Doral Economic Impact Holdings, LLC
A Florida Limited Liability Company ACTUAL BUSINESS PLAN
Pursuant to 8 CFR §204.6(j)(4)(B) and Matter of Ho
October 2013
Sponsored by:
Florida EB-5 Investments, LLC
(USCIS-designated Regional Center since July 15, 2010)
125 Spring Lake Hills Drive
Altamonte Springs, Florida 32714
Phone: 954 274 6483
Email: rodrigo.azpurua@gmail.com
Website: http://www.rivierap.com/
Contents Private and Strictly Confidential TABLE OF CONTENTS
1.0
EXECUTIVE SUMMARY ............................................................................................................... 3
1.1
Definition of Terms ....................................................................................................................... 3
1.2
Matter of Ho Index ........................................................................................................................ 6
1.3
Introduction.................................................................................................................................... 7
1.4
New Commercial Enterprise.......................................................................................................... 8
1.5
Job-Creation Investment Target .................................................................................................... 9
2.0
BUSINESS OVERVIEW ................................................................................................................ 10
2.1
Investment Organizational Structure ........................................................................................... 10
2.2
Management Team ...................................................................................................................... 11
2.2.1
New Commercial Enterprise Management .......................................................................... 11
2.2.2
Regional Center Sponsorship .............................................................................................. 12
2.2.3
Project Ownership ............................................................................................................... 14
2.2.4
Project Developer Management .......................................................................................... 14
2.3
3.0
Consultants .................................................................................. Error! Bookmark not defined.
PROJECT DESCRIPTION ............................................................................................................. 19
3.1
Project Overview ......................................................................................................................... 19
3.2
Project Details .............................................................................................................................. 19
3.3
Subject Property........................................................................................................................... 22
3.4
Subject Property Area Profiles .................................................................................................... 25
3.4.1
City of Doral Overview ....................................................................................................... 25
3.4.2
Miami-Dade County Overview ........................................................................................... 26
3.4.3
Population ............................................................................................................................ 27
3.4.4
Employment ......................................................................................................................... 32
3.4.5
Housing ................................................................................................................................ 35
4.0
PROJECT DEVELOPMENT TIMELINE ...................................................................................... 36
5.0
PROJECT FINANCING ................................................................................................................. 39
5.1
Capitalization ............................................................................................................................... 39
5.2
Project Development Costs.......................................................................................................... 40
6.0
PROJECT FINANCIAL PERFOMANCE ...................................................................................... 41
6.1
Financial Projections ................................................................................................................... 41
6.2
Loan Repayment .......................................................................................................................... 43
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7.0
MARKET ANALYSIS .................................................................................................................... 44
7.1
Industry Activities ....................................................................................................................... 44
7.2
Offices of Lawyers (NAICS 541110) .......................................................................................... 46
7.2.1
U.S. Law Firm Overview..................................................................................................... 47
7.2.2
Local Law Firm Market ....................................................................................................... 50
7.2.3
Market Position .................................................................................................................... 52
7.3
Accounting, Bookkeeping, and Payroll Services (NAICS 54121) .............................................. 53
7.3.1
U.S. Accounting, Bookkeeping, and Payroll Services Industry Overview ......................... 54
7.3.2
Local Accounting, Tax Preparation, Bookkeeping, and Payroll Services Market .............. 62
7.3.3
Market Position .................................................................................................................... 63
7.4
Management Consulting Services (NAICS 54161) ..................................................................... 66
7.4.1
U.S. Management Consulting Industry Overview ............................................................... 67
7.4.2
Local Management Consulting Market ............................................................................... 71
7.4.3
Market Position .................................................................................................................... 72
7.5
Other Professional, Scientific, and Technical Services (NAICS 5419) ...................................... 75
7.5.1
U.S. Market Research Industry Overview ........................................................................... 75
7.5.2
Local Market Research Industry .......................................................................................... 80
7.5.3
Market Position .................................................................................................................... 81
7.6
8.0
Marketing Strategy ...................................................................................................................... 83
EMPLOYMENT.............................................................................................................................. 84
8.1
Targeted Employment Area ......................................................................................................... 84
8.2
Job Creation ................................................................................................................................. 85
8.3
Tenant Occupancy ....................................................................................................................... 86
8.3.1
Evidence of Occupancy by Tenants .................................................................................... 87
8.3.2
Confirmation of New Jobs ................................................................................................... 98
8.3.3
Reasonability of Job Estimates ............................................................................................ 99
EXHIBIT A: REGIONAL CENTER DOCUMENTS .............................................................................. 100
EXHIBIT B: FLOW OF FUNDS .............................................................................................................. 106
EXHIBIT C: DEVELOPMENT COST DETAILS ................................................................................... 108
EXHIBIT D: REVENUE PROJECTION DETAILS ................................................................................ 119
EXHIBIT E: TEA DESIGNATION .......................................................................................................... 122
EXHIBIT F: LEASE FOR PROSPECTIVE TENANTS .......................................................................... 125
EXHIBIT G: MARKET STUDIES ........................................................................................................... 126 Doral Economic Impact Holdings, LLC
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1.0
EXECUTIVE SUMMARY
1.1
Definition of Terms
Developer: Riviera Point Development Group, LLC (“RPDG”), a Limited Liability Company
within the State of Florida, is the development entity contracted by the Owner/Operator to
manage and conduct the project development activities.
EB-5 Investor: A prospective purchaser of a Unit in the New Commercial Enterprise; an EB-5
Investor may also be known simply as an Investor. If an Investor purchases a Unit, such Investor
shall thereafter be referred to as an EB-5 Member.
EB-5 Limited Liability Company (“EB-5 LLC”): Doral Economic Impact Holdings, LLC
(“DEIH”), a Florida Limited Liability Limited Company, is the New Commercial Enterprise
that will aggregate EB-5 investor funds and loan them to the Owner for job-creating purposes.
DEIH consists of DEFM as the EB-5 Managing Member and each of the foreign investors who
purchase a Unit in the EB-5 LLC as its EB-5 Members. The EB-5 LLC may also be known
simply as The Company.
EB-5 Managing Member: Doral EB5 Financing and Management, LLC (“DEFM”), a
Florida Limited Liability Company that will manage the EB-5 LLC’s business activities on
behalf of the Limited Partners as well as serve as a sponsor of the Project.
EB-5 Member: A Member in the EB-5 LLC, with certain rights, powers, and duties as specified
in the Operating Agreement of the New Commercial Enterprise, who is admitted to the LLC with
the EB-5 Immigrant Investment Program and USCIS policy memoranda and Administrative
Appeals Office precedent decisions governing the EB-5 Program. An EB-5 Member may also be
known simply as a Member or an EB-5 Investor.
EBIDTA: EBIDTA is an acronym for “Earnings Before Interest, Depreciation, Taxes, and
Amortization”. Interest expense is a function of leverage, not operations; Depreciation expense is
an accounting convention, not an operational indicator; Taxes are considered "non-operational"
in a sense because they can be affected by a variety of accounting and tax conventions; and
Amortization expense is another accounting convention dealing with the amortization of
intangibles. Therefore, EBIDTA is a much stronger indicator of ongoing, operational strength
than Operating Cash Flow, Free Cash Flow, Net Operating Income, or Net Income.
Sources: www.wallstreetoasis.com/forums/ebitda-vs-operating-cash-flow-vs-free-cash-flow and www. investopedia.com
High Unemployment Area: A geographical area which has experienced unemployment of at
least 150 percent of the national average rate. See INA § 203(b)(5)(B)(ii).
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Immigration Act: The Immigration Act at 8 USC 1153(b)(5)(A)(i)–(iii), (B)(i)–(iii), (C)(i)–(iii)
and (D).
Job Creating Entity (“JCE”): Referring to the Owner/Operator, this is the business operation
creating direct, indirect, and/or induced employment in order to meet job creation requirements.
The Job Creating Entity is the target organization for EB-5 invested funds, typically made
available to the Company in the form of a loan from the EB-5 LLC.
Metropolitan Statistical Area (“MSA”): The general concept of a metropolitan area is that of a
large population nucleus, together with adjacent communities having a high degree of social and
economic integration with that core. Metropolitan areas may comprise a number of towns or
cities, or even entire counties. A consolidated MSA has a population of one million or more and
also has separate component areas meeting statistical criteria and supported by local opinion.
New Commercial Enterprise (“NCE”): Referring to the EB-5 LLC, a New Commercial
Enterprise is one which was created on or after November 29, 1990. This is the enterprise that
EB-5 Investors will be investing in.
Offering: The offering is of Units in DEIH pursuant to the Private Placement Memorandum.
Operating Agreement: The Limited EB-5 LLC Agreement of DEIH, as the same may be
amended from time to time. All definitions utilized in the EB-5 LLC Agreement are incorporated
herein by reference.
Owner/Operator: Riviera Point Business Center at Doral, LLC (“RPBCD”), a Limited
Liability Company within the State of Florida, is the Job Creating Entity that will develop and
own the Project and will manage and operate the resulting business activities.
Project: Riviera Point Business Center at Doral, an undertaking to develop, constructs, and
thereafter operates an office building with approximately 41,000 square feet of rentable space,
leasing to small business owners in the area. These will be owned and operated by the RPBCD.
Project Documents: Project documents include, but are not limited to, the following: (a) EB-5
LLC Operating Agreement; (b) Comprehensive Business Plan; (c) Marketing and Operations
Plan; and (d) Attached Exhibits.
Regional Center: Florida EB-5 Investments, LLC (“FEB5RC”), a Florida Limited Liability
Company and USCIS-designated on July 15, 2010, will function as the sponsoring Regional
Center in accordance with USCIS guidelines. The Regional Center will advise the Project, the
EB-5 process, and the associated entities as well as provide reporting for matters of I-526 and I829 related requirements.
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Rural Area (“RA”): A geographical area located both outside of a Metropolitan Statistical Area
and outside of a city or town having a population of 20,000 or more based on the most recent
decennial census of the United States. See INA § 203(b)(5)(B)(iii) and 8 CFR §204.6(j)(6)(i).
Subject Property: 9000 NW 15th Street, Doral, Florida 33178; the proposed lot of land
intended for development of the Project. The Subject Property may also be referred to as the
Project Site.
Targeted Employment Area (“TEA”): A TEA may be a Rural Area or a High Unemployment
Area as designated by the appropriate state authority.
Unit: A unit in DEIH, which will be offered to foreign nationals outside the U.S. at a purchase
price of $500,000 each.
United States Citizenship and Immigration Service (“USCIS”): USCIS is the government
agency that oversees lawful immigration to the United States.
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1.2
Matter of Ho Index
Regarding Matter of Ho, 22 I&N Dec. 2006: A comprehensive business plan as contemplated by
the regulations should contain, at minimum, a description of the business, its products and/or
services, and its objectives. Since the following business plan is “Actual”, it was drafted after the
Matter of Ho standard.
The plan should contain a market analysis (Section 7.0 Market Analysis)….including the names
of competing businesses and their relative strengths and weaknesses, a comparison of the
competition’s products and pricing structures, and a description of the target market/prospective
customers of the new commercial enterprise. (Section 2.2 Management Team outlines skills and
strengths of regional center management, and Section 3.0 and Section 7.0 describe the desirable
features of each asset proposed herein).
The plan should list the required permits and licenses obtained. (Section 4.0 Project
Development Timeline lists those needed to develop the Project.).
If applicable, it should describe the manufacturing or production process, the materials required,
and the supply sources. (Not applicable as the plan does not include manufacturing.)
The plan should detail any contracts executed for the supply of materials and/or the distribution
of products. (Not applicable as the plan does not include manufacturing.)
It should discuss the marketing strategy of the business, including pricing, advertising, and
servicing. (Section 7.5 Marketing Strategy)
The plan should set forth the business’s organizational structure and its personnel’s experience.
(Section 2.2 Management Team)
It should explain the business’s staffing requirements and contain a timetable for hiring, as well
as job descriptions for all positions. (See Exhibit G: Market Studies for the Economic Analysis
attached to this I-924 Application, also note Section 8.2 Job Creation for a summary of job
creation.)
It should contain sales, cost, as well as operating expense and income projections and detail the
bases therefore. Most importantly, the business plan must be credible. (Section 6.0 Project
Financial Performance)
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1.3
Introduction
Purpose
DEIH is the EB-5 LLC formed for the purpose of funding a real estate development Project
sponsored by FEB5RC, an approved regional center as designated by USCIS. The EB-5 LLC
will be managed by DEFM as EB-5 Managing Member on behalf of the EB-5 Members. DEIH
proposes to enter into a loan agreement with RPBCD, which will develop, own, and operate the
Project. RPBCD has entered into a development agreement with RPDG to manage the Project’s
development and oversee construction activities of the Project at the Subject Property. The
Project is a proposed real estate development which will include construction and operation of
approximately 41,000 square feet office’s to be known as The Riviera Point Business Center at
Doral.
EB-5 Program
There are two distinct EB-5 pathways for an alien investor to gain lawful permanent residence:
the Basic Program and the Regional Center Pilot Program. Both programs require that the alien
investor make a capital investment of either $500,000 or $1,000,000 (depending on whether the
investment is in a TEA) in a new commercial enterprise located within the United States. The
new commercial enterprise must create or preserve 10 full-time jobs for qualifying U.S. workers
within two years of the alien investor’s admission to the United States as a Conditional
Permanent Resident (“CPR”). When making an investment in a new commercial enterprise
affiliated with a USCIS-designated regional center under the Regional Center Pilot Program, an
alien investor may satisfy the job creation requirements of the program through the creation of
either direct or indirect jobs.
Notably, an alien investing in a new commercial enterprise under the Basic Program may satisfy
the job creation requirements only through the creation of direct jobs. If the regional center
proposal bases its predictions regarding the number of direct or indirect jobs that will be created
through EB-5 investments in the regional center, in whole or in part, by offering investment
opportunities to EB-5 investors with the reduced $500,000 threshold, then the Targeted
Employment Areas should be identified.
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1.4
New Commercial Enterprise
The EB-5 LLC
DEIH is formed for the purpose of providing foreign investment
funding to the Project.
EB-5 LLC Objective The EB-5 LLC was established to finance the construction and
improvement of certain real properties located within the State of
Florida. In Doral within Miami-Dade County, the DEIH intends to
finance the development and initial operation of an office building.
Regional Center
FEB5RC, a USCIS-approved regional center, is sponsoring the Project.
Affiliation
As the sponsoring regional center, FEB5RC will advise the General
Partner so as to ensure that all EB-5 compliance matters with respect to
the Offering are met with all the rights and responsibilities accorded
under the laws of the State of Florida.
Use of EB-5
Equity investment into DEIH will be issued in full as a loan to the
Investment Proceeds Project’s owner and operator for the purpose of financing the
construction and operations of the job-creating facility.
Return on
The Owner plans to accrue interest on invested funds at the rate of 1%
Investment
from loan issuance to the point of loan maturity. All accrued amounts
will be paid at this point from the excess cash flow of the business.
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1.5
Job-Creation Investment Target
The Project
Project
Management
Project Location
Market Outlook
Development Costs
Project
Capitalization
Project
Development
Schedule
Job Creation
Projections
TEA Designation
Financial
Projections
The Riviera Point Business Center at Doral is a proposed real estate
development which will include construction and operation of
approximately 41,000 square feet office’s, leasing to small business
owners in the area.
The Project will be developed, owned, and operated by RPBCD. The
Project development will be managed by RPDG.
The Project is located within Miami-Dade County at 9000 NW 15th
Street, Doral, Florida 33178.
The strategic location of the proposed Project lends it viability in the
current commercial office leasing market within the designated counties
in Florida.
Total project costs are approximately $9.5 million, including $4.82
million in hard construction costs.
The total capitalization requirements for the Project will be met through
a combination of the following:
• $9.5 million EB-5 loan financing from 19 foreign investors
Although it is not anticipated, should additional capital need to be
secured, the developer may seek other sources of financing to include,
without limitation, construction loans or additional equity investments.
The development timeline will be driven by access to EB5 investment
dollars. Construction is estimated to take twelve months; The Project
will commence business operations after approximately 3 months of
construction begins due to pre-leasing activities. The Owner expects
tenants to occupy units within one month of completion of construction.
According to the economic analysis conducted by Wright Johnson,
LLC, the Project will create 246.7 jobs that are a result of this
development. To meet the EB-5 capital raise of $9.5 million, each
investor will be assigned 13.0 jobs.
According to the Florida Department of Economic Opportunity, the
subject property is located within a group of contiguous census tracts
with an unemployment rate of 12.7%, which qualifies as a Targeted
Employment Area (“TEA”). Therefore, minimum investment per
foreign investor will be $500,000.
According to financial projections, annual revenue will be $912,168
after the second year of leasing activities with a Net Operating Income
of $644,368.
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2.0
BUSINESS OVERVIEW
2.1
Investment Organizational Structure
DEIH is a new commercial enterprise with its place of business at 201 South Biscayne
Boulevard, Suite 905, Miami, Florida 33131. DEIH was formed for the purpose of financing a
job-creating new real estate development within the geographic designation for FEB5RC. The
EB-5 LLC will be managed by DEFM as EB-5 Managing Member on behalf of the EB-5
Members.
DEIH will receive at-risk equity investment from EB-5 investors, who will be Members and coowners in the EB-5 LLC. The EB-5 LLC will issue the full amount of equity investment as a
loan of $9.5 million into the Project by means of a loan to Riviera Point Business Center at
Doral, LLC, the Project Developer and Operator.
The following diagram provides the Investment Structure of the Project:
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2.2
Management Team
2.2.1
New Commercial Enterprise Management
DEFM is the Managing Member of DEIH with its principal place of business located at 201
South Biscayne Boulevard, Suite 905, Miami, Florida 33131. Although DEIH is sponsored by
FEB5RC, a USCIS-designated EB-5 Regional Center, the Managing Member is not affiliated
with FEB5RC.
DEFM has one Principal:
Rodrigo
Azpurua
Chief Executive
Officer and
President
Rodrigo Azpurua started and integrated the Company as a professional
team of financial, real estate, governmental compliance and other real
estate management and development specialists committed to provide
solutions to every real estate challenge, from site identification, conceptual
design, land use ap-provals, architectural and engineering studies and
construction packages, through fi-nancing, constructing, leasing and
maintaining the property as an active part of a real estate portfolio. The
cornerstone of every project managed by RIVIERA POINT
DEVELOPMENT GROUP is the due diligence and feasibility analysis,
always focused on risk manage-ment as the key to successful projects or
investments.
Mr. Azpurua has a Law Degree from Universidad Santa Maria in Caracas,
Venezuela and has 14 years of real estate legal practice and international
laws. He is a member of the worldwide-recognized PMI and has been
directly responsible in the management of over $180,000,000 of Land
Developments projects for about 1 million square feet of office space in
seven different locations in the State of Florida.
Mr. Azpurua is also a Certified Commercial Investment Member (CCIM),
with over $44,000,000 in completed land transactions. The CCIM
designation is considered the most prestigious of all Real Estate
designations. Often referred to as the PhD of Commercial Real Estate, a
practitioner must not only demonstrate educational mastery but also a
depth of real world commercial real estate experience and expertise. Only
6% of all Commercial Real Estate practitioners in the U.S. are CCIM’s
designees.
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2.2.2
Regional Center Sponsorship
FEB5RC is the regional center sponsoring the EB-5 LLC and its Project, with its principal place
of business located at 125 Spring Lake Hills Drive; Altamonte Springs, Florida 32714. FEB5RC
is a USCIS-designated EB-5 Regional Center under the Immigration Investor Pilot Program,
approved since July 15, 2010, for the specific purpose of investing EB-5 monies into targeted
commercial enterprises located in the geographic area of the regional center, which includes all
Counties within the State of Florida (see Exhibit A: Regional Center Documents):
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The Project is a real estate development which includes the following industries within
FEB5RC’s industry designations:
NAICS 2362
Nonresidential Building Construction
NAICS 5411
Legal Services
NAICS 5412
Accounting, Tax Preparation, Bookkeeping, and Payroll Services
NAICS 5416
Management, Scientific, and Technical Consulting Services
NACIS 5419
Architectural, Engineering, and Related Services
FEB5RC has one Principal:
Walter M.
Cummins Jr.
President
Walter M. "Marty" Cummins Jr. is a Florida Licensed Attorney since 1984,
a Florida Real Estate Broker, business consultant and entrepreneur.
Originally from Columbus, Ohio, he moved to the Orlando area in 1984.
He received his undergraduate degree in History in 1973, where he was
elected President of the Student Senate. He attended Duke University
School of Law in 1973/74 and graduated from Ohio State University’s
School of Law in 1976, becoming a member of the Bar that same year. He
moved to Florida in 1984, and is married to the former Jan Strumer. They
have one daughter.
Marty served as a gubernatorial appointee member of the East Central
Florida Regional Planning Council 1987 to 1989, and was President of the
College Park Neighborhood Assn. 1991 to 1993. From 1989 through 2004
he and his wife owned and operated the popular community gathering spot
"Chapters Café & Bookshop" where they conceived and co-founded the
501 c 3 public foundation, The Jack Kerouac Writers in Residence Project
of Orlando Inc. Marty and Jan conceived and operated the following
community and charitable activities and events: Central Florida book &
music festivals, the "Just Desserts" fundraiser with WFTV-TV of Orlando,
Walt Disney World, Universal Studios and SeaWorld to raise money for
sick children, and the Seminole Ornament Society Holiday fund raising
banquet with Bonnie Manjura.
Since 2005, Marty has practiced law, served as a business consultant while
he and his wife have continued to conduct their book business from the
internet and specialty convention bookshops around the Country.
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2.2.3
Project Ownership
DEIH proposes to enter into a loan agreement with RPBCD, which will develop, own, and
operate the Project to be located at 9000 NW 15th Street in Doral, Florida. RPBCD will be the
EB-5 “target commercial enterprise” that will borrow EB-5 capital invested into the EB-5 LLC
and develop the job-creating project. RPBCD’s business operations at the new business center
will be managed by its General Partner, Riviera Business Center Management, LLC.
DEFM has one Principal:
Rodrigo Azpurua
Chief Executive Officer and
President
2.2.4
Mr. Azpurua is the sole Principal of RPBCD as well as being a
Principal of DEFM.
Project Developer Management
RPBCD has entered into a development agreement with RPDG, which will manage the Project’s
development and oversee construction activities at the Subject Property. The following are key
managers for RPDG:
Rodrigo Azpurua
Chief Executive
Officer and President
Noel Epelboim
Chief Operations
Officer and
Vice President
Mr. Azpurua is the sole Principal of RPBCD and DEFM as well as
being Chief Executive and President of RPDG.
Since 2001, Noel has been involved in the development of several
commercial and residential real estate projects in South Florida,
including a 65,000-square-foot strip center in Parkland, a 40-unit
condominium building in Hallandale, and a 25-unit condominium
building in Bay Harbor Islands.
His early career included leadership positions with Constructora
Arquinpro C.A. (Caracas, Venezuela) – in which he served as COO
and founding member and was involved in the design, construction,
and commercialization of over 2 million square feet of high-end
condominium, commercial, and office development across
approximately 50 projects. Under his leadership, Constructora
Arquinpro was selected as a Top 5 Residential Developer in Gerente
500 magazine’s annual report of most successful companies.
Noel holds a degree in Civil Engineering from Universidad
Metropolitana (Caracas, Venezuela – 1982) and a Master of Science
degree in Civil Engineering (structures and construction management)
from the Georgia Institute of Technology (Atlanta, USA – 1985).
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Ricardo Hernandez
Chief Financial
Officer
Howard Gilly
Director of
Operations
Ricardo Hernandez is a VP of Real Estate in the Special Assets
Division for Mercantil Commercebank, NA. In his nine years tenure
with Mercantil, he has been responsible for providing an independent
and objective assessment of risk factors associated with all types of
real estate facilities. His expertise includes evaluating potential
acquisitions and developments through financial modeling, and
market research. In the last three years he has being responsible for
the sale of the Bank's OREO and Note portfolios.
Mr. Hernandez holds a Master of Science degree in Real Estate
Development from Columbia University; a master’s degree in Project
Management from Universidad Católica Andres Bello; and a Bachelor
of Arts degree in Architecture from Universidad Simón Bolívar. He
has also taken advance courses from MIT and ULI.
Howard Gilly lends his tremendous expertise and skill to a
comprehensive scope of Project Management, Project Coordination,
and Project Engineering tasks. His specific professional experience
includes knowledge and insight in all project stages such as
conceptual engineering, basic engineering, detail engineering and
Engineering & Procurement Construction (EPC) Projects.
Mr. Gilly is a Project Manager Professional (PMP), certified by the
Project Management Institute (PMI) 2001, and has served as the
Operational Manager of Oil & Gas Division, Project Manager for
Production Division Projects (Engineer & Construction), Construction
Superintendent, Project Manager for Electrical Discipline Projects,
and Project Manager for Multidisciplinary Project for the design and
construction of urban community developments.
Mr. Gilly has also acted as Technical Manager for Inelectra also
(Local Consulting Company) in Energy Supply Equipment Area,
Electrical Project Coordinator, Project Engineer for Design,
calculation and constructions of electrical distributions medium and
low voltage system, aerial and underground electrical networks,
Project Engineer for Procurement, commissioning and start-up
activities for electrical projects, Project Engineer for Cost estimated
calculation for electrical projects, Project Engineer for Coordination
of activities for sales, design, supply, installation and start-up of
power system (DC & AC) for Telecommunications Central Offices,
and Project Engineer for Coordination & construction of grounding
system for communication Central Offices.
Mr. Gilly is a Member of Venezuelan Chapter Board of Directors
2012-2014. Additionally, he specializes in Management, Consulting,
Energy, and Oil & Gas.
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Freddy Boulton
Director of Sales
Dan Li
Global Marketing
Director
Freddy Boulton started his career as a consultant for Andersen
Consulting, where he developed his expertise in Process and
Operations Management. In 1997, he obtained an MBA at Cambridge
Business School, and later headed up various ventures in Venezuela,
Colombia, Argentina, Brazil, and Mexico.
His expertise is uniquely focused around Operations Management and
Sales Marketing. Since his entry into Florida Real Estate and
Development in 2003, he has been responsible for creating and
implementing successful marketing strategies that have generated
sales in excess of $30,000,000. He is a member of the prestigious
Chairman’s Club of Re/Max Real Estate.
Dan Li, along-time resident of New York city, is originally from
China and immigrated to the United States in 1997. Dan attended
Fasion Institute of Technology where she earned her Bachelor's in
Fashion Merchandise Management. Fluent in both Mandarin and
English, Dan’s career spans a wealth of international expertise.
Prior to service as Global Marketing Director for RPDG, Ms. Li
worked at a New York based-law firm in the business development
department. Her strong legal and commercial business/real estate
experience made her a tremendous asset to RPDG and the investor
clients she serves. She has made it her personal mission to provide a
safe harbor for investors through integrity, and her own first-hand
immigration experience with the potential challenges typical
immigrants face.
Ms. Li oversees day-to-day investor management in addition to
supporting attorneys and migration agents in regards to investment
and EB-5-related matters. Dan regularly attends EB-5 Conferences
and Seminars and speaks frequently on RPDG projects to an
international audience.
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3.0
PROJECT DESCRIPTION
3.1
Project Overview
The Riviera Point Business Center at Doral will be approximately 41,000 square feet office
building, leasing to small business owners in the area. Riviera Point Development Group
identified, researched, and acquired a land parcel of approximately 2.5 acres of raw land.
The Project will be located at 9000 NW 15th Street, Doral, Florida 33178.
3.2
Project Details
The purpose of the Project in its entirety is to develop, construct, and thereafter manage a new
office building. The project will create demand for business services including office
administrative services, business services and support services within Doral, Florida.
Commercial
Elements
Office Units
•
•
•
2-story office building
Total space: 41,000 SF
o Net Office space: 36,479 SF
o Common areas and balconies
Units:
o From 800 SF – 8,000 SF
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Commercial
Elements
(continued)
Floor Plans
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Commercial
Elements
(Continued)
Site Area
Gross Land
Area
Site Location
Elevation Renderings
Building Footprint:
• 25,701 square feet
Parking Area:
• 122 spaces
• 2.45 acres
• 106,693 square feet
• Address:
9000 NW 15th Street
Doral, Florida 33178
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3.3
Subject Property
The Project is a proposed offices development at 9000 NW 15th Street, on the northwest
quadrant of Dolphin Expy and NW 87th ave, in Doral within Miami-Dade County, Florida. The
Subject Property is approximately one mile from Interstate I-95 Exit #4B and approximately
seven miles from Miami International Airport.
The site of the proposed new development can be seen in the following maps:
Location
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Existing Property
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Site Plan
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3.4
Subject Property Area Profiles
3.4.1
City of Doral Overview
Doral is a city located in north-central Miami-Dade County that was incorporated in
2003. An industrial and suburban mixed neighborhood of Miami, the city takes its
name from the famous golf and spa resort located within its municipal boundaries.
Doral is 5 miles north-west of Miami International Airport.
Source: http://www.cityofdoral.com/
City of Doral Profile
Land Area (square miles):
13.2
Population (2009):
46,000
Pop. Density (2010): 3,462.4/sq. mile
Government Type:
• Mayor
• City Council
Median Household Income (2010):
• $53,060
Number of Firms (2007):
11,484
Source: U.S. Census Bureau; http://quickfacts.census.gov.
For a city of its size, Doral has a large number of importers and exporters because of its
proximity to the Miami International Airport.
In the late 1950s, real estate pioneer Alfred and Doris Kaskel purchased 2,400 acres of
swampland between for about $49,000 with the intention of building a golf course and hotel. In
1962, the Kaskel's dream came true when they opened a hotel and country club that featured the
Blue, Red and Par 3 golf courses. They named it Doral - a combination of Alfred and Doris.
Source: http://www.cityofdoral.com/
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The following table shows the climate at Doral:
Source: National Oceanic and Atmospheric Administration.
3.4.2
Miami-Dade County Overview
Miami- Dade is located along the southeast tip of the Florida peninsula. It is bounded
by Biscayne Bay and the Atlantic Ocean to the east, Everglades National Park to the
west, the Florida Keys to the south, and Broward County to the North.
Source: Miami-Dade County, Florida; http://www.countyofMiami-Dade.us/.
Miami-Dade County Profile
Land Area (square miles):
1,897.72
Population (2011):
2,591,035
Pop. Density (2010):
1,315.5/sq. mile
County Seat:
Miami, FL
Government Type:
• Board of Supervisors
Median Household Income (2010):
• $43,957
Number of Firms (2007):
403,672
Source: U.S. Census Bureau; http://quickfacts.census.gov.
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Dade County was created on January 18, 1836, under the Territorial Act of the United States.
The county was named after Major Francis L. Dade, a soldier killed in 1835 in the Second
Seminole War, at what has since been named the Dade Battlefield. At the time of its creation,
Dade County included the land that now contains Palm Beach and Broward counties, together
with the Florida Keys from Bahia Honda Key north and the land of present day Miami-Dade
County.
Source: http://miamidade.gov/
3.4.3
Population
The following table shows populations from the last three U.S. Census surveys:
Location
1990
2000
2010
City of Doral
3,126
20,438
Miami-Dade County
1,937,094
Florida State
Population Change
1990-2000
2000-2010
45,704
+553.8%
+123.6%
2,253,362
2,496,435
+16.3%
+10.8%
12,937,926 15,982,378
18,801,310
+23.5%
+17.6%
Source: U.S. Census Bureau; www.factfinder2.census.gov.
The population changes shown present that residency continues to grow in the City and County
at a high rate. Therefore, the region’s employable population is more than large enough to
provide available labor to fill the newly created construction jobs as well as provide sufficient
renters that demand the building.
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Ethnicity Demographics
The following table and chart displays the ethnic diversity within Miami-Dade County:
Ethnicity
2010 Population
% of Total Population
745
1.6%
Asian
1,566
3.4% Hispanic/Latino
36,344
79.5% Native American
17
0.0% Pacific Islands
3
0.0% 6,659
14.6% Some Other Race
127
0.3% Two or More Races
243
0.5% 45,704
100%
African (Black)
White
Total
Miami-­‐Dade County Racial Demographics 0.30% 0.00% 0.50% 3.40% 1.60% African (Black) Asian 14.60% Hispanic/La=no Na=ve American 79.50% Pacific Islands White Some Other Race Two or More Races Source: U.S. Census Bureau (2010 Census); www.factfinder2.census.gov
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Age Demographics
The following table and chart displays the 2010 age demographics within the City of Doral and
Miami-Dade County:
Age Range
City of Doral
Miami-Dade County
Population
Percent
Population
Percent
Less than 20 years
14,119
30.89% 616,245
24.69% 20 – 29 years
5,680
12.43% 348,952
13.98% 30 – 39 years
8,770
19.19% 353,071
14.14% 40 – 49 years
8,527
18.66% 385,917
15.46% 50 – 59 years
4,345
9.51% 316,017
12.66% 60 – 69 years
2,554
5.59% 225,200
9.02% 70 – 79 years
1,249
2.73% 153,136
6.13% 460
1.01% 97,897
3.92% 45,704
100%
2,496,435
100%
80 years and older
Total
The City of Doral and Miami-­‐Dade County Age Demographics 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Desert Hot Springs Riverside County 19 years 20 -­‐29 30 -­‐39 40 -­‐49 50 -­‐59 60 -­‐69 70 -­‐79 80 years and years years years years years years and younger older Source: U.S. Census Bureau (2010 Census); www.factfinder2.census.gov
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Households
In 2011 there were 14,000 households in the City of Doral. The average household size was 3.3
people.
Families made up 81 percent of the households in Doral. This figure includes both marriedcouple families (66 percent) and other families (15 percent). Of other families, 8 percent are
female householder families with no husband present and own children under eighteen years old.
Nonfamily households made up 19 percent of all households in Doral. Most of the nonfamily
households were people living alone, but some were composed of people living in households in
which no one was related to the householder.
In Doral, 54 percent of all households have one or more people under the age of eighteen;
10percent of all households have one or more people 65 years and over.
Among persons fifteen years and older, 60 percent of males and 55 percent of females are
currently married.
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Language
Ninety-one percent of people at least five years old living in the City of Doral in 2011 spoke a
language other than English at home. Of those speaking a language other than English at home,
87 percent spoke Spanish and 13 percent spoke some other language; 35 percent reported that
they did not speak English "very well."
Education
In 2011, 17 percent of people twenty five years and older had at least graduated from high school
and 56 percent had a bachelor's degree or higher. Five percent were dropouts; they were not
enrolled in school and had not graduated from high school.
The total school enrollment in Doral was 15,000 in 2011. Nursery school and kindergarten
enrollment was 2,300 and elementary or high school enrollment was 8,400 children. College or
graduate school enrollment was 4,400.
Source: American Community Survey 2011 Doral, Florida Population and Housing Narrative Profile; http://factfinder2.census.gov.
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3.4.4
Employment
In the City of Doral, 63 percent of the population sixteen years and older were employed; 30
percent were not currently in the labor force. Eighty-four percent of the people employed were
private wage and salary workers; 10 percent were federal, state, or local government workers;
and 6 percent were self-employed in their own (not incorporated) business.
Commuting
Eighty-six percent of Doral workers drove to work alone in 2011, and 8 percent carpooled.
Among those who commuted to work, it took them on average 27 minutes to get to work.
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Industries
In 2011, the civilian employed population sixteen years and older in Doral worked in the
following industries:
Occupations for the civilian employed population sixteen years and over in Doral in 2011:
Source: American Community Survey 2011 Doral, Florida Population and Housing Narrative Profile; http://factfinder2.census.gov.
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Major Employment Industries
Miami-Dade County has over 74,585 businesses and government entities employing over
823,116 people with a payroll of $35.05 billion. The U.S. Census Bureau reports the following
top five industries for employment within Miami-Dade from its 2010 County Business Patterns
report:
Number of Paid
Employees
Number of
Establishments
Annual Payroll
($1,000)
Health care and social
assistance
127,889
8,821
$5,698,564
Retail trade
120,926
10,390
$3,175,371 Accommodation and
food services
98,393
4,795
$2,034,173 Wholesale trade
65,903
8,622
$3,234,598 Administrative and
support and waste
management and
remediation services
63,092
3,555
$2,182,218 Industry
Source: U.S. Census Bureau; http://www.factfinder2.census.gov
Top Employers
The 2011 Comprehensive Annual Financial Report for the City of Doral lists the following top
five employers:
Employer
Carnival corporation
Boston scientific corporation
Marriot international
Univision
Supreme international
Business Sector
Employees
Transportation
2,380
Healthcare
1,200
Lodging
1,031
Broadcasting
800
Retail
525
Source: City of Doral Comprehensive Annual Financial Report (2011), page 64; http://www.cityofdoral.com/
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3.4.5
Housing
In 2011, the City of Doral had a total of 18,000 housing units, twenty-two percent of which were
vacant. Of the total housing units, 59 percent were in single-unit structures, 41 percent were in
multi-unit structures, and less than 0.5 percent were mobile homes. Eighty-three percent of the
housing units were built since 1990. The median number of rooms in all housing units in Doral is
five. Of these housing units, 62 percent have three or more bedrooms.
In 2011, Doral had 14,000 occupied housing units - 8,100 (58 percent) owner occupied and
5,800 (42 percent) renter occupied. Eighty-eight percent of householders of these units had
moved in since 2000. Three percent of the households did not have telephone service. Two
percent had no vehicles available and another 14 percent had three or more.
The median monthly housing costs for mortgaged owners was $2,629, non-mortgaged owners
$940, and renters $1,626. Sixty-six percent of owners with mortgages, 34 percent of owners
without mortgages, and 58 percent of renters in Doral spent 30 percent or more of household
income on housing.
Source: American Community Survey 2011 Doral, Florida Population and Housing Narrative Profile; http://factfinder2.census.gov.
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4.0
PROJECT DEVELOPMENT TIMELINE
For the Project, the Developer expects pre-construction, site work, construction, and delivery
close-out to take approximately 16 months. The following high-level Work Breakdown Structure
details the development schedule based on the Developer’s expectations, driven by access to
EB-5 investment dollars (see Exhibit C: Development Cost Details for Developer’s basis):
Year 1
Q1
Q2
Year 2
Q3
Q4
Q1
Q2
Year 3
Q3
Q4
Q1
Q2
Q3
Q4
Development Phases
Admin & Planning
Pre-­‐Construction
Site Work & Building Construction
Delivery/Close-­‐out
Operations
Developer equity
deployed
pre-construction
EB-5 funds deployed
during the construction phase.
25.3 jobs created
from construction activities
All EB-5 funds
have been deployed
221.4 jobs created
from business operations
246.7 jobs created from construction activities and business operations
ADMIN & PLANNING PHASE
The Admin & Planning phase may cover land entitlements, design, civil engineering, permit
applications, and applicable fees. Specific milestones within the Admin & Planning Phase
include, without limitation: Project due diligence and EB-5 Project positioning in finalizing a
market study report and economic analysis for job creation projections. The Developer intends to
use private equity to finance the administrative costs that are incurred during this phase
(discussed in further detail in section 5.2 Development Costs).
The Developer has received the following entitlements/approvals (see Exhibit C: Development
Cost Details):
•
•
•
•
Parking & Access Easement
Florida Power and Light Company Easement
Miami-Dade Water and Sewer Department Approval
Environmental Site Assessment
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PRE-CONSTRUCTION PHASE (4 MONTHS)
Pre-construction activities may include securing soil engineer and land surveyor, permits are
received, contractors selected, and development fees paid. The Developer is in the process of
obtaining the following pre-construction documents:
Project management is engaged in completing various pre-construction action items. The
following chart presents the Developer’s assignment of responsibility for each item.
The Developer intends to utilize EB-5 funds to finance pre-construction activities.
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SITE WORK AND BUILDING CONSTRUCTION PHASE (8 MONTHS)
Site work begins after all action items/issues are resolved. Site work may include construction
fencing, rough grading, soil excavation/import/compaction, and underground wet and dry
utilities. Major milestones may include are pad (or podium) certification and compaction report
approval, after which building construction may begin. Other tasks may include trash enclosure,
curb, gutter, hardscape, back fill (if needed) and finish grade, landscaping, grade base and pave,
and monument and signage.
Building construction (including exterior and interior construction) begins after pad/podium
certification for the building foundation is obtained and the compaction report complete (if
needed). Tasks may include excavation and foundation (to the extent not completed in preconstruction or site work), underground rough plumbing and electricity, pour and form slab/curb,
framing, rough electrical, rough plumbing, fire sprinkler, roofing, glass and glazing, set HVAC
units, painting, fire alarm installation, system start-ups, and clean and punch list. Major
milestones in the building construction period include the vertical framing, roofing, and siding.
The Developer intends to utilize EB-5 funds to finance site work and construction activities.
DELIVERY/CLOSE-OUT PHASE (1 MONTH)
The period refers to the completion of development for commencement of operations and closeout of the contractor's responsibilities. Tasks may include building finals, alarm systems,
certificate of occupancy, closeout documentation, and as-built plans (landscape, fire, and
building). The Developer intends to utilize EB-5 funds to finance delivery and close-out
activities.
OPERATIONS
The Developer intends to begin leasing operations as units are made available. Advertising and
pre-leasing activities are projected to commence after approximately 3 months of construction
activities, in order to market and negotiate lease terms with prospective tenants. The Developer
expects tenant occupancy to begin immediately upon close-out and delivery of the building.
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5.0
PROJECT FINANCING
5.1
Capitalization
The Project objectives are as follows, which will be achieved through the full financing of its
capitalization requirements:
1) To construct and manage an office building with approximately 41,000 square feet,
leasing to small business owners.
2) To create profit for the EB-5 LLC and its investors.
3) To promote job creation.
EB-5 alien investor capital combined with developer equity will be used to achieve the
objectives of the Project and to fully finance its $9.5 million capitalization requirements. EB-5
loan financing in the amount of $9.5 million that DEIH will provide to the EB-5 LLC. The
sources of funding for the Project are detailed in the following table:
Project Capitalization
Source of Funds by Amount
Source of Funds by %
EB-5 Loan Financing from
DEIH
$ 9,500,000
100.00% Total Capitalization
EB-­‐5 Loan Financing $ 9,500,000
The Project Developer and Operator expect to utilize Owner’s equity to fund the first nine
months of activity, to include admin & planning activities. Upon receiving access, EB-5 funds
will be utilized to finance the remaining admin & planning costs as well as construction of the
office building and site (see Exhibit B: Path of Funds for further details on the use of EB-5
funds).
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5.2
Project Development Costs
Total Development costs are summarized as follows:
Riviera Point Business Center at Doral
Land
Acquisition Costs
$ 1,648,000
Building
Construction Hard Costs
$ 4,817,500
Soft Costs
Construction Soft Costs
$ 2,584,500
Other Costs
Pre-­‐Opening Costs
$ 450,000
$ 1,648,000
4,817,500
2,584,500
TOTAL DEVELOPMENT COSTS
450,000
$ 9,500,000
Land Value covers acquisition of the land, including closing costs.
Construction hard costs may cover, without limitation, site work, off-site work, shell building
construction, interior construction, and tenant improvements (FF&E). The Developer intends to
utilize EB-5 funds to finance a portion of these hard costs that are included in the eleven month
construction period.
Construction soft costs may cover, without limitation, costs associated with permits, utility and
impact fees, insurance, appraisals and feasibility studies, signage, initial inventory, initial
franchise fee, expenses for office and administration, and contractor’s fees.
Pre-opening costs may cover, without limitation, costs associated with hiring and training
employees, advertising for grand openings, and initial working capital for operational expenses.
The Developer includes $35,000 of working capital within Soft Costs.
For the bases regarding these costs, see Exhibit C: Development Cost Details for further details.
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6.0
PROJECT FINANCIAL PERFOMANCE
6.1
Financial Projections
The following Pro Forma is a summary of revenue and expense projections for the first three
years of office unit rentals, which are expected to commence after approximately four months
after construction starts. This expectation is due to planning for pre-leasing of units (see Exhibit
D: Revenue Projection Details):
Rental Period Cash Flow
Year
After
construction
Gross Potential Income ("GPI")
Leasable Area = 41,000 sf
$/sf
1
2
3
$984,000 $1,013,520
$1,043,926
$24.00 /sf
$24.72 /sf
$25.46 /sf
20%
10%
5%
Loss of Income due to Vacancy
$196,800
$101,352
$52,196
Gross Operating Income ("GOI")
$787,200
$912,168
$991,729
Operating Expenses ("OE")
$260,000
$267,800
$267,800
$6.34 /sf
$6.53 /sf
$6.73 /sf
26%
26%
26%
$527,200
$644,368
$723,929
Estimated Vacancy %
$/sf
%OE/GOI
NET OPERATING INCOME
Gross Potential Income refers to the proceeds received from the rental of office units. The
Developer forecasts unit sales at $24 per square foot with a first year vacancy of 20%. The
Developer intends to raise rental rate by 3% annually.
CoStar reports the average quoted rental rate for all classes of available office space within the
Miami-Dade County market at the end of Q2-2013 was $28.73 per square foot. Following are
average rental rates reported for each class:
•
•
•
Class-A Office Space
Class-B Office Space
Class-C Office Space
$34.87
$25.42
$21.47
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CoStar reports the Miami-Dade County Office Market ended Q2-2013 with a vacancy rate of
12.8%. Following are vacancy rates reported for each class:
•
•
•
Class-A Office Space
Class-B Office Space
Class-C Office Space
18.9%
13.5%
5.7%
Operating expenses are based on the following breakdown provided by the Developer:
For further details on revenue and expenditures, see Exhibit D: Revenue Projection Details.
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6.2
Loan Repayment
The EB-5 LLC will be providing financing in connection with the development of the Project.
The Loan terms including the following:
(1) Loan Amount:
$9,500,000.
(2) Interest Rate:
1% per annum on a non-compounded basis.
(3) Repayment Terms:
Accrued interest will be paid annually from the excess cash flow of the business.
Principle will mature after five years, at which point the Owner may remit payment, seek
refinancing, or sell the completed Riviera Point Business Center at Doral to a new
owner/operator.
(4) Loan:
The Loan will be secured by a lien on the Project that will be subordinated to any
Senior Loan, if applicable.
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7.0
MARKET ANALYSIS
7.1
Industry Activities
The Developer will engage in the following industry activities:
Nonresidential Building Construction (NAICS 2362)
This industry comprises establishments primarily responsible for the construction (including new
work, additions, alterations, maintenance, and repairs) of commercial and institutional buildings
and related structures, such as stadiums, grain elevators, and indoor swimming facilities. This
industry includes establishments responsible for the on-site assembly of modular or prefabricated
commercial and institutional buildings. Included in this industry are commercial and institutional
building general contractors, commercial and institutional building for-sale builders, commercial
and institutional building design-build firms, and commercial and institutional building project
construction management firms.
This industry’s activities are not included within the following market analyses in order to focus
on the primary business activities.
Legal Services (NAICS 5411)
This industry comprises offices of legal practitioners known as lawyers or attorneys (i.e.,
counselors-at-law) primarily engaged in the practice of law. Establishments in this industry may
provide expertise in a range or in specific areas of law, such as criminal law, corporate law,
family and estate law, patent law, real estate law, or tax law.
Section 7.2 Offices of Lawyers (NAICS 541110) present detailed market analyses of this industry
as it pertains to the Project.
Accounting, Tax Preparation, Bookkeeping, and Payroll Services (NAICS 5412)
This industry comprises establishments primarily engaged in providing services, such as auditing
of accounting records, designing accounting systems, preparing financial statements, developing
budgets, preparing tax returns, processing payrolls, bookkeeping, and billing.
Section 7.3 Accounting, Bookkeeping, and Payroll Services (NAICS 54121) present detailed
market analyses of this industry as it pertains to the Project.
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Management, Scientific, and Technical Consulting Services (NAICS 5416)
This industry comprises establishments primarily engaged in providing advice and assistance to
businesses and other organizations on management issues, such as strategic and organizational
planning; financial planning and budgeting; marketing objectives and policies; human resource
policies, practices, and planning; production scheduling; and control planning.
Section 7.4 Management Consulting Services (NAICS 54161) present detailed market analyses of
this industry as it pertains to the Project.
Other Professional, Scientific, and Technical Services (NAICS 5419)
This industry group comprises establishments engaged in professional, scientific, and technical
services (except legal services; accounting, tax preparation, bookkeeping, and related services;
architectural, engineering, and related services; specialized design services; computer systems
design and related services; management, scientific, and technical consulting services; scientific
research and development services; and advertising, public relations and related services).
Section 7.5 Other Professional, Scientific, and Technical Services (NAICS 5419) present detailed
market analyses of this industry as it pertains to the Project.
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7.2
Offices of Lawyers (NAICS 541110)
Until 2007, the Law Firms industry benefited from strong demand for commercial services due
to booming investment markets and corporate activity, such as initial public offerings (IPOs) and
mergers and acquisitions (M&As). The global recession led to dramatic declines in these
activities, however, and a subsequent drop in demand for legal services, weakening the top-tier
firms that receive the bulk of their revenue from major corporate clients. Those same firms,
however, picked up the majority of countercyclical work, such as bankruptcies, following the
recession.
IBISWorld projects the Law Firms industry will generate $335.4 billion in 2018, representing
annualized growth of 2.5% in the next five years. Overall performance of the economy,
investment activity, corporate profit and changes in laws and regulations will heavily influence
revenue growth during this period. Industry revenue is forecast to grow 3.3% in 2014 as firms
benefit from stronger growth in corporate profit. Furthermore, litigation and prosecution
following the financial meltdown will also support industry growth, and new financial
regulations will create opportunities for law firms that specialize in such areas.
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7.2.1
U.S. Law Firm Overview
The industry’s biggest firms have relied on commercial activities for the majority of their
revenue. As the economy fell during 2009, though, the number of mergers and acquisitions
(M&As) and initial public offerings (IPOs) slowed, causing some casualties along the way. In
addition, businesses looking to cut costs have reduced spending on legal services. While many
law firms found shelter in countercyclical work, such as bankruptcies, large-scale layoffs have
occurred nationwide as partners have tried to maintain profit margins through the aftermath of
the economic downturn.
Not everything, however, has been doom and gloom for the industry. In the five years to 2013,
IBISWorld estimates that industry revenue will increase at an annualized rate of 1.1% to $296.5
billion. The waning economy forced many businesses to seek legal advice related to
restructuring, bankruptcy and insolvency.
The U.S. Census Bureau reports the following for 2011:
The IBISWorld June 2013 Industry Report 54111 Law Firms in the U.S. reports the following
performance and outlook statistics:
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The following categories define the industry structure:
Many small- and medium-size firms specialize in a particular service area. They often provide
noncommercial services such as criminal defense, family law or a particular niche of the
commercial segment. In contrast, large firms generally offer a full range of services and take the
lion’s share of major commercial work. This factor is due largely to their heavy manpower
requirements and the high level of complexity in deals that involve large corporations.
It is estimates that 38.0% of industry revenue is derived from commercial activities relating to
merger and acquisition (M&A) activity; capital raisings involving debt and equity markets;
activities relating to initial public offerings (IPOs); and legal services associated with private
equity transactions that include leveraged buyouts. Commercial activities are cyclical and depend
on the state and outlook of the investment market.
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Industry performance for Law Firms is heavily influenced by the following key external drivers:
•
•
•
•
Initial public offerings:
o Many major law firms receive significant fees from working on initial public
offerings (IPOs), merger and acquisition activity and capital raisings. As
investment activity increases, revenue for law firms rises.
o The number of IPOs is expected to increase, resulting in a potential opportunity
for the industry.
Corporate profit:
o Companies are more likely to engage in high-cost litigation when corporate profit
is high. Furthermore, strong corporate profit stimulates IPOs, merger and
acquisition activity and capital raisings, which all require the services of law
firms.
o Corporate profit is expected to increase slowly.
Crime rate:
o An increase in the rate of reported crimes leads to higher demand for legal advice;
as a result, industry revenue will increase. Throughout the past 20 years the crime
rate has declined, mainly because of the aging population.
o The crime rate is expected to continue to decrease slowly, representing a potential
threat for the industry.
Number of businesses:
o The major market for law firms in the United States is the business and corporate
sector. An increase in the number of businesses with employees will lead to an
increase in work for law firms.
o The number of businesses is expected to increase slowly.
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The following success factors represent the most important for Law Offices to optimize
profitability during the continued growth:
•
•
•
•
•
•
7.2.2
Lawyers who have the ability to effectively communicate and negotiate: Lawyers
with strong communication skills are necessary in order to make a strong case in court.
When making a settlement outside of court, negotiation skills are crucial.
Experienced work force: Judgments are based on precedent. Experienced lawyers are
more likely to be familiar with previous rulings, especially regarding large and complex
cases.
Having a good reputation: An excellent reputation equates to the soaring prices
commanded by high-profile firms. Likewise, strong word-of-mouth recommendations
provide business to lawyers in private practices.
Having a high prior success rate: Firms with a high success rate will attract more
clients and be able to charge more for services.
Superior financial management and debt management: Information presented in
court can make or break a case. Whether through a witness testimony or reliable
bookkeeping records, it is crucial to possess accurate information.
Access to flexible workforce skilled in multiple aspects of the law: Important cases
require excruciatingly long hours. A talented and flexible workforce will be efficient for
extended periods of time.
Local Law Firm Market
The U.S. Census Bureau reports the following for 2011:
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Subject Property Source: Google Search
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7.2.3
Market Position
Demand for legal services provided by law firms depends on the general economic and business
environment and comes from a variety of sources, including commercial, property and personal
injury issues. Clients demand legal services in order to deal with banking and finance law, family
law, wills and probate, criminal law, intellectual property and industrial relations.
Law firms generate a significant proportion of revenue from commercial entities by performing
services related to initial public offerings (IPOs), merger and acquisition (M&A) activity, capital
raisings and, more recently, leveraged buyouts. These activities are closely aligned with the
business cycle; therefore, industry demand depends on the strength of the economy, particularly
within the finance sector.
Changes to legislation affect demand for legal services, especially within a commercial
environment. Changes in regulations occur in nearly every downstream industry, including
financial services and mining. Generally, changes to laws and regulations increase demand for
law firms, since clients often require expertise in order to interpret and comply with these types
of changes.
The following chart presents the market segments for Law Firms:
Business and corporate clients are estimated to account for 65.0% of industry revenue in 2013.
These clients use industry services to work on IPOs, M&A activity and capital raisings.
Because of the economic downturn, many businesses sought legal advice related to restructuring,
bankruptcy and insolvency. Bankruptcy laws have become one of the fastest growing practice
areas in the legal industry. Bankruptcy laws help organizations and individuals who are no
longer able to pay their creditors by either liquidating their assets to pay their debt or by creating
a repayment plan.
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7.3
Accounting, Bookkeeping, and Payroll Services (NAICS 54121)
This analysis primarily discusses accounting services, bookkeeping, and payroll services:
Accounting Services:
After experiencing back-to-back years of revenue decline in 2009 and 2010, the Accounting
Services industry returned to growth starting in 2011. Accounting industry firms offer a wide
array of services including: consulting assistance, restructuring services, tax and other
accounting related services, as well as audit and assurance work. As the economy expanded and
business activity rose, revenue in the accounting industry improved. In the five years to 2013,
industry revenue is expected to increase at an annualized rate of 2.0% to $99.1 billion.
In the five years to 2018, industry revenue is forecast to increase at an annualized rate of 3.4% to
total $117.4 billion. The provision of value-added services and new platforms of expertise will
supply growth for large and medium-size players, while smaller firms will take advantage of an
expected increase business formation in the United States. While revenue is expected to grow at
a healthy pace, wage growth is also expected to increase at an average annual rate of 2.3% in the
five years to 2018. Increasing profit margins in the Accounting Service industry is dependent on
controlling wage costs.
Bookkeeping and Payroll Services:
The Payroll and Bookkeeping Services industry provides payroll and bookkeeping services on an
outsourced basis. This industry has grown because clients are increasingly outsourcing backoffice administrative activities to focus their efforts on core business functions. By outsourcing
payroll and bookkeeping, small businesses can save time and money, freeing up resources for
higher-priority activities. The rising complexity of payroll and benefits payments and deductions
has led many clients to outsource this function to ensure compliance.
As the economy begins to recover, the improving labor market will boost demand for payroll and
bookkeeping services. In the five years to 2017, revenue is forecast to increase at an annualized
rate of 3.0% to $56.3 billion. Despite this growth, continuing high unemployment will cause
price competition, which will ultimately weigh on profit margins.
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7.3.1
U.S. Accounting, Bookkeeping, and Payroll Services Industry Overview
Industry Performance:
Accounting Services: In 2009 and 2010, when the fiscal crisis ebbed and countercyclical work
related to insolvency and liquidation services slowed, industry revenue declined by 0.8% and
3.8% respectively. Starting in 2011, industry revenue rebounded. Buoyed by economic growth,
rising equity markets and a growing number of new businesses, the industry experienced an
increase in demand for its traditional services, which include auditing, advisory and accounting
related services. In 2013, industry revenue is expected to increase by 5.3%.
Bookkeeping and Payroll Services: The Payroll and Bookkeeping Services industry relies on
outsourcing by time-poor managers and small operators that want to spend their time growing
their businesses rather than completing administrative tasks. This trend of small businesses
outsourcing non-core tasks fueled growth during the mid-2000s. Over the long-term, demand for
these services have increased as more small businesses have turned to outside help for payroll
and bookkeeping.
The U.S. Census Bureau reports the following for 2011:
Industry Statistic:
The IBISWorld June 2013 Industry Report 54121c Accounting services in the U.S. reports the
following performance and outlook statistics:
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The following categories define the Accounting Services industry structure:
The IBISWorld March 2012 Industry Report 54121b Payroll & Bookkeeping Services in the U.S.
reports the following performance and outlook statistics:
The following categories define the Bookkeeping and Payroll Services industry structure:
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Product & Services:
Accounting Services: Auditing and other assurance services are the industry’s largest product
segment, accounting for 42.2% of total industry revenue. Audits are commonly done in reference
to a company’s historical financial statements, whereby the auditor presents financial
information in a manner that conforms to generally accepted accounting principles (GAAP).
Audits are undertaken to ensure the validity of financial statements and to make sure that a
company has not misstated its earnings or financial position. Because independence and
expertise is valued in this type of service, most audit work is provided by certified public
accountants (CPAs). CPAs provide a range of services in addition to auditing and assurance,
including corporate advisory, financial and estate planning, forensic accounting and various
consulting services.
Tax services comprise an estimated share of 35.4% of total industry revenue in 2013. The tax
service sector can be further broken down into two segments: tax services for corporations
(11.8%), and tax planning and preparation services for individuals and non-incorporated
businesses (11.1%). Corporate tax services include tax-related merger and acquisition (M&A)
services, corporate income tax preparation and a variety of other services. Businesses also turn to
accounting firms to minimize their income taxes and ensure tax compliance to complex tax laws.
The industry’s largest accounting companies, derive a larger percentage of revenue from their
corporate tax services.
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Bookkeeping and Payroll Services: The industry primarily provides payroll and bookkeeping
services. While many operators have expanded their service offerings to include other types of
human resources products, these services do not affect revenue. Since the start of the recession,
most firms have experienced a decline in demand due to cost-cutting measures and client
reductions. In the next five years, demand is expected to rise as companies increase employee
head count and begin outsourcing activities again.
In general, employee participation in various benefit plans has increased over time, causing
demand for this segment to rise. However, rising unemployment has recently caused the number
of employees on firms’ payrolls to decline. As a result, this segment has marginally declined as a
proportion of total industry revenue since the recession. It is estimates that payroll services will
generate 67.8% of industry revenue.
Bookkeeping’s routine and often tedious nature has made many clients outsource the activity, so
they can concentrate on higher-level finance and accounting matters. Still, accounting software
has made the process considerably easier. Consequently, many small businesses started
performing bookkeeping in-house following the recession. It is estimates that the segment
generates 22.2% of industry revenue.
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External Drivers:
Accounting Services: Industry performance for Accounting Services is heavily influenced by the
following key external drivers:
•
•
•
•
Demand from professional, scientific and technical services:
o Professional services firms of all types rely on certified public accountants. So
rises in demand from these downstream industries will increase industry revenue
o Demand from professional, scientific and technical services is expected to
increase.
Demand from retail trade:
o Like other businesses, retail companies rely on the services of accounting firms.
Therefore, an increase in demand from these downstream markets will boost
revenue for industry operators.
o Demand from retail trade is expected to increase.
Initial public offerings:
o Accounting firms are used extensively for initial public offerings (IPOs), which
fell significantly as a result of the recession. Growth in the number of IPOs will
cause demand for the industry’s services to rise.
o Initial public offerings are expected to increase.
National unemployment rate:
o An increase in the number of businesses promotes further demand for industry
services. During a recession, the number of employing businesses typically
decreases, causing many accounting firms to experience a decline in demand.
o The number of businesses is expected to increase slowly. A dip in business
creation could pose a potential threat for the industry.
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•
Demand from finance and insurance:
o Finance and insurance companies are some of this industry’s largest clients. As
such, increases in demand from these downstream markets will boost industry
revenue.
o Demand from finance and insurance is expected to increase, representing a
potential opportunity for the industry.
Bookkeeping and Payroll Services: Industry performance for Bookkeeping and Payroll Services
is heavily influenced by the following key external drivers:
•
•
•
National unemployment rate:
o Operators often provide payroll services on a per-employee-processed basis;
therefore, the national unemployment rate has a direct effect on the industry.
Rising unemployment hurts industry demand because it reduces revenue for the
number of employees that are processed.
o This driver is expected to decrease and represents an opportunity for the industry.
Outsourcing to the Business Services sector:
o Industry activity is most affected by the level of outsourcing of non-core
activities. Businesses are increasingly outsourcing administration functions,
resulting in strong growth in revenue and industry gross product.
o This driver is expected to increase.
Number of businesses:
o The number of businesses operating in the United States has a direct influence on
the demand for payroll and bookkeeping services. Growth in the number of
businesses will increase industry demand.
o This driver is expected to increase.
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•
External competition:
o Potential clients sometimes opt for industries that offer a wider variety of
services, such as the Human Resources and Benefits Administration industry
(IBISWorld report 56111). An increase in external competition typically has an
adverse effect on the industry.
o This driver is expected to increase, reflecting a potential threat for the industry.
Industry Outlook:
Accounting Services: Revenue in the Accounting Services industry is expected to increase in
2014, driven by strong sales growth from the major industry players. In addition to their core
auditing and corporate tax work, industry firms derive a significant proportion of revenue from
advisory work on major corporate deals, such as M&As and capital market activities. These
activities are expected to increase during the next five years, driving demand for major firms’
cyclical services. Smaller firms will also experience growth as the business market improves. In
2014, it is projects that industry revenue will increase 3.9% to $103.0 billion. In the five years to
2018, revenue in the industry is expected to increase at an average annual rate of 3.4% to $117.4
billion.
Bookkeeping and Payroll Services: As the economy recovers, business activity and renewed
expansion plans will take up more time from managers and small business operators. This factor
will equate to less spare time for administrative tasks like payroll and bookkeeping. Many
businesses that brought these functions in-house to cut costs during the recession will begin to
outsource them again to focus on their core competencies. Furthermore, an improving labor
market will provide the Payroll and Bookkeeping Services industry with a platform for growth
during the next five years. In the five years to 2017, it is projects that revenue will increase at an
annualized rate of 3.0% to $56.3 billion.
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Success Key Factors:
Accounting Services: The following success factors represent the most important for Accounting
Services to optimize profitability during the continued growth:
•
•
•
•
•
•
Access to highly skilled workforce: An appropriately qualified and trained staff is
essential to carrying out the complicated services provided by accounting firms.
Having a good reputation: Developing and maintaining a good reputation is vital for
attracting clients.
Effective quality control: Effective quality control procedures in place are essential to
meet the highest level of regulation and scrutiny.
Maintenance of excellent client relations: Maintaining a loyal, satisfied client base
ensures repeat business.
Having a clear market position: Specialization or catering to a niche market focuses a
firm’s resources and is a successful strategy for small to mid-size operators that are
unable to compete on scale with major players.
Ability to compete on tender: The ability to tender competitively for contracts, and
complete the job within budget, is a characteristic of successful firms.
Bookkeeping and Payroll Services: The following success factors represent the most important
for Bookkeeping and Payroll Services to optimize profitability during the continued growth:
•
•
•
•
•
Access to quality personnel management: In order to stay competitive, service
providers need to have access to high quality personnel management.
Ability to quickly adopt new technology: Service providers need to continually find
new and better ways to apply the increased functionality and flexibility of technology to
improve services. This technology then needs to be made available to clients.
Accessibility to consumers/users: Successful service providers offer products with an
accessible client user interface, mostly provided through the use of Web-based
technology.
Economies of scale: The high degree of assimilation in services implies that service
providers should be able to achieve significant economies of scale. These can be
transformed into improved earnings and used for competitive pricing when the industry
matures.
Ability to manage external (outsourcing) contracts: Third party providers need solid
contract management skills to secure a professional, ongoing relationship.
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7.3.2
Local Accounting, Tax Preparation, Bookkeeping, and Payroll Services Market
The U.S. Census Bureau reports the following for 2011:
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7.3.3
Market Position
Demand Determinants:
Accounting Services: The services provided by accountancy firms have varying demand over the
course of the overall business cycle. Regulatory and compliance mandates provide consistent
demand for traditional accounting and auditing services. Public clients often retain auditing firms
for extended periods guaranteeing a dependable stream of revenue for an accounting firm.
Certain services offered by accounting firms are actually countercyclical, such as the demand for
insolvency and receivership services. During the recession, as business bankruptcies increased,
accounting firms saw a rise in revenue related to these services. Revenue from insolvency
services are short-lived, accounting firms initially receive fees for performing bankruptcy or
receivership work but they lose long-term revenue streams when the client no longer needs
service on an annual basis.
Demand for accounting services is also derived from the government, businesses and individuals
requiring advice and assistance complying with statutory requirements such as company and
individual taxation returns, audited accounts and financial reporting. Therefore, any increase in
legislation or corporate governance standards will prompt further demand for accounting
services.
Bookkeeping and Payroll Services: Businesses are increasingly outsourcing back-office and
routine administrative functions, as they dedicate more resources to their core strengths. In the
payroll segment, this trend has been reinforced by the increasing complexity of employee
legislation and regulation, particularly in the areas of deduction and benefits payments. The
complexity can be multiplied if the client operates many work sites across a number of states.
The demand for industry services also relates to changes to economic and employment growth.
The number of small businesses affects the pool of possible clients and the number of employees
that are being paid through industry providers. The recession caused unemployment to rise
sharply and many businesses to go bankrupt. As a result, client payrolls shrunk, reducing
demand for the Payroll and Bookkeeping Services industry. Some clients have been able to bring
their payroll and bookkeeping in-house after reducing employee headcount. This activity has
been particularly prevalent because slower business activity has freed up managerial time for
administrative tasks.
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Market Segmentation:
Accounting Services:
The following chart presents the market segments for Accounting Services rental:
The majority of revenue generated by the Accounting Services industry is derived from
corporate clients, and the remainder from small businesses and other sources, which includes
government clients. Many of the larger accountancy firms set an annual target of chargeable
hours per partner, while smaller firms set an annual target for total fee income per partner. The
industry standard for total chargeable hours of partners is usually set at a minimum of between
55.0% and 60.0% of hours worked.
Corporate clients use accounting firms for auditing and consulting services, including work on
IPOs and M&As. The financial crisis caused a shift back to basics due to a decline in demand for
deal-related advisory services; the volume of IPO and M&A activity dried up and struggling
clients cut nonessential costs. On the other hand, demand from corporate clients for bankruptcies
and insolvency issues increased for many firms. Corporate clients are expected to increase as a
portion of total revenue during the next five years as the economy recovers and more IPOs and
M&As take place. Globally an increase in regulations related to accounting matters and more
intricate global tax structures will help drive revenue in the next five years to 2018.
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Bookkeeping and Payroll Services:
The following chart presents the market segments for Bookkeeping and payroll:
Business clients are the primary market for the Payroll and Bookkeeping Services industry.
Growing businesses tend to reach a point where the cost of compliance with bookkeeping and
labor market regulations exceeds the cost of outsourcing administration tasks. With ever
increasing regulatory complexity, outsourcing the payroll of bookkeeping functions has become
more common among small businesses. While small industry operators typically serve small
businesses, operators of all sizes serve the small business market. This factor is largely because
of the capacity constraints of small operators. Furthermore, many small businesses prefer to
work with other local business owners to ensure they understand their market.
While medium and large companies have more employees, many have their own in-house HR
departments and a full-time accounting and finance staff. Consequently, this segment is
estimated to generate less revenue than the small business market. IBISWorld estimates that this
market has increased as a proportion of revenue during the five years to 2012 because small
businesses are more susceptible to economic downturns than larger, more diversified companies.
Government departments and agencies also use industry services, particularly as economic
recessions constrain budgets and revenue growth.
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7.4
Management Consulting Services (NAICS 54161)
After tepid growth the past few years, the Management Consulting industry is poised to make a
recovery in 2013 with expected revenue growth of 5.4% during the year. The industry includes
firms that provide assistance to private, public and nonprofit institutions on issues ranging from
strategic organization to human resources planning. With more than 90.0% of industry revenue
coming from consulting contracts with private businesses, industry performance is largely driven
by the level of corporate profit and the number of businesses in the United States.
Hit by industry-wide price compression, profit margins dropped from 11.7% of revenue in 2008
to about 9.1% in 2013. Profit margins are projected to increase gradually to 10.9% of revenue in
2018. As increasing profitability heightens competition, the industry landscape will shift over the
next five years, reflecting opposing trends toward consolidation among major companies and
fragmentation among highly specialized firms.
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7.4.1
U.S. Management Consulting Industry Overview
The Management Consulting industry has historically moved against economic cycles, with
demand for strategic reorganization replacing demand for expansion planning during an
economic downturn. However, the severity of the recent recession forced many of the industry’s
potential clients to exit the market, reducing demand for recessionary restructuring. Recovery
within the Management Consulting industry has instead been driven by human resources
segments, niche consulting and the emergence of new consultants acting flexibly as independent
contractors.
The historical trend toward countercyclical demand for management consulting services
weakened during the recession. In 2009, revenue plummeted 11.7% as prolonged declines in
aggregate demand reduced the number of businesses, and thus potential consulting clients, for a
second year. The industry saw an uptick in growth, however, as corporate profit began to recover
in 2009. Management consulting revenue is expected to rise slightly above pre-recessionary
levels to $171.9 billion in 2013, representing an increase of 5.4% during the year. The industry
has experienced only marginal growth in the past five years, with revenue estimated to increase
at an annualized rate of 0.2%
The U.S. Census Bureau reports the following for 2010:
The IBISWorld June 2013 Industry Report 54161 Management Consulting in the U.S. reports
the following performance and outlook statistics:
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The following categories define the industry structure:
Process and operations management comprises the largest service group in the management
consulting industry at an estimated 31.0% of industry revenue. This service area includes
process, physical distribution and logistics consulting. Under the heading of logistics consulting,
production scheduling and supply chain management form a consistent source of revenue for
management consultants: Profit-motivated companies seek strategies to generate cost savings
and increase operational efficiency, regardless of the macroeconomic climate. As a result, this
service segment has remained relatively constant during the past five years.
Corporate strategy services contribute an estimated 17.0% to management consulting revenue.
This service area includes strategic advice in the areas of general growth strategy, leadership
development, performance improvement, mergers and acquisitions, and corporate portfolio
design. In the area of leadership development, consultants view employee engagement as a
potential source of competitive advantage. As online learning methodologies have reduced the
cost of providing employee training, this service area has experienced growth.
At 16.0% of industry revenue, human resources and benefits consulting forms a key service area
for management consultants, and one that has been a growth segment for the industry. Human
resources and benefits services can most simply be divided into retirement and health benefits
consulting.
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Industry performance for Management Consulting is heavily influenced by the following key
external drivers:
•
•
•
•
Corporate profit:
o The levels of business sentiment and profitability are positively correlated with
the demand for management consulting services. As profit and cash reserves rise,
companies feel more confident making large, long-term investments, such as
hiring management consultants for assistance.
o Corporate profit is expected to grow, which indicates a potential opportunity for
this industry.
Government consumption and investment:
o Although the corporate sector accounts for about 90.0% of industry revenue,
government agencies are responsible for much of the remainder. Industry revenue
is closely linked to government consumption and investment via public sector
consulting demand. Concerns about the federal deficit have limited the potential
for further expansion of federal spending.
o Government consumption and investment is expected to decline slowly.
Number of businesses:
o General growth in the number of businesses directly affects aggregate demand for
management consulting. As the number of businesses increases, demand for
management consulting typically rises as well.
o The number of businesses is expected to increase slowly.
External competition:
o The Management Consulting industry operates in an increasingly competitive
environment. As a result, competition has recently increased from firms in other
industries. While this industry is narrowly defined to include only those
establishments for which management consultancy is the primary business
activity, accounting, IT and niche service providers are increasingly bundling
consulting with their core products and services.
o External competition is expected to increase slowly, posing a potential threat to
the industry.
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The following success factors represent the most important for management consultants to
optimize profitability during the continued growth:
•
•
•
•
•
•
7.4.2
Ability to compete on tender: Most consultancy tasks are subject to competition, so
competitiveness on price and service offerings is crucial.
Effective quality control: The effectiveness of consulting activities is often easily
measured, making it simple for clients to assess the value of consulting services.
Well-developed internal processes: Given the generally labor-intensive nature of the
industry, operators need to ensure that appropriate cost- and time-management systems
are in place on a project basis so that these can be closely monitored.
Access to highly skilled workforce: Often, consulting contracts are entered into on the
basis of the consultant possessing specialized knowledge that relates to clients’
operations. Without this skill base, the consulting firm has little bargaining power.
Having good working relationships with subcontracting building trade specialists:
Subcontractors are used to ensure that quality output can be guaranteed on time and
budget. Many skilled consultants operate as independent contractors.
Access to niche markets: Firms can be more successful if they have specialized skills or
services and can serve a niche market.
Local Management Consulting Market
The U.S. Census Bureau reports the following for 2011:
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7.4.3
Market Position
The demand for consulting services is closely linked to the availability of budgetary resources
and other discretionary expenditure by business, public sector, and nonprofit clients. As such,
business confidence, corporate profit and government investment are important factors that
strongly affect the growth of this industry.
The demand for management consulting services is strongly linked to the economic cycle. It is
particularly sensitive to business and government activity levels in areas such as mergers,
acquisitions, financial planning, feasibility studies, human resources, strategic planning and
corporate profit.
Management consultants must prove that the value of their services is worth the money that is
spent. Unfortunately for industry operators, expenditure on consultancy services by governments
and businesses tends to be one of the first areas to be reduced when the level of business
confidence and economic growth decreases. Slow economic growth leads to a tightening of the
overall budgetary and financial resources. In some instances, however, management consulting
can be a countercyclical industry, whereby consulting companies are hired to improve a
company’s performance during a downturn.
Global economic conditions, including changes in clients’ particular industries and markets, also
affects revenue in the consulting business. Revenue fluctuations are also subject to the
introduction of new products, including competing services, and the effect of government
policies and regulations.
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The following chart presents the market segments for management consulting:
About 90.0% of the industry’s total revenue is derived from the corporate sector. Financial
services, manufacturing, consumer products, telecommunications, energy, utilities and healthcare
are all major clients of the Management Consulting industry. The remaining 10.0% of industry
revenue comes from government agencies and nonprofit groups. All of these industries are
experiencing rapid and significant change, largely from the client’s external environment. As a
result, businesses in these markets require ongoing advice as technology, consumer preferences
and government regulations change.
Financial service providers are the management consulting industry’s largest consumer,
accounting for about 22.0% of industry revenue. This market uses a variety of services, from
strategic planning to organizational restructuring. While many businesses have since reduced
their spending as a result of the recession, this market has also undergone a significant amount of
restructuring, which has mitigated losses for many operators. Demand from the financial service
industry is expected to increase slowly over the next five years as an increasing portion of the US
economy is concentrated in the financial sector.
The consumer products and manufacturing markets focus on the branding and logistics
consulting segments because sales and shipping are significant factors in these fields. The
prospect of the Chinese economy exhibiting robust growth over the next decade is leading to a
rush by many consumer goods manufacturers to enter the Chinese market. Management
consulting firms will continue to assist in the transition to Asian markets, making consumer
manufacturing a likely source of demand growth over the next five years.
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The healthcare market, which is primarily composed of hospital management and pharmaceutical
companies, uses the industry’s logistics, human resources and public relations services.
Healthcare science and technology are rapidly expanding frontiers, even as economic and
financial pressures reduce profit margins, intensify competition and constrain the funds available
for investment. This changing environment is encouraging healthcare companies to hire
management consultants to aid in improving cost while maintaining standards in treating ill
patients. This market is expected to grow over the next five years.
Telecommunications is a rapidly changing field that is strongly influenced by technological
change. Currently, the introduction of voice over internet protocol (VoIP), the ability to conduct
conversations over the internet without the associated costs of telephones, is a high growth
industry. Because traditional Wireline operators provide the data connections used by VoIP,
revenue and thus demand from this market are expected to remain steady over the next five
years.
Firms in the Management Consulting industry serve nearly every other industry in one way or
another. Many management consultants specialize in serving very specific segments of the
market in order to differentiate their services. Consequently, a significant portion of industry
revenue is generated in other industries.
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7.5
Other Professional, Scientific, and Technical Services (NAICS 5419)
This industry is an umbrella for the following sub-industries:
•
•
•
•
•
Market Research
NAICS 541910
Photography
NAICS 541920
Translation Services
NAICS 541930
Veterinarian Services
NAICS 541940
All Other Services
NAICS 541990
o Appraisal (except real estate) services
o Marine surveyor (i.e., appraiser) services
o Arbitration and conciliation services (except by lawyer, attorney, or paralegal
offices)
o Patent broker services (i.e., patent marketing services)
o Commodity inspector services
o Pipeline or power line inspection (i.e., visual) services
o Consumer credit counseling services
o Weather forecasting services
o Handwriting analysis services
The focus on the rest of this analysis will be on the Market Research sub-industry as the more
likely to become a tenant within the new office building.
7.5.1
U.S. Market Research Industry Overview
Spending on market research was curtailed as a result of the recession’s detrimental effect on
consumer spending, which caused corporate profit to suffer. Businesses that largely rely on
consumer spending reduced marketing budgets, causing demand for market research to decline.
Long-term contracts initially mitigated a substantial fall, but the lack of new long-term contracts
in 2008 and 2009 took a toll on the industry, resulting in a significant contract decline in 2009.
Luckily for industry operators, the 2012 presidential election and the Summer Olympics
contributed to increased demand for industry services because both events required market
research for voter polling and marketing campaigns. During 2013, an increase in research
budgets is expected to boost industry revenue 3.3% to reach $19.9 billion.
A common recessionary strategy is to focus on and retain existing customers because efforts to
acquire new customers are too costly. This strategy has a particularly negative effect on market
research spending because it shifts the focus away from identifying and testing potential markets
and marketing strategies. To the industry’s benefit, though, total advertising expenditure has
been on the rise since 2010 when corporate profit returned to growth. During 2013, the industry
is expected to benefit from an estimated 2.4% increase in corporate profit.
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Opportunities for market researchers to measure online media audiences have increased
throughout the past five years. The rapid expansion of new media is giving market researchers
new ways to interact with and study consumers’ opinions. Many companies now allow
consumers to provide ratings, comments and feedback for products online. As more consumers
use social networking sites, companies have more options to engage consumers in conversations
about a product. Being able to directly converse with customers can improve a company’s
understanding of consumer wants and needs.
During the five years to 2018, revenue for the Market Research industry will grow as businesses
increase marketing budgets in light of economic recovery. As the labor market continues to
recover, a rise in consumer spending will cause corporate profit to grow, allowing businesses to
spend more on marketing budgets. Under these recovery conditions, revenue is forecast to
increase at an average annual rate of 2.7% to total $22.7 billion in the five years to 2018. This
growth includes a 3.0% increase to $20.5 billion in 2014 as businesses continue spending more
on advertising, research and development.
The U.S. Census Bureau reports the following for 2010:
The IBISWorld April 2013 Industry Report 54191 Market Research in the U.S. reports the
following performance and outlook statistics:
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The following categories define the industry structure:
The process for product testing can involve qualitative and quantitative research as well as test
marketing in a suitable regional center. It usually also involves research into the effectiveness of
advertising and promotion in terms of sales performance. Although the goal of market research
has not changed, changes in media consumption and advances in computer technology have
affected the tools researchers use to gather and analyze data.
Quantitative market research includes household direct-response questionnaires as well as doorto-door and telephone interviews. This form of research uses scales to help operators understand
the needs, wants and opinions of individuals. During the past five years, quantitative research has
changed significantly with the application of new technology and the ability to link various
databases. This change has increased sophistication in the techniques used by market research
firms.
Qualitative research attempts to explain why consumer make the decisions they do, and how they
come to a decision. Qualitative research can be undertaken through a combination of personal
interviews (including face-to-face and telephone interviews) and focus groups. Focus groups are
used for product testing and as a means of ascertaining why customers buy or do not buy certain
products. They are also used to test their thoughts and responses to products, services and ideas.
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During the past five years, the internet and social media have shifted the dialogue between
market researchers and consumers. Market research companies can now monitor consumer
opinions by establishing message boards, online forums and ratings systems. These methods
allow companies to bypass paid participants in a focus group to reach and engage an active
audience. The internet also gives market researchers the opportunity to target and engage very
specific populations. The rise of social media has particularly caused a fragmentation of
consumer markets, making it possible to reach market segments that were hard to reach before.
Industry performance for Market Research is heavily influenced by the following key external
drivers:
•
•
•
Corporate profit:
o When corporate profit rises, businesses often allocate more money to marketing
and advertising budgets. Growth in corporate profit leads to an increase in market
research spending, which benefits industry revenue.
o Corporate profit is expected to increase, representing a potential opportunity for
the industry.
Research and development expenditure:
o As the economy slowly recovers, consumers will likely increase their spending,
including discretionary and big-ticket item purchases. Consequently, businesses
will invest more in market research to test and refine products before they are
launched.
o The research and development expenditure is expected to increase.
Total advertising expenditure:
o Market research helps businesses measure audiences and effectiveness of an
existing or planned advertising campaign. A rise in media and promotional
expenditure by clients will increase demand for an industry’s services, as
companies seek to maximize the return on their marketing investments.
o Total advertising expenditure is expected to decrease slightly, representing a
potential threat to the industry.
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•
National unemployment rate:
o An increase in the national unemployment rate can cause consumers to cut back
their spending, driving sales to decline. As a result of slow sales, businesses can
decide to reduce their marketing budgets when launching new products and
services.
o The national unemployment rate is expected to decrease.
The following success factors represent the most important for market researchers to optimize
profitability during the continued growth:
•
•
•
•
•
•
Firms who have the ability to quickly adopt new technology: Research firms that can
adopt new market research techniques and technology can provide clients with more
effective and measurable results.
Ability to compete on contract basis: Firms that can compete for market research
activities on a contract or tender basis will have a competitive advantage because most
major market research projects are awarded on such a basis.
Access to skilled and flexible workforce: Research projects often require excruciatingly
long hours. A skilled and flexible workforce will work efficiently for extended periods of
time, covering many areas of operations including undertaking interviews and collating
results.
Provision of relevant results: Effective monitoring of results during each stage of the
research process will ensure that the final results are both reliable and relevant to a
client’s needs.
Good project management skills: Firms that offer superior project management
personnel can ensure that projects meet time and quality requirements within a prescribed
budget. This is particularly important because the industry is labor intensive with a
relatively low margin.
Development of a symbiotic relationship with another industry: Firms that provide
services to companies with an ongoing need for market research, such as advertising
agencies and consumer goods manufacturers, are more likely to develop a loyal base of
clients.
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7.5.2
Local Market Research Industry
The U.S. Census Bureau reports the following for 2011:
Subject Property Source: Google Search
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7.5.3
Market Position
The industry’s major players are affected by domestic and international factors that can alter the
marketing budgets of clients. Marketing budgets affect new product development and advertising
expenditures, reducing the demand for industry services. Targeted audience research is an
important trend affecting the Market Research industry. Clients are becoming more demanding
in their expectations of players to correctly identify target audiences and the best media, or
approach, to present their product. This has forced firms to continually reevaluate the
effectiveness of campaigns to ensure the most effective and efficient use of their marketing
budgets.
The primary demand for this industry comes from new and existing product research and
development by packaged goods companies. This is estimated to account for 28.0% of the total
market research expenditure in the United States. Media and advertising industries, and
healthcare and pharmaceutical industries both account for an estimated 21.0% of the total market
research expenditure.
A growth in per capita disposable income will have a positive effect on consumer sentiment,
resulting in increased spending on a wide array of consumer goods, including automobiles,
houses and travel. As consumer spending increases, corporate profit rises, providing businesses
with a more substantial marketing budget.
Demand is also derived from a variety of areas including political polling on voting intentions,
issues and views and linked to the election cycle. Quite often, governments undertake market
research as a precursor to the development of a policy or a public information or education
campaign. They also use it to help promote responses to and recognition of these campaigns.
While governments conduct their own market research, private companies conduct consumer
market research on behalf of clients.
The following chart presents the market segments for market research:
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This industry’s markets can be divided into the three broad segments: providers of consumer
goods and services wishing to measure and understand their market; providers of media and
advertising wishing to measure and understand their viewers; and government institutions
wishing to measure and understand their electorates.
This industry’s largest market includes businesses that produce or sell consumer items, such as
packaged goods (i.e. any packaged food, liquor or other consumer product). Another major
consumer product-based market segment is the automotive industry. Consumer service providers
such as finance and insurance providers along with health and pharmaceuticals industries also
use significant amounts of market research. Market research firms provide consumer behavior
information and retail transaction measurement data, giving clients insights on how to make
strategic decisions and measure their sales and market share. The reliance on these industries
makes market research firms that specialize in these areas sensitive to changes in consumer and
corporate spending, when economic conditions change. Demand for market research from
consumer goods and services providers has been growing in the past five years, fueled by
companies’ investments in research and development, and industry demand is expected to grow
at a faster rate during the next five-year period.
Media research includes measuring and profiling audiences across television, online and mobile
platforms. This research includes collecting ratings and viewer data for print and electronic
media. Clients use media research to better understand their audiences and maximize the value of
their content. More recently, demand for online media viewership data has been on the rise. This
has grown from merely measuring the number of unique hits on a website to include data on the
consumption of online media such as internet, radio, television, and music and video downloads.
Measuring the effectiveness of internet advertising has also become a priority because of the rise
in online advertising and the rise of the number of internet users. About 75.0% of adults and
about 95.0% of teenagers access the internet at home, work, school or using mobile devices,
according to the Pew Research Center, a nonprofit organization that provides information on
different issues and trends worldwide.
The Other market segment includes remaining business sectors and nonprofit organizations, as
well as governments and political parties. Government organizations use market research in a
number of ways, including: gauging public opinion; profiling an electorate, a particular
demographic segment, or a political party’s supporters or opposition; measuring the audience for
political advertising and information campaigns and responses to these items. Market research
service providers also conduct political opinion polling, both on behalf of political parties and for
media use. During the past five years, this market segment has experienced some heightened
demand because of the 2008 and 2012 presidential elections and the 2012 Summer Olympics.
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7.6
Marketing Strategy
Product
Product marketing will focus on the availability of vacant office space units for the professional
business activities presented. Each firm will have its own needs to be fulfilled, regarding size of
the office and leasehold improvements required.
Price
As an independent operation, pricing has been based on a combination of cost-plus and the local
real estate rental market. Pricing will not be expected to change significantly other than with
inflation and industry growth.
Promotion
Promotion, or advertising, will occur through specific media in order to reach a specialized range
of consumers:
•
•
•
•
Network development with commercial real estate associations;
Local newsprint advertising (Miami Herald, Doral News, Doral Tribune, etc.);
Store front, curbside, and roadway signage;
Joint promotions with local organizations;
Distribution (Placement)
As these are office space properties, marketing will focus on those searching for a place to start a
new business.
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8.0
EMPLOYMENT
8.1
Targeted Employment Area
Under the EB-5 immigrant investor program, an alien can become eligible to obtain U.S.
permanent resident status by investing either US $1 million or US $500,000 in a new commercial
enterprise in the U.S. To participate in the immigrant investor program through investing the
lower US $500,000 amount, the alien must invest his/her capital funds into a geographic area
that qualifies as a Targeted Employment Area.
Section 203(b)(5)(B) of the Immigration and Nationality Act defines a TEA as an area that, at
the time of investment, is a rural area or an area that has experienced an unemployment rate that
is at least 150 percent of the national average unemployment rate.
Specific to the Project, which is located within the boundary of the regional center’s USCISpending geographic designation, the minimum threshold for an individual alien investor’s capital
investment into a new commercial enterprise will be $500,000 if the investment is made in a
TEA, or $1,000,000 if outside of a TEA. According to Florida Department of Economic
Opportunity, the Subject Property is located in Census Tract 90.10, which currently qualifies as a
TEA when combined with the contiguous Census Tracts 7.03 and 91 within the Miami-Ft.
Lauderdale-Pompano Beach MSA due to a high unemployment rate of 12.7%. (See Exhibit E:
TEA Designation for details).
The overall job creation impacts of the Project, including indirect and induced construction job
creation impacts, fully support 19 EB-5 foreign investors within a TEA to provide the $9.5
million in total EB-5 investor capital that the Project Developer is seeking. Evidence that the
proposed Project is in a TEA within the regional center boundary will be provided with the
individual I-526 Petitions of EB-5 investor(s).
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8.2
Job Creation
The economic impact analysis conducted by Wright Johnson LLC finds that the Project will
generate significant and positive economic benefits for the local, regional and U.S. economy.
The total investment will be $9,500,000 and the EB-5 investment into the project will be the
entire $9,500,000 from 19 foreign investors. Of the total capital expenditure, $4,817,500 will be
spent on hard construction for the development. 100% of foreign investment will be used to
finance these construction costs.
Foreign investment will require evidence of creating at least 190 jobs. According to the
economic analysis, the Project will create 246.7 permanent new jobs comprising of direct,
indirect, and induced jobs. Therefore, each investor will be assigned 12.98 jobs to meet the
EB-5 capital raise of $9.5 million. The following table demonstrates the breakdown of jobs
utilizing the RIMS II input/output model:
Source: Economic Analysis conducted by Wright Johnson, LLC; p. 6.
Verification at the I-829 state of the EB-5 process would be receipts, tax documents, and other
expense records. Construction employment was derived through expenditure modeling based
upon detailed construction cost figures supplied by FEB5RC.
The proposed Project includes less than two years of construction. Therefore, direct
construction jobs are not included in the total job creation estimates in accordance with USCIS
requirements. Also, the number of construction jobs must be based upon the capital expended on
the “hard costs” of construction only. Certain soft costs, such as interest reserves and permitting
are not included. These jobs are calculated as indirect effects within the RIMS II model and to
use these costs would be double counting.
For further details on Project job creation, including the additional indirect and induced impacts
of construction expenditures, please refer to the economic impact analysis report titled, An
Economic Analysis of a Professional Business Center Encompassing the Counties of Broward,
Miami-Dade, and Palm Beach of the State of Florida, which can be referenced within Exhibit G:
Market Studies.
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8.3
Tenant Occupancy
This business plan takes into consideration that FEB5RC is using EB-5 capital to construct
commercial buildings. The job creation estimates employed in this business plan are based, at
least in part, on the assumptions that direct employees of the future tenants of the buildings can
be utilized as inputs into the applicable input-output model.
However, USCIS has concerns that the attribution of these direct jobs to the EB-5 investment
may not be based on reasonable economic methodologies, and therefore do not demonstrate in
“verifiable detail” that the requisite jobs will be created. Rather, contemporary economic
methodologies appear to indicate that such jobs would be more appropriately attributed to the
tenants themselves and not to the regional center because the demand for labor precedes the
decision about where to house that labor as a general economic principle. Consequently, USCIS
recognizes only those employment impacts that could be attributed to the regional center, such as
those resulting indirectly from the construction activity and, if applicable, the ongoing building
management activities that will be required to maintain the building.
However, USCIS does recognize the possibility that regional centers might present additional
evidence to demonstrate an economically acceptable nexus between the EB-5 investment and
responsibility for the job creation asserted in the application. Accordingly, additional evidence
may be presented to demonstrate that the proposed methodology is economically reasonable.
There are three issues of concern to USCIS on this matter that must be addressed:
•
•
•
First, there is concern that once an office building is finished that the space will be
largely vacant. USCIS requires evidence that tenants are likely to occupy the commercial
space.
Second, there is concern that jobs which become located within the tenant space of the
project should be shown to be more likely than not a result of an expansion in specific
services driven by the project as opposed to merely tenant shifting and/or re-location of
already existing jobs. USCIS requires confirmation that tenant jobs will be “new” jobs
and not merely “relocated” jobs.
Third, there is concern that the estimated number of tenant jobs for the commercial space
must be supported by a detailed, verifiable, and transparent methodology that estimates
industry-specific tenant employment levels, and that the estimated number of tenant jobs
is a reasonable estimate. USCIS requires evidence that job creation estimates are
reasonable.
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8.3.1
Evidence of Occupancy by Tenants
Description of Products and Services
The Project consists of a multitenant, suburban office building with approximately 41,000 square
feet of space on 2.5 acres, built in a pair of modules separated by an attractive secluded
courtyard. Ample parking for professionals and clientele is available just steps away from each
module. The building’s office units range in size from 800 SF to 8,000 SF (see section 3.2
Project Details for specifics of the proposed office building).
The proposed Business Center will offer its tenants a stylish and convenient place to start up
their professional offices. Professional tenants may include medical, real estate brokers,
stockbrokers, title companies, insurance agencies, mortgage brokers, CPA’s, investment firms,
and law firms.
The products and services provided by the prospective tenants may be summarized as follows:
•
•
•
•
Legal Services: Provide expertise in a range or in specific areas of law, such as criminal
law, corporate law, family and estate law, patent law, real estate law, or tax law.
Accounting Services: Provide auditing of accounting records, designing accounting
systems, preparing financial statements, developing budgets, preparing tax returns,
processing payrolls, bookkeeping, and billing.
Consulting Services: Provide advice and assistance to businesses and other organizations
on management issues, such as strategic and organizational planning; financial planning
and budgeting; marketing objectives and policies; human resource policies, practices, and
planning; production scheduling; and control planning.
Other Professional Services: Provide other professional, scientific, or technical services
such as market research; commercial photography; translation services; veterinary
services; architectural, engineering, and related services; specialized design services;
computer systems design and related services; management, scientific, and technical
consulting services; scientific research and development services; and advertising, public
relations and related services
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Detailed Market Analysis
Current Size of the Market Area:
The market analysis is based on three levels of the market area:
•
•
•
Miami-Dade County
Miami Airport Submarket
Target Employment Area
Miami-Dade County is represented in the following map:
Miami Airport Submarket is represented in the following map (within red circle):
Source: CB Richard Ellis (“CBRE”)
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The TEA is represented in the following maps:
TEA Map of Census Tracts
TEA Office Building Inventory
Historic and Developing Trends:
Based on the research of Cushman and Wakefield Professionals made from the data base of
Costar, the referenced CoStar office report (see Exhibit G: Market Studies), unless specifically
stated otherwise, calculates office statistics using CoStar Group’s entire database of existing and
under construction office buildings in each metropolitan area. Included are office and office
condominium, office loft, office medical, all classes and all sizes, and both multi-tenant
buildings and single tenant buildings, including owner-occupied buildings. CoStar Group
national database includes approximately 80.7 billion square feet of coverage in 3.5 million
properties. All rental rate reported in the CoStar Office Report have been Converted to a Dull
Service equivalent rental rate.
CoStar Group, Inc. (NASDAQ — CSGP) is commercial real estate's leading provider of
information and analytic services. Founded in 1987, CoStar conducts expansive, ongoing
research to produce and maintain the largest and most comprehensive database of commercial
real estate information. Our suite of online services enables clients to analyze, interpret and gain
unmatched insight on commercial property values, market conditions and current availabilities.
Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe
with a staff of approximately 1,500 worldwide, including the industry's largest professional
research organization.
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The Owner provides the following detailed market analysis:
The project site is within a TEA that has seen no new office buildings of less than 50,000 sq. ft.
since the onset of the 2009 “great recession,” despite evidence of growing demand for office
space in this area. CoStar Group, Inc. is one of the largest providers of information/marketing
services to commercial real estate professionals in the United States. Data from CoStar (see
chart below) show a sharp drop in the vacancy rate in the area in 2010 and 2011 as the economy
recovered from a severe recession in 2009. At the start of 2013 the rate was below 10 percent.
Despite positive net absorption of commercial office space within this region since 2010, there
are no new additions to supply shown in the CoStar data since 2008.
Source: Cushman & Wakefield; CoStar Data on the Doral TEA Commercial Office Building Market
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Thus, when Cushman Wakefield prepared a formal forecast of commercial office demand, they
projected “negative” vacancy rates, rates below zero as shown in the chart below.
Source: Cushman & Wakefield; Forecast of Commercial Office Demand in the Doral TEA
While negative vacancy rates are not a realistic option in the real world, chart above depicting
Cushman & Wakefield’s vacancy rate projection provides strong evidence of excess demand that
is likely to be manifested in rising rents unless new supply is added within this area. The
absence of any new supply since 2008 and the projection of “negative” vacancy rates suggests
that substantial excess demand is emerging in the local market.
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The following figure reinforces this finding with a focus on commercial space rents. These rents
have been rising since the middle of 2010, an outcome consistent with the phenomenon of excess
demand. With no new supply in the last 4 years, the rents are likely to rise even more as was the
case in the real estate boom shown in this chart preceding the 2009 recession. Investments that
appropriately address this excess demand situation would relieve a market imperfection that has
emerged in Doral.
Source: Cushman & Wakefield; Vacancy Rates and Rents for Commercial Office Space in the Doral TEA
The December 20, 2012 memo of USCIS indicates that it is appropriate to claim tenant jobs as
part of the job creation impact of an investment project if the investment fills an investment void
within the relevant area. The specific language from the December memo reads:
In high unemployment areas in which new projects are not likely to significantly displace
other income or labor, applicants and petitioners should generally indicate how a specific
project will fill an existing investment void in that area to generate new demand for
tenant businesses.
As shown by the CoStar data discussed above, there is an investment void in Doral, since no new
commercial office buildings have been added to local supply since 2008, despite many quarters
of positive net absorption which has drawn down the vacancy rate.
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There is also evidence that demand is expanding in the area. The proposed project sits just to the
west of Miami’s international airport, and the port authority which manages the airport has
announced a major expansion including a hotel, business center, and retail plaza. This project is
likely to generate new demand for nearby office-based businesses. In addition, the state is rebuilding a key highway intersection, the S.R. 826 and S.R. 836 Interchange, which will relieve
congestion in the area and make the area more attractive for development.
Moody’s forecast for the Miami area suggest employment growth paralleling growth in the
national economy (see chart below) and notes that Miami’s ties to Latin America are likely to
propel forward an already strong international trade sector.
A Chase/J.P Morgan forecast suggests further that the real GDP of the Florida economy will
expand at a slightly higher rate than the U.S. economy as a whole.
The combination of no change in supply since 2008, and expanding demand as shown by airport
expansion, forecasted growth in Miami/Dade County, and forecasted growth in Florida as a
whole adds up to a convincing demonstration that an investment void exists for office space
within the Doral TEA.
The Project focuses on very small startup or otherwise small firms that desire space of 1,000 sq.
ft. or less. This is an under-served niche within the local commercial real estate market. The
developer indicates that competitive buildings in the area (office buildings under 50,000 sq. ft.)
have no suites of less than 4,000 sq. ft. The developer perceives strong demand from businesses
that want to lease 1,000 sq. ft. or less and is including suites of that size in the proposed office
building. This is a market niche that is likely to appeal to startups as well as businesses that want
small spaces in the longer terms (e.g., solo professional practitioners). By targeting an
underserved niche within the local market, the developer is removing an additional market
constraint and enhancing the probability of rapid leasing of the space by firms creating new jobs.
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This analysis presents evidence of excess demand for office space within the market area and of
filling an investment void. Therefore, both Owner and Developer concludes that the proposed
Project satisfies both rationales for counting tenant jobs as part of the job creation impact of an
investment financed by immigrant investors under the EB-5 program.
Projected Growth Rate:
Using a reasonable methodology set by real estate industry’s standards, Cushman & Wakefield
takes an average of the net absorption of the past 5 years and uses it to forecast the net absorption
of the next 2 years. Those numbers are represented in the following portion of the Forecast
Report chart previously presented and expressed in the table that follows. The Project’s proposed
office building is not considered into these calculations.
Source: Cushman & Wakefield; Forecast of Commercial Office Demand in the Doral TEA
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Period
#
Deliveries
Rolling 2-yr Net Abs
(SF)
Net Absorption
(SF)
RBA
Vacant
Space (SF)
Vacancy
Rate
2012 Q4
0
2,034
23,477
849,477
91,505
10.8%
2013 Q1
0
(405)
(18,329)
849,477
109,834
12.9%
2013 Q2
0
1,536
26,910
849,477
82,924
9.8%
Current Quarter
2013 Q3
0
929
(2,843)
849,477
85,767
10.1%
2013 Q4
0
17
5,949
849,477
79,818
9.4%
2014 1Q
0
(678)
5,949
849,477
73,869
8.7%
2014 2Q
0
4,084
5,949
849,477
67,920
8.0%
2014 3Q
0
6,626
5,949
849,477
61,971
7.3%
2014 4Q
0
4,435
5,949
849,477
56,022
6.6%
2015 1Q
0
7,470
5,949
849,477
50,073
5.9%
2015 2Q
0
4,850
5,949
849,477
44,124
5.2%
2015 3Q
0
5,949
5,949
849,477
38,175
4.5%
Source: Cushman & Wakefield; Forecast of Commercial Office Demand in the Doral TEA
Competing Businesses:
The following table summarizes the competing properties identified on the TEA Office Building
Inventory previously presented:
Address
7200 NW 7th Ave
Miami, FL 33150
7330 NW 12th St
Miami, FL 33126
7855 NW 12th St
Miami, FL 33126
7875 NW 12th St
Doral, FL 33126
7975 NW 12th St
Miami, FL 33126
8095 NW 12th St
Doral, FL 33126
8181 NW 14th St
MICC Center 16
Miami, FL 33126
1987 NW 18th Ct
Miami, FL 33172
1989 NW 18th Ct
Miami, FL 33172
8899 NW 18th Ter
Miami, FL 33172
11250 NW 20th St
Miami, FL 33172
Typical
Space Smallest
Max
Rent
Expenses
Leased
Floor Stories
Available Space
Contig
(per SF/Yr) (Per SF)
Size
Submarket
Building Type
Year
Built
Building
Size
Miami Airport
Class B Office
1985
24,907
8,000
3
0
NA
0
100%
$0.00
$2.22
Miami Airport
Class B Office
1972
18,387
91,963
2
8,003
8,003
8,003
100%
$7.50
$2.23
Miami Airport
Class B Office
1979
25,400
12,700
2
2,335
760
1,575
91%
$21.00
$4.77
Miami Airport
Class B Office
1979
25,400
12,700
2
17,383
1,654
12,700
38%
$21.00
$4.89
Miami Airport
Class B Office
1982
1,900
1,900
1
0
0
0
100%
$0
$51.80
Miami Airport
Class B Office
1999
41,878
10,469
4
2,305
2,305
2,305
95%
$24.50
$2.45
Miami Airport
Class B Office
1985
11,840
7,204
3
0
NA
0
100%
$0
$2.99
Miami Airport
Class B Office
NA
6,862
3,899
2
0
0
0
100%
$0
$0.00
Miami Airport
Class B Office
NA
9,411
5,347
2
0
NA
0
100%
$0
$0.00
Miami Airport
Class B Office
1991
31,274
15,637
2
0
NA
0
100%
$0.00
$2.24
Miami Airport
Class B Office
2006
19,456
19,456
1
0
NA
0
100%
$6.82
$0.00
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Address
7225 NW 25th St
Miami, FL 33122
9600 NW 25th St
Miami, FL 33172
10900 NW 25th St
Doral, FL 33172
10580 NW 27th St
Square One
Miami, FL 33172
10640 NW 27th St
Miami, FL 33172
7902-7930 NW 36th St
Miami, FL 33166
9500 NW 41st St
Miami, FL 33178
7495 NW 48th St
Miami, FL 33166
7715-7719 NW 48th St
Doral, FL 33166
7735-7743 NW 48th St
Doral, FL 33166
7500 NW 52nd St
Miami, FL 33166
2550 NW 72nd Ave
Miami, FL 33122
4995 NW 72nd Ave
Miami, FL 33166
5000 NW 72nd Ave
Miami Springs, FL 33166
5050 NW 74th Ave
Miami, FL 33166
7331 NW 74th St
Medley, FL 33166
1300-1342 NW 84th Ave
Doral, FL 33126
1450 NW 87th Ave
Doral, FL 33172
3275 NW 87th Ave
Miami, FL 33172
2400-2420 NW 87th Pl
Doral, FL 33172
2422 NW 87th Pl
Doral, FL 33172
2000 NW 89th Pl
Miami, FL 33172
3801 NW 97th Ave
Doral, FL 33178
1400 NW 107th Ave
Miami, FL 33172
1500 NW 107th Ave
Doral, FL 33172
2200 NW 107th Ave
Doral, FL 33172
2335 NW 107th Ave
Doral, FL 33172
2500 NW 107th Ave
BB&T Bank Building
Miami, FL 33172
3601 NW 107th Ave
Doral, FL 33178
1701 NW 112th Ave
Miami, FL 33172
9300 Doral Blvd
Miami, FL 33178
Typical
Space Smallest
Max
Rent
Expenses
Leased
Floor Stories
Available Space
Contig
(per SF/Yr) (Per SF)
Size
Submarket
Building Type
Year
Built
Building
Size
Miami Airport
Class B Office
1987
24,141
8,270
3
1,641
365
638
96%
$19.50
$5.02
Miami Airport
Class B Office
1981
35,000
5,000
7
4,133
722
1,248
88%
$23.00
$1.88
Miami Airport
Class B Office
2003
16,887
9,350
2
2,663
2,663
2,663
84%
$21.00
$3.12
Miami Airport
Class B Office
1988
4,838
4,838
2
0
NA
0
100%
$0.00
$3.16
Miami Airport
Class B Office
1986
2,780
1,580
2
0
NA
0
100%
$0.00
$3.33
Miami Airport
Class B Office
1996
15,000
15,000
1
0
NA
0
100%
$0.00
$12.50
Miami Airport
Class B Office
1980
22,600
11,300
2
1,500
1,500
1,500
93%
$25.00
$2.41
Miami Airport
Class B Office
1965
16,000
16,000
1
0
NA
0
100%
$0.00
$1.81
Miami Airport
Class B Office
1965
42,614
14,850
3
882
882
882
98%
$19.50
$5.95
Miami Airport
Class B Office
1965
28,384
28,384
1
7,096
3,548
7,096
100%
$18.00
$8.94
Miami Airport
Class B Office
1971
21,600
10,800
2
14,700
3,000
14,700
32%
$15.00
$1.75
Miami Airport
Class B Office
1984
24,141
22,933
3
976
290
366
96%
$21.56
$2.13
Miami Airport
Class B Office
1986
33,642
30,462
4
0
NA
0
100%
$0.00
$1.84
Miami Airport
Class B Office
1976
1,129
1,129
1
0
NA
0
100%
$0.00
$37.14
Miami Airport
Class B Office
1970
9,505
9,505
1
1,400
400
500
85%
$19.50
$4.54
Medley/Hialeah
Class B Office
1976
26,615
26,615
1
0
NA
0
100%
$0.00
$0.04
Miami Airport
Class B Office
2005
12,000
12,000
1
0
NA
0
100%
$0.00
$0.53
Miami Airport
Class B Office
2007
21,810
10,905
2
2,461
2,461
2,461
100%
$21.50
$3.27
Miami Airport
Class B Office
1999
9,500
5,000
2
0
NA
0
100%
$0.00
$5.08
Miami Airport
Class B Office
2006
13,250
13,250
1
2,207
1,102
1,105
92%
$19.00
$0.21
Miami Airport
Class B Office
2006
869
869
1
0
NA
0
100%
$0.00
$3.19
Miami Airport
Class B Office
1982
22,391
22,391
2
0
NA
0
100%
$0.00
$2.58
Miami Airport
Class B Office
2008
19,983
6,661
4
0
NA
0
100%
$0.00
$2.68
Miami Airport
Class B Office
1996
39,079
9,769
4
16,974
1,413
9,299
60%
$26.00
$0.62
Miami Airport
Class B Office
1995
28,900
14,450
2
0
NA
0
100%
$0.00
$3.33
Miami Airport
Class B Office
1996
21,457
21,457
1
0
NA
0
100%
$0.00
NA
Miami Airport
Class B Office
1979
5,000
5,000
1
0
NA
0
100%
$0.00
$35.61
Miami Airport
Class B Office
2000
32,902
8,225
4
8,909
1,261
4,224
73%
$26.00
$7.00
Miami Airport
Class B Office
2004
36,000
9,000
4
0
NA
0
100%
$0.00
$3.46
Miami Airport
Class B Office
2008
14,745
14,745
1
3,018
1,422
3,018
89%
$29.00
NA
Miami Airport
Class B Office
1980
30,000
10,000
3
0
NA
0
100%
$0.00
$0.00
Average
1,875
Average
$19.22
$5.37
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The main strength of competitive properties is that they are ready for immediate occupancy. The
primary weakness of competitive properties is that they are older buildings.
The average age of each building is 10 years; therefore the majority is outdated for the South
Florida Small Business owner that is demanding trendy in style and in technology. The building
owners carry mortgages from previous years and don’t want to affect their income by spending
money on interior build outs (or tenant improvements), so they are not able to accommodate new
tenants with the space sizes they require. The proposed Project offers new construction, a lake
view, and immediate access to the highway.
Additionally, the average smallest space available in the competitor buildings is 1,875 square
feet. The average tenant in the area uses a space under 1,000 square feet. Therefore, the proposed
Project will meet a customer requirement that current supply is unable to completely satisfy.
Distinguishing Characteristics of Subject Property
Located at 9000 NW 15th Street, Doral, FL, the Subject Property is a couple of blocks away
from the Interchange of Dolphin expressway ( SR 836) and Palmetto Highway (SR 826). The
Business Center is also minutes away from the Miami International Airport, the International
Mall, The Dolphin Mall, PGA Championship Golf courses (the Cadillac Championship), great
restaurants, and gorgeous residential areas like Doral Isles.
The SR 826 and SR 836 Interchange is used by over 430,000 motorists daily and is currently
being reconstructed to enhance safety and reduce congestion for motorists using the Interchange
with a $560,000,000 project performed by the Florida Department of Transportation. This
project, also known as Section 5, is the final and largest section of the 12-part Palmetto
Expressway (S.R. 826) Improvement Program, which consists of major construction along a 16mile corridor.
Source: Florida Department of Transportation; http://www.826-836.com/project-overview/project-history/.
In several respects the growth of the population of Dade County is an interesting, if not unique,
phenomenon. Despite of the US economic and political situation, Miami continues to expand
with rapid vigor. Dade County exhibits potentialities which are proving an irresistible lure to
men whose pioneering instincts lie close to the surface. In such a community, the reasons for
population growth lie in the strength of inducements to immigration-the study of birth and
mortality rates is unimportant.
The City of Doral’s Mayor Luigi Boria stated in April 2013 after the disputed presidential
elections in Venezuela that Doral can expect a new wave of immigrants from the South
American country who could increase the population by 40 percent in the next two years. The
number of Venezuelans could jump from nearly 50,000 residents to about 70,000 by 2015. “This
wave represents a challenge for us,” noted Boria, who after winning the November election
became the first Venezuelan mayor in Florida.
Source: Miami Herald; http://www.miamiherald.com/2013/04/15/3346268/doral-expects-new-wave-of-venezuelan.html
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8.3.2
Confirmation of New Jobs
Net Absorption is the net difference with the amount of
square feet that moves into a certain market (define
boundaries) minus the amount of square feet the moved
out the same market The following table presents the data
of leased space, which is all those moved into the market,
and the net absorption.
Therefore, the net absorption identifies spaces that were
leased by new tenants. The amount of space that was
merely relocated from the same market may be calculated
by the following equation:
Relocated = Leased Space minus Net Absorption
Relocated =
25,368 SF
- 5,738 SF
19,630 SF
This indicates that 22.6% of leases were due to new
businesses with new jobs while 87.4% were relocations.
In addition, the Owner intends to facilitate new job
creation rather than relocation within the rules and
regulations of the lease to be signed by each and every
tenant (see Exhibit F: Lease for Prospective Tenants).
Specifically, line item 44 on page D-5, which is in Appendix D: Rules and Regulations of the
lease, states the following:
“Tenant shall not relocated employees from a previous location to this Building. All
employees employed by the Tenant in this building shall be new employees, in newly
created positions, hired expressly for purposes of staffing the office located in this
Building.”
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8.3.3
Reasonability of Job Estimates
IMPLAN has long been accepted by the USCIS (and many other governmental agencies) as a
valid economic methodology that satisfies the requirements of 8 CFR § 204.6(j)(4), 8 CFR §
204.6(m)(3)(iv) and 8 CFR § 204.6(m)(3)(v).
The IMPLAN data and accounts closely follow the accounting conventions used in the annual
industry accounts produced by the U. S. Bureau of Economic Analysis. This data is reported in
the U.S. Benchmark Input-Output Accounts. A benchmark input-output account is produced
every five years, soon after the U. S. Economic Census is compiled jointly by the United States
Census Bureau (USCB), the Bureau of Economic Analysis (BEA) and the Bureau of Labor
Statistics (BLS). In addition to this benchmark input-output account, BEA produces a set of
annual industry accounts.
IMPLAN is based on the concept of a production function, which determines the quantities of
inputs that are required to produce a unit of output. The basic data are collected by the
Commerce Department from a variety of sources, such as the Annual Survey of Manufacturers
and various annual surveys of the service sector. The data are benchmarked to the Economic
Census figures once every five years and then updated annually. These figures comprise the
national input/output model.
The IMPLAN model has certain similarities with the RIMS (Regional Input/Output Modeling
system) model developed by the Department of Commerce, but is generally thought to contain
several superior features besides its greater ease and flexibility of use.
The IMPLAN model used in the referenced economic analysis (see Exhibit G: Market Studies)
generates output data in the form of job creation and economic impact numbers. The IMPLAN
software derives monetary predictions based on various input data. The USCIS has long
recognized that an economic report provides two data sets of information, “job creation” and
“economic impact,” both within the geographic scope of the regional center. Job creation
analysis is summarized within section 8.2 of this business plan.
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EXHIBIT A: REGIONAL CENTER DOCUMENTS
Regional Center Approval letter:
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EXHIBIT B: FLOW OF FUNDS
Formation of New Commercial Enterprise, DEIH, to organize 19 EB-­‐5 Investors and pool $9,500,000 of EB-­‐5 capital. DEFM will serve as EB-­‐5 Managing Member; FEB5RC is the sponsoring Regional Center. •
Limited EB-­‐5 LLC Path of Funds Investment of Capital Job Creation •
DEIH conducts its internal due diligence regarding the lawful source of funds. Capital to be placed in escrow pending the approval of the I-­‐526 petitions. •
•
The EB-­‐5 LLC shall issue a loan to the RPBCD, which is the Job Creating Entity developing the Project. The full amount of EB-­‐5 capital raised for the project is at-­‐
risk. •
•
Based on the Economic Analysis, the project will create 246.7 permanent new jobs. Funds are spent within the first 24 months of operation to create these jobs. •
•
•
Verification RPBCD will prepare evidence of EB-­‐5 capital expenditures and revenues generated over the 2-­‐year conditional period of residency to validate the required job creation when submitting Form I-­‐829 Removal of Conditions. Doral Economic Impact Holdings, LLC
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EXHIBIT C: DEVELOPMENT COST DETAILS
Developer’s Timeline:
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Easements and Approvals:
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Developer’s Estimates:
PROFORMA
DESCRIPTION
COST
$/SF
LAND COST
Total
$1,600,000
$48,000
$1,648,000
$39.02
$1.17
$40.20
Total
$307,500
$20,500
$3,280,000
$1,230,000
$193,520
$5,031,520
$7.50
$0.50
$80.00
$30.00
$4.72
$122.72
Property Purchase Price
Closing Costs
3%
HARD COSTS
Sitework
Off-site Work
Shell Cost
Tenant Improvements
Contingencies
100%
4%
SOFT COSTS
Site-Plan and Construction Drawings
Civil Engineer
Traffic Engineer
Survey
Impact Fees
Construction Permit
Real Estate Taxes
Insurance (GL&BR)
Marketing and Advertising
Soil Report, Environmental and Material Testing
Appraisals
Project Management Fee
Accounting and Legal
Mortgage Loan Interest Expense
3%
9%
12%
EB-5 Affiliate Loan 12-month Interest
Class "A" Members 1.5-year Preferred Return
Contingencies
20%
Total
$200,000
$25,000
$15,500
$10,000
$166,943
$150,946
$70,000
$100,000
$85,000
$10,000
$8,000
$566,212
$85,000
$221,000
$4.88
$0.61
$0.38
$0.24
$4.07
$3.68
$1.71
$2.44
$2.07
$0.24
$0.20
$13.81
$2.07
$5.39
$190,000
$300,000
$52,880
$2,256,480
$4.63
$7.32
$1.29
$55.04
$564,000
$13.76
$564,000
$13.76
OTHER COSTS
Developer Fee
(to be paid ONLY after preferred return is paid and Class "A"
Members capital contributions are returned)
Total
TOTAL COSTS
$9,500,000
$231.71
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RS Means Online Estimate:
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EXHIBIT D: REVENUE PROJECTION DETAILS
Basis of Revenue:
Office Market Statistics for Miami-Dade County, showing $28.73 per square foot rental rate and
12.8% vacancy for all classes within the county:
Office Market Statistics for the Miami Airport Submarket, showing $24.26/SF rental rate and
14.4% vacancy for all classes within the county:
Therefore, the Owner’s presumption of $24/SF rental rate and 20% vacancy is conservative as
well as reasonable.
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Basis of Expenses:
The Developer used the following Comparables to determine expenses:
The following chart shows the average ratios of industry costs for commercial leasing:
Source: IBISWorld; Industry Report 53112 Commercial Leasing in the US; June 2013
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Applying the above percentages to the assumed rental rate of $24/SF, the expenses the Owner
presumes results in the following:
Wages
Marketing
Rent/Utility Costs
Total
$1.776/SF
$0.576/SF
$3.936/SF
$5.80/SF
The Owner assumes a $6.35/SF total expenses excluding interest, depreciation, taxes, and
accumulation. Therefore the Owner expects General and Administrative costs to average
$0.55/SF.
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EXHIBIT E: TEA DESIGNATION
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EXHIBIT F: LEASE FOR PROSPECTIVE TENANTS
Insert clean version of Lease for Prospective Clients
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EXHIBIT G: MARKET STUDIES
The studies referenced in this business plan are listed as follows:
•
The CoStar Office Report: Miami-Dade County Office Market
o Published:
Mid-year 2013
o Pages:
38
o Conducted by:
CoStar Group, Inc.
•
An Economic Analysis Of a Professional Business Center Encompassing the Counties of
Broward, Miami-Dade, and Palm Beach of the State of Florida
o Published:
July 2013
o Pages:
46
o Conducted by:
Wright Johnson LLC
These studies are attached in the following pages.
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