market positioning and pricing analysis...marcus & millichap is not affiliated with, sponsored...

37TH ST STRIP CENTER275 37th St NE • Rochester, MN 55906

Market Positioning and Pricing Analysis

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37TH ST STRIP CENTERRochester, MNACT ID Y0510475

N O N - E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E

Non-EndorsementsMarcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of anycorporation's logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates orsubsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information aboutthis listing to prospective customers.

ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY.PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.

DisclaimerTHIS IS A BROKER PRICE OPINION OR COMPARATIVE MARKET ANALYSIS OF VALUE AND SHOULD NOT BE CONSIDERED AN APPRAISAL. This information hasbeen secured from sources we believe to be reliable, but we make no representations or warranties, express or implied, as to the accuracy of the information. Referencesto square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a service mark of Marcus &Millichap Real Estate Investment Services, Inc. © 2018 Marcus & Millichap. All rights reserved.

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P R E S E N T E D B Y

Tom GommelsAssociateNational Retail GroupMinneapolis OfficeTel: (952) 852-9734Fax: (952) [email protected]: MN 40524426

3NOTE: LISTING AGENT, TOM GOMMELS OF MARCUS & MILLICHAP, IS ALSO A PRINCIPCAL OF GOTC

PROPERTIES, LLC, THE SELLER OF THIS PROPERTY.

TABLE OF CONTENTS

SECTION

INVESTMENT OVERVIEW 01Regional MapLocal Map

Aerial Photos

FINANCIAL ANALYSIS 02Tenant Summary

Operating Statement

Notes

Pricing Detail

MARKET COMPARABLES 03Sales Comparables

MARKET OVERVIEW 04Demographic Analysis

37TH ST STRIP CENTER

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INVESTMENT

OVERVIEW

PROPERTY OVERVIEW


PROPERTY HIGHLIGHTS

PROPERTY OVERVIEW

Solid Mix of Amazon Resistant Tenants

25,000 Vehicles Per Day Directly in Front of Subject Property

Major Development Happening Across the Street and Just tothe East

Leases Are NNN

Many Existing Tenants Have Gone Through One or MoreRenewal Periods

Rochester Expected to Experience Significant Growth for theForeseeable Future

City of Rochester Expected to be in Strong Growth Pattern forthe Long-term

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Marcus & Millichap is pleased to present for sale the 37th Street Strip Center in Rochester, MN.The strip center is currently 100% occupied, providing current security with strong potential upsideboth in the near term and further out, as NE Rochester continues to experience strong developmentgrowth. Development work occurring in the immediate includes the following:

HyVee Grocery, just to the west, recently completed a major remodel and expansion.

Think Bank relocated from approximately 1 mile away to their new site directly across the streetfrom the subject property.

Behind Think Bank, there have been a major amount of new apartments and town homes built.

Next to Think Bank, a new car wash is currently under construction.

The former Shopko, just to the east, has been recently sold. The Shopko buyer, Haley ComfortSystems, has announced plans to develop a new showroom for their business while adding arestaurant site and additional retail.

Rooster's Barn & Grill plans to open their third Rochester location, just to the east, adjacent to theformer Shopko site.

The subject property is located on 37th Street, a busy corridor featuring 25,000 cars per day.

The existing leases are NNN with management fees charged to tenants, allowing the buyer to hire amanagement company and treat this as a passive investment. The majority of the leases in placehave annual rent increases providing a hedge against inflation.

Rochester is the county seat of Olmsted county and is the third-largest city in Minnesota. The cityhas been frequently recognized since the 1980's as one of the best places to live in the UnitedStates.

Mayo Clinic has its world headquarters in Rochester and forms the core of Rochester's economy.As of 2019, Mayo employed 36,000+ people and draws more than 2 million visitors annually. MayoClinic is in the early stages of a $6 Billion expansion called Destination Medical Center (DMC)during which Mayo will add in excess of 30,000 new employees to their Rochester Campus. Thestability of the economy in Rochester as well as expected future growth make this an attractiveinvestment.

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LOCATION OVERVIEW

CLOSE PROXIMITY TO:

275 37th St NE, Rochester, MN 55906

LOCATION OVERVIEWTENANT SUMMARYPRICING AND VALUATION MATRIX

PROPERTY NAME37TH ST STRIP CENTER

PRICING AND VALUATION MATRIX


LOCATION OVERVIEW

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LOCAL MAP


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AERIAL PHOTO


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SUBJECT PROPERTY

(Billboard Sign Not Included)

FUTURE DEVELOPMENT

25KCARS PER DAY

CAR WASH (UNDER CONSTRUCTION)

ONGOING DEVELOPMENT

BowmanTool

FUTURE DEVELOPMENT

Former Think Bank(currently being

redevelopedby Rochester Police Dept)

Gage Elementary

School

(Newly Relocated)

HyVee Recently

Underwent Major Remodel

AERIAL PHOTO


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SUBJECT PROPERTY

(Billboard Sign Not Included)

FUTURE DEVELOPMENT

CAR WASH (UNDER CONSTRUCTION)

FORMER SHOPKO –RECENTLY SOLD –

BUYER TO REDEVELOP

Chateau Theatre

25K CARS PER DAY

REPORTEDLY FUTURE

LOCATION

17K CARS PER DAY

(Newly Relocated)

Currently Under Renovation/Expansion Recently Remodeled

Marcus & Millichap closes

more transactions than any other

brokerage firm.

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PROPERTY PHOTO

• Most Tenants are ‘Amazon Resistant’

• High Traffic Location (25K Daily Traffic

Counts in Front of Property)

• Major Development Happening Directly

Across the Street and in Immediate Area

• Several National Retailers in Immediate

Area

• NNN Leases Including Management Fees

Allowing for Hands-off Ownership.

• Several Leases Have Below Market Rents

• Nail Salon Has Expressed Interest in Long-

Term Lease With Space Reduction

• Most of the Leases Have Annual Rent

Increases


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FINANCIAL

ANALYSIS

FINANCIAL ANALYSIS


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TENANT SUMMARY

FINANCIAL ANALYSIS


OPERATING STATEMENT

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FINANCIAL ANALYSIS


NOTES

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FINANCIAL ANALYSIS


PRICING DETAIL

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MARKET

COMPARABLES


SALES COMPARABLES MAP

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37TH ST STRIP CENTER(SUBJECT)

Marion Road Retail

Broadway Marketplace

Broadway Corner Plaza

Rochester Marketplace

Corporate Gardens

Valhalla Shopping Center

SALES COMPARABLES

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SALES COMPARABLES

Avg. 7.37%

0.0

0.9

1.8

2.7

3.6

4.5

5.4

6.3

7.2

8.1

9.0

37th STStrip

Center

Marion RoadRetail

BroadwayMarketplace

BroadwayCornerPlaza

RochesterMarketplace

CorporateGardens

ValhallaShopping

Center

Average Cap Rate

Avg. $228.94

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

$450.00

$500.00

37th STStrip

Center

Marion RoadRetail

BroadwayMarketplace

BroadwayCornerPlaza

RochesterMarketplace

CorporateGardens

ValhallaShopping

Center

Average Price Per Square Foot

SALES COMPARABLES SALES COMPS AVG

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1

rentpropertyaddress1

rentpropertyname1


rentpropertyname1


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SALES COMPARABLES

Annual Per SFIncome $185,541 $16.18

Expenses $56,667 $4.94

NOI $128,875 $11.24

Occupancy 100%

Tenants Lease TypeAsking Price: $1,748,643 Edward Jones NNN

Price/SF: $152.47 Agape Chiropractic NNN

CAP Rate: 7.37% TM Alterations NNN

Year Built: 2000 Massage & Spa NNN

The Lord's House NNN

CBD of Rochester NNN

37TH ST STRIP CENTER275 37th St NE, Rochester, MN, 55906

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Annual Per SFOccupancy 100%

NOTES7% CAP is reported, not verified.

Tenants Lease TypeClose Of Escrow: 5/16/2019 Toppers Pizza

Sales Price: $2,300,000 Nail Salon

Price/SF: $258.60

CAP Rate: 7%

Year Built: 2014

MARION ROAD RETAIL1217 Marion Rd SE, Rochester, MN, 55904

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NOTESCap rate is projected base on a reported $20 PSF in rent with 81% occupancy at closing. Proforma CAP is projected at 7.9%.

Tenants Lease TypeClose Of Escrow: 7/31/2018 Gamestop

Sales Price: $2,678,000 Barbershop

Price/SF: $250.68 Sprint

CAP Rate: 6.5%

Year Built: 2008

BROADWAY MARKETPLACE221 28th St SE, Rochester, MN, 55904

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


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SALES COMPARABLES

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NOTESCAP rate is projected using a $18 PSF for base rent. Costar reported asking rent was $19 PSF.

Tenants Lease TypeClose Of Escrow: 3/1/2018 Drycleaners

Sales Price: $1,877,687 Nails

Price/SF: $243.26 Ichy Tokyo

CAP Rate: 7.4%

Year Built: 2007

BROADWAY CORNER PLAZA102 20th St SE, Rochester, MN, 55904

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Tenants Lease TypeClose Of Escrow: 3/15/2018 Noodles & Co

Sales Price: $2,450,000 Caribou

Price/SF: $418.09 PI Wood-Fired Pizza

CAP Rate: 6.8%

Year Built: 2001

ROCHESTER MARKETPLACE3932-3944 Marketplace Dr NW, Rochester, MN, 55901

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Tenants Lease TypeClose Of Escrow: 2/14/2018 Liquor Store

Sales Price: $1,600,000 Midwest Dental

Price/SF: $128.00 Southwest Chiropract

CAP Rate: 8.5%

Year Built: 2001

CORPORATE GARDENS2215 2nd St SW, Rochester, MN, 55901

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


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SALES COMPARABLES

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NOTESOldest building of the Rochester sales comps.

Tenants Lease TypeClose Of Escrow: 6/1/2018 Barbershop

Sales Price: $1,800,000 Dry Cleaners

Price/SF: $75.00 Merry Maid

CAP Rate: 8%

Year Built: 1974

VALHALLA SHOPPING CENTER300 Elton Hills Drive, Rochester, MN, 55901


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MARKET

OVERVIEW

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Rochester, MN & DMC

Rochester is the county seat of Olmsted county and is the third-largest city in Minnesota. The city has been frequently recognized by Money Magazine, since the 1980's as one of the best places to live in the United States ranging from the best overall to the best in the Midwest. In addition, Rochester was named by Livability as the top City in America for 2017. According to the United States Census Bureau the estimated population in 2018 for Rochester was 116,961.

Mayo Clinic forms the core of Rochester's economy. As of 2019, it employed more than 36,000 people and while drawing more than 2 million visitors annually. The clinic's many facilities, along with hotels, restaurants and retail stores, comprise nearly all of the city's downtown. Excluding the state government, Mayo Clinic is the largest employer in the state of Minnesota. Mayo Clinic’s revenue in 2019 was a reported $13.8 billion.

Mayo Clinic is in the early stages of their Destination Medical Center (DMC) expansion which is expected to add over 30,000 employees by completion. DMC is a robust 20-year $5.6 billion economic development initiative. The largest in Minnesota’s history, DMC is designed to position Mayo Clinic as a global center for the highest quality medical care and to generate high-value jobs, new tax revenue, and businesses. This long-term growth plan makes Rochester a very attractive market for businesses and investment opportunities both now and in the long term.

For more information on Destination Medical Center please visit https://dmc.com

Rochester, MN Consistently One of the ‘Top Places to Live in America’.

Rochester’s 2016 Population was 114,011 (USCB).

Mayo Clinic’s DMC Project is Expected to add 30,000+ Employees.

Subject Property is one of the most desirable locations in all of Rochester, MN.

Rochester, MN & DMC

PROPERTY NAME

MARKETING TEAM


DEMOGRAPHICS

Source: © 2019 Experian

Created on February 2020

POPULATION 3 Miles 5 Miles 10 Miles 2023 Projection

Total Population 58,630 114,535 148,296 2018 Estimate

Total Population 56,663 107,394 138,383 2010 Census

Total Population 54,109 100,651 128,001 2000 Census

Total Population 52,281 87,532 109,533 Current Daytime Population

2018 Estimate 99,281 153,996 173,862HOUSEHOLDS 3 Miles 5 Miles 10 Miles 2023 Projection

Total Households 25,787 47,722 60,504 2018 Estimate

Total Households 24,633 44,352 55,972Average (Mean) Household Size 2.23 2.37 2.43

2010 CensusTotal Households 22,958 40,791 50,913

2000 CensusTotal Households 21,281 34,687 42,484

Occupied Units2023 Projection 25,787 47,722 60,5042018 Estimate 25,556 46,075 58,095

HOUSEHOLDS BY INCOME 3 Miles 5 Miles 10 Miles 2018 Estimate

$150,000 or More 12.45% 14.21% 15.86%$100,000 - $149,000 17.22% 18.49% 19.56%$75,000 - $99,999 15.07% 15.64% 16.24%$50,000 - $74,999 16.68% 16.54% 16.26%$35,000 - $49,999 11.79% 11.34% 10.74%Under $35,000 26.77% 23.78% 21.33%

Average Household Income $90,596 $97,577 $102,790Median Household Income $66,518 $72,314 $77,513Per Capita Income $39,816 $40,597 $41,817

HOUSEHOLDS BY EXPENDITURE 3 Miles 5 Miles 10 MilesTotal Average Household Retail Expenditure $76,513 $80,329 $83,720 Consumer Expenditure Top 10 Categories

Housing $18,867 $19,799 $20,792Transportation $12,855 $13,592 $14,178Shelter $11,051 $11,637 $12,191Personal Insurance and Pensions $7,403 $7,955 $8,612Food $6,600 $6,929 $7,228Health Care $5,280 $5,440 $5,723Utilities $3,749 $3,875 $4,045Entertainment $3,611 $3,947 $4,180Cash Contributions $3,263 $3,072 $2,999Household Furnishings and Equipment $1,968 $2,067 $2,203

POPULATION PROFILE 3 Miles 5 Miles 10 Miles Population By Age

2018 Estimate Total Population 56,663 107,394 138,383Under 20 23.77% 26.25% 26.50%20 to 34 Years 23.44% 22.59% 20.78%35 to 39 Years 6.57% 7.07% 6.99%40 to 49 Years 10.62% 10.88% 11.48%50 to 64 Years 18.91% 18.32% 19.66%Age 65+ 16.70% 14.91% 14.60%Median Age 36.97 35.76 36.86

Population 25+ by Education Level2018 Estimate Population Age 25+ 39,371 72,509 93,598Elementary (0-8) 1.48% 1.33% 1.18%Some High School (9-11) 3.74% 3.66% 3.51%High School Graduate (12) 20.74% 19.67% 20.00%Some College (13-15) 19.83% 19.29% 19.78%Associate Degree Only 10.51% 10.95% 11.46%Bachelors Degree Only 25.54% 25.29% 24.92%Graduate Degree 17.30% 18.82% 18.31%

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IncomeIn 2019, the median household income for your selected geography is$82,716, compare this to the US average which is currently $58,754.The median household income for your area has changed by 45.96%since 2000. It is estimated that the median household income in yourarea will be $92,905 five years from now, which represents a changeof 12.32% from the current year.

The current year per capita income in your area is $45,518, comparethis to the US average, which is $32,356. The current year averagehousehold income in your area is $102,723, compare this to the USaverage which is $84,609.

PopulationIn 2019, the population in your selected geography is 6,445. Thepopulation has changed by 1.07% since 2000. It is estimated that thepopulation in your area will be 6,596.00 five years from now, whichrepresents a change of 2.34% from the current year. The currentpopulation is 47.86% male and 52.14% female. The median age of thepopulation in your area is 39.66, compare this to the US averagewhich is 37.95. The population density in your area is 2,046.37 peopleper square mile.

HouseholdsThere are currently 2,852 households in your selected geography. Thenumber of households has changed by 12.68% since 2000. It isestimated that the number of households in your area will be 2,960five years from now, which represents a change of 3.79% from thecurrent year. The average household size in your area is 2.33persons.

EmploymentIn 2019, there are 2,589 employees in your selected area, this is alsoknown as the daytime population. The 2000 Census revealed that73.52% of employees are employed in white-collar occupations in thisgeography, and 25.11% are employed in blue-collar occupations. In2019, unemployment in this area is 2.78%. In 2000, the average timetraveled to work was 16.00 minutes.

Race and EthnicityThe current year racial makeup of your selected area is as follows:82.03% White, 7.71% Black, 0.07% Native American and 6.39%Asian/Pacific Islander. Compare these to US averages which are:70.20% White, 12.89% Black, 0.19% Native American and 5.59%Asian/Pacific Islander. People of Hispanic origin are countedindependently of race.

People of Hispanic origin make up 3.81% of the current yearpopulation in your selected area. Compare this to the US average of18.01%.

PROPERTY NAME

MARKETING TEAM


HousingThe median housing value in your area was $193,248 in 2019,compare this to the US average of $201,842. In 2000, there were1,975 owner occupied housing units in your area and there were 556renter occupied housing units in your area. The median rent at thetime was $587.

Source: © 2019 Experian

DEMOGRAPHICS

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DEMOGRAPHICS

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www.MarcusMillichap.com

Tom Gommels

AssociateNational Retail GroupMinneapolis OfficeTel: (952) 852-9734Fax: (952) [email protected]: MN 40524426

P R E S E N T E D B Y

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market positioning and pricing analysis...marcus & millichap is not affiliated with, sponsored...

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