CB RICHARD ELLIS NET LEASED PROPERTIES John Glassmoyer and Jeffrey Thomas ITT Educational Services 5005 South Wendler Drive Tempe, Arizona INVESTMENT OFFERING Price: $8,400,000 Going In Cap Rate: 6.51% Remaining Lease Term: + 9 Years THE OFFERING John Glassmoyer and Jeffrey Thomas are pleased to offer for sale an approximate 30,000 square foot building leased to ITT Educational Services until 2016. This investment offers the buyer a unique property with 8:1 parking in an excellent, central location. INVESTMENT HIGHLIGHTS Excellent Accessibility Central location with incredible access to the entire metropolitan area via six major freeways and an international airport. Ideal Location Located next to Denny s, several hotels, across the freeway from 1.2 million square foot mall, across the street from Fry s Electronics, and just north of a Four-Diamond luxury resort. Upside Potential through a possible tenant expansion. Strong Financials Tenant s stock has increased 89% over the past year. Revenues, operating income and return on equity have all increased; revenues and net income have increased every year since 1998. Newer Construction Built in 2003 as a build-to-suit for ITT. High Traffic Location Freeway frontage, one parcel removed from Baseline Road, with exposure to over 50,000 vehicles per day. THE PROPERTY Price: $8,400,000 Net Operating Income: $547,200 Going In Cap Rate: 6.51% Net Operating Income As of 05/16/2008: $568,800 Cap Rate as of Rental Increase 05/2008: 6.77% Total Building Size: + 30,000 SF Land Size: + 4.58 Acres Year Built: 2003 Ownership: Fee simple Property Type: Office and Industrial Facility Use: Postsecondary school Construction Type: Concrete tilt construction Building Coverage: 15.04% Zoning: I-1, General Industrial Parking: 8:1 THE LEASE Tenant: ITT Educational Services, Inc. Lease Term: 13 years Lease Term Remaining: + 9 years Lease Commencement: 05/16/2003 Lease Expiration: 01/31/2016 Lease Structure: Double Net Landlord Responsibilities: Roof repairs and replacements in excess of $1,000 per year, HVAC system repairs in excess of $5,000 per year, exterior painting (if needed), repaving parking lot or portions thereof if major (cracks wider than 3/4 ) unless due to failure of maintenance by Tenant. Base Rent: Years 1-5: $18.24 PSF, annually Years 6-10: $18.96 PSF, annually Years 11-13: $19.68 PSF, annually Options to Extend: One (1) five-year option Option Rent (Annually): Year 1: $20.17 PSF Year 4: $21.72 PSF Year 2: $20.67 PSF Year 5: $22.26 PSF Year 3: $21.19 PSF Refit Allowance: $3.00 PSF ($90,000) for Additional Tenant Renovations on the 1st day of the 8th year of the Lease Term. This is provided to Tenant in the form of Free Rent at the beginning of the 8th year. Exclusively Represented By: JOHN GLASSMOYER JEFFREY THOMAS CB Richard Ellis Net Leased Properties Please Contact: JOHN GLASSMOYER
THE TENANT - ITT EDUCATIONAL SERVICES, INC. http://www.ittesi.com NYSE: ESI Standard & Poor s: B+ ITT Educational Services, Inc. (ESI) is a leading provider of technology-oriented postsecondary degree programs, and has been actively involved in the higher education community in the United States since 1969. ESI is headquartered in Carmel, Indiana, a suburb of Indianapolis, and operates 90 ITT Technical Institutes in 33 states. Institutes predominantly provide career-focused degree programs of study in fields involving technology to approximately 49,000 students. The company s schools have traditionally offered a range of technology-focused degrees in areas such as computer-aided design, engineering technology, and information technology. However, some business degrees are offered, including a master s of business administration (MBA). Some programs, including the MBA, are offered exclusively online, while students earn other degrees through combinations of classroom and online courses. Each ITT Technical Institute is authorized by the state in which it is located and nationally accredited by an accrediting commission recognized by the U.S. Department of Education. ITT has been benefitting from funding cuts at state universities. A combination of rising tuition costs and class shortages at some institutions has made career college a more attractive option for postsecondary education. ITT is expanding both the number and types of programs it offers, in response to increasing enrollment rates. Total enrollment grew by 10% in 2004, 5% in 2005, and over 15% in 2006. The company typically opens three to four new campuses each year. Company Financials (S&P Report Dated 05/12/2007) ITT Educational Services has a net worth of $103,945,000. Revenues have increased every year since 1997. 2006 revenue was $758 million, a 10% increase from 2005 revenues of $688. First quarter 2007 revenues were $204.2 million versus $176.3 million a year earlier, growing 16%. Operating Income for the quarter was $44.1 million, versus $30.2 million the prior year. Income before taxes was $45.0 million, versus $32.7 million, increasing 37%. Return on Equity of 57% in 2006. Net Income has increased every year since 1998. Company Highlights ITT Educational Services is a leading provider of technology-oriented postsecondary degree programs since 1969. Operates 90 ITT Technical Institutes in 33 states (as of March 31, 2007). In January 2007, ITT reported new student enrollment increased 15.6% in 2006, and first quarter 2007 student enrollment increased 13.1%. Programs of Study Offered School of Information Technology Computer network systems, software applications and programming, web development, information systems administration. School of Electronics Technology Computer electronics engineering technology. School of Drafting and Design Multimedia, computer drafting and design, digital entertainment and game design. School of Business Business accounting technology and business administration. School of Criminal Justice and School of Health Sciences. THE PROPERTY The subject property is located north of Baseline Road on the east side of Wendler Drive in Tempe, Arizona. Baseline Road is a major, six-lane, east/west arterial. East of the subject is Interstate 10, which runs northwest to southeast, accessible via Baseline Road. Freeway ramps are immediately east of the intersection of Wendler Drive and Baseline Road. Interstate 10 is a six-lane freeway providing access between Metropolitan Phoenix and Tucson, and extends westward through Phoenix to the West Coast and Los Angeles metro area. This freeway provides the main truck-shipping route between the two regions, and also carries traffic eastbound to Florida. Major east/west transportation is provided via the Superstition Freeway (U.S. 60), which is 1/4 mile northeast of the property, with access from Interstate 10. Sky Harbor International Airport, served by over 20 airlines, is approximately four miles northwest of the property. The building is one story, rectangular in shape, and is surrounded by ample parking. There is a reception area located on the west side of the building, which connects to the office area in the southwest corner of the building. The remainder of the building is the school, which includes classrooms, library, a break room, storage and restrooms. Property Highlights Approximately 1,300 feet of frontage along the east side of Wendler Drive and Interstate 10. The immediate neighborhood is mostly industrial and commercial uses, consisting of office buildings, a Fry s Electronics, hotel and Denny s Restaurant. The Pointe South Mountain 4-Diamond Luxury Resort is located south of the property along Baseline Road. As the largest all-suite resort in Arizona, features include an 18-hole championship golf course, 6 unique restaurants, the Oasis Water Park, and Phantom Horse Athletic Club & Spa. Arizona Mills Mall, with over 1.2 million square feet of space and 175 stores, is located east across Interstate 10. DEMOGRAPHICS* 1 Mile 3 Mile 5 Mile Population (2006 Est.) 19,304 99,943 262,298 Avg. HH Income $47,112 $56,398 $64,353 TRAFFIC COUNTS* Interstate 10 and Highway 60 202,000 Vehicles Per Day (0.29 miles from subject) Baseline Road and Arizona Mills 55,270 Vehicles Per Day (0.36 miles from subject) Priest Drive and Baseline Road 27,437 Vehicles Per Day (0.43 miles from subject) 46th Street and Baseline Road 43,000 Vehicles Per Day (0.84 miles from subject) *Source: Claritas, Inc.
TEMPE, ARIZONA The Property is located in Maricopa County, within the greater Tempe area. The Phoenix Central Business District is located approximately seven miles northwest. The City of Tempe, Arizona, the seventh largest city in Arizona with a population of over 160,000, has grown from a small college town and bedroom community into a center of learning, culture, and technology. Downtown Tempe, which is centered between the newly developed Tempe Town Lake and Arizona State University, offers a unique urban lifestyle in the metro Phoenix area and many opportunities to live, work and play in one location. Tempe is bordered by Phoenix, Scottsdale, Mesa, and Chandler. A key factor in Tempe s lifestyle is Arizona State University (ASU), which has grown from a small teaching college into the largest university in the nation with over 61,000 students. With several campuses located throughout the metropolitan area, ASU is a highly ranked college with first-class faculty members and is on its way to becoming a First Tier Research Institution. Students from over 147 countries and hundreds of cities across the United States attend ASU. The City enjoys a diversified economic base with a strong presence of technology companies. Tempe s central location makes it a great place to do business. With more than 200 commercial, retail, industrial, and office parks, many near freeways, bus routes, or the airport, employees and customers can reach businesses quickly. Tempe businesses can access six freeways, an international airport just five minutes from downtown and a variety of alternative transportation methods. Tempe provides quick, convenient transportation, making it the most accessible city in the metropolitan area. Tempe also has a young, highly educated, skilled workforce that fuels the city s thriving and diverse economy. Tempe s workforce comprises 94,861 energetic, highly educated, and skilled workers. In addition, a pool of more than a million workers resides within a 30-minute commute of the City. Not only is Tempe a hotspot for business, but it has flourished into one of the valley s meccas for entertainment. Truly, Tempe is a city where life and work connect. Tempe Town Lake, located adjacent to downtown Tempe, was created in 1999 as the focal point of the larger Rio Salado Project. This 220-acre lake, contained within the Salt River flood channel, provides the largest usable body of water available to the population of Arizona. Resorts, restaurants, retail shops, and a marina complement this regional destination. There are 40 current projects underway in the Tempe and Town Lake area including residential, office and retail projects. Tempe Highlights Tempe is the 7th largest city in Arizona with a population over 160,000. Home to Arizona State University, a highly ranked college with over 61,000 students. Excellent accessibility via 6 major freeways, an international airport, and various other transportation methods. GREATER PHOENIX METROPOLITAN AREA Phoenix is the nation s 4th largest MSA and 14th largest metropolitan area with nearly 3.7 million residents, and has been one of the nation s fastest growing regions for the last several decades. Ranked as one of the three fastest growing cities in the nation, annual population increases will ensure continual growth in the labor force. More than half of the state s population resides in Maricopa County, which includes the cities of Phoenix, Mesa, Glendale, Scottsdale, Tempe, Chandler, Peoria, and Gilbert. This metro area is the state s major center of political and economic activity. Business and residential sectors in Phoenix are expected to continue to flourish in the years ahead due to the remarkable quality of life benefits, diverse and well-educated workforce, and stateof-the-art commercial and transportation infrastructure. According to Newsweek Magazine, Greater Phoenix is projected to be the second largest job engine in the U.S. through 2025. Serving as a business and distribution hub for the southwest, Phoenix is centrally located between Los Angeles, San Diego, Denver, Las Vegas, and Albuquerque. Many of the nation s leading companies in aerospace, financial services, and high-tech manufacturing have a regional operations location in Phoenix including Honeywell, Motorola, Intel, JP Morgan Chase, and USAA Insurance, to name a few. Greater Phoenix Market Highlights* Greater Phoenix area has displayed exceptional growth, with a population growth rate of 3.9%, more than double the national average of 1.5%. Greater Phoenix population is expected to grow at more than twice the national rate for the next two decades. Total Phoenix employment base now stands at more than 1.9 million workers, growing by 800,000 in the last decade, giving new and existing employers a consistent supply of labor. Over 200 Fortune 500 companies have operations in Greater Phoenix, including: Boeing, Southwest Airlines, Wells Fargo, Unisys, FedEx, Qwest Communications, General Electric, Humana, Phelps Dodge, and American Express, to name a few. Sky Harbor International Airport is now ranked as the 5th busiest airport in the world. *According to Greater Phoenix Economic Council Major Private Employers Phoenix Metropolitan Area, 2006 Company No. of Employees State of Arizona 49,305 Wal-Mart Stores 28,800 Banner Health Systems 16,400 Arizona State University 11,533 Wells Fargo and Company 11,800 Fry s Food and Drug Stores 11,780 Honeywell Aerospace 10,700 U.S. Airways 9,625 JP Morgan Chase & Co. 8,900 Target Corp. 8,162
PROPERTY PHOTOGRAPHS West End of Building; Facing North South End of Building and Parking Lot; Facing North West End of Building; Facing South East End of Building; Facing North
PROPERTY PHOTOGRAPHS South End of Building View Facing East; North End of Parking Lot East End of Building; Facing North South Parking Lot; Facing North
AERIAL PHOTOGRAPH OF SUBJECT AND SURROUNDING AREA N ARIZONA MILLS MALL With over 1.2 million square feet of space, Arizona Mills Mall features hundreds of the best names in retail including: Harkins Luxury 24 Cinemas IMAX Theaters Aeropostale AnnTaylor Loft Bath & Body Works Outlet bebe Outlet Chico s Outlet Disney Store Outlet Foot Locker GameWorks Hi-Health World of Nutrition Holiday Inn Express Hotel & Suites Last Call Neiman Marcus Nike Factory Store Rainforest Cafe Sports Authority Sunglass Hut/Watch Station Tommy Hilfiger Company Store Wilsons Leather Outlet Visit the Arizona Mills Mall website for additional information at: www.arizonamillsmall.com. POINTE SOUTH MOUNTAIN RESORT A Four-Diamond luxury resort located at the base of South Mountain Preserve located just south of the subject property. Known as the largest all-suite resort in Arizona, it features 18-hole championship golf, 6 unique restaurants, the Oasis Water Park, and Phantom Horse Athletic Club & Spa. Visit their web site for additional information at: www.pointesouthmtn.com. FRY S ELECTRONICS Founded in 1985 in California, Fry s has approximately 34 stores throughout the U.S. Stores range in size from 50,000 to over 180,000 square feet and retail over 50,000 electronic items within each store. Additional shopping is available online at: www.frys.com and www.outpost.com.
LOCAL AND REGION MAPS 5005 S WENDLER DRIVE TEMPE, ARIZONA 5005 S WENDLER DRIVE TEMPE, ARIZONA
SITE PLAN 0.52 Acres Vacant Land N Wendler Drive Baseline Road Interstate 10 Freeway Reserved for Potential Future Expansion
SPACE PLAN N POTENTIAL TENANT EXPANSION