20,899 21,525 22.171 Ticket, Supplies & Misc_ 149,003 153,473 158,077 162,819 157,704 172,735 Payroll & Benefits 1,171,576 1,206.724 1,242,925 1,280,213 1,318,620 1,358,178 Uniforms 2,178 2,244 2,311 2.330 2,452 2,525 Utiliues 72.410 74,582 76.819 79,124 81.498 83.943 Parking Management 131,223 135,160 139,214 143,391 147,693 152.123 Sales and Parking Tax 307, 143 316,357 325,848 335.623 345,692 356,063 KTKL Payment 0 0 a 0 0 0 Total Operating Expenses 2,145,129 2,209.485 2,275,768 2,344,041 2,414,362 2,486,792 --·-----o--- Net Operating Income 1.550,401 1.596,343 1.640,499 1,689,614 1,739,733 1,791.356 Leasing II. Capital Costs and Ot~er Tenant lmpro"Vements 22.028 Leasing Comm1ss1ans 110,142 ----~~------- Total Leasing & Capital Costs and Other 132.170 ------- Cash Flow Before Debt Service $1,550,401 $1,596.343 $1,508,329 $1.689,614 $1,739.733 $1,791,356 & Taxes =========== =========== :;========:;:;;; ====.::::===== =====::;::;:::::;;:::: :::_:::_::::;::;;;;:;;;::;;;;;;;;;;; 6.82% 7.02% 6.64% 7.44% 7.66% 7.88% Debt Ser<ice 100% Financing at 4.5% for 30 years $ (1,368,050) (1,363,050) $ (1,368,050) $ (1,368,050) $ (1,368,050) $ (1,368,050) Cash Flow after Debt Ser<ice $ 182,351 $ 228,292 $ 140,279 321,563 $ 371,683 $ 423,306 Forfeited Potentiaj Revenue Settlement Fee RET Income 216,538 223,032 229,723 236,615 243,713 251,025 Ground Lease Base Rent Income 129,818 129,818 129.813 129,818 129,818 129.818 Ground Lease Percenta-ge Rent Income 140,644 144,484 150.456 154,529 158. 724 163,045 Total Fortaited Potential Revenue 486,998 497,334 509,997 520.962 532,255 543,888 Total Return after Forteited Revenue (no Debt) $1,063.403 $1,099,008 $998,332 $1,168,652 $1,207,478 $1,247.468 Total Return after Debt Service and Forfeited Reven (304,648) $ (269.042) (369,719) (199.399) (160,573) $ (120,582) Revenue/Expense Notes Va!et Parking 4 of7 -... ,._, .... J\.r, R.:. 11 61 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES WITH ESCALATION Schedule of Prospective Cash Flow A../\ f~ c u s Year 24 Year 25 Year 26 Year 27 Year 28 Year29 For the Years Ending Dec-2037 Dec-2038 Dec-2039 Dec-2040 Dec-2041 ~c-2042 Potential Gross Revenue Base Rental Revenue $587,425 $665.393 $680,986 $680.986 $680.986 $680,986 Absorption & Turnover Vacancy (113.498) Scheduled Base Rental Revenue 587.425 551,895 680,986 680,986 680,986 880,986 CPI & Other Adjustment Revenue 70,517 12,288 13,620 34,45"' 55,921 78,023 E>cpense Reimbursement Re'Venue RET 0 0 a 0 Janitorial 910 758 910 910 910 910 liability Insurance 8.768 7,307 8,768 8,768 8.768 8,768 Propeny Insurance R&M 6,229 5,191 6,229 6,229 6.229 6.229 Telephone Expenses ncket. Supplies & Misc. Payroll & Benefits Uniforms Utilities 7,730 6,442 7,730 7,730 7,730 7,730 ---- Total Reimbursement Revenue 23,637 19,698 23,637 23,637 23,637 23,637 Pamng Revenue Monthly Parking 154,781 159.424 164.207 169,133 174,207 179,434 Dally Parking 1.890. 120 1.946,823 2.005,228 2.065.385 2, 127,347 2,191,167 Valet Parking 2,022,610 2,083,288 2, 145.787 2,210,180 2,276,465 2,344,759 ----- Tota! 4,067,511 4, 189,535 4,315,222 4,444,678 4,578,019 4,715,359 Total Potential Gross Revenue 4,749.Q90 4,n3.416 5,033,465 5, 183,759 5,338.563 5.498.010 General Vacancy (343, 167) (239.050) (363.612) (374,331) (335.473) (396.898) ------------------ Effective Gross Revenue 4,405.923 4,534,366 4,ll<i9,853 4,809,378 4,953,090 5,101,112 Operating Expenses RET 0 0 0 0 0 Janitorial 10,180 10,485 10,aoo 11.124 11.457 11,801 LiabFl1ty lnsura.nca 98,075 101,018 104,048 107,170 110,385 113,696 Property Insurance 171,295 176,434 181,727 187,179 192,795 198,578 R&M 69,675 71.766 73,919 76,136 78.420 80,773 Telephone Expenses 22,836 23,521 24,227 24,954 25,703 26,474 Ticket, Supplies & Misc. 1n,917 183,254 188,752 194,415 200,247 206,254 Payroll & Benefits 1,398.924 1,440,891 1.484,118 1,528,641 1,574,501 1,621,736 Uniforms 2.601 2,679 2,760 2,842 2.928 3.015 Utilities 86.461 89,055 91,726 94.478 97,312 100,232 Parking Management 156,687 161,388 166,229 171,218 176,353 181,643 Sales and Parkmg Tax 366,745 377,747 389,079 400,752 412,n4 425,158 KTKL Pa)ffient a a 0 a 0 a I otal Operating Expenses 2,561,396 2,638,238 2.717,385 2.798,907 2.882,875 2,969,360 Net Operating Income 1,844,527 1,896,128 1,952,468 2,010,471 2.070,215 2,131,752 -~~-~-----~ ----- Leasing & Capital Costs and Other Tenant fmprovements 25.537 Leasing Commissions 127.685 To!EI Leasing & Capital Costs and Other 153,222 0 Cash Flow Before Debi Service $1,844,527 $1,742.906 $1,952,468 $2,010,471 $2,070,215 $2,131.752 & Taxes ;;;;;;;;;:;;:;;:;;;;;;;;;;;;;;:;:; ==-===:::===== =========== ===-======= =:=====::;: ;;;.;;;;;;::;;;:;;;====:::: 8.12% 7.67~Vo 8.59%1 8.85% 9.11% 9.38% Debt Service 100% Financing at 4.5% for 30 years (1.368.050) (1,368,050) $ (1 ,368,050) (1,368.050) $ (1,368.050) (1.368,050) Cash Flow after Debt Service $ 476,476 374,856 $ 584,418 $ 642.420 $ 702,164 763,702 Forfeited Potential Revenue Settlement Fee RET Income 258,556 266,312 274,302 282.531 291,007 299,737 Ground Lease Base Rent Income 129,818 129,818 129,818 129,818 129.818 129,818 Ground Lease Per'Centage Rent Income 167,496 174.030 179,141 184,005 189,014 H14,174 Total Fo-rfeited Potential Revenue 555.870 570,160 583.261 596,354 609,839 623,729 Total Return after Forfeited Revenue (no Debt) $1 ,286,657 $1,172,746 $1,369.207 $1,414,117 $1.460,376 $1,508,023 Total Return after Debt Service and Forfeited Reven $ (79,394) $ (195,305) $ 1,157 $ 46.066 $ 92,325 139,973 Revenue/Ex~nse Notes Valet Parking 5 of 7 .. A.,r," (~ [; 62 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES WITH ESCALATION Schedule of Prospective Cash Flow J\A ,, Cl.JS " Year30 Year31 Year 32 Year 33 Year 34 Year35 For lhe Years Ending Dec-2043 Dec-2044 Dec-2045 Dec-2046 Oec-2047 Dec-2048 -~~----------- Potential Gross Revenue Base Rental Re11enue $753,295 $789,449 $789,449 $789,449 $789,449 $852,318 Absorption & Turnover Vacancy (131,575) (152,531) ------- Scheduled Base Rental Revenue 621,720 789,449 789,449 789,449 789.449 699,787 CPI & Other Adjustment Rev&nue 28,490 11,842 35,880 60,640 86,143 49,541 Expanse Reimbursement Revenue RET 0 0 Janitorial 758 910 910 910 910 758 Liability Insurance 7,307 8,766 8,768 8,768 8,768 7,307 Property Insurance R&M 5,191 6,229 6,229 6,229 6,229 5,191 Telephone Expenses Ticket, Supplies & Misc. Payroll & BeneMs Uniforms urn~ties 6,442 7,730 7,730 7,730 7,730 6,442 ----·- Total Reimbursemsnt Revenue 19,698 23,637 23,637 23,637 23,637 19,698 Parkirig Revenue Monthly Parking 164,817 190,361 196,072 201,954 208,013 214,:153 Daily Parl<,ng 2,256,902 2,324,609 2,394,347 2,466,178 2,540,163 2,616,368 Valet Parking 2,415,102 2,487,555 2,562, 182 2.639.047 2,718,218 2,799,765 Total 4,856,820 5,002,525 5, 152,601 5,307,179 5,466,393 5,630,386 Total Potential Gross ReV&nue 5,526,728 5,827,453 6,001 ,567 li,180,!J05 6,365,622 6,399,412 General Vacancy (276.316) (420,588) (433,067) (445,919) (459. 157) (319,487) -~--- Effective Gross Revenue 5.250,412 5,400,865 5,568.500 5,734,986 5,906,465 6,079,925 ----- Ope<aling Expenses RET 0 0 0 Janitorial 12,155 12.520 12,895 13,282 13,681 14,091 Liability tnsurance 117,107 120,620 124,239 127,966 131,805 135,759 Property Insurance 204,536 210,672 216,992 223.502 230,207 237,113 R&M 83,196 85,692 88,263 90,911 93,638 96,447 Telephone Expenses 27,268 28,086 28,928 29,796 30,690 31,611 Ticket. Supplies & M<Sc. 212,442 218,815 225,380 232,141 239, 105 246,279 Payroll & Benefits 1,670,388 1,720,499 1,772, 114 1,825,278 1,880,036 1,936,437 Uniforms 3,106 3,199 3,295 3,394 3,496 3,601 utilities 103,239 106,336 109,5~ 112,812 116,196 119,682 Parking Management 187,092 192.705 198,486 204.441 210,574 216,891 Sales and Parking Tax 437,912 451,05() 464,581 478,519 492,874 507,660 KTKL Payment 0 0 0 0 0 0 ------ Total Operating Expenses 3,058,441 3, 150,194 3,244,699 3,342,042 3,442,302 3,545,571 ----- Net Operating Income 2.191,971 2.256,671 2,323,801 2.392,944 2,464,163 2,534,354 Leasing & Capital Costs and OtMr Tenant improvements 29,604 34,320 leasi11g Commissions 148,022 171,598 ----·- Total Leas,ng & Capital Costs and Other 177,626 0 205,918 ----·- Cash Flow Befora Debt Servce $2,014,345 $2,256,671 $2,323,801 $2,392,944 $2,464, 163 $2,328,436 & Taxes ====-====::== =========== =::::======== ===========-::::::::::::=::;;;:;;;:=::;::;; ==:;;====-== 8.86~/i;o 9.93% 10.23% 10.53% 10.84% 10.25% Debt Service 100% Financing at 4.5% for 30 years $ (1,368,050) $ $ $ $ Cash Flaw after Debt Ser.ice $ 646,295 $ 2,256,671 2,323,801 2,392,944 2,464,163 2,328,436 Forfeited Potentiaf Revenue Settlement Fee RET Income 308,729 317,991 327,531 337,356 347,477 357,901 Ground Lease Bcse Rent tricome 129,818 129,818 129,818 129,818 129,818 129,818 Ground Lease Percentage Rent Income 201,295 207,673 213,311 219,119 225,100 232,833 Total Forfeited Potential Reven"e 639,842 655.482 670,660 686,293 702,395 720,SS2 Total Return afte< Forferted Re,enue (no Debt) $1,374,503 $1,601.189 $1,653, 141 $1,706,650 $1,761,768 $1,607,883 Total Return alter Debt Service and Forfeited Reven 6,453 $ 1.601.189 $ 1,653,141 $ 1,706,650 $ 1,761,768 $ 1,607,683 Revenue/Expense Notes Valet Par!<ing .'. ~ ~·~ -.. , J\.'" f; c u 6 of 7 63 A.AR GU 5 For tne Years Ending Potential Gross Revenue Base Rental Revenue Absorption & Turnover Vacancy Scheduled Base Rental Revenue CPI & Other Adjustment Revenue Expense Re1mbursernent Re\lenue RET Janitorial Liability Insurance Propeny Insurance R&M Teklphone Expenses Ticket, Supplies & Misc. Payroll & Benefits Uniforms Uti!Nies Tolal Reimbursement Revenue Parking Revenue Monthly Parking Dady Parking Valet Parking Total Total Potential Gross Revenue General Vacancy Effective Gross Revenue Operating Expenses RET Jamtorial Liability Insurance PropMy lnsuranGA R&M Teklphone Expenses Ticket. Supplies & MiSc Payroll & Benefits Uniforms Utillties Parking Management Sales and Parkrng T a.x KTKL Payment To1ai Operal1ng Expenses Net Opera11ng Income Leasing & Capital Costs and Other Tenanl Improvements Leasing Comm1ss1ciM Total Leasing & Capital Costs and Other Cash Flow Before Debt Sen..ce & Taxes Oebt Service 100% Financing at 4c5°/o for 30 years Cash Flow alter Debt Se0J1ce Forfeited Potential Revenue Settlement Fee RET Income Ground Lease 8ase Rent Income Ground Lease Percenlaga Rent Income Total Forfeited Potential Revenue Total Return after Forfeited Revenue (no Debt) PELICAN GARAGE PRICING ANALYSIS-REDUCED RATES WITH ESCALATION Schedule of Prospective Cash Flow Year 36 Dec-2049 $915.188 915,163 9.152 0 910 8,768 6.229 7,730 23,637 220,681 2,694,859 2,883,758 5,799,297 6.747.274 (486.608) 6,260,666 14,514 139.832 244,226 99.341 32.559 253,667 1,994,530 3.709 123,273 223,398 522.890 0 3,651,939 2,608,727 $2.608,727 2,608,727 368.638 129,818 240,751 739.207 Total Return afler Debt Sarv.GA and Forfeited Reven $ $1,869,520 1,869,520 Revenue/Expense Notes Valet Parking 7 of 7 ···.J\!\ f! c ,. 64 J\A R GU s For the Years Ending Potential Gross Reveriue Base Rental Revenue Absorption & Turnover Vacancy Scheduled Base Rental Re\/enue CPI & Other Adjustment Revenue E;ii;pense Reimbursement Revenue RET Janitorial Liability Insurance P,operty fnsurance R&M Telephone O:penses Ticket, Supplies & Misc. Payroll & 8enefits Unrfcmis Utilities Total Reimbursement Revenue Parking Revenue Monthly Parking Daily Parking Valet Panong Total Total Potential Gross Re ... enue General Vacancy Effect1lfe Gross Relilenue Operating Expenses RET J.anitori.a! L1abil1ty Insurance Property Insurance R&M Telephone Expenses Ticket. Supplies & Misc. Payroll & Benefits Uniforms UtJlitles ParkJng Management Si3ies and Parking Tax KTKL Pa)fl1enl Total Operating Expenses Net Operating lnc::ame Leasing & Capital Cosls and Ottier Tenant lmpro11ements Leasing Commissions Total Leasing & Capital Costs and Other Cash Fklw Before Debt Service $ & Taxes DebtSeNlce 100% Financing at 4.5% for 30 years $ Cash Flow after Debt Service $ Forfeited Potential Revenue sernement Fee RET Income Ground lease Base Rent Income Groond Lease Percentage Ren1 Income Totill Forteil€d Poten~al Revenue Totill Rewm after Fotfe1ted Revenue (no Debt) Total Return after Debt Service and Forfeited Reven, $ Revenue/Expense Notes Valet Parking PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND FREEZE Schedule of Prospective Cash Flows Year 1 Year 2 Year 3 Dec-2014 Dec-2015 Dec-2016 ---~-- $246,259 $246,259 $246,259 ---- 246,259 246,259 246.259 0 661 681 701 6.366 6.557 6,754 4,523 4,658 4,798 5,612 5,780 5,954 17,162 17,676 18,207 75,453 75,453 75,453 957,700 957,708 957,700 047,832 915,659 988,911 1,680,993 1,948.820 2,022.072 2,144.414 2,212,755 2.286.538 (161,396) (168,064) (175,104) 1,983,018 2,044.691 2,111,434 -·---- 0 5,158 5,313 5.472 49.694 51,185 52.720 86,794 89,398 92,080 35,304 36,363 37,454 11,571 11,918 12,276 90.149 92,853 95,639 708,823 730,088 751,990 1.318 1.358 1,398 43,809 45,123 46,477 79,392 81,774 84,227 174,849 182,729 191,052 100,000 103,000 106,090 ------- 1.386.861 1.431,102 1,476,875 596.157 613,589 634,559 0 0 ----- (22, 725,000) $596.157 $613.589 $634,559 ::::::::::::::::::::::::==== ======== ====""""=~~ 2.62% 2.70% 2.79% 22,500,000 $ ( 1.368,050) (1,368,050) (1,368,©J) $ (225,oom $ (771.89:\) $ (754,461) (733.491) $ 250,000 131,008 134.938 138.986 94,080 94,080 103,490 79,010 82.293 85,761 554,00B 311,311 328,237 (22,725,000) $42,059 $302.278 $306,322 (225.000) (1,325,991) (1,065,773) $ (1,061.729) Year 4 Year 5 Dec-2017 Dec-2018 $275,839 $335,000 --~--- 275,839 335,000 722 744 6.957 7,165 4,942 5,090 6,133 6,317 18,754 19,316 75,453 75.453 957,708 957,708 1,068,024 1,153,466 2,101,165 2, 186,627 2.395.778 2.540,943 (184,020) (194,840) 2,211,758 2,346,103 0 5,636 5,805 54,302 55.931 94,842 97,687 38.578 39.735 12,644 13,023 98,508 101,463 774,550 797,7'87 1,440 1,483 47,871 49,307 86.754 89,356 199,048 209,149 109.273 112,551 ----- 1.524.246 1,573,277 ------ 687.512 772.826 ---- ----- 0 5687,512 $772,826 ==~====== ========= 3.03% 3.40% ( 1,368,050) $ (1,3613,050) (680.538) $ (595,224) 143.156 147,451 105,372 105,372 90.166 95.521 338,694 348,344 $348,818 $424,482 (1,019,232) $ 1943,568) Projected to generate $770,757 Jn 2013. Several contracts started 1n Q2 therefore HFf 1of7 65 PELICAN GARAGE PRICING ANALYSIS· REDUCED RATES AND FREEZE Schedule of Prospective Cash Flows J\' R c u s Year 6 Ya.c 7 Year 0 Year 9 Year10 Year11 For the Years Ending Dec-2019 Oec-2020 Dec-2021 Dec-2022 Dec-2023 Oec-2024 Potentjal Gross Revenue Base Rental Re-venue $335,000 $335.000 $335,000 $364,789 $424,368 $424,368 Absorption&. Turnover Vacancy (70,728) Sche<Juled S~e Ren1al Revenue 335,000 335.000 335.000 294.061 424,368 424,368 CPI & Other Adjustment Revenue 2,122 14,917 Expense Reimbursement Revenue RET 0 0 0 JanitOfial 766 789 813 698 862 888 Liability Insurance 7,380 7,601 7,829 6,727 8,306 8,555 Property ~nsurance R&M 5,243 5,400 5,562 4,779 5,901 6,078 Telephone Expenses nck.et, Sup~Jes & Misc Payroll & Benefits Uniforms Utilities 6,506 6,701 6,902 5,930 7,323 7,542 -------~--- Total Reimbursement Revenue 19,895 20,491 21,t06 18,134 22,392 23,063 Parking Revenue Monthly Parl<ing 75,453 75.453 75.453 75,453 75,453 75,453 Daily Parking 957,708 957,708 957,708 957,708 957,708 957,708 Valet Parking 1,188,070 1,223.7t2 1,260,424 1,298,236 1,337,183 1,377.299 ---- Total 2,221,231 2,256,873 2,293,5$5 2,331,397 2,370,344 2,410,460 --~---- Total Potential Gross Revenue 2,576.126 2,612,364 2,649,691 2,643,592 2,819,226 2.872,308 General Vacancy (200,183) (205.686) (211,354) (147.245) (227,780) (234,613) ------ Effective Gross Revenue 2.375.943 2,406,678 2,438.337 2.496,347 2,591,446 2,638,195 --~----------- Operating Expenses RET 0 0 0 0 0 JanPtorial 5,980 6,159 6,344 6,534 6,73() 6,932 Lia bllily lns.u r ance 57,609 59,337 61,117 62,951 64,839 66,785 Property Insurance 100,613 103,637 106,746 109,948 113,246 116,644 R&M 40,927 42,155 43,419 44,722 46,064 47,4413 Telephone E:<penses 13,414 13,816 t4,231 14,658 15,098 15,550 Ticket, Supplies & Misc. 104,507 107,643 110,872 114,198 117,624 121,153 Payroll & Benefits 821,720 846.372 871,763 897.916 924,853 952,599 Un.ifonns 1,528 1,574 1,621 1,670 1,720 1,771 U1Jlities 50,787 52,310 53,880 55.496 57,161 58,876 Parking Mani3gement 92.037 94,7ll8 97,642 100,571 103,589 106,696 Sales and Parl<ing Tax 215,424 221,887 228.543 235.399 242,461 249,735 KTKL Payment 115.927 119,405 122,987 126,677 130,477 ---~·---- Total Operating Expenses 1.620.478 1,669,093 1,719,166 1,770,740 1,823,862 1,744,187 ------ Net Operating Income 755,465 737,585 719,172 7<5,607 767,584 894,008 -~-- LeBsing & Capital Costs and Other Ten.ant Improvements 15,914 Leasing Commissions 79.569 -~---- Total Leasing & Cap~tal Costs and Other 0 95,483 --------- Cas.h Flow Before Debt Service $755,465 $737,585 $719,172 $630,124 $767,584 $894,008 & Taxes ==:;::::;:::;::=:;:: :;::=:;:::;:::;:::;::=:;:::;:: :;:::;:::;:::;:::;:::;:::;:::;:::;::.:;:::;:: :::========= =::::::::::::::;::::::::.:.::: ::::::::::::::::::::::::::::::::: 3.32% 3.25% 3.16% 2.n% 3.35% 3.93% Debi Service 100% Financ1119 at4.5% for 30 years (1,368,050) ( 1,368,050) $ (1,3$8,050) ( 1.368,050) $ ( 1 .368.050) (1.368,050f Cash Flow after Debt Service (612.586) $ (630,466) $ (648,87~) (737,926) $ (600,467) (474,042) Forfeited Potential Revenue Settlement Fee RET Income 151,874 156,430 161,123 165,957 170,936 176,064 Grnond lease Base Rent Income 105,372 105,372 115,902 118,008 1 tB,008 118,00!l Ground lease Percentage Rent Income 98,135 100.828 103,601 107.203 111.635 114,665 Total Forleited Potenual Revenue 355,381 362,630 380.626 391,168 400,579 408.737 Total Return alter Forfeited Revenue (no Debt) $400,083 $374,954 $338,545 $238,958 $367,005 S485.271 Total Return after Debt Service and Forfeited RevertL (%7,967) (993,096) ( 1,029, 505) (1.129.094) (1,001.045) $ (882.n9) Revenue/Ex:pense Notes Valet Parking =projects annualized $847,832 for 2014 2 of7 66 --------------- PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND FREEZE Schedule of Prospective Cash Flows At R G I' _, s Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 For lhe Years Ending Dec-2025 Dec-2026 Dec-2027 Dec-2028 Oeo-2029 Dec-2030 Potential Gross Revenue Base Rental Revenue 5424,368 $424,368 5435,633 $506,718 $506.718 $506.718 Absorption & Turnover Vacancy (81.993) Scheduled Base Renlal Revenue 424,368 424,368 353,640 506,718 506,718 506.718 CPI & Other Adjustment RevemJe 28,095 41,869 <14,385 15,202 30,859 Expense Reimbursement Revenue RET 0 0 0 0 0 0 Janitonat 910 910 758 910 910 910 Liabilir_y Insurance B,768 8.768 7.307 8,768 6,766 8,768 Property lnsuranGe R&M 6,229 6,229 5,191 6,229 6.229 6,229 Telephone Expenses Ticket, Supplies & Misc Payroll & Benefrts Urnforms Utl1t1es 7,730 7,730 6,442 7,730 7,730 7.730 ---- Total Reimbursement Revenue 23,637 23.537 19,698 23.537 23,637 23.637 Parking Re1,1enue Monthly Par~109 75,453 75,453 75.453 75,453 75,453 75,453 Daily Parking 957,708 957,708 957,708 957,708 957,708 957,708 Valet Parlong 1.418,618 1,461,176 1,505,012 1,550,162 1.596.667 1,644,567 ----~ Total 2,451,779 2,494,337 2,538,173 2,583,323 2.629.828 2,677,728 Ta1al Potential Gross Revenue 2,927,879 2,984,011 2.955,696 3,113,678 3, 175,385 3,238,942 General Vacancy (241,628) (248,738) (173,293) (264.218) (272.005) (280.026) ------- Effective Gross Revenue 2,666,251 2,735,273 2,782,603 2,849,460 2,903,380 2.958.916 ----------- Operating Expenses RET a 0 0 0 0 0 Janitor1al 7,14Q 7,354 7.575 7,802 8.038 8,277 Liability Insurance 68.788 70,852 72,977 75.167 77,422 79,7<14 Property Insurance 120,143 123,747 127,460 131,284 135,222 139,279 R&M 48.869 50,335 51,845 53.400 55.002 56,653 Telephone Expenses 16,017 16,497 16,992 17,502 18,027 18,566 Ticket, Supplies & Misc. 124,797 128,531 132,387 138.358 140,449 1<14,663 Payroll & Benefits 981,177 1,010.612 1 ,040,930 1.072.158 1 104,323 1, 137.453 Uniforms 1,924 1,879 1.936 1.994 2.053 2.115 U~l1ties 60.642 62.461 54,335 65.255 68,253 70,301 Parking Managemenl 109,897 113,194 116.590 120.008 123,690 127,401 Sales and Parking Tax 257,227 264,944 272,892 281,079 289,512 298.197 KTKL Pal'ffienl 0 0 0 0 ---------- Tot;H Operating Expenses 1,796,511 1,850,406 1.905.919 1,963,097 2,021,989 2.082.651 ---- Net Operating Income 889,740 884,867 876,684 886.363 881,391 876,265 ------ Leasing & Capital Costs and Other Ten.ant tmprovements 19,002 Leasing Commtssions 95,010 ---~.~ Toial Leasing & Capital Costs and Other 0 0 114,012 0 0 ~~-~~- Cash Flow Before Debi Service $889,740 $884,867 $876,684 $772,351 $881,3.G1 $876,265 & Taxes ========== ;:::::;!;~====== ========== ========= ====-=====::::;:: =====-:::=~~;;=- 3.92% 3.89% 386% 3.40% 3.88% 386% Debt Service 100% Financing at 4.5% for 30 years ( 1,368,050) (1,36B,05ll! (1,368,050) $ (1,368,050) (1.368,050) (1,368,0501 Cash Flow after Debi SeNioe (478,310) (483,183) (491 ,366) $ (595,699) (486,659) (491 .785) Forfeited Potenbal Revenue Settlemen1 Fee RET Income 181.346 1S6,786 192.390 198.161 204,106 210,229 Ground Lease Base Rent Income 118,008 129,818 129,818 129,818 129,818 129.818 Ground Lease Percentage Renl Income 117,797 121,002 124,596 129.794 133,298 136,917 Tolal Forfeiled PotenMI R•ve,ue 417,141 437,606 446,804 457,763 467,222 475,964 Total Relurn after Forfeited Revenue (no Debt) $472,599 $447,261 $429,880 $314,588 $414,169 $399,301 Total Return after Debt Service and Forfeited R.evenl (895,451) (920,789) (938.170) ( 1 ,053,463) (953.882) (958.75(]) Revenue/Expense Notes Valet Parking 3 of 7 67 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND FREEZE Schedule of Prospective Cash flows JV·R GU 5 Year 18 Year 19 Year 20 Year21 Year22 Year23 For the Years Ending Dec-2031 Dec-2032 Dec-2033 Dac-2034 Dec-2035 Dec-2036 ------·------- Potenti~ Gross Revenue Base Rental Revenue $506,718 $506,718 $5117,424 $587.425 $537.425 $587,425 Absorption & Tt.Jmover Vacancy (97,904) ------------------ Scheduled Base Rental Revenue 506,718 506.718 489.520 587,425 587,425 587.425 CPI & Other Adjus.bnent Re11enue 46.986 63,598 14.686 32,749 51.354 E;i;pense Reimbursement Revenue RET 0 0 0 Jainilori.al 910 910 758 910 910 910 Liability Insurance 8,768 8,768 7,307 8,768 8,768 8,768 Property Insurance R&M 6,229 6,229 5.191 6,229 6,229 6,229 Telephone Expenses Tlcket Supplies & Misc. Payroll & Sene"ts Unrforms Utilities 7,730 7,730 6,442 7,730 7.730 7,730 ·---- Total Reimbursement Revenue 23,637 23,637 19,6RB 23,637 23,637 23,637 Parking Re ... enue Monthly Par!<ing 75,453 75,453 75,453 75,453 75,453 75.453 Daily Parking 957,708 957,708 957,700 957,708 957,708 957,708 Valet Parking 1,693,904 1,744. 721 1,797,063 1,850,974 1,906,504 1,963,699 ----- Total 2,727.065 2,777,882 2 830,224 2,884.135 2,939,665 2,996.860 ----- Total Potenfial Gros.s Revenue 3,31)4,406 3,371.035 3.339.442 3,509,883 3,5113,476 3,659,276 General Vacancy (288.267) [296,796) (206,882) (314,441) (323,735) (333.307) Effective Gross Re'llenue 3,016,119 3.075,039 3,132,560 3,195,442 3,259,741 3.325.969 ·---- Operating Expenses RET 0 0 0 Jan~torial 8,525 8,781 9,045 9,316 9.595 9,883 Lfability Insurance 82.137 84,601 87.139 99,753 92,445 95,219 Property Insurance 143,457 147,761 152,194 156.760 161.462 1so,306 R&M 58,352 60,103 61.906 63,763 65,676 67,646 Telephone Expenses 19,125 19.699 20,290 20,899 21,525 22.171 Ticket Supplies & Mjsc 149,003 153.473 153.077 162.819 167.704 172,735 Payroll & Benefits 1,171,576 1,206,724 1,242,925 1,280,213 1.318,620 1,358,178 Uniforms 2,178 2,244 2,311 2,380 2.452 2,525 Utilities 72.410 74.582 76,819 79,124 81,498 83,943 Parking Management 131,223 135,160 139.214 143,391 147,693 152,123 Sales and Parking Tax 307,143 316,357 325,!348 335.623 345.692 356,063 KTKL Payment 0 0 0 0 0 -----·- Total Operating Expenses 2.145.129 2,209,485 2.275,768 2.344.041 2,414,362 2,486,792 Net Operating Income 870.990 865,554 856.792 851.401 845,379 839,177 ~--- Leasing & Capital Costs and Ottier T e11ant lmpro,,.ements 22,02B Leasing Commissions 110.142 ------Total Leasing & Capital Costs and Other 132,170 ---------- Cash Ffow Before Debt Service $870.990 5865,554 $724.€22 5851.401 5845,379 $839,177 & Taxes =:!===,,,:::::: ======="""" ==-=====:;1;. ="==-===-==~== ======== ==-===:o;.:::::::::::: 3.83% 3.B1% 319% 3.75% 3.72% 3.69% Debi Service 100% Finandng at 4.5% for 30 years (1 ,368,050) (1.368,050) !1 ,368,050) (1,368,050) $ (1.36!3.050) (1,368.0SO) Cash Flow after Debt Service (497.060) (502,496) $ (643.428) (516,649) (s22.e1n $ (528.873) Forfeited Poten1;Jal Revenue Settlement Fee RETlncome 216,536 223,032 229,723 236.615 243,713 251,025 Ground Lease Base Rent jncome 129,819 129,818 129,818 129,818 129,818 129,81B Ground Lease Pef"'...entage Rent Income 140.644 144,484 150,456 154,529 151l,724 163,045 Total Forfeiced Poten~al Revenue 486,998 497,334 509,997 520,962 532.255 543.888 Total Return after Forfeited Revenue {no Debt) $383,992 $388,220 $214,525 $330,439 $313,124 $295.289 Total Return after Debt Service and Forfeited Revent (984,059) (999.831) (1.153,~26) (1.037,611) ( 1,054,927) (1.072,761) ReveriuelE~pense Notes Valet Parking 4 of7 68 PELICAN GARAGE PRICING ANALYSIS-REDUCED RATES AND FREEZE Schedule of Prospective Cash Flows "'\ RGUS Year24 Year 25 Year26 Year 27 Year28 Ye.ar 29 For the Years Ending Dec-2037 Dec-2038 Dec-2039 Oec-2040 Dec-2041 Oec-2042 ------- - Potenti-al Gross Revenue Base Rental Revenue $587,425 $665,393 $680,986 $680,986 $1580,986 $680,986 Absorption & Turnover vacancy (113,498) ---------------- Scheduled Base Rental Revenue 587,425 551,895 680,986 580,SSS 680,986 680,986 CPI & Other Adjustment Revenue 70,517 12.288 13,620 34,458 55,921 78,028 Expense Reimbursement Revenue RET 0 0 0 0 Janitorial 910 758 910 910 910 910 Liability Insurance 8,758 7,307 8.768 B.768 8.768 8,768 Property Insurance R&M 6.229 5,131 6.229 6.229 6.229 6.229 Telephone Expenses. Ticket Supplies & Misc. Payraji & Benefits Uniforms Utilities. 7.730 6,442 7,730 7,730 7,730 7,730 • _" _____ Total Reimbursement Revenue 23,637 19,698 23,637 23,637 23,637 23,637 P.arkirig Revenue Monthly Porl<ing 75,453 75.453 75,453 75,453 75,453 75,453 Dany Parking 957,708 957,708 957,708 957,708 957,708 957.708 Valet Parking 2,022,610 2,083,288 2.1~5.787 2,210,160 2,276,465 2,344-759 Total 3,055,771 3,116,449 3,178,948 3,243,321 3,309.626 3,377,920 ------- Total Potential Gross Revenue 3,737,350 3,700,330 3,897,191 3.982.402 4,070,170 4, 160,571 General Vacancy (343,167) (239,050) (363,612) (374,381) (385.473) (396,898) Effective Gross Revenue 3,394,183 3.461,280 3,533,579 3,608,021 3,684,697 3,763,673 Operatmg Expenses RET 0 0 Janitorial 10,180 10,485 10,800 11,124 11,457 11,801 liability Insurance 98,075 101,018 104,048 107,170 110,385 113,696 Property Insurance 171,295 176,434 181,727 187.179 192,795 198,578 R&M 59.675 71 ,766 73,919 76.136 78.420 80,773 Telephone Expenses 22,836 23,521 24.227 24,954 25,703 26,474 Tlc~et, Supplies & Misc. 1n.s11 183,254 186,752 194,415 200.247 206.254 Payroll & Benefits 1,398.924 1,440,691 1,484,118 1,528,641 1,574,501 1.621,736 Uniforms 2.601 2,679 2,760 2,842 2,928 3.015 Utilities 86,46~ 89,055 91,726 94,478 97.312 100,232 Parkif"lg Management 156.687 161 ,388 166.229 171,216 176,353 181.643 Sales and Parking Tax 366,745 377,747 389,079 400,752 412,774 425, 158 KTKL Payment 0 0 0 0 0 -------------- Tot;31 Operating Expenses 2.561.396 2,638.238 2,717,365 2,7913,907 2.882.875 2.969.360 Net Operating Income 832,787 823.042 816,194 809.114 801.822 794.313 ----- Leasing & Capital Costs and Other Tenant Improvements 25.537 Leasing Commissions 127,685 ------ Total Leasing & Capital Casts and Other 0 153,222 0 0 ------- Cash flow Before Debt Service $832.787 S669.620 $816,194 $609, 114 $801,622 $794,313 & Taxes ========== =======~=-=== =::::=::::======= =========== =:======== =-========:::: 3.66% 2.S5% 3.59% 3.56% 3.53% 3.50% Debt Service 100% Financing at 4.5% for 30 years. $ ( 1,368,050) (1358,050) (1.368.050) $ (1.368,050) (1,368,050) (1,368,050) Gas~ Flow after Debt Service (535,263) (698 230) $ (551.856) (558.936) (566,228) (573,737) FDrfe1ted Potential Revenue Setdemerit Fee RET lnC<Jme 258.556 266,312 274,302 282,531 291.007 299,737 Ground Lease Base Reflt Income 129,818 129.ern 129,818 129,818 129,818 129,816 Ground Lease Percentage Rent Income 167,496 174.030 179,141 184,005 189,014 194.174 Total Forteited Po1ential Revenue 555.870 570, 160 583.261 596.354 609,839 623,729 Total Reb..lm after Forfeited Revenlle (no Debr) $276,917 $99,660 S232.93:l $212.760 $191,983 $170,584 Total Return after Debt Service and Forfeited RtNertL (1,091,133) (1,263.391) n ,13s,111) (1,155,290) s (1,176,067) (1,197,466) Revenue/Expense Notes Valet Par~ing S of 7 69 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND FREEZE Schedule of Prospective Cash Flows 1\.A fi .G U .s Year 30 Year 31 Year32 Year 33 Year34 Year35 For tile Years Ending Dec-2043 Dec-2044 Dec-2045 Dec-2046 Deo-2047 Dec-2°'18 Potenti.al Gross Revenue B.,:ise Rental ReYenue $753,295 $789,449 $789,449 $789,449 $789,449 $852.318 Absorption & Turnover Vacancy (131.575) (152,531) Scheduled Base Rental Revenue 621.720 789,449 789.449 789.449 789,449 699, 787 CPI &. Other AdjL.J5bnent Revenue 28.490 11,842 35,880 60,640 86,143 49,541 Expensa Reimbursement RevenLJe RET 0 0 0 0 Janitorial 758 910 910 910 910 758 L~ability lnsLJrance 7,307 8,768 8,768 8,768 8,768 7,307 Property lns urance R&M 5.191 6.229 6,229 6.229 6,229 5,191 Telephone Expenses Tic1<.et. Supplies & Misc, Payroll & Beneflls UnWorms urnitles 6,442 7,730 7,730 7,730 7,730 6,442 --~~-· -·--· ------ Total Reimburse merit Revenue 19.698 23,637 23,637 23,637 23,637 19,698 Parklng Re\lem.Je Monthly Parking 75,453 75.453 75,453 75,453 75,453 75,453 Daily Parking 957,708 957.708 957,708 957.708 957,708 957,708 Valel Parking 2,415, 102 2,487,555 2,562, 182 2,639.047 2,718,218 2.799,765 -~--------·------ Total 3,448,263 3,520.716 3,595,343 3,672,208 3.751,379 3,832.926 Total Potential Gross Re\leoue 4,118.171 4,345,644 4,444,309 4,545,934 4,650.608 4.601,952 General Vacancy (276.316) [420,588) (433,067) (445,919) (459,157) (319,487) ---·--·------ Effective Grass Revenue 3.841,855 3,925,056 4,011,242 4,100,015 4.191.451 4,282,4€5 Operating Expenses RET 0 0 0 0 0 Janilorial 12,155 12,52() 12,895 13,282 13.681 14,091 L~bility Insurance 117,107 120,620 124,239 127,966 131,805 135,759 Property Insurance 204,536 210,672 216,992 223,502 230,207 237, 113 R&M 83,196 BS,692 88,263 90,911 93,638 96.4~7 Te!eptione Expenses 27,268 28.086 28,928 29,796 30,690 31,611 T~ket. SuppHos & Misc. 212,442 218,815 225,380 232,141 239.105 246.279 Payroll & Benefits 1,670,388 1.720,499 1,772,114 1,825,278 1,880,036 1,936,437 Unforms 3,106 3,199 3.295 3,394 3.496 3.601 Utilities 103,239 106.336 109,526 112,812 115,195 119,682 Par1<in;J Management 187,092 192.705 198.486 204.441 210,574 216.891 Sa~es and Parking Tax 437,912 451,050 464.581 478,519 492,874 507,560 KTKL Pa'/TT!ent 0 0 0 D 0 To1a1 Operating Expenses 3,058,441 3,150.194 3.244,699 3,342.042 3.442.302 3,545,571 Net Operating lricome 7B3A14 774,862 766,543 757.973 749,149 736,894 Leasing & Capilal Cos1s and Dther Tenant Improvements 29.604 34,320 Leasing Commissions 148,022 171,598 ---- Total Leasing & Capital Costs and Othef 177,626 0 0 205.918 -----· Cash Flow Before Debt SeNice $605.788 $774,862 $766.543 $757,973 $749.149 $530.976 & Taxes ========== ::::;.::;::;;:;::;:=== .:::::======= ===-===== ======== ======== 2.67% 3.41% 3.37% 3.34% 3.30% 2.34% Debt Service 100% Financing at 4.5% for 30 years (1,368,050) s Cash Flow afte.-Oebt Service (762,262) $ 774,862 766,543 757,973 $ 749.149 530.976 Forfe~ted Potential Re'venue Setdemef1! Fee RET Income 308,729 317,991 327,5.11 337.356 347.477 357,901 Ground Lease Base Rent lncome 129.618 129,818 129,818 129,818 129.818 129,818 Ground Lease Percentage Rent Income 201.295 207.673 213,311 219.119 225,100 232,833 Total Forfeited Potential Revenue 639,842 655.482 670,660 686,293 702,395 no.ss2 T olal Return after Forfeited: Revenue {no Debt) ($34,054) $119.380 $95,883 S71,680 $46,754 ($189,576) T olal Return after Debi Se{vice and Forfeited RevenL $ (1,402,104) 119.380 $ 95,883 71,SBD 46,754 [189,576) Revenwe/Ei<perise Notes Valet Parking 6 of 7 70 For !he Years Ending Potential Gros.s Revenue Bese Rerital Revenue Absorption & Turnover V.acancy Scheduled Base Rental Revemrn CPI & Other Adjuslment Revenue Expense Reimbursement Re"<Jenue RET Janttorial Liability Insurance Property Insurance R&M Telephone EJI pens.es Ticket, Supplies & Misc. Payroll & Benefits Un forms Utilities Total Reimbursem.enl Revenue Parking Revenue Monlhly Parking Daily Parking V;;::iJet Parking Total Total Potential Gross Revenue General V8cancy Effective Gross Re1r1enue Operating EJ;penses RET Janitori<:il Liability Insurance Property ~nsurance R&M Telephone Exp€nses Ticket, Supplies & Misc. Payrcn & Benefits Uniforms Utilities Parking Management Sales and Parking Tax KTKL Pa)TTient Total Operating E>penses Net Operating Income Leasing & Capital Costs and Other Tenant Improvements leasing Comm1ss1ons Totaf Leasing & C.apital Costs and Other Cash Flow Before Debt Service & Taxes Debt Service 100% Financing al 4.5% for 30 years Cash Flaw after Debt Service Forfeited Polentlal Revenue Settlement Fee RET Income Ground Lease Base Rent Income Ground Lease Percentel9e Rent tricorne Total F orfeiled Potential Revenue Total Return after Forfeited Revenue (no Debt) Total Retum .after Debt Service and Forfeited Revern. Revenue/E:-;p-ense Noles Valet Parkirg PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND FREEZE Schedule of Prospective Cash Flows Year36 Oec-2049 $915,188 915,188 9,152 910 8,768 6,229 7,73/J 23,637 75,453 957,708 2,883,758 3,916,919 4,864,896 (486,608) 4,378,288 0 14,514 139,832 244,226 99,341 32.559 253,667 1.994,530 3,709 123,273 223,398 522,890 0 3,651 ,939 726,349 0 $725,349 3.20% 726,349 368.638 129.818 240.751 739,207 ($12,858) (12,858) 7 of 7 A. ~ c .•.. ,. "'"" ''· ,,, ..... ' 71 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Propsective Cash Flows For the YAars Ending Potent al Gross Revenue Base Rental Revffiue Absorµtton & Turnover Vacancy Scheduled Base Rental Revenue CPI & Other Adjustment RevMue Expense Reimbursement RevMue RET Janitorial liability Insurance Property Insurance R&M Telephone Expenses Ticket, Supplies & Misc. Payroll & Benefits Uniforms Utilities Tolal Reimbursement Revenue Parking Revenue Moothly Parking DailyParitlng Val et Parking Total Tolal Potential Gross Revenue General Vacancy Effective Gross Revenue Operating Expenses RET Janite<ial Liability Insurance Property Insurance R&M Telephon... Expaises Ticket, Supplies & Misc. Payroll & Benefits Uniforms Utilities Parking Managooioot Sal es and Parking T"" KTKL Payment Tola! Operating Expenses Net Operating Income Leasing & Capital Costs and OthAr Tenant Improvements Leasing Commissions Total Leasing & Capital Costs and Olher Cash Flow Before Debt Seivice & Taxes Debt Seivice 100% Financing at 4.5% for 30 years Cash Flow after Debt Service Farleited Potential Revenue Settlement Fee RET Income Ground Lease Base Rent lnCOl1ie Ground Lease Percentage Rent Income Total Forfeited Polential Revenue $ Tolal Return after Forletled Revenue (no Debt) $ Total Relum after Debt Service and Forfeited Reven• $ Revenue/Expense Notes Valet Parking (22.725.000) Year 1 Dec-2014 $246,259 246,259 0 661 6,366 4,523 5,612 17,162 75.453 957,708 847,832 1,800,993 2,144,414 (161.396) 1,983.018 0 5,158 49,694 86,794 3S,304 11.571 90,149 708,823 1,318 43,809 79,392 174,849 100.000 1,386,861 596.157 0 $596,157 2.62% Year 2 Dec-2015 $246.259 246,259 a 681 6,557 4,658 5,780 17,676 75.453 957,708 915,659 1,948.820 2,212,755 (168.064) 2.044,691 0 5,313 51,185 89,398 36,363 11,916 92,1)53 730.088 1,358 45,123 81,774 182,729 103,000 1,431,102 613,589 0 $613,589 2.70% Year 3 Dec-2016 5246.259 246.259 0 701 6,754 4,798 5,954 18.207 75,453 957,708 988,911 2.022.072 2,2Bii,538 (175,104) 2,111,434 0 5,472 52,720 92,080 37,454 12.276 95,639 751,990 1.398 46,477 84,227 191,052 106,090 1,476,875 634,559 0 $634,559 2.79% Year 4 Dec-2017 $275,839 275,839 a 722 6,957 4,942 6,133 18,754 75,453 957,708 1,068,024 2,101,185 2,395,778 (184.020) 2,211,758 a 5,636 54,302 94,842 38,578 12.644 98,508 774,550 1,440 47,871 86,754 199,848 109.273 1,524,246 687,512 $687,512 3.03% Year 5 Dec-2018 $335,000 335,000 744 7,165 5,090 6,317 19,316 75,453 957,708 1,153.466 2,186,627 2,540,943 (194,840) 2.346.103 0 5,805 55,931 97,687 39.735 13,023 101.463 797,787 1.483 49,307 89,356 209, 149 112,551 1,573,277 772,826 0 $772,826 3.40% 22.500,000 -'$"----'(-"1..::;368=,0:=50::;,)-=.$ _ __.(""'1"'.368=,050=)'--"$ __ i...:( 1"",368=.0:.:50=-) -=$'-----'-( 1"'.3"'6"'8,.::;050::..::.c..l -'$'-----'-( 1;,:;,3;;.;:68:o:.,:.::o50;:;:;;.L) (225.000) $ (22,725,000) (225.000) $ (771,893) $ (754,461) $ (733.491) $ (680,538) $ (595,224) 250,000 131,008 94.080 79,010 554,098 $42,059 (1.325,991) 1of7 134,938 94,080 82,293 311,311 $302,278 ( 1,065,773) $ 138,986 103,490 85,761 328,237 $306,322 (1.061,729) $ 143, 156 105,372 90,166 338,694 $348,818 (1.019.232) $ 147.451 105,372 95,521 348.344 $424.482 (943,568) Projected to generate $770,757 in 2013. Several contracts started in 02 rherefore HFf 72 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Propsective Cash Flows . . . ~: ,~,, Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 For the Years Ending Oec-2019 Dec-2020 Dec-2021 Dec-2022 Dec-2023 Dec-2024 --------- Potential Gross Reve.iue Base Rental Revenue $335,000 $335,000 $335,000 $364.789 $424,368 $424,368 Absorption & Turnover Vacancy (70.728) --------· Scheduled 8.ase Rental Revenue 335,000 335.000 335,000 294.061 424,368 424,368 CPI & Other Adjus!ment Revenue 2.122 14.917 Expense Reimbursement Revenue RET 0 0 0 0 a 0 J<WJitorial 766 789 813 698 862 888 Liability Insurance 7.380 7,601 7.829 6,727 8,306 8.555 Property Insurance R&M 5.243 5,400 5,562 4,779 5,901 6.078 T elephooe Expenses Ticket. Supplies & Misc. Payroll & Benefits Umforms Utilities 6,506 6.701 6,902 5,930 7,323 7,542 ~--- Total Reimbursement Revenue 19,895 20,491 21,106 18,134 22,392 23,063 Parking Revenue Moothly Parking 75,453 75,453 75,453 75,453 75.453 82.998 Dady Parking 957,708 957,708 957,708 957,708 957,708 1,053,479 Vale! Parking 1,188.070 1.223.712 1.260.424 1,298 236 1,337,183 1.377.299 ----------- ToCal 2,221,231 2.256.873 2.293.585 2.331,397 2,370.344 2,513,776 Total Potential Gross Revenue 2,576,126 2.612,364 2,649,691 2.643,592 2,819,226 2,976, 124 General Vacancy (200,183) (205,686) (211,354) (147,245) (227.780) (234,613) ---- Effedive Gross Revenue 2,375.943 2,406,678 2.438.337 2,496,347 2,591,446 2.741.511 ----- Operating Expenses RET 0 0 0 0 0 0 Janitorial 5.980 6.159 6,344 6.534 6,730 6.932 Liability Insurance 57,609 59,337 61,117 62,951 64,839 66,785 Property Insurance 100,618 103.637 106,746 109.948 113,246 116,644 R&M 40,927 42,155 43,419 44,722 46,064 47.446 Telephone Expenses 13.414 13.816 14,231 14,658 15.098 15,550 Ticket, Supplies & Misc 104,507 107,643 110,872 114.198 117,624 121,153 Payroll & Benefits 821.720 846,372 871,763 897,916 924,853 952,599 Uniforms 1.528 1.574 1,621 1.670 1.720 1,771 Utilities 50.787 52,310 53,880 55,496 57,161 58.876 Parkmg Management 92,037 94.798 97.642 100,571 103.589 106,696 Sales and Parking Tax 215,424 221,887 228,543 235.399 242,461 249.735 KTKL Payment 115.927 119.405 122.987 126,677 130.477 0 Total Operating Eicpenses 1,620,478 1,669,093 1,719,165 1,770,740 1,823,862 1.744.187 ------------ Net Operating Income 755,465 737,585 719.172 725.607 767.584 997.324 Leasing & Capital Costs and Other Tenant Improvements 15.914 Leasing Commissioos 79,569 ~---- Total Leasing & Capital Costs and Other 0 0 95,483 0 ------ Cash Flow Before Debt Service $755,465 $737,585 $719,172 $630,124 $767,584 $997.324 & Taxes ::::::.:::======= ====:::::::::::::::::::::: :;::========== :::::::::::::::::::::::::::::: =====::::-:::;-:::;;;::::;:~ =========== 3.32% 3.25% 3.16% 2.77% 3.38% 4.39% Debt Service 100% Financing at 4.5% for 30 years $ (1.368,050) $ (1.368.050! $ p.368.050) $ (1.368.050) $ ( 1,368.050) $ p.368.050l Cash Flow after Debt Service $ (612.586) $ (630.466) $ (648,879) $ [737,926) $ (600,467) $ (370,726) Forfejted PoCential Revenue Settlemenl Fee RET Income 151,874 156.430 161,123 165,957 170,936 176.064 Ground Lease Base Rent Income 105.372 105,372 115,902 118,008 118.008 118.008 Ground Lease Percentage Rent Income 98.135 100.828 103,601 107,203 111.635 114,665 Total Forfejted Potential Revenue 355,381 362,630 380,626 391,168 400,579 408,737 TotaJ Return after Forfejted Revenue (no Debt) $400,083 $374,954 $338,545 5238.956 $367.005 $588.587 Total Return after Debt Service and Forfejted Reven• (967,9'!7) $ (993.096) $ ( 1.029.505) $ (1,129,094) $ ( 1,001,045) (779,463) Revenue!Expense Notes Valet Parking ' prOJects annualized $847 ,832 for 2014. 2 of7 73 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Propsecti11e Cash Flows -.., _. ~ A·~ ... , Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 For the Years Ending Dec-2025 Dec-2026 Dec-2027 Dec-2028 Dec-2029 Dec-2030 --··,,----------- Potential Gross Revenue Base Rertal Reve11ue $424,368 $424,368 $435,633 $506,718 $506,718 $5()6,713 Absorptioo & Turnover Vacancy (81,993) ---- Scheduled Base Rental Revenue 424.368 424,368 353,640 506,718 506,718 506,718 CPI & Other Adjustment Revenue 28,095 41,669 44,385 15,202 30.859 Expense Reimbursement Revenue RET 0 0 0 0 0 0 Janitorial 910 910 758 910 910 910 Liability Insurance 8,768 8,768 7,307 8,768 8,768 8.768 Property Insurance R&M 6.229 6.229 5.191 6.229 6,229 6.229 Telephone Expenses Ticket, Supplies & Misc. Payrol I & Benefits Uniforms Utilities 7,730 7}30 6,442 7,730 7,730 7,730 ---------- Total Reimbursement Revenue 23.637 23,637 19,698 23,637 23,637 23,637 Pa1<1ng Revenue Monthly Parking 82,998 82,998 82,998 82,998 82,998 82,998 Daily Parking 1,053.479 1,053,479 1,053.479 1.053.479 1,053,479 1,053,479 Valet Parking 1.418,618 1,461,176 1,505,012 1,550,162 1,596,667 1,644,567 --------- Total 2.555,095 2,597,653 2,641,489 2.686,639 2,733,144 2.781.044 ---- Total Potential Gross Revenue 3,031.195 3,087,327 3.059,212 3,216,994 3,278,701 3.342.258 General Vacancy (241,628) (248.738) (173,293) (264,218) (272.005) (280,026) Effective Gross Revenue 2,789,567 2,838.589 2,885,919 2,952,776 3,006,696 3,062,232 ---------- Operating Expenses RET 0 0 0 0 0 Janitorial 7.140 7,354 7,575 7,802 8.036 8,277 Liability Insurance 68.7B8 70,852 72,977 75,167 77,422 79,744 Property Insurance 120,143 123,747 127,460 131.284 135,222 139,279 R&M 48,869 50,335 51.845 53.400 55,002 56,653 T elephane Expenses 16,017 16.497 16,992 17,502 18,027 18,568 TiGket. Supplies & Misc. 124,787 128,531 132,387 136,358 140,449 144.663 Payroll & Benefits 981,177 1,010,612 1,040,930 1,072,158 1,104,323 1,137.453 Uniforms 1.824 1.879 1,936 1,994 2,053 2.115 Utilities 60,642 62,461 64,335 66,265 68.253 70,301 Parking Management 109,897 113.194 116,590 120.088 123.690 127,401 Sales and Parking Tax 257,227 264,944 272.892 281,079 289,512 298.197 KTKL Payrn ent 0 0 0 0 0 T atal Operating Expenses 1,796,511 1,850.406 1,905.919 1,963,097 2,021,989 2,082,651 --·--------Net Operating lncorne 993,056 988,183 980,000 989,679 984,707 979,581 ----- Leasing & Capital Costs and Other Tenant Improvements 19,002 Leasing Commissions 95,010 --··-·-Total Leasing & Capital Costs and Other 0 0 114,012 0 0 ---------Cash Flow Before Debt Service $993,056 $988,183 $980,000 $875,6ii7 $984,707 $979.581 & Taxes ;;::;;====:::::::::::::::::::::: ::::::::::::::::::====== ========== ::::=::::-:::::::=====:::: =========== ===::::::::::::::;:::::::::::::::-:::: 4.37% 4.35% 4.31% 3.85% 4.33% 4.31% Debt Ser\Oce 100% Financing at 4 5% for 30 years s ( 1,368,050) $ (1.368,050) $ (1.368,050) $ p.368,050) s (1.368,050) $ p.368.050) Cash Flow after Debt Service (374,994) $ (379,867) $ (388,050) $ (492,383) $ (383,343) $ (388.469) Forfeited Potential Revenue Settl em erit Fee RET Income 181,346 186,786 192,390 198,161 204,106 210,229 Ground Lease Base Rent Income 118,008 129,818 129,818 129,818 129,818 129.818 Ground Lease Percentage Rent Income 117,787 121,002 124,596 129,784 133.298 136,917 Total Forfeited Potential Revenue 417,141 437,606 446,804 457,763 467,222 476,964 Total Return after Forleited Revenue (no Debt) $575.915 $550.577 $533,196 $417,904 $517,485 $502,617 Total Return after Debt Service and Forfeited Revent (792,135) $ (817.473) $ (834,854) $ (950,147) $ (850.566) $ (865,434) Revenue/Expense Notes Valet Parking 3 of 7 74 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Propsective Cash Flows For tl1e Years Ending Potential Gross Revenue Base Rental Revenue Absorption & Turnover Vacancy Scheduled Base Rental Revenue CPI & Olher Adjustment Re.venue Expense Re<mbursement Revenue RET Janitorial Liability Insurance Property Insurance. R&M T elephooe Expenses Ticket, Supplies & Misc Payroll & Benefits Uniforms Utilities Total Re<mbursemenl Revenue Parking Revenue Moothly Parking Daily Parking Valet Parking Total Total Pa1ent1al Gross Revenue General Vacancy Effective Gross Revenue Operating Expenses RET Janitorial Liability Insurance Property Insurance R&M Telephone EJcpenses Ticket, Supplies & Misc. Payroll & Benefits Uniforms Utilities Parking Managemeiit Sales and Parking Tax KTKl Payment Total Operating Expenses Net Operating Income Leasmg & Capital Costs and Olher T enait lmpr011ements Leasing Commissions T atal Leasing & Capilal Casis and Other Cash Flow Before Debt Service & Taxes Debt Service 100% Financing at 4 5% for 30 years Cash Flow after Debt SefVice Forfeited Potential Reveoue Settlement Fee RET Income Ground Lease Base Rent Income Ground Lease Percenlage Rent Income T atal Forleiled Potentiai Revenue Total Reium after Forfeiled Revenue (no Debt) $ $ Total Return after Debt Service and Forfe<ted Revem $ Revenue/Expense Noles Valet Parking Year 18 Dec-2031 $5{)6,718 5{)6,718 46,986 Q 910 8.768 6,229 7,730 23,637 82.998 1,053.479 1,693,904 2,830,381 3,407,722 (288,287) 3, 119,435 Q 8,525 82,137 143.457 58.352 19,125 149M3 1,171,576 2,178 72,410 131,223 307,143 0 2, 145.129 9R306 0 $974,306 4.29% (1.368,050) $ (393,744) 216,538 129,618 140,644 486,998 $487,308 (880,743) $ Year 19 Dec-2032 $506.718 506,718 63,598 0 910 8,768 6.229 7,730 23.637 82,998 1.053,479 1,744,721 2,881,198 3,475, 151 (296,796) 3,178,355 0 8,781 84,601 147.761 60,103 19,699 153.473 1,206.724 2.244 74,582 135,160 316,357 0 2,209,485 968.870 0 $968,870 4.26% (1.368.050) $ (399,180) $ 223,032 129,818 144,484 497,334 $471,536 (896,515) 4 of 7 Year 20 Dec-2033 $587,424 (97,904) 489,520 0 758 7,307 5,191 6,442 19,698 82.998 1,053.479 1,797,063 2,933,540 3,442,758 (206,882) 3,235,876 0 9,045 87,139 152,194 61,906 20,290 158,077 1.242.925 2,311 76,819 139,214 325,848 0 2,275,768 960,108 22,028 110,142 132.170 $827,938 364% (1,368.050) $ (540,112) $ 229,723 129,818 150,456 509,997 $317,941 (1,050,110) $ Year 21 Dec-2034 $587,425 587,425 14,686 0 910 8.768 6,229 7,730 23,637 91,298 1.158,827 1,850,974 3.101,099 3.726,847 (314,441) 3.412.406 0 9,316 89,753 156,760 63,763 20,899 162.819 1.200.213 2,380 79,124 143,391 335,623 0 2,344,041 1,068,365 0 $1,068,365 470% (1,368,050) (299,686) $ 236,615 129,818 154,529 520,962 $547,403 (820,648) $ Year 22 Dec-2035 $587.425 587.425 32.749 0 910 8,768 6.229 7,73{1 23.637 91,298 1, 158,827 1,906,504 3,156,629 3,800,440 (323,735) 3,476,705 0 9,595 92,445 161.462 65,676 21.525 167,704 1,318,620 2.452 81,498 147,693 345,692 0 2.414,362 1.062.343 0 $1,062,343 4.67% (1,368,050) $ (305,707) $ 243,713 129,818 158,724 532,255 $530,088 (837,963) $ Year 23 Dec-2036 $587,425 587,425 51,354 0 910 8,768 6,229 7,73{1 23,637 91,298 1,158,827 1,963,699 3,213,824 3,876,240 (333,307) 3,542,933 0 9,883 95,219 166,306 67,646 22,171 172,735 1.358,178 2,525 83,943 152,123 356,063 0 2.486.792 1,056,141 $1,056,141 465% ( 1,368,050) (311,909) 251.025 129,818 163,045 543,888 $512,253 (855,797) 75 PELICAN GARAGE PRICING ANALYSIS-REDUCED RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Propsective Cash Flows ~" ~ 0 _' ~ Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 For the Years Ending Dec-2037 Dec-2038 Dec-2039 Dec-2040 Dec-2{)41 Dec-2{)42 --·-- Potential Gross Revenue Base Rental Revenue $587,425 $665,393 $680,986 $680.986 $680.986 $680,986 Absorption & Turn over Vacancy (113.498) ---------- Scheduled Base Rental Revenue 587,425 551,895 680.986 680,986 680,986 680,986 CPI & Other Adjustment Revenue 70.517 12.288 13,620 34,458 55,921 78,028 Ei<pense Reimbursement Revenue RET 0 0 0 0 0 0 Jaritorial 910 758 910 910 910 910 Liability Insurance 8.768 7.307 8.768 8,768 8.768 8,768 Property Insurance R&M 6,229 5.191 6,229 6.229 6,229 6,229 Telephone Expenses Ticket. Supplies & Misc Payroll & Benefits Uniforms Utilities 7,730 6.442 7,730 7,730 7,730 7,730 ------- Total Reimbursement Revenue 23,637 19,698 23.637 23,637 23.637 23,637 Parking Revenue Moothly Parking 91,298 91,298 91,298 91.298 91,298 91.298 Daily Parking 1, 1513,827 1,158.827 1, 158.827 1.158,827 1,158,827 1.158,827 Valet Parking 2,022,610 2,083.288 2.145,787 2,210,160 2,276.465 2.344.759 -~--~-- Total 3,272,735 3.333.413 3.395.912 3,460,285 3,526,590 3,594,884 ----- Total Potential Gross Revenue 3,954,314 3.917,294 4,114.155 4, 199,366 4,287,134 4,377,535 General Vacancy (343, 167) (239,050) (363,612) (374,381) (385,473) (396.898) Effective Gross Revenue 3.611,147 3.678.244 3,750.543 3,824,985 3.901,661 3.980.637 ----- Operating Expenses RET 0 0 o 0 0 0 Janitorial 10,180 10.485 t0,800 11,124 11,457 11,801 Liability Insurance 98.075 101,018 104,048 107, 170 110,385 113,696 Prope<ty Insurance 171,295 176,434 181,727 187.179 192,795 198,578 R&M 69,675 71.766 73,919 76.136 78,420 80,773 Telephone Expenses 22.836 23,521 24,227 24,954 25.703 26,474 Ticket. Supplies & Misc. 177,917 183,254 188,752 194.415 200,247 206,254 Payroll & Benefits 1,398,924 1,440,891 1,484,118 1,528,641 1.574.501 1,621.736 Uniforms 2.601 2,679 2.760 2.842 2.928 3,015 UUliUes 86,461 89,055 91,726 94,478 97,312 100.232 Parking Management 156,687 161 ,388 166,229 171,216 176.353 181,643 Sales and Parking Tax 366,745 377,747 389.079 400,752 412,774 425, 158 KTKL Pa)'Tl1ent 0 0 0 0 0 0 Total Operating Expenses 2.561,396 2.638.238 2,717,385 2.798.907 2,882,875 2.969.360 ---- Net Operating Income 1,049.751 1,040.006 1,033,158 1.026.078 1.018,786 1.011.2n -----Leasing & Capital Costs and Other Ten ant Improvements 25.537 Leasing Commissioos 127,685 ~---------- Total Leasing & Capital Costs and Other 0 153.222 0 0 0 --- Cash Flaw Before Debt Service $1,049,751 $886.784 $1,033.158 $1,026,078 $1.018,786 $1,011,277 & Taxes ~====::=~:::.~== ==========-::::::::::::======~ =~==;;;;====== ==========-= =======-==== 462% 390% 4.55% 452% 4.48% 445% Debt Service 100% Financing at 4.5% for 30 years $ !1.368,050) (1,368,050) $ ( 1 .368.050 ! $ \1.368.050) $ p,368050) s ( 1 ,368,050) Cash Flow after Debt Service $ (318,299) (481.266) $ (334,892) $ (341,972) (349.264) $ (356.773) Forfeited Potential Revenue Settlement Fee RET Income 2513,556 266.312 274,302 282,531 291,007 299.737 Ground Lease Base Rerit Income 129,818 129,818 129,818 129,818 129,818 129,818 Ground Lease Percentage Rent lnccxne 167.496 174,030 179.141 184,005 189,014 194.174 Total Forfeited Potential Revenue 555,870 570,160 583,261 596,354 609.839 623.729 Total Return after Forfeited Revenue (no Debt) $493.881 $316,624 $449,897 $429,724 $408.947 $387,548 Total Return after Debt Service and Forfeited Revem $ (874.169) $ (1,051,427) $ (918,153) $ (938.326) $ (959.103) $ (980,502) Revenue/Expense Notes Vale! Parking 5of7 76 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Propsective Cash Flows I~ K •J .~ ,.J ~ •t t Year 30 Year31 Year 32 Year 33 Year34 Year 35 For the Years Ending Dec-2043 Dec-2044 Dec-2045 Dec-2046 Dec-2047 Dec-2048 -----· ··----Potential Grass Revenue Base Rental Revenue $753,295 $789,449 $789.449 $789,449 $789,449 5852.318 Absorption & Turnover Vacancy (131.575) (152,531) --·-------- Scheduled Base Rental Revenue 621.720 789.449 789.449 789,449 789,449 699,787 CPI & Other Adjustment Revenue 28.490 11,842 35,880 60.640 86,143 49,541 Expense Reimbursement Revenue RET 0 0 0 0 0 0 Janitorial 758 910 910 910 910 758 uability Insurance 7,307 8.768 8,768 8,768 8,768 7,307 Property Insurance R&M 5,191 6,229 6,229 6,229 6,229 5,191 Telephone Expenses Ticket, Supplies & Misc Payroll & Benefits Uniforms Utilities 6,442 7.730 7,730 7,730 7,730 6,442 Total Reimbursement Revenue 19.698 23.637 23.637 23,637 23,637 19.698 Parking Revenue Monthly Parking 91,298 100,428 100,428 !00.428 100.428 100.428 Daily Parking 1.158.827 1,274,710 1.274,710 1,274,710 1,274,710 1,274,710 Valet Parking 2,415.102 2,487.555 2.562.182 2.639.047 2,718.218 2,799,765 ---- Total 3,665.227 3.862.693 3,937,320 4,014, 186 4.093.356 4,174,903 ---- T otat Potential Gross Re.venue 4,335,135 4.687,621 4,786,286 4,887.911 4,992,585 4,943,929 General Vacancy (276,316) (420,588) (433,067) (445,919) (459,157) (319.487) -----Effective Gross Revenue 4.058,819 4.267,033 053,219 4.441.992 4,533,428 4,624.442 ----------- Operaling Expenses RET 0 0 0 0 0 a Janitorial 12,155 12,520 12,895 13,282 13.681 14,091 Liability Insurance 117,107 120,620 124,239 127,966 131,805 135.759 Property Insurance 204.536 210,672 2t6.992 223.502 230.207 237,113 R&M 83,196 85,692 88,263 90.911 93,638 96,447 Telephone Expenses 27.268 28,086 28.928 29,796 30,600 31,611 Tickel. Supplies & Misc. 212.442 218.815 225,380 232.141 239.105 246,279 Payroll & Benefits 1,670,388 1,720.499 1,772,114 1,825,278 1,880,036 1.936.437 Uniforms 3.106 3,199 3.295 3.394 3.496 3,601 Ulilrties 103,239 !06,336 109,526 112,612 116.196 119.682 Parking Management 187,092 192,705 198.486 204,441 210,574 216,891 Sales and Parking Ta>< 437,912 451,050 464,581 478.519 492,874 507,660 KTKL Pa)'Tllent 0 0 0 a 0 0 -·------------·--- Total Operating Expenses 3,056,441 3,150,194 3,244,699 3,342,042 3,442,302 3,545.571 Net Operating fnC<lflle 1.000,376 1.116.839 1,108.520 1,099,950 1,091.126 1,078.871 --------·-- Leasing & Capital Costs and Other T eriant Improvements 29.604 34,320 Leasing Commissioos 148,022 171,598 ------__ .. ___ --·--- Tolal Leasing & Capital Costs and Other 177,626 0 205.918 Cash Flow Before Debt Service $822,752 $1,116,839 $1,108,520 $1,099,950 $1.091.126 $872,953 & Taxes =====::::::::::::::::::: ====~~::;;;;:;;;;:;;; =====:::===== =========;!:: =!!~~======= =========== 3.62% 4.91% 4.88% 484% 4.80% 384% Debt Service 100% Financing at 4 5% for 30 years $ (1.368.050/ $ $ $ $ $ Cash Flow after Debt Service (545,298) $ 1,116,839 $ 1,108,520 $ 1,099,950 1,091,126 $ 872,953 Forfeited Potenlial Revenue Settlement Fee RET Income 308,729 317,991 327,531 337.356 347,477 357,901 Ground Lease Base Rent Income 129,61a 129,818 129.818 129,818 129.818 129.818 Ground Lease Percentage Rent Income 201,295 207.673 213,311 219,119 225.100 232.833 Total Forfeited Potential Revenue 639,842 655,482 670,660 686.293 702,395 720,552 Total Return after Forfeited Revenue (no Debt} $182,910 $461.357 $437,860 $413.657 $388,731 $152.401 Total Return after Debt Service and Forfeited Revro1 $ (1,185,140) s 461,357 $ 437.860 $ 413,657 $ 388.731 152.401 Revenue/Expense Notes Vale! Parking 6 of 7 77 PELICAN GARAGE PRICING ANALYSIS -REDUCED RATES AND ESCALATE 10% EVERY 10 YEARS Schedule of Propsective Cash Flows For the Years Ending Polential Gross Reveriue Base Rental Revenue Absorption & Turnover Vacancy Scheduled Base Rental Revenue CPI & Other Adjustment Revenue Expense Reimbursement Revenue RET Janitorial Liability Insurance Property Insurance R&M T elephooe Expenses Ticket. Supplies & Misc Payroll & Benefits Unifonns U!ilities Total Reimbursement Revenue Parking Revenue Monthly Parking Daily Parking Valet Parking Total Total Potential Gross Revenue General Vacancy Effective Gross Revenue Operating Expenses RET Janilorial Liab1l1ty Insurance Property Insurance R&M Telephone Expenses Ticket, Supplies & Misc. Payroll & Benefits Uniforms Utilities Parking Management Sales and Parking Tax KTKL Payment Total Operating Expenses Net Operating Income Leasing & Capital Costs and Otlier Tenant Improvements Leasing Commissions Total Leasing & Capilal Costs and Other Cash Flow Before Debt Service & Taxes Debt Service 100% Financing at 4.5% for 30 years Cash Flow after Debt Service Forfeitec Paten~al Revooue Settlement Fee RET Income Ground Lease Base Rent Income Ground Lease Percentage Rent Income Total Forfeited Potential Revenue Total Return after Forleited Revenue (no Debt) $ $ Total Return after Debt Service and Forf<:>led Reven1 $ Revenue/Expense Notes Valet Parking Year 36 Dec-2049 $915.188 915.188 9,152 0 910 8.768 6.229 7,730 23.637 100,428 1.274,710 2.883,758 4.258,896 5.206.873 (4B6,608) 4,720,255 0 14,514 139,832 244,226 99,341 32,559 253.667 1,994,530 3,709 123.273 223.398 522.890 0 3,651,939 1.068.326 0 $1.068.326 4.70% 1,068.326 368,638 129,818 240.751 739,207 $329, 119 329,119 7 of7 78 Condensed Title: COMMISSION ITEM SUMMARY Resolution of the Mayor and City Commission of 1he City of Miami Beach, authorizing 1he City Manager to dec~ine, the Right of First Offer Transaction, as required pursuant to the terms of the Ground Lease between City ("Owner'') and Pelican Investment Holdings, LLC ("Tenant"), dated December 1, 1999, involving improvements at 1027-1041 Collins Avenue ("Project"); approving the Sale of the Project subject to satisfactory completlon by City staff of the City's Due Diligence. and payment by Tenant to City of the City's Due Diligence Costs and the "Settlement Offer"; further authorizing the City Manager and City Clerk to execute any and all closing documents. on behalf of the City. Ke Intended Outcome Su rled: Im rove parking availabi6ty Supporting Data (Surveys, Environmental Scan, etc.): Approximately 21 % of residents rate the availability of parking throughout the City as about the right amount; and 28% of businesses rate the avaHabil' of arkin for customers and em lo ees as excellent or ood. Issue: Shall the City Commission authorize the City Manager to decline the Right of First Offer Transaction, approve the Sale to the Pro sed Purchaser and authorize the C' Mana rand C Clerk to execute all necessa closin documents? KTKL Settlement: In 1993, the City purchased land from KTKL, which it needed in order to secure a developer for the construction of the Project. The Project included a Parking Facility which was urgently needed at the time. In connection with said purchase agreem&11t, KTKL had the right to exclusive use of 28 spaces at the Parking FacilHy for a period of 30 years ("KTKL Spaces"). The City and KTKL thereafter entered into a Settlement Agreement, whereby the City leased back from KTKL its 28 spaces with respect to the value of 28 par1cing spaces in the Parking Facility, based upon a formula of net income from the Parking Facility ("KTKL Memorandum"). KTKL then sued the City citing underpayment under the Memorandum and the City and KTKL settled the alleged sums ("KTKL Settlement"), which Involved annual payments from the City to KTKL thoogh October 31, 2032, the thirty year lease period of the KTKL spaoes. The City entered into a Ground Lease and Development Agreement wi1h the original tenant (which also developed the Project), for an initial forty year tenn, ending January 31, 2040, wi1h one additional ten year option. The Project was completed on October 31, 2002 and has a parking garege with 328 spaces and ground retail space of appro)(imately 3,350 square feet On October 29, 2013, the current tenant, Pelican Investment Holdings, LLC ("Tenant"), provided Cjty with notice that Tenant intended to sell 100% of its leasehold interest in the Project to Jones Lang LaSalle Income Property Trust, Inc., for the total sum of $22,500,000.00 in cash ("Offer"). The City, under the Lease, has until December 26, 2013 to approve the Proposed Purchaser AdditionaHy, per the Lease, the City has until December 13, 2013, to notify Tenant, whether or not the City intends to consummate the Right of First Offer Transaction, at the same price and upon such other material terms set forth in the Offer Notice. The Ground Lease is subject 10 this KTKL Settlement and the Proposed Purchaser is requesting assurances that during the Term of the Ground Lease. the City will continue not to utilize the KTKL Spaces, as their Offer relies upon the ability to sublease all the parking spaces in the Garage Facility. The Proposed Purchaser has offered the City the total sum of $250,000.00 (the "Settlement Offer") as consideration for said representation and agreement ("Settlement Offer"). After considering the revenue figures from surrounding City-owned and managed parking garages, as compared to the Pelican Parking Facility, which is a privately managed: the comparison of the cost to construct a public Parking Facility: the $250,000 Settlement Offer and the expense of the annual KTKL Settlement payments, staff determined that it would take the City 14.70 years to break even if the City exercised the Owner's Reciprocal Right of First Refusal. Additionally, at the end of the Lease term, the Project will revert back to the City. Therefore, staff is recommending that the City reject the Right of First Refusal, and autholize the City Manager to approve the proposed Sale. CONCLUSION The Administration recommends that the Mayor and City Commission approve the attached Resolution, authorizing the City Manager to decline, in writing, the Right of First Offer Transaction, as required pursuant to the terms of Section 36.2 of the Agreement of lease ("Ground Lease") between the City ("Owner") and Pelican Investment Holdings, LLC ("Tenanf'). dated ae of December 1, 1999. involving the Improvements to Property (the "Projed") located at 1027 Collins Avenue, Miami Beach, Florida and 1041 Collins Avenue, Miami Beach, Florida; and further approving the Sale of the Project to the Proposed Purchaser, Jones Lang LaSalle Income Property Trust, Inc., upon satisfactory completion of the City's Due Dillgenoe in connection with said proposed Sele, and payment of the City's Due Diligence Costs and of the Settlement Agreement; and further authorizing the City Manager and City Clerk to execute an and all closin documents on behalf of the c· Ad11lsory Board Recommendation: I n1a Financial Information: Source of Funds: I I Amount I 1 I Financial Impact Summary: City Clerk's Office Legislative Tracking: I Max Sklar, Ext. 6116 Sign-Off&: RHCD Director MS MIAMI BEACH I I Exhibit "3" Account , I AGENDA ITElll, J c 7 A A DATE' /2--1/-( 3 79 (9 MIAMIBEACH City al Miami a-ch, 1700 Convan!ion Center Drive, Miami Beach, Florido 33139, www.miomibeachll.gov TO: FROM: DATE: SUBJECT: COMMISSION MEMORANDUM Mayor Philip Levine and Members o the City Co Jimmy L. Morales, City Manager December 11, 2013 '1 A RESOLUTION OF THE MAYO AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FL RIDA AUTHORIZING THE CITY MANAGER TO DECLINE, IN WRITING, THE RIGHT OF FIRST OFFER TRANSACTION, AS REQUIRED PURSUANT TO THE TERMS OF SECTION 36.2 OF THE AGREEMENT OF LEASE ("GROUND LEASE'") BETWEEN THE CITY (uOWNER") AND PELICAN INVESTMENT HOLDINGS, LLC ("TENANT"), DATED AS OF DECEMBER 1, 1999, INVOLVING THE IMPROVEMENTS TO PROPERTY (THE 11 PROJECT") LOCATED AT 1027 COLLINS AVENUE, MIAMI BEACH, FLORIDA, AND 1041 COLLINS AVENUE, MIAMI BEACH, FLORIDA; AND FURTHER APPROVING TENANT'S SALE OF THE PROJECT TO THE PROPOSED PURCHASER, JONES LANG LASALLE INCOME PROPERTY TRUST, INC., SUBJECT TO AND CONDITIONED UPON CITY STAFF'S SUCCESSFUL COMPLETION OF ITS EVALUATION OF THE PROPOSED PURCHASER IN ACCORDANCE WITH ARTICLE 10 OF THE LEASE (THE "CITY'S DUE DILIGENCE"), AND PAYMENT TO THE CITY OF ITS REASONABLE COSTS INCURRED IN CONNECTION WITH THE PROPOSED SALE INCLUDING, WITHOUT LIMITATION, REIMBRUSEMENT OF THE CITY'S DUE DILIGENCE COSTS, AND PAYMENT, OF THE "SETTLEMENT OFFER" (AS SUCH TERM IS HEREINAFTER DEFINED IN THIS RESOLUTION); AND FURTHER AUTHORIZING THE CITY MANAGER AND CITY CLERK TO EXECUTE ANY ANO ALL CLOSING DOCUMENTS ON BEHALF OF THE CITY. Background On January 5, 1998, the City issued RFP No. 20-97/98, seeking proposals for the development of Public-Private Parking facilities (the "RFP"). On April 6, 1998, proposals from five (5) different development teams were submitted and evaluated by an Evaluation Committee, and on July 15, 1998, the City Commission authorized negotiations with four (4} of the proposed development projects. As a result of said negotiations, on October 20, 1999, the Mayor and City Commission adopted Resolution No. 99-23372, approving an Agreement of Lease (the "Lease") and Development Agreement between the City (also "Owner") and Pelican Development LLC 80 Commission Memo Sale of the Pelican Garage 1027-1041 CollinsAvenue December 11. 2013 Page 2 of5 ("Pelican Development"}, for Pelican Development to develop a parking garage ("Parking Facility"), with ground floor retail space (8Retail Space"), not to exceed 5,000 square feet (the "Project") on the City-owned land located at 1027 Collins Avenue, Miami Beach, Florida and 1041 Collins Avenue, Miami Beach, Florida. The Lease was executed on December 1, 1999, for an initial forty (40) year term, wh~ch ends on January 31, 2040, with one additional ten (10) year option (the "Term"). The Project received its Certificate of Occupancy on October 31, 2002, for the Parking Facility, having 328 total parking spaces, and the Retail Space, having approximately 3,350 square feet. On or about January 17, 2001, Pelican Development entered into a lease "With E. Levy Corporation, Inc., in connection with the entire Retail Space, located at 1041 Collins Avenue ("Retail Tenant"). On or about June 1, 2004, the Project was sold and transferred from Pelican Development to Ocean Blvd II, LLC, an Indiana limited liability company. On or about May 27, 2010, the Project was again sold and transferred from Ocean Blvd II, LLC to the current tenant, Pelican Investment Holdings, LLC, a Florida limited liability company ("Tenant"). Analysis Pursuant to Section 10.5 of the Lease {"Required Notices"), a proposed transfer and/or sale of the Project requires written notice to the Owner, with the identity of the transferor, transferee, nature of the transaction, percentage of interest conveyed and such other information requested by Owner {the "Notice of Sale"). On October 29, 2013, Tenant provided Owner with a Notice of Sale that Tenant intended to sell 100% of its leasehold interest in the Project (the "Sale"), as follows: Owner of Ground Lease: Seller: Proposed Purchaser: Purchase Price: City of Miami Beach; Pelican Investment Holdings, LLC; Jones Lang LaSalle Income Property Trust, Inc.; $22,500,000.00 in cash. A copy of the Notice of Sale, including the Section 10.5 disclosures, the letter of intent and the Proposed Purchaser's financials is attached hereto as Composite Exhibit "1". The Lease further provides that the City, as part of its approval of the proposed Sale, may request additional jnformation in connection therewith, and to evaluate the proposed Purchaser of the Project (the "City's Due Diligence"). The City must approve or disapprove the proposed Sale by December 26, 2013. City staff is in the process of finalizing its Due Diligence in connection with the proposed Sale. Additionally, in accordance with Section 36.2 of the Lease {"Owner's Reciprocal Right of First Refusal"), the City has the right to elect, in writing, within 45 days after owner's receipt of the Offer Notice (i.e. December 13, 2013), whether or not to consummate the Right of First Offer Transaction, at the same price and upon such other material terms set forth in the Offer Notice. The Project consists of a seven story parking garage, having 328 parking spaces and 3,350 square feet of retail space, currently sub-leased to E. Levy Corporation Inc., a surf and bathing suit apparel retail store. This sub-tenant pays rent, in the total sum of 81 Commission Memo Sale cf the Pelican Garage 1027-1041 Collins Avenue December 11, 2013 Page 3of 5 $20,521.00/month and $246,257.00/year. For the calendar year 2012, the Garage Facility earned a total of $2,251,987.00, and the Retail Space earned a total of $252,021.00, as evidenced from the 2012 Statement of Operating Revenues and Expenses, attached hereto and made a part hereof as Exhibit "2". In determining whether or not to recommend exercising the Owner's Reciprocal Right of First Refusal, City staff requested revenue figures from City-owned and managed parking garages and prepared the following comparison: ma The Pelican 10th Street and Colllns Retail portion 7th Street City Garage 7th Street and Cotlins l6th:Strat Qty ...... ...... 1nCtC0Uln(. No. 5D!IC4!1 lncomt for FYU./12 · 328 $2,251,987.00 $252,021.00 646 $2, 166, 255. 75 3,117,461.80 ........... ptrSpece $6,865.81 $3,3;53.34 $3,882.2'.l If City operated the Pelk;m Gcinige Facility, based upon <i yeafly revenue of $3,900.00, using <i best case scenario, the gro5s revenues for the 328 spaces would total $1,279,200.00 + $252,021.00 ( Retaill=$1,S31,221.00 per year (Based upon 2012 figures), it would take the City 14. 70years to recoup the purchase price, assuming Retail Tenant does not default. The City, via applicable City ordinances, has had a longstanding position of keeping the parking rates below market for the benefit of its residents and visitors and therefore cannot compete with the income stream of a privately operated garage. The average gross revenues per parking space for the 7tr. Street and 1 s1t1 Street City-owned garages is approximately 53% of the gross revenues generated by the Pelican Garage Facility and, based upon the Offer proposed, it would take the City 14. 70 years to break even, based upon the gross revenue disparity, without taking into consideration the operating costs of the garage. Additionally, the Purchase Price of $22,500,000.00 equates to approximately $68,597.56/space. In order to evaluate the offer, staff has obtained, from the Capital Improvement Projects Department, the below chart with respect to the cost per space of constructing a parking garage . .. 1' .. lGll9 6SS 31637 $27 676 00) Z010 S3S 76SS 13 500 00'.J 2012 435 2BSO W184ml The Purchase Price far exceeds the cost of constructing the garage, even with the adjustment for inflation as of the year 2015. Pursuant to the Lease, the City currently receives Base Rent, in the total sum of 82 Commission Memo Sale of the Pelican Garage 1027-1041 Collins Avenue December 11, 2013 Page 4of 5 $94,080.00 per year/$7,840.00 per month. The Base Rent is scheduled to increase on January 1, 2016 by the lesser of the cumulative CPI over the previous five year term or 12%. Additionally, the City receives Percentage Rent, which is due within sixty (60) days from the end of each year, in the amount of 2.5% of the Project Revenue {based upon gross revenues for the year from the Project). The City received a total sum of $59, 100.03 for Percentage Rent for the 2012 ca~endar year, for a total rental income of $153,180.03. K.T.K.L. Settlement: Additionally, the Lease is subject to a settlement agreement between the City and KTK.L. Corporation {"KTKL.), which was the original owner of one of the lots ("KTKL Lot"), which the City purchased, to acquire the lands in connection with the development of this Project. Originally, pursuant to the purchase and sale agreement between KTKL and the City, dated as of November 18, 1993 ("KTKL Purchase Agreement"), as part of the consideration for the sale of the KTKL Lot, KTKL wanted exclusive use of 28 spaces (3 of which were slated to be used to build a dumpster on the ground floor) at the Garage Facility ("KTKL Spaces"), and also had the rtght to purchase the Garage Facility if the City did not complete the construction of the Garage Facility timely. The construction did not occur timely and, as a result, the parties entered into a settlement Agreement, tltled "KTKL Memorandum", approved by Agreed Order of Approval, dated July 27, 1999, KTKL relinquished its right to purchase back the KTKL Lot and, instead, leased the KTKL Spaces back to the City, based upon a net revenue formula. Thereafter, KTKL sued to enforce the KTKL Memorandum, citing that the payments they were receiving in connection with the KTKL Spaces were incorrect and thereafter the parties entered into a settlement agreement, dated September 15, 2010 ("KTKL Settlement"), whereby the City pays KTKL a determined annual payment for the balance of the thirty year period involving the KTKL Spaces. Based upon said KTKL Settlement, the annual payment for the year 2012 was $98,345.43. As the Lease is subject to the KTKL Settlement, the Proposed Purchaser (as part of its due diligence} is requesting assurances from the City that, during the remaining Term of the Lease, the City will continue not to utilize the KTKL Spaces (as the proposed Purchase Price relies upon the ability to sublease all the parking spaces in the Garage Facility}. The Proposed Purchaser has offered the City the total sum of $250,000.00 ("Settlement Offer") as consideration for said representation and agreement. The City has historically not used these spaces, and has collected the Base Rent and Percentage Rent generated from the Project from the Tenant, and is therefore recommending acceptance of this Settlement Offer. Additionally, in light of the fact that it would take the City 14. 70 years to break even if the City exercised the Owner's Reciprocal Right of First Refusal, staff prepared the following chart, comparing both options, based upon the Income/gross revenues for the calendar year 2012 and the KTKL Settlement payments over the next fourteen years, as follows: 83 Commission Memo Sale of the Pelican Garage 1027,1041 Collins Avenue December 11, 2013 Page 5 of 5 scenario If citv Purchased The PelJcan. based uoon YR 2012 tncome & Expenses for the next 14 Years Income $21,437,094.00 KTKL Payments• -$1, no. n2. n Less purchase price -$22,500,000.00 Total gross earnings -sz. 793,678.n $Canario lf Citv Did not Purchase The Pelican based upon YR 20l2 Income &Expenses forthe next 14 Years Income $2, 144,520.42 KTKL Payments• -$1. 730, 772. n Settlement $250,000.00 Total gross earn' ngs $663,747.65 * l<TKL Payments from January 2014-Januarv, 2027 (14 years) Based upon the foregoing, and the fact that the Project will revert back to the City at the end of the Term, staff is recommending that the City reject the Right of First Refusal and approve the Sale of the Project to the Proposed Purchaser. CONCLUSION The Administration therefore recommends that the Mayor and City Commission approve the Resolution authorizing the City Manager to decline, in writing, the Right of First Offer Transaction, as required pursuant to the terms of Section 36.2 of the Lease; and further approve the Sale of the Project to the Proposed Purchaser, Jones Lang LaSalle Income Property Trust, Inc., upon satisfactory completion of the City's Due Diligence in connection with said Sale, reimbursement of the City's Due Diligence costs, and payment of the "Settlement Offer". The Administration further recommends that the City Commission authorize the City Manager and City Clerk to execute any and all closing documents, on behalf of the City, in connection with the City's approval of the proposed Sale. JLM\KGB\MS\GNT Attachments: "1" -letter of intent and the Proposed Purchaser's financials "2" -Statement of Operating Revenues and Expenses for Tenant cc: Jimmy L. Morales, City Manager Katti ie G. Brooks, Assistant City Manager Max Sklar, Director for Tourism, Cu~ture and Economic Development Gisela Nanson Torres, Leasing Specialist F.IECOM$ALL\ASSEMESOLUT10NS\PCLICAN GARAGaRESOLUTfONS\COMMISSION MEMO SALE OF THE PELICAN GARAGE DECEMBER 11, 2013 84 Commission Memo Sale of lhe Pelle.an Garage 1027-1041 Collins Avenue December11,2013 Page 5 of 5 Sceriarto If dtv Purthased lhe .Pelican, based uPOO Vil2012 tnc0me.&.~pe~s forthe:next 14·vears Income $21,437,094.00 KTKL Payments• ·$1,730,n2.n less purchase price -$22.500.00Q.OO Total gross earnings ·$2. 793,678. 77 scienario If Otv Did not Purchase 111e. PeliQtn based upon'VR 2012 Income a· Expenses for'the nelt 14.Vears Income $2, 144,520.42 KTKL Pavments• -$1, 730, 1n. n Settlement $250.000.00 Total gross earn I ngs $663, 747.65 • KTKL Payments from January 2014-January, 2027 (14 vears) : Based upon the foregoing, and the fact that the Project will revert back to the City at the end of the Term, staff is recommending that the City reject the Right of First Refusal and approve the Sale of the Project to the Proposed Purchaser. CONCLUSION The Administration therefore recommends that the Mayor and City Commission approve the Resolution authorizing the City Manager to decline, in writing, the Right of First Offer Transaction, as required pursuant to the terms of Section 36.2 of the Lease; and further approve the Sale of the Project to the Proposed Purchaser, Jones Lang LaSalle Income Property Trust, Inc., upon satisfactory completion of the City's Due Diligence in connection with said Sale, reimbursement of the City's Due Diligence costs, and payment of the •settlement Offer". The Administration further recommends that the City Commission authorize the City Manager and City Clerk to execute any and all closing documents, on behalf of the City, In connection with the City's approval of the proposed Sale. JLM\KGB\MS\GNT Attachments: ~1· -letter of intent and the Proposed Purchaser's financials "2" -Statement of Operating Revenues and Expenses for Tenant cc: Jimmy L Morales, City Manager Kathie G. Brooks, Assistant City Manager Max Sklar, Director for Tourism, Culture and Economic Development Gisela Nanson Torres, Leasing Specialist F.-\ECOMSALLIASSETIRESOLU"nONSIPELJCAN GARAGE\RESOLUTIONS\COMMISSION MEMO SALE OF THE PELICAN GARAGE DECEMBER 11, 2013 85 RESOLUTION NO. ______ _ A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA AUTHORIZING THE CITY MANAGER TO DECLINE, IN WRITING, THE RIGHT OF FIRST OFFER TRANSACTION, AS REQUIRED PURSUANT TO THE TE RMS OF SECTION 36.2 OF THE AGREEMENT OF LEASE ("LEASE") BETWEEN THE CITY ("OWNER") AND PELICAN INVESTMENT HOLDINGS, LLC ("TENANT11 ), DATED AS OF DECEMBER 1, 1999, INVOLVING THE IMPROVEMENTS TO PROPERTY (THE "PROJECT") LOCATED AT 1027 COLLINS AVENUE, MIAMI BEACH, FLORIDA, AND 1041 COLLINS AVENUE, MIAMI BEACH, FLORIDA; AND FURTHER APPROVING TENANT'S SALE OF THE PROJECT TO THE PROPOSED PURCHASER, JONES LANG LASALLE INCOME PROPERTY TRUST, INC., SUBJECT TO AND CONDITIONED UPON CITY STAFF'S SUCCESSFUL COMPLETION OF ITS EVALUATION OF THE PROPOSED PURCHASER IN ACCORDANCE WITH ARTICLE 10 OF THE LEASE (THE "CITY'S DUE DILIGENCE"); PAYMENT TO THE CITY OF ITS REASONABLE COSTS INCURRED IN CONNECTION WITH THE PROPOSED SALE INCLUDING, WITHOUT LIMITATION, REIMBURSEMENT OF THE CITY'S DUE DILIGENCE COSTS; AND PAYMENT TO THE CITY OF THE "SETTLEMENT OFFER" (AS SUCH TERM IS HEREINAFTER DEFINED IN THIS RESOLUTION): AND FURTHER AUTHORIZING THE CITY MANAGER AND CITY CLERK TO EXECUTE ANY AND ALL CLOSING DOCUMENTS ON BEHALF OF THE CITY IN CONNECTION WITH THE PROPOSED SALE. WHEREAS, on January 5, 1998, the City issued Request for Proposals No. 20· 97198, seeking proposals for the development of Public-Private Parking Facilities (the RFP); on April 6, 1998, proposals from five (5) different development teams were submitted and evaluated by an Evaluation Committee; and on July 15, 1998, the City Commission authorized negotiations with four (4) of the proposed development projects; and WHEREAS, as a result of said negotiations, on October 20, 1999, the Mayor and City Commission adopted Resolution No. 99-23372, approving an Agreement of Lease (the ·Lease") and Development Agreement between the City and Pelican Development LLC, for development of a pubtic parking garage with ground floor retail space (not to exceed 5,000 square feet), on the City-owned land located at 1027 Collins Avenue, and 1041 Collins Avenue (the "Projecf'): and WHEREAS, an Agreement of Lease (the "Lease") was executed between the City ("Owner") and Pelican Deyelopment, LLC, dated as of December 1, 1999; and WHEREAS, on or about June 1, 2004, the Project was sold and transferred from the original tenant. Pelican Development to Ocean Blvd II, LLC. an Indiana limited liability 86 company, and on or about May 27, 2010, the Project was sold and transferred from Ocean Blvd II, LLC to the current tenant, Pelican Investment Holdings, LLC, a Florida limited liability company ("Tenant"); and WHEREAS, in accordance with Article 10 of the Lease. on October 29, 2013, the Tenant notified the City in writing ("Offer Notice"), requesting the City's consent to the proposed sale and assignment of Tenant's 100% interest in the Project (the 11Sale") to a real estate investment trust, Jones Lang LaSalle Income Property Trust, Inc. ("Proposed Purchaser"), for a total cash sum of $22,500,000.00 f'Purchase Price"); and WHEREAS, pursuant to Section 26.2(c)(iii) of the Lease, the City has until December 26, 2013, in which to approve or disapprove of the Sale of the Project to the Proposed Purchaser; and WHEREAS, in accordance with Section 36.2 of the Lease, "Owner's Reciprocal Right of First Refusal•, the City also has the right to elect, in writing, whether to consummate the Right of First Offer Transaction, at the same prjce and upon such other material terms set forth in the Offer Notice; the City has until December 13, 2013 to exercise this Right of First Refusal; and WHEREAS, the Lease is also subject to a 1999 settlement agreement with KTKL Corporation (the "KTKL Settlement"). under which the City is obligated, for a term of thirty years (which commenced on October 31, 2002). to pay KTKL for the City's lease of 28 spaces (the UKTKL Spaces") in the Project: and WHEREAS 1 although the KTKL Spaces have been historically utilized by the Tenant since the opening of the Project, the Proposed Purchaser, as part of its due diligence, is requesting an estoppal certificate from the City, which among other matters, representing that. during the remaining Term of the Lease, the City will continue not to utilize the KTKL Spaces; and WHEREAS, following negotiations with City staff, the Proposed Purchaser has offered the City the total sum of $250,000.00, as consideration for said representation and agreement ("Settlement Offer''); and WHEREAS, after considering the revenue figures from surrounding City-owned and managed parking garages (as compared to the Project garage, which is a privately managed garage); the financials for the Project; the $250,000.00 Settlement Offer to the City; and the expense of the annual KTKL Settlement payments 1 City staff detennined that it would take the City 14.70 years to break even if the City exercised the Owner's Reciprocal Right of First Refusal; and WHEREAS, based upon the fact that the Offer materially exceeds the cost per space to construct a City-owned parking facility and, further, that the Project will revert back to the City at the end of the Lease term, the Administration is not prepared to recommend that the City exercise the Reciprocal Right of First Offer Transaction: and 87 WHEREAS, the Administration therefore recommends that the City Commission approve the proposed Sale of the Project to the Proposed Purchaser, Jones Lang LaSalle Income Property Trust, Inc., subject to City staff's successful completion of the City's Due Diligence, Tenant's payment of the City's Due Diligence costs, and payment to the City of the Settlement Offer. NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City Commission hereby authorize the City Manager to decline, in writing, the Right of First Offer Transaction, as required pursuant to the terms of Section 36.2 of the Agreement of Lease ("Ground Lease") between City ("Owner") and Pelican Investment Holdings, LLC ("Tenant"), dated as of December 1, 1999, involving the improvements to Property (the "Project") located at 1027 Collins Avenue, Miami Beach, Florida, and 1041 Collins Avenue, Miami Beach, Florida; and further approve the Sale of the Project to the Proposed Purchaser, Jones Lang LaSalle Income Property Trust, Inc., subject to and conditioned upon City staff's successful completion of its evaluation of the Proposed Purchaser in accordance with Article 10 of the Lease (the "City's Due Diligence"); and payment to the City of its reasonable costs incurred in connection with the proposed Sale including, without limitation, reimbursement of the CifYs Due Diligence costs and payment of the Settlement Offer; and further authorizing the City Manager and City Clerk to execute any and all closing documents on behalf of the City. PASSED and ADOPTED this 11th day of December 2013. ATTEST: CITY CLERK JLM/KGBIMS T.lllGENM\2003\dK1DO~RE8.doc MAYOR APPROVED AS TO FORM & LANGUAGE & FOA EXECUTION -., 88 Torres, Glsela From: Sent: To: Cc: Daniel Unger [daniel@fortcapital.com] Tuesday, October 29, 201311:41 AM Torres, Gisela Mike Conaghan; Aguila, Raul; Sklar, Max; atachmes@shutts.com Subject: RE: Right of First Offer Transaction· The Pelican Garage 1040 Collins Avenue Attachmanta: Hello Gisela, G. Pelican TIUe Poltcy.pdf; H. Pelican LOI executed.pelf; I. Most recent financial statement from buyer REIT Jones_Lang_LaSalle_lncome_Property_ Trust_lnc_2Q13_ 10-0.pdf I am submitting here the information you requested on the offer and the buyer. Followtng your points: a. Name ofTransferee; A SINGLE PURPOSE ENTITY THAT WILL BE A WHOLLY-OWNED SUBSIDIARY OF JONES LANG LASALLE INCOME PROPERTY, TRUST, INC (JLLIPT). 1. The REIT's website Iswww.jllipt.com 2. Its prospectus can be found here: http:Uwww.illipt.com/content/pdf/JLLIPT Prospectus 3-28- 2013 with Supp 12.pdf b. Name of Transferor; PELICAN INVESTMENT HOLDINGS, LLC. c. Nature of Transaction; ARMS LENGTH SALE OF THE LEASEHOLD INTEREST TO AN UNRELATED THIRD PARTY. d. Percentage of interest to be conveyed; 100% INTEREST. e. Other additional information In order to evaluate the purchaser, such as evidence that the Intended purchaser is adequately capitalized to perform its responsibilities under the Lease (information may vary depending upon the transaction and parties thereto) REFER TO POINTS ABOVE and see attachment ("I. Most recent financial statement from buyer REIT Jones Lang LaSalle Income Property Trust Inc 2013 1CJ..Q.pdf"). f. Purchase Price of offer; $22,500,DOO.DO. g. All material terms of offer; INCLUDED WITHIN LETTER OF INTENT-LOI (ATTACHED). h. Closing Date tlmeline; 15 DAYS OF THE LATTER OF CITY WAIVING ITS RIGHT OF FIRST OFFER OR UPON COMPLETION OF PURCHASER'S 21 DAY DUE DILIGENCE PERIOD. i. Indicating which closing costs shall be borne by each party; AS PER SECTION VIII OF THE LOI, PURCHASER WILL PAY FOR COST INCURRED IN PERFORMING DUE DILIGENCE INCLUDING ITS LEGAL COUNSEL, PHYSICAL AND ENVIRONMENTAL INSPECTIONS, TITLE INSURANCE AND ANY UPDATES TO THE SURVEY. SELLER WILL BE RESPONSIBLE FOR RECORDING FEES, ESCROW FEES, TRANSFER TAXES, DOCUMENTARY STAMP TAXES, ITS LEGAL FEES, AND FOR PROVIDING A CURRENT ALTA SURVEY. ALL OTHER COSTS WILL BE SPLIT EVENLY (SO/SO] BETWEEN PURCHASER AND SELLER. ;. Deed/TitleTITLEATIACHED. Let me know if you need any more information on the buyer's side, Thank you again, DANJEL UNGER FORT CAPITAi. MANAGEMENT V.'\VWJortcapita!.Ctl!J) 176 NE 43RD STREET. MJAMI, FLORIDA 33137 c. +1.770.671.8817 r. +i.30,s.571.8228 Exhibit l : I . ' 89 October 18. 2013 VIAE-MAIL Luis Casblo Director Holliday Fenoglio Fow&er 1450 BrlekeU Avenue Sults2'150 Miami, Fl 33131 RE: Pelican Garag• Miami BelChJ Flortda 81Y!aad Dear Luis: LASALLE INvESTMENT MANAGEMENT' ~Gl-..i 100 ..... l'llft S1l1let 8altllnnl MlrJllnd 21202 tll •1•10418400 Fa +141017e 81 The purpose of thi~ letter is to outline some of the general business terms and COl'lditions under which LeSalle Investment Management, lnc., • agent for an lnVestor Client ("Purchaser"), will purchase a 100% leasehold interest In the Pelican Garage ("Property"') from Pellcan Investment Holdings, LLC {"Setler"). This letter supersedes our letter of October 8, 2013 Thie letter should not be construed as a purchase offer or commitment as It Is subject to the condlttons eet forth Jn this letter, including the execution of e mutuany satlsfaclof'y Purcnaae and Sale Agreement The general business terms and oondltions c:A the proposed agreement are as follows: l PURCHASER LaSalle Investment Management, Inc. es agent for Jones Lang LaSalle lnc9me Property Trust, Inc. ("Purchaser"). .. SB' f'! Pelican Investment Holdi'lgs, LLC ("Seller"). BL nlE PROPERTY<Sl Pelican Garage, located at 1021 Collins Avenue In Miami Beach, Flcxtda. Tbe Property conslsts of a 329 apace Parking Garage that also ~ 3,"350 square feet of rentable retai space. l='urc:haserwi11axiuirea100% leasehold interest n the Property. IV. PURCHASE PRICE The total purchase price far the Property will be $22,500,000. A..-.116c"dlN-LqL..sme~ ~ 91d "'II~ by the FNncilll S.W-AulhCdy Rsglllllred in~ N~ 2607DliO 90 LASALLE INVESTMENT MANAGEMENT' V. TENANT •PROVEMENIS. CQMMISSIQNS. AND CAPITAL 11PROVEMENIS Alf ~itisting tel'18flt !mprovements, commissions, and capital expenditure obligations will be ttie respontibilty of the Seller. VI. PBOPER!Y MANAQEMENI AND LEASING All existing managemen~ !easing, and aervlce contracts shal be tennilable at dosing. VA. PRQPER!Y BRQKERAGE COMMISSION§ Seller shaH pay lf'IY brokerage c:omll"is$ions due related to this bansadion. Purchaser has not worked with any other broker, and Purchaser shall be responsible for any fee or oorrmSalon due tl LaSalle lnvestmenl: Management, lrn VIL CLOSING COSTS Purchaser wil pay for costs incurred In performing Purchaser's due dBigence lncludll'lg its legal counsel, physica1 and environmental inspections, and title insuranoe. Seller will be responsible for recomlng fees, escrow fees, transfer taxes, dooomentary atamp 1meea, Its legal fees, end for providing 11 current ALTA Survey. Purchaser will pay for any-updates to the suNey. All other costs wUI be split evenly (50/50} between Purchaser and Seller. The dosing of the purchase shall be subject to normal proralions. Purchaser wll select the Title Canpany. IX. CONDDJONS The tenns and <:0ndllons set forUl in lhia letter are predicated upon information pro\lifed by Seder and the Seller's representative, Holliday Fenoglio Fowler. The closing of the proposed transaction Is subject to Purchaser's sstlsfection with its review of all legal documema and certain other Information relating to the Pre>petty. Such revi81h' wlll include, without llmltatlon, management agreemen~ tenant teases, eerviee oontracts, historical operating statements and real estate taxes, hlstorlcal financial statements, operating and capital budgets, ongoing brokerage commission obligations for existing leases, if any, building plans and specifications, applicable zoning and subdivision laws, and survey and title insUfilnce documentation. 91 PelcM Gerage Page3 (/I& LASALLE \\VJ) INVESTMENT MANA.GWENT' The closing of any transaction Is further subject to: (i) Pun::haser'5 satisfaction with Its physical and environmental inspections of the Praperty, Including without !Imitation, Inspections for asbestos-containing and other haz.ardous materials; (ii) aatisfadof)' Interviews with 1enants lncfudlng analysis of the credit worthlneM of tenants; (RI) the execution by Purchaser and Seller af a mutually satisfactmy Purchase and Sale Agreement; and [IV) eati8factOry lenEl:lt estoppels. X. APPROVAL. EABNESI MONEY ANQ CLOSING Purchaser contemplates the following time frames regarding due dllgence, documentation, filal approval, and cloefng. 1) Purchsserend Seller execute L.etteroflntant. 2) Within five (5) business days of (1). LaSalle Investment Managemenrs lnv&stment Committee will formally ~ lhe transaction. Titia lrntMtrn9nt II dmcretiorwy to us.ne Investment Mamgemenrs rnveetment Committee. 3) Within 10 days after {1), Pul'!:haser and Seller will negotiate and execute a Purchase and Sale Agreement N con1rad execution, Purchase1 wlD deposit $'750,000 of refundable eamest money in escrow. After the completion of (2), Purttiaser wlll also begin Its' due diligence wt.• simultaneously negotiating the Purchase and Sale Agreement. 4) VVithln twenty one (21) days of (2), Purchaser wllJ complete its due diligence •.. At completion of due diligence period, Purchaser wll deposit an additional $1,500,000 and It& earnest money deposit5 will become non-refundeble subject to the City of Miami Beach waiving Hs' ROFO. 5) Within forty-five (45) days of {2), City will waive its' ROFO. In lhe evenl the City exercises Its' ROFO, Sefler wtll reimburse Purchaser for Its' reasonable due dDigenoe and legal cosla. El) Ctosing wiU oocur within fifteen (15) days of the latterof (4) or (5}. Xl ESTOPPEL Our attorneys reviewed the "fmn esloppel Their commenfs are below. 1) The ROFO described Jn Section 38.2 wltl need 1D be waived. This can be done In a separate document if necessary. 2) The transfer of the Ground Lease Jo our buying en11ty wi1I have to be consented to by Ground L..andlad In acccr'danoewtth Section 10.3(c). 92 Pelbn Garage Page4 A LASALLE \\VJ) INV.BSTMENT MANAGEMENT' 3) Since our buyer will be a subsidiary of a public, non-traded REIT with oontlnual share offerings and redemptions, the Gmund Landlord will need to waive Section 10.3(c) to allow for transfers of non-controlling lnlerests (and the issuance of new share&, etc.). 4) Since our REIT structure netessitates a lea$8 with the parf<lng operator, the Ground Landlord wlll have to consent in advance fD such a "Master Sublease.· Currently, a Master Sublease requires Ortlund landlord's consent 5) We would ike to add a statement. In the estoppal confirming that Article 23 Of the Lease (KTKL Settlement) Is &Uper$8ded by the KOO. settlement agreement our attorneys are available to discuss these points with the Seller and their attorney. TheBe comments wl1I be addreued wl1hln 1he estoppel or dooomenta11on will be prOYided -ID Buyer to eccampllsh same. XII. A§Sl()NMENT Purchaser may assign its Interests under this letter. XIII. CQNFIDEtmAUJY The parties acknowtedge and agree that U. contents of this letter and the terms of lhe proposed transaction wru be kept confidential In accordance with ttiat Confidentiality Agreement entered into between the parties as of August 28", 2013. This letter of Intent ie: only Intended to set forth general understandings of the perties end to provide the basis for negotiating the Purchase and Sale ~rnent The parties BCl<nowle<lge that, except tor the sections concerning Confldentlallly and excluslvity, this letter Is not a binding c:orrrnitment or agreement between the parties and execution of a muluaHy satisfactory Purctiaee and Sale Agraement, con1alnlng aa the ess.ential terms of an agreement between Pun:~r and SeRer Is a condition precedent to the creation of a blndthg contract betWeen the two parties. This Letter of Intent does not obligate either party to proceed to the completion of a purchase and sale agreement nor should Seier construe the delivery and execution of this Letter of Intent as a reasonable basis to believe that a closing will in fact occur. Further, this letter does not obligate the parties to negotiate toward the execution and defivery of s Pun:l1ese and Sale Agraement Setler l"ElSefV88 the right to accept back up offers. Unless accepted by Seller, this letter shall tennlnate at 5:00 p.m. (EST), on Friday November 1•, 2013. If the business terms and conditions for lhe proposed transaction meet with your client's approval, please have your dient sign this letter, keep one oopy for yourfiles end retum one copy 1D LaSalle lnve&lment Mintgement, Inc. 93 Pelcan Garage Page!! We look f'olwad m working with you on thlS tmnaadiOn. Vety truly yours, Richard R. Reese Jr. Managing Director of LaSalle Investment Management, Inc. As agent fer Ha Investor client cc: Pabic:k McCormick AGREEDTOANDACCEPTEO 94 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORMlO-Q IX! QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterJy period ended June 30, 2913 OR 0 TRANSmON REPORT PURSUANT TO SECTION 13 OR JS(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the tr1ruiltion period from to Commission file number: 0-51948 Jones Lang LaSalle Income Property Trust, Inc. (Euet name of ftllstnnt 11 specified in its charter) M1ryland (State or other J.rlldldlon DI hlCVjl(ll'8ti..a or orgnlzatlu> 2~1432284 (LR.S. Employrr Jdentificalion Npmber) 200 East Randolph Drive. Cbk1go IL, 60601 (Addras ofprladpal e11udn omc11, lnd11dlne Zip Code) (312) 782·:5800 (Regl1lrant'1telrpbont1umher, lndudlllg art• code) N/A (li1n11rr Hiiie, larmu llddra11nd rermrl"fmt1I ynr, lhlllD&ed 1lac1 l11t report) Indicate by check mark whether the :registrant (1) has filed aJI reports required lo be filed by Section 13 or IS(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such 1horter period that the registrant was required to file such reports), and (2) has been subject to such fiJing requirements for the past 90 days. YES IB1 NO D Indicate by check mark whether die registrant has submitted electronically and posted on its corporate Web site, if 11ny, every Interactive Data File required to be submitted and posted pur&uent to Rule 405 of Regulations. T (§232.405 of this cbapta) during the preceding 12 months (or for such shorter period that the rq:istrant was required lo submit and post SIJ(;h files). YES I&! NO D lndicat:e by check mark whether die registrant is a large accelerated mer, an accelerated filer, or a non-accelerllled filer. Large accelerated filer Non-accelerated filer D l!l Accelerated filer Smaller reporting company D D Indicate by check mark whether the registran1 is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES D NO IXl The number of shares of the registrant's Common Stock, $.01 par value, outslanding on August 8, 2013 were 26,444,843 shares of Class E Common Stock, 10,425,137 shares of Class A Common Stock, and 1,791,607 shlll'Cs of Class M Common Stock. -----------~~--------~---- 95 Jones Lang LaSalle Income Property Trust. Inc. INDEX Part I -FINANCIAL INFORMATION PAGE NUMBER Item l. Financial Statements 3 Consolidated Balance Sheets as of June 30, 2013 (unaudited) and December 31, 2012 3 Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months and six months ended June 30, 2013 and 2012 (unaudited) 4 Consolidated Statements of Equity for the six months ended June 30, 2013 and 2012 (unaudited) S Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012 (unaudited) 6 Notes to Consolidated Financial Statements (unaudited) 8 Jtem 2. Management"s Discu"ion and Analysis of Financial Condition and Results ofOpenstions 20 Jtem 3. Quantitative and Qualitative Disclosures About Market Risk 38 Item 4. Controls 11nd Procedures 39 Part II -OTHER INFORMATION Item 1. Legal Procccdinp Item IA. Risk Factors Item 2. Unregistered Saks of Equity Smiritics and Use of Proceeds ltem 3. Defaults Upon Senior Sccuritie:i Item 4. Mine Safety Disclosures Item S. Other Information Item 6. Exhibits SIGNATURES 2 39 39 39 40 40 40 41 42 96 Hem I. F"m.ncial St.tements. Jones Laoz LaSalle Income Property Trust, Inc. ASSETS CONSOLIDATED BALANCE SHEETS $ hi lho•sand11 Hapl per ••an: amounlll l___._.;...:.;UI~ ·,;::::,-....._. ••• · .. , • ';'.~·ir;·!i'~· .··~;(;\;·; .. '>~ U•llil04&lllOIUM> .llliial ~ :~·.;·; ~· , . · : • -~~~.::~--. L.and (including ftoin Vllis ofS32,593 and $32,593, re~veJy} S Buildings ud equipment (including:ltom ~ OfSl3().638 Ind $232,423, .es~) . . -. ' '-. ' . ~ Less w:umulatcd depreciation (inc:lucting from VIEs ofS(28,452) and S(2B,027) respective!)') Net~~ .,id ~uipment : · : : ;ifa:; ~i~ ·: .. Investment in unconsolidated md estate affiliate ~r..:i1l~~!#s'to··~-· ...... .· ·.:l .. ,:~B~.,;;.:;;~; .. · ' ~:·: 1r ... ""·"~~'"Q, : , •.. ·· . . .. w.. ......... . ., ,,,.,: .. ~~.. .: . ·'·... . . ~1r :·. Cash and cash equlvalcnts {Including from VIEs of ~.626 aod $2,SOO, respective!)') ltestrlc1edW!i:(mcl~ns &om VJEs of$3,639~~~~.05i, rcspcctiwly) . ):~> _ Ten1111t accounts receivable, net (including &om VIEs of$1,674 and $1,203, n:spc:cti\oely) Deferred expenses, net (including from VIila ofSfil9 and S783. respective!)') Mquired intangible assets, net {includinJ from VIEs of$4.293 and S4,!i48, respectively) Defe1Ted rent~, act{~ludina tom VIEso,f$833 llDdSl,074, respoctivoly) Prepaid expenses and other asJetS (Including from VIEs ofS764 and S364, respectively) TOTALASSEt:S;.;:i~:;,: · ·· . !! ·•• :':;:~.'.:' LIABILITIES AND EQUITY ==w~-~~ debt payable, net;(~~l~ t VIEs ofSi&S,861 mid.ll~7~~}:: Acco1111ts payable and other accrued elq!Cllses (including from VJ Es ofS2,,0S6 and S2,9S3, respectively) Distributloru1 p~able Accrued lntere5t (including from VI Es ofS880 and S909, respectively) Accrued ieal $1e &Des (i~luding from VI& oCSI,939 and $63B, rc1pectiw:ly) Advi5or fees payabk: . Ac.quired ~~-liabilitiDS, net • . ' -.• of;""", ... :~ •-l''•t ,,..· .-. ,. '. • • 1"' ;:. TOTAL LJABILJllBS · .. r-~::a2;~X'11".:!'lil!J.{.:.:..,n .. . · ... ;.... : '. • . ,,.;.-1u''ii•'"~""' ·"''"'"''' , .. ·).All.IUIUUJJ~u18iUW-WOU ;D'en""_... -'< :)_·~=.·.~-2--~ ... ff~.·--~~~.~-~.:~~~.:~:J ... :.=~.· .. ·~·-.·.·'.·, .. · .... · .. "-~:""·.·, r· . . .... -. Equity: Class Ejl~ stc>ck: SO.OJ par nlue; 209;6Qci.QOO ibares authorized; 26,.#4,843.shares · iss~ ~.~~ding at Jun~ 30, 2013~ ~~ 3 l, 2012, respectively :• ~,,:< . ·. · Cllllls A common slock: $0.01 par value; 400,000,000 shares authorized; 9,320,989 and 3,612,169 shares issued and outstanding at June 30, 2013 and Occcmbcr 31, 2012, respectively . Class M ~~ stock: $0.0 I par value.; 4o<).'i»o,Ooo shares 1uthorir.ed; l,Q9~ 13 :IJ:!!!:<.. , l04,lB2 .Shatci.S issued and outstandingJtJ~ ~.)(] 13 and December 31, 2Q1Z>~';\::;: · ~c:l:r << '· ·.i7.: ... 'r.. . ··:•· o.::~~~;:: ;t;;':. Additional peid·in capital (net of offering. cmrts ofS6,.549 and $3,219 as of Juoe 30, 2013 and December 31, 2012, re8pettively) ~· ·: ;~j-~~~~?ff'cr ~~prc¥s1v~:~fllf~f~~'.= ~:~,·~:·~·:· Distributions to stockholders A<=ctim~~4efic1t ;,;H,.;:.~:i · Total Jones Lang LaSalle lntome Property Trust, lne. stockholders' equity Nonco.mrOiilr.& lnwest5 Total equity TOTAL uA.Bri.1m...~ND EQUITY •· .. TI.: llhbrcviatian "VIEs" above means Var iablc lnt.eml. Entities. Sec ru>lc11 In consolidalod linancial stab:nu:nls. 3 ~i s s June 30, 2013 December 31, 2012 (U Dludllcd) m,192 s 719,041 . •, 126.S5S 669,901 (18,)81) (12,421) ,_.....,.,....,.___, ___ _ 766,~·j.~:>:.~i,· 714,021 J9.S95 19,988 . 1as'mif'. ~'. '~R~· i..:·.'.:··.~.;,.-·J. 4,016 '~,:;.;_·,':" ·.:-!~;:.. 20,769 36,986 ... ~~=-:,, . 10,719 . ~{: ' 15,880 2,437 6,747. 37,342 6.]06 3,122 873,389 ·s .. 1.125 6,208 41,125 4,S75 1,419 842,034 =~r.::· '· . '··~. 4!9,547. $ '.i;~i A92,9BS 21,154 3,509 1,813 3,184 38S 1',61S 2,975 2,033 937 324 S,S17 · · 10.080 ___ ........ _. ___ _ 495,169 524,949 .. ,, .. ~ ... ,,_ .. ,.., ................. ,. ~-~~t~~~:-{.~.J(j~~---- ~-,::::m:,~,'.J!! .. 264 . j};) 264 93 36 582,930 s 12,383 ·13\~j§;gft~F ;,-,~ · 542 . -. -~·-·~~~-~'.~"' ::·:! (97,392) (90,691) (ll&,o9a) .. · .. .. : .(ll!,851) 367,826 306.684 10,394 ' .. 10,401 378,220 3l 7,085 87:J~B9 .;s. 142t034 97 J()nes Lang LaSalle .. come Property Trust, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREH EN SJ VE INCOME (LOSS) $ in tbowands. ncept per share amounts (Unaudited) T•ne-•di! Ndrd Jme JO, 2013 . ··. Sh.11.omtlll ncledJneJO, au Sbmon1u t111led J•ne3t, 2012 Minimum rents $ 19,762 s IS,921 3,480 s 42,533 $ 32.,.307 6,983 Tenant rocoveries md ocher rental income Total revenues Operating expenses: Real estate taxm '.·· ~rty~ . r. -~.~:-if=~r~~if ~'.·~t~-~ ~~--- Nm (recovery of) provision for doubtful accounts Advis0ifces'. :'.·· . · ,. '.::.:.'~·=-:: . Coinpanylevelexpenses General and administrative Depreciation and amortization Total operauna expenses Operating income Other Income Pd (expenses): Interest expense ,. .'Oebt.mo-difi~ e1'Pensos _·-~ !";_~'... .;r .;.•:-.. ·.:· .. · •. :<...!' l'; ,-l 1~:~. ~. · c•: .,-.,.t,~.!",,".!·"I'' ... .' .... J'' .... ,.., .. Equity in loss of unconsolida1ed affiliates Tota.I other income and (expenses) .. Income (loss) from continuing operations Discontinued aperatlons: Loss from discontinuing operations Loss on •!ll,~_ofdiscon1inued operations ·;_:=r.-. ·, Gain on transfer of property and extinguishmcnt of debt S,4S9 25,221 2,552 :~ ~Jt·~~i~~~~:,:~ ! 1~~-~· (7) r°'lii .. . . 606 399 6,798 18,078 7,143 .. ~·>r!t:· -·· (6.419) ·3~··· (71) (6,490) 653 19.401 2,223 S,563 3S S72 9,0S8 Sl,591 . ~ ,•,. ·..:; s.001 :) . _;ii42j91 -_ ... , .• !':" ~ ~:··.. . (169} ,. 2,107 688 999 344 796 4,997 19,189 -----14,422 40,620 -----4,979 10,971 (6,41S) (12,878) ·n~> 39.290 4.402 . J0,907 152 1,302 1,339 543 10,004 28,649 10,641 (13,317) (416) (92) (240) ----~-----(6,831) (13,152) (13,S57) __ ......_ __ ----- (1,852) (2,181) (2,916) (898) ' . ' ~~ : ;"~.: (l 17) (2,95 I) (117) 11,791 : .. -:~~;~i~~-·w~1)'1neome:fi:om di.c-OntiJl~"'i~ions ·.~ · ::~_·' ... ;, ,-"}'.: c1.01s) .•. ·.·:1 .• ;";~:1:-:: • .:.·1:.1·,..;,;,._,.c;.c.·. .... •,;:~.,~1.., 11_,~,,~ii:T.1_~: · .. ___ ___...._ -::;: ,;~;F;;.: :s. 723 -----Net income (loss) 653 (2,867) (2,181) 5,807 ~s: Nci_~c iattributable to the ncmcOii~JJing • ---------- mterests .· .·' -:.·~-?:_::·:... ___ (_27)_. (45) ___ ( .... ~ .... < ..... ___ (1_37_) Net income (loss) attributable to Jones Lang LaSalle Income Property Trust, Inc. Net inoomc (iossj hm continuing operation~ 11ttributable to _Jon~.~.arlt.asille Income Property ~;lgc.:~ share~ basic4iD<11luted_;. · ·. ,.:;;)[(t:3:i;;.·< .. S Total (loss) income fiorn discontinued operations per share- basic and diluted $ ;Net~f~)i$s"tl1rlable·to Jones L8rig:· :w·_ijf.~lncome :: Property. · · ·~ .. _lric.·per share-;basic and.dil :··;:~~nm.;.. · · : s ,: • • , -c ' .. >i• ·I 1-\1.~if.;..• • .i II' . Weighted average common stock outstanding-basic and diluted Other coinpreh~iVc (loss) income: .. ·. ·:. i"'•' ··,··, Foreign cum:ncy translation adjustment Total otbef comprehensive (loss) inpome · . i:~ I • 626 (2,912) (2,247} ·..;:~:i: co.oa> s . . _ . .x~?Y s . - $ (0.04) $ - $ 35,343.798 24,022,SOO 33,445,787 ·_,, .. ,:!'.:"· (311) (205) ___ ..__...;... (529) (3 JJ) . {205) : . (529) -----Net comprehensive income (Joss) $ 315 s (3.117) $ 12.776) $ See notes to consolidated financial statements. 4 S,670 (OJ3) 0.36 0,23 24,008.932 (23) {23) Sz647 98 .a-.~i'.21M ,.,.....,.., .. _ ..... ......_or ..... D&dnicmB ........ ............,. Nei (lmaJ "'- ---E , ........ US.De ID-Property TlwC, he. CONSOLIDATED STA.Tt:MENni OF EQUJn' s la dlo9allU, nclft p1r ._ _. (l;-'iCed) --°""' ...... -,.._. ~ ...... , ...... ''. '._~ I ·..264 ·>u1;~. J. J6 -------l04,U2 I I =--a:· • 512,!U Kl ·.~- .-.•-:·~~ ··. ~.· 7'.102 f'Jilo> IJ,]]O) •1 ~ ~~ ~'.i~~-:··::~s::~'''.l'.i&'.~!~~>.~1~·~:~~~~.;;+--·. 1539) Ooth_......flom -""'~···--f C.h ~ ..... IO . i ~~-,: ;r:;~~--. ~. ;;:f,~UfifCif..tr }'JK(t~Hi~:ii·J;~-:~ .'•-:::~~~a\: ",{ .... ;:.'. .-:' -. ~~-·: .~ --~~~i;;·: :s1~:~~i~:~~m~:!~;:.~~;IEi~t~:K~-. :~;~f1;·:. ~·~=~·;·-i'~ Diolriboliam .-..rod (ID.IOI portllof8 -·--• 19(1,691) l(US,l!I) 10,«JI ll,:147) 66 (211) (6,701) ' -l.,oi 117,lJIS 74,174 C2'66} £J.1JOJ Ill £2,111) •'53l :M ~) -~~,.j~~t~_;:: .,~f~!le444.Ml ~·'··,a• :I:E i.m,,113 :;:::[' • · .s12,no • 13 :• (6.7Cll) lD)!M ·l 171,220 Notiacame ~-~;.p~r~~~--.. ~-·~~~·-_: ~· .~;f f~~!~!~~~~~T.;~~;~:UH~¥~5~~:~~; .. ~h~::~~~>~-.: ~~~~ttF. ·--~~;.~·.·:--• 1 • Colh ... lrihUlld !Riii\ -lliftlill-- a.m c111z1..-m · · =·~ ~-·. ·-::~.;;_~:.:~~ ': -':-'·)?:·i?:~;J45~~~;;;n~.-~:;~~f.~1t~~i~'~T~1~· ·:· ·-:-· ;r:1r:i: · - ~ ........... ' . ·;;~-;: '·':~~;:r.·r;;:'.::· ·~, ,;p .. : · . .;... .·:· 5,d70 ,,_-~ -· --= .. l~.111 IOll :tJO'>· -~ s l)l,079 ~ MO'I Ql) 109 lliltributioa dtclutd (S0.09S06) poroharc ........ J • .idO,Jlll~. ~""'!'!~!"' "='--...,,,,!"' .,,,......,..,14.,.,,'.,,66,.l (4.~) ;_,.·:.24,~7,;104 '·ti''-~·-· ....... ., .• --.. ... -----·-··M,•2S•'• 2S!> $ (H,202) S(l"7;1!?) --IOlil,,•H• ~ See notc1 to consolidated finnal statements. s 99 .Jones Lang LaSalle IMome Property Trust. Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS S ill thousands, nnpt per 1h1re amounh (Unaadlted) CASH FLOWS~f:Rfud OPERA TINO A.cnvntES: Nct(~a)incamc S ' .......... , ' ' •J •"f''''!5,~~· ,. I • ~••• •• ~ • ,',,··,_ ,• ·.,'·'.,,',·,·,·~.:.-.--· '.'.~.'.·;: •••• ·_.··: ~AdJll*iiiritl~~~ile ~'*) ibcoiric)irlit~,.?ovillm ~.~!!i~ lllCii!~cs: .. :.. . ... ,.c .. ~.,;;;;~~.; Depreciation (including disoonlinued opcmions) Am~:OCin-ptac111oase~ble.,(hK;llldin,,&dl~rWed~ns) · ··}' •. ; .. Amortization of ntl. aboYc·end bclow-martct in-place !cues (includina discontinued operations) Amorti7atioo oftinand fees (il\Ch·~-dilCOlltinued ationl) . . Ill ......, oper Amonlzatim of debl premium and dlSCOllllt (lnclucling discontinued operatio1111) Am~.oflcueeammlu~~~~~~~) LGlls on Ale of discontinued operations Gain on ~ref property llld ~t of dcblCini:l~·~inued operations) Nc1 (rei:overy of) provision for doubtful llCCOU!lls (including dilCOlltinued O(lel'llions) Slraiglt lino rm (inchldilis di~ ilpentlons) Impairment of real e:sLatc (inc:ludina di11m1tinucd operations) Equity in lojJ8 orunconaoli~ .mu~•.: .,~iL Net ch1111ps in ll5Sets and liabilities: Tm;.~ m:i:ivablc ·· '.: ;;~I, .. ' . .-.' ·~1~ . • • -.. Prepaid expenses and olher mm Acfyisor fees .. yahlc Accounll payable and ocher •CICl'llCd cxpcnSH Net cab proviilix! by c:?l'lting activitim_ . CASH nows FROM INVESnNG ACTIVITIES: :; Purd\•~f~f~'~ lnvotmcllit. < } · i · Pl'llCl:Cds fmm 881e of"iial a~ imintmenls, net Cmpitml improvancnlJ and I cue cairrlnmions l..olln escrows Nc:t caah uxd in i1iYC111nti m:livkic' CASH FLOWS FROM FINANCING ACTIVITIES: ~. ·. :wu.nce of~n 1lock '."''.IL ·-.. :.,,, H~11 ~c..-· ' Repurchase of 1lu rl!I OJJ~~·· Distributions to atoclrhnl dmi :.: . ,· ·' Dilltril!ulians paid 111 nonconlrolliDJ illlcrests Conlnl>utiDRi rccei\lec! from oonwnlrollina intcmt:I .. -.. Draws · ~ii mcility ' ,;~' ·." · .·.~, .......... ,. Proceeds from mottpge llOIC$ ;:; ·'oei>t~~~i:f ·'.· '. ~'I I? .. -~. ~~/: .-. Princ:ipal payments oo mortgage: nntes and other debt payable Net cash provided by(osed in)financiniadti+ Net (lk.~rcase) incr=ie in cash lllld ash cqui1111hmli Effect of ac~ ralca .• ·:~.:·""· CIS:h and cash equivalents at the begilllling of the pmod : Cuh ~ ~;ij~Jj{~enti at Ille cmd ~~Jji;l'.lid Supplemental disclci!lllrC af c.uh flow inlbrmation: lrierest i:iW;,,, ··" .. :·· 6 s Sh •ont•s ended. Sult 30, 21113 Sh lllonfhs Hdtd , •• .J(),2012 (2,111) s S,807 1,.548 UU-89. (-4,303) ·:~ ~-402 (471) :.~ .... (169) .. (1.746) ?H~\a~19> (564) 61 16"7 1,0,031 . . ·,~. :~.820\ . . "1l'lw .... ·.{_. . : '(s,633) 5,161 . (S9,292) i'}t:~~.1. (266) ·::~li:iw) (5,544) '(211) 208 12,000 .. -·: " ~ ~ 1,227 i,.b2 (Jlil) .:-656 (107) ~~~ ::~i~{ 51S 117 . ' (11,'191) 183 (96) 91J :~.; '..-)«) . . . • .f09 (208) 171 S,460 5,120 : (3,959) (4,882) .(3.721) (l,11112) (305) 109 (S0,384) (2,750) ·--------33,092. (4,828) (16.162) 3,936 · ,· :fm. . ::\(II} 36, 986 28,03 3 l0;169 :, :ioi· 15"'"==' · ··=, :··=· '='l=l~=~'=· il,173 s 1.•.119 100 Wtlte-of& of receivables w~~l'!'lbed asllllb ·•· . ~··..-.. Clwlp in lilbility fQr ieapi"I expendinns ~?.~·:c·1~~'"·; ., ..... ·-~~ $ 249 $ IO)SO 6,142 Lilbil~~:~~ ~-"~·~;·Jt~.;~:: ~·~~. :~ ... --:.:;·~:~~~~2f!;~~f.~~~: · -:t ;~ ~~;'.~1~~~~;.J;.: _:, --~~~~~~i~=:J~:;'.~~ ;:~q~~~-_,. --_ ~ : ~t~::~~~~~~·~ Stoc:k issued dli'o11efl dividend reinveslment plan S~k bliec! ~Pnatlon ' . : .:.~~,f~'~:':' Clwlgc in illWlllCC of commoo lfodc; niceivable ChmiFlti·~~demi,~: . · -::-. ... 11n1(!'''. Dillrlbutlan payable ..,__;_:.:...~_' •. M:.'.·.·'. •. ~.·::.'~:......·'' Ul• '~ .. ~ .. ,.'"'.'_;:L_ -I:.....:.<: ...... ·.·.·~, .... ~ .......... ,_, ... ~".·'.' . • .. "l·~ •c•~••·' . "' umna1m•~t~ .... ,. 5&W~"CI-.......-. ..... m ucm~~~JL ·::~;{~~ii~~~ : See notes to ronsolidaml ft.nancial mtcments. 7 62J ' r :···.:· ~~~~ • 4J. ·:-~~~::-'rr-·:: ~· ,-~~ 1,141 1,710 3,509 , ':,.:~::-. --., . .... . J:,,-". 82 2,llS l!i 399 2,285 4l,Sj{' 101 ( Joan LIUll L•Salle l•eomt Pruptrty Trust, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS S In tbo11Unds, except per 1bare •1nou1tls NOTE I-ORGANIZATION t;enerul Except where the t:ontexl suggests othetwl~. the terms "we, " "us, " "our" and the "Company" refer to Jones Long LaSalle Income Property Trust, Inc. The terms "Advisor" and "LaSa/fe " refer to LaSalle Investment Management, Inc. Jones Lang LaSalle Income Property Trust. Jnc. is an externally managed, non-listed, daily valuation perpetual-life teal estate investment tn1st ("RElT") that owns and manages a diversified poitfulio ofapartment, industrial, offioe and retail properties located primarily in the United States. We expect over time that our real estate portfolio will be further diversified on a global basis through the acquisition of additional properties outside of the United States and will be complemented by investments in real esta1D-related debt and securities. We were originally incorporated on May 28, 2004 wider the laws of the State of Maryland. We believe that we have operated in such a manner to qualify to be taxed as a REJT for federal income tax purposes commencing with the taxable year ended December 31, 2004, when we first elected REIT status. As of June 30, 2013, we owned (i) interests in a total of 34 consolidated properties located in ten states and one in Canada and (ii) an interest in one unconsolidated property located in the United States. From our inception to October I, 2012, we raised proceeds through pri\late offerings of shares of our undcsignated common stock. On October I, 2012, the Securities and Exchange Commission (the "SEC") declared effective our Registration Statement on Fonn S-11 {Commission File No. 333-177963) (the "Registration Statement") with respect to our continuous public offering of up to $3,000,000 in any combination of Clas a A and Class M shares of common stock (the "Offering"). In order to facilitate the Offering, on September 27, 2012, with the approval ofour stockholders, we amended and restated our charter to, among other things. (i) designate our outstanding common stock as Class E common stock, (ii) create two new classes of common stock, Class A and Class M. and (iii) make certain additional changes requested by state securitie1111dministrators. We also amended and restated our bylaw& on September 27, 2012 in connection with the Registration Statement being declared effective by the SEC. Additionally, on October l, 2012, we effected a stock dividend for all Class E shares at a ratio of 4.786-to-1 in order to achieve a net asset value ("NAV") per share for each of the Class A, Class Mand CJass E shares of $10.00 as of the date we commenced the Offering. Affiliates of our sponsor, Joces Lang LaSalle Jncorporated (•Jones Lang LaSalle" or our ,.Sponsor"), have invested an aggregate of$60,200 through purchases of shares of our Clas1 E common stock. As of June 30, 2013, 26,444,843 shares of Class E common s.toc:k, 9,.320,989, s.hal'Cll of Class A common stock and 1,629,313 shares of Class M common stock were outstanding and held by a total of2,703 stockholders. Prior to November 14, 2011, the Company (previously named Excelsior LaSalle Property Fund, Inc.) was managed by Dank of America Capital Ad.visors LLC (the "Former Manager"), a registered investment adviser with the SEC, that had the day-to-day msponsibility for our management and administration pursuant to a management agreement between the Company and the Former Manager (the "Management Agreement"). On November 14, 2011, the Former Manager assigned its right, duties and obligations as manager of the Company under the Management Agreement to LaSalle and since that date, the Former Manager has had no responsibility for the manasemenc of the Company. LaSalle acts as our advisor pursuant to the amended and restated advisory agreement between the Company and LaSalle, which became effective on October I, 2012 (the "Advisory Agreement"). Our Advisor, a registered investment adviser with the SEC, bas broad discretion with respect to our investment decisions and is responsible for selecting our investments and for managing our investment portfolio pursuant to the 1enns of the Advisory Agnement. LaSalle is a wholly owned, but operationally indepe.ndent subsidiary of Jones Ulng LaSalle, a New York Stock Exchange-listed global real estate,. investment management finn. We have no employees as all operations are managed by our Advisor. We have executive officers, but they are employees of and compensated by our Advisor. NOTE 2---SUMMARY OF SIGNIFICANT ACCOUNTING POLJCTES BllSls of Presentation anil Principia of Const>lldation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles {"GAAP"}. the ins.tructions to Fonn 10-Q and Rule 10-0 I of Regulation S-X and include the accounts of our wholly-owned subsidiaries, consolidatod variable interest entities ("VJE") and the unconsolidated investment& in real estate affiliates accounted for under the equity method of accounting. We consider the authoritative guidance of accounting for B 102 investments in common stock, investments in real estate ventures, investors BCCOunting for an investee when the investor has the majority of the voting interest but the minority partners have certain approval or veto rights, determining whether a general partner or general partners as a group controls a limited partnership or similar entity when the limited partner$ have 1::ertain rights, and the consolidation ofVIEs in which we own less cban a 100% interest. All significant intcrcompany balances and transactions have been eliminated in consolidation. Parenthetical dlacJosures are shown on our Consolidated Balance Sheets regarding the amounts of VIE assets and liabilities that are consolidated. Our VlEs include entities owning The District at HoweJI Mill, Cabana Beach San Mll'COS, Cabana Beach Gainesville, The Lodge of Athens, Campus Lodge Columbia, The F.dge at Lafayette and Campus Lodge Tampa as we maintain control over significant decisions. which began at the time of acquisition of the properties. The creditors of our VIEs do not have general recoun1e to us. Noncontro1ling lnterests represent the minority members' proportionate share of the ~uity in our VIEs. At acquisition, the assets, liabilities and non-controlling interests were measured and re<:0rded at the estimated fair value. Noncontrolling interests will increase for the minority members• share of net income of these entities and contributions and decrease for the minority members' share of net loss and distributions. As of June 30, 2013, noncontrolling interests represented the minority members' proportionate share of the equity of the en1ities Jisted above as VIEs. The accompanying unaudited interim financial statements have been prepared in accordance wlth the accounting policies described in the financial statements and related notes included in the Company's Form 10-K tiled with the SEC on March 7. 2013 (our"2012 Fonn 10-K") and should be read in conjunction with such financial statements and related notes. The following notes to these interim financial statements highlight changes to the notes included in the December 31, 2012 audited financial staiements included in our 2012 Fonn 10-K and present interim disclosures as required by the SEC. The interim f"mancial data a& of June 30, 2013 and for the three and six months ended June 30, 2013 and 2012 is unaudhed. In the opinion of the Company, the interim data includes all adjustments, consisting ml)' of normal rccuning adjustments. necessary for a fair statement of the results for the interim periods. Allowance for Doubtful .Accountt An allowance for doubtful accowits is provided against the portion of accounts receivable and deferred rent receivable that is estimated to be uncoJlcctiblc. Such allowance is reviewed periodically based upon our recovery e"perience. At lune 30, 2013 and December 3 J. 2012, our allowance for doubtful accounts was $152 and SS70. respectively. Deferred Expmsa Deferred eXpenses con slat of debt issuMce costs and lease commissions. Debt issuance costs are capitalized and amortized over the terms of the respective agreements as a component of interest expense. Lease commissions are capitalittd and amortized over the term of the related lease as e component of depreciation and amortization expense. Accumulated amortization of deferred expenses at June 30, 2013 and December 31, 2012 was $4.025 and $4,013, respectively. Acquisili""' We have allocated purchase price to acquired intangible assets, which include acqujred in-place lease intangibles, acquired above-market in-place lease intangibles and acquired ground lease intangibles, which arc reported net of accumulated amorti7.lltion of$22,SOS and $26,SIS at June 30, 2013 and December 31, 20i2, respectively. on the accompanying Consolidated Balance Sheets. The acquired intangible liabilities represent acquired below-market in-place leases, which are reported net ofaccumuhrted amortization of$2,.S82 and $5,465 at June 30, 2013 and December 31, 2012, respectively, on the accompanying Consolidated Balance Sheets. FaJ.r Value Dlscimllre The authoritative guidance requires the diBoClosure of the fair value of our financial instruments for which it is practicable to estimate that value. The guidance does not apply to all balance sheet items. Mark.et information es available or present value techniques have been utilized to estimate the amounts required to be disclosed. Since such amounts are estimates, there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument. We have estimated the fair value of our mortgage notes and other debt payable reflected in the accompanying Consolidated Balance Sheets at amounts that are based upon an intelpretation of available market information and valuation methodologies (including discounted cash flow analysis with regard to fixed rate debt) for similar loans made to borrowers with similar credit ratings and for the same maturities. The fair value of our mortgage notes and other debt payable, including our line of credit which was entered into at market rates, using level two inputs was approximately $4,708 higher and Sl 7,136 higher than the 9 103 aggregate carrying amounts at June 30.2013 and December 31, 2012, respectively. Such fairwlue estimates ere not nec:esserily indicative of the 11JJ1ounts that would be realized upon disposition of our mortgage notes payable. UR! of Estimates The preparation of financial statements in confonnity with GAAP requires us to make estimates and assumptions. These estimates and assumptions impact the reported amounts of assets and liabilities and the diaclosure of contingent assets and liabilities at the date of the financial statements and the reponed amounts of revenues and expenses during the reporting period. For example. significant estimates and assumptions have been made with resp~t to useful lives of assets, reroverable amounts of receivables, initial valuations snd related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. A«ual results could differ from those e11timates. NOTE 3-PROPERTV The primary reason we make acquisitions of real estate investments in the apartment, industrial, office and retail property sectors is to invest capital contributed by stockholden in a diverr.ified portfolio of real estate assets. The consolidated properties acquired by the Company during 2013 are as follows: Pnperf)' Sedar Sq•IU'e Owntnllip Fttt Loultk>• Vo Acqul1lCio• Dak 0 J~u~:p1,~~lon Center ·.)iif~~<(~al Suwanee Distribution Center Industrial »:·:,+.iJ2..QQO,'.i~liin~ JL;· '· . . , .. .:.: :;t:;::•o~;~!~i f P,J!e 26, 201~ ;S·. ~:;ii1~21.ooo --··~. '".i:~-:e.?~ : SS9,000 Atlanta, GA 100% June :ZB., 2013 We allocated the purchase price of our 2013 acquisitions in accordance with authoritative ,&uidance as follows: Building and equipment in~p· · 1ace 1~:i~~61tJte'.~(:~:j:,:'i'.·,~. 1_ .·::. ··-.·'.":-~~,,~::-.: .. :·...;..· •• •·: Above-market lease intangible :acJow-market 1eaciC::intan8ibJe $ 2013Ac4•ldtlnu 8,9.S.S 43,360 ·-ti,5S4 103 (2.9) $ .SS,943 : Weighted averase amoru:zatlon period for intangJhle 1SSe1S and liabilitia 2 • 10 years 37,943 The following table summarues the loss from discontinued operations for Georgia Door Sales Distn"bution Center, Metropolitan Park North and Marketplace at Northglenn for the three and six months ended June 30, 2012: Total revenue Real estate taxes Pro~~;'.;{: .. Provision for doubtful accounts Tlu·H moat•s tnded J•ae 30, 2Dl2 $ 1,163 s (327) Sb m011ths ndtd Jane JG, 2012 (23~. -!~!~-~ I 4,896 (778) (669) 7 (31) ~era! aD~~:~~Jt1f.~e .-·' :-~~.~~·:<::~~~.~:~.~·~·:~7j~:~k·;)---,::···. (It):'·.~~~~', ::;;~ . (103)° Net provision foc impainnent Depreciatidli' ~a &mortization Interest expense ·Loss from d~u_Cd operations (913) <326f ><~e c1.090) (l,863) (4,263) ' ; s (898) .... $-............. --(2-,9-.S.-l) ==== ............................ _,,,...== 10 104 NOTE 4-VNCONSOLIDATED REAL ESTATE AFFILIATES We own a 46.5% interest in Legacy Village. On December 4, 2{)12. we acquired the remaining 2()% interesi: in 111 Sutter S~. We had previously owned a majority, but non-controlling, interest in 1l1 Sutter Slreet from March 29, 2005 through December 4, 2012. The following table summari7.Cs financial information for our unconsolidated real estate affiliate: S1UHmariud Comblrud Balilltce Shuts· Uncon1olldated Ral Estate Affillatg June JO, 201) Dcccmlic:r )I, 2112 Tutalauets ',· s 102,394 s ]04,882 .. Total liabilities s 18,947 $ 91,176 Memben' equit)' " -.:· 13,447 13,706 Total Iiabilitie$ and membm' equity $ 102,394 $ 104,882 Company l,.vestmmt In UnctHtSol/dMed Rt!tll Eslllte Alflll4U J1DdO, 201J Dc:crmber JI, 2011 s 13,447 $ 13,706 Less: other members' equity (1,303) (8,442) J4,7SI 14.724 Basis di1ferential in invesamentift'~Jiit))~ real estate effiliates, net (1) . • • • • -': •• •, ,, ~.;"I ~ ,. ~-• Investments in unconAOlidated real estate Affiliates $ 19,895 $ 19,9118 (1) The basis differential in investment in the equity oHhe unconsolidal:ed real estate affiliate is attributable to a difference in the fair value of Legacy Village over Its hilltorlcal cost at acquisition plus our own acquisition costs for Legacy Village. We amortize the basis differential over the Jives of the re]ated wets and liabilities that make up die fair value difference. primarily buildings and improvements. In some instances, the useful lives of these assets and liabilities differ from the useful lives being used to amortize 1he asset5 end liabilities by the other members. The basis differential allocated to land is not subject to amortization. Tllnt BllDilll tadrd Juu 30, 2013 nree D.Olllbtaded J•neJO,Hll Sb months tided J•ae 38, 21113 Sb monlh• ended J11ae JO, 1012 Total revenlleS .. •;:~ff'~~ :~?~~~~%~~~iEJ!~~~,:( ;:i,,::~,5;,:: .: ::~~n .. · iS Total operating expenses 3,498 ·::,,:·" 6.390 s . 4,919 9,054 $ 13,058 6,890 9,054 opej.aitqg incoil,:i4'.:. ··:', · "::· C'.~~'.'. ~tT:>~':;;v1, .. 1;023 . Total other expenses 1,20S Net Jo.. · · ~':~·': .;:-'{;~:· = ~s;:;;;r~\ij:;s.·. {182) s Comparry Equity in lnCfJme of Urrconsolidated Ru/ E:rtale Affil;ates 1,401 2,028 (627) s Tlane mom•• en4ed firc:t •011lht e•ded Juat 31, 1013 June JO, J.OIJ. Net loss ofunconselidated Fe8J cit8te affiliates · ;::::~=.= i~;;;;1::: '·-s . Other members' shllf'C of net loss (inc:ome) .Adjustments and other expenses······· . , . • '. . -. , - . ~~,. ' . - -• ~ . I Other expense from unconsolidated real estate affiliates (182} s 98 13 (627) s 224 (10) (3) 2,164 4.004 2,423 4,070 (259) s (66) ------ Sa 111o••h• nded Sh monCli11:udcd I •me JO., ZOil JHe 30, 2012 (2S9) S (66) 140 (178) 27 10 (6) O>mpany equity'int~so( ·-· . ' : ., ' unconsolidated feal estate~~,'.,,;_::::.:$ -(7t) $ (92) s (416) s ------(240) 11 105 NOTE S--MORTGAGE NOTES AND OTHER DEBT PAYABLE Mortgage notes and other debt payable have various maturities through 2027 and consist of the following: Preprrty ;:un;..;.~' •·'tiOte ·. · · ible (1) (2) .~:=:~R~L ...... ~ .· .. Am .. al p1y1blt 11 11f M1turity/ lllteml ------------- gi:t19pltll•rll1 D1te Rite J1me 3ll, 2813 Dun111tr 31, 2012 su~ .. ~~!t~!M## 2021 . 1.94%-6J4% . J,,1:·:,~im~.i~,~J.3f,: s 479.206 June 2015 2. 7()0.(, 7,000 .. ;>;:·.:· ;2:·~-I :.:···~~-g,~~~~1l./1· :~L: ·. ,.,15~; ~ i_;~~ J0 }/ i r ·~;i:~ ... i~ ~.,....,,..,,,.-'~-;,~:;;:;,~• .. ~:, ~~-~:H~:~~~~~~H;~~~~~~~~~·~.!.; 12,000 ,,.,-.. ;;"re-uc· · -... , ..... ...,. _____ _ Monsage notes and olhcr debt payable 458,239 491,206 .. ,f(.;j~ ~ usmned ~ht 1,779 Mortgage notes and other debt payable, net s 459,547 $ 492,985 ====---= (I) On June 20, 2013, we entered into a $12,000 mortgage note payable secured by 4001 North Norfleet Road. The note matures February I, 2017 and has a floating interest rate equal to LIBOR plus 2.75% (2.94% at June 30, 2013). (2) On July I, 2013, we retired the mortgage note payable on 36 Research Park Drive. The outstanding balance on the morts:age nole payable, including aci::rued interest, was approximately SI0,6S0,000. We negotiated a discounted payoff in the amount ofS9,SOO. (3) The seller of 11 J Sutter Street provided short·1enn financing at clo5ing at the prime rate (3.2S%at December 31, 2012) plus ISO basis points. In January 2013, we retired the $12,000 note payable. Aggregate principal payments of mortgage notes payable as of June 30, 2013 mc as follows: Line of Clldil Ye1r •:.\•.:: .. ..... ~·;-.-.. :;:.· .•/ •,, 2013 2014 2015 2016 2017 Thereafter .T~ . -. ' $ s An101nt !6,686 138.,857 24,452 33,530 ] 12,621 IS,093 4SI,239 On June 2S, 2013, we entered into a $40,000 revolving line of credit agreement with Bank of America, N.A. to cover short-tenn capital needs for new property ~uisitions and working cash. The line of credit has a two year tenn and bears interest based on LlBOR plus a spread ranging from 1.50% to 2. 75% depending on the Company's leverase Tllti-0 (2.25% spread at June 30, 2013). We may not draw funds on our line of credit if we experience a Material Adverse Effect, which is de(med to include, among other things, (a) a material adverse effect upon the operations, business, assets, liabilities. or financial condition of the Company, taken as a whole; (b) a material impairment oflhe rights and remedies of lender under any loan document or the ability of any loan party to perfonn its obligations under any loan document; or ( c) a material adverse eff~t upon the legality, validity, binding effect or enforceability against any loan party of any loan document to which it is a pal1y. As of June 30, 2013, there were no material adverse effects. Our line of credit does require us to meet certain customary debt covenants which include a maximum leverage ratio, a minimum debt service ratio as well as minimum amounts of equity and liquidity. At June 30, 2013, we were in compliance with all debt covenants. NOTE6--COMMONSTOCK We have three classes of common stock outstanding as of June 30, 2013. Our previously existing class of undesignated common stock WIS designated as Class E common stock on Septembt:r 27, 2012. The outstanding shares of Class E common stock wi]] convert to Class M common stock on October 1, 2013. We will not issue any additional shares of Class E common 12 106 stock. Shm'es of Class A and M common stock are currently being sold under our continuous public Offering. The fees payable to our dealer manager with respect to each outstanding share of each class, IS a percentage ofNAV, are as follows: ,·1c1ass ·iil s~·7:2~m;~r: Class M Shares Class E Shares Selina Co111mbllloa Detltl' Muqer Fet Dllltrlblldtn Pee uptoJ.5% j~~lt:%:m:· ',-.. '0.5~%;;::.:~!~H!iEY 'it.SO% . ?L None None 0.55% None ...... ' •.; ~,·,.' . ·.::t. '·'·'J.". . ·· .... ·· :'·,·· None None The selling commission. dealer manager fee and distribution fee are offering costs and are recorded as a reduction of capital in excess of par value. Stock Jss111111ca The stock issuances for our three classes of shares for the six months ended June 30, 20 l 3 and for the year ended December 31, 2012 were as follows: Class A Sh~·z: ,.J;~:~ :· ·; Class M Shares Cius E ~Jlare,jj') Ji~'.: 0 ; Total Sis mODtlll eadNI Ju11t lt, 2(1 IJ #orahara Ama•nl '.· _5,13~~~0;~:;{~·· .. 58,692 1.,525,031 15.S23 s 74,215 Yareaded Deeember Jl, 2012 # ohllan:a AmHllllll .J,6_~;1,~~ :. . S 3'iW3~ 104,212 l,OS7 ~,2~is;:l:-~: · ~0;~94, -----$ 88,886 (1) On Autust 8, 21H2. we sold 5,120,355 shares of our undesi&Mted common stock to en affili•te of our Advisor at our June 30, 2012 net asset value of approximately $9. 76 per share. The undesignated shares of our common stock were designated as Class E shares on September 27, 2012. Stock Dividend On October 1, 2012. we declared a stock dividend with respect to all Cfass E shares at a ratio of 4.786-to-1. The effects of the stock dividend, which was effected as a stock split, have been applied retroactively to all share and per share amounts for aJI periods presented. Shan Repurcbase Plan On October I, 2012. we adopted a new share repurchase plan whereby on a daily basis stockholders may n:quest we repurchase all c;ir a portion of their shares of Class A and Class M common stock at that day's NAV per share. The share repurchase plan is subject to a one-year holding ix:riod, with certain exceptions, and limited to 5% ofNAV per quarter with certain limitations based on the size of the capital raise in our Offering. Class E shares are not e1igible to participate in the share repurchase plan. For the three and six months ended June 30, 2013, we repurchased 26,048 shares of Class A common stock that were issued through our distribution reinvestment plan. Dl.rtrlbution Reinvestment Plan From January 1, 2012 through September 30, 2012, we issued 82,270 shares of common stock for approximately $794 pursuant to our dividend reinvestment plan that was in effect prior to the commencemen1 of the Offering on October 1, 2012. On October I, 2012. we tenninated our existing dividend reinvestment plan and adopted a new distribution reinvestment plan wbeJCby Class A and Class M shares may elect to have their cash distributions reinvested in additional shares of our Common Stock at the NAV per share on the distribution date. Class E shares are not eligible to participate in the distribution reinvestment plan. For the six months ended June 30. 2013. we issued SZ.291and9,229shares of Class A and Class M Common Stock, respectively, for $623 under the distribution reinvestment plan. Earnings Per Share ("EPS,.) Basic per share amounts are based on the weighted average ohhares outstanding of35,.343,798 and 33.445.787 for the three and six months ended June 30, 2013 and 24,022,500 and 24,008,932 for the three and six months ended June 30, 2012, respectively. We have no dilutive or potentially dilutive securities. The computations of basic and diluted EPS were adjumed retroactively for all periods presented ID reflect the stock dividend lhirt occurred on October J, 2012. 13 107 OtgaldZlltibn a1td Offering Costs Orpnization and offering expenses include, but are not limited to, legal, accounting and printing fees and persoMel costs of our Advisor (in.eluding rcimbunement of personnel costs for our executive officers) attn"butable to our organization, prepanation of the registration statement, regisl!Btion and qualification of our common saock for sale with the SEC and in the various states and filing fees incurred by our Advisor. LaSaJle agrc~ to fund our organization and offering expenses through October 1, 2012, which is the date the SEC declared our registration statement effective, following which time wc commenced reimbursing LaSalle over 36 months for organizeiion and offering expenses incurred prior to the commencement date. Following the Offering commencement date, we began paying directly or reimbursing LaSalle if it pays on our behalf any ora&ni:ra.tion and offering expenses incurred during the Offering period (other than selling commissions, the dealer manager fee and distribution fees) as and when ineuned. After the termination of the Offering, our Advisor has agreed to reimburse us to the extent that the organization and offering expenses that we incur exceed l 5% of our gross proceeds from the Offering. Organization costs are expensed, whereas offering costs are recorded as a reduction of capital in excess of par value. As of June 30, 2013 and December 31, 2012, LaSalle had paid $4,211 and $2,719, respectively, oforganization and offering expenses on our behalf which we had not reimbursed. These costs are included in Accounts payable and other accrued expenses. NOTE 7-RELATED PARTY TRANSACTIONS Effective as of October l, 2012, we entered into a First Amended and Restated Advisory Agreement w ilh LaSalle, plD'Sumt 1o which we pay a fixed advisory fee of 1.25% of our NAV calculated daily. The Advisory Agreement allows for a perfonnance fee to be earned for each share class based on the total return of that share class during the calendar year. The perfonnance fee is calculated as lOOAi of the return in excess of7% per annum. Prior to October l, 2012, under the terms ofthe Management and Advisory Agreements, wc paid each of the Fomter Manager and Advisor an annual fixed fee equal to 0.75% ofNAV, calculated quarterly. Effective Janulll')' 1, 201 O, the Fonner Manager's fixed fee was reduced from 0.15% ofNAV to 0.10% ofNAV. Beginning on November 14, 2011, when the Fonner Manager assigned the Management Agreement to the Advisor, we began paying the: Fonner Manager's fixed fc:e to the Advisor. As a result, we began paying the Advisor total aggregate compensation of 0.85% ofNAV for management and advisory services provided to the Company. Additionally, under the tenns of the Management and Advisory Ai"eements, we paid the Fonner Manager and our Advisor an aggregate annual variable fee equal to 7.5D%ofthe Variable Fee Base Amount, as defined in the Advisory Agreement, calculated quarterly. The Fonner Manager was allocated an increasing proportion of the variable fee to the extent the Company's NAV inc:rcucd, up to a maximum of 1.87% of the 7.SD% fee paid. Effective January I, 2010, the Fomler Manager waived its participation in the variable fee and the Advisor waived its participation in the variable fee per tho tenns of the Management Agreement. The fixed advisory fee for the three and six months ended lune 30, 2013 was $1,121 and $2,107, respectively. The fixed management and advisory fees for the three and six months ended June 30, 2012 were $488 and $971, respectively. The fixed advisory fees payable at June 30, 2013 and December 31, 2012 was $385 and $324, respectively. The variable fee far the three and six months ended June 30, 2012 was $84 and $331, respectively. No variable fee expense was included in Advisor fees payable at December 31, 2012. No performance: fee wa11eamed for the three and six months ended June 30, 2013. We pay Jones Lang LaSalle Americas. Inc. ( .. JLL Americas"), an affiliate of the AdviMr, for property management and leasing services perfonned at various properties we own, on terms no less favorable: than we could receive from other third party service providers. For the three and six months ended June 30, 2013, we paid JLLAmericas S52 and $104, respectively. For the three and six months ended June 30, 2012, we paid JLL Americas SSO and $90, respectively. During the three months ended June 30, 2013. we paid JLLAmerieas $100 in loan placement fees related to the mortgage debt on 4001 North Norfleet and the line of credit. LaSalle: Investment Management Distributors, LLC, an affiliate of our Advisor, is the dealer manager (the "Dealer Manager'') for our Offering. For the three and six months ended June 30, 2013, we paid the Dealer Manager selling commissions, dealer manHger fees and distribution fees totaling $535 and S853, respectively. A majority of the sc:Jling commissions., dealer manager fees and distribution fees are reaJlowed lo participating broker-dealers. As of June 30, 2013, we owed $4,21 l for organimtion and offering costs paid by LaSalle (see Note 6-Common Stock). These costs are included in Accounts payable and other accrued expenses at June 30, 2013. 14 108 NOTE &--COMMITMENTS AND CONTINGENCIES The Dignity Heahh Office Portfolio mortgage debt miuires diat we deposit an annual amount of$85S, up to a cumulative maximum of$J,900, into an escrow account 1o fund future tenant improvements and leasing commissions. The amount of the escrow funded by each of1he 15 buildings in the portfolio is capped indi\lidually pursuant to each Joan agreement At June 30, 2013, we had approximately $1,217 deposited Jn this escrow, and we expect to fund $348 during the remainder of2013. Additionally, we are required to deposit approximately S 15 J per year into an escrow account to fund capital expenditures. At June 30, 2013, our capital account escrow account balance was S 163. These escrow accounts allow us to withdraw funds as we inclD' costs related to tenant improvements, leasing commissions and capital expenditures. Additionally, on a monthly basis, we are required to fund an escrow account for the future payment of real estate taxes and insurance costs in an amount equal to I/12th of the estimated real estate taxes and insurance premium. At June 30. 2013, our real estate tax and insurance escrow balance was $693. We expect to fund the loan escrows tiom property operations. As part of the lease with our single tenant at the 4001 North Norfleet Road property, we provided the tenant a right to expand the current building by up to 2!6,000 square feet of space. If the tenant exercises this right, we will be obligated to constJUct this expansion space. The tenant has the right to provide notice to us of its desire to expand ll llDY time prior 10 February 28, 2016 (the end of the ninth year of the lease), or if the lease is extended, until any time prior to the end of the fourth year of any extension. As of June 30, 2013, we had not received an expansion notice from the tenant. NOTE 9--SEGMENT REPORTING We have four operating segments: apartment propatfos, industrial properties. office properties, and retail properties. Consistent with how we mriew and manage our properties, the financial information summarized below is presented by n:portable operating segment and reconciJed to income (Ion) from continuing operations as ofllfld for the three and six months ended June 30, 2013 and 2012. IS 109 ladulrid Oftiee Three Months Elldlq Jui.e 30, 1013 .• ·-t·-·~r1\<.'t '·,.· _;~~:/!:'~·:·~ . -. ~ .. Minimum rents $ 7,844 s 1,051 s 9,366 $ 1,501 $ 19,762 Tenant ~venes .and other nmtaJ meome' 448 •• ·, "',,.!', :-' .~ .. · •' ;.:~·2· -4,236 __ s_6_.3 .· ; •. · ·· ·S,459 Total FIVIDlll!S $ 8,292 s 1,263 $ 13,602 $ 2,D64 $ 25,221 Oper~~ ~ia: .. ': 'i)1:~::JJ,;··;·:··. . : ~: ·,• .. Real estate taxes S 143 s 166 $ 1,190 $ 353 $ 2,.552 . '..:_ -' • . :' ~--~-,-E.:JIMJi'll~Jll::_}lj~.~_!,.I,'.· •.. ' ~ :• 11MR~<lMmiQD ' -' .. · ·.o -~ · '-1"~j•~Jo.«,!i,,r-_: .· •. · 3.,229 • 4 .~t'.. . : ,7.~~ :e ::.:;':."X-... ~·.1, ·:":lli.l!i~~~~~~~~~~-~;:~:-".·.< ·. · . . :;;;;·,·':W! ·:J1: '.~~ (Recovery of) provision for doubtful accounts 47 (56) 2 (7) Total ~tope' nd~.;anHIW.:..<· .Ji)~_;;~'.~:~'':'.': :s·-· .. 4119 --.-·---. ' ... r---_.!~~~~:·~-· --' s · '662 :s 9;1s4 ----s ·196· '1'.!S 4,177 ----Operadn& mc:omr: -Segments $ 4,173 $ l,067 $ 9,425 $ l,402 $ 16,067 Capital Hpendlturu by segment $ S96 $ 7 $ 3,709 $ 74 $ 4,386 Reconclllatlon to lncome from continuing operations -~i~~ .. ~~.;;isegmorus .. :·. . ~;;:.. Advisor fees : '.eom~~lcv~ expcns0s _·•. · General and administrative oePreclati~~' an~ amortiZation Operating income . ' '' . Other income and (expenses): Interest expense Equitfin JQss of unconsolidated aftili~ Total other income and (expenses) .· ... ·. i1n~e.'1n>m:~nuing Oj,erati 0 ns ·' ;idmiH!~i\:' Cik.:~i;;(: ReoonciUatioil t~ totail consolidated ~~;~'bf ;rune 30, 1013 Assets per reportable segments Corporate l~e1 aids Total consolidated assets Reconciliation to total consolidated assets as of December 31, 2012 AB-~..;...s. ,,_~:~·i;;~·b·_ .. le. -~-_.., .-. · · '-;:-~:-.;:; .. ·· . ., ·· ''·'· ·······""·-. ,~~~.~~.I ~sm.,~~ 1 ,:.~:': 0 ;0•~.:-)JJ~:~ff~~(:'~.·· ·.. ..".·~ ~< ·, ·-;,~~{?ii-~~~~J~:;~ •I. Corporate level assets ·rota10rins0nd'atcia 8ssets · · . · .. ~-, ._.,. ~.;, -~. -.·~ . ..-. ·t!•; -t.;: -;':;~~.;1~5;-~ .· •w ,-•-•"r,'· 16 .-•• J ~ .. ~. •, :>;,• . "··~:.~ ·:16,067 1,121 ·:·!:,L -·-;.606 ''. 399 6,798 $ 7.143 $ (6,419) :···. -.~·.;; (71) . ·•. . ':;,.,,'"----- $ (6,490) • · · :$ ):':·RS3 $ 846,722 ~-. -. :.~ . 26.667 s 873,389 110 Apmrtme•t1 lndmlrl1I Olllcc Tata I 1bree Months Ended June 30. 2012 ~~:~.~~,,~-~~·~ ~ '~:~}!;'. rH~~;8HiU!liUl~L~;u~~11~.:.' ; ~-. :~!.;r;·~.-~ ;~ ~~~iHilL~~~~;1:~r ~ ~ ~--.~ /~~:;t~f ~:: ~ : .. i~~Bi~it~i1~ ~;:~}:: :~·~:: . tr::: J~~.f~~r~.~~{l ~ Minimum rents $ 7,7S7 $ 1,026 $ 5,661 $ 1,477 $ 15,921 :~;f~.K:ovme!anct'~t~in~·· .·· :~~i~lL~f\::~ .-233 ··· ·,~lj59·-··> s19. ·.~·-n~:-;~Jijo: Totalnvenues S 8,226 S 1,259 $ 7,920 $ 1,996 $ 19.401 i;9P,el]ldn& eipeasts: . ;: . ·· .. ::· Real estate taxes $ 796 s . . :::-.::~m;_~~;;@:~ .; 19S . 87 Provision for doubtful accounts 19 ~~·-~eli~~lii1il!~~ :_·> ., ... s ·,1a~'1+' · .. ;,s 282 ------Operating income -Sepnents $ 4,282 s 977 ==== '· ,- $ 941 $ 291 $ 2,223 ;~,, ::~;~;;,:. ·:_· ... 323/ &A!m!;~~3 . 16 35 -~-. ·~-~~-·:.-:~"""pi~i:_·$_·· ·_6_14_· ''$.')·1~•:u $ 4,939 $ 1,382 $ 11,SBO Capital expenditures by segment s SS2 S 26 s 1,.370 s 76 s 2,024 ReeoncJllatlon to Income from eondnulnr; operations ~~in~e·~,~~Ji~~'~/· .. , Advisor fees r.~n1~~ 1Mii .~iiie;~.~.-~~}~~;_< .... : · :_ .:·:. ;!'J~~Y. ..... ~o( ~ ··~·~~:-r:?•:•·,:'·· -:i .. General and administrative ; .Depreciation snd 1111~ Operating income ~·inrome and (expenses):. · Interest expense ~-~ "'"'•: ' I~~~Ui·i~~~f~datCd iftil~~;:~ii~:i~~~TIJf' Total other income l!IOd (expenses) :~:trom oontlnulng o~i~~· .. 17 ~ '..: .·: ';~-·~x· "-~~: . •I '• ~1~~:"t, . . 512 :::::.~· 344 4,997 s 4,979 $ (6,415) · ..• ~) _;,;t4J~) $ (6,831) $ (1,152) 111 Six Mootll1 Endin& J•ne 31. 2013 Minimum rents TenUat·~ and ~lmuaJ income Total revenue. 4~~:~~~:r.·_::f~~:r::~··_ Real estat.e tllxes . ·_l>tO-_~_·_-.:· .• ·_ -~.s .· f::~"Jtt't~ .. ·-· • • c'l'' i:,-"('-r.:l!~-~ ·: Provision for doubtful accounts _Tob."r~ openttnses.Pem:a Operating income -Segme11ts Ap111mt1~ $ 15,849 .. ·a1 I $ 16,660 $ 1.684 97 Capital e:s:peadltures by segment S 959 --.. ~~; -~~:.~~~1~=· :~_~iUif~~~~rf:~·::'.-.:-.... · ·: -·::·~·.~~-.~:~~~~tr: Reconclllatlon to Income from condnuin1 openitlons ~'gincome ·Segments Advisor fees ...... ,. ... '··'' '1 ., • ,::19'm~~flevel ~ ~., .. 1l. , .. General and administrative _~~~-~Clo liid.Dio~ Operating income :Other:inl:omc 111d (ex~).:,, - Interest expense :_ t~~6p'~_lrication ~~~h~l;t.; . ; . Equity in loss ofunconsolidated at1llia1es ;T~i¥ii ~Ffuromc and (c~;;;_~) . . . . Loss from continuing operations : ,. :f.' ' 18 ladml!Ul s 2.084 . : 386 s 2,470 s 2l.S67 6,736 s 28,303 Retail Tomi s 3,033 s 42,533 ~.'iJil" tr':!. -:Ji::~~~l" 9,0S8 __ .....;. __ S 4,158 S Sl,S91 $ 41 $ 10,166 s 74 s Ll,240 -·-· . .. _:~i~f:;·~(~~ ~- . ' .. -•·. .. ~'::;~~~~:~r.:~ -.,.~ . .;:;·· .•••I ' s 34.{162 2,107 ·. ~-:.~, ... :Ef~~~~-~.-L:._ ~999 796 .t .. h".-";.jJ.;,..,.,.. . . .. ··• . :·,_. 1); . •• 19;1~ s J0,971 $ (12,878) (112) (92) S (l3,U2) $ (2,lll) 112 l•du1rW Olllct RellJI To ... Sil: Mon.tbs Ended J'11ne 30, 2812 Minimum rents s !5,751 s ~t~~~e·~:··~~f~~·_iacome ~bl'!',\"~."·'.~ ---· -~;~· ·-· ~ -_. Total reven•es s 16,607 s ..:~ .. .0.'"_._·;..;,;ntinl eTneDIN: '. 3;Vi;: ._;-." ·• . .-.--r :!.~.~~·r.~.:~i:.~ Real estate taxes S 1,532 $ 2,073 s 11,482 : ·:·:41o ·r.:;:,0in:r: 2.553 s 16,106 s .. $ 2,994 ·1,030 4,024 s 32,307 ·>t1~3 $ 39,290 319 $ 1,899 $ 582 s 4,402 ~u~ ~;~~~~mi~~~E6f ;':,i:L::,i;i~§s§i!llfi~l~f:·~:.:; 114 j{~-~~~p(ti_ .. ;<· 6n. l,'. · ;~o~?. Provision for doubtful accounts 23 106 23 152 mI~&mnt'•r•rlii~ii:~·;:?::·;:m:;?1~m~1~i!~2··'.: ... ''.'_. _s_o3_.. ""''.j-.-,,,-0-10'"". • :;s -1,216 .: '·s :rs.~r Operating income -Segments S 8,875 S 2,050 $ I 0,096 S 2,808 S 23,829 .·"-·' Capital expenditures by segment $ 786 s !'•_;·~ ..... ; ' 1.;:·~-:'" .'-~- Reeondllatlon to lnenme from contlnuln& operations :~ting incom~. • ~e~~~J:;!![;:i;.> Advisor fees .. 9.Qinpanf1evcl ·mcpe.,~;~ ~: '._'._'t'.\ General and administrative <-~ci&tion and mnortizaiiclli". Operating income '<>!h.eir income and (expmues): '. ,, •. ;. Interest expense ~;·@.~ ~ri -~~oon1e ~f "D.~li~'.atruiate~,:. : A~~~!~fi~im: Total other income and (expenses) '.~'from oontinumg ~""· . NOTE JO-DISTRIBUTIONS PAYABLE ' . •"•. ·~· . '.}·1·: . .ji~,;}"·.::~· 26 $ 2,SSD $ . :·: ~~: .-:i_.;~.:~ 83 s 3,445 s·. 231~9 ... ,J:;,; ... 1,302 :m1Jjiiij9 · : .. :.:(·?tr'!~ S43 10,004 $ 10,641 $ (13,317) <;>,:.::;-:. ·;;ir i~4o> $ (13,557} : ·s ".;(2;916) On May 7, 2013, our board Df directors declared for the second quarter of2013 a gross dividend in the amount ofSO, 10 per share to holders of each c:lass of our common stock of record as of June 27, 2013. The dividend was paid on August 2, 2013. Class E srockholders received $0.10 per share. Class A and Class M stockholders received SO.IO per share less applicable class-specific per share fees resulting in a net dividend of S0.07818 and S0.08881, respectively. NOTE Jl-SUBSEQUENT EVENTS On July l, 2013, we retired the mortgage note payable on 36 Research Paik Drive. Tbe out5tmng balance on the mortgage note payable, including accrued interest, was approximately $l0,6SO. We negotiated a discounted payoff in the amowit of$9,SOO, which wps funded with a $7,000 draw on our line of Credit and cash 011 hand. The discounted payoff will be reflected as a gain on extinguishment of debt. As a result. we own the property free and clear of mortgage debt. On August 6, 2013, our board of directors approved a gross dividend fur the 1hird quarter of 2013 ofS0.10 per share to stockholders of record as of Sept.ember 27, 2013, payable on November l, 2013. Class E stockholders receive $0.10 per share. Class A and Class M stockholders will receive SD.ID per share less applicable class-specific fees . . . . . .. . 19 113 ( Item 2. Manapmea.t•1 Discussion and Analysis of Ymaneial Condition and Results of Operation a. S In thoutande, eJ"pt per share amounts C..utlonary Note RepnUn1 Fol"Mlrd-Lookfng Statements Thi$ Quarterly report on Form 10.Q may contain forward-looking statements within the meaning of Section 2 lE of Che Securities Exchange Act of 1934, as amended (the .. Exchange Actj and Section 27 A of the Securities Act of 1933, as emended (the •securities Act"). regarding, among other things. our plans. strategies and prospects, both business and financial. Forward- looking statements include, but se not limited to, statements that represent our beliefs concerning future operations, stra1egies, financial results or ocher developments. Forward-looking statements can be identified by the use of forward-looking tenninology such llS, but not limited to, "may," '"should," .. expect," "anticipate," "estimate," "would be," "believe," or "continue" or the negative or other variations of comparable 1enninology. Because these fOJWaTd-looking statements are based on estimates and assumptions that are subject to signifi.:ant business, eoonomic and rompetitive uncertainties. many of which are beyond our control or are subject to change, actual results could be materially different. Although we believe 1hat our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or reaJize these plans. intentions or expectations. Fo~looking statements are inherently subject to risks, uncertainties and assumptions. Readers arc GaUtioned oot Co place undue reliance on these forward-looking staeements, which speak only as of the date this Fonn 10-Q is filed with 1he SEC. Exe• as required by law, we do not undertake to update or ~e any forward-looking statements contained in this Fonn 10-Q. Important factors that could cause actual results to differ materially from the forward-looking statemenls are disclosed in "Item 1 A. Risk Factors," "Item l. Business" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" contained ln the Company's 2012 Fonn I 0-K and our periodic reports filed with the SEC. Management Ovenle11V The following Management's Discussion and Analysis of Financial Condition and Results of Operations (''MD&A ") is intended to help the reader undersland our results of opera.lions and financial condition. This MD&.A is provided as a supplement to, and should be read in ooajunction with, our consolidated financial statements and the accompanying notes to 1he consolidated financial statements appearing elsewhere in this fonn 10-Q. All references to numbered N01es are Co specific notes to our Consolidated Financial Statements beginning on page 8 of this Fonn I 0-Q, and the descriptions referred to are incorporated into the 1pplicablc: portion of this section by reference. References to "base rent'' in lhis Form 10-Q refer to cash payments made under the relevant lcase(s). excluding real estate 1axes and certain property operating expenses that arc paid by us and are recoverable wider the relevant lease(s) and exclude adjustments for straight-line rent revenue and above-and below· market lease amortization. The discussions surro1D1ding our Consolidated Properties refer to our wholly or majority owned and controlled properties, which as ofJune 30, 2013, were comprised of; Apartment& Station Nine Apanmcnts, Cabana Beach San Maccos, Cabana Beach Gainesville, Campus Lodge A1hcns, Campus Lodge Columbi1. The Edge at Lafayette and • Campus Lodge Tampa. Industrial IOS Kendall Park Lane, • 4001 North Norfleet Road, Joliet Distribution Center and Suwanee Distribution Center. Office • Monument IV at Worldgate, 111 Sutter Street, 20 114 • the Dignity Health Office Portfolio, • 4 Reaearch Park Drive, • 36 Research Park Drive, • Canyon Plaza and • Railway Street Corporate Centre . Ret•ll .. Stirling Slidell Shopping Centre and • The District at Howell Mill . Our Uncomolidated Property, owned through a joint venture mrangement as of June 30, 2013, refers to Legacy Village. Be<:ause management's operating strategies are generally the same whether the properties are consolidated or uncomolidatcd, we believe that financial information and operating statistics with respect to all properties, both consolidated and unconsolidated, provide important insights into ouroperatina; results, including the relative size and significance of these elements to our overall operations. Collectivc)y, we refer to our Consolidated and Unconsolidated Properties as our "Company Portfolio." OID' primary business is the ownership and management of a diversified portfolio of office, retail, industrial and apartment properties primarily located in the United States. It is expected that over time our real estat.e portfolio will be further diversified on a global basis and will be complemented by investmenrs in real esta1e-related assets. We are managed by our Advisor, LaSalle Inveslment Managmient, Inc .. a subsidiBJ)' of our Sponsor, Jones Lang LaSalle Incorporated (NYSE: JLL). a leadlng global real estate investment management and services firm. We hire property management and leasing companies to provide the on-site, day-to-day management and leasing services for our properties. When selecting a property management or leasing company for one of our properties, we look for service providers that have a strong local market or industry presence, create portfolio efficiencies, have the ability to develop new business for ut and will provide: a strong internal control environment that will comply with our Sarbanes-Oxlcy Act of2002 ("Sarbanes-Oxley") internal control requirements. We currently use a mix of property management •d leasing service providers thll include large national real estate service firms, including an affiliate of our Advi110r, and smaller local firms. We seek to minimi:ze risk and maintain stability of income and principal value through broad diversification across property sectors and geosraphic markets and by balancing tenant lease expirations and debt maturities across the Company Portfolio. Our diversification goals also take into account investing in sectors or regiona we believe will CleBte returns consistent with our investment objectives. Under nonnal conditions, we intend to pursue investments principally in well-located, well~leased assets within the apartment, industrial, office and retail sectors. We expect to actively manage the mix of properties and markets over time in response to changing operating fundamentals within each property sector and to changing economies and real es:tate markets In the geographic areas wnsidcrcd for investment. When consistent with our investment objectives, we aJso seek to maximi2le lhe tax efficiency of our investments through like-kind exchanges and other tax planning strategies. The fol1owing tables summarize our diversification by property sector and geographic region based upon the fair value of our Consolidated 111d Unconsolidated Properties. These tables provide examples of how our Advisor evaluates the Company Portfolio when making investment decisions. 21 115 Property Sector Divenilication Estimated Percent or Fair Value as of June 30, 2013 CDIHllldlltcd Prapcrda Apartment Industrial ;:Office ·<~~ · ~-J: ~;:~:~~-_=:!::~::·-::~~:~rj~:fft~r;~~:;:~~~~-~~~~~~:r~~·~~-~ · Retail 14% 51% 9% Geographic Region Divenifn:ation Estimat.ed Pen:ent of Fair Value as of June 30, 2013 100% Coasolidatcd Prepcrtln Uaronulidattil Property West South East Midwest Intcmadonal Seasonality ,·.; ,-; . . .·. i ,_· ·:~ -~-~~.: -~~~ ..... ~~;~.:~ ~ ... :· ·36% 31% -1~.4 13% ·- 100% Consolld1te4I and tJKOUGJidamJ PnpeldH Coaolld1fecl 111d 23'¥· 13% 47% 1'79h V1eHsollu1c4I Propmttt .· .. ·1·. .··1. •' 32% 29% 14% 20% :5% For our six student-oriented apartment communities, the majority of our leases oommence mid-August and terminate the last day of July. These dates generally coincide with the commencement of the unlversltie11' fall academic tenn and the completion of the subsequent swnmer school session. In certain cases we enter into leases for less than the fulJ academic year, Including nine-month or shorter-term leases. As a resuJt, cash flows may be reduced during the summer months at properties having lease tenns shorter than 12 months. The annual releasing cycle results in significant turnover in the tenant population from year to year. Acrordingly, certain property revenues and operating expenses tend to be seasonal in nature, and therefore not incurred ratably over the course of the year. Prior to the commencement of each new lease period, mostly during the first two weeks of August, we prepare the wtlts for new incoming tenants. Other than revenue generated by in--place leases for retumina tenants, we do not ienerally recognize lease revenue during this period, referred to as ''Turn". as we have no leases in place. Jn addition, during Tum we incur significant expenses making our units ready for occupancy. which we recopize immediately. This lease Tum period results in seasonality impacts on our operating results during the second and third quarter of each year. With the exception of our student-oriented apartment communities described above, our investments are not materially impacted by seasonality, despite certain of our retail tenants being impacted by seasonality. Percentage rents (rents computed as a percentage of tenant sales) that we earn from investments in retail properties may, in the future, be impacted by seasonality. Use of Estimates The preparation of financial statements in confonnity with GAAP requires us to make estimales and assumptions. These estimates and assumptions impact the reported amounts of assets and liabilities and the disclosure of contingent ass~s and liabilities at the date of the financial statements 11nd the reported amounts of revenues and expenses during the reporting period. For example, significant estimates and assumptions have been made with respect to the useful lives of assets, recoverable amounts of receivables and initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ from those estimates. Critical Attaunttn& Polic=les The MD&A is based upon our consolidated financial statements, which have been prepared in accordance with OAAP. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues 1111d expenses. Management basea its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making 22 116 judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ fi'om these estimates under different assumptions or conditions. We believe there have been no signjficllDt changes during the three and six months ended June 30, 2013 to the items that we disclosed as our critical accounting policies and estlmates under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, .. bi our 2012 Fonn 10-K. Comolid•ted Propetties Consolidated Properties owned at June 30, 2013 are as i>llows: Joliet Dislribution Center .Joliet. IL J1D1e 26, 2013 Relail Seame111: 100 442,000 Pereentase LellMCI. •• or Jaae30. 2013 100 ·~·-"· · f1······--~···--···--.,······-·="·J·T!H'l"'·-·-·-,. .... ...._fi,,."'wl'-"J··'""'•'}i'···' 11·· ~•·j'llill!:.i~-""';u-''"~""""MW'".' "~'. ~ ._, .. 1. ~ .~ .... ,~~P.!!'li.'·~DmfiUii~~i7 · UtYli;~,i~ z~ Vi i=~tt»~~r~1·· h ~~h:i.~/.~(~:~ ·. ,:~~~·~l i:DY. .:~m::e .. ;~::fiJ~~E. · ~~-t~-11 ............. ,,, ~ ............. )-.. ,re-;·:m"'.1;; ................ ;,.,~ ..... 1 ....... ,.,,..-~,, .... ,l~.\ ... W:!mf .. ~i~1.i.1~faft. .. JlM« "'l ,, ·.·.~~L ~(J~1r ... .t~1:,1'ti•.-1.•;t:.."U" ~ jli;_'~'"··~ ... reueu11'1:l'!., t.l't~m-!m«l!'~';::ttt~~~~! ,,.c The District at Howell Mill (3) Atlanta, GA J12DC 1s. 2007 87.85 306,000 98 ( l) This apartment property is located near a univenity, and during s.umme-r months the occupancy will fluctuate due to leasing efforts before the school year. (2) We own a 78% interest in the joint venture dud owns a fee interest in this property. (3) We own an 87.85% interest in the joint venture that owns a fee interest in this property. Unconsolidated Property Unconsolidated Property owned at June 30, 2013 was: 23 117 Openllnc St.atlltics We generally hold investments in properties with high occupancy rates leased to quality tenants under long·tenn, non· cancelab2e leases. We believe these leucs are beneficial to achieving our inv~nt objectives. The following table shows our operating statistics by property type for our Consolidated Properties as of June 30, 2013: :~~·'!t~em Industrial (2) . : .·;JOffice . . ~ ·:: .. 'i ~-: •.. ···- R.etail :~~~r-~·-·-~--. ·· .. ;·_ N••htr•f Pnpenie1 ·~~~~i~::;'~:r :~: ~:: I ., ,7 4 .::.:.,~? :: '21 2 -~; . •' 34 Aver .. e Milll111um To11I Atta % efTotlll Bue that per iSq Ft) Aru Occap1acy % Octapled Sq Ft (1) 2.337.000 :;'. . ·.:'~1~%i': . 93% s ... :·;3l~~;· 2.,112,000 32 100 2.11 I.749,000 .. ;l;;;u.·:'.'..' : . · 82 ·22.1s 445,000 7 92 14.SI --........ ~ 6.643,000 ·100% 93% $ ·12.01 =--=-- (I) Amount c:alculnted as in-place minimum base rent for all occupied space at June 30, 2013 and excludes any straight line rents, tenant recoveries and percentage rent revenues. (2) Approximately 795,000 square feet of industrial square footage becomes rem hearing on August 1, 2013. The Average Minimum Base Rent per Occupied Square Foot for our industrial sector will be approximately $3. 79 at thal time. The following table shows our operating s1atistic1 for our Uncon501idaled Property 8S of June 30, 2013: N ... bertr Pro111rUo Tot1IAru (Sq Fl) ~9S.OOO %ofT•fll Ana OtHPlllQ % l ~~-' '.:< 94% Avenae Mlnhn•m BucRcmt111r Otcupltd Sq Fl (I) -$21.):~ J :; .• (I) Amount calculated as in-place minimum hue rent for all oecupled space at June 30, 2013 and excludes any straight line rents, tenant recoveries and percentage rent revenues. As of June 30, 2013, our average effective annual rent per square foot, calculated as average minimum base rent per occupied square foot less tenant concessions and allowances, was $14. 72 for our Consolidated Properties and $20.39 for our Unconsolidated Property. Recent E~nl8 and 011tlook Ge~ra/ Company and Market Commentary On October l, 2012, the SEC declared effective our registration statement on Form S-11 (File No. 333-177963) with respect to our continuou1 public Offering of up to $3,000,000 in any combination of Class A and Class M shares of Common Stock, consisting of up to $2,700,000 of shares in our primary Offering and up to $300,000 of shares pursuant to our distribution reinvestment plan. We intend to offer shares of our Common Stock on a continuous basis for an indefinite period of time by filing a new registration statement before the end of each offering. subject to regulatory approval The per share purchase price varies from day-to-day and, on each day, equal~ our NAV per share for each class of Common Stock, plus, for Class A shares only. applicable selling commisskms. LaSalle Investment Management Distributors, LLC, our affiliate and the dealer manager of our Offering, has agreed to distribute shares of our Common Stock exclusively through Merrill Lynch, Pierce, Fenner & Smith Incorporated for up to one year following the Offering commencement date, subject to certain exceptions. We intend IO use the net proceeds from the Offering, after we pay the fees and expenses attributable to the Offering and our operations, to (I) grow and fwther diversify our portfolio by making Investments in accordance with our investment strategy and policies. (2) reduce borrowings and repay indebtedness incurred under various financing mstnlments and (3) fund repurchases of our shares under our share repurchase plan. Using capital raised since our Offering went effective, we executed on a number of our key strategic initiatives during the ab: months ended June 30, 2013, including: • executed a new three year lease at Monument IV at Worldgate with Fannie Mae; • mired the remaining balance on the $12,000 note payable related to the December 2012 acquisition of 111 Sutter Street in San Francisco, California; • extended the maturity date and reduced our interest rate on the existing $53,922 mortgage loan for 111 Sutter Street: 24 118 • retired the mortgage note payable on Monument lV at Worldgate. in the amount ofSJS,351 including accrued interest. in advance of its September I, 2013 maturity date; • purchased Joliet Distribution Center for $21,000; • purchased Suwanee Distnl>ution Center for $38,000; and • secured a $40,000 revolving credit fBcility. Through these specific and other imponant accomplishments we continued to reduce our Company leverage ratio, increased cash reserves and provided cash flow to our stockholders through quarterly dividend payments. Our primary investment objectives are: • 1o generate an attractive level of current income for distribution to our stockholden; • to pre.serve and proiect our stockholders' capital Investments; • to achieve appreciation of our NAV over time; and • to enable stockholders 1o utilize real estate as an asset class in divenified, long-tenn investment portfolios. The cornerstone of our investment strategy is to acquire and manage income-producing commercial rea1 estate properties and real estate-related assets around the world. We believe this strategy will enable us to provjde our stockholders with a portfolio that is well·diversitied across property type, geographic region and industry, both in the United States and internationally. lt is our belief that adding international investments to our portfolio overtime will serve as an effective tool to construct a well-diversified portfolio designed to provide our stockholden with stable distributions and attractive long-term risk-adjusted returns. We believe that our broadly diversjfied portfolio will benefit our stockholders by providing: • diversification of sources of Income; • access to attractive real estate opportunities currently in the United States and, over time, around the world; and • exposure to a diversified basket of currencies, over time. Since real estate markets are often cyclical in nature, our strategy will a.IJow us to more effectively deploy capital into property types and geographic regions where the underlying investment fundamentals are relatively strong or strengthening and away from those property types and geographic regions where such fundamentals are relatively weak or weakening. We intend to meet our investment objectives by selecting invesuncnts across multiple property types and eeoaraphic regions to achieve portfolio stability, diver&lfication, cu1Tent income and favorable risk-adjusted returns. To a lesser degree, we also intend 10 invest in debt and equity interests backed principally by real estate, which we refer to colk:etively as ''real estate-Rlated assets." Our board of directon has adopted invesbnent &uidelines for our Advisor to implement and actively monitor in order to allow us to achieve and maintain diversification in our overall investment portfolio. Our board of directors fonnally reviews our investment guidelines on an annual basis and our investment portfolio on a quarterly basis or, in each case. more often as they deem appropriate. Our board of directors reviews the investment guidelines to ensure that the guidelines are being followed and are in the best interests of our stockholdm. After we have raised substantial proceeds in the Offering, and our total NAV has reached SB00,000, which we refer to as our ramp-up period, we will seek to invest: • up to 80o/o-of our assets in properties; • up to 25% of our assets in real estate-related assets; and • up to l 5% of our assets in cuh, cash equivalents and other short-tenn investments. Notwithstanding the above, the actual percentage of our portfolio that is invested in each investment type may from time to time be outside these target levels due to numerous factors including, but not limited to, large inflows of capital over a short period of time. lack of attractive investment opportunities or increases in anticipated cash requirements for repurchase: requests. During the ramp-up period, we will balance the goals of achieving a more diversified portfolio and reducing our leverage. Our strategy to n:duce leverage may include working aggressively with existing lenders to allow us 10 negotiate more favorable loan tenns. During the ramp-up period, we intend to use lower leverage, or in &OJne cases possibly no leverage, to finance our new acquisitions in order to reduce our overall Company leverage. Our Company leverage ratio (calculated as our share of total liabilities divided by our share of the fair value of total assets), was 5'1°.4 as of June 30, 2013, down from 63% at December 31, 25 119 2012 as a result of debt extinguishments. increasing property values and raising new equity. After the ramp-up period, we expect to maintain a rmgeted Company leverage ratio of between 30% and 50%. 20/J Key lnJtiatlva During 2013, we intend to U11e capital raised from our Offering to make new acquisitiont that will further our investment objectives and are in keeping with our invettment strategy. Likely acquisition candidates may include well b.:ated, well lc::ued industrial properties and grocery-anchored community oriented retail properties. We: will look to acquire other property ty~ when the opportunities and risk profile match our invc:stment objectives and strategy. We: also intend to use capital to repay er refinance loans in our existing portfolio in order to reduce our overall Company leverage and to take advantage: of the current favorable interest rate environment. In keeping with our strategy to repay or refinance our existing mortgage loans. we intend to retire loans when certain windows of prepayment allow us to pay them off without incurring prepayment penalties. We may also refinance properties with current rate mortgages al lower interest rates and loan to values. We also intend to use our revolvinr; line of credit to allow us to more efficiently manage our cash flows. We continue to evaluate the strategic alternatives for our investment in the Dignity Health Office Portfolio as three of the mortgage loan pools. mature in Novembc:r 2013 and the fourth pool matures in March 2014. Our slrategic altem~s. include refinancing lhe loans, selling the entire portfolio or selling portions of the portfolio. We will also evaluate dispoJitions of other properties in the portfolio to potentially redeploy capital in a manner aligned with our investment objectives and strategy. 2DJJ Kq Events andAccomp/Ishmetrtt During Janumy 2013, we retired the $12,000 note payable related to our purchase of 111 Sutter Street. On March 27, 2013, we entered into a loan modifLCation agreement with the existing lender on the $53,922 mortgage for 111 Sutter Street. The loan modification extended the mmurity date by eight years from July 201 S to April 2023, provides for interest-only payments for the first four years of the new tenn and reduces the fixed-rate Interest from 5.5&% to 4.SO%. The loan modification is expected to save annually in excess of$550 in interest expense: and defers in excess of$150 in annual principal amortization payments. On April 30, 2013, we n:tired the mortgage note payable on Monument IV at Worldgate in advance of its September l, 2013 maturity date. The outstanding balance, including accrued interest, was approximately $35,351 which was funded with cash on hand. The loan had a 5.29% interest rate and its prepayment will save in excess ofSJ,850 in annual interest expense. As a result, we own the property free and clear of mortgage debt. This loan prepayment was in keeping with our objectives to dcleverage our portfolio and further decreased our Company leverage. On June 20, 2013. we entered into a $12,000 mortgage note payable on 4001 North Norfleet Road. The: loan matures on February 1, 2017 and bears floating rate interest at a rate equal toLmOR plus 2.15%. Proceeds of the loan -were used for the property acquisitions made in June 2013. On June 25. 2013, we entered into a $40,000 revolving line of credit agreement with Bank of America, N.A. The line of credit hu a two year teml and bears interest based on LIBOR plus a spread ranging fiom 1.500.4 to 2.15% depending on the Company's consolidated leverage ratio. On June 26, 2013, we acquirc:d Joliet Distribution Center, a 442,000 square foot indus.trial property located in Joliet, Illinois for approximately $21,000, using cash on hand. The: property is IOO% leased to tw-0 tenants with a weighted average remaining lease Cenn of approximately six years. On June 28, 2013, we acquired Suwanee Distrjbution Center, a 559,000 square foot industrial property located in suburban Atlanla, Georgia for approximately $38,000, using a $7,000 draw on ourrevolvins line of credit and cash on hand. The property is 100% leased to Mitsubishi Electric & Electronic$ USA with a remaining lease ti::nn of JO years. On July I, 2013, we retired the SI 0,650 mortgage note: payable on 36 Research Park Drive. We negotisied a discounted payoff for the mortgage note in the amount of$9,SOO, using a $7,000 drew on our revolving line of credit and cash on hand. The loan had a S.60% interest rate and its payoff' will save in excess ofSS7S in annual interest ex:penae. We now own the property free and clear of mongage debt. This loan repayment was in keeping with our objectives to deleverage our portfolio and further decreased our Company leverage. 26 120 Ruults of Opendons Gvleral Our revenues are primarily received from tenants in the form of fixed minimum base rents and recoveries of operating expenses. Our expenses primarily relate to the costs of operating and financing the properties. Our share of the net income or net loss from Unconsolidated Properties is included in the equity in loss of unconsolidated affiliates. We believe the following analysis 1>f reportable segments provides impor1ant information about the operating results of our real estate investments, such as trends In total revenues or operating expenses that ma)' not be as apparent in a period-OVer-pcriod comparison of the entire Company. Wi:i group our investments in rml estati:i assets fiom continuing opi:irations into four reportable operalio& segments based on the type of property, which are apartments, industrial, office and retail. Operations from corporate level ltems and real estates assets held for Hie are excluded ftom reportable segments. Wilh respect to the discussions of revenues and operating expenses below, the office seJl'lent includes 111 Sutter Street for the three and six tn(Jnths ended June 30, 2013 as a result ofthe con!lolidation on December 4, 2012. The consolidation was a rault of acquiring the rernainilli 20% interest in the property. 111 Sutter Street is included in equity in loss of unconsolidated affiliates for the three and six months ended June 30, 2012. Revenues and expenses related to Georgia Door Sales Distribution Center, Metropolitan Parle North and Marketplace at Northglenn are shown as discontinued opcnrtions for the lhree and six months ended June 30, 2012. Rau/ts of OJMl'Ol"'ngfor the Tit~ Mmatlu Ertdi!d June JO, 20/J and 2012 Revenue. The following chart sets forth menues from continuing operations, by reportable segment. for the three months ended June 30, 2013 and 2012: Tbree mantll1 itnded Tbne mant .. end•d .hnt 30. 20l3 Jum 38, :ZOlZ ·Revenues: Minimum rents Apartments s 7,144 $, /1,_7.~7 .$ ~ ~': ;>, 11 1.1% -. ·. -Industrial 1,051 1,026 25 2.4 Office 9,366 .s~i , .. :;,·{:~.v:'>;?(ls ~= ~-~:. 6S.4. Retail 1,501 L,477 24 1.6 Total s 19,762 ·s lS.921 s 3,841 . ' .:· i4.:t % Tenant recoveries and other rental Income l Apartments s 448 $ 469 $ (21) (4.:S)% Industrial 212 233 . ·(21) .0:¥..·-. :::\(90) : -•<" -,-:"':~.-'.~-.~ :,~ ~::• •• ,. •. Office 4,236 2,259 1,977 87.:S Retail . s(;j'.' .· •.· :Sl9 44 . /.~;8.S -~ c Total s S,459 $ 3,480 s 1,979 56.9% Total re\rcnues $ 25,221 $ .19,401 $ ~ ::··.-r : S;B20 _: .. :;.· .:~ ·-~. :-: 30.0% Minimum rents increased by $3,841 for the three months ended June 30, 2013 as compared to the same period in 2012. The increase is primarily due to minimum rents of $3,066 at 111 Sutter Street as a result of the consolidation of the property on December 4, 2012. Additionally, minimum rents increased by $858 at Monument JV at World.gate related to the commencement of the Amamn Corporate LLC and Fannie Mae leases. Partially offsetting the increase was a decrease of$314 at Canyon Plaza related to the default and subsequent bankruptcy ofConexant Systems. Inc. ("Conexant") during the period ended June 30, 2013. Tenant recoveries relate mainly to real estate taxes and certain property operating expenses that are paid by us and are recoverable under the various tenants• leases. Tenant recoveries and other rental income at our properties increased by SI, 979 27 121 for1he three months ended June 30, 2013ascomparedkl1he same period in 2012. The increase is primaril)' related to lease 1mnination revenue ofSI,91 l at Canyon Plaza related to the default and subsequent bankruptcy ofConexant during 1he period ended June 30, 2013. Additionally, there was an increase of recovery revenue of$200 at l 11 Sutter Stteet due to the consolidation of the property on Deeember4, 2012. Oper#llHtg Upelfsa The following diart sets forth real estate taxes, properly operating expenses and (recovery of) provisions. for doubtful accounts from continuing operations. by reportable segment, for the three months ended June 30, 2{)13 and 2012: ~ ........ , ...... . es: ;-~~-. Rea] estate taxes ~ff~~g~f;~.~~~~~:f~~ents lndustrial · :·:.~·;~v · ·. < :·Office Retail Total t;,;:;;:~~~ryr:operatin~ Apartments ::.Mill~n-·· ":~:;industriiaJ -:~~tJ;tV;.--,': ··• , -· Office Tbrff moatm c•ded nree 111011dls emde4 s eti1nec "" Cll111tt $ ·::>::;J!'>s . . -·~ ·-"·-- s June 30., ll13 Jqe 30, ltJ2 143 s 166 1,190 353 2,552 $ .:·<<196 195 . 941 291 2,223 ·. -------- ~l· ., , ~ .. ,_ ,, ·" " -- 47 (29} 249 62 329 S.9% (14.9) 26.S 21J 14.B % 3.229 s 3,129 s 100 3.2 % 30 .. -,~~7 . ~]~nm:t (57) (65.s) 3,043 2,024 1,019 S0.3 .:~,,~;;_.,; :~, · .· .. , .. 301 ::r '~~3 -~~r; ;'.;\<o6r ·-(5.o) ,·~ .. ~~~fr~(~:::':/~.~------------- ·.· '·1 •. ···: :'. ~~~~--~;,r·· . :r•.~;;'I'. •. ~ ... ~:·='""· ~-- , .';. ~~ ~~:·: .. :·;:I . I.I.-•• ~ ..... , I Net (recovery of) provision for doubtful accounts Total Apartments Office 'Retail ·· > : :,: .··· ~otBJ operating expenses ,., . .: .. · ~. -.-'' ,• ": -' s 6,609 S S,563 S 1,046 18.8 % ------~:~~-~~-::·:.: !~:~tE .< ., 47 $ (56) 2 (7) $ 19 16 35 7.821 ------9, 154 $ -=--==--- f s ·S 28 (72) 2 (42) 1,333 147.4 % {4SO.O) lOO.O (120.0}% 17.0 % Real e8tate tax expense increased by $329 for the three months ended June 30, 2013 as compared to the same period in 2012 primarily due to the consolidation of 111 Sutter Street causing real estate taxes to increase by $15 I. Additionally, there were iru:reases of$68 and $61 at Railway Street Corporate Center and The District at Howell Mill, respectively, related to tax reassessments in the three months ended June 30, 2013. Property operating expenses consist of the costs of ownership and operation of the real estate investments, many of which are reooverabJe under net leRSes. Examples of property operating expenses include insurance, utilities and repair and maintenance expenses. Propcr1y operating expenses increased $1,046 for the three months ended June 30, 2013 as compared to the same period of2012. The increase is primarily reJated to an increase of$733 at 111 Sutter Street due to property consolidation on December 4, 20 l 2. The increase was also related to increases in utility expenses and repair and maintenance expenses totaling approximately $243 at Canyon Plaza related to the decrease in occupancy, causing us to incur expenses for the vacant space during the three months ended June 30, 2013 as compared to the same period in 2012, which were previously incwml by the tenant. Additionally, we incurred increased insurance costs and water usage expense totaling approximately $ l O l at our apartment properties during the three months ended June 30, 2013 as compared to the same period in 2012. Net (recovery of) provision for doubtful accounts relates to receivables deemed potentially uncollectible due to the age of the receivable or the status oflhe tenant. Provision for doubtful accounts decreased by $42 for the three months ended June 30, 2013 as comps.red to the period ended June 30, 2012, primarily related to collections of previously reserved accounts ofS72 at the Dignity Heatth Office Portfolio. This was partially offsc:t by an increase of$29 at our apar1ment properties due to higher bad debts during the three months ended June 30, 2013. 28 122 The following chart sets forth expenses not directly related to the operations of the repanable $C:gments for the three months ended June JO, 20 I J and 2012: Drtemoalbsmde4 Tllre~-lhleaded S % · .. ~ :·~~~;t;~~}nrr~::-~.>.:Jf::_·:-: _:·. Advisor fees :Company)~~feXJ;erlse._ General and administrative .Depreciati41ii and amortiDtion Interest Cl(J>CJISC »-;•-<, . :·' ' ~-?t~~t, . Bqu.ity in )p~.w uDc:onsolidated affiliates : Loss from discontinued operations ~'~f~-~-~l-~'scon''~~--~~~}-~mt¥.~~~n~~flfi_~·~ Total expenses .l•M 30, 20U l••• JO, 2812 Cb•EI! L111ncr • z:=•=·== ... ------.. ·.~-,.,.., ""'·-""-'"'~""·-.,.,.·-,.., .. -. ..-...... -.-· '·~i!~·; .. ~~~~_r~~f~ ·.-. ~:.: ·: .. ~li~li~S:i!~§f ~~fl:~-.. s 1,121 s . ' .,_.:;·'.~·~:"'";6o6 399 .•·. ·:·6,?98 6,419 :, 7] $ 15,414 s 572 ~ .. 344 S S49 :~•:?'(12) .s.s .·.-;-:.i,aof 4 4,997 6,41S 416 898 . -(34.S) (898) 111 ) ... \~~tlV) 14,447 $ 967 ---- 96.0o/1 (11.9) 16.0 36.0 0.1 (82.9) (100.0) ;, ·(100.0) 6.7% Advisor fees relate to the fixed and variable management and advisory fees earned by the Fonner Mana&er and the Advisor during 2012 and fixed advisor fees earned by the Advisor during 2013. Fixed fees. increase or dec:rcasc based on changes in the NAV which will be primarily impacted by changes in capital raised and the value ofour properties. Variable fees earned during 2012 were calculated as a fonnula of cash flow generated from owning and operating the real eslate Investments and fluctuated as cash flows fluctuated. The increase in advisor fees ofSS49 for the three months ended June 30, 2013 as compared to the same period of2012 is primarily related to the increase in NAV over the prior year. Our Company level expenses relate mainly to our compliance and administration related costs. Company level expenses decreased $82 for the three months ended June 30, 2013 as compared to the same period In 2012 primarily due to a decrease in Investor service fees and corporate legal fees. General and administrative expensli!S relate mainly to property expenses unrelated to the operations of the property. General and administrative e:itpenses increased SSS for the three months ended June 30, 2013 as compared to the same period in 2012. The increase is primarily related to an increase of $104 at 111 Sutter Stn::ct due to property consolidation on December 4, 2012. These increases were partially offset by a decrease of$83 in property related legal fees incurred during the three months ended June 30, 2013. Depreciation and amortization expense is impac.ted by the values assigned to buildings, personal property and in-place lease assets u part of the initial purchase price allocation. The increase ofSl,801 in depreciation and amortization expense fur the three months ended June 30, 2013 as compared to the period ended June 30, 2012 is primarily related 10 an increase of S2,064 that we recorded al 111 Sutter Slrcetas a result of the consolidation ofthe propl:fty on December 4, 2012. Thi.a increase was partially offset by a decrease of$356 at Canyon Plaza due to accelerated amortization of the in-place ltwe jqtangible asset related to the default and subsequent bankruptcy ofConexant during the first quarter of2013. Interest expense decreased by $4 for the three: months ended June 30, 2013 u compared to the period ended June 30, 2012. The decreases in intereSI expense were related to the debt retirements at Monument IV at Worldgate, 4001 North Norfleet, andlOS Kendall Park Lane. which occurred on April 30, 2013, December 27, 2012 and July 2, 2012, n:apec1ively. These decmtSc:s were partially offset by an increase at 111 Sutter Street due to 1he debt assumed at the property consolidated on December 4, 2012. Equity in loss of unconsolidated affiliates represents our share of net loss &om our investments in Unconsolidated Properties. The loss decn:ased by $34S for the three months ended June 30, 2013 as compared to the period ended June 30, 2012, primarily related to 111 Sutter Street being consolidated as of December 4, 2012. Loss ftom discontinued operations is related to the dispositions of Georgia Door Sales Distn"bution Center, Metropolitan Pad North and Marketplace at Northglenn during 2012. Loss. on sale of discon1inued operations is related to the disposition of Georgia Door Sales Distribution Center during 2012. 29 123 Raulb of Operalioru/or lllt! Six Months Ended June JO. 2011and2012 The fo11awing chart sets forth revenues fiom continuing operations, by reportable segment, for the six months ended June 30, 2013 and 2012: llevimiies: Minimum rents ; ~;7~~ :;,~.:~;g~j~~enci :.:·f~:~~:~~~1f~\:;I~·:.; ~ -~ .. s Industrial -~ ~-{~.t· !{:~·~·~(~~. Oilice Retail $ _T~tf~~es and~~;~~ income Apartments $ Total '"·'' .:· s $ Sb mvndi1 ndcd JUH JO, 2013 ' ,-, _-.. ~·:-:r·c • ,_ !, ~ ··,.··· ·~~'. •• 811 s 6,736 1,125 9,0S8 S Sil mDDID tadal J•HlO,lOll .. ._ ._.-__ ,_ ·:.·-~~{-~~;- _1,.,· •• jii.)ril~tt/~- &49 s ··~· l'"." : "~-~ib"lfit1'!'-'-" ·:--~ . • . ~~~f ...... ;}~?: ~ 4,624 1,oJO 6,983 $ 51.591 """s--......,,..,..,,.,,.,,... 39,29() s s Cb•ge (38) ; ·',;." ~(94{ 2,112 95 2,075 12,.301 ====== y.:~~-- '"ii.'!;,' I :~ % Cb a qt (4.5)% ~}~:6) 45.7 ........ ,_,. 9.2 29.7% 31.3 % Minimum rents increased by SI0,226 for the six months ended JWJe 30, 2013 as compared to the same period in 2012. The increase is primarily related to minimum rents ofSS,964 for l l l Sutter Street due to the consolidation of the property on December 4, 2012. The Increase also relates to $2,888 of accelerated amortization for the below-market lease intangible liability at Canyon Plaza rcla1ed to the default and subsequent bankruptcy of Conexant during the period ended June 30, 2013. Additionally, minimum rents increased by $1,230 at Monument IV at Worldgate related to the commencement of the Amazon Corporate LLC and Fannie Mae leases. 'nlnant recoveries relate mainly lo real estate taxes and certain property operating expenses that are paid by us and are recoverable under the various tenants' leases. Tenant recoveries and other rental income at our properties increased by $2,075 for the six months ended June 30, 2013 as compared to the same period in 2012. The increaae is primarily related to lease termination revenue of $1,911 at Canyon Plaza related to the default and subsequent bankruptcy of Concxant during the period ended June 30, 2013. Additionally, there was an increase of recovery revenue of$368 at 111 Sutter Street due to the wnsolidation of the: property on December 4, 2012. 30 124 OpuaJing F.xpmra The followini: chart sets forth real estate taxes. property operating expenses and (recovery of) provisions for doubtful accounts from continuing operations, by reportable segment, for the six months ended lune 30. 2013 and 2012: i)_. _-._•_._ ..• ·. ·.'"nae~~----.'~~-·,·_,_ .. ·.·. :_. ·· '.; ;·. J;~ -X~; -·~~~ -~r _ ,~ _,. ,,~, >f,'t;::l.J~·.~ .. ~ · •.·•. ~ .... Real estate taxes ·ApUtmmts Industrial : . : J,. -~ ~ ~~;~·-~-~-: ~~-.>.: Retail .. ·--~ .. ~;"!-' .:~: _·\.·"1'··~· ~·~ i, '·: Property op&i~g Apartments ··-~r ... :~~n~~ . ~::·:~~~:~~~~~r· ~ .. .: Total Office RotaiJ 1~11 ..... Net (recovery of) provision for doubtful accounts Total Apariments Office Retail •. .. .. ·-~. .• Sb: mGntb!I eadfll Jnmell,20U Sil Jl1011b elldetl June 311, 2012 J Clt1ngc -";_,.._ ---............... -,,...----....,,,,..,..,, ---...,...--------.,,.,..,,.,... ·:-\~:.:.. ~-~~·~·-~::~~~:;~~·-~~~L --~=~~;~~~~; ~~~~·-.~ -· · .. i;s;.t.<~. ··~::~~-tt~f. $ $ Vi)4 :S 327 2,3~. 628 6,414 $ . ~~-7 5,641 -S,19 12,691 $ • ; •I ; .. :~ ·.._ l ~ '97 s (301) -~·· ' 35 ....,....----...---.,... $ (169) $ '-e. . _,.s 11,si9 ·:S . '.t532' s 389 J~-~ 582 6,177 s : ~: 1)-4 4,005 .::;'6t"i 10,907 s ;lSl. 9.9 % (62) (15.9) ...~ '24.7 ~:: ·.' 46 7.9 . ::~> __ ;:. --__ .1_3_.,_%_. 237 3.8 % --~~:~(5,7) -~~ -~~ (SO.ID~~ 1,636 40.8 ''.(32) (S.2) 1,784 16.4 % --...--.--;. .. ~ 23 $ 106 23 1:52 $ ~' : 'J . ~4 (407) 12 (321) 2,061 ------15, 46 l $ ==-...... -- •'"E?-:-. 321.7 % (384.0) 52.2 (211.2)% 13.4% Real estate tax expens,e increased by $60:5 for the six months ended June 30, 2013 as compMed to the same period in 2012 primarily due to the consolidation of 111 Sutter Street causing real estate taxes to increase by 5395. Additionally, there was an increase of $76 at Railway Street Corporate Center due to a reassessment in the six months ended June 30, 2013 and an increase of S70 at Cabana Beach Gainesville due 1o a tax refund received in the six months ended lune 30, 2012 related to a successful tax appeal for the 2{) 11 tax payment. Property operating expenses consist of the costs of ownership and operation of the real estate invesnnents. many of which are recoverable under nel leases. Examples of property operating expenses include insurance, utilities and repair and maintenance expenses. Properl)" operating expenses increased $I, 784 for the six months ended June 3(), 2013 as compared to the same period of2012. The increase is primarily related to an increase of$1 ,360 at 111 Sutter Street due to property consolidation on December 4, 2012. We aJso incurred approximately $329 of property opCI11.ting expenses for the vacant space at Canyon Plaza related to the deGillase in occupancy during the six months ended June 30, 2013 as compared to the same period in 2012. Additionally, we incurred increased insurance costs and water usage expense totaling $236 at our apartment properties during the six months ended lune 30, 2013 as compam:I to the same period in 2012. Net (recovery of) provision for doubtful accounts relates to receivables deemed potentially uncollectible due to the age of the receivable or the status of the tenant. Provision for doubtful accounts decreased by $321 for the six months ended June 30, 2013 as compared to the period ended June 30, 2012, primarily related to the collection of previously reserved accounts of $226 at Canyon Plaz.a, related to the Conexant default. We received cash from a letter of credit issued by Conexant to cover rent payments for December 2012 through 1he date of their bankruptcy. Additionally, we benefited from a decrease of $180 at the Dignity Health Office Portfolio related to fewer ha.cl debts and eollections of previously reserved charges during the six months ended June 30, 2013. 31 125 The fullowing chart sets forth expenses not di~ctly related to the operations of the reportable segments for the six months ended June 30, 2013 and 2012: Advisor~·: ;.'· Company level expenses . . _,' ............... ., __ .., .. ~, ...... ~.' . Omelil mnrt· BiJ.ministrative .·, ;_,_•,. ·.~.··;.;_··~t.~_-··t_,~: .. ~.;.: ..... · ... ' ... :.;.~ ... ,., ' ..... Depreciation and amortization 'lntere~~ ( Debt modification expenses Equity i~ loSs of unconsolidated aft;iliates Loss from discontinuing openrtions Sh momlm Hded J•mJO,lOlJ ·s .. ; ;!01 s 999 • ... ~.1.-: :_.:~~}r:~~~~ ·_ 19,189 ";"'.'.l~i'7• 182 92 Sia m!Rllbs aided S % Jane 30, lGl2 Clltap CJuaet · ·1,;302 s aos : · 61.&% 1,339 (340) (25.4) .::; :.;~~.;1;'.( . , 1~~ ~~g;l ,AA.6 10,004 9,185 91.8 . ' ' ·;:'l3Ji7 (439) ;(: (3.3) 182 100.0 240 (148) ' (61.7) 2,95 l (2,9Sl) (100.0) ~,on~fe,t~~P.r~ ~,gui~~!1t"~f~L :.· ·· · .:]ll~). 11,791 · )ppCl.O) Loss on sale of discontinued operations 117 (117) (100.0) Tota. ·1.=."P. ieitses · · .q;f:" ··~ · r~1• :: · s :t.:.~: ·. J6~3 ·s · ·tu2:i s 1s.n1 ;~ io1.1% ------ Advisor fees relate fo the f"ixed and variable managemen1 and advisory fees earned by the Former Manager and the Advisor during 2012 and fixed advisor fees earned by the Advisor during 2013. Fixed fees increase or decrease based on changes in ihe NAV which will be primmily impacted by changes in capital raised and the value of our properties. Variable fees earned during 2012 were calculated as a formula of cash flow generated from owning and operating the real estate investments and fluctuated as cash flows fluctuated. The increase in advisor fees of $805 for the six months ended June 30, 2013 as compared to rhe same period of2012 is primarily related to the increase in NAV over the prior year. Our Company level expenses relate mainly to our compliance and &dministration related costs. Company level expenses decreased $340 for the six months ended June 30. 2013 as compared to the same period in 2012 primarily due to a decrease in invef.tor E.Crvice fees and corporate legal fees. GenemJ and administrative expenses relate mainly to property expenses unrelated to the operations of the property. General and administrative expenses increased 5253 for the six months ended June 30, 2013 as companid to the same period in 20 i 2. The increase is primarily related to expenses of$ I 66 at 111 Sutter Street due to property consolidation on December 4, 2012. Additionally, we incurred higher legal fees ofS 102 at Canyon Plaza related to the Conexant default and subsequent bankruptcy. Depreciation and amonlzation expense is impacted by the values assigned to buildings, persona] property and in-place lease assets as pert of the initial purchase price allocation. The increase of$9,18S in depreciation and amortization expense for the six months ended June 30, 2013 es compared to the period ended June 30, 2012 is primarily related to an increase of$5,586 e1 Canyon Plaza due to accelerated amortization of the in-place lease intangible asset related to the Conexant default. Additionally, we recorded $3,471 of depreciation and emortimtion at I l I Sutter Street due to property consolidation on December 4, 2012. Interest expense decreased by $439 for the six months ended June 30, 2013 as compared to l:he period ended June 30, 2012. The decreases in interest expense were due to the debt retirements at Monwnent JV at Wor1dgate, 400 I North Norfleet. end lOS Kendall Park Lane, which occurred on April 30, 2013, December 27, 2012 and July 2, 2012, respectively. These decreases were partially offset by increase at 111 Sutter Street as a result of the debt assumed at the property consolidated on December 4, 2012. Debt modification expenses in 2013 are due to expenses incurred for the loan modification et 111 Sutter Street on March 27, 2013. Equity in loss of unconsolidated affiliates represents our share of net income or loss from our investments in Unconsolidated Properties. The loJs decrcasoo by $148 for the six months ended June 30, 2013 es compared to the period ended June 30, 2012. The decrease was primarily related to an equity loss of S408atl11 Sutter Street in the six monlhs ended June 30, 2012 not included in the six months ended June 30, 20J3 due to Ill Sutter Street being consolidated on December 4, 2012. This was partially offset by a higher net loss at Legacy Village as the six months ended June 30, 2012 included a successful settlement of a real estate tax dispute with lhe local school district. 32 126 Loss from discontinuing operations is related to the dispositions ofGemgia Door Sales Distribution Center, Metropolitan Pm North and Marketplace at NorthgleM during 2012. Gain on transfer of property and cxtinguishment of debt is related to the transfer of ownership of Metropolitan Park North on March 23, 2012. Loss on sale of discontinued opendions is related to lhe disposition of Georgia Door Sales Distribution Center during 2012. Funds From Operations Consistent with real estate industly and investment community preferences, we consider funds from operations, or FFO, as a supplemental measure of the operating performance for a real estate investment trust and a complement to GAAP measures because it facilitates an 1H1derstanding of the operating perfonnance of our properties. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) attributable to the Company (computed in accordance with GAAP). excluding eains or losses from cumulative effects of accounting changes, extraordinary items, impainnent write- downs of depreciable real estate and sales of properties, plus real estate related depreciation and lUTlortization and after adjustments for these items related to noncontrolling interests and unconsolidated affiliates. FFO does not give effect to real estate depreciation and amortization because these amounts are computed to allocate the cost ofa propert)I over its useful life. Because values for well-maintained real estate assets have historically increased or decreased based upon prevailing martcct conditions, we believe that FFO provides investors with a clearer view of our operating performance. In order to provide a better understanding of the relationship between FFO and GAAP net income, the most directly comparable GAAP financial reporting measure, we have provided a reconciliation of GAAP net income (loss) attributable to Jones Lang LaSalle Income Property Trust, Inc., to FFO. FFO does not represent cash flow from operating activities in accordance with GAAP, mould not be considered as nn alternative to GAAP net income and is not necessarily indicative of cash available to fund cash ne~. ThrH montlls eaded Jwne JO. 20]) .Net incame (loss) 1ttrlbut&Ne to Jones Lang i:..aSille lnoome,Propett;yTrust, Inc. ·, · .'..;~; S . . . - Plus: Real estate depreciation wid amortiz.ation Loa rroin1&:0t~l~nate · ;.:::, · "vi<r;~:i: · · · ;•'. _:::~~ ;~~~-.H~· ·:: :::·~ ·;· .:.· .-; . ,;" :~l~fr;~: ~~!S~~~~E!: ~~I~-.,;:·:_;:: . Real eslalc dcpn:ciation and amortization from diBCOntinued operations Real i!Rw9~~8tioo and amor&adOn:•~1e:· ·' ;: ..•.. .rn..:-~1!H~ L._...., . """'"" ·'"~., .. -·,,., ... · .. w:··.,~·~~ii~~ ~-~ : : )};:/.~~t~~~·i~?~·,/ . -~ :-' Share of real estate depreciation and amortization from unconsolidated real estate affiliates Gain on lransfer of property lmpainnent of real estat.e held for sale 626 $ 6,798 (313) 518 Tlu'H .,antll1 oded l1111t JO, 2012 ' ,(2,912) s 4,997 : ~-~~: .... tp 326 {332) 915 Smm.ntll• ended June JD, 2013 (2,247) 5 19,189 SO;ma.tl1 tndtd Jue 30, 2012 .5,670 1(),004 .ll7 1,090 ~"L'•~"Y'--'--~L·-·-• r •• ', •r.,, ,,, ~-,... .. r..,.~·....-... ~--~-.,.-• . . ... . ' .. ~ (632> ·:L: · '(654> 1,030 1,793 . (6,018) 913 Funds" fiUU :ciperations att.ributable 10 Jo. r.&ng· · · ·LaSaDo bcOme Property Trust. Inc. . . t, · . ·:-, _ .. 'F~: •. =--~·-I·'" • • ~---:~:.:~. =s==·=7=,6=29= ~i~!il!~¥:':1ij.111 .s--11111•7 ... J_olQ..,.:·::s'~F::~~ 12,91s Weighted average shares outstanding, basic and diluted (I) 35,343,798 24,022,500 33,445,787 24,008,932 ,~~#.~~~~¥ijer~:~~:~~~~';;;~·:<. · ·~ ·o.2z. ~fi;~imi~~~~rM·J:;' . ·o.s~,fif~AlmffiH;.~~'~ (I) On October 1, 2012, we declared a stock dividend with respect to all Class E shares at a ratio of 4.786-to-I. The effects of the stock dividend hl!-ve been applied retroactively to all share and per share amounts for all periods presented. 33 127 Below is additional infonnation related to certain items that significantly impact the comparability of our FFO or significan1 non-cash items fi'om the periods presen~d: Tll"t-llfll• roded J'un .JI, 2013 :~tralgbt-Jint mnal income .. · · · .,,:· ;\}(~7~~ . Amortization ofabovc-111d below-m11ke1 leases (63.S) "Ammtizirtion of m:t di.co1D1! on mumed dcot :; -":: <>.:.::: ri(SO) Los!i (gain) on debt modification or extinguishment Aapiisition expenae ! '". NAV per Share Tin" ... atu uM l•ull,2012 (l6U) · (1.59) (71) Sbmntfl• Sil 1110.lhl t&Hlc4 tided Ju•t3',20U J•ne 30, 2012 (2,003) (271) (4,303) (32.S) (a.4) (120) 1B2 (S,773) 91 Prior to October], 2012, we established our NAV per share of common stock on a quarterly basis for the purposes of establishing the price of shares sold in our private offerings and the repurchase price for shares purchased in our share repurchase program. We determined our NAV as of the end of each of the first three quarters of a fiscaJ year within 45 calendar days following: the end of such quarter. and our fourth quarter NAV after the completion of our year-end audit. We calculated our quarterly NAV as of the detennination date as follows: (i) the aggregate value of(A) our interests in real estate investments, plus (B) all our other assets, minus (ii) the aggregate fair value of our indebtedness and other outstanding obligations. Beginning on October I, 2012, our Advisor calculates om NAV for each clBSS of our common stock (CIZISS A, Class E and Class M) after the end of each business day that the New York Stock Exchan1e is open for unrestricted trading. The valuation guidelines we have adopted for purposes of the daily determination ofNAV per share differ from the valuation methodologies we employed in connection with our his.torieal quarterly NAV per share calculations in certain respects. For example, for purposes of calculating our historical quarterly NAV per shin, our mortgage debt payable was recorded at fair value on a quarterly basis. This method resuhed in an asset or liability, dependin& on curTent lending ntcs for similar mort1;1ages to those we held. Our new valuation guidelines provide that, for purposes of calculating NAV per share on a daily basis, mortgage debt payable will be valued at the outstanding loan balance. We disclosed our NAV per share policy under "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities," in our 2012 Fonn IO-K. NAV u of June 30, 2013 The NAV per share for our Class A, Class Mand Class E shares as of June 30, 2013 was $10.12, Sl0.12 and $10.14, respectively. The NAV ofaU share classes remained relatively Oat as compared to December 31, 2012 as dividends dec:lered offset property operations for the first half of 2013. The following table provides a breakdown of the ml\joroomponents ofourNAV per share as of June 30, 2013 and December 31, 2012: J11at3D,2DU Ou1 A CblSll M Clu1 E 0... A Compoun1 Dl'NAV S111r8 Slw'e1 Sham Sii.ires Dectmber31, 2012 CllNE Sbrr1 ~~~~~~~~~~~~~- ; ~ ~~te}nvestments ~I) · S ll.~5 :,~j;~;:~~.~7-.,~~~ .. , ~.n S 2S.07. :s 25.09 $. 25.lO Debt (12.29) (12.30) (12.32) (16.37) ( 16.39) (16.40} !~~ei'.~#' and liabitities, net • •. . . .~;;;~:!!'.;·~''.;[~mJ~i~J§i!tiit~~~>~tiI~tl{.~LV::· · ; ".:tA2 . ·· ;~A3 .. 1.44 Estimated enterprise value premium None None None None None None Assumed Assumed Assumed Assumed Anumed Assumed _, 1;i:·::L.1o;i2. ~s-Jrn~bi~·.~ti.-;;iii~1t·'.,....,..,,,..... _....,..._._.....,.,..o ... ;1-2---..-s.......-.......-.......-.......-.......--l0.13 $.: I0.14 Number of outstanding shares 9,320,989 l,629,313 26.444,843 3,612,169 104,282 26.444,843 (I) The value of our real estate investments was less than the historical cost by approximately 13.21'.4 and 14.2% as of June 30, 2013 and December 31, 2012, respectively. 34 I I 128 The following are key assumptions (shown on a weighted-average basis) that arc uaed in the: discounted (;llSh flow models to estimate the value of our n:al estate investments as ofJune 30. 2013: Exit capitldi#on rate ' '' Discount ratdlntemal rate ofretum (IRR) .·;.i\nnUal ~ct~ lfOwth rate c:"t:~j~.;~. .. Ho1ding period (years) Apartment 6.91% . '·. ~ .• ~~ .i &.18% . ::~ .·2 .... ~.,·;t' 10.00 Industrial omrc 1.14% ·-7.234,i, 7.63% 8.41% ' l,?f~i~~~;~· . J.33% 10.00 10.00 Rtian ···.'J.43% 7.92% ;,f'.1312% ,: ~~~le -... ~ •. 10.00 Toti I Ce111pt.ny 7.19"/0 1.18% .·~jl~ 10.00 The following are lcey assumptions (shown on a weighted-average basis) that ere used in the discounted cash flow models to estimar.e the value of our real estate investments as of December 31, 2012: Apattmtat Jndaslrial Office ; .. :..,--""'10 '-->~·:.. < 1 · ta)' -··:;<'!:ff.1:110:-w:i·.·~f..e.-•. ~,.,, T•rl"<'<"<..J:f.·.,,r~""~'.>ri'~ .. ~· ,.. ·· • . ·u , ~'C&J'.I. ~,)tJ:""" ... ;,·~:~.~i::m~~::·::'.·· ··:.< :::i~r·.:. · 1~43%.'"}m;i;;::-1.13% Discount rate/internal rate of return (IRR) 8.4S% 7 .90% 8.50% Annual inarketrem growth raie· :·.'Ji.> 3'32% 3.08% ~r·· B9% Holding period (years) 10.00 10.00 10.00 Tet1I lhtaU Compuy 'jg~l:~8%'.. . >'.Mdi ~ !!.~ .... ·~-• ... • ' .. ·'.,"l:t:! 7.25% ':;J.00% 10.00 8.27% 3.09% 10.00 While we believe our assumptions are reasonable. a change in these assumptions would impact the calculation of the value of our reaJ estate assets. For example. assuming aU othc:r factors remain unchanged, an increase in the weighted-average discount rate/internal rate of return (IRR) used as of lune 30, 2013 of 0.2S% wou1d yield a decrease in our total real estate asset value of J.85% and ourNAVpereach share class would have been $9.71, $9.71 and $9.73 for Class A. ClllSS Mand Class E, respectively. An increase In the weighted-average discount ratelintemal rate of return (IRR) used u of December 31. 2012 of 0.25% would yield a decrease in our total real estate asset value of 1.80% and our NAV per each share class would have been $9.68, $9.70 and $9.71 for Class A, Cless M, and Class E, respectively, Limltation.s and RJgks As with any valuation methodology. our methodology is based upon a number of estimates and assumptions that may not be a<:cUrate or complete. Different parties with different ~sumptions and estimates could derive a different NAY per share. According]y, with respect to our N AV per share, we can provide no assurance that: • a stockholder would be able to realize this NAV per share upon attempting to resell his or her shares; • we would be able to achieve. for our stockholders, the NAV per share, upon a listing of our shares of oommon stock an a national securities exchange, selling our real estate portfolio, or merging with another company; or the NAV per share, or the methodologies relied upon to estimate the NAV per share, will be found by any regulatory authority to comply with any regulatory requirements. Furthennore. the NAY per share was celculated es of a particular point in time. The NAV per share will fluctuate over time in response to, among other thines, changes in reel estate market fundamentals, capital marlcets activities, and attn"butes specific to the properties and leases within our portfolio. JS 129 Uquldity and C•pltal Resources Our primary uses and soun:es of cash are as follows: Vs es Short-tenn liquidity end capital needs such as: • Interest payments on debt • Distributions to stockholders Fees payable to the Advisor Minor improvements ma.de to individual properties that are not recoverable through expense recovenes or common area maintenance charges t.o tenants General and administrative costs • Costs associated with our continuous public offering Other Company level experues • Lender escrow accounts for real estate taxes, insurance, and capital expenditures • Fees payable to our Dealer Manager Longer-tenn liquidity and capital needs 1uch as: • Acquisitions of new real estate investments • Expansion of existing properties 'Thnant improvements and lea.sing commissions Debt repayment requirements, including both principal and interest Repurchases of our shares pursuant to our Share Repurchase Plan Sources • Operating cash flow, including the receipt of dis1ributions of our share of cash flow produced by our unconsolidated real estat.e affiliates Proceeds from sceured loans co!lateralin=d by individual properties Proceeds from our revolving line of credit Sales of our shares Sales of real estate investments • Draws from lender escrow accounts The sources and uses of cash for the six months ended June 30, 2013 and 2012 were as follows: 'N~~~\iiClec! by ol)erBtfug B&~iii~~:~ . Net cash used in investing activities Net ciash provided by (wed in) mWJomg activitia Sil: mom•s ended Sb. m_..thl ended lu11e 341, 2013 l•ne JO, 2012 N:. · ltl,038 · s: ':. t;T.:~2.485 "S (59,292) (3,721) 33,092 ::~i;~:.;o· (4,828) SCb1n11e :_.~:: ~:~~f ~1:~~~~1-. '(~44 7) {SS,571) 37,920 Cash provided by operating activities decreased by $2,447 for lhe six months ending Jwie 3{), 2013, as compared to the same period in 2012. An increase of $4, 160 in cash from operating activities is primarily relatted to consolidation of l 11 Sutter Street on December 4, 2012 and the lease tennination fee received from Conexant. Also impacting our cash provided by operating activities are changes in our working capital, which include tenant accounts receivable, prepaid expenses and other assets, Advisor fee payable, and ac:counts payable and other accrued experues. These changes in our working capital caused a decrease to cash provided by operating activities of$6,607 between the six months ended June 30, 2013 and the same period in 2012, primarily related to lower accrued real e&tate taxes and accmed interest. Cash used in investing activi1ies increased by $SS,S71 for the six months ending June 30, 2013, as compared to the same period in 2012. The overall increase was primarily related to the aequisition of two industrial properties totaling $58,820 between the six months ended June 30, 2013 and the same period in 2012. Cash provided by financing activities increased by $37,920 for the six months ended June 30, 2013 as compared to the srune period in 2012. The increase is primarily related to the issuance of common stcickof$72,451 jn 2013. Partially offsetting the increase are net principal payments an mortgage loans and other debt payable of$31,384 primarily related to the 36 130 retirements of the seller financing note payable from the acquisition of 111 Sutter Street and the mortgage on Monument IV at Worldgate in excess of proceeds received from new ml'.lrtgage notes and 1'.11her deb1 payable. We expect to continue to raise capital from the Offering and will use portions of the capital raise to acquire new properties, retire debt and repurchase common stock. Flttllndng We have relied primarily on fixed-rate financ.ing. locking in what were favorable spreads between real estate income yields and mortgage interest rates and have tried fo maintain a balanced schedule of debt maturities. The following consolidated debt table provides information on the outstanding principal balances and the weighted average int~st rate at June 30, 2013 and December 31. 2012 for such debt. Ile unconsolidated debt table provides infonnation on our pro rata $hare of debt associated with l'.lur unconsolidated joint ventures. Variab1e Variable :jijbil . : ~ ,; .... }- .. '.~~l;n. Consolidated Debt Jant 30. 241U Drttmbtr 31, 2012 Printiptl Balann: .:/~,F~39~.~ .. 19.000 'Welpttd AYtnae Prb1clpal Welt:bltd Avtl'llt lntrrut lbte Balanrc l•h:rul Rate ,'_,~,~~1~mr5:::~ •• &%;.(~){:,::;;~?9,206 :!i:~,~~l!: .,·,.'. s.~~ 2.BS 12.000 4.75 -------S.31% $ 491,206 .S.S7% . ' $ Unconsolidated Debt lui.e JO, 2013 ~inber Jl, 2013 l'rD-nUI 1111:11 re af Pri11dp1l B1l1ntt ~ ~-.~ . ;~<;t: ~ :S. .;)i~~.•~~~o : :~ ' s . ' . Wei1hlcdAnr1111e Pro-r:11l.l lll1reef l•llll!rut Rate Prlnrlpal B1lanr. .,~5§ .. 9J% .$ .. :.L;; 39,724 "'-'-~n· · . ·~!'J.o>· . ~.63% s :r> . 39.12• 'Weipkd ATlnlllC Interest Rate S.63% S.63% OJ11tractual Cad Obligaliom tlltd Cmnml1ments The Dignity Health Office Portfolio mortgage debt require5 that we deposit an annual amount of$8:SS. up w a cumulative maximum ofSI,900, into an escrow account to fund future tenant improvements and le11Sin1;: commissions. The amount ofthe escrow funded by each of the IS buildings in the portfolio is capped individually pursuant to each loan agreement.At June 30, 2013. we had approximately $1,217 deposited in this escrow account, and we expect 10 fund $348 during the remainder of 2013. Additionally, we are required 1o deposit approximate1y $151 per year into en escrow account to fund capital expenditures. At June 30, 2013, our capital account escrow account balance was $163. These escrow accounts allow us to withdraw funds. as we incur casts n:lated to tenant improvements, ]easing commissions and eapital expenditures. Additionally, on a monthly basis, we are n:quired to fund an escrow account for the future payment of real estate taxes and insurance costs in an amount equal to 1112"' of the esthnated real estate taxes and insurance premium. At June 30, 2013, our real estate tax and insurance escrow balance was $693. We expect to fund the 1oan escrows from property operations. As part of the lease with our single tenant at the 400J North Norfleet Road property, we provided the tenant a right to expand the current building by up to 286,000 square feet of space. If the tenant exercises this right, we will be obligated to construct this expansion space. The tenant has the right to provide notice to us of its desi~ to expand B1 any time prior to February 28, 2016 (the end of the ninth yearofthe lease), or if the lease is extended, until any time prior to the end of the fourth year of any extension. As of June 30, 2013, we had not received an expansion notice from the tenant. Off Balance Sheet Arrangements At Jurie 30, 2013 and December 31, 2012, we had approximately $150 in outstanding letters of credit, none of which are reflected as liabilities on our balance sheeL We have no other off balance sheet arrangements. 37 131 Distributions to Stockholders To remain qualified as a REIT for federal income tax purposes, we must distribute or pay tax on 100% of our capital ,gains and distn"bute at least 90% of ordinary taxable income to stockholders. The following facrors, among olhers, will affect operating cash flow and. accordingly, influence the decisions of our board of directors regarding distributions: scheduled increases in base rents of existing leases; changes in minimum base rents and/or overage rents attributable to replacement of existing leases with new or renewal leases; changes in occupancy rates at existing properties and procurement of leases for newly acquired or developed properties; • necessary capital improvement expenditures or debt repayments at existing properties; and • our share of distributions of operating cash flow generated by the unconsolidated real estate affiliate, less management costs and debt service on additional loans that have been or will be incUJTed. We anticipate that operating cash flow, cash on hand, proceeds from dispositions of real estate invertments, or refinancings will provide adequate liquidity to conduct our operations, fund general and administrative expenses. fund operating costs and interest payments and allow distnbutions to our stockholders in accordan«: with the REIT qualification requirements of the Internal Revenue Code of 1916, as amended. Uem 3. QuarUitatiYe a11d Quatitative Distlosutts About Market Risk. We are subject to market risk associated with changes in Interest raies in tenns of the price of new fixed-rate debt for refinancing of existing debt. We mma.ge our interest rate risk exposure by obtaining fixed-rate loans where possible. As of June 30, 2013, we had oonsoJidated debl of$458,239, $19,000 of which was variable-rate debt. Including the $1 ,308 net premium on the asswnption of debt, we had consolidated debt ofS459.S47 at June 30, 2013. None of the variable-rate debt was subject to interest rate swap or cap agreements. A 2S basis point movement in the interest rate on the SJ 9,000 of variable-rate debt would have resulted in an approximately $48 annualized increase or decrease in consolidated interest expense and cash Oow from operating activities. As of December 3 I, 2012, we had consolidated debt ofS491,206, which included S 12,000 of variable-rate debt. Including the $1,779 net premium on the assumption of debt, we had consoHdated debt of$492,98S at December 31, 2012. None of the variable-rate debt was subject to interest l'Bie swap or cap agreements. A 25 basis point movement in the interest rate on the $12,00D of variable-rate debt would have resulted in an approximately $30 annualized increase or decrease in consolidated interest expense and cash flow from operating activities.. Our Unconsolidated Property is financed with fixed-rate debt; therefore, we arc not suhjeci to interest rate exposure at this property, except to the extent changes in interest rates impact the fair va1ue of our fixed-rate financing as discussed below. We are subject to interest rate risk with respect to our fixed~rate financing in that changes in interest rates will impact the fair vaJue ofour fixed-rate financing. To detennine fair market value, the fixed~rete debt is discounted at a rate based on an estimate of current lending rates, assuming the debt is outstanding through maturity and considering the collateral. At June 30, 2013, the fair value of our mortgage notes payable was estimated to be approximately $4,708 higher than the carrying value of S458,239. Iftreasury raies were 25 basis points higher et June 30, 2013, the fair value of our mortgage notes payable wouJd have been approximately $1,175 higher than the carrying value. At December 31, 2012, the fair value of our mortgage notes payable was estimated to be approximately Sl7,136 higher than the carrying value of$491,206. Iftreesmy rates were 25 basis points higher at December 31, 2012, the fair value of our mortgage notes payable would have been approximately S 13, 755 higher than the carrying value. In August 2007, we purchased Railway Street Corporate Centre located in Calgary, Canada. For this investment, we use the Canadian dollar as the functional currency. When preparing consolidated financial statements, essets and liabilities of foreign entities are translated at the exchange .,.tes at the balitnce sheet date, while income and expen5e items are tl"!lnslated et weighted average rates for the period. Foreign currency translation adjustments are recorded in llCcumulated other comprehensive income on the Consolidated Balance Sheet and foreign currency translation adjustment on the Cor.solidated Statement of Operations and Comprehensive Income (Loss). 38 132 As a resuJt of our Canadian investment, we are subjl!Ct to market risk associated with changes in foreign CUlTCncy exchange rates. These risks include the translation oflocal currency balances of our Canadian investment and ll'allS8Ctions denominated in Canadian dollars. Our objective is to control our exposure to these risks through our nonnal operating activities. For the six months ended June 30, 2<lJJ and 2012, we recognized a foreign currency tianslation Joss ofS529 and 523, respectively. At June 30, 2013, a 10% unfavorable exchange rate movement would have caused our $529 foreign currency translation loss to be increased by $860 resulting in a foreign currency translation loss of approximately $1.389. ltem4. Controls and Proced ... es. Evaluation ofDl1Closure Cclntrols and Procedures Under the supervision and with 1he participation of our management, including the chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules l3•15(c) and 15~15(e)underthe Exchange Act), as of the end of1he period covered by this report. Based on management's evaluation as of June 30, 2013, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable llSSUl'Bllce that the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded. processed, summarized and reported within the time periods specified in the SEC's rules and forms and such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Chances in Internal Control Over FJnanclal Repordq There were no changes to our internal control over financial reporting during the quarter ended June 30, 2013 that have materia1ly affi:cted, or arc reasonably likely to materially affect, our internal control over financial reporting. Item 1. Leaal Proceedlnp. PARTII OTHER INFORMATION We are involved in various claims and litigation matters arising in the ordinary cour1¢ ofbminess. some of which involve claims for damages. Many of these matters are covered by insurance, although they may neverthekss be subject to deductibles or retentions. Although the ultimate liability for these matters cannot be determined, based upon information currently available, we believe the ultimate resolution of such claims and litigation will not have a material adverse effect on our financial position, results ofoperati.ons, or liquidity. Item lA. Risk Factors. The most significant risk factors applicable to the Company are described in Ttem lA ofour 2012 Fonn 10-K. There have been no material changes from those previously~scJosed risk factors. Item 2. Unre1istered Sales of Equity Securities and Use of Pr~eecb. Our &here repurchase plan limits repurchases during any calendar quarter to shares with an aggregate value (based on the repurchase price per share on the day the repurchase is effected) of S% of the combined NAV of all classes of shares (including the Class E shares which are not eligible for repurchase) as of the last day of the previous. calendar quarter, which means that in any 12-month period, we limit repurchases to approximately 2QGAi of our total NAV. If the quarterly volume limitation is reached on or before the third business day of a calendar quarter, repurchase requests during the next quarter will be satisfied on a stockholder by stockholder basis, which we refer to as a "per stockholder allocation," instead of a first-come, first-served basis. Pursuant to the per stockholder allocation, each of our stockholders would be allowed to request repurchase III any time during such quarter of a total number of shares not to exceed five percent of the shares of common stock the stockholder held as of the end of the prior q11arter. The per stockholder allocation requirement will remain In effect for each succeeding quarter for which the total repurchases for the immediately preceding quarter exceeded four percent of our NAV on the last busineu day of such preceding quarter. If total repurchases during a quarter for which the per stockholder allocation applies are equal to or less than four percent of our NAV on the last business day of such preceding quarter, then repurchases will again be first- come, f"II'St·sc:rv~ for the next sut:eeCding quarter and each quaner thereafter. 39 133 Moreover, until our total NAV has reached $600,000, repurchases for shares of aJJ classes in the aggregate may not exceed 25% of the gross proceeds received by us from the commencement of our offering through the last day of the prior calendar quarter. During the six months ended June 30, 2013, we repurchased 26,048 shares of Class A common slock under the share repurchase plan. We did not issue any securities during this period that were not registered under the Securities Act. T•Ul Numbtr ef Sb1ns Mnbnam N1111btr afSlians Yo1al N11111btrof Awragt Pritt l'lrthutdl• P1rt .rr .. lllidy lhat May Yet Be Pan:llUed Sliaru Redeemed hid per Share AHou•etd Plant or Pn1&n-(I) l'llnuur to t~ ...... ram {2) -- -•• < • -~ •• • • ~-•. ·--~·. 26,~ _ ·c~'-=~~n9?~·,~Jici·: ,,:::_ 26,04• (.i'l~~i\~;~"t~~ri~.~?:·,. (1) On October 1, 2012, we adopted the new !hare iepurchase plan. (2) Redemptions arc limited as descnoed above. On October l, 2012, our registration statement on Fonn S-11 (File No. 333-177963), covering our Offering of up to Sl,000,000 of shares of common stock, of which $2, 700,000 of shares of common stock arc being offered pursuant to our primary offering and $300,000 of shBRS of common stock lll"C being offered punuant to our distribution reinvestment plan, was declared effective under the Securities Act. We commenced the Offering on the same date. The per share price for each class equals the daily NAV per share for such class. plus, for Class A shares only, applicable selling commissions, with discounts available to certain categories of purchasers. As of June 30, 2013, we have sold lhe following common shares and raised the following proceeds in connection with the Offering: ·.;,,· DJstrJbution Reinvestment Plan i:i~ A Shares Class M Shares ~'iohl HT' " :-_.. Shares Proceeds 9,294,746 s 95,209 · iJ1?.oi4:~i~r·· :c · ,. 16,066 ''2,'29J '"~ S29 9,229 94 10,93.5,3.50 ' :~$ 111,898 ::i::::::====== As of June 30, 2013, we inourrcd the following costs in connection with the issuance and distribution of the registered &eeutities: TypeofCoat AmOHnt . . ' . .:~, ' :\. . ~· ~56,549 (1) Comprised of$636 in selling commissions, $214 in dealer manager fees, $170 in distribution fees and $5,529 in other offering costs. $1,018 of the selling commissions, dealer manager fees and distn'bution fees have been reallowed to third parties. From the commencement of the Offering through June 30, 2013, the net proceeds to us from our Offering, after deducting the total expenses incurred described above, were $109,320. From the commencement of the Offering through June 30, 2013, net proceeds from our Offering have been all~ated to reduce borrowings by $71,488 and to purchase interms in real estate of $37,832. lteml. Def.ulb Upon Senior Securities. Not applicable. Item 4. Mlne Safety Disclosures. Not applicable. Item 5.. Other lnfMmation. None. 134 Item 6. ~Exhibit lndc:x 1hat immediately follows the signatu~ page to this Fonn 10-Q is incorporated herein by reference. 41 135 SIGNAWRES Pursuant to rhe requirements ofSection 13 or lS(d) of the Securities Exchange Act of 1934, lhe Registnmt, Jones Lang LaSalle Income Property Trust, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duty authorized. JONES LANG LASALLE INCOME PROPER'IY TRUST, INC. Date: August 8, 2013 By: /s/ C. Allan Swaringen ~~~~~~-.....-~~~~--~~~~~~-c. Allan Swartn~n Presf.den~ Chief Executive Officer 42 136 EJ:l!ibitNo. 31.1 31.2 32.1 32.2 101.INS• 101.SCH• IOI.CAL• IOI.DEF* IOILAB• 101.PRE* EXHIBIT INDEX DggdQ1lq1 Certifklltion of Chief Executive Officer Pun1uant to Section 302 of the Sarbanes-Oxley Act of2002. Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of2002. Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes..OXley Act of 2002. Certification of Chief Financial Officer Pursuant to Section 906 oftbe Sarbanes-Oxley Act of2002. XBRL Instance Document XBRL Schema Document XBRL Calcullll:ion Linkbase Documen1 Definitioo Linkbase Document XBRL Labels Linkbase Document XBRL Presentation Linkbasc Document • Punuant to Rule 406T of Regulation S-T, this in1eractive data file is deemed not filed or part ofa registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not tiled for purposes of section 18 of the Securities ExchllllF Act of 1934, and otherwise is not subject to liability under these sections. 43 137 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEV ACT OF 2002 I, C. Allan Swaringen, cenify that: l. I have reviewed this quarterly report on Form 10-Q of Jones Lang LaSalle Inoome Property Trust, lnc.; Exhibit Jl.1 2. Based on my kMwledge, this repon docs not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report. fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a·IS(e) and 1Sd·l5(e)} and internal control over financial reporting (as defined in Exchange Act Rules 13a-1.5(f) and 1.5d·15(f))forthe registnmt and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such intem11l control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles~ c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures., as of the end of the period covered by this report based on such evaluation; and d) Disclosed. in this report any change in the registrant's internal control over financial reponin1 that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal qwutc:r in the case of 111 annual report) that has materialJy affected, or is reasonably likely to materially affect. the registrant's internal control ov"1' financial reportina; and 5. The registrant's other certifying officer and I have disclosed. based on ow most recent evaluation of internal control over financial reporting. to the registrant's auditors and the audit rommittee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or openttion of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial infonnation; and b) Any fnlud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 8, 2013 Isl C. ALLAN SWARINGEN C:. Allan s-rias~o Pre11deac •od Cild Euc:•dvt Oftker 138 CERTIFICATION OF CHIEF FINANOAL OFF1CER PURSUAI'liT TO SECTION 302 OF THE SARBANES-OXL.EV ACT OF 2001 I, G~ory A. FaJk, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Jones Lang LaSalle Income Property Trust, Inc.0 E:s:bibit 31.2. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact neceswy to make the statements made. in light of the circumstances under wbich such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial infonnation included in this report, fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer 11nd I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a·l S(e) and 1Sd·lS(e)) 1111d internal control over financial seporting (as defmed in Exchange Act Rules 13a-IS(f) and lSd-lS(f)) for the registrant and have: a) Desiped such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material infonnation relating to the registrant, including Its consolidated subsidiaries, Jg made known to us by others within tho5e entities, particularly during the period in which this ~ is being prepared; b) Designed such internal control over financial reporting. or caused such internal control over financial reporting to be designed under our supervision. to provide rDaSOnable assurance regarding the reliability of financial reponing and the preparation of financial statements for external purposes in accordance with senerally accepted accounting principles; c) Evaluated the effi:ctivencss of the registrant's disclosure controls and procedures and presented In thl& report our conclusions about the effectiveness of the disclosure controls and procedures. as of the end of the period covered by this report based on such evaluation; and d) Disclos.cd in this report any change in the registrant's internal control over financial reponing that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over fmancial reponing; and S. The registraDt 's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation ofintemal contro1 over financial reporting which arc reasonably likely to adversely affect the regislrant's ability to record, process, summarize and report financial infonnation; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the regislrant 's internal control over firuuu;:ial reporting. Date: August 8, 2013 Isl GREGOR.Y A. F ALJC Gnaory A. Fmlk Chief Fi••cial Ollictr 139 CERTIFICATION OF CIUEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF mE SARBANES-OXLEY ACT OF 2002 Exhibit 32.1 In connection with the Quarterly Report ofJones Lang LaSalle Income Property Trust. Inc. (the "Company") on Fonn 10-Q for the period ending June 30, 2013, as filed with the Securities and Exchange Commiuion on the date hereof(the .. Report"}, I, C. Allan Swaringen, in my capacity as Chief Executive Officer of the Company, do be~by certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuanl to Section 906 oflhe Sarbanes-Oxley Act of2002, lhat: (l)The Report fully complies with the requirements of Section 13(a}or lS(d) of the Securities Exchange Act of 1934; and (2) The information contained in lhe Report filirly presents, in all material respects, the financial condition and results of operations of the Company. Isl C. ALLAN SWAJUNGEN C. Alla• Slll'ariD11H Pnlide•t ui Clller Eaec•dve Offtcer August I, 2013 140 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibil 32.2 In connection with the Quarterly Report of Jones Lang LaSalle Income Property Trost, Inc. (the ''Company") on Fonn 10-Q for the period ending June 30, 2013, as filed with the Securities and Exchange Commission on the date hmof(the "Report"'), I, Gregory A. Falk, in my capacity as Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adop1ed pursuant to Section 906 of the Sarbanes-Oxley Act of2002, that: (1) The Report fuJly complies with the requirements of Section 13(a) or 1 S(d) of the Securities Exchange Act of 1934; and (2) The infonnation contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ GRF.GOltY A. FALK Grttory A. Fd Cblef Fin•ad•I Olriar August 8, 2013 141 SJATEMENT OF OPERATING BEVENUES AND EXPENSES fQR THE YEAR ENDED DECEMBER 31. 2012 PELICAN INVESTMENT HOLDINGS LLC MIAMI BEACH, FLQRIDA Exhibit 2 142 TURNER & Ass-oCIATES, L'LP CERTIFIEO PUBLIC.ACCOUNTANTS AND BUSINESS ADVISORS Miami Lakes Ofllce Cen&er' 16291 NW60lhAverut, Stma 100 Miami Lakes, FL 33014 To the Members PeHcan lnvestment Holdings LLC Miami Beach, Rorida INDEPENDENT AUDITORS' REPORT Telephone: 8r:JS.m-Om Facsimile: 3()5-5511-51!1l1 www.lumercpu.com We have audited the accompanying statement of operating ~ues and upensas of Pelican Investments Holdings LLC (a Florida corporation) for the year ehded December 31. 2012. and the related notes. Management's Responslblllty for the Flnandal Statement Management Is responsible for the preparation and fair presentation of this financial statement in accordance with acoounUng principles generally accepted In the Unlte<l Sta!e& of America; this Includes the design, . implementation, and maintenance of internal control relevant lo ttie preparation and fair presentation of the ftnanclal s1atemen1 that 18 tree from materfal misstatement, whether due to fraud or error. Auditor's RnponslbllRY our responslbllity Is to expreN an opinion on this financial statement based on our audiL We conducted our audit In accordance With auditing atandarda generally aooepted In the· United States of America. Those standards require lhat we plan and perform the audit to obtain reasonable anurance about whether the financial statement la free from matarfal mlntatement. • An audit Involves perfonnlng procedures to obtain audit evidence about the amounts and disclosures in the f.-ianclill slalement. The procedu~ selected depend on the auditor's judgment lncfL1ding the assessment cf the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers lntemal control ratevant to the entity's preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate In the circumstances, but not for the purpose of expressing an opinion on the effactiveness of the entfly's Internal control. Accordingly, we express no such opinion. An audH also Includes evaluating the appropriateness of accounting policies used and tlie reasonableness of significant accounting estimatas made by management, as well as evaluating the overaH presentauon of the financial statement. We believe that the audit evidence vve have obtained ~sufficient and appropriate to provide a basis fa-our audit opinion. Opinion In OL.1' opinion, the financial statements referred to above presen1s fUly, In all materlal respects, the operating revenues and expenses d Pelican 1.nvestment Holdings lLC for the year ended December 31, 2012, in accordance with. accounting principles generally accepted In the United States of America. Emphasis-of-Matter This report Is Intended solely for the Jnfonnatlon and use of the members and management of Pelican Investment Holdlngs. LLC and the City of Miami Beach. Florida and Is not Intended to be and shouid not be used by anyone other than these specJfled.partlea. July2, 2013 Membars American lnstaute of Certified PublleAeooul'llanle and Florida lnatltul& of Cerdlled Public Accountants ..... Ill ..... piiper 143 Rewnuea Glirmg• pirklre ........ .,.. Relall rll'llll .... 81111 llDC TolalRftna &pentel lnslnrm Unlbm a 111.rdry ~t .... ~-& rni-111.,.,. Olke~ PmldnQ lmblltJ lnlurmlm Payrol&lllaWd PWOfeltlCnal ... p~--~ S.p-IWUI Rl!Plhllnlll~ Tei.pia. IJllllm Talll!!xs--s.i.-tritOplnitng Rmlwl .. Ind~ .a..my1, 2012-o-i.w11, 2!012 Plllcm lnwllli••• HoldlrGI u.c JANUARY FEBRUARY MARCH N'AI. MAY .DIE JULY AUGUST S!.P'T'EtieER OCTall!R NOVEMBER DECEl.eER 2012 2012 20t2 2012 2012 2012 · ZOU 2012 2012 2Di2 2012 2012 TOTALS I 163M7 ' 17U7'4 I V0'610 I 1ill(OA3 s 204.m I 181:300-1220,2119 1112;ar I 1S7A23 I 158.00D s: 162,923 $ 190,721 * 2,251,187 :Z1~ 21.002 21,DD2 2:1,D01 H,002 21,11(12 21,Dai! 21,001 21.002 21,002 21,()02 21.001 $ 252,021 C1!l73Dl CU.432> Mf.'1201 C12.112l 111,554) (11,p!I!} C13.1!!:tl '10,511) lp:020) (!.1158) l!.974) (11.m'J S M«>,007) 174,130 11M,844 273.n:t 202.172 2'14,m 191,218 227,818 182,892 198,805 189.SD 173,851 200,9111) 2.30'.oo'I 8.037 8#31 1,837 1,637 8.es? 8,837 A,8311 8.137 8,837 8,137 11,831 a.a 103,842 . . 218 -. . -• ----1,100 4,88" 8.3119 8.217 4.1111 uaa 4,QD8 5Jri!8 4M3 4,822 04.781 4,M1 !i,037 158,172 -8,282 4,2215 8,541 8.7lll 5,7211 9,720 11,619 S,381 4,90!5 e.140 5,73t ll.900 74.e.40 128 128 ue 128 128 128 128 12:1 128 128 121 128 1,538 1,111111 1,588 2,3111 2,3111 2.3111 2,319 2,319 2.:HI 2,319 2,319 2,3111 2,319 28,392 152.982 oC8,328 54.&«> "43,807 43,787 38,172 .Q,858 38.o!M 37,1183 311,381 3~7!!5 44,302 !118,73-t 2, 1llO 2, 1911 2.1111 2.196 2,1sa5 2, 1911 2,1111' 2,198 2,198 2.1811 Z.191 2,197 28.3S4 14.908 1'4.fllJO 14,9DI 14,90& '"'tal 14.90i8 14,905 14,908 14.006 14,908 14,908 14,llO!i t?B.&117 -1:2,193 12,402 14,61111 12,114 lll,191 12,820 13,fi30 12.407 12,DllO 12,D'T4 12,189 12,MD 1!13, lall ... 1311 '-1311 4,841 4,314 •.1M ... •,7311 4.173 4.888 4$71 4,1!54 4.llO'I' 58,358 .,.... --3,442 8,llM 9111 1,5311 1,459 9615 5,31115 15,7411 2, 151 14,m 43,573 819 t73 975 Tel 9111 878 1,Q?i 1,G711 1,288 1,$1'1 1,1)3 1.890 12,182 2.5!12 ------3.247 3,487 3,087 3,9112 3,381 u1s 3,22!5 2.964 3,764 132 33.284 1!!11tHl5 1Ql,83'\ U1,!!S 112,Dlll 105,32& 104,773 108,79$ 101.348 102,618 105,133 98,412 f1!!,938 1,211!,1!34 Net 1911111UM-811pO!W f flJ34 I ,,,p13 S 15:2.?!)9 ! 905 f 198,803 f 88,.443 I 120,!l! f 11:"8 I !!8,288 I M,22!J $ 75,539 S 81.454 Ii 1,074,3117 see l~IClllnl 9.ldftn' rlt)Olt 111c1f'lll~anowta11nanc11111a11men11 Page2oU 144 OCEAH 8lVD n UC CY20112 JANUARY FEBRUARY MARCH APRI. MAY JUNE JULY AU OUST SEPfEMDER OCTOBER HO\IEMBER DECENllER Revenv.ff 2Q12 2012 1012 2012 2012 2012 2012 2012 2012 2012 2012 2012 TOT/I.LS MondllJ Rennne $ 8,430 • 11.361 6,310 ] 1,188 9,029 s 1,813 ' 11,388 t 1o,.tOB $ 7,121 • 11,484 .. 11,112: • 10,llt I 114,7911 Dal!JRWHH 111,1171 , 19, 11111 19:5,903 139.424 ISJ,092 U0,217 11J7.5112 128,!1911 '12,401t 1D&,11114 117,314 129,3114 1,&111,118 ValetR.ent 88,353 47,$37 68,047 44.0'13 41,7S9 41.$65 'IUM2 Sil.II~ ar.oao :!6.m sun 50,'1113 &14,llS:S ~ Oiiier Rt'ftllut 33 iCe7 2SO (2) 171 d-45 212 391 372 1,190 1188 273 8.188 -ValldaflDu .Rwen nc Groll Reeel_p(I 1eua1 171,214 21'0,li1D 18Jl.,113 21M,791 111,:JOCI 22Cl,20t 112,297' 157,423 158,DOI 182,921 190,721 ~.251,911? SalesTuea 10,730 t1.432 17.720 12,712 11,55"4 11,0IB 13,93 1<1,598 8,820 9,1168 9,874 1U~ 140,007 Gro11 l11COatC 153,117 \83,842 5790 181,971 1911,221 170,214 2flU16 lst,891 147,IOS 141,351 152,IMB 179,31111 2,11UIO D.mEHilll l!RSJtS! Sappilell-om~ 5,1_5;1 S,fr10 2,1141 2,11:1.1 2,'175 li,115 2,519 2,798 2,241 .... 1127 3,1tt 4,111 41,'39 Repair.a & Malateauce -3,442 11,111<1 IM!6 1,539 1,4511 11118 '·* 5,748 2,m 14,m 43,57-3 [1naranco Bl:pHJC :l.055 2,917 •,374 3,7111 3,IMI 3,9'8 3,1M3 3.866 3,71ll 1,191 3,81!2 4,0$2 44,800 Managuaenl ftt 4,967 S,369 5,21J7 4,1571 .... 4,9011 5,028 4,993 4,122 4,781 4,1151 6,0$7 li8, 172 MlletU.1100111 Expensi: 1,lll 355 2,llOO <l,13'1 3.2li1 3,735 3,080 3.572 2,884 2,713 2,817 2,8'111 33,001 Paynrll Tues lnc!: Btaet"lb 8,170 7.247 11,194 8,1114 8,1173 4,100 5,547 4,~2 4,4112 oll,3111 4,101 4,8111 72,1::17 tJ•itllnu A lauadry 261 9115 8 - - -. 1,150 Ulilltla ElC)ICll• 2,582 3,247 3,4157 3,0&7 3,1112 ll,3151 3,513 3,225 2,11114 S,754 132 33,284 Telephone Eapeme lll!t 673 87'5 786 998 t17 1,071 1,076 1,288 1.817 1,133 1.1190 12,18! \Vaga 0,712 39,082 45,7411 35,1143 37,114 34,072 37,311 35.2111 33,491 34,059 31,M-C 311,411 "'48,597 Groanll nnt 7,840 7,840 '1,84[) 7,140 7,140 7,114D 7.840 7,840 7,840 7,a.JO 7,MO 7,84D D4,0IO Space rt.Dbl 4,739 4,739 4,341 4,314 4,70!1 4."8 4,m 4.m 4,!Rlll 4,1111 4,854 4,IOT 98,351 Cntraet labor Total E:qieraa Bdon Mauqement l eo,eM 74,874 Q0,426 112.liB'T 7&,m 75,661 7B.1183 72.~ 73,880 78,604 !111,669 19,713 11311,1!12 Nel Operatt.n1 Sarplu 72,473 1111,18'1 182,3114 911,•04 117,.594 94,1153 1211,753 111,243 7l,lr13 71,147 113,310 n,!!116 1.173,308 BaH Manapment FH Inc:eatffc Managernen1 Fee Tot.I Er.pen•et 80,1184 74,1174 ll0,4211 112,587 75,833 7li,8111 78,883 ?2,,4U 73,890 78,60' ee,66t H,193 938,672 Net Owner 72.4n 111.1'18 ll\2,,3'!4 99,404 117.5114 84,5113 1211,753 !11.241 73,913 71.847 81."91l H,5\18 1,173.308 Lus:Owner Amance N•t Due Owner (Park One) s 72 473 89,188 s 182,364 $ 9B,41M s 117,594 $ tM,583 $ 129,79 $ IG,:M3 $ 73,913 s 71,8'7 .s H,3llO .S 89.598 s 1,173,308 See lnaepende11t audllara' rapoit Page 20f3 145 NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012 PELICAN INVESTMENT HOLDINGS LLC NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS Pelican Investment Holdings LLC (the "Company") was incorporated under the laws of the State of Florida on May 6, 2010. On May 27, 2010 the Company purchased a parking garage from Ocean Blvd II, LLC. The parking garage is located on land leased from the City of Miami Beach, Fk>rlda. In con]unctton wtth the purchase transaction, the Company assumed the land lease from Ocean Blvd II, LLC. The land lease from the Clly d Miami Beach expires on September 30, 2041. This eele waa approved by the City of Miami Beach. BASIS OF ACCOUNTING The Company has prepared the accompanying special-purpose flnancial &tatements 10 present the operating revenues and expenses of the Company pursuant to Seclion 28.1 of a lease agreement dated December 1, 1009, between Pelican Development LLC, the original lessee, and City CJf Mlaml'Seach, Aorlda. The lease agreement epectfles that the Company fJrepare manclal statements for the premises on a annual basis In accordance with generally accepted accounting prlnclples as promulgated by ·the American Institute of Certlfled Publlc Accountants, except as otherwise provided by this le.-se, with such changes EIS the Company encl the City of Miami Beach. Florida ahall mUluaffy agree are consistent YAth lhfa lease In order to reflect technologles and methodologies not addressed in the acmunthg princlples. T~ese financial statements are Pf8&ented In accordance with ;ii;CQUnling prlnciples generally accepted In Ille United States « Amertca except for the omission of depreciation, interest expense, Income laxes and any expenses related to any contingent llabllltles. NOTE 2 -RB..ATED PARTY TRANSACTION Included In theae statements is $27,891 of general and administrative eicpenses alloca1ed to the Company from a related party. See independent auditors' report. Page 3of3 146