OFFERING MEMORANDUM an 8-unit apartment community located in Seattle, Washington HOVEN Exclusively Listed by Dan Swanson Vice President 206.296.9610 dswanson@kiddermathews.com kiddermathews.com
Table of Contents Table of Contents 1. Investment Summary The Offering Investment Highlights 2. Property Overview Property Summary Photos Floor Plans The Location Planned Transportation Improvements Property Aerial Amenities Aerial 3. Financial Summary Rent Roll Income & Expenses Pricing 4. Comparables Sales Comparables 5. Puget Sound Market Overview Disclaimer The information contained in the following 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, 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. OFFERING MEMORANDUM 2
Investment Summary The Offering Investment Highlights OFFERING MEMORANDUM 3
Investment Summary The Offering Kidder Mathews is proud to present for sale the eight unit Hoven Apartments. Located in the heart of Seattle s vibrant University District, just blocks from the UW campus, the Hoven presents investors with the rare opportunity to own a well maintained asset in a highly profitable and stable apartment sub market minutes from Downtown Seattle. Rental upside, an excellent location, unique floor plan, and historically high appreciation make this architecturally designed building a very attractive long-term investment. SHORELINE BALLARD KENMORE BOTHELL HOVEN PROPERTY OVERVIEW Address 5231 22nd Ave NE Seattle, WA 98105 Price $1,995,000 Down Payment* $825,000 (41%) Price per Unit $249,375 Price per SF $369.44 QUEEN ANNE BELLEVUE Number of Units 8 PUGET SOUND SEATTLE LAKE WASHINGTON Average Unit Size 675 Net Rentable SF 5,400 WEST SEATTLE MERCER ISLAND Lot Size 0.16 acres (6,800 SF) Year Built 1969 Type of Ownership Fee simple BURIEN RENTON APN 717480-0400 Zoning LR3 OFFERING MEMORANDUM 4
Investment Summary Highlights U. District Location 3 blocks and less than ½ mile from Campus Eight unique and spacious loft style units with 18' living room ceiling height Originally designed, built and owned by locally renowned architect George Oistad Eight off-street parking spaces One mile from Husky Stadium Rail Station to open Spring of 2016 Two blocks from the Burke Gilman Trail Patios/decks for each apartment Dishwashers, garbage disposals and individual hot water tanks in every unit Near University Village shopping center, restaurants and grocery Near bus routes 30 and 74 to downtown and 68 and 372 within the U-District Easy access to I-5 and 520 Well maintained property with low maintenance landscaping One block from Ravenna Park Eight storage lockers Secure common laundry Bike storage for five bikes Attractive architectural charm and unique spacious apartment units Sloped roof 88 walkscore per www.walkscore.com - very walkable OFFERING MEMORANDUM 5
Property Overview Property Summary Photos Floor Plans The Location Planned Transportation Improvements Property Aerial Amenities Aerial OFFERING MEMORANDUM 6
Property Overview Property Summary The eight unit Hoven Apartments is located at 5231 22nd Avenue NE, less than 1/2 mile from the UW campus. Built in 1969, the building is built with wood frame and siding with a uniquely attractive architectural design. All units are approximately 750 square feet and are loft style. The living room ceiling height is approximately 18 feet high with the bedroom opening up to the space below. Each unit comes with a deck or patio, individual hot water tanks, and dishwashers. First floor units one through four have been updated to different degrees with two units featuring polished concrete floors and the other two with wood looking floors in the main living area (lofts are carpeted), new wall and trim paint, new tub surrounds, updated light fixtures, resurfaced counters, and installation of kitchen disposals. The property features eight off-street parking spaces, a secure common laundry room, eight storage lockers, storage for up to five bicycles, original single pane aluminum windows, and sloped torch down roof. The Hoven offers an investor an opportunity to purchase a well maintained asset in the University District, a top-tier In City Seattle submarket close to downtown. Given the building condition and amenities, the strength of the location, and the ability to finance the property at currently low rates, the Hoven will provide a strong return for years to come. OFFERING MEMORANDUM 7
Property Overview Interior Photos OFFERING MEMORANDUM 8
Property Overview Interior Photos OFFERING MEMORANDUM 9
Property Overview Floor Plans Living Room Kitchen Second Floor Bedroom Loft Closet OFFERING MEMORANDUM 10
Property Overview The Location THE NEIGHBORHOOD The University District is conveniently located five miles north of Downtown Seattle and only blocks from the esteemed University of Washington, which is home to nearly 78,000 students and faculty members. The UW Medical Center alone employs over 21,000 and is less than a mile from Hoven s front steps. Southeast of the property is the University Village, a 25-acre shopping center with numerous high end retail shops, grocery, and restaurants. The Burke Gilman trail, two blocks from the subject, provides bike and walking access directly to the UW campus, the light rail station, and neighboring communities including Fremont and Ballard. Also nearby, the University Way corridor known as The Ave is home to coffee houses, trendy stores, movie theatres, and restaurants. With easy access to Interstate 5 and Highway 520, numerous bus routes, and the UW Light Rail station scheduled to be open on March 19, 2016, the University District is central to all areas of the city. Tenants of the Hoven Apartments enjoy the convenience of in-city living while maintaining direct access to the University of Washington and University District. THE UNIVERSITY OF WASHINGTON The University ranks among the top 10 in the nation in terms of faculty members awarded with international / national awards and honors. Among the faculty at UW are six Nobel Prize winners and 15 MacArthur fellows. UW employs 34,668 faculty and staff members and supports a total of 79,331 jobs directly and indirectly. Its economic impact exceeds $12.5 billion annually. More than 260 companies, now employing over 9,000 workers, have been started by UW faculty, students or with UW-developed technology. Celebrating 150 years, the University of Washington is the largest university in the Northwest and one of the oldest universities on the West Coast. The University is considered a Public Ivy institution, and its research budget is one of the largest in the country. The UW occupies over 500 buildings, with over 20 million gross square footage of space. UW s operating expenses and research budget totaled more than $6.4 billion for fiscal year 2014-2015. At $1.385 billion, the university receives the fourth highest amount of federal research funding of any public university in the country. OFFERING MEMORANDUM 11
Property Overview FUTURE EXPANSION The Daily Journal of Commerce, on February 17, 2016, reports the University of Washington s plan for the next 20 years, which includes the construction of up to eight million square feet of new buildings which would accommodate 17,000 additional students. The University of Washington is seeking approval for a new zoning overlay within its current boundaries. Part of the plan will ask city officials to increase height limits to 300 feet around the rail station, and in areas of campus west of 15th Avenue NE. As this growth takes place, it will create future demand for additional UW staff, students, and other related employees. SHOPPING AND ARTS The neighborhood in which Hoven is located, the University District, is one of the most popular in Seattle, with a culturally eclectic and diverse shopping neighborhood anchored by a highly successful shopping center, University Village. University Village is an open-air lifestyle shopping center which offers a unique formula of locally-owned boutiques, signature national retailers such as the Apple Store, Sony, the Microsoft Store, Crate & Barrel, Restoration Hardware, Pottery Barn, Lululemon, Banana Republic, and a distinct collection of restaurants and eateries. University Village produces sales per square foot numbers that rank in the top five percent of lifestyle centers nationally (Puget Sound Business Journal, March 18, 2011). The U-District is home to two major museums (the Burke Museum and the Museum of History and Industry), and is considered by some to be the artistic hub of Seattle. It is also the site of the Seattle International Film Festival. OFFERING MEMORANDUM 12
Property Overview LAKE WASHINGTON MADISON PARK CAPITOL HILL SEATTLE CBD LAKE UNION FREMONT HOVEN WALLINGFORD ROOSEVELT GREEN LAKE U DISTRICT STATION HUSKY STADIUM STATION PLANNED TRANSPORTATION IMPROVEMENTS Sound Transit s University Link light rail line will connect the UW campus with downtown Seattle, Capitol Hill, and the Sea-Tac Airport. The project includes a tunnel extending from Husky Stadium and a subsequent extension to a station located at northeast 45th Street and Brooklyn Avenue northeast. Construction is nearly complete and train service is scheduled to begin on March 19, 2016. The City is also considering expanding the South Lake Union Streetcar line towards the University of Washington. OFFERING MEMORANDUM 13
Property Overview Property Aerial RAVENNA PARK HOVEN 22nd Ave NE 20th Ave NE 21st Ave NE 22nd Ave NE Ravenna Ave NE NE 50th St BURKE GILMAN TRAIL UW & RETAIL OFFERING MEMORANDUM 14
Property Overview Amenities Aerial THE AVE HOVEN BURKE GILMAN TRAIL NE 45th St super fast UNION BAY BURKE GILMAN TRAIL FUTURE LIGHT RAIL STATION (2016) OFFERING MEMORANDUM 15
Property Overview Bus Routes NE 75TH ST GREEN LAKE ROOSEVELT WAY UNIVERSITY WAY 25TH AVE NE NE 65TH ST RAVENNA WAY 11TH AVE NE 15TH AVE NE NE 50TH ST NE 45TH ST 372 68 30 74 HOVEN SAND POINT WAY NE LAKE WASHINGTON NE PACIFIC ST UNION BAY BUS ROUTES 30 to Downtown Seattle 68 to UW and Northgate 74 to Downtown Seattle 372 to UW Bothell and UW OFFERING MEMORANDUM 16
Property Overview University Village Neighborhood Amenities Map GREEN LAKE 14 6 7 3 12 1 3 1 WARREN MAGNUSON PARK 9 9 WOODLAND PARK 44 11 11 43 10 8 8 7 5 1 RAVENNA PARK HOVEN 1 2 5 23 10 32 4 33 3435 2 3 31 3 11 1 3 14 13 CALVARY 4 30 10 6 2 12 CEMETERY 4 15 2 5 29 8 7 12 6 5 6 28 11 11 8 7 3 11 9 7 6 1 27 9 3 8 26 42 5 4 25 7 3 15 21 39 20 10 4 3 24 23 36 37 6 12 16 2 10 41 40 38 22 6 13 2 10 9 1 13 9 12 13 16 14 14 1 15 20 10 11 16 1 17 10 18 19 18 19 5 10 15 16 1 4 1 11 7 LAURELHURST PARK 6 8 BURKE GILMAN TRAIL 13 LAKE WASHINGTON 17 21 UNION BAY 1 22 1 OFFERING MEMORANDUM 17
Property Overview Amenities Key EAT / DRINK COFFEE SHOPPING HEALTH & WELLNESS SCHOOLS 1 Tempero Do Brasil 24 Liam s 1 Starbucks 1 American Apparel 1 Community Fitness 1 University of Washington 2 My Sweet Lord Restaurant 25 Blue C Sushi 2 Tully s 2 Petco 2 YMCA 2 University Cooperative 3 Pearl Bistro 26 Piatti 3 Seven Coffee Roasters Market 3 Buffalo Exchange 3 CorePower Yoga - U-District 3 Sasha s Preschool 4 Mars Bar 27 Delfino s Chicago Style Pizza 4 Queen Mary Tea Room 4 Tommy Bahama 4 The Seattle Gym 4 Lady Bug Montessori 5 Pizza Ragazzi 28 RAM 5 Ventoux Roasters 5 Sephora 5 Fitness Center West 5 Child Learning & Care Center 6 Cedars Restaurant 29 Nasai Teriyaki 6 Zoka Coffee Roaster & Tea 6 Free People 6 Crossfit 6 Bright Horizons 7 Memos Mexican Restaurant 30 Mamma Melina Ristorante 7 Fran s Chocolates U-Village 7 Gap 7 Pure Barre 7 Roosevelt High School 8 Costas Restaurant 31 Krua Thai in Ravenna 8 Gretchen s Place 8 Bicycle Center 8 Unique Physique 8 Greenlake Elementary 9 Thai Tom 32 Frank s Oyster House 9 Top Pot Doughnuts 9 Super Supplements 9 Metropolitan Pilates 9 Greenlake Preschool 10 Subway 33 Pair 10 Herkimer Coffee 10 FedEx 10 University Sun Tan 10 Licton Springs K-8 11 Portage Bay Cafe & Catering 34 Gaudi 11 Tribal Brazillian Coffee Shop 11 Walgreens 11 Desert Sun Tan - U-District 11 Laurelhurst Elementary 12 Cedars of Lebanon 35 Mioposto Pizzeria 12 Chaco Canyon Organic Cafe 12 BabyGap 12 Seattle Sun Tan 12 Eckstein Middle School 13 Flowers Bar & Restaurant 36 Burgermaster 13 Burke Cafe 13 University Florist 13 Tropical Tan 13 Sand Point Elementary 14 Apple Thai 15 Pizza Hut 16 Bagel Oasis 17 Agua Verde 18 Red Square BBQ 19 Motosurf 20 The 8 21 Vista Cafe 22 The Rotunda 23 Domino s 37 China Village Restaurant 38 Milano Pizza & Pasta 39 Djan s Modern Thai Restaurant 40 Dick s Drive In 41 Sea-Thai Restaurant 42 Seamonster Lounge 43 Chutneys Bistro 44 Tilth Restaurant 45 Tutta Bella Neopolitan 14 Ugly Mug Cafe 15 Cafe Solstice 16 George Cafe 17 Suzzallo Espresso 18 Mary Gates Hall Espresso 19 Reboot 20 A Muddy Cup 21 Uptown Espresso 22 Fuel Coffee 23 Mighty-O-donuts 14 City Eyework 15 T-Mobile 16 Pottery Barn GROCERY 1 Vegan Haven 2 U-Way Grocery 3 Safeway 4 Trader Joe s 5 Whole Foods 6 Metropolitan Market 7 PCC Natural Market 8 QFC 9 Le Corbau Grocery 14 Billings Middle School 15 Wallingford Cooperative 16 Washington Charter School 10 Trinity Market 11 7-Eleven OFFERING MEMORANDUM 18
Financial Summary Rent Roll Income & Expenses Pricing OFFERING MEMORANDUM 19
Financial Summary Rent Roll SCHEDULED INCOME UNIT # UNIT TYPE SQUARE FOOTAGE ACTUAL RENT RENT PER SQ. FT. MARKET RENT MARKET RENT / SQ. FT. 1 1 BR / 1 BA 650 $1,475 $2.27 $1,575 $2.42 2 1 BR / 1 BA 650 $1,575 $2.42 $1,575 $2.42 3 1 BR / 1 BA 650 $1,375 $2.12 $1,575 $2.42 4 1 BR / 1 BA 650 $1,495 $2.30 $1,525 $2.35 5 1 BR / 1 BA 700 $1,070 $1.53 $1,625 $2.32 6 1 BR / 1 BA 700 $1,070 $1.53 $1,625 $2.32 7 1 BR / 1 BA 700 $1,070 $1.53 $1,625 $2.32 8 1 BR / 1 BA 700 $1,070 $1.53 $1,625 $2.32 TOTAL 5,400 $10,200 $12,750 AVERAGE 675 $1.89 $2.36 OFFERING MEMORANDUM 20
Financial Summary Income Laundry Based on 2015 actual income. Utility-Bill-Back Current based on current rent roll. Pro Forma based on billing back $70 per unit. Non-Refundable/Misc. Based on 2015 actual income Vacancy Four percent (4%) vacancy. Expenses Real Estate Taxes Current taxes based on 2015 King County Tax Assessor s billing data. Pro Forma based on 80% of the sales price at the current tax rate. Insurance Based on Farmer s Insurance quote dated July 30th, 2015. Utilities Based on 2015 actual expenses. Repairs and Maintenance Based on 2015 actual expenses. Professional Management 5% management expense. Landscaping Based on 2015 actual. Capital Reserves $250 per unit is accumulated to pay for large capital expenditures amortized over years of operations. Administration Based on 2015 actual expense (Admin & Accounting). CURRENT PRO FORMA INCOME Total Scheduled Rent $122,400 $153,000 Laundry $1,401 $1,401 Utility-Bill-Back $3,960 $6,720 Non-Refundable/Misc. $2,148 $2,148 Scheduled Potential Income $129,906 $163,269 Less Physical Vacancy (4%) ($5,196) ($6,531) Effective Gross Income $124,710 $156,738 EXPENSES Real Estate Taxes $10,646 $15,481 Insurance $1,966 $1,966 Utilities $7,653 $7,653 Repairs & Maintenance $7,028 $7,028 Professional Management $6,235 $7,837 Landscaping $175 $175 Capital Reserves $2,000 $2,000 Administration $942 $942 Total Expenses $36,645 $43,082 Expenses Per Unit $4,581 $5,385 Expenses Per Square Foot $6.79 $7.98 Net Operating Income $88,064 $113,656 OFFERING MEMORANDUM 21
Financial Summary ANNUALIZED OPERATING DATA CURRENT RENTS PRO FORMA OPERATIONS Gross Potential Income $129,906 $163,269 Less Physical Vacancy 4% ($5,196) 4% ($6,531) Effective Gross Income $124,710 $156,738 Less Expenses 29.38% ($36,645) 27.49% ($43,082) Net Operating Income $88,064 $113,656 Less Loan Payments ($63,046) ($63,046) Pre-Tax Cash Flow 3.03% $25,018 6.13% $50,610 Plus Principle Reduction $22,454 $22,454 Total Return Before Taxes 5.75% $47,472 8.86% $73,064 PRICING Price $1,995,000 Down Payment* $825,000 Price Per Unit $249,375 Cost Per NRSF $369.44 Current GRM 15.36 Market GRM 12.22 Current Cap Rate 4.41% Market Cap Rate 5.70% FINANCING Loan Amount* $1,170,000 Rate 3.50% Amortization 30 years Annual Debt Service ($5,254) Debt Coverage Ratio -1.399 The above financing terms were obtained in September 2015 and are based on a 5-year term, 30 years amortization. As loan information is time sensitive and subject to market fluctuations, we recommend that you verify quoted terms by contacting a preferred lender of your choice. OFFERING MEMORANDUM 22
Comparables Sales Comparables Sales Comparables Map OFFERING MEMORANDUM 23
Sales Comparables SUBJECT THE HOVEN 5231 22nd Ave NE, Seattle List Price $1,995,000 Price/Unit $249,375 Price/SF $369.44 Cap Rate 4.4% GREEN LAKE GRM 15.4 Units 8 Year Built 1969 1 4229 BUILDING 4229 11th Ave NE, Seattle Date Sold 8/28/2015 3 1 4 2 HOVEN 2 Sale Price $1,516,000 Price/Unit $303,200 Price/SF $375.34 Cap Rate 4.1% GRM 14.0 Units 5 Year Built 1994 BURDOT 5243 22nd Ave NE, Seattle Date Sold 01/09/2015 Sale Price $ 1,675,000 Price/Unit $279,166 Price/SF $307.34 Cap Rate 4.4% LAKE UNION GRM 15.2 Units 6 Year Built 1965 OFFERING MEMORANDUM 24
Sales Comparables GREEN LAKE 3 SILVER 4134 11th Ave NE, Seattle Date Sold 01/30/2015 Sale Price $2,775,000 Price/Unit $277,500 Price/SF $333.17 Cap Rate 4.4% GRM 14.2 Units 10 Year Built 1926 2 4 1 3 HOVEN 4 UNIVERSITY 5 PLEX 5030 15th Ave NE, Seattle Date Sold 9/22/2014 Sale Price $1,160,000 Price/Unit $232,000 Price/SF $276.98 Cap Rate 4.7% GRM 13.7 Units 5 Year Built 1911 LAKE UNION OFFERING MEMORANDUM 25
Puget Sound Market Overview Seattle / Puget Sound Region Top Puget Sound Area Companies Quality of Life Demographics Education Economy Transportation OFFERING MEMORANDUM 26
Puget Sound Market Overview Seattle/Puget Sound Region Metropolitan Seattle is a vibrant metropolis that continually attracts new people and businesses with its top-tier educational institutions and culture of innovation, competition and entrepreneurship. Seattle s increasingly diverse economic base is anchored by aerospace, transport, tourism and other traditional industries coupled with dynamic clusters of high technology and biotechnology firms, which will likely result in economic growth beyond the levels of other comparable metropolitan areas. The Seattle area, the nation s 15th largest metropolitan area, is known for its strong business climate as well as its skilled workforce. Several factors contribute to the region s thriving business community, from the prevailing entrepreneurial spirit to the education levels and skill sets of its work force. Innovative companies attract high-quality workers who typically possess a high level of education. This welleducated talent flows to economic centers, such as Seattle, for well-paying jobs as well as for the quality of life. The Census Bureau recently announced that Seattle is the best-educated big city in America; 54.3 percent of all Seattle adults 25 and older hold bachelor s degrees or better. Next in the rankings are San Francisco, Washington, D.C., Atlanta and Boston. The median household effective building income in the Greater Seattle Area is 20 percent higher than the national median, ranked 14th of 363 markets nationwide in 2012. Contributing factors to region s economic prosperity include a successful, highly entrepreneurial business sector and consistent population growth. Quality of Life If you could live anywhere and an outdoors lifestyle matters to you, then you couldn t pick a better place to be than the Greater Seattle area. There are very few places where one can go skiing after work on Friday evening and then wake up and go sailing or play golf on Saturday morning. The region is simply an incredible place to live as well as to do business. GREATER SEATTLE AREA Seattle is the largest city in the four-county metropolitan area known as the Puget Sound region. The area s other major metropolitan cities are Bellevue, Tacoma, Everett and Bremerton. Surrounding these are growing cities that include Kirkland, Redmond, Kent, Renton, Bothell and Issaquah. CLIMATE The temperate climate lets residents and visitors enjoy the outdoors year-round. High temperatures in July average just 75 degrees, while low temperature drop below freezing an average of only 15 days per year. Rain does fall in Puget Sound and that is why the region s vegetation is always a lush green. However, it rarely rains heavily and the total average rainfall is 35 inches, less than New York City or Miami. OUTDOOR ACTIVITIES, CULTURE & SPORTS The area s natural beauty and mild climate encourage year-round activities such as hiking in the Olympic or Cascade Mountains, kayaking on Lake Union or cycling on any of the many rails-to-trails paths. Art and culture are also driving forces in the region. There are 34 museums, 30 performing arts centers and, at last count, 28 professional theatre companies. Professional sports teams include major league football, baseball, soccer, hockey and lacrosse. In addition, there is thoroughbred racing and the University of Washington Huskies to cheer on. OFFERING MEMORANDUM 27
Puget Sound Market Overview Top Puget Sound Area Companies Amazon.com AT&T Wireless Alaska Airlines Berlex Laboratories Boeing Children s Hospital Costco Expedia, Inc. Google Group Health Cooperative Macy s Microsoft MultiCare Health System Nintendo Paccar, Inc. Providence Health Care RealNetworks REI Safeco Safeway Starbucks Swedish Health Services Symetra Financial T-Mobile The Kroger Company University of Washington Virginia Mason Medical Center Weyerhaeuser - Forest Products Nordstrom OFFERING MEMORANDUM 28
Puget Sound Market Overview Demographics Education POPULATION The region consists of approximately 3,780,900 (2013, Puget Sound Regional Council) residents in King, Snohomish, Pierce and Kitsap counties. The current figure represents a 14.4% increase over the 2000 Census. Positive population growth in the region is expected to continue. The Puget Sound Regional Council is estimating the area s population to be 4,127,700 in 2020, an 8.5% increase. BUYING INCOME The Seattle-Tacoma-Bellevue metropolitan area (MSA) is clearly the economic engine of Washington State. The MSA ranks 14th among 363 markets nationwide in terms of effective buying income (EBI or after-tax, discretionary spending power). The median household EBI in the Greater Seattle Area is 20% higher than the national median. WORKFORCE Approximately 56% of the population is in the prime workforce age of 25-64. Puget Sound residents are among the most highly educated in the nation, with more than 35% having at least a bachelor s degree and one-third of those holding a graduate or professional degree. Washington State is home to six public four-year colleges and universities, 34 public community and technical colleges, and more than 300 private colleges, universities, career and vocational schools. UNIVERSITY OF WASHINGTON The University of Washington is among the top higher learning institutions in the nation, ranking 16th among the world s top 500 universities by Academic Rankings of World Universities and 25th out of the world s best 100 universities by Times Higher Education World University Rankings in 2013. The UW is also the number one public university in the nation for receiving federal support in research and training. Their medical school ranked first among all schools in the country for primary care and the School of Nursing also retained its top ranking for the 27th year. Overall, the UW School of Medicine is ranked ninth among research medical schools and first among public medical schools. The graduate program in computer science ranks seventh and the college of education graduate program was tied for ninth. Nearly three-fourths of University s graduates remain in the state. JOB GROWTH Puget Sound has added nearly 80,000 payroll jobs since 2011 and there are no signs of slowing down. In 2013, the region added 52,500 jobs, and 54,000 jobs are forecasted for 2014. The Puget Sound Economic Forecaster s positive employment forecast indicates another 200,000 total payroll jobs to be added between 2013-2017. Overall, the region is projected to add 340,000 payroll jobs during the next ten years while personal incomes are expected to grow 5.7%. University of Washington OFFERING MEMORANDUM 29
Puget Sound Market Overview Economy KEY INDUSTRY SECTORS While the greater Seattle economy includes a broad range of companies, local business and civic leaders have identified key innovative, knowledge-based industries that drive our economy and are critical to the region s current and future prosperity. These are: Information Technology Seattle University Bastyr University Aerospace SEATTLE UNIVERSITY Seattle University is a Jesuit university situated on 48 acres in Seattle s First Hill and Capitol Hill neighborhoods. The school was founded in 1891 and is the largest independent university in the Pacific Northwest. The university has a total enrollment of 7,750 students of which 56% are undergraduates. Seattle University employs 1,381 faculty and staff. The U.S. News 2013 rankings place Seattle University 6th among the top universities in the West that offer a full range of masters and undergraduate programs. BASTYR UNIVERSITY Bastyr University, located north of Seattle, Washington, is one of the world s leading academic centers for advancing knowledge in the natural health sciences. A twentynine-year pioneer in natural medicine, Bastyr continues to be in the forefront of developing the model for 21st century medicine. Bastyr University s academic and research programs have received international recognition for pioneering work in science-based natural medicine. Life Sciences Interactive Media Clean Technology Information Technology Many of the most well known names in the software and information technology industry are located in the Great Seattle area. The established companies include Microsoft, Amazon.com, Nintendo, RealNetworks, T-Mobile, Expedia and several others. The strong base of businesses has created the largest employment cluster in the region, supporting nearly 110,000 jobs. The Greater Seattle area has several worldleading strengths in the IT sector. The State of Washington is the largest employer of software publishing workers in the US. In addition, Washington ranks first in the country in the creation of new software companies. OFFERING MEMORANDUM 30
Puget Sound Market Overview Microsoft is the second largest employer in Washington. In addition to the 42,940 employees in the region at the end of 2013, the company historically has had an estimated 3.4 implied employment multiplier. As a result, the company currently supports nearly 140,000 indirect jobs in the area. Microsoft has also greatly impacted the region through next generation companies. Since Microsoft s founding, over 250 companies have been spun off through investment/development or from former Microsoft employees. to over 6.5 million square feet locally. The rich and deep pool of talent has led other industry leading IT companies such as Google to establish the area as an important location for growth. In the Greater Seattle area, Google has a complex of new buildings in Kirkland and offices in the Fremont neighborhood of Seattle that employs 1,000 people. In August of 2011, Google signed a 58,000 square foot lease in Bothell, which will add 840 more jobs locally. The local engineers continue to work on the high priority projects such as the Chrome browser and operation systems and Google Talk. The most recent major IT company to open a Seattle office was Salesforce.com in October of last year. Woodson Martin, the company s SVP stated, We are after the best and brightest software engineers in the industry and a heck of a lot of those people live in the Seattle area. That s why we are there. Other technology companies in the area that are expanding include; Facebook, Google and F5 Networks. Aerospace Amazon.com has continued its strong employment growth. The online retailer added more than 20,000 payroll jobs worldwide in 2012 alone and 45,000 new jobs since 2008. Amazon.com has over 117,000 full and part time employees for the first time. The company doesn t release detailed employment information for the region; however, it is estimated they are hiring 150 people per week just in Seattle with a total employment force of about 14,000 in the City. Amazon s leasing and buying activity indicate there is no end of growth any time soon. The online retailer purchased its 1.7 million square foot campus in October of 2012 for $1.16 billion or $644 per square foot. This was easily the biggest office transaction in Seattle s history. In addition, they lease over 1.1 million square feet of nearby Downtown office space. In December of 2012, Amazon.com closed on three city blocks in Downtown Seattle s Denny Triangle for build a 3.3 million square foot expansion. This would bring in an estimated 12,000 new jobs. Between current occupied space and planned, Amazon.com would double their total Seattle footprint The Puget Sound region has a proud history and a strong future as a leader in the aerospace industry. In 2012, aerospace supported more than 200,000 jobs in the state and includes over 650 companies, making the area the largest commercial aviation center in the country. The largest employer is The Boeing Company, with over 87,000 workers in Washington State. Their main factory is located in Everett, which is 25 minutes north of Downtown Seattle. The Everett factory produces Boeing s 747s, 767s, 777s, the new 787 Dreamliner airplanes, and now the refueling tankers for the Air Force. The new tanker deal, which Boeing signed in 2011, is worth an estimated $35 billion and is expected to support 50,000 U.S. jobs, of which 11,000 are in Washington State. In Renton, just 15 minutes south of Downtown Seattle, is Boeing s 737 factory, which is the world s most successful commercial airliner in terms of airplanes sold. The 737 has increased production from 31.5 to 38 planes per month in the past three years. The new fuel efficient 737 MAX has received over 1,000 firm orders since it was released in August of 2011. OFFERING MEMORANDUM 31
Puget Sound Market Overview Boeing has been the catalyst for the Puget Sound s resurgence. The aerospace giant hired nearly 14,000 new employees since 2011. With an estimated employment multiplier of three, Boeing has been responsible for an approximately 42,000 indirect jobs over the past two years. Boeing reclaimed the number one spot in aerospace in 2012, crushing its rival Airbus in net orders. In 2012, Boeing had 1,203 net orders compared to Airbus 833. In addition, Boeing delivered 601 airplanes, which is a new record for the 97 year old company. Boeing current has over 4,300 firm orders for commercial airliners, which is seven years of inventory. Life Sciences The life science industry in the Puget Sound is now recognized as one the premier biotechnology and medical technology centers in the world, and one of the fastest growing research centers in the country. The industry has accounted for 12% job growth in our region since 2007 compared to a 2% decline in all other industries. The city of Bothell and most recently, South Lake Union in Downtown Seattle, are the two major hubs for life science companies in the region. Of the 13+ million square feet of buildings developed in South Lake Union since 1990, over 20% are medical/ biotech buildings. The industry employs 34,000 direct jobs in the region and is responsible for 92,000 total jobs in the sector. Life science companies contributed $11 billion towards the State s 2012 GDP and $7 billion towards personal incomes. Since 1980, research universities and non-profit organizations have attracted over $70 billion into Washington State. This includes medical device firms, ultrasound imaging, environmental firms, and world class institutions and organizations such as the University of Washington, Fred Hutchinson Cancer Research Center, and the Bill and Melinda Gates Foundation. With a current endowment of $37 billion, the Bill and Melinda Gates Foundation is also a major supporter of the area s life science companies. Recent funding helped the University of Washington move the Departments of Genome Sciences and Bioengineering into a new, shared facility and helped establish a Department of Global Health. The Foundation opened its new campus at 500 5th Ave N. in June 2011. The reported cost of the first phase of construction, which includes the two office buildings currently under construction, is $500 million. Management estimated that 1,200 staff initially moved into the Foundation will add additional capacity with a third office building, which broke ground in August of 2012. The South Lake Union biotechnology area, near both the Foundation and the University, houses The Fred Hutchinson Cancer Research Center, the Institute for Systems Biology, the Pacific Northwest National Laboratory (Seattle office), Amgen s Helix Campus on Elliot Bay, the Allen Institute for Brain Science, the Pacific Northwest Research Institute, the Infectious Disease Research Institute, PATH, the Seattle Biomedical Research Institute and the Benaroya Research Institute at Virginia Mason. The distinct healthcare industry which includes hospitals, healthcare products and services, training and research, accounts for 96,000 jobs in Seattle and annual revenue of $10 billion. Collaboration among professionals in healthcare, life sciences and information technology has led to advances in bioinformatics and health informatics. OFFERING MEMORANDUM 32
Puget Sound Market Overview Interactive Media The Puget Sound is an undisputed global leader in Interactive Media development. Starting with Cyan s PC games of the nineties, Myst and Riven, to Valve s Half Life, and Bungie s Halo trilogy, the history of the area is strong. With Microsoft, Nintendo and RealNetworks in the region along with over 150 noteworthy game-technology companies, the Greater Seattle area can claim to be of the top three gamedevelopment centers in the world. commitment to the environment. As a result, the area is an exceptional location for emerging clean technology companies involved in clean energy, green building and environmental technologies. In 2012, there were more than 400 clean technology companies located in region employing more than 21,000 people. Statewide, the clean technology industry accounted for more than 83,000 jobs in the sectors of energy efficiency, renewable energy, reducing pollution and pollution cleanup. The sectors of wind, solar, biomass, wave/tidal and geothermal energy currently employ more than 17,000. Washington State has long supported clean technology and has the largest coordinated hydro-electric system in the world, providing 75% of the state s electrical power. The Washington Clean Technology Alliance (WCTA) was established in 2007 to take full advantage of the opportunities presented by this emerging sector and to ensure Washington s continued leadership. Transportation Industry leaders such as Warner Bros. Interactive, Gas Powered Games, NCSoft, and Sony Online Entertainment have offices here. Over the last few years, an industry task force gathered and collaborated with public and private sector leaders to develop the Washington Interactive Media Program- the first of its kind in the nation. The program is designed to promote, nurture and grow the video game industry in the area. There are currently over 15,000 jobs at Greater Seattle area companies or divisions wholly devoted to game today and the industry in this region is growing at over 30% each year. Clean Technology King County s has a well-developed transportation system which provides links to all parts of the country and world. Seattle s port is closer to the main trading partners in Asia than any other major U.S. port and the region s distribution networks move goods efficiently inland. The region s multi-modal transportation system includes two transcontinental railroads, nationwide trucking capacity, three interstate highways, a ferry system, a world-class port and an international airport. The Burlington Northern Santa Fe (BNSF) and Unions Pacific Southern Pacific (UPSP) railroad serve the greater Seattle area. Both railroads have spur lines that span the area, making it possible to deliver almost any type of load. Outside of Puget Sound and across the state, there are over 4,000 miles of operable track. The Greater Seattle region has a storied history of entrepreneurship, is home to companies with world changing technologies and has an unmatched culture of OFFERING MEMORANDUM 33
Puget Sound Market Overview Truck transportation in Washington is made possible by over 3,700 interstate trucking companies, including common carrier and contract companies. The State ranks among the top 10 states in general freight tonnage carried by trucks intrastate. All regional communities are accessible from Seattle over an efficient, well-planned freeway system. The average commute between Seattle and outlying cities and suburbs is 23 minutes (non-peak) and 45 minutes (peak drive time). The region s highway network is anchored by three main highways: U.S. Interstate 5 which runs north-to-south from Vancouver, British Columbia to San Diego, California. Interstate 90 which runs west-to-east connecting Seattle with New York, and Interstate 405 (Washington) is a 30-mile stretch of freeway that bypasses Seattle east of Lake Washington. I-405 runs from Lynnwood in the north to Tukwila. Over 23 million passengers annually ride the Washington State Department of Transportation s Ferry System, the largest in the country and the third largest in the world. This system transports over 10 million vehicles a year, more than any ferry system in the world. The fleet has 20 auto-passenger ferries and two passengeronly ferries. The DOT operates 20 terminals and operates on 9 routes. PORT OF SEATTLE The Port of Seattle has world-class facilities and relative proximity to Asia; the port is the fastest route for cargo to and from America s heartland. The transit time from port cities in Asia to Seattle is eight days, which is 30 hours less than through Southern California ports. The Seattle-Tacoma-Everett port region is the third largest container complex in the country, smaller only than New York/New Jersey and Los Angeles/Long Beach. The region s ports serve not only the Pacific Northwest but also the Midwest, East Coast and Canada. 2011 marked continued strong port activity after a record year in 2010. In 2010, 31.6 million passenger and 283, 425 metric tons of air cargo passed though Sea-Tac airport. Passenger levels increased 1% from 2009 and the volume ranked the airport as the 17th busiest in the U.S. Because of the state s strategic geographic location, Sea-Tac is one to two hours of flying time closer to Pacific Asia than Southern California airports. In addition, trans-polar routing enables Sea-Tac to rival East Coast cities like New York in flight times to European capitals. OFFERING MEMORANDUM 34
Contact Information Contact Dan Swanson Vice President 206.296.9610 dswanson@kiddermathews.com Kidder Mathews 601 Union Street, Suite 4720 Seattle, WA 98101 kiddermathews.com