Business Plan
Broadway and University Industrial Portfolio
3440 & 3502 E Broadway Rd and 1626 & 1646 E University Dr
The Broadway and University Industrial Portfolio presents an ideal mark-to-market opportunity, along with an exceptional in-place yield, making it an outstanding investment prospect. The acquisition price of $186 per square foot is below the sub-market average of $204 per square foot, recorded over the past 12 months for comparable assets of similar vintage and size. These properties typically have a coverage ratio of 36%, whereas our portfolio averages 28%. For properties with a coverage ratio below 30%, our acquisition basis significantly undercuts the average of $217 per square foot.
At 1626 & 1646 University, the in-place income is divided between two tenants: Truck Pro, paying $1.29 per square foot, and Hajoca Corporation, paying $1.23 per square foot. These leases include 3% annual increases and have a weighted average lease term (WALT) of 3.58 years. They are currently priced 10% below the market rate for comparable low-coverage sites. Similarly, at 3440 & 3502 Broadway, Tecta Roofing pays $1.10 per square foot, and a new tenant, currently negotiating a lease, is projected to pay $1.20 per square foot. Despite recent signings, we have comparable data supporting a similar 10% discount to current market rates. We project the net operating income (NOI) will rise from today’s $914,772 to $1,165,985 upon stabilizing the entire portfolio after five years.
We have allocated a budget of $10 per square foot across the entire portfolio for property enhancements (paint, concrete seal, miscellaneous updates) to ensure we are maximizing our rental rates upon signing new leases. Our model conservatively accounts for four months of downtime across all potential vacancies, regardless of renewal expectations. Given the supply constraints of lower coverage sites in the submarket, we believe we can outperform the underwritten downtime with very limited risk following capital improvements.