The pro forma information as well as projected rent roll information attached hereto is based, in
part, upon information gathered and analyzed as part of our due diligence investigation of the
property to date and does not purport to represent the future financial position of or results of
future ownership operations for the property.
Déjà vu - Second Street Station
Ft Pierce Florida USA
Second Street Station continues our strategy of locating underperforming South Florida
properties which are not on the market, multi-tenanted, unanchored, in regenerating and/or
rapidly growing areas structured virtually cash flow neutral from closing.
It is our second “shot” at this unique property, as some may remember.
Kind regards
B&B
THE OPPORTUNITY
Second Street Station is a restored historic retail/commercial property in Fort Pierce, Florida
USA, in the centre of an area of exponentially growing real estate values with significantly
greater future growth potential. (the tax base has increased 50% in the last year according to
municipal sources).
Almost one year after we first considered this property, the market continues to be vibrant and all
of the factors and developments described in the previous analysis have progressed. Importantly
also, hurricane recovery in the commercial areas is almost complete.
Our strategy is to acquire the property quickly, taking advantage of the fact that we have already
completed most of our due diligence research previously, then rent the property at market rent on
relatively short term leases and refinance the property in the next 6 to 18 months, recovering
US$.8 to 1.2 million cash. Current market rents in the area are over US$ 14/sf on a net basis
considerable less than the average being achieved by the property. By raising rents continuously
in conservative increments we expect by 2008 “Mom and Pop’s” to be replaced by upscale
regional or national tenants. Piggybacking on the already planned new developments in the
immediate area, we expect rents in 2008 to be at least US$22 per square foot with full pass
through of CAM.
Although the cap rate is low currently, there is excellent potential for increasing NOI by standard,
good real estate management techniques (the owner, who manages the property while running a
substantial garment business, admits most of the tenants are personal friends and that she has a
hard time being firm with them. She commented that the reason she purchased and restored the
building was to, "...do something nice for the city."). More importantly, being in the centre of an
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area just “waking up”, a la West Palm Beach 15 years ago, the demand for retail and commercial
space seems certain to grow at a higher than linear rate.
Downtown retail/office vacancies in the Historic District to the east of US Route 1 are almost
non-existent where current developments include expansion of the already substantial marina,
three mixed use developments – one by Catalfumo, www.catalfumo.com/portfolio who is a major
developer in Palm Beach/Port St Lucie/Martin counties, a $50 M 5 story condo/retail project
called “Renaissance”, a parking garage, a hotel, the 1300 seat “Sunrise”theatre and the
dismantling and redevelopment of the downtown conventional electric power plant.
Architecturally, there is the potential also to restore the now single story building to its original
two stories as has been discussed with the City.
WHY THE US STATE OF FLORIDA
Real Estate has been appreciating in some areas at an annual rate of 35%.
Considered the most livable State in The Union, it is estimated approximately 1000 people move
to the State each day. Every day in the decade of the 1990's, Florida grew by 834 people.
Florida continues to be one of the most rapidly growing states in the nation. According to the
2000 Census, Florida's population was 15,982,378 on April 1, 2000, an increase of 3,044,307
since April 1, 1990. The 1990s was the third consecutive decade in which the Florida population
grew by approximately 3 million residents. Florida's absolute population increase during the
1990s was the third largest of any state, trailing only California and Texas. Its percentage
increase (23.5 percent) was the seventh highest in the nation.
Net immigration into Florida was almost 2.6 million during the 1990s and accounted for 85.3
percent of the state's growth. This stands in sharp contrast to the experience in many states, where
net migration is small or even negative.
Florida is currently the fourth most populous state, with 14 million residents, and is projected to
grow to 17-18 million by 2010, and to 22 million by 2020. According to a new study from the
Center for Immigration Studies, immigrants and their children account for 30 percent of the
state's population growth.
WHY FORT PIERCE?
Located just 30 minutes north of Palm Beach County, the city is a short commute to North Palm
Beach via I-95 and the Florida Turnpike.
Fort Pierce celebrated its 100th birthday in 2001
Fort Pierce is now recognized as “The Next City”. It is one of the last un-gentrified cities on the
Florida’s East Coast (like Riviera Beach) wedged between Vero Beach to the North and Hobe
Sound/Pt St Lucie/Stuart to the South which are exploding with growth and development.
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Fort Pierce has been experiencing steady growth over the past five years, growth which has
become almost exponential recently.
Historically the local economy depended on being the county seat of St Lucie County with a US
Federal Court House and the citrus industry benefiting from a deep-water port, excellent rail
connections and large labour pool. The citrus packing business is in decline. Tourism is driven
by the beaches and the excellent fishing.
For what is actually quite a small town, Fort Pierce has an International Airport
www.fltplan.com/AirportInformation/KFPR.htm www.stlucieco.gov/airport/airport-info/
and an active commercial port www.stlucieco.gov/port/Background.htm
www.stlucieco.gov/port/maps/aerial_of_port.htm . With a controlling depth of 28 feet the port
attracts offshore day cruises, SuperYachts and luxury Intracoastal Waterway vessels.
A number of major national companies plan ventures in St Lucie County; the Wal-Mart
distribution centre is already open.
Ft Pierce can be thought of as extending East from I-95 to the Sea and divided in 5 sections:
www.mapquest.com/maps/map.adp?country=US&address=&city=Fort+Pierce&state=FL
1.
2.
3.
4.
5.
Undeveloped land (I- 95 and Hartman Road),
The mature middle class neighbourhood (Hartman Road to South 7th street),
The western downtown (South 7th Street to US1)
The Historic District (US1 to the Intracoastal/Indian River)
South Hutchinson Island
Area 1: Here major developers including Lennar have applied to build large-scale residential
subdivisions, according to the city.
Area 2: This area was developed after WWII but became residences for citrus workers. As
residents who grew up there a generation ago return and the city makes infrastructure
improvements this area is improving.
Area 3: The Arcade Shopping Centre and Office building, two restoration projects which
pioneered the regeneration here, are being joined by redevelopment of nearby former retail
building in advance of the new Federal Courthouse.
Area 4: “The Historic District” – Now with virtually no retail/office vacancies, relatively low
property prices have already resulted in a transformation where many of the structures date from
early in the last century. Growth is also fed by the local marina, which is scheduled to be rebuilt
after the damage of last year’s hurricanes.
Area 5: Hutchinson Island/Causeway Island – Activity on the Seaway Drive Causeway has made
acquiring any real estate there extremely problematic. An almost 400 unit condo project which
sold out in a single day is now almost completed and the trailer park adjacent to the Smithsonian
Institution is now being razed for redevelopment.
Other useful URL’s include:
www.cityoffortpierce.com
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www.mapquest.com/maps/map.adp?country=US&address=&city=Fort+Pierce&state=FL
WHY THIS PROPERTY?
The property is in the heart of the Fort Pierce Historic District (Area 1 above) to the east of US
Route 1, on the northeast corner of Second Street and Avenue A (the corner of “Main and
Main”). www.holoresdatasys.com/ftpierce/map.pdf
Despite having been completed one hundred years ago as the two story “Atlantic Hotel”, Second
Street Station is in excellent condition after a renovation approximately 6 years ago. Tangible
proof of its structural integrity was perhaps best demonstrated by having survived two head-on
hurricanes last year with no damage. Based on our previous structural/mechanical investigations,
we estimate approximately US$25k deferred maintenance items.
Second Street Station is directly south of the above referenced redundant power plant which is
scheduled to be demolished and redeveloped. It is adjacent to the planned luxury condominium
project to the Northeast, one block to the west of the marina, adjacent to the Cobb Building - a
National Historic Landmark, diagonally across from the planned parking garage/hotel/retail
project to the Southeast and one block north of the 1300 seat theatre and the Renaissance.
The property is generally rented at lower than market rates, particularly considering the major
new developments and projects within one city block of the property and promises to benefit in
the near future from surrounding development.
FINANCIAL SUMMARY (“THE DEAL”)
(Please see detailed financial pro forma attached)
PLEASE NOTE: The analysis includes a 5% each allowance for vacancy, management and
capital reserves,
Agreed Price:
US$1,800,000 CASH
Projected NOI:
2006: US$110,258
2007: US$137,098
2008: US$170,698
FEATURES
High visibility downtown street corner
Centre of historical district and well-advanced major redevelopment
9122 sf retail/office space with the potential to expand vertically, subject to planning
75% (approx) of floor area appears to have non-load bearing walls which could facilitate renting
to a single tenant
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CONSTRUCTION
100+ years old, fully restored and in excellent condition
Single story, 75% (approx) of floor area appears to have non-load bearing walls
Flat-pitched roof
No parking but with on street and adjacent municipal parking facilities and new municipal garage
planned
Individually air conditioned throughout
TIME LINE
Contract signed:
1JUL05
DD Ends, Deposit “Hard”:
15JUL05
Closing:
1SEP05
DETAILED FINANCIAL ANALYSIS
Please see attached pro forma spreadsheet.
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