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Custer Square

7402 - 7406 Custer Rd SW, Lakewood, WA 98499

Michael Armanious, CCIM

253-988-6115

[email protected]

7525 28th Street WestUniversity Place, WA 98466253-460-8640 (p)253-460-8650 (f)www.mikearmanious.com

REAL ESTATE INVESTMENT

All information furnished regarding property for sale, rental or financing is from sources deemed reliable, but no warranty or representation is made tothe accuracy thereof and same is submitted subject to errors, omissions, change of price, rental or other conditions, prior sale, lease or financing orwithdrawal without notice. No liability of any kind is to be imposed on the broker herein.

ANALYSIS

Analysis Date May 2015

PROPERTY

Property Custer Square

Property Address 7402 - 7406 Custer Rd SWLakewood, WA 98499

Year Built 1995

FINANCIAL INFORMATION

Down Payment $525,000

Closing Costs $15,000

LT Capital Gain 20.00%

Federal Tax Rate 28.0%

Discount Rate 15.00%

PURCHASE INFORMATION

Property Type Commercial

Purchase Price $1,750,000

Fair Market Value $1,750,000

Tenants 5

Total Rentable Sq. Ft. 10,074

Resale Valuation 2.5% (annual appreciation)

Resale Expenses 6.0%

LOANS

Debt Term Amortization Rate Payment LO Costs

Adjustable $1,225,000 20 years 20 years 6.0% $8,776 $6,125

INCOME & EXPENSES

Gross Operating Income $161,820

Monthly GOI $13,485

Total Annual Expenses ($47,279)

Monthly Expenses ($3,940)

CONTACT INFORMATION

Michael Armanious, CCIM

253-988-6115

[email protected]

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PROPERTY PHOTOS

7402 - 7406 Custer Rd SWLakewood, WA 98499


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PROPERTY DESCRIPTION



Property Description

KW Commercial is pleased to offer CusterSquare, a five unit retail strip center with a standalone pad located in the heart of Lakewood, WAon Custer Rd.

Custer Road is a main arterial and access pointfrom the heart of Lakewood to Interstate 5. Anestimated 35,000+/- cars travel on Custer Road,making this an attractive location for retailtenants.

This property is situated directly across thestreet from McDonald's amongst three otherretail strip centers also located on Custer Road. Subject property is situated approximately 2 milesnorth of Lakewood Towne Center Mall and approximately half mile northwest of a WalmartSupercenter on Bridgeport Way.

Lakewood is the second largest city in Pierce County and the twenty fifth largest in WashingtonState. Lakewood is located between Sea-Tac International Airport and Washington's capital;Olympia.

Lakewood is home to nearly 60,000 residents and over 3,000 businesses. Lakewood is also thehome of Joint Base Lewis-McChord and Camp Murray; two major military installations.

In addition to the vibrant residential and business communities, the city offers several recreationalopportunities for residents and tourists alike including:-Five lakes offering water skiing, rowing and fishing-Four golf coourses-Fort Steilacoom Park-Historic Lakewold Gardens-Thornwood Castle-Grand Prix Raceway

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LEASE RENT ROLL


All information furnished regarding property for sale, rental or financing is from sources deemed reliable, but no warranty or representation is made to the accuracy thereof and same is submittedsubject to errors, omissions, change of price, rental or other conditions, prior sale, lease or financing or withdrawal without notice. No liability of any kind is to be imposed on the broker herein.

Suite Tenant Start Date Expire Date RSF $/RSF AnnualizedRent

TenantImprovements

Commissions RenewalTerm

RenewalIncrease

Notes

101 Light Dental Studios 05/01/2007 06/30/2017 2,844 $18.63 $52,992 $0.00 $0.00 1 year $0.00

102 Pilates Plus 08/28/2012 08/31/2019 2,508 $11.48 $28,800 $0.00 $0.00 1 year $0.00

103 & 104 Caribbean Seoul 03/13/2014 03/12/2019 1,424 $14.82 $21,100 $0.00 $0.00 1 year $0.00

105 Bella Salon 06/17/2014 06/17/2019 1,916 $14.84 $28,428 $0.00 $0.00 1 year $0.00

Pad Veloce Pasta To Go 03/04/2014 03/04/2019 1,373 $22.21 $30,500 $0.00 $0.00 1 year $0.00

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SALES COMPARABLES



Subject 1 2 3 4 5

2%

4%

6%

8%

10%

12%

14%

16%

Avg.

7.47

Cap Rate

Subject 1 2 3 4 5

$41

$82

$123

$164

$205

$246

$287

$328

Avg.

$165.66

Price per Sq. Ft.

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SALES COMPARABLES



S Custer Square7402 - 7406 Custer Rd SWLakewood, WA 98499

Sale Price $1,750,000

Tenants 5

Price/Tenant $350,000

Price/SqFt $173.71

Cap Rate 6.48%

Year Built 1995

1 Cirque Plaza-sold5502 S Orchard StUniversity Place, WA 98466


Tenants 9


Price/SqFt $159.55

Cap Rate 8.0%

Year Built 1987Sale Date 3/2/2012

Major Tenants

Subway

Little Caesar's

Herfy Burger & Teriyaki

Nancy Design Nails

Up In Smoke E-Cigarettes

NOTESStrategically located at the intersection of the heavily traveled Cirque Drive & Orchard Street West. Convenience shopping for the affluent community of University Place.Recent updates to the buildings.

2 Emerson Courtyard4040 South Orchard StFircrest, WA 98466


Tenants 20


Price/SqFt $146.62

Cap Rate 8.23%

Year Built 2005Sale Date 8/21/2013

Major Tenants

MVP Physical Therapy

Emerson Dental

Delisio Coffee Company

Orchard Cleaners

Edward Jones

NOTESRetail and office mixed use property in Fircrest (Tacoma), Washington. Emerson Courtyard is a high quality well maintained property located at a key intersection.

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SALES COMPARABLES



3 Edgewater Crossing8813 Edgewater Drive SWLakewood, WA 98499


Tenants 3


Price/SqFt $325.71

Cap Rate 6.75%

Year Built 2007On Market

Major Tenants

Edward Jones

Green Coconut Tree

NOTESSimilar to the subject property, this retail strip is well located on a busy thoroughfare in Lakewood, WA. It is the former site for Forza and is currently leased by Frenchy's-a French cafe. The location generates a NOI of $77,862 and is listed for sale at $1,153,000, a 6.75% Cap Rate. It has been on the market for over 6 months.

4 Golden Plaza8302 South Tacoma WayLakewood, WA 98499

Sale Price $899,000

Tenants 6


Price/SqFt $96.37

Cap Rate 7.17%


Major Tenants

Taqueria La Carreta

NOTESGolden Plaza is a high vacant property and has been listed for over ten months with no offers. Currently the only tenant in the building is a Mexican restaurant. The pricewas recently reduced by $100,000 to the current list price. This is a bank owned property. Newer building with anchor tenant restaurant and 5 additional units.

5 8415 Steilacoom Blvd SW8415 Steilacoom Blvd SWLakewood, WA 98499

Sale Price $795,000

Tenants 4


Price/SqFt $100.09

Cap Rate 7.2%


NOTESExcellent opportunity for investment in a good location. 2-story building on large 2 parcel lot, located on busy street. 1st floor has 3 retail shops with good tenants.Secondfloor has for five office units, which may be converted to apartments.Cap 7.17%

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EXECUTIVE SUMMARY



ACQUISITION COSTS

Purchase Price, Points and Closing Costs $1,771,125

Investment - Cash $546,125

First Loan $1,225,000

INVESTMENT INFORMATION

Purchase Price $1,750,000

Price per Tenant $350,000

Price per Sq. Ft. $173.71

INCOME, EXPENSES & CASH FLOW

Gross Scheduled Income $161,820

Total Vacancy and Credits $0

Operating Expenses ($47,279)

Net Operating Income $114,541

Debt Service ($105,315)

Cash Flow Before Taxes $9,225

Total Interest (Debt Service) ($72,610)

Depreciation and Amortization ($30,739)

Taxable Income (Loss) $11,191

Tax Savings (Costs) ($3,134)

Cash Flow After Taxes $6,092

FINANCIAL INDICATORS

Cash on Cash Return Before Taxes 1.69%

Optimal Internal Rate of Return (yr 5) 9.38%

Debt Coverage Ratio 1.09

Capitalization Rate 6.55%

Gross Income / Square Feet $16.06

Gross Expenses / Square Feet ($4.69)

Operating Expense Ratio 29.22%

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MAPS AND AERIALS



p. 11

MAPS AND AERIALS



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CASH FLOW ANALYSIS



Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

GROSS SCHEDULED INCOME $161,820 $175,896 $178,812 $180,489 $180,489 $180,489 $180,489 $180,489 $180,489 $180,489

Total Operating Expenses ($47,279) ($47,702) ($47,789) ($47,839) ($47,839) ($47,839) ($47,839) ($47,839) ($47,839) ($47,839)

NET OPERATING INCOME $114,541 $128,195 $131,023 $132,650 $132,650 $132,650 $132,650 $132,650 $132,650 $132,650

Loan Payment ($105,315) ($105,315) ($105,315) ($105,315) ($105,315) ($149,784) ($149,784) ($149,784) ($149,784) ($149,784)

NET CASH FLOW (b/t) $9,225 $22,879 $25,707 $27,335 $27,335 ($17,134) ($17,134) ($17,134) ($17,134) ($17,134)

Cash On Cash Return b/t 1.69% 4.19% 4.71% 5.01% 5.01% -3.14% -3.14% -3.14% -3.14% -3.14%


Depreciation ($30,433) ($31,758) ($31,758) ($31,758) ($31,758) ($31,758) ($31,758) ($31,758) ($31,758) ($30,444)

Amortization ($306) ($306) ($306) ($306) ($306) ($306) ($306) ($306) ($306) ($306)

Loan Interest ($72,610) ($70,593) ($68,452) ($66,178) ($63,764) ($123,382) ($120,033) ($116,260) ($112,008) ($107,217)

TAXABLE INCOME (LOSS) $11,191 $25,537 $30,507 $34,408 $36,821 ($22,796) ($19,448) ($15,675) ($11,423) ($5,318)

Income Taxes ($3,134) ($7,150) ($8,542) ($9,634) ($10,310) $6,383 $5,445 $4,389 $3,198 $1,489

CASH FLOW (a/t) $6,092 $15,729 $17,166 $17,701 $17,025 ($10,751) ($11,688) ($12,745) ($13,935) ($15,645)

Cash On Cash Return a/t 1.12% 2.88% 3.14% 3.24% 3.12% -1.97% -2.14% -2.33% -2.55% -2.86%

Footnotes: b/t = before taxes;a/t = after taxes

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FINANCIAL INDICATORS




Gross Rent Multiplier 11.08 10.45 10.54 10.70 10.97 11.24 11.53 11.81 12.11 12.41

Capitalization Rate 6.55% 7.33% 7.49% 7.58% 7.58% 7.58% 7.58% 7.58% 7.58% 7.58%

Cash On Cash Return b/t 1.69% 4.19% 4.71% 5.01% 5.01% -3.14% -3.14% -3.14% -3.14% -3.14%

Cash On Cash Return a/t 1.12% 2.88% 3.14% 3.24% 3.12% -1.97% -2.14% -2.33% -2.55% -2.86%

Debt Coverage Ratio 1.09 1.22 1.24 1.26 1.26 0.89 0.89 0.89 0.89 0.89

Gross Income per Sq. Ft. $16.06 $17.46 $17.75 $17.92 $17.92 $17.92 $17.92 $17.92 $17.92 $17.92

Expenses per Sq. Ft. ($4.69) ($4.74) ($4.74) ($4.75) ($4.75) ($4.75) ($4.75) ($4.75) ($4.75) ($4.75)

Net Income Multiplier 15.66 14.34 14.38 14.56 14.93 15.30 15.68 16.07 16.48 16.89

Operating Expense Ratio 29.22% 27.12% 26.73% 26.51% 26.51% 26.51% 26.51% 26.51% 26.51% 26.51%

Loan To Value Ratio 66.47% 62.96% 59.47% 55.99% 52.53% 49.95% 47.30% 44.57% 41.76% 38.84%

Footnotes: b/t = before taxes; a/t = after taxes

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DETAILED GENERAL EXPENSES




Total Expenses ($47,279) ($47,702) ($47,789) ($47,839) ($47,839) ($47,839) ($47,839) ($47,839) ($47,839) ($47,839)

Property Management Fee ($4,855) ($5,277) ($5,364) ($5,415) ($5,415) ($5,415) ($5,415) ($5,415) ($5,415) ($5,415)

Replacement Reserves ($1,007) ($1,007) ($1,007) ($1,007) ($1,007) ($1,007) ($1,007) ($1,007) ($1,007) ($1,007)

Building Insurance ($4,100) ($4,100) ($4,100) ($4,100) ($4,100) ($4,100) ($4,100) ($4,100) ($4,100) ($4,100)

Lawn Maintenance ($3,675) ($3,675) ($3,675) ($3,675) ($3,675) ($3,675) ($3,675) ($3,675) ($3,675) ($3,675)

Repairs & Maintenance ($3,500) ($3,500) ($3,500) ($3,500) ($3,500) ($3,500) ($3,500) ($3,500) ($3,500) ($3,500)

Taxes - Real Estate ($19,832) ($19,832) ($19,832) ($19,832) ($19,832) ($19,832) ($19,832) ($19,832) ($19,832) ($19,832)

Utility - Electricity W/S/G ($10,310) ($10,310) ($10,310) ($10,310) ($10,310) ($10,310) ($10,310) ($10,310) ($10,310) ($10,310)

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ANNUAL PROPERTY OPERATING DATA




Rental Income $161,820 $175,896 $178,812 $180,489 $180,489 $180,489 $180,489 $180,489 $180,489 $180,489

GROSS SCHEDULED INCOME $161,820 $175,896 $178,812 $180,489 $180,489 $180,489 $180,489 $180,489 $180,489 $180,489

GROSS OPERATING INCOME $161,820 $175,896 $178,812 $180,489 $180,489 $180,489 $180,489 $180,489 $180,489 $180,489

Expenses

Property Management Fee ($4,855) ($5,277) ($5,364) ($5,415) ($5,415) ($5,415) ($5,415) ($5,415) ($5,415) ($5,415)

Replacement Reserves ($1,007) ($1,007) ($1,007) ($1,007) ($1,007) ($1,007) ($1,007) ($1,007) ($1,007) ($1,007)

Building Insurance ($4,100) ($4,100) ($4,100) ($4,100) ($4,100) ($4,100) ($4,100) ($4,100) ($4,100) ($4,100)

Lawn Maintenance ($3,675) ($3,675) ($3,675) ($3,675) ($3,675) ($3,675) ($3,675) ($3,675) ($3,675) ($3,675)

Repairs & Maintenance ($3,500) ($3,500) ($3,500) ($3,500) ($3,500) ($3,500) ($3,500) ($3,500) ($3,500) ($3,500)

Taxes - Real Estate ($19,832) ($19,832) ($19,832) ($19,832) ($19,832) ($19,832) ($19,832) ($19,832) ($19,832) ($19,832)

Utility - Electricity W/S/G ($10,310) ($10,310) ($10,310) ($10,310) ($10,310) ($10,310) ($10,310) ($10,310) ($10,310) ($10,310)

TOTAL OPERATING EXPENSES ($47,279) ($47,702) ($47,789) ($47,839) ($47,839) ($47,839) ($47,839) ($47,839) ($47,839) ($47,839)


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