Hey everyone, and welcome back to my blog. I am excited to announce that I started work on my final project for Churchill (a complete loan package) last Thursday, and while I have held off on talking about it for a while to ensure that this indeed was my final project, I know for sure now.
Churchill will not be working on the deal involving the apartment complex near the light-rail, so I am instead working on a retail center refinance in Queen Creek (buckle up- this might be a long post).
This specific retail center is located on the intersection of two major roads in Queen Creek, one of which runs straight through town, and therefore sees lots of traffic. The properties that are being refinanced exist in a center that is shadow-anchored by Walmart. In reference to a retail center, an anchor refers to the main or biggest business in that complex. For example, the Safeway near BASIS, on Frank Lloyd Wright and Via Linda, would be the anchor tenant for that complex. A shadow-anchor is a relative term, in that it means that the anchor is not part of the deal at hand; the owners of the properties that will be refinanced do not own Walmart. This complicates things for a number of reasons, but the main one is that the next two big businesses in that complex, Staples and Petco, are co-tenants with Walmart. Co-tenancy basically means that if Walmart decides to leave that complex and vacate the building, Staples and Petco will most likely also leave or see major reductions in their rent. Lots of new terms, I know, but bear with me here.
The reason that this project is a good one to explore economic development of an area before and after a commercial real estate deal occurs is that Queen Creek is one of the fastest growing cities in the Valley. Over the past fifteen years, it has seen an increase of 100,000 people, and expects to see 20,000 more by 2021. In addition to this, the median household income is increasing relatively quickly as well, with projections showing an increase of approximately 10,000 dollars per year for each household by 2021. Increases in population and median household income tend to signal the economic development of an area. In regards to the specific center, I'll have to look into the growth of the surrounding area, and to what extent it was facilitated by the development of this retail center.
As for what I've been working on over the past week, I've started with the preliminary analysis of the property. I first worked on the rent roll, which, as you may remember, tracks the rent paid by all of the tenants. These properties make over 1.6 million on rent alone. I then had to work on Bumps, which is the amount per square foot per year that the rent increases for each tenant. The increases are usually less than a dollar per year, and oftentimes the bumps happen more than one year apart. After that, I worked on the operating history, which is very similar to the work I was doing for the loan reviews; I took a look at the sources of income and the expenses that the properties had overall, and based on that, potential lenders can see how the properties operate in a nutshell. On Wednesday, I worked on taxes, which was a little tough.
Tax information is based on parcels as designated by the Maricopa County Assessor's office. Parcels are small areas of land, and this particular retail center has at least 15 different parcels that make it up. I originally did all of the tax information for all 15 parcels; the tax information that I collected consisted of the amounts paid for the past 6 years, the valuations of the parcels for 2016 and 17, and the projected taxes for 2017. As you can imagine, it took me a very long time to do this for 15 parcels, and after I finished, I went back to double-check that I did all of them correctly. Upon doing this, I found that I had collected the information for 9 parcels that weren't part of the subject properties, and missed 3 entirely. It was quite frustrating, but at least I know now to check before I start doing this.
Today, I've been working on the neighborhood description, as well as the maps and aerial photos for the loan package. All of the work I mentioned previously goes into an excel spreadsheet to keep it organized, and it will eventually also be included in the package. The neighborhood description and maps are more for presentation purposes (to give the potential lenders an idea of what the properties look like) than economic ones. I think this is probably the hardest portion of this for me so far, because there are several aspects that have to be addressed in the neighborhood description, such as demographics, economic development of the area, and expansion or development plans for the area as outlined by the municipal governments. I've been working on this all day and I still don't have a decent draft going, because of all of the information that I have to synthesize into a page or two (I'm sorry Mrs. Hammond!). It's taking me a while to understand the demographics and market information that Churchill has provided me with, but I hope to have a decent draft by Monday. As for maps and aerials, they tend to take me an hour total, so I figure that if there's ever a point at which I have no idea what's going on as I glance over these numbers, I can work on those for a while and have those finished by Monday as well.
Anyway, while I haven't embarrassed myself that much this week, I decided to take a risk this week and wear red lipstick! It wasn't the best decision. Maybe it's just the specific lipstick I have, but every time I eat or drink something, it gets everywhere. All over my chin and even my nose, and then on whatever unfortunate food or beverage I'm having in the moment. I suppose for every big victory there has to be a little loss. Thanks for reading, and I'll see you next week!
Churchill will not be working on the deal involving the apartment complex near the light-rail, so I am instead working on a retail center refinance in Queen Creek (buckle up- this might be a long post).
This specific retail center is located on the intersection of two major roads in Queen Creek, one of which runs straight through town, and therefore sees lots of traffic. The properties that are being refinanced exist in a center that is shadow-anchored by Walmart. In reference to a retail center, an anchor refers to the main or biggest business in that complex. For example, the Safeway near BASIS, on Frank Lloyd Wright and Via Linda, would be the anchor tenant for that complex. A shadow-anchor is a relative term, in that it means that the anchor is not part of the deal at hand; the owners of the properties that will be refinanced do not own Walmart. This complicates things for a number of reasons, but the main one is that the next two big businesses in that complex, Staples and Petco, are co-tenants with Walmart. Co-tenancy basically means that if Walmart decides to leave that complex and vacate the building, Staples and Petco will most likely also leave or see major reductions in their rent. Lots of new terms, I know, but bear with me here.
The reason that this project is a good one to explore economic development of an area before and after a commercial real estate deal occurs is that Queen Creek is one of the fastest growing cities in the Valley. Over the past fifteen years, it has seen an increase of 100,000 people, and expects to see 20,000 more by 2021. In addition to this, the median household income is increasing relatively quickly as well, with projections showing an increase of approximately 10,000 dollars per year for each household by 2021. Increases in population and median household income tend to signal the economic development of an area. In regards to the specific center, I'll have to look into the growth of the surrounding area, and to what extent it was facilitated by the development of this retail center.
As for what I've been working on over the past week, I've started with the preliminary analysis of the property. I first worked on the rent roll, which, as you may remember, tracks the rent paid by all of the tenants. These properties make over 1.6 million on rent alone. I then had to work on Bumps, which is the amount per square foot per year that the rent increases for each tenant. The increases are usually less than a dollar per year, and oftentimes the bumps happen more than one year apart. After that, I worked on the operating history, which is very similar to the work I was doing for the loan reviews; I took a look at the sources of income and the expenses that the properties had overall, and based on that, potential lenders can see how the properties operate in a nutshell. On Wednesday, I worked on taxes, which was a little tough.
Tax information is based on parcels as designated by the Maricopa County Assessor's office. Parcels are small areas of land, and this particular retail center has at least 15 different parcels that make it up. I originally did all of the tax information for all 15 parcels; the tax information that I collected consisted of the amounts paid for the past 6 years, the valuations of the parcels for 2016 and 17, and the projected taxes for 2017. As you can imagine, it took me a very long time to do this for 15 parcels, and after I finished, I went back to double-check that I did all of them correctly. Upon doing this, I found that I had collected the information for 9 parcels that weren't part of the subject properties, and missed 3 entirely. It was quite frustrating, but at least I know now to check before I start doing this.
Today, I've been working on the neighborhood description, as well as the maps and aerial photos for the loan package. All of the work I mentioned previously goes into an excel spreadsheet to keep it organized, and it will eventually also be included in the package. The neighborhood description and maps are more for presentation purposes (to give the potential lenders an idea of what the properties look like) than economic ones. I think this is probably the hardest portion of this for me so far, because there are several aspects that have to be addressed in the neighborhood description, such as demographics, economic development of the area, and expansion or development plans for the area as outlined by the municipal governments. I've been working on this all day and I still don't have a decent draft going, because of all of the information that I have to synthesize into a page or two (I'm sorry Mrs. Hammond!). It's taking me a while to understand the demographics and market information that Churchill has provided me with, but I hope to have a decent draft by Monday. As for maps and aerials, they tend to take me an hour total, so I figure that if there's ever a point at which I have no idea what's going on as I glance over these numbers, I can work on those for a while and have those finished by Monday as well.
Anyway, while I haven't embarrassed myself that much this week, I decided to take a risk this week and wear red lipstick! It wasn't the best decision. Maybe it's just the specific lipstick I have, but every time I eat or drink something, it gets everywhere. All over my chin and even my nose, and then on whatever unfortunate food or beverage I'm having in the moment. I suppose for every big victory there has to be a little loss. Thanks for reading, and I'll see you next week!
