The Wichita MSA has 105 multi-tenant retail/office properties with a combined area of more than 6 million square feet. Wichita’s economy is experiencing net employment growth, which has improved the office market. Since 2003, there was positive annual absorption of office and retail space. Market-wide vacancy has averaged 16.2% over the past year. Rental and vacancy rates for Class B, mixed-use space in the Property’s northeastern submarket were slightly above those reported for the overall Wichita area. Rental rates had a range of $9.35 – $12.43 per square foot, while vacancy rates were between 10.4% – 15.5%. Growth in the Property submarket has primarily been related to retail development, which appears to be well supported by demographics and the primary traffic carriers within the neighborhood. Overall, lease rates are showing modest increases across the market, and growth is projected in the smaller retail centers. The market in retail space in the Wichita area is forecasted to grow by 1.3% over the next five years.
Offeror, Property Manager & BGK Group
Under a Confidential Private Placement Memorandum and Addendum dated December 11, 2007 (the “Memorandum”), BIG Carriage Park, LLC and BIG Carriage Park Investors, LLC are offering investors tenancy-in-common interests in the property, and limited liability company units in an entity that will own a tenant-in-common interest in the property. The offerors and the property management company are owned by BGKIntegrated Group LLC. Since November 2006, BIG’s wholly-owned subsidiaries have conducted 10 offerings of tenancy in common and/or limited liability company interests involving over 1,348,791 square feet of office and light industrial properties in Alabama, New Mexico, Texas, Louisiana, Ohio, Kansas, Florida and West Virginia for an aggregate price (including investor equity and assumed debt) in excess of $203,902,975. BGK owns, operates, and manages commercial real estate. Formed in 1991, BGK has acquired more than 300 properties nationwide, sponsored real estate projects involving over $800,000,000 of equity from more than 2,500 investors, and obtained over $2,500,000,000 in mortgage loans. BGK currently manages almost 18,000,000 square feet of space.
The Property is presently owned by a real estate limited partnership managed by affiliates of BGK. The TIC offeror will acquire at least a 2% interest in the property, and the current owner or its affiliates will retain unsold interests. On or before the closing, the property owner is expected to obtain an assumable $7,750,000 mortgage loan at a 6.55% interest rate. Financial projections for the property are based on historic income and expense statements, and familiarity with property leases and tenants and the local market. The Property will continue to be operated by an experienced management team to provide a smooth transition in management with no “down time,” or disruption of leasing/tenant relations. The TIC offeror has also arranged a $200,000 credit facility for certain future leasing costs, if needed.
Our objective is to improve the Property’s occupancy and cash flow levels, while seeking appreciation as the local economy expands. That expansion is projected to tighten the office and retail markets, with higher rents and lower leasing costs. Priced below replacement cost, and given its mixed-use nature and location adjacent to a major thoroughfare and surrounding businesses, the Property appears well positioned for growth. Management will seek to renew key tenant leases at market rents to improve future cash flow, while seeking new tenants as space becomes available. A property sale is projected in 7 – 10 years. The following table reflects a projected sale in the 7th year. All financial information therein is based on the assumptions set out in the Memorandum and includes forward looking statements. There is no guaranty or certainty that the projected results will be achieved.