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2230 W Chapman Avenue, Orange, CA 92868Owner-User Offering: Flexible Occupancy (current executive suite)
Property Video at EconomosDeWolf.com
FOR SALE
The information contained in this document is proprietary to Economos DeWolf, Inc. and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of Economos DeWolf, Inc. and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.
TABLE OF CONTENTS
W CHAPMAN AVENUE
2230
Steve EconomosCo-FounderDirect 949-576-2750Mobile [email protected] #01159994
Geoff DeWolfCo-Founder
Direct 949-576-2751Mobile 949-500-6654
[email protected] #01319312
Exclusive advisors
Economos DeWolf25 Pacifica, #5321, Irvine, CA 92618economosdewolf.com
Images. Here you’ll find attractive building photographs and the
functional interior floor plans. Pages 7-8
Property. This section opens with a brief property description
followed by the property’s compelling highlights and aerials showcasing its location and nearby amenities. Pages 3-6
Market. This section opens with three key sale comps followed by
a custom market report for the surrounding area. Pages 15-16
Financials. Providing solid support to purchase and occupy this
property, the financials consist of a description of the owner-user opportunity, a purchase-vs-lease analysis, loan illustration, and the tax benefits of depreciation. Pages 9-14
SUMMARY
Sale price $4,275,000 (±$165 per square foot)
Size ±25,900 square feet
Address 2230 W. Chapman AvenueOrange, California 92868
Propertydescription
An elevator-served, two-story office building built in 1981 and renovated to today’s standards. It has incredible exposure along busy W. Chapman Avenue. The building has operable sliding-glass doors, usable balconies, and an attractive interior. It has ±85 parking stalls.
Location This building enjoys prominent Chapman frontage with easy access to the I-57, I-5, and I-22, and is near numerous restaurants and amenities.
Occupancy The building currently operates as an executive-suite service. With highly-flexible lease terms in place, the buyer has many occupancy options, including the entire building, a single floor, or a small amount to accommodate growth.
Pro
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HIGHLIGHTS
Pro
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Highly-functional two-story elevator-served office building with
easy surface parking.
Incredible Chapman exposure and near-immediate freeway
access.
Very flexible occupancy options for the buyer: entire building,
a single floor, or a small amount to accommodate growth.
A buyer can lock in long-term occupancy costs and avoid
being at the mercy of rising lease rates, plus build equity
along the way.
In-place income from the executive-suite tenants.
Priced below recent sale comps and well-below replacement
cost. The building has a high-quality interior with many offices
that would be very costly to replicate.
It’s near many convenient restaurants and amenities, and is
just a short drive to Old Town Orange with high-end
restaurants and shopping; also near Angel Stadium and the
Honda Center (home of the Anaheim Ducks and many
concerts and events).
AERIAL MAP
Pro
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2230 WChapmanAvenue
2230 W Chapman Ave.
Miles to Interstate 57 0.2
Miles to Interstate 5 0.6
Miles to Interstate 22 0.9
Miles to Interstate 55 3.7
Miles to John Wayne Airport 11.4
AMENITIES
Pro
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OLD TOWN ORANGE
1. Starbucks2. Smoqued BBQ3. Blaze Pizza4. Bruxie5. Citrus City Grill6. Gabbi’s Mexican
Kitchen7. Haven Gastropub8. Paul’s9. Provisions Market10.Watson’s Soda
Fountain11.Wells Fargo12.US Bank2230 W
ChapmanAvenue
PHOTOGRAPHSImag
es
FLOORPLANS
Imag
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In the analysis on the following page, we assume that a user secures a
25-year, fully-amortized SBA 7a loan option with a 10% down payment
and financed loan fees.
As the percentage of principal accumulation increases year-over-year, it
becomes increasingly favorable to purchase instead of lease. Following
are charts depicting the principal payments paid over 25 years, ending in
a loan balance of zero when the building is owned free-and-clear:
OWNER-USEROPPORTUNITYF
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PURCHASE VS. LEASE ANALYSIS
Situation: An owner-user purchases and occupies 2230 W Chapman Avenue for $165/sf with an initial investment of $17/sf (10% down payment).
Estimated Monthly CostsTypical Operating Expenses: $0.70/SFMortgage Payment: $0.88/SF
Amount of Principal in Mortgage Payment: ($0.30/SF)
Ownership Cost in Year 1: $1.28/sf
Compare to Estimated Starting Lease Rate: $2.00/sf
The advantage of owning over leasing increases every year. Assuming lease rates increase by 3% annually and operating expenses increase by 2.5% annually, below is a ten-year comparative analysis of purchasing vs. leasing (per square foot):
Fin
anci
als
Lease OwnAnnual Savings
Cumulative Savings
Year 1 $2.00 $1.28 $8.64 $8.64
Year 2 $2.06 $1.28 $9.38 $18.03 Return of Initial Investment
Year 3 $2.12 $1.28 $10.14 $28.16
Year 4 $2.19 $1.28 $10.91 $39.07
Year 5 $2.25 $1.28 $11.70 $50.76
Year 6 $2.32 $1.28 $12.50 $63.27
Year 7 $2.39 $1.28 $13.33 $76.59
Year 8 $2.46 $1.28 $14.17 $90.77
Year 9 $2.53 $1.28 $15.04 $105.80
Year 10 $2.61 $1.28 $15.92 $121.72 Own vs. Lease Savings After 10 Years
LOAN ILLUSTRATIONF
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cial
s
Assume a business owner or trust personally purchases the building and leases it to his/her business at a market rate (this is allowable under the SBA program). Cash flow and taxable income of the business are not affected. However, this owner’s personal financial situation would benefit from depreciation of the building. In terms of this scenario, depreciation is the spreading of cost over the useful life of an asset.
The Internal Revenue Service allows for a tax deduction of commercial property improvements depreciation based on a 39‐year life. Simply stated, a portion of the cost of the building (excluding land) reduces taxable income, and thus tax liability, for a period of up to 39 years.
In this scenario, let us assume the following facts:
Purchase Price: $4,275,000Building Size: 25,900 Square Feet ($165/sf)Percentage of Building to Land: 45% / 55%Owner’s personal income tax bracket: 33%
The amount subject to depreciation, in this example, is 45% of $4,275,000, or $1,923,750. Spread over the IRS’ mandated 39 years, the deduction per year is approximately $49,000. At a tax rate of 33%, the tax savings due to depreciation is $16,000 per year of ownership.
If you are considering this on a monthly per‐square‐foot basis consistent with the example on the previous page, this tax savings equates to an additional ownership benefit of $0.05/sf per month.
As time progresses, the cost basis of the building is being reduced by depreciation accumulated since purchase. Should the owner decide to sell, the depreciation is recaptured and taxed, but it is at a standard 25% as opposed to the 33% ordinary income rate used when the deduction was realized. This yields an overall tax benefit during the building ownership period, especially if the building is kept and passed down to future generations.
It is important to note that this example may differ from your situation. Please consult with your tax advisor.
TAX BENEFITSOF DEPRECIATIONDEPRECIATION IS NOT INCLUDED IN THE COST OF OCCUPANCY SHOWN EARLIER; THIS IS AN ADDITIONAL POSSIBLE BENEFIT
Fin
anci
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REPLACEMENTCOST ANALYSISF
inan
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Building square footage 25,900
TotalPer BuildingSquare Foot
Shell and core cost $4,273,500 $165
Soft cost (taxes, insurance, development fee, etc.) $1,554,000 $60
Tenant improvements $1,554,000 $60
Site work (est. 85 parking stalls @ average of $3,000 per stall) $255,000 $10
Estimated land cost (per building sq.ft.) $906,500 $35
Total Replacement Cost $8,543,000 $330
Compare to Asking Price $4,275,000 $165
SALECOMPS
PropertySale Date
SizePrice P.S.F.
Market Insight
101 W 4th StreetSanta Ana
Mar 2017
18,894 SF
$4,200,000$222
This 1900 office building is larger, has not been
renovated since 1988, and is lacking parking. 2230 W
Chapman is priced to sell at just $165/sf.
1036 W Taft AvenueOrange
Jun 2017
14,101 SF
$3,085,000$219
Owner-user sale for a building comparable in
quality and location. 2230 W Chapman is larger so should
be less valuable, but the difference of $54/sf more than accounts for the size
differential.
615 W Civic CenterSanta Ana
Aug 2017
22,376 SF
$3,380,000$151
This building is inferior in quality and 15 years older
than 2230 W Chapman. $165/sf for 2230 W Chapman Avenue by comparison is a
solid value.
Mar
ket
OFFICE REPORTSOURCE: COSTAR 2017
Mar
ket
OFFICE REPORTSOURCE: COSTAR 2017
Mar
ket
Steve EconomosCo-founderDirect 949-576-2750Mobile [email protected] #01159994
Geoff DeWolfCo-founderDirect 949-576-2751Mobile [email protected] #01319312
Exclusive investment advisors
Economos DeWolf, Inc.25 Pacifica, #5321, Irvine, CA 92618License 02040292economosdewolf.com
