BUSINESS PLAN ABC INC. OFFICE BUILDING 1 Executive Summary 3 2 Project Overview/Ownership Structure 6 3 Locational Market Analysis 8 TEA Discussion State of Florida Region: Southeast BEA Region Local possibilities: Southeast Florida MSA 4 Real Estate Industry Marketing Analysis 23 National Real Estate Market Miami Real Estate Market NAICS 531 Real Estate Rental & Leasing NAICS Codes Analysis 5 Economic Impact/Jobs Creation 38 Projected Expenses/Revenues Economic Impact/Conclusions Methodology 6 Market Analysis Reference Data 42 1
SECTION 1 EXECUTIVE SUMMARY SPONSOR: QueensFort Capital Florida Regional Center QueensFort Capital Corporation 1000 5 th Street Suite 223 Miami Beach, FL 33139 Telephone: (305) 704-3081 Fax: (305) 402-0333 Web Site: Email: www.queensfortcapital.com info@queensfortcapital.com TYPE OF BUSINESS: Real Estate Investment and Development Company PROJECT SUMMARY: This is a business plan for a capital investment project. It is being submitted with the application for Regional Center designation for QueensFort Capital Regional Center ( QCFRC ). The purpose of the business plan is to demonstrate that the construction and successful operation of an office building would be feasible under current market and economic conditions if developed within the market area of the QueensFort Capital Florida Regional Center ( application for USCIS approval of the Regional Center is being filed concurrently with this exemplar.) The capital investment project for the construction and operation of an office building would be owned by a To- Be- Formed Limited Liability Company (Office Building Developer). That Limited Liability Company will owned by a To- be- Formed Limited Partnership (The Company ), which in turn is owned by a group of 12 EB- 5 Investors (Limited Partners) and a To- be- Formed Limited Liability Company (the General Partner ). The office building will be located in the proposed QueensFort Capital Florida Regional Center geographic region within Dade or Broward County. It will meet the standards of the United States Citizenship and Immigration Services (the USCIS ). $x or x% of the cost of the project will be funded with EB- 5 investor funds under the USCIS EB- 5 2
Immigration Investor Pilot Program. The construction and operation of the office building is anticipated to be a $X commercial enterprise project that will create at least X permanent new jobs (33.8 from construction and 146.8 from operations), and overall, have a significant economic impact on the regional center geographic area and the local economy. The office building will be located in the Miami/Dade - Broward County area. For the purpose of this exemplar, the development and operation of a 24,000 square foot office is detailed. It is anticipated that Targeted Employment Area ( TEA ) will be obtained for the site. The Limited Partners will be offered a designated rate of return while their money is invested and the possibility, but not a guarantee, of getting their entire investment back after a waiting period of at least five (5) years after construction is complete. MARKET DEFINITION & CUSTOMER PROFILE: The market for office rental units in the South Florida market has stabilized since the market downturn during the X- X crash, with vacancy rates now improving, dropping to levels that are encouraging for new inventory coming into the market. Management envisions this project to fill a need for general professional office space. INVESTMENT/FINANCING: The results of the economic impact study prepared by Mike Evans of Evans, Carroll & Associates substantiates a maximum raise of up to $X million through EB- 5, well in excess of the $X required for the project. COUNSEL & OTHER PROFESSIONALS: Immigration Counsel is provided by: Anthony Korda Korda Zitt & Associates 2028 Harrison Street, Suite 201-4 Hollywood, FL 33028 Phone: (954) 620-1291 Fax: (954) 620-1286 3
Email: ak@kordazitt.com Econometrics and modeling work is completed by: Michael K. Evans Evans, Carroll & Associates, Inc. 2785 NW 26th St. Boca Raton, FL 33434 Phone: (561) 470-9035 Email: mevans@evanscarrollecon.com Business planning materials are prepared by: Jo Ann Clarke Clarke Associates 3157 Egremont Drive West Palm Beach, FL 33406 Phone: (561) 577-5058 Email: jaclarke@clarkeassocs.com 4
SECTION 2 BUSINESS DESCRIPTION/OWNERSHIP STRUCTURE BUSINESS DESCRIPTION QueensFort Capital Corporation plans to finance the construction of a generic office building in the Miami/Dade and Broward County area. The construction of the X square foot building will be completed in less than two years, at which point leasing activities will commence with two market segments identified: 1. Professional Office Space (Non- Medical). 2. One floor devoted to an executive suites marketing program. A requirement for the chosen location will be TEA- eligibility within the Regional Center s geographic focus; the most likely locations to be reviewed and evaluated include Miami and Ft. Lauderdale. Company Ownership/Stock Ownership The following chart diagrams the ownership structure of this new project: Removed 5
A single- purpose Limited Partnership will be formed and the EB- 5 investors, through an at- risk contribution, will become limited partners in the entity that develops and operates the office building. The Limited Partnership will be controlled by its General Partner. 6
SECTION 3 LOCATIONAL MARKET ANALYSIS TEA Discussion The project is expected to be located in a census tract that can be combined with contiguous census tracts to form Targeted Employment Areas, with an unemployment rate of over X% in X. Hence each EB- 5 investor can invest $500,000, rather than $1 million, in this project. On this basis, EB- 5 immigrant investors could raise up to $X million for the office building. Each potential location will be reviewed for both marketability and TEA eligibility. State of Florida 8.3 The State of Florida Florida is one of America s top states by a number of measures: State of Florida At a Glance Statistics The Statistic The Number Florida s Rank Population 18.8 million 4 th most populous state Civilian Labor Force 9.2 million 4 th largest in the U.S. Gross Domestic Product $747.7 billion 4 th largest in the U.S. Total Personal Income $738.4 billion 4 th largest in the U.S. 1 st in the Southeast Per Capita Personal Income $39,272 2 nd in the Southeast Florida s business climate is best described by Governor Rick Scott: "Florida is open for business your business." Florida is business- friendly for a number of reasons 1 : 1. Favorable business climate 2. Global hub for International Trade 1 Broward Alliance 7
3. Industry clusters create synergies for businesses 4. Talented labor pool 5. Favorable quality of life Business-Friendly Government Leaders committed to keeping Florida's business climate favorable Periodic reviews of regulations to ease the burdens placed on business One of only 10 states with a right- to- work provision in its constitution Competitive cost More affordable land, labor and capital than in most comparable states Special incentives for businesses in targeted industries Tax breaks for locating in rural and urban Enterprise Zones or on Brownfield sites Pro-Business Tax Structure Limited corporate taxes; no personal income tax No property tax on business inventories or goods- in- transit (up to 180 days) Sales and use tax exemptions for specific industries and circumstances Expedited Permitting Ongoing effort to make permitting processes quicker, less costly, more predictable Available Resources Access to private capital from venture capital companies and financial institutions Access to public capital through federal and state programs Entrepreneurial support One- on- one counseling and training via 35 Small Business Development Centers throughout Florida and the National Entrepreneur Center in Orlando Flexible, low- cost space and business services for young companies at dozens of high- tech incubators, accelerators and university- based research parks Assistance in preparing proposals for funding through the U.S. Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs GLOBAL HUB FOR INTERNATIONAL TRADE Manny Mencia, Sr. Vice President, International Trade & Business Development, 8
Enterprise Florida Inc. states, Our relationship with Latin America is what gives us the edge..." International Trade Total merchandise trade (exports plus imports) of $X billion in X, an increase of X% over X. X% of total U.S. trade with Latin America and the Caribbean, more than any other state. Highest trade surplus among all U.S. states. 2nd largest Foreign Trade Zone (FTZ) network in the nation, where tarifffree value can be added to foreign goods before they are shipped on to other countries 2 Exports/Imports 3rd largest exporter of high- tech products among U.S. states with sales exceeding $15.1 billion in 2010 A leader in knowledge- based exports accounting, legal, medical, consulting, engineering and other services at $29.9 billion in 2010 $55.2 billion in Florida- origin exports goods produced or with significant value added in Florida account for 20% of all U.S. exports to Latin America and the Caribbean in 2010 More than $12 billion worth of imports in 2010 from China and Japan alone Foreign Direct Investment (FDI) 9th among all U.S. states in total holdings by majority foreign- owned firms 6th in FDI employment: FDI Employment Country Rankings Investment Employment 1. Japan $4.16 billion 1. United Kingdom 45,000 jobs 2. Germany $4.13 billion 2. Canada 24,300 jobs 3. United Kingdom $3.88 billion 3. Germany 22,600 jobs 4. Australia $3.56 billion 4. Japan 21,100 jobs 5. Canada $3.36 billion 5. Netherlands 20,700 jobs Florida s Top 5 2 Enterprise Florida, October 10, 2011 article www.floridatrend.com Business Florida 9
Merchandise Trading Partners 1. Brazil $15.9 billion 2. Colombia $7.6 billion 3. China $7.4 billion 4. Japan $6.0 billion 5. Switzerland $5.5 billion Source: Enterprise Florida, 10/11. Connectivity 3 Roads: Rail: X- mile state highway system, plus XX miles of other public roads X miles of main route rail lines connect major business centers and airports nodes Airports: X commercial airports offer non- stop scheduled service to more than X domestic and international destinations More direct flights to Latin American and Caribbean destinations than all other U.S. airports combined Seaports: At least one deepwater port within 90 miles of every Florida business Increases in container capacity, cranes and berths at many ports to accommodate post- Panamax ships Spaceports: 2 of the 8 commercially licensed spaceports in the United States. Telecommunications One of the world's top 5 telecom hubs Network Access Point (NAP) in Miami, a major switching station for Internet traffic coming into and out of Latin America High- speed networks, such as Florida LambdaRail and LA Grid, facilitate R&D efforts 10
KEY INDUSTRY CLUSTERS i Gray Swoope, Secretary of Commerce, President & CEO, Enterprise Florida Inc. 4 states that "We're making bold efforts to improve what is recognized as one of the country's best business climates." Cleantech Significant solar resources Leader in cellulosic biofuel production Hotbed of ocean energy R&D Growing center for advanced energy storage (battery) technologies Life Sciences Internationally renowned research institutes with growing clusters of bioscience firms around them X companies specialize in biotechnology, pharmaceuticals and/or medical devices, with plenty of room and the skilled workforce to support even more Information Technology X IT companies employ nearly X workers Strong presence in such diverse sectors as digital media; modeling, simulation and training; photonics/optics; and mobile technologies Aviation/Aerospace Nearly 2,000 Florida- based aviation and aerospace companies engage in aircraft system design, testing and production; flight training; propulsion systems; and avionics Numerous military installations serve as catalysts for R&D and sources of highly skilled personnel Homeland Security / Defense Heavy expertise in aviation/aerospace, information technology, photonics, simulation and materials science Innovative companies pursuing products to secure borders and ports, detect chemical or biological contaminants, enhance cyber security and ensure rapid response to emergency situations Financial / Professional Services 3 Enterprise Florida, October 10, 2011 article www.floridatrend.com Business Florida 4 See Enterprise Florida Inc. web site at http://www.enterpriseflorida.com/ 11
X- plus financial and professional services companies employ X Significant exporter of knowledge- based services throughout the world A WILLING AND WELL-TRAINED WORKFORCE At X, X labor pool in the U.S Ranked No. 1 for workforce and training by the U.S. Chamber of Commerce and National Chamber Foundation 2011 Enterprising States report. Singled out for efficient job placement system, high share of high school students in advanced placement courses and affordable, efficient higher education system. Customized training programs and incentives to meet targeted employer needs Industry- specific Banner Centers provide skilled labor to employers quickly and at reasonable costs Public Schools One of the first states to incorporate a voluntary pre- kindergarten (VPK) program into its statewide public school system A statewide K- 12 system that considers reading and STEM (Science, Technology, Engineering and Math) curriculum priorities At a Glance: Florida Education Public Schools (K-12) 4,125 Average Teacher Salary (K-12) $46,696 Pre-K-12 Enrollment 2,643,39 6 Pre-K-12 Per-Student State and Local Funding $6,268 State Universities 11 State Colleges 28 Independent Colleges & Universities of Florida (ICUF) 29 Non-Public Postsecondary Schools (including technical and trade schools) 946 Public Technical & Trade Schools 50 Source: Enterprise Florida, 10/11. 12
Postsecondary Education The number of Floridians with associate, bachelor and advanced degrees has increased at almost double the national rate since X. State and community colleges rank among America's top degree producers nine years in a row. Researchers at Florida's 13 largest universities among the nation's leading R&D performers, garnering X billion in research funding from outside sources in X, up $X million from X. Customized Training Grants Key customized training grants result in a highly- trained workforce. Quick Response Training (QRT) Employer- driven training for new employees in targeted industries. Available to new or expanding Florida employers Employer determines type of training, who will deliver it and how Community college, school district or other state educational facility assists with application and program development Reimbursable expenses include: instructors' wages, curriculum development, textbooks/manuals Incumbent Worker Training (IWT) Skills upgrade training for currently employed workers Purpose: to aid in business retention and keep Florida's workforce competitive Available to all Florida businesses in operation for at least one year prior to application Priority given to businesses in targeted industries and specified urban/rural sites A SUPERIOR QUALITY OF LIFE Renowned vacation destination X million visitors in X A higher- than- average proportion of repeat visitors, many of whom choose to become residents Fantastic climate Average annual temperatures between X and X degrees Fahrenheit Outstanding education 13
Public school system ranked 5th in the nation by Education Week 43 high schools on Newsweek's 2011 list of "America's Best High Schools" Economic value No personal income tax Cost of living below that of comparable states with similar growth and inmigration rates Lifestyle 1,350 golf courses 2,300 miles of tidal shoreline 11,000 miles of rivers, streams and waterways 152 state parks The world's biggest and best theme parks A thriving arts and culture scene Unique shopping opportunities World- class sporting events State-of-the-art healthcare More than X general medical and surgical hospitals Florida facilities were ranked: No. 1 in the nation for ophthalmology; No. 18 for cancer care; and No. 19 for gastroenterology on U.S. News & World's Report's 2011-12 list of "America's Best Hospitals." State of Florida Statistical Analysis, BEA Per Capita Personal Income: In 2010 Florida had a per capita personal income (PCPI) of $38,222. This PCPI was 96 percent of the national average, $39,945. The 2010 PCPI reflected an increase of 2.2 percent from 2009. The 2009-2010 national change was 2.8 percent. In 2000 the PCPI of Florida was $29,079. The 2000-2010 average annual growth rate of PCPI was 2.8 percent, on a par with the national annual growth rate. Total Personal Income: In 2010 Florida had a total personal income (TPI) of $720,221,530. In 2000 the TPI of Florida was $466,644,105. Change in Personal Income 2009-10 % 2000-2010 AAGR Florida 3.3 % 4.4 % U.S. 3.7 % 3.7 % AAGR: average annual growth rate Note that total personal income estimates are in thousands of dollars, not adjusted for inflation. Source: BEA (GDP by State): 14
Change in Personal Income www.bea.gov/newsreleases/regional/gdp_state/ It is notable that although the entire 10- year period indicates that Florida s growth rate is above the national level, for the X- X period, Florida lagged behind the national average. Components of Personal Income 2009-10 2000-2010 Florida U.S. Florida U.S. Net earnings 1.9 % 3.1 % 3.5 % 3.1 % Dividends, interest, and rent 2.6 % 2.9 % 4.1 % 2.8 % Personal current transfer receipts 7.9 % 6.7 % 8.2 % 7.7 % Total personal income includes net earnings by place of residence; dividends, interest, and rent; and personal current transfer receipts received by the residents of Florida. Source: BEA (GDP by State): www.bea.gov/newsreleases/regional/gdp_state/ Gross Domestic Product (GDP): In 2010, Florida current- dollar GDP was $747.7 billion and ranked 4th in the United States compared to 2000, where Florida GDP was $481.1 billion and ranked 4th in the United States. In 2010, Florida real GDP grew 1.4 percent, lagging behind the national change of 2.6 percent. However, the 10- year average annual growth rate for Florida real GDP was 2.1 percent, higher than the national average annual growth rate of 1.6 percent. GDP Industries: In 2010, the largest industry in Florida was real estate and rental and leasing. This industry accounted for 16.9 percent of Florida GDP and had 0.6 percent real growth. The second largest industry was government, which accounted for 12.7 percent of Florida GDP and had 0.4 percent real growth. The largest contributor to real GDP growth in Florida was retail trade. This industry accounted for 0.36 percentage point of the total growth in real GDP. The second largest contributor was health care and social assistance. This industry accounted for 0.21 percentage point of the total growth in real GDP. Region: Southeast BEA Region SOUTHEAST REGION The Southeast Region is the location of the Regional Center s Initial Project. Key cities in the Southeast Region include Fort Lauderdale, Fort Pierce, Key West, Miami, Stuart, Vero Beach, and West Palm Beach. 15
Local Market Overview The Miami- Dade County economy had suffered less than the rest of the state in terms of job creation, turnover, and earnings: US Census Bureau Quick Facts Miami-Dade County 3 rd Quarter, 2010 QWI Quick Facts Miami-Dade Florida Total Employment 75,648 533,942 Net Job Flows 2,332-8,055 Job Creation 5,875 20,817 New Hires 5,217 35,401 Separations 8,231 63,819 Turnover 6.1% 7.3% Avg Monthly Earnings $3,737.50 $3,329.50 Avg New Hire Earnings $2,174.25 $2,012.25 However, reports are that the construction industry in this area is still shrinking. Locally, the winter tourist season is looking much better than last year with solid gains 16
in passenger levels at both Miami International Airport and South Florida seaports. Foreign trade out of local ports is expected to continue seeing solid gains throughout the year. Still, several major soft- spots will continue to drag down the economic recovery. Foreclosures are expected to continue flooding the local real estate market and that will prevent home and condo prices from improving for possibly several more years. This will compound the unemployment problem as construction jobs remain few and far between, even in the Sunshine State. Job growth overall is slowly improving, particularly in 2012. Southeast Florida MSA The new Southeast Florida Metropolitan Statistical Area (MSA) is the sixth largest in the United States. This MSA has grown by over 1.1 million since 1990. By 2030, a projected 7.4 million people will reside in this MSA. Until recently, the three major counties that comprise Southeast Florida (Broward, Miami- Dade and Palm Beach) were in two separate Metropolitan Statistical Areas (MSAs). Recently, the United States Office of Management and Budget (OMB) identified the three counties as one MSA. The OMB refers to the Southeast Florida MSA as the Miami- Fort Lauderdale- West Palm Beach MSA (MSA). According to 2002 population estimates, the Southeast Florida MSA is the 6 th largest in the United States with more than 5.1 million people. RANK Metropolitan Area 2002 Pop.* 1 New York-Newark-Edison, NY-NJ-PA 18,487,077 2 Los Angeles-Long Beach-Santa Ana, CA 12,707,765 3 Chicago-Naperville-Joliet, IL-IN-WI 9,202,111 17
RANK Metropolitan Area 2002 Pop.* 4 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 5,708,335 5 Dallas-Fort Worth-Arlington, TX 5,398,207 7 Washington-Arlington-Alexandria, DC-VA-MD-WV 4,926,258 8 Houston-Baytown-Sugarland, TX 4,902,519 9 Detroit-Warren-Livonia, MI 4,466,529 10 Boston-Cambridge-Quincy, MA-NH 4,429,608 * Estimated 2002 population based on U.S. Census 2000 Source: Claritas, Inc., 2003 In 2000, the Miami- Fort Lauderdale Consolidated Metropolitan Statistical Area (CMSA) included only Broward and Miami- Dade counties and was the 12 th largest CMSA in the nation. If Palm Beach were included in the CMSA, the combined area would have ranked 10 th. Between 1990 and 2002, growth in the Southeast Florida MSA has occurred in the western areas as shown in the map to the right. The red areas indicate where 65% or more growth has occurred in the 12- year period. Orange areas show an increase between 31 to 64%. 18
The Southeast Florida MSA population grew by over 950,000 between 1990 and 2000. Broward County saw the greatest growth (367,000) followed by Miami- Dade (316,000) and Palm Beach (268,000). Palm Beach County s growth rate was the highest at 31% over the 10 year period. Broward s growth rate was 29% and Miami Dade s was 16%. Between 2000 and 2002, the Southeast Florida MSA gained 200,000 persons over the two- year period. Population Density-How does the MSA compare? The Southeast Florida MSA ranks as the 13 th most densely settled MSA in the United States. However, this calculation includes large areas west of the development boundary (including water conservation areas, the Everglades National Park and the Everglades Agricultural Area). If you remove those areas from the calculation, the density increases from 1,006 to 2,040 persons per square mile, making it the third most densely settled MSA in the United States. Although the tri- county region does not have the urban downtown densities of some of the more urban areas on the list (Philadelphia or Chicago), the density of South Florida s suburban areas is higher than other metropolitan areas. Future Projections The Southeast Florida MSA is projected to grow to 7.4 million by 2030. This is an increase of 48% between 2000 and 2030 and an annual growth rate of 1.6%. Miami- Dade is projected to grow to 3.1 million while Broward is projected to have 2.5 million. By 2030 Palm Beach will have a population of 1.8 million. The Southeast Florida MSA will represent 30% of Florida s population in 2030 down slightly from 31% in 2000. 21
Projected Population Southeast Florida MSA 2000 2010 2020 2030 Broward 1,623,018 1,910,142 2,206,972 2,482,000 Miami-Dade 2,253,362 2,548,177 2,836,672 3,102,200 Palm Beach 1,131,184 1,378,331 1,619,945 1,845,300 Tri-County 5,009,564 5,838,660 6,665,609 7,431,530 % of Florida 31.3% 30.8% 30.6% 30.4% Florida 15,982,378 18,978,396 21,807,078 24,428,300 Source: University of Florida, Bureau of Economic and Business Research 22
SECTION 4 REAL ESTATE INDUSTRY MARKETING ANALYSIS NATIONAL MARKET ANALYSIS AND SO ON. 23