Beauty vs. the Beast
Presented by LuAnn Stiles Hill, RPA,Leed AP Senior Property Manager Liberty Property Trust
Beauty vs. the Beast Position your asset to be Best in Class to meet the needs of future customers
The Beast Case Study
Before
Before
Before
Before
Before
but yes, I could use some help
Understanding the Beast you Have C- asset Strategy Lead the market with Best in Class Beauty
Best Value Option Consider improvements that increase Marketability and flexibility Extend useful life Operational efficiency
Curb Appeal
Floor Restoration
Mezzanine Removal
Interior Improvements
Exterior Improvements
Competitive Advantage Future tenant use and infrastructure can further compound adaptability
Competitive Advantage
Competitive Advantage
After - C+
After - C+
After C+
After - C+
After - C+
After - C+
Financial Performance The Beauty Minimum Investment $3 psf Leasing opportunity minimum investment up to 7% yield add tenant improvements up to 9% yield Sale reality do nothing 1% over basis/allocation minimum investment 25% over basis/allocation
Presented by Blake Kelley Development Manager Prologis
Preventative Maintenance is Key
Preventative Maintenance is Key Roof Maintenance Cleaning (semi-annual, annual) Maintenance of scuppers and drains HVAC Maintenance Quarterly filter changes Cleaning of grills Parking Lots and Truck Courts Sump pump maintenance Crack fill/seal coat Curb and gutter repair Fire / Life Safety Quarterly/annual inspections and repairs Exterior Lighting Ultrasonic testing on parking lot pole lights to check for corrosion Sewer Lines Routine hydro-jetting of problem lines cuts down on main line back-up and breaks
Building Age Annual CapX Total 1 $0.015 2 $0.030 3 $0.045 4 $0.060 5 $0.075 6 $0.090 7 $0.105 8 $0.120 9 $0.135 10 $0.150 11 $0.165 12 $0.180 13 $0.195 14 $0.210 15 $0.225 16 $0.240 17 $0.255 18 $0.270 19 $0.285 20 $0.300 21 $0.315 22 $0.330 23 $0.345 24 $0.360 25 $0.375 26 $0.390 27 $0.405 28 $0.420 29 $0.435 Capital Expenses Rise as the $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Building Ages Capital Profile 100MM SF Portfolio, Avg Bldg Age 19 Yrs 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Roof (48%) Parking (24%) Exterior (14%) Other (10%) Contingency (4%) $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0
Curb Appeal is Imperative!
Budgeting for Capital Improvements
Roof Replacement: 20 Years Common defects or evidence of failure: Leaks! Significant mineral loss Water damage evident under roof deck Buckling TPO: tenting and delamination Alternative to roof replacement = Elastomeric Coating $1.30/sf vs. $2.50 - $5.00/sf
HVAC Replacement: 15 Years Common defects or evidence of failure: Noisy units Clogged filters / ductwork Lack of cooling / heating or airflow in general
Exterior Paint: 5-7 Years Common defects or evidence of failure: Panel joints: Physical separation of caulk from panel Peeling paint: May also be due to a previous improper application or mold/mildew behind paint Fading or streaking occurring in large sections Discoloration at roof or ground level
Common defects or evidence of failure: Alligatoring Asphalt: 15 Years Potholes Major separations in asphalt Heaving or shrinking
Other Building Components Which May Require Upgrade / Replacement
Other Components Floor Slab Common defects or evidence of failure: Cracking Wear patterns or rough floor surface due to path of travel Change in elevation (major and requires testing and possibly total replacement)
Lighting Metal Halide T-12 Strip T-8 Low Bay T-5 High Bay Other Components
Fire / Life Safety Other Components Changes in code requirements may result in upgrades Sprinkler Heads Diesel Fire Pumps & Generators Dealing with Air Quality Control Board (AQMD), permitting, etc.
Seismic Retrofits Life Safety #1 PML Discounted insurance rates Resale of the building
Presented by Nick Jones Asset Manager EastGroup Properties
Redevelopment Value add Facts: 40 years old (1974) 126,000 Square Feet (SF) Front-load Primarily setup for single-tenant Varying depths due to 29,000 SF expansion for 237 deep (92,000 SF) 150 deep (38,000 SF)
Floor Plan: As of 12/31/2012 100% LEASED
Aging Buildings & Your Customer
Aging Buildings & Your Customer Previously discussed life span of various major building components Roof, asphalt, concrete, exterior paint/panel joints, etc. will inevitably need replacement Disruption and inconvenience from the Customer's perspective can result in postponement and budget overruns
Scenario: 794,000 s.f. Major Asphalt Repairs/Slurry Issues: Schedule changes due to consumer demand Customer could not anticipate with much notice Where to place 70+ trailers for the duration of the project Keeping the path of travel open at all times for the trucks to enter and exit the truck court Project Summary: Projected Start: Actual Start: Original # Moves: 3 Actual # Moves: 6 Budget Overrun: 15% June November Customer also paid out of pocket to shuffle & relocate the 70+ trailers during each phase of the project
Phasing Map 6 2 6
Unwelcome Surprises
Unexpected Loss due to Water Damage Alone Buildings Aged 25-58 Years Loss Date Yr Built Cause Gross Amount 2/17/2015 1957 Water Damage Fire Suppression System 23,314.08 1/6/2014 1959 Water Damage Water Supply System 3,615.58 1/6/2014 1959 Water Damage Water Supply System 3,615.58 8/1/2014 1959 Water Damage Fire Suppression System 13,165.77 1/1/2015 1960 Water Damage Water Supply System 7,500.00 7/23/2014 1961 Water Damage Water Supply System 102,028.25 3/1/2014 1963 Water Damage Water Supply System 23,009.30 12/8/2014 1964 Water Damage Water Supply System 21,822.65 2/12/2015 1966 Water Damage Water Supply System 13,000.00 6/13/2013 1966 Water Damage Sewer and Drains 14,753.00 8/4/2014 1966 Water Damage Fire Suppression System 14,902.43 10/23/2013 1966 Water Damage Water Supply System 41,538.45 7/1/2014 1966 Water Damage Fire Suppression System 68,079.00 11/4/2014 1967 Water Damage Fire Suppression System 18,618.50 4/23/2015 1967 Water Damage Fire Suppression System 35,000.00 1/6/2014 1967 Water Damage Water Supply System 3,615.58 7/31/2013 1969 Water Damage Fire Suppression System 19,238.15 1/8/2015 1969 Water Damage Fire Suppression System 37,090.34 9/7/2014 1970 Water Damage Water Supply System 15,095.00 1/8/2013 1970 Water Damage Fire Suppression System 20,432.62 1/26/2013 1970 Water Damage Fire Suppression System 24,434.00 9/18/2014 1970 Water Damage Sewer and Drains 71,938.31 4/4/2013 1970 Water Damage Water Supply System 14,273.89 3/12/2014 1971 Water Damage Fire Suppression System 12,307.92 3/5/2014 1971 Water Damage Fire Suppression System 498,608.97 10/28/2013 1971 Water Damage Fire Suppression System 14,563.00 7/1/2014 1971 Water Damage Fire Suppression System 20,104.18 1/24/2014 1972 Water Damage Sewer and Drains 49,618.18 4/21/2015 1972 Water Damage Water Supply System 40,000.00 4/27/2015 1972 Water Damage Fire Suppression System 200,000.00 8/8/2014 1973 Water Damage Fire Suppression System 10,959.50 3/4/2014 1973 Water Damage Water Supply System 20,581.63 8/26/2013 1973 Water Damage Water Supply System 16,247.68 8/14/2014 1974 Water Damage Water Supply System 19,832.00 4/17/2014 1974 Water Damage Water Supply System 22,374.00 4/24/2014 1974 Water Damage Water Supply System 34,182.50 9/20/2013 1974 Water Damage Water Supply System 26,807.00 10/31/2014 1974 Water Damage Sewer and Drains 14,520.33 1/8/2015 1974 Water Damage Fire Suppression System 14,404.84 3/2/2014 1974 Water Damage Water Supply System 19,126.63 1/2/2015 1975 Water Damage Fire Suppression System 29,522.75 Loss Date Yr Built Cause Gross Amount 11/30/2014 1975 Water Damage Fire Suppression System 43,242.55 6/12/2013 1975 Water Damage Fire Suppression System 15,426.61 12/23/2013 1975 Water Damage Fire Suppression System 17,622.32 1/8/2013 1975 Water Damage Fire Suppression System 47,150.92 7/15/2014 1976 Water Damage Sewer and Drains 11,946.73 12/21/2013 1977 Water Damage Fire Suppression System 17,663.50 5/5/2015 1977 Water Damage Water Supply System 10,001.00 3/4/2014 1977 Water Damage Fire Suppression System 114,270.46 12/7/2014 1978 Water Damage Sewer and Drains 63,000.00 2/7/2014 1978 Water Damage Fire Suppression System 15,227.20 9/24/2013 1978 Water Damage Water Supply System 17,943.16 3/26/2015 1979 Water Damage Water Supply System 25,000.00 3/23/2013 1980 Water Damage Water Supply System 132,148.28 4/10/2014 1980 Water Damage Sewer and Drains 73,948.31 8/11/2013 1980 Water Damage Water Supply System 73,461.53 3/7/2015 1980 Water Damage Fire Suppression System 45,000.00 10/16/2014 1980 Water Damage Sewer and Drains 18,012.75 11/27/2013 1981 Water Damage Water Supply System 14,012.90 7/12/2013 1981 Water Damage Fire Suppression System 17,369.39 7/9/2014 1982 Water Damage Water Supply System 34,437.90 6/26/2013 1983 Water Damage Roof System 12,768.05 6/25/2014 1983 Water Damage Sewer and Drains 26,064.43 6/13/2013 1983 Water Damage Sewer and Drains 29,987.69 12/5/2013 1983 Water Damage Fire Suppression System 28,654.81 11/30/2014 1983 Water Damage Fire Suppression System 73,784.76 10/30/2014 1985 Water Damage Fire Suppression System 21,426.32 4/21/2013 1986 Water Damage Water Supply System 10,205.94 11/10/2014 1986 Water Damage Sewer and Drains 16,064.06 6/6/2013 1986 Water Damage Water Supply System 20,280.00 12/26/2013 1987 Water Damage Water Supply System 23,556.73 12/4/2013 1987 Water Damage Fire Suppression System 27,267.68 1/6/2014 1988 Water Damage Water Supply System 3,615.58 1/6/2014 1988 Water Damage Water Supply System 3,615.58 2/18/2013 1988 Water Damage Sewer and Drains 76,122.63 7/16/2013 1988 Water Damage Water Supply System 21,080.12 5/23/2014 1988 Water Damage Water Supply System 14,776.94 4/7/2014 1988 Water Damage Water Supply System 39,729.05 5/29/2013 1988 Water Damage Water Supply System 46,611.26 5/27/2014 1989 Water Damage Fire Suppression System 70,399.60 2/17/2015 1989 Water Damage Roof System 30,000.00 1/1/2015 1990 Water Damage Water Supply System 7,500.00 TOTAL: 3,084,238.33
Scenario: Fire Main Break Under Building Building Age: 35 years Details: Original underground section of PIV deteriorated due to age Water flow destabilized concrete and flooded entire 200ksf bldg. (including 14ksf office area) 500 sf section of concrete floor failed causing sink hole
Failed Concrete Sinkhole
Flooding of Warehouse
Staging of Damaged Product
Responding to the Customers Needs Restoration crew and GC on site within 1 hour to assess damage and begin: Water extraction Asbestos Abatement Complete re-carpet/paint of office area Structural work Nearby Prologis facility provided to customer for storage and staging of damaged product Customers 3 shift operation was uninterrupted!
Aging Building? Think Proactively! Parking lot replacement: Replace fire main pipe. Plan your replacement moves according to the layout of the piping so you re replacing the sections in a logical order. If your fire main is under the slab, move it above ground Replacing cast iron piping with newer PVC? Put a tracing wire on it to help locate future leaks Survey your water heaters in the office: Relocate those that are installed in places they can cause damage Make sure the overflow is plumbed to a drain
Floor Plan: As of 1/1/2013 19% LEASED (102,000 SF = 5% of Jacksonville SF) VACANT 92,437 SF VACA NT 9,375 SF
EXTERIOR - DESIGN CHALLENGES Dated 1970 s aggregate rock on exterior 650 long façade with minimal architectural detail Concrete canopy running length of Building Mismatched suite entrances Limited ADA access Outdated suite and building lighting No landscaping (or irrigation) at front of Building Property Owners Association Approval
BEFORE (otherwise I probably wouldn t be on this panel!)
Scope of Work New entrance at Suite 18 with ADA lift Landscaping at new entrance 1.5 thick EFIS System with acrylic finish above canopy 3 thick EFIS System with acrylic finish above canopy Aluminum Cap at top of EFIS system Anodized aluminum fascia and struts at concrete canopy Acrylic finish on all panels below canopy Demo concrete stairs at unused suite entrances Upgraded Suite and Building lighting with LED fixtures
BEFORE
AFTER
Original Entrance Suite 18
Entryway in process
AFTER
Canopy Before & After
Summary $500K Building upgrades ESFR ; T5 Lighting ; Re-Roof $400K Demo and tenant improvements for New Tenant New electrical and HVAC for custom print room, upgrade WH & loading area $300K Exterior upgrades to façade Covered aggregate exterior and dramatically improved curb appeal New entryway Requirement in order to make this location their new regional HQ Upgraded Canopy and struts $1.2M Total cost (approx.) new tenant (TSS) leasing 102,000 SF $4.25 psf/a NNN rent (~25% above market) Seven year term
Questions?