Veranda package TEST22

Financing Request

The Veranda Office/Retail Park

822 Florida A1A, Ponte Vedra Beach, FL 32082

Transaction Team

Mr. Scott Taccati | Trillium Capital Resources | Executive Director
P: 706-615-3030 | E: [email protected]
Mr. Brent Shryock | Trillium Capital Resources | Managing Director
P: 904-329-7266 | E: [email protected]

Introduction to the Veranda

Dear Colleague:

Thank you for you’re your interest in the financing request for The
Veranda Office Complex located in Ponte Vedra, Florida. I want to
provide you with a brief history of the project and overall deal logistics.

Trillium Capital Resources As a banker in my former life, I originated the construction loans on
5629 Princeton Avenue Buildings I, II and III in the late 90’s and Early 2000’s. Over the years I
Columbus, Ga 32904 have kept in contact with borrowers/ principals Donis and Elliot Horne.
The Horne’s have never entered the capital markets for their financing
needs and have always used traditional bank lenders.

Upon their decision to refinance with long term non-recourse debt, Mr.
Horne has engaged Trillium Capital Resources and Northmarq to take
into the insurance for the final take out of their current bank loan.

To that note, we have selected your firm as one of our potential
partners on this transacation. We have agreed to not to present to any
of Northmarq’s selected lenders and visa versa. Our list is very limited
and only to the key players that we believe will best suit our clients

needs.

The borrowers are very thorough and conservative in their approach and
are looking for a variety of options for their financing package. We have
included a letter from the client to better help you gauge his “hot

button” deal points.

Positive Rent
GrowtheWxecelolleokntffoinrwanacrdintgopwacokrkaignegtowiythouyroculieanntd. your team and delivering an

Sincerely,

Scott V. Taccati

Executive Director
Trillium Capital Resources

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Table of Contents

3

Client Letter

My brother and I have owned and developed the Veranda property from the initial acquisition of
the raw land in 1998 until now. Most of the individual buildings are now owned by various Trusts
with my brother and I being the general partners. We have invested substantial equity in the
project as the comparison between the investment recap and the current loan amount will show.

Other than the current $28 million in mortgage held by Synovus the Veranda properties owe a
total of approximately $6.1 million to various related entities we own. Some of the proceeds of
the mortgage will be used to pay off these amounts and building cash flow over time will pay off
any remaining amounts. We have been waiting to place long term financing on the project until
we finished the last building and the overall project achieved sufficient occupancy.

The 2008 recession came about just as we completed construction of buildings 5 and 6.
Although we lost very few tenants from the actual recession, the leasing activity was almost non-
existent for a couple of years. As the economy improved the leasing activity returned to a
consistent absorption rate.

The Ponte Vedra market is a small market when compared to other areas of Jacksonville but has
a consistent absorption of established good credit local and regional businesses whose owners
live in the Ponte Vedra area and the national credit tenants that want to be here because of
Ponte Vedras high average income.

The significant advantage Veranda has in the Ponte Vedra market comes from the development
restrictions put in place after Veranda was approved along with the lack of land available to
develop a competitive project. With the anti-development attitude of the community we do not

see a scenariPoowshietrievetheRseencotnditions change.
Growth

We have not included personal financial statement of the principals with the attached package.
We are fine with releasing them to the company we have selected to negotiate with after
negotiations have been completed and an agreement is in place whose offer can be subject to
review of t he statements. It should be pointed out that our cash position is strong enough so
that we are building the new building out of cash and paying almost $2 million dollars out of
cash to Merrill Lynch as part of the lease requirements.

4

Client Letter

1. Interest rate: we will consider both floating and fixed rate loans so it is better to quote both if

available.

2. Personal Guarantee: We do not want a loan that requires a personal guarantee unless there is a

substantial financial benefit for providing one and even then a lender should quote with and without

our providing one.

3. Term: We want at least a 10 year term but would like quotes on any longer terms the lender is

willing to quote.

4. Amortization: To recognize the lower LTV we are asking for the lender to state the number of years

that they will allow no amortization and then what amortization term they will use.

5. Loan amount: Between $32 and $36 million

6. Assumable: the loan must be assumable with any costs to assume clearly stated.

7. Prepayment penalties must be clearly defined.

8. Required reserves must be clearly defined.

9. When can the interest rate be locked and how much money has to be deposited with lender to be

able to rate lock?

10. Fully detail all non-refundable lender or 3rd party fees

11. Fully detail all refundable fees as to when and how much due and when refunded and under what

conditions would they not be refunded.

12. We will carefully review conditions which would allow the mortgage to be placed in default other

than nonpayment of interest and principal and maintaining agreed upon reserves.

13. We do not want a specific debt service ratio to have to be maintained to not be in default as long

as we are paying the principal and interest and maintaining agreed upon reserves.

14. We want a limited amount of restrictions on our ability to lease as the marketdictates. We do not

want to be restricted to lease at rates that are competitive enough to get good tenants if the economy

takes a downturn which requires rates to be lower.

15. Other covenants of any type must be reasonable and customary.

16. A part of our award decision will not only be the final fee agreed upon with a broker but the

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Donis Horne
Managing Member

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Executive Summary The Veranda office park is a Class A multi-tenant
office/retail park located in Ponte Vedra Florida. The
Class A asset consists of 6 buildings, which includes a parking
Low Leverage garage with 75,000 SF of leasable space. multi-tenant
DY 13.5-15.4% office park. The improvements were constructed
Great Location between 1998-2018.
Low Vacancy
The loan request is for $36 million with an anticipated
Located next to the world famous TPC Sawgrass Golf LTV ratio of 52 - 59% with a term and amortization up
course. Ponte Vedra is the one of the Jacksonville to 35 years. We estimated the value of the property to
MSA’s Exclusive and most desirable real estate be approximately $70M using a conservative cap rate
submarket of 8%.

The requested loan per square foot is approximately
$99 PSF in a market where gross rental rates are in
the $25 to $27 PSF range.

You will note this request can be supported without
any additional income from Building IV, which is the
final building constructed (Final Delivery Mid 2018).

We anticipate the final Debt Yield to be 13.5-15.4%
with a DSCR above 2.21.

Currently, all buildings are operating above 90%
occupancy. Building IV, which just is under
construction, is already preleasing. Key Tenant Merrill
Lynch will occupy 64% of building IV.

Property Snapshot

Veranda I Leasable S/F Occupancy YR Built
Veranda II 54,909 91% 1998
Veranda III 58,126 92% 2000
Veranda IV 66,457 96% 2002
Veranda V 45,087 64% 2018
Veranda VI 75,033 91% 2007
63,433 98% 2007
Total
363,045 94%

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Executive Summary

Professional Tenants The majority of the leases are structured on a full service
National Firms basis with base year operating expenses included in the
rent. A few of the leases are still full service but
structured with base rent and operating expense
reimbursement. All of the leases are based on usable
square feet.

All of the buildings have professional office tenants with
a preponderance of law firms and financial services
firms. Many of the financial service tenants are national
companies with well known names such as PGA Tour,
Raymond James, Wells Fargo, Merrill Lynch and UBS
Financial Services.

Subject property is located in Beaches submarket of the
Jacksonville, MSA and represents a large percentage of
the market. Furthermore, local zoning and government
restrictions preclude any new large scale office
development from entering the market.

The high barrier to entry in the Beaches submarket limits
the credit risk exposure from future competing projects.

7

Market Dynamics Jacksonville MSA

Premium According to CoStar, the Beaches office market
Rents consists of a total of 3,080,657 SF and
529,624 SF of “4 and 5 star” space. The
Supply subject property represents 12% of total space
Limited and 70% of 4 and 5 star space in the beaches
market.
Positive Rent
Growth The Jacksonville office market, containing 63.6
million square feet was hit particularly hard
during the downturn and was much slower to
recovery than the average U.S. metro. The
beaches market was not as impacted due to
tighter supply. Rent growth since 2014 has
been very healthy, averaging well above
historical averages. Given the limited number
of deliveries expected in the near future, rent
growth may maintain current levels for the
foreseeable future.

The Beaches Submarket commands the
metro's highest rents at nearly a 40% premium
above the market average due to limited
supply, while the second-highest is in
Downtown Southbank - a more traditional CBD
submarket. Subm arkets that saw growth over
4% in 2017 were almost exclusively those with
the lowest rent levels going into the year,
demonstrating the demand for affordable
office space.

8

Sales Comp Data

Florida Office

With sales comps for this size and
class within the Jacksonville MSA
are lacking, the Florida office
market has been steady since
2016.

According to Costar, there were a
total of 57 Sales Transactions of
$20M in the entire state of
Florida or more since 2016.

Of those transactions we see the
Cap Rates between 3% – 9% with
an average Cap Rate of 6.5%.
Furthermore the average Sales
Price per SF average was $268
SF.

With these comps and overall
market activity we are confident
in using a 7% - 8% Cap rate for
underwriting and minimum of
$200 a SF projected appraised
Value.

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Sponsorship Summary

Positive Rent
Growth

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Sponsorship Summary

Positive Rent
Growth

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Executive Summary – Property Details The Veranda II

The Veranda I

The Veranda III The Veranda IV
The Veranda V
Final Delivery Mid 2018
45,087 S/F

The Veranda VI

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Veranda Financing Request

Current 2017 Stabilized with Building 4

Projected Value @ 8 % Cap Rate $60,865,212 $69,486,875
Loan Amount
Loan to Value $36,000,000 $36,000,000
Income (with 13% Vacancy Factor)
Expenses (Including .20 Reserves) 59% 52%
Rentable Square Footage (Current)
NOI $7,333,197 $8,227,158
NOI PSF
Debt Service (4.50@ 30 Am) $ 2,463,980 $2,750,516
DSCR
Debt Yield 317,958 363,045
Expense Ratio
Loan PSF $4,869,217 $5,558,950
Break Even Occupancy PSF
Break Even Occupancy Rate @ 24.00 PSF $15.31 $15.31

$2,188,881 $2,188,881

2.22 2.54

13.53% 15.44%

34% 33%

$115.43 $99.16

$14.63 $13. 60

60% 57%

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Financials 2015

Income: $6,899,378
Expenses: $2,561,456

NOI: $4,337,922
Avg. Rent PSF: $21.70

Income PSF: $21.70
Expenses PSF: $8.06

NOI PSF: $13.64

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Financials 2015

2015 Veranda Operating Statement Veranda 1 Veranda 2 Veranda 3 Veranda 5 Veranda 6 All Buildings

Gross Potential Rental Income @ $24.75 PSF $1,358,998 $1,438,619 $1,644,811 $1,857,067 $1,569,967 $7,869,461
(Leasable Square Footage) 54,909 58,126 66,457 75,033 63,433 317,958
Rental Income
Property Management Fee Income $1,758,620 $1,403,551 $1,651,623 $878,101 $945,222 $6,637,117
Other Misc. Income $- $0 $0 $0 $158,519 $158,519
Total Income $103,741
$16,967 $42,924 $24,716 $5,290 $13,844
Expenses $1,775,587 $1,446,475 $1,676,339 $883,391 $1,117,586 $6,899,378
Utilities
Maintenance Supplies & Equipment $127,763 $144,356 $158,645 $6,861 $90,056 $527,681
Management Fee $135,722 $147,954 $280,965 $176,729 $137,847 $879,217
Payroll $302,662
Insurance $70,266 $74,246 $72,369 $6,000 $79,781 $246,046
Association Dues $45,081 $44,670 $50,852 $57,633 $47,810 $126,042
Taxes And Licenses $26,539 $27,519 $30,166 $12,931 $28,887
Other Expenses $11,257 $37,091
Professional Services $7,576 $112,860 $8,899 $1,152 $8,207 $401,477
Total Operating Expense $104,892 $114,695 $17,771 $51,259
Replacement Reserves $1,031 $5,992
$1,484 $4,168 $1,098 $1,302 $1,077 $35,249
Net Operating Income $3,815 $568,061 $4,587 $17,464 $5,215 $2,561,456
NOI After Reserves $523,137 $11,625 $722,276 $297,843 $450,139 $63,592
$10,982 $13,291 $15,007 $12,687
INCOME PSF $878,414
EXPENSES PSF $1,252,450 $866,789 $954,063 $585,548 $667,447 $4,337,922
NOI PSF $1,241,468 $940,772 $570,541 $654,760 $4,274,330
$24.89
$32.34 $9.77 $25.22 $11.77 $17.62 $21.70
$9.53 $10.87 $3.97 $7.10 $8.06
$15.11 $14.36 $7.80
$22.81 $10.52 $13.64

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Financials 2016

2016 Veranda Operating Statement Veranda 1 Veranda 2 Veranda 3 Veranda 5 Veranda 6 All Buildings

Gross Potential Rental Income @ $25.00 PSF $1,372,725 $1,453,150 $1,661,425 $1,875,825 $1,585,825 $7,948,950
(Leasable Square Footage) 54,909 58,126 66,457 75,033
Rental Income 63,433 317,958
Other Misc. Income $1,658,129 $1,464,191 $1,440,889 $1,052,316
Total Income $20,924 $53,315 $25,382 $9,242 $1,263,691 $6,879,216

$1,679,053 $1,517,506 $1,466,271 $1,061,558 $13,804 $122,667

$1,277,494 $7,001,882

Expenses $121,181 $123,355 $138,051 $10,830 $89,364 $482,781
Utilities $124,764 $147,889 $158,962 $108,314
Maintenance Supplies & Equipment $111,966 $651,895
Management Fee $65,891 $74,711 $72,795 $67,326
Payroll $46,431 $48,759 $52,225 $43,492 $70,532 $351,255
Insurance $22,662 $24,622 $26,307
Association Dues $2,622 $44,293 $235,200
Taxes And Licenses $7,254 $7,347 $8,465 $5,320
Other Expenses $109,640 $117,180 $112,932 $12,849 $23,788 $100,001
Professional Services $1,551
Total Operating Expense $1,109 $1,178 $1,163 $3,512 $8,569 $36,955
Replacement Reserves $2,848 $2,939 $3,074 $255,817
$501,780 $547,980 $573,974 $15,007 $48,038 $400,639
$10,982 $11,625 $13,291
$959 $5,960

$2,945 $15,318

$400,454 $2,280,004

$12,687 $63,592

Net Operating Income $1,177,273 $969,526 $892,297 $805,741 $877,041 $4,721,878
NOI After Reserves $1,166,291 $957,901 $879,006 $790,735 $864,354 $4,658,286

INCOME PSF $30.58 $26.11 $22.06 $14.15 $20.14 $22.02
EXPENSES PSF $9.14 $9.43 $8.64 $3.41 $6.31 $7.17
NOI PSF
$21.44 $16.68 $13.43 $10.74 $13.83 $14.85

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Financials 2016

Income: $7,002,538
Expenses: $2,280,000

NOI: $4,722,534
Avg Rent PSF: $22.02

Income PSF: $22.02
Expenses PSF: $7.17

NOI PSF: $14.85

17

Financials 2017

Income: $7,376,156
Expenses: $2,400,389
NOI: $4,975,767
Rent PSF: $23.20

Income PSF: $23.20
Expenses PSF: $7.55

NOI PSF: $15.65

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Financials 2017

2017 Veranda Operating Statement Veranda 1 Veranda 2 Veranda 3 Veranda 5 Veranda 6 All Buildings

Gross Potential Rental Income @ $26.00 PSF $1,427,634 $1,511,276 $1,727,882 $1,950,858 $1,649,258 $8,266,908
Rental Income $1,459,689 $1,519,445 $1,435,909 $1,410,065 $1,380,309 $7,205,417
Investment Earnings
Property Management Fee Income $42,958 $0 $0 $0 $0 $42,958
Other Misc. Income $- $0 $0 $0 $0 $0
Total Income $26,556 $20,157 $8,295 $19,953
$52,819 $1,546,001 $1,456,066 $1,418,360 $1,400,262 $127,780
$1,555,467 $7,376,156

Expenses $105,490 $121,060 $132,669 $17,251 $95,108 $471,578
Utilities $138,850 $136,203 $146,230 $99,012 $133,633 $653,928
Maintenance Supplies & Equipment $71,198 $376,028
Management Fee $66,496 $81,521 $75,906 $43,607 $80,907 $258,638
Payroll $51,079 $56,763 $59,428 $18,727 $47,761 $138,572
Insurance $28,071 $29,854 $32,183 $29,737
Association Dues $5,168 $37,573
Taxes And Licenses $7,499 $7,603 $8,751 $53,427 $8,552 $448,692
Other Expenses $110,082 $114,000 $112,732 $58,451
Professional Services $1,768 $4,480
Total Operating Expense $970 $473 $1,097 $1,616 $172 $10,900
Replacement Reserves $2,439 $2,221 $2,475 $311,774 $2,149 $2,400,389
$510,975 $549,698 $571,472 $15,007 $456,470 $63,592
$10,982 $11,625 $13,291 $12,687

Net Operating Income $1,044,492 $996,303 $884,594 $1,106,586 $943,792 $4,975,767
NOI After Reserves $1,033,510 $984,678 $871,303 $1,091,579 $931,105 $4,912,175

INCOME PSF $28.33 $26.60 $21.91 $18.90 $22.07 $23.20
EXPENSES PSF $9.31 $9.46 $8.60 $4.16 $7.20 $7.55
NOI PSF
$19.02 $17.14 $13.31 $14.75 $14.88 $15.65

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10 Year Cash Flow Model

ASSUMPTIONS

Property Office Building Exit Cap Rate 7.75%
Building Size 356,573 sf Selling Costs 3.00%
Acquisition Date Mar-18
Refinance Amount Leverage (LTC) 100.00%
Closing Costs $ 3 6,000,000 Interest Rate* 5.00%
General Inflation 0.00% Amortization
General Vacancy 2.00% Broker Fee 25 years
Initial Lease-up to Stabilization 5.00% Debt Amount 0.00%
Capital Reserves psf Equity Needed
Capital Improvements 18 months $ 3 6,000,000
Operating Expenses psf $0.20 $ -
$0
Market Leasing Assumptions $7.71
Market Rent psf
Renewal Probability MLA
Months Vacant $25.00
TI psf (new) * 70.00%
TI psf (renewal) 8 months
Lease Commissions (new) $20.00
Lease Commissions (renewal)
Rent Abatements $5.00
Annual Rent Escalations 4.00%
OPEX Reimbursements 2.00%
Lease Term none
2% annually
Base Year (Gross)
5 years

20

10 Year Cash Flow Model

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The Veranda Pictures

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The Veranda Pictures

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Pictures Veranda I

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Pictures Veranda II

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Pictures Veranda III

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Pictures Veranda IV

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Pictures Veranda V

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Pictures Veranda VI

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Aerial View

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