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Harbor Bond Portfolio | Offering Memorandum | SeattleLandOffering.com | Kidder Mathews 1

OFFERING MEMORANDUM

HARBOR BOND PORTFOLIOWell-located 16.81-acre waterfront industrial land-lease situated in one of Seattle’s highly sought-after close-in Seattle Industrial market

SeattleLandOffering.com

SEATTLE C B D

EXCLUSIVELY OFFERED BY


Patricia J. Loveall, SIOR Executive Vice President [email protected]

Evan Lugar Executive Vice President [email protected]

Jason RosauerExecutive Vice President [email protected]

Rob Anderson, JDFirst Vice [email protected]

Table of Contents

EXECUTIVE SUMMARY01

PROPERTY DESCRIPTION02

LOCATION OVERVIEW03

MARKET OVERVIEW04

SEATTLE C B D


3 Northlake Building | Offering Memorandum | NorthlakeBuilding.com | Kidder Mathews

01Executive Summary

BOEING FIELD


Executive SummaryThe Offering

Kidder Mathews has been retained by King County to exclusively market the Harbor Bond Portfolio for a long-term land lease.

The Harbor Bond Portfolio is strategically located in the close-in submarket of South Seattle at the intersection of East Marginal Way S and S Lucille St, offering immediate access to Interstate 5 to and Highway 99 to the east. This property consists of three parcels totaling 16.81 acres of industrial land with immediate access to Seattle’s urban core.

The South Seattle market is one of the most dynamic submarkets in the Western United States with a current vacancy rate of only 3%. With positive absorption across the region of industrial space of over 1.4 million SF the market shows no signs of slowing. Further, as the local job market continues to boom and Seattle keeps its #1 spot in the country for fastest large-growing city, this site is ideal to take advantage of the shrinking last mile options available for its fast expanding local populace.

Property Overview

LOT 1 LOT 2 LOT 3

Property Address 5801 E Marginal Way S

Parcel Number 1924049051 1924049043 1924049002

Type Land Land Land

Size SF 203,425.2 147,232.8 381,585.6

Acre 4.67 3.38 8.76

Zoning IG1 U/85 IG1 U/85 IG1 U/85

TOTAL LAND SF / ACRES 732,243.6 / 16.81*

Utilities Available Water, sewer, electricity, natural gas, telephone service

Rail Access 3 spurs servicing the property

*Site size is estimated per King County Parcel Records and to be verified by tenant prior to lease execution

OFFERING PROCESS

The ownership will set a deadline for a definitive bid date; however, reserves the right to accept an offer prior to such date. Additional information is available online at SeattleLandOffering.com.

Last Mile Seattle Property

Last mile refers to the final step of the delivery process from a distribution center to the end consumer. With an exponential increase in e-commerce demand, last mile locations are critical concerns in the supply chain. The Harbor Bond Portfolio is located just 4.1 miles from the Seattle CBD, which is half of the average last mile distance in Seattle (at 7.7 miles). Last mile logistics is significant by allowing businesses to ship more products to consumers quicker and cost-effectively, both main focuses of the supply chain. Consumers are increasingly wanting expedited shipping and are willing to pay a premium for better delivery services (i.e. same-day delivery) offering shorter delivery times.

Ohio Ave S

N


Harbor Bond Portfolio | Offering Memorandum | SeattleLandOffering.com | Kidder Mathews 6 N

SEATTLE C B D 02

Property Description

Property DetailsSite Description

Property Description

The property consists of a total of 732,243.6 SF of land with a small portion of submerged tidelands

*Site size is estimated per King County Parcel Records and to be verified by tenant prior to lease execution

Streets and Access

The Harbor Bond Portfolio is positioned on East Marginal Way providing regional and local access throughout the Puget Sound

To the east, Interstate-5 serves as the main north/south access point throughout the region, with three interchanges making the Seattle’s urban core easily accessible

To the north is the West Seattle Bridge that connects Interstate-5 to the residential area of West Seattle

Airport Way South, Fourth Avenue South, and First Avenue South serve as additional north/south arterials

Topography The site is generally level and at street grade

Flood Hazard The area is determined to be outside of the 500-year flood plan

Zoning

IG1 U/85’

This is a general industrial zoning designation for the City of Seattle intended for light and general industrials uses but also allows some office and retail uses

The height limits are 85’

FAR for industrial uses is 2.5

*A small portion of the property is subject to the Urban Industrial Shoreline Environment portion of the Seattle Zoning regulations. Additional zoning information can be accessed online in the war room.


Property Aerial

BOEING FIELD


E M

AR

GIN

AL W

AY S

Duw

amish W

aterway

WEST SEATTLE BRIDGE

Duw

amish W

aterway

Lake Washington

N

Regional Aerial

TO I-5 NORTH

2.6 Miles | 8 Minutes

TO SEATAC VIA WA-509 SOUTH


TO I-5 SOUTH

2 Miles | 7 Minutes

TO PORT OF SEATTLE VIA W MARGINAL WAY SW


TO BOEING FIELD


TO PORT OF TACOMA VIA SR-599 / I-5


TO DOWNTOWN VIA WA-99 N

4 Miles | 15 Minutes


OX951-2-836

SE

ATTLE S

UB

OX951-2-833

OX951-2-832

N

S Brandon St

Ohi

o A

ve S

S Lucille St

S Dawson St

E M

arginal Way S

Utah A

ve S

1st Ave S

DUWAMISH WATERWAY

Rail Spurs


03Location Overview

N


Location Overview

Georgetown

The Harbor Bond Portfolio is positioned on the northern end of the Georgetown neighborhood adjacent to SoDo. Once known as the manufacturing hub, Georgetown has transitioned to the premiere last mile logistics hub. Bounded on the north by the mainlines of BNSF and Union Pacific Railroad, and the South King County International Airport and Boeing Field, one of the nation’s busiest non-hub airports located on the southeast part of the neighborhood.


Drive Times Map

15 MINUTES

10 MINUTES

PUGET SOUND

Seattle

Bellevue

Kirkland

Tukwila

Vashon Island

Kent

HARBOR BOND PORTFOLIO

DISTANCE FROM HARBOR BOND LOCATION

LOCATION DISTANCE TIME

Downtown Seattle via WA-99

4 miles 15 minutes

Port of Seattle via West Marginal Way SW

4.6 miles 12 minutes

Boeing Field 2.2 miles 8 minutes

I-5 South 2 miles 7 minutes

Seatac via SR-599 South 9.4 miles 15 minutes

Port of Tacoma via SR-599 / I-5

29.5 miles 35 minutes

I-5 North 2.6 miles 8 minutes

5 MINUTES

SEATTLE C B D

N


04Market

Overview

Market Overview

Puget Sound Industrial Review

The Puget Sound region’s industrial market 4th quarter results continues to be positive. Fourth quarter experienced over 2.6 million SF of signed leases, with majority moving into the new spaces over the next couple of months therefore placing vacancy constant in the three to four percent range. Notably, 2.05 million SF was delivered and 20.6 million SF is in the pipeline. Construction activity also remains strong with 36 buildings underway totaling over 5.5 million SF. The region’s employment base also remains optimistic with job growth at 3.4%, delivering 71,500 jobs. A large sector of the industrial market, manufacturing, has historically shown declines in employment, however, was actually positive adding 5,300 jobs over the past 12 months. Additionally, local economists have revised its job growth forecast for 2019 from 1.2% to 1.9%. Boeing, a key employer within the industrial market, is planning to boost monthly production of the 737 and 787 jets in 2019 and 767 in 2020, and have therefore been rehiring to accommodate these production targets. Another major employer, Microsoft, moved forward with its Redmond campus expansion by adding 18 new buildings by 2022 as well as spending $170 million in upgrades to existing buildings. This will result in adding potentially north of 8,000 additional workers. Sales activity continued to be strong over the past three months. Year-to-date, there have been nearly $2.1 billion in sales with an average cap rate of 6.07%. The three most significant sales to close in the fourth quarter include RREEF’s acquisition of Safeway’s Distribution properties in Auburn for $144.5 million ($112/SF) from Albertsons Companies. The second sale is the $111 million ($503/SF) acquisition by Duke Realty Corporation of Des Moines Creek Business Park Phase II (Buildings A & B) from Panattoni. The third major sale is the $98.5 million ($205/SF) sale of Prologis Park SeaTac to LBA Realty, which involved six warehouse/distribution buildings.

1.4 M SF

ABSORBED IN 2016

3.6%

VACANCY RATE

5.5 M SF

UNDER CONSTRUCTION

20.6 M SF

PROPOSED



South Seattle industrial market, often referred to as Close-In Seattle, comprises of 35 million square feet with 4Q18 vacancy of 3%. The market size has been reduced by the redevelopment of industrial sites stadiums and retail projects, predominantly car dealerships. Since 2014 investors and developers have been actively acquiring existing industrial buildings and land for redevelopment to meet user demand for last mile distribution facilities. Due to scarcity of land and available buildings, shell lease rates have continually soared from $0.58 per square foot in 2014/2015 to $1.30 per square foot in YE2018 (Home Depot’s 97,000 SF lease at Prologis’ Georgetown Crossroads) representing a 124% increase in lease rates. Although developers are not quoting rates, staying fluid to respond to rising rents, current development suggests shell rates are ranging from $1.20 to $1.30 per square foot per month, NNN. Users, who previously occupied space in Seattle and wanted to remain in Seattle, have been forced to outlying markets due to non-existing building inventory to lease. Users include Outdoor Research, Bartells Drugs and K2. Land values have risen dramatically since 2014, where the previous highwater mark was $30.00 per square foot (CenterPoint acquisition at 8801 East Marginal Way South), land prices increased to $40.00 in 2015 with the Prologis acquisition of 13.69 acres (Georgetown Crossing) to $50.00 per square foot in 2016 with the Prologis acquisition of the 63-acre former SuperValue site to the recent Avenue 55 acquisition of the former Compton Lumber site at $92.00 per square foot and Ryan Companies acquisition of the former PSF Industries Site for $101.68/sf. Both Avenue 55’s and Ryan Companies purchase will be redeveloped as multi-story industrial buildings.

Building values have soared as well from $90 to $115 per square foot 5 years ago to $180 to $250 per square foot depending upon size and amenities. Terreno Realty recently acquired the 49,802 square foot, former Total Reclaim Building for $252.15 per square foot. This property has 69% site coverage and is a 24’ clear height building. Albeit different product type than the proposed Seattle Oxbow, targeting users a single user, it is reflective of every-growing confidence in the South Seattle market.

Comparative competitive sets, lease and sale comparables and a development pipeline support the increasing values and demand for institutional quality development. Anticipated, consistent robust rent growth is likely, with low vacancy and positive absorption.

South Seattle Industrial

SOUTH SEATTLE MARKET DATA


Disclaimer

The information contained in this Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Kidder Mathews and should not be made available to any other person or entity without the written consent of Kidder Mathews.

This Marketing Brochure has been prepared to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation. Kidder Mathews has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB’s or asbestos, the compliance with State and Federal regulations, current or past tax payments, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant’s plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable; however, Kidder Mathews has not verified, and will not verify, any of the information contained herein, nor has Kidder Mathews conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of the information set forth herein.

This information has been secured from sources we believe to be reliable. We make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Recipient of this report must verify the information and bears all risk for any inaccuracies.


EXCLUSIVELY REPRESENTED BY

Jason RosauerExecutive Vice President, Board [email protected]

Rob Anderson, JDFirst Vice [email protected]

Evan LugarExecutive Vice [email protected]

Patricia J. Loveall, SIORExecutive Vice President, Board Director [email protected]


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