Archdiocese of Baltimore Pkg

Asset Analysis

Prepared for:

prepared by: Joseph P. Nolan, SIOR

David J. Fritz, CCIM, SIOR +1 443 632 2065
[email protected]
+1 443 574 1410
[email protected]

WHILE WE HAVE NO REASON TO DOUBT THE ACCURACY OF ANY OF THE INFORMATION SUPPLIED, WE CANNOT, 6011 University Boulevard
AND DO NOT, GUARANTEE ITS ACCURACY.  ALL INFORMATION SHOULD BE INDEPENDENTLY VERIFIED PRIOR TO Suite 350
A PURCHASE OR LEASE OF THE PROPERTY.  WE ARE NOT RESPONSIBLE FOR ERRORS, OMISSIONS, MISUSE, OR
MISINTERPRETATION OF INFORMATION CONTAINED HEREIN & MAKE NO WARRANTY OF ANY KIND, EXPRESS OR Ellicott City, MD 21043
IMPLIED, WITH RESPECT TO THE PROPERTY OR ANY OTHER MATTERS. +1 410 290 1110
naiklnb.com

TABLE OF CONTENTS

Section I Market Overview
Section II Aerial
Section III Sale / Leaseback - Option A
Section IV Option B & C

WHILE WE HAVE NO REASON TO DOUBT THE ACCURACY OF ANY OF THE
INFORMATION SUPPLIED, WE CANNOT, AND DO NOT, GUARANTEE ITS
ACCURACY.  ALL INFORMATION SHOULD BE INDEPENDENTLY VERIFIED PRIOR
TO A PURCHASE OR LEASE OF THE PROPERTY.  WE ARE NOT RESPONSIBLE
FOR ERRORS, OMISSIONS, MISUSE, OR MISINTERPRETATION OF INFORMATION
CONTAINED HEREIN & MAKE NO WARRANTY OF ANY KIND, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PROPERTY OR ANY OTHER MATTERS.

Market Overview

Section I

Section I

Market
Overview

Market Overview

NAI KLNB is tasked with the opportunity to investigate and analyze
the ability for the Archdiocese of Baltimore to monetize their real
estate assets.

In doing so, this report is an overview of the market conditions for
recommendation to the Archdiocese of Baltimore as it relates to the
Catholic Center, the Franklin Street Garage and the John Paull II
prayer garden.

Baltimore City Office Market

The Baltimore metropolitan office market finished the fourth quarter
of 2016 with11.2 million square feet of vacant space and a 14.0%
vacancy rate. Vacant space increased by 307K quarter-over-quarter.
Net positive absorption in the fourth quarter totaled 1,063,486 square
feet. The total positive absorption for the year was 1.5 million square
feet.

The Class A sector in Baltimore metro area has a vacancy rate of
11.4% with approximately 4.2 million square feet of vacant space
currently available. Class A recorded about 968,000 square feet of
net positive absorption at years end. The Class B sector has a 16.3%
vacancy rate after almost approximately 351K square feet of net
positive absorption. Annual net absorption increased almost 550,000
square feet.

Baltimore City finished the fourth quarter with a vacancy rate of
15.72% with approximately 530,000 square feet of net positive
absorption. The Class A sector vacancy rate decreased to 10.45%
meanwhile fourth quarter net positive absorption increased to 577,538
square feet. The Exelon headquarters, which delivered in the fourth
quarter, accounted for most of the increase. The Class B sector
vacancy rate increased to a rate of 19.6% from third quarter. Class
B finished 2016 with approximately 84,000 square feet of net positive
absorption and about 2,400,000 square feet of available vacant
space.

Section I

Market
Overview

Baltimore City Multi-Family Overview

There are several new, under construction and planned multi-family
units coming on the market within Baltimore City. We are cautiously
optimistic about the rental market to occupy these new apartments.
These residents want walkable amenities and/or have certain demand
drivers/employment drivers nearby. Some projects offer these
amenities, but are located where the milennial work force resides in
Locust Point, Federal Hill, Fells Point, Harbor East and Canton.

With the conversion of older office buildings to rental housing is still
speculative and may not achieve enough demand. WE are not overly
optimistic to recommend selling the Catholic Center and Franklin Street
Garage to a residential developer unless there’s a compelling story and
their ability to perform.

A developer may pay if the Catholic Center was vacant, $4MM-$5MM
range to do a conversion for apartments. This process could be a
lengthy one subject to study periods and possible entitlements.
The following scenarios hope to establish the highest and best
approach in maximizing value.

Aerial

Section II

Section II

Aerial

Franklin Street Garage

Prayer Garden

Enoch Pratt Library

The Catholic Center

➤

N

200 ft

Sale / Leaseback
Option A

Section III

Section III

Sale/Leaseback
Option A

Sale/Leaseback - Option A

Archdiocese of Baltimore
320 Cathedral Street
Baltimore, MD 21202

Gross SF: 83,300 SF
Loss Factor: 8%

75,000 +/- Useable SF

Market Rent = $17.50 PSF, full service

Tenant = The Archdiocese of Baltimore

Potential Gross Rent = $1,457,750.00 (83,300 RSF x $17.50 PSF)
Note: the above annual base rent may increase 2.5% - 3% per
annum over a 10 - 15 year lease term unless otherwise negotiated an
increase say, every 5 years over the term.

OPERATING EXPENSES

Salaries $70,000
Benefits $21,000
Utilities 206,250
Janitorial
Repairs & Maintenance 67,500
Real Estate Taxes 112,500
Security 118,000
Management
Insurance 56,250
31,500
Total Operating Expenses 30,000
NOI
$713,000
$744,750

$745,000 ÷ 8% cap = $9.3MM/111 psf
$745,000 ÷ 8.5% cap = $8.7MM/$104 psf
$745,000 ÷ 9% cap = $8.2MM/$99 psf

Section III

Sale/Leaseback
Option A

Sale/Leaseback Option A (cont.)

Franklin Street Garage
3-15 W. Franklin Street
Baltimore, MD 21201

Parking Spaces: 390

FY 2016 Gross Revenue: $880,000

2012-2015 Operating Expenses: $450,000

NOI: $430,000

• P lease note FY 2016 Op Ex’s totaled $710,000 which
accounted for Capital Expenditures

$430,000 ÷ 5% cap = $8.6MM
$430,000 ÷ 5.5% cap = $7.8MM
$430,000 ÷ 6% = $7.1MM

Note: T he above capitalizations rates are subject to the
Archdiocese owning the Franklin St. garage after the City
of Baltimore’s lease expiration and establishing a long
term lease/management contract with a parking garage
operator. Otherwise, the current income from the land
lease is $60,000 annually. If a new lease was structured
with the City of Baltimore, we believe the new rent should
be in the range of $105,000 - $115,000 per year. We
calculated the cumulative effect if the rent increased
between 2.5% - 3% over the 30 year term. We would
recommend the new rent structure should be increased
annually 2.5% - 3% versus using the CPI Index versus a
long term flat rent.

Option B & C

Section IV

Section IV

Option B & C

Option B & C

OPTION B

Vacate the Catholic Center and sell the building and garage to
another office user or a developer (multi-family). However, there
are risks associated with selling to a developer. This based upon
the number of multi-family units coming to market within Baltimore
City and additional risks include, but not limited to overall market
conditions changing during the length of time for entitlements and
settlement to occur. Whereas an office user/buyer will have a definite
time line to decide on such a purchase to expand and relocate their
operations. Customarily, office users of this size are looking 12-18
mos out from their lease expiration.

OPTION C

Lease or purchase a new facility within close proximity to the Catholic
Center, i.e. lease space in The Baltimore Sun Building? However, this
scenario may need to align with Option B above.

6011 University Boulevard
Suite 350

Ellicott Ciy, Maryland 21043
+1 410 290 1110

naiklnb.com