1 Lease vs. Buy Mini Case Darden Restaurants Inc.

1
Lease vs. Buy Mini Case
Darden Restaurants Inc.
Prepared by:
Mitch O’Reilly
Georgio Kwok
May 7, 2013
2
10505 NW 112th Avenue, Miami, FL 33178
Darden Restaurants
The purpose of this project is to determine whether Darden
Restaurants should purchase or
lease a property of 150,000 square feet of office space near the
Turnpike and Northwest 96th

Street for a regional headquarters in Miami, Florida. The
company is located and
headquartered in Orlando, Florida and is looking to expand its
regional expertise into the South
Florida market. Darden’s investment horizon is a six-year
holding period. Our analysis showed
that Darden Restaurants should purchase the property. The
company would realize an internal
rate of return on after-tax cash flows of 19.70% and a net
present value of $7,771,554.
Required Return on Equity
According to the Bloomberg terminals, the 2-year beta for
Darden Restaurants was 0.832 and is
16.8% less risky than the benchmark index such as the S&P
500. The bonds chosen to
determine the cost of borrowing had maturity dates of
10/15/2021 and 11/1/2022, which were
long than the expected holding period of 2018 for this analysis.
Averaging the callable bond
yields from Bloomberg, the long-term cost of borrowing was
3.47%. However, since these
bonds are redeemable prior to 2018, they have a higher yield
than non-callable bonds; thus, we
deducted 50 basis points from the 3.47% to arrive at 2.97% as
the long-term cost of borrowing.
3

Using the capital asset pricing model (CAPM), the required
return on equity for Darden
Restaurants was calculated to be 8.35%. The risk free rate (Rf)
was found by averaging the 10-
Year Treasury rate from the past 10 years, which yielded an
average rate of 3.53%.1
1 Federal Reserve Economic Data.
http://research.stlouisfed.org/fred2/
4
Date 10-Year Treasury Rate
1-Jan-13 1.91%
1-Jan-12 1.97%
1-Jan-11 3.39%
1-Jan-10 3.73%
1-Jan-09 2.52%
1-Jan-08 3.74%
1-Jan-07 4.76%
1-Jan-06 4.42%
1-Jan-05 4.22%
1-Jan-04 4.15%
1-Jan-03 4.05%
Average 3.53%

The implied equity risk premium was taken from Damodaran’s
website and for the month of
April 2013 the risk premium was 5.79%.2
Re = Rf + β (Rm – Rf)
.0353 + (.832 * .0579) = 8.35%
Using the Capital Asset Pricing Model, the required return on
equity is 8.35%. This important
measure is reflected in the recommendation to Darden’s
Restaurants.
Assumptions and Givens
The following parameters were provided:
The property can be purchased for a total of $32,000,000, of
which $27,000,000 is
building value
60% of the value of the property can be financed if purchased,
for 10 years, with 30 year
amortization
The firm is in the 35% tax bracket, the depreciation recapture
is taxed at 25%, and long
term capital gains are taxed at 15%
For the assumption of the annual average appreciate rate, we
used the Zillow Home Price
Expectations Survey where the economists predicted that home
values would appreciate 4.05%
annually through 2017.3 Taking a conservative approach, 100
basis points were deducted from

the economists’ projections to arrive at annual appreciate rate of
3.05%. The adjustment was
necessary since the demand for office space is generally weaker
than the residential real estate
market. The 3.05% rate is also more indicative of the current
inflation rate in the US.
Using Costar, we collected data on several properties with
similar features and amenities
located within a 3-mile radius of the site. Most of the office
buildings were recently built or
renovated and all were near 150,000 square feet in net rentable
area. Averaging the eight
2 Implied Equity Risk Premium. Aswath Damodaran.
http://people.stern.nyu.edu/adamodar/
3 Zillow Real Estate Research.
http://www.zillowblog.com/research/2013/03/19/zillow -home-
price-
expectations-survey-predicts-home-value-appreciation-through-
2017-to-exceed-pre-bubble-norms/
5
comparable properties below, we determined Darden’s potential
triple net lease rate to be
$23.24 per square foot.
Address NRA
(SF)
Lease Type Lease Rate

($/SF)
Operating
Exp ($/SF)
Total Rent
($/SF)
Year
8750 NW 36th St 140,600 NNN $12.25 $10.34 $22.59 1991
9100 NW 36th St 246,917 FS $18.64 N/A $18.64 1980
9250 NW 36th St 187,321 FS $25.00 N/A $25.00 1984
9850 NW 41st St 133,117 NNN $13.25 $10.18 $23.43 2006
9725 NW 117th Ave 114,287 FS $24.50 N/A $24.50 2006
10452 NW 117th Ave 118,723 FS $24.50 N/A $24.50 2007
3895 NW 107th Ave 80,000 FS $24.04 N/A $24.04 2014
3885 NW 107th Ave 133,117 FS $23.75 N/A $23.75 2012
Average 144,260 $20.31 $23.24
Sensitivity Analysis
The sensitivity analysis below shows Darden’s after-tax IRR at
various future selling prices and
at different borrowing rates. For example, if the property had
future selling price of $32,000,000
(0% appreciation) instead of the assumed value of $38,320,000
and if the interest rates on the
borrowed funds was 4.5% or 1.5% more than forecasted rate,
then the after-tax IRR would be
13.55%. While this value is much lower than the predicted
19.3% return, it is still greater than
8.35%, so even under these pessimistic assumptions, the best

option would be for Darden to
acquire the property.
Moreover, the triple net lease rate would have to be less than $7
before Darden would be
indifferent between buying or leasing the property. Since
Darden can borrow money cheaply
and because the company’s required return on equity is
relatively low, in most instances the
6
best financial decision would be for Darden to purchase this
property. However, this
recommendation could change if the company anticipated a
longer holding period than 6 years.
Loan
Rate
Summary Decision
Based on the assumptions for this project as well as the
appreciation and lease rates from our
research, our recommendation is for Darden Restaurants to buy

this office building rather than
to lease it. If the firm decides to purchase the property, it
would receive a 19.70% internal rate
of return on after-tax cash flows, which is substantially higher
than the required return on equity
investment of 8.35%. In addition, the company would receive a
positive net present value of
$7,771,554 after the 6 years with a future selling price of
$38,321,099 using an appreciation rate
of 3.05%. Finally, as the sensitivity analysis revealed, this
recommendation would not change
under the assumed worst case scenarios.

After-Tax IRR Future Selling Price
19.70% 40,000,000 38,000,000 36,000,000 34,000,000
32,000,000
2.50% 21.12% 19.78% 18.35% 16.82% 15.15%
3.00% 20.81% 19.45% 18.01% 16.45% 14.77%
3.50% 20.48% 19.12% 17.65% 16.08% 14.37%
4.00% 20.15% 18.77% 17.29% 15.70% 13.97%
4.50% 19.81% 18.41% 16.92% 15.31% 13.55%
7
Exhibit 1:
After-Tax Incremental
Lease vs. Buy Analysis 2013 2014 2015 2016 2017 2018
Corporate Tax Bracket 35%
Required After-Tax Return 8.35%
Annual After-Tax
Incremental Cash Flow
to Owning
Depreciation Tax
Shelter (TB * Dep.) $242,308 $242,308 $242,308 $242,308
$242,308 $242,308

Interest on an After-Tax
Basis (Int * (1-TB)) ($370,094) ($362,272) ($354,217)
($345,924) ($337,384) ($328,591)
After-Tax Lease
Payment SAVED (Lease
* (1-TB)) $2,265,900 $2,311,218 $2,357,442 $2,404,591
$2,452,683 $2,501,737
Loan Principal Paid ($405,830) ($417,865) ($430,257)
($443,016) ($456,154) ($469,681)
Net Annual After-Tax
to Owning $1,732,283 $1,773,389 $1,815,276 $1,857,959
$1,901,453 $1,945,772
Ending After-Tax
to Owning $19,757,276
Net After-Tax
to Owning $1,732,283 $1,773,389 $1,815,276 $1,857,959
$1,901,453 $21,703,048
Present Value of
Incremental Ownership
Cash Flows $20,571,554
Purchase Price ($32,000,000)
Loan $19,200,000

8
Owner's Initial Equity
Contribution ($12,800,000)
NPV of Incremental
Decision to Own
INSTEAD of Lease $7,771,554
Decision Buy, positive NPV
After-Tax IRR on
Decision to Own
INSTEAD of Lease 2013 2014 2015 2016 2017 2018
After-Tax Owning Cash
Flows: ($12,800,000) $1,732,283 $1,773,389 $1,815,276
$1,857,959 $1,901,453 $21,703,048
IRR on After-Tax Cash
Flows 19.70%
Compare to Required
Return on Equity
Investment 8.35%
Decision Buy, IRR on an after-tax basis is greater than the
required return on equity investment
Maximum lease rate
before leasing becomes
better $6.59

Mini Case 2:
Lease vs. Buy Analysis
Property Description: 150,000 square feet warehouse/office
building in
West Miami.
Decision: Buy.
Rationale:
1. UPS’s low cost of debt
2. UPS’s low required return of equity invested.
Decision Sensitivity:
Stable even under variation in the required return on equity (Re)
and cost of
debt (Rd), as well as variation in the NNN rent rates.
Core Competency: Logistics.
Analysts:
Pavel Egiyan & Daniel Fornes
T: (305) 890-7475
T: (786)-506-0355
E: [email protected]
Key Metrics Discussed
• IRR: 17.17%
• Re: 7.67%
• Rd: 2.50%
• NPV: $6,563,050

7 May 2013 │ 20 pages
7 May 2013 │ 20 pages
2
Contents:
+
Executive Summary ...................................... 3
Opportunity Defined ..................................... 4
Property Description .................................... 5
Company Beta .............................................. 7
Cost of Debt .................................................. 8
Risk-Free Rate ............................................... 9
Equity Risk Premium ..................................... 9
Required Return on Equity .......................... 10
Comparable rents and properties .............. 11
Lease vs. Buy Analysis ................................ 14
Appreciation Assumptions .......................... 15
Decision Sensitivity Analysis ....................... 16
Appendix .................................................... 17
3

Executive Summary:
This report includes a Lease vs. Buy analysis in regards to an
office/warehouse expansion opportunity that, based on our
economic rationale, should be beneficial to UPS.
The analysis employs four key performance metrics (company
beta, cost of debt, risk-free rate, and equity risk premium) used
in
the Capital Asset Pricing Model (CAPM) to calculate the
required
rate of return on equity to be compared to the Internal Rate of
Return associated with either leasing the office/warehouse space
or
owning it.
Our analysis suggest that UPS should buy the office/warehouse
space in question because of a combination of factors, such as
UPS’s low cost of debt and low required return of equity
invested.
As our sensitivity analysis suggests, the current decision is
quite
stable even under some variation in the required return on
equity
(Re) and cost of debt (Rd), as well as variation in the NNN rent
rates.
Therefore, UPS should buy the building!
4
A Great Opportunity for UPS

With its Latin America headquarters in Miami, located at 3401
NW 67th
Avenue, Bld. 805, and continually growing volumes of
international trade
and commerce between the USA and Latin America, office
space
expansion seems to fit this path of growth in the economy.
Based on this premise, we concluded that UPS would benefit
from a larger
distribution/warehouse with an office/showroom/distribution in
the same
region, which would allow UPS to further capitalize on its
proximity to the
nearby Miami International Airport and Port of Miami
infrastructures.
This map displays the distance between UPS’s Latin America
headquarters
in Miami (A) and the new office space located close to the
Miami
International Airport (B). The new warehouse/office building is

only 10.8
miles or 20 minutes away from the currently leased UPS office
and is truly
direct to every airport, seaport and railway system in both
Miami-Dade
and Broward counties and can be easily accessed through the
Florida
Turnpike.
+
5
Property Description
6
Property Description (cont.)
7
UPS' Beta
In our Lease vs. Buy analysis, we referred to Bloomberg Equity
resource to determine the
degree of UPS’s non-diversifiable firm-specific risk relative the

risk-return trade-off in the
economy, as measured by the Equity Risk Premium (ERP). We
discovered that the Raw Beta of
UPS averages at 0.885 over a 10-year period from 2003 to 2010.
This score means that UPS is
11.5% less risky than the market, such as the S&P 500.
+
8
UPS’s Cost of Debt
We also referred to Bloomberg to estimate UPS’s long-term cost
of borrowing. As of May 7, 2013, UPS has three
bonds outstanding, as shown on Bloomberg printout below. Two
of the three outstanding issuances are callable
bonds, which indicates the company’s uncertainty about future
long-term interest rates and serves as a means of
protection against interest rates fluctuations. The remaining
bond is a bullet bond and, therefore, in not callable.
Based on the decision period in question (10 years), we looked
at UPS’s bonds that would have their maturity
dates as close to the end of our investment horizon as possible
(year 2023), as well as offer relatively comparable
risk-return tradeoff. The only UPS bond that fit our criteria was
the first bond on the list, which matures in 2020
(three years off) and offers 2.333% Ask Yield to Maturity.
Therefore, we concluded that the appropriate cost of
debt for UPS is the Ask Yield to Maturity of around 2.50%
(where the extra 0.167% is a risk premium we
associated with the additional three years of uncertainty in

UPS’s returns as views by potential investors/lenders.
+
Bloomberg Equity output
Excel output
9
Risk-free Rate
As can be seen from the 10-Year Treasury
Constant Maturity Rate chart below, the
average rate of return over the last 10-year
investment horizon is approximately 3.5%.
This rate will be used next as a risk-free rate
(Rf) in the Capital Asset Pricing Model (CAPM)
equation to compute the required rate of
return (Re) that UPS investors/lenders would
demand.
Chart source:
http://research.stlouisfed.org/fred2/graph/?s[
1][id]=WGS10YR#
+
Equity Risk Premium
Based on a widely used source of implied equity risk premiums,
such as Aswath Damodaran’s website
(http://people.stern.nyu.edu/adamodar/), we obtained the
average Equity Risk Premium over the past

ten years is approximately 4.71%. This rate indicates that
investors have been demanding a 4.71%
premium to entice them to invest in higher risk equities instead
of risk-free T-Bills.
+
10
Capital Asset Pricing Model (CAMP)
Applying the Capital Asset Pricing
Model’s formula Re = Rf + β(Rm – Rf),
we calculated that the required return
on equity with which UPS’s investors/
lenders will be content is 7.67%
Required Return on Equity
+
11
+
Comparable 1
8333 NW 53rd St
Class Type: A
RBA: 150,00

Rent/SF: 20.00
Year Built: 2010
Lease Type: NNN
Comparables
Using Costar, we collected information on NNN lease rents on
new and nice (not extravagant) large properties in
Medley/Hialeah office market. The comparables we obtained are
as follows:
Comparable 2
9675 NW 117th Ave
Class Type: A
RBA: 150,350
Rent/SF: 24.50
Year Built: 2009
Lease Type: NNN
Comparable 3
9725 NW 111th Ave
Class Type: A
RBA: 118,287
Rent/SF: 24.50
Year Built: 2007
Lease Type: NNN
12
+

Comparables (cont.)
When looking at the market statistical data
for office space we decided to go with the
Medley/ Hialeah Market due to the
proximity to Flagler Station. We felt that
using the statistical data for office space in
Miami-Dade County would have been a
broader look at the market and not
represented the office market around
Flagler Station.
According to CoStar’s First quarter report for 2013 the
Medley/ Hialeah quoted rates are $24.44, when compared
to Miami-Dade County quoted rates which are $28.36, it is
clear to see that the Medley/Hialeah market is at the lower
end of the Miami-Dade Office market. The lowest quoted
rates were Miami-Dade Central County for $17.83 and the
Highest were in Brickell for $38.52. It is important to not that
these quoted rates are a blend of Class A, B, and C Office
space for their respective area.
Medley/Hialeah Office Market
13
+
Comparables (cont.)
Historical Analysis for All Cases
Historically quoted rental rates in the Medley/Hialeah Market
have been on a decline going as far back

as the 4th quarter of 2009 for the blend quoted rate.
Historically absorption rates since 2009 have been negative
with blended vacancy rates maintain
themselves at 12%.
15
Assumptions:
1. Property Appreciation Rate
We assumed an annual average appreciation rate of
2.5% to hold for 6 years until 2018. We based this
assumption on average rate of US inflation, which
has been around 2-2.5% over the last ten years.
2. NNN Rent
Based on our CoStar research of competitive
properties in the area, we have determined that a
$20 psf NNN rent rate should be appropriate for this
analysis.
Chart source: http://www.tradingeconomics.com/united-
states/inflation-cpi
16

Sensitivity Analysis:
In regards to its office/warehouse space expansion, the most
advantageous decision for UPS is
to buy the building instead of renting it.
This decision rests on a combination of factors, such as UPS’s
low cost of debt and low required
return of equity invested. As the tables below suggest, the
current decision is quite stable
even under some variation in the required return on equity (Re)
and cost of debt (Rd), as well
as variation in the NNN rent rates. Therefore, UPS should buy
the building!
17
Appendix
18
Comparable 1
19
Comparable 2

20
Comparable 3
Office Depot. (ODP)
7 May 2013
P a g e | 1
University of Miami
*Sources: Bloomberg unless otherwise stated
Office Depot (ODP)
University of Miami

7 May 2013 │ 14 pages
North America │ United States
Lease vs. Buy Analysis
o Office Supplier
Building - 150,000 square foot office building in West Miami
Low Rental Rates – improve the benefits of leasing rather than
buying. Low rates help decrease the opportunity cost supported
through buying.
High Required Cost of Debt – makes buying the less
advantageous
option as interest expense consumes a large amount of Cash
Flow.
High Required Cost of Equity – as shown through the CAPM
discounts Cash Flow at over 15%, which is higher than the IRR
of
13.88%
Decision – Rent rather than Buy

Analysts Covering:
Jeremy Mizraji & Eric Krieger
T: (973)-650-8814
T: (954)-483-4105
Important Metrics
o IRR: 13.88%
o Re: 15.48%
o Rd: 6.00%
o NPV: ($844,875)

mailto:[email protected]
mailto:[email protected]
Office Depot. (ODP)
7 May 2013
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Contents
Opportunities for Office Depot
...............................................................................................
...................... 3
Cost of Debt
...............................................................................................
.... Error! Bookmark not defined.
Beta
.................................................................................... ...........
................. Error! Bookmark not defined.
Risk-Free Rate
...............................................................................................
................................................ 6
Equity Risk Premium
...............................................................................................

...................................... 7
Capital Asset Pricing Model
...............................................................................................
........................... 8
Comparable Area
...............................................................................................
........................................... 9
Comparable Office Rents
...............................................................................................
........................ 10-11
Net Absorption & Average Rent
...............................................................................................
.................. 12
Appreciation
...............................................................................................
................................................. 13
Conclusion
...............................................................................................
....... Error! Bookmark not defined.

Office Depot. (ODP)
7 May 2013
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Opportunities for Office Depot
With its global headquarters in Boca Raton, we gathered that
Office Depot would benefit from
a logistics and storage facility in the region. This would further
capitalize on the nearby port
and airport infrastructure at PortMiami and Miami International
Airport. There is a plethora of
large warehouse and office structures in the Doral and Hialeah
areas of northwestern Miami-
Dade County that fit the aforementioned criteria. Moreover, we
believe that Office Depot’s

present merger with Office Max necessitates a more modern and
streamlined distribution
center.
The map displays the distance between Office Depot’s global
headquarters in Boca Raton (A)
and the new distribution facility located near Miami
International Airport (B). Even though the
locations are 45 minutes away, they are both easily accessible
through highway and rail.
Office Depot. (ODP)
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Cost of Debt
Three outstanding issuances appeared after searching
Bloomberg for Office Depot’s
outstanding debt. Unfortunately, all three issuances were
callable. After further researching
comparable companies’ bond issuances, we determined that the
office supply industry only
issues callable bonds as a means of protecting against interest
rate inconsistency. Also, one of
the issuances had a maturity time within 2013, so we did not
include the 6.25% coupon bond in
our analysis. After comparing the two remaining USD, fixed,
callable bonds with a TTM of
3/15/19, we concluded that the appropriate cost of debt is the
ask yield to maturity of
approximately 6.00%.
Amortization Schedule 2013 2014 2015 2016 2017 2018
LTV 60%

Loan Amount ($19,200,000)
Loan Rate 6.00%
Amortization Term 30
Loan Life 6
Loan Payment $1,394,859
Beginning Balance ($19,200,000) ($18,957,141) ($18,699,710)
($18,426,834) ($18,137,585) ($17,830,981)
Interest ($1,152,000) ($1,137,428) ($1,121,983) ($1,105,610)
($1,088,255) ($1,069,859)
Principal $242,859 $257,431 $272,876 $289,249 $306,604
$325,000
Ending Balance ($18,957,141) ($18,699,710) ($18,426,834)
($18,137,585) ($17,830,981) ($17,505,980)
Office Depot. (ODP)
7 May 2013
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Beta
We utilized Bloomberg Equity information to determine Office
Depot’s Raw Beta of
approximately 2.084. Office Depot is approximately 208.4%
riskier than the Market (S&P 500).
Office Depot. (ODP)
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Risk-Free Rate
The 10-Year Treasury Constant Maturity Rate has averaged
approximately 3.5% over the last

ten years. This rate will suffice as our risk-free rate within our
CAPM equation.
http://research.stlouisfed.org/fred2/graph/?s[1][id]=WGS10YR
http://research.stlouisfed.org/fred2/gra ph/?s%5b1%5d%5bid%5
d=WGS10YR
Office Depot. (ODP)
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Equity Risk Premium
According to Aswath Damodaran’s website, the average Equity
Risk Premium over the past five

years is approximately 5.75%. Investors have been demanding
a 5.75% premium when
deciding to invest in higher risk equities rather than risk-free
treasury bills.
Office Depot. (ODP)
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Capital Asset Pricing Model

Re = Rf + B(ERP)
Through FRED’s 10-Year Treasury Constant Maturity Rate, we
have calculated the Risk-Free
Rate to be 3.5%.
Re = 3.5% + B*(ERP)
After consulting Damodaran’s website, we have determined that
the average Equity Risk
Premium over the past five years is approximately 5.75%.
Re = 3.5% + B*(5.75%)
We utilized Bloomberg to derive a Raw Beta of 2.084.
Re = 3.5% + 2.084(5.75%)
Re = 15.48%
After-Tax Incremental Lease vs. Buy Analysis 2013 2014 2015
2016 2017 2018
Corporate Tax Bracket 35%
Required After-Tax Return on Corporate Equity Invested in
Real Estate 15.48%
Annual After-Tax Incremental Cash Flow to Owning
Depreciation Tax Shelter (TB * Dep.) $242,308 $242,308
$242,308 $242,308 $242,308 $242,308

Interest on an After-Tax Basis (Int * (1-TB)) ($748,800)
($739,328) ($729,289) ($718,647) ($707,366) ($695,408)
After-Tax Lease Payment SAVED (Lease * (1-TB)) $1,950,000
$1,998,750 $2,048,719 $2,099,937 $2,152,435 $2,206,246
Loan Principal Paid ($242,859) ($257,431) ($272,876)
($289,249) ($306,604) ($325,000)
Net Annual After-Tax Incremental Cash Flow to Owning
$1,200,649 $1,244,299 $1,288,861 $1,334,349 $1,380,773
$1,428,145
Ending After-Tax Incremental Cash Flow to Owning
$16,887,176
Net After-Tax Incremental Cash Flow to Owning $1,200,649
$1,244,299 $1,288,861 $1,334,349 $1,380,773 $18,315,321
Present Value of Incremental Ownership Cash Flows
$11,955,125
Purchase Price ($32,000,000)
Loan $19,200,000
Owner's Initial Equity Contribution ($12,800,000)
NPV of Incremental Decision to Own INSTEAD of Lease
($844,875)
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Comparable Area
In order to determine our comparable properties, we chose a
range of office and industrial
properties with a close proximity to Miami International
Airport. The yellow square above
displays the main target area of our search. We also further
refined our search to only include
properties built after 2000 and within 100,000 and 200,000
square feet.

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Comparable Office Rents
Office Building RBA/GLA
SF
Available Rent/SF/Year
Year
Built
A - Royal Palm Offices at Doral 122,000 23,553 21.00
1972/2007
B - Palmetto West Park Phase III 108,668 75,673 15.61 2007
C - 8333 Downtown Doral 150,000 51,431 20.00 2010

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Palmetto West Park Phase III seems to be the third phase of a
larger development where the
first two phases have been completely leased out. For some
reason this building is far from
fully leased and thus skews the comparable rents in this
submarket. For this reason we have
chosen an average rent that is closer to comparable properties A
and C, which results in a
weighted average rent of approximately $20.00 PSF.

(Tenant Improvements were not included as they would only
further progress the decision to rent).
Office Building Rent/SF/Year Weight
Royal Palm Offices at Doral 21.00 45%
Palmetto West Park Phase III 15.61 10%
8333 Downtown Doral 20.00 45%
Total $20.01 100%
Office Depot. (ODP)
7 May 2013
P a g e | 12
University of Miami
Net Absorption & Average Rent
Apparently, a substantial amount of office and industrial space

was delivered onto the market
surrounding the airport around 2010. After much of this space
was absorbed, the vacancy rate
for this submarket has remained around 14% for the last year.
Office rents have grown towards the upper $20’s range in this
submarket.
Office Depot. (ODP)
7 May 2013
P a g e | 14
University of Miami
Conclusion

Office Depot should choose to lease rather than buy the 150,000
square foot office building in
West Miami. This decision can be attributed to a combination
of fairly low rental rates, a high
cost of debt, as well as a high required cost of equity capital.
As displayed in the charts above,
buying does not become the appropriate course of action until
extreme assumptions are
extrapolated. For now, Office Depot should choose to rent.
After-Tax IRR on Decision to Own INSTEAD of Lease 2013
2014 2015 2016 2017 2018
After-Tax Owning Cash Flows: ($12,800,000) $1,200,649
$1,244,299 $1,288,861 $1,334,349 $1,380,773 $18,315,321
IRR on After-Tax Cash Flows 13.88%
Compare to Required Return on Equity Investment 15.48%
NPV
($844,875) $14 $17 $20 $23 $26
13.48% ($2,213,819) ($996,493) $220,834 $1,438,161
$2,655,488
14.48% ($2,694,557) ($1,510,854) ($327,152) $856,551

$2,040,254
15.48% ($3,147,950) ($1,996,412) ($844,875) $306,663
$1,458,200
16.48% ($3,575,797) ($2,455,047) ($1,334,297) ($213,547)
$907,204
17.48% ($3,979,766) ($2,888,501) ($1,797,235) ($705,970)
$385,296
Decision: More Likely to Lease
Rent Rate
Re
IRR
13.88% 4.00% 5.00% 6.00% 7.00% 8.00%
25.00% 16.63% 15.74% 14.83% 13.90% 12.94%
30.00% 16.02% 15.20% 14.36% 13.48% 12.59%
35.00% 15.41% 14.66% 13.88% 13.07% 12.24%
40.00% 14.80% 14.11% 13.40% 12.66% 11.90%
45.00% 14.19% 13.57% 12.92% 12.24% 11.55%
Rd
T
a
x

R
a
te
WAL_SOCW6121_09_A_EN-CC.mp4
Offering Memorandum Miami, FL
CUBE WYNWD
TABLE OF CONTENTS
INVESTMENT SUMMARY 3
BUSINESS PLAN 4
PROPERTY OVERVIEW 5
TENANT DETAILS 6
FLOORPLANS 7
FINANCIAL SUMMARY 9
NEIGHBORHOOD SUMMARY 17
WYNWOOD DEVELOPMENT MAP 20
MARKET COMPARABLES 21

NEIGHBORHOOD PHOTOS 23
MARKET OVERVIEW 24
SPONSOR OVERVIEW 25
PROPERTY OVERVIEW
5
Cube Wynwd consists of ~86k SF of rentable area on a lot of
14,625 SF. The Property is a few steps away from NW 2nd Ave,
Wynwood’s main
pedestrian/vehicular thoroughfare and retail corridor. 2nd Ave
is defining itself as the cultural center of Wynwood, attracting
visitors to The
Wynwood Walls, its many galleries, and the area’s unique
restaurants and bars. Some of the area’s most notable attractions
include The
Wynwood Walls, Panther Coffee, Coyo Taco, Wynwood Block,
The Wood Tavern, and Wynwood Kitchen & Bar, all located
within walking
distance of the Property, further supporting the retail foot
traffic and cache of the location. The architecture and landscape
of the Property is
inspired by the industrial style of Wynwood and subtropical
climate of the region. In keeping with Floridian style, Cube
Wynwd’s ground floor
features a 30-foot-wide passive breezeway, which runs the full
depth of the building and terminates in an open-air office lobby
with a nine-story
tall breeze block wall. The building maintains the classic design
aesthetic that has made Wynwood Miami’s epicenter for

creative, tech, media
and information office tenants. The Property also offers 130
offsite parking spots available to tenants, located on an ~16k SF
lot a few blocks
SE of the Cube, as well as valet parking.
The Property is ideally situated with easy access to major
expressways via I-95 and I-195 as well as proximity to other
key neighborhoods such
as Edgewater, Design District, MiMo and Downtown Miami.
Additionally, Cube Wynwood is just minutes away from Miami
Central train station,
home to the Brightline passenger train, MetroMover, Metrorail
and TriRail.
OFFICE SAMPLE FLOORPLAN
8
NEIGHBORHOOD SUMMARY
17
Wynwood’s remarkable growth and development over the past
ten years from a light industrial warehouse district to a thriving
arts, entertainment and retail district has attracted crowds of
locals and tourists alike.
Wynwood is centrally located minutes from Downtown Miami,
South Beach and The Design District, and enjoys excellent
regional access via I-95, I-395 and I-195. This combination of
strategic location and access was a key factor in the

neighborhood’s emergence.
18
Wynwood’s rapid evolution has been fueled by creatives and
entrepreneurs that have opened art galleries, restaurants, bars,
and shops that
have become institutions in the community. Wynwood has also
attracted droves of creative office users, driving activity in the
neighborhood
during work days. These pioneers have predominantly signed
leases in adaptive reuse buildings that provided small functional
spaces and
manageable economics relative to more mature submarkets such
as Brickell and South Beach. Wynwood is quickly becoming
Miami’s answer
to neighborhoods like Williamsburg in New York, West Loop in
Chicago, and Abbot Kinney in Los Angeles.
Wynwood’s next stage of evolution is being driven by large
scale vertical development of residential and office mixed-use
projects, with several
of these projects, such as Cube Wynwd, recently delivered and
others either under-construction or preparing to break ground
over the next 12
months. Wynwood is on track to welcome over 460 new
residential units and more than 760,000 square feet of office
space. These projects will
deliver increased density and transform the neighborhood into a
24-7 live, work, play community.
With a prime location in the neighborhood’s epicenter, the

Property is well positioned to capitalize on the growing
customer base and
subsequent demand for office, retail, and multifamily space in
this expanding neighborhood.
Wynwood’s neighborhood community center is the Wynwood
Walls, one of the largest commissioned mural programs in the
world located
along NW 2nd Avenue between NW 25th and NW 26th Streets.
The constantly evolving Walls first opened for Art Basel 2009
and have
included more than 50 artists from 16 countries. The Wynwood
Walls cover over 80,000 sf of mural space and have received
media coverage
from the New York Times, BBC News, Vanity Fair, and Forbes.
The Wynwood Doors opened in 2010 with 176 feet of roll -up
storefront gates
and the project further expanded in 2011 with additional murals
outside the original park known as Outside the Walls.
19
Wynwood was recently ranked by Forbes Magazine as one of
America’s Best Hipster Neighborhoods and was named one of
the Greatest Places
in America by the American Planning Association. The
neighborhood has become so popular that it has one of the most
sought-after demographics
for retailers around the world. As of the end of 2019 the
following data has been recorded:
Wynwood spans over 50 city blocks and is home to more than

400 businesses including art galleries, restaurants, boutique
shops and design studios,
all of which contribute to a local spending of $552 million
dollars every year by out-of-town visitors.
Wynwood capitalizes on word of mouth marketing through
social media. For every person that shares a picture in
Wynwood on social media, more
than 100 people will see it. Wynwood currently has 3.1M
hashtags on Instagram.
Daytime population expected to increase by 2,800 or more
based on the 197,000 square feet of office space under
construction.
Full-time population expected to increase by 1,206 based on
delivery of 464 units at a market average 2.6 persons per
household.
Wynwood Population Data:
• 10,000 – weekly population
• 30,000 – weekend population
• 4,500 – daytime employment
• 1.5M & Growing – visitors per quarter
Wynwood Market Data:
• New residential rental projects are exceeding $3 rents per
square foot
• Retail rents: 279 percent growth since 2011
• Average annual retail rent growth since 2011: 31 percent
20
WYNWOOD DEVELOPMENT MAP

OFFICE MARKET LEASE COMPARABLES
22
Building Name/ Address Landlord Year Built/Ren. Submarket
Tenant Square Feet Term Gross Rent
The Oasis Carpe Real Estate Partners 2020 Wynwood Spotify
18,354 130 $57.00
545 Wyn Sterling Bay 2020 Wynwood Gensler 13,456 129
$59.00
Wynwood Annex East End/Related 2019 Wynwood Live Nation
7,954 130 $57.00
Wynwood Garage Goldman Properties 2018 Wynwood WeWork
30,000 144 $54.00
The Cube Red Sky 2018 Wynwood Spaces* 24,000 132 $52.00
The Plaza Agave Holdings Under Construction Coral Gables
BAC Bank 65,000 144 $52.00
2850 Tigertail / 2850
Tigertail Ave. The Related Group 2021 Coconut Grove Ratzan
Law 6,200 126 $67.00
Cocowalk /
3015 Grand Ave Grassriver Properties 2020 Coconut Grove
Spaces* 40,000 128 $52.00
830 Brickell /
830 Brickell Ave. OKO and Cain 2022 Brickell None
701 Brickell /
701 Brickell Ave. Nuveen Real Estate 1985/2012 Brickell
MG&M 14,500 87 $65.00
Brickell World Plaza /
600 Brickell Elm Spring, Inc. 2011 Brickell Morgan Lewis
22,000 127 $60.00
Brickell World Plaza /
600 Brickell Elm Spring, Inc. 2011 Brickell I-Squared Capital

18,763 129 $60.00
801 Brickell Nuveen Real Estate 1986 Brickell Odyssey
Reinsurance 4,661 126 $61.00
801 Brickell Nuveen Real Estate 1986 Brickell CGI Merchant
Group 3,875 75 $60.00
Four Seasons /
1441 Brickell Jamestown, L.P. 2003 Brickell Summa 14,000 84
$62.00
Southeast Financial /
200 S. Biscayne Blvd Ponte Gadea USA, Inc. 1984 Downtown
Miami Rialto Capital 45,000 132 $52.00
The Optima Red Tower Inmobiliaria Brom 2013 Aventura law
firm 22,500 128 $54.00
One Turnberry Place /
19495 Biscayne Blvd. Triarch Capital Group, LLC. 1987/2002
Aventura Evan Brody CPA 12,500 124 $53.00
Brickell Arch Gaedeke 2004 Brickell Abanca Bank 6,423 84
$57.00
Brickell Arch Gaedeke 2004 Brickell Legg Mason 5,454 120
$56.00
Maximum $67.00
Minimum $52.00
Weighted Average $57.01
* Lease signed in 2018
Class A Office Lease Comparables - All Leases Signed in 2019
NEIGHBORHOOD PHOTOS
23
MIAMI MARKET OVERVIEW

24
Downtown Miami Population: 88,540
Population Density: 23,300/sq mile
Daytime Population: 234,976
Downtown Miami Households: 46,130
Miami-Dade County Population: 2,712,952
Total MSA Population 2015: 6,012,331
Average Age: 35
Median Household Income: $66,498
Total Visitors Annually 13,900,000
Median Length of Stay 5.7 nights
Average Party Size 2.03
Total Annual Visitor Spending $24.4 billion
Total Annual Economic Impact $36.6 billion
Known as the “Magic City,” Miami is an international hub of
cultural diversity
and world-class offerings. Miami is home to the largest
concentration of
international and domestic banks south of New York. This
global city has
more than 1,000 multi-national corporate office headquarters,
73 foreign
consulates, and 21 foreign trade offices. Miami International
Airport serves
more than 39 million passengers annually, making it the second
leading
gateway to the United States, behind only JFK Airport.

Miami has transformed from a leisure and vacation destination
to a city of
business, art, culture, and lifestyle. Neighborhoods including
Downtown,
Brickell, Wynwood, Design District, Edgewater, and Midtown
have emerged
and sculpted the city into the thriving metropolitan area it is
today.
Confi de ntial Offering Memorandum
107,304 SF Class A Office
1300 Sawgrass Corporate Parkway
Sunrise, Florida
SUNRISE
CORPORATE
PL AZA I
4
01
EXECUTIVE
SUMMARY

6
INVESTMENT SUMMARY
Address:
Sunrise, FL 33323
Building Size: 107,304 SF
Year Built: 1999
Land Area: 8.03 acres
Floors: 3
Parking: 4.8/1,000
Occupancy: 95%
In-Place NOI: ±$1,840,000
WALT: 6.3+ Years
Cushman & Wakefield of Florida, LLC has been retained as the
exclusive
advisor for the disposition of Sunrise Corporate Plaza I (the
“Property”),
a 107,304 SF, three-story Class A office building located in
Sunrise, FL
within the renowned Sawgrass International Corporate Park, one
of South

Florida’s largest corporate office parks and the premier option
for regional,
national and international organizations seeking high quality
office space in
Broward County. Developed in 1999 by the Opus Group and
institutionally
owned and maintained since, Sunrise Corporate Plaza I is one of
Sawgrass
International Corporate Park’s premier office properties,
attracting tenants
with a superior 4.8 / 1,000 SF parking ratio, hurricane impact
windows, full-
building generator and expansive lakefront views. These Class
A features,
combined with the Property’s tremendous highway connectivity,
has
resulted in an impressive 93.6% average occupancy since the
Property
was delivered in 1999.
THE OFFERING
7EXECUTIVE SUMMARY | 7
At 95% occupancy with the three largest tenants signed through
2026,
Sunrise Corporate Plaza I represents a tremendous opportunity

to
acquire secured long-term cash flows while marking-to-market
rents
that are 13% below market on average. The diverse rent roll
represents
a wide range of industries and is anchored by Team Focus
Insurance
Group (35.2% of RBA), a top-rated property and residential
insurance
company who has called South Florida home for over forty
years and
has housed their corporate headquarters at Sunrise Corporate
Plaza I
since 2005 .
Sunrise Corporate Plaza I’s convenient location provides access
to
almost the entirety of South Florida via connections to the
Sawgrass
Expressway to the west, I-95 and Florida’s Turnpike to the east,
and
I-595 to the south. This unparalleled connectivity to the tri -
county area
allows 90% (5.9M people) of South Florida’s population to be
within

a one-hour drive of the property, providing tenants with a wide
talent
base.
Newer housing supply, strong school systems, and market
leading
amenities have made Sunrise an ideal location for families and
businesses to flourish. These positive factors have attracted
multiple
international credit companies to the Sawgrass International
Corporate
Park, including American Express, HBO, Ford, AT&T, JP
Morgan Chase,
New York Life, Xerox, Equity Residential, and TicketMaster.
This inflow
of major corporations, combined with a lack of new office
supply, has
resulted in an average occupancy of 92% and a 19% growth in
base rents
over the last five years, both outperforming West Broward
submarket
and Broward County as a whole.
“ The City of Sunrise has become one of
South Florida’s economic powerhouses”

— Business View Magazine
10
BEAUTIFUL PANORAMIC LAKE VIEWS WITH
AN ATTRACTIVE OUTDOOR COURTYARD
WELL POSITIONED PROPERTY
SUPERIOR 4.8/ 1,000 SF PARKING RATIO
Ô As one of the highest parking ratios in the submarket,
the Property can accommodate tenants of nearly
any size and parking requirement
Ô Tenants in strategic, transportation-oriented
locations like Sawgrass International Corporate
Park typically seek efficiency and generally more
dense space planning
Ô The Class A competitive set averages 4.4/1,000
parking ratio, proving a competitive advantage for
the Property
HIGHLY SOUGHT-AFTER PRODUCT TYPE
Ô Open floorplans can be easily subdivided to
accommodate multiple tenants, allowing ownership
the ability to meet most tenant requirements
Ô Institutionally owned and maintained, the Property
attracts top-tier tenancy and requires limited capital

Ô Hurricane impact glass and a full-electrical redundancy
Ô Large, flexible floorplates provide a myriad of options
for tenants
Originally developed by Stiles Construction, Sawgrass
International Corporate Park (the “Park”) is a 612-acre master
planned office park with
excellent highway visibility which is strategically bound by the
Sawgrass Expressway, Interstate-75 and Interstate-595 in
Sunrise, FL.
Ô The Park consists of over 3 million square feet of office and
industrial space and enjoys a plethora of nearby amenities that
continue to
multiply as western Broward County experiences increased
residential densification
Ô Fort Lauderdale-Hollywood and Miami International
Airports are both easily accessed within a 35-minute drive
Ô American Express consolidated over 3,000 employees from
their Weston and Plantation offices into the new 400,000 SF
regional
headquarters in 2017
Ô Weston-based Ultimate Software moved into an entire
100,710 SF building in the Park in 2019

Ô Strong institutional ownership base, which include: Banyan
Street Capital, Barrings, Foundry Commercial, Lincoln Property
Company,
Starwood Capital, Stiles Realty, TA Realty, Trinity Capital
Advisors, Vanderbilt Partners and Workspace Property Trust
teamed with some of
the country’s largest pension fund advisors, life insurance
companies and other institutional equity sources.
SOUTH FLORIDA’S PREMIER OFFICE PARK
12
SAWGRASS INTERNATIONAL CORPORATE PARK
SUBMARKET HIGHLIGHTS
§̈¦95
§̈¦95
£¤1
£¤1
£¤98
£¤441
§̈¦75
§̈¦595

£¤1
PALM BEACH COUNTY
BROWARD COUNTY
West Palm
Beach
Boca
Raton
Royal
Palm Beach
Fort
Lauderdale
£¤27
MIAMI-DADE
COUNTY
Miami
Hialeah
Kendall
Hollywood
Pompano
Beach

Coral
Springs
Delray
Beach
Boynton
Beach
Wellington
Plantation
Palm Beach
Gardens
Jupiter
Weston
Pembroke Pines
Tamiami
Drive Times
0 - 15 Minutes
15 - 30 Minutes
30 - 60 Minutes
Ô Sawgrass International Corporate Park historically has one of
the
lowest submarket vacancies in Broward County (6.4% in the last
three years) and currently sits at 7.9% vacancy

Ô No new supply since 2008
SAWGRASS CORPORATE PARK
MICRO MARKET
WEST BROWARD SUBMARKET
7,347,542
MSF TOTAL OFFICE INVENTORY
10.2%
Q3 VACANCY
145,983 SF
UNDER CONSTRUCTION
3,923,804
7.9%
Q3 VACANCY
0 SF
UNDER CONSTRUCTION
695K SF ABSORBED SINCE 2010
28%
RENT GROWTH
SINCE 2010
26%
RENT GROWTH
SINCE 2010

89%
5-YEAR AVERAGE
OCCUPANCY
94%
5-YEAR AVERAGE
OCCUPANCY
0%
5%
10%
15%
20%
25%
30%
35%
40%
$20
$25
$30

$35
$40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2019 2020
Q3
Vacancy
Gross Rent
0%
5%
10%
15%
20%
25%
30%
35%
40%
$20
$25
$30

$35
$40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2019 2020
Q3
Vacancy
Gross Rent
Ô With no new supply and strong absorption, gross rents have
increased 33% in the past three years
Ô The Park has 75% of the inventory of the Fort Lauderdale
CBD
LOCATION HIGHLIGHTS
FAVORABLE SUNRISE DEMOGRAPHICS
South Florida’s Most Central Location
SURROUNDING
COMMUNITIES
SOUTH
FLORIDA
HOME VALUE

BACHELOR’S
DEGREE
HOUSEHOLD
INCOME
$337K-$481K $312K
37%-61% 32%
$91K-$135K $77K
The Property is located in the heart of the Sunrise office
submarket.
Surrounding communities offer superior household
demographics and
home values, which helps draw credit tenancy to Sawgrass
International
Corporate Park. Access to major roadways allows 90% (5.9M
people) of
South Florida’s population to be within a one hour drive of the
property.
§̈¦95
§̈¦95
£¤1
£¤1
£¤98

£¤441
§̈¦75
§̈¦595
£¤1
PALM BEACH COUNTY
BROWARD COUNTY
West Palm
Beach
Boca
Raton
Royal
Palm Beach
Fort
Lauderdale
£¤27
MIAMI-DADE
COUNTY
Miami
Hialeah

Kendall
Hollywood
Pompano
Beach
Coral
Springs
Delray
Beach
Boynton
Beach
Wellington
Plantation
Palm Beach
Gardens
Jupiter
Weston
Pembroke Pines
Tamiami
Drive Times
0 - 15 Minutes
15 - 30 Minutes

30 - 60 Minutes
Drive Time Areas
0-15 Minutes
15-30 Minutes
30-60 Minutes
SUNRISE
CORPORATE
PL AZA I
14
Everglades WildlifeEverglades Wildlife
112
,5
0
0
V
P
D
112
,5
0

0
V
P
D
9,400
MULTI-FAMILY UNITS
WITHIN A 5-MILE RADIUS
2.4 MSF
OF LUXURY RETAIL
AT SAWGRASS MILLS
UNPARALLELED AMENITY BASE
Saw
grass Expy (120,050 V
PD
)
Saw
grass Expy (120,050 V
PD
)
UNMATCHED ACCESS & LOCATION
100K+
CARS PER DAY
5.9 MILLION
PEOPLE WITHIN 1 HOUR

HIGHWAY ACCESS
I n te r n at i o n a l P kwy
I n te r n at i o n a l P kwy
SUNRISE 2.4 MSF OF RETAIL INCLUDING
350 SHOPPING AND DINING OPTIONS
SUNRISE
CORPORATE
PL AZA I
16
02
PROPERTY
OVERVIEW
18
SITE PLAN
SU

N
RISE CO
RPO
RATE PA
RKW
AY
SUN
RIS
E C
OR
PO
RAT
E
PLA
ZA
I
19PROPERTY OVERVIEW | 19
MARKHAM PARK
Sawgrass Corporate Pkwy.Sawgrass Corporate Pkwy.
129,000 VPD129,000 VPD

120,050 VPD
120,050 VPD
20
Address:
Sunrise, FL 33323
Year Built: 1999
Acres: 7.33
Rentable SF:
107,304;
Upon rollover, there lies the ability to
recapture a total of 442 SF on the first
and second floor per BOMA remeasurements
Zoning: I-1 - Light Industrial
Number of Floors: 3
Tax Parcel ID Number: 49-40-34-02-0045
2020 RE Tax
Assessments:
Last Assessed Value: $18,779,120
Ad Valorem Taxes: $371,496

Non Ad Valorem Taxes: $19,650
Total Taxes: $391,146
Tax Rate Ad Valorem (per $1000.00): $19.7824
*Note: Assessment is based on 2020 TRIM Notice if no budget
change is made
Parking:
4.8/1,000 (surface). In addition to ample surface parking, there
are 13 covered spaces, 12 of which are leased at no cost
to: Team Focus Insurance Group: 8; Smith Transportation: 2,
and Benefytt Technologies: 2. 1 space is currently leased to
Jon B. Sage for $125/month
BUILDING INFORMATION
Structure:
Continuous perimeter reinforced concrete spread footings with a
reinforced concrete slab-on-grade and interior
isolated spread footings supporting steel columns. Structural
framing consists of steel columns and framing with pre-
cast concrete panels
Windows: Hurricane impact
Roof: The original building roof consists of a modified bitumen
roofing system
Exterior Walls:
The exterior walls are a combination of unpainted pre-cast

smooth faced concrete panels, exposed aggregate faced
pre-cast concrete panels, and decorative quarry tile inserts
Ceilings:
Finished: 9 feet
Slab-to-Slab: 13 feet
Elevators: Three, Dover manufactured hydraulic passenger
elevators serving floors 1-3
Fire & Life Safety:
Automatic wet-type fire sprinkler system provided by a 40-HP,
500 GPM, fire sprinkler booster pump. The building is
also equipped with a Cerberus Pyrotronics fire alarm panel
Electricity: Florida Power & Light (FPL)
Water & Sewer: City of Sunrise
HVAC:
Three, 130-ton roof top units
Unit: RTU 1 RTU 2 RTU 3
Type: Trane Trane Trane
Installed: 2019 2020 2018
Warranty: 5-Year Parts Only 5-Year Parts & Labor 5-Year Parts
& Labor

26
40
HISTORICAL
AND PRO FORMA EXPENSES
2017 2018 2019 PRO FORMA
TOTAL $ $/PSF TOTAL $ $/PSF TOTAL $ $/PSF TOTAL $
$/PSF
EXPENSES (1)
REAL ESTATE TAXES (2) $374,037 $3.48 $393,621 $3.66
$379,715 $3.63 $375,500 $3.49
INSURANCE $86,550 $0.80 $97,555 $0.91 $99,210 $0.92
$101,690 $0.95
MANAGEMENT FEES (3) $94,229 $0.88 $81,195 $0.76
$66,106 $0.61 $94,233 $0.88
REPAIRS & MAINTENANCE (4) $323,945 $3.01 $306,751

$2.85 $282,406 $2.63 $289,466 $2.69
ELECTRIC $265,528 $2.47 $237,530 $2.21 $219,933 $2.05
$225,431 $2.10
WATER & SEWER $27,023 $0.25 $26,659 $0.25 $25,451
$0.24 $26,087 $0.24
TRASH REMOVAL $25,615 $0.24 $26,136 $0.24 $26,484
$0.25 $27,146 $0.25
CLEANING $124,466 $1.16 $97,769 $0.91 $83,460 $0.78
$85,547 $0.80
ADMINISTRATIVE $38,979 $0.36 $37,641 $0.35 $42,199
$0.39 $43,254 $0.40
OWNERS ASSOCIATION DUES $17,235 $0.16 $21,324
$0.20 $19,066 $0.18 $19,543 $0.18
TOTAL EXPENSES $1,377,607 $12.81 $1,326,181 $12.33
$1,244,030 $11.66 $1,287,897 $12.00
Notes:
(1) Pro Forma Expenses are based on 2019 expenses grown
2.5%, except where noted
(2) Pro Forma RE Taxes hare based on the 2020 TRIM Notice,
discounted 4% for early payment. It is the responsibility of the
buyer to calculate the increase, if any,
that would occur upon sale
(3) Pro Forma Management Fees are based on 3% of projected
gross revenue
(4) R&M includes ~$55,000/year for a building engineer in
2017-2018, reduced to ~$35,000/year thereafter

FINANCIAL INFORMATION // HISTORICAL OPERATING
EXPENSES
42
05
MARKET
OVERVIEW
44
Broward County is the
second most populous area in the state
Broward County is located in Southeast Florida and is bordered
by the
Atlantic Ocean to the east, the Everglades to the west, and Palm
Beach
and Miami-Dade Counties to the north and south. It is easily
accessible
via Interstate-95, Interstate-75 and the Florida Turnpike, three
primary
north/south freeways within South Florida. Other major
thoroughfares
in the county include the Sawgrass Expressway and Interstate-
595,
which connect western Broward County with the eastern
portions of the
county. Transportation is facilitated by countless miles of
waterways, an

international airport, three local airports, and a well -trafficked
seaport.
The county covers a total area of 1,320 square miles, including
1,205
square miles of land, 65% of which is conservation area, and
115 square
miles of water. There are 31 incorporated cities within Broward
County,
many of which have experienced substantial growth over the
last
two decades. Recent trends indicate major growth towards
western
Broward County from the populated metro areas of eastern
Broward
and Miami-Dade Counties, and the resurgence of the downtown
areas
of Fort Lauderdale and Hollywood into 24-hour cities. Broward
offers
BROWARD COUNTY OVERVIEW
23 miles of Atlantic Ocean coastline, an average annual
temperature of
76 degrees, and a comfortable lifestyle attracting residents,
businesses
and visitors.
ECONOMY
Broward County had a 9.2% unemployment rate as of August
2020,
down 570 basis points from the peak in May and showing strong
signs
of recovery. Prior to COVID-19, Broward enjoyed one of the
lowest
unemployment rates in the nation at just 2.9%. Every major
employment

sector forfeited jobs over the year with roughly half of the
losses coming
from the leisure & hospitality sector. In the third quarter of
2020, the
US economy saw major improvements coming out of
government
mandated shutdowns and shelter in place ordinances. Florida
recently
entered Phase 3 in reopening the state, further bolstering
economic
activity by lifting all restrictions on businesses statewide. The
situation
remains fluid, but indicators point to an above average recovery
rate for
South Florida.
45MARKET OVERVIEW | 45
TRANSPORTATION
Broward County is a gateway to the world, connected by a vast
transportation network of airports, railways, roadways and a
seaport.
By land, by air, or by sea, the Broward County infrastructure is
under
constant improvement and expansion to accommodate the long-
term
growth in population projected for this part of Florida. Broward
County
is the only place in the country where an international airport,
seaport,
railways and a massive network of super-highways come
together in an
area less than 1.5 miles in diameter.

From Fort Lauderdale-Hollywood International Airport,
travelers can
fly non-stop to over 55 cities in the United States and 40
international
destinations. The airport serves 36 scheduled airlines, eight
commuter
operators, and 20 cargo carriers. The airport sprawls over two
square
miles and handles over 21 million passengers and 175,000 tons
of cargo per year. It lies near Port Everglades and offers
shippers
convenient access to the port’s free-trade zone. About 930
domestic
and international flights operate from the airport daily,
including both
commercial and private flights. As one of the fastest growing
airports
in the U.S., passenger traffic is expected to reach 25 million by
2015.
With an eye toward the future, the county implemented a master
plan
to guide the development of future airport facilities to
accommodate
the airport’s growth, and recently completed a $650 million
capital
program, which delivered new and improved access and
passenger
terminal facilities to the airport.
Port Everglades is a thriving 2,190-acre seaport located within
the three
cities of Hollywood, Fort Lauderdale, and Dania Beach. It is
located on
U.S. Highway 1 near I-95 and I-595, offering convenient access
to all

other major expressways that serve Broward County. Activity at
the
port has grown impressively through the years, with over 3.2
million
cruise passengers and more than 5.6 million tons of container
cargo
moving through the port annually. Not only is it the world’s
third busiest
cruise port, but it impacts more than 201,000 Florida jobs as a
leading
container port.
3.2 Million Cruise Passengers &
5.6 Million Tons of Cargo Per YearFt. Lauderdale Int'l Airport
Port Everglades
36 Million Passengers &
175,000 Tons of Cargo per year
46
F
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SAWG R ASS SAWG R ASS
I N T E R N AT I O N A L I N T E R N AT I O N A L
CO R P O R AT E CO R P O R AT E
PA R KPA R K
61 2 AC R E S O F
O F F I C E / I N D U ST R I A L
SAWG R AS S SAWG R AS S
M I L L S M A L LM I L L S M A L L
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Sunrise Blvd (42,000 VPD)Sunrise Blvd (42,000 VPD)
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(123,500 VPD)
(123,500 VPD)
SUNRISE
CORPORATE
PL AZA I
Ô Mixed-use master-planned 65-acre, $1.5 billion high street
project

Ô Will be one of the nation’s largest under-construction mixed-
use communities
Ô Features 2,250 residential condominiums within its eight
residential towers,
650,000 square feet of office space, and its own Central Park
Ô Developed by KGH International Development
Ô 29.4 acres of land to be developed by GL Homes and its GL
Commercial division
Ô Entitled for 750 multifamily units and 50,000 square feet of
commercial/retail
Ô Looking to attract one or two anchor tenants before breaking
ground
Ô Redevelopment of the BB&T Center and surrounding parking
lots will add office,
residential, hotel, entertainment and retail venues
Ô A ULI study recommended a development plan with up to
1,400 apartments,
180,000 square feet of entertainment, 840 hotel rooms, 1.1
million square feet
of offices, and a resort
Ô Sports field with stormwater storage, wetlands and a
pedestrian path with
a plaza connecting the site to Sawgrass Mills
Ô Developed by CallisonRTKL
METROPICA

RADIUS AT SAWGRASS
BB&T CENTER REDEVELOPMENT
1
2
3
PROXIMATE TO TRANSFORMATIVE DEVELOPMENTS
48
TRENDS BEING ACCELERATED
WORKING FROM HOME
• In 2018, approximately 3.6% of U.S. workers spent more than
half of
their time working remotely. Many businesses had not been
overly
progressive in pursuing distributed workforce plans.
COST SAVINGS
• The COVID-19-driven recession will sharpen the focus on cost
containment as well as creating new strategies for how best to
utilize office space.
• The cost-cutting priorities will need to be balanced, however,
with
the human resources and business leadership demands to ensure
workers continue to feel part of their company’s culture, feel

connected personally with colleagues, and are equipped with
space
that inspires creativity, innovation and collaboration.
RETURN OF THE SUBURBS
• The suburbs are being reformed in the image of the dense,
walkable,
live-work-play environments that city centers embody. A
commonly
recognized driver of urban growth and renewal—the
Millennials—
have been exiting the CBD for a few years now. Affordability of
housing and availability of school options have been a draw that
has made Millennials the largest homebuying generation for the
past few years, and the majority of homes they purchase are in
the
suburbs, while only 15% are in the city center.
• Last year, the suburbs accounted for 69% of net absorption
and the
first quarter of 2020 saw almost all positive net absorption
occur
in the suburbs. This is a reversal of 2017 and 2018, and pre-
Covid,
attributed to millenials moving to the suburbs to start families.
• This trend was being driven by the relative affordability of
space,
the improvement in urbanized nodes of mixed-use developments
with high-quality office space, and the demands of the
workforce.
The health and safety concerns of COVID-19 are causing
workers
and employers to reconsider the location strategy of their
portfolio.

The hub and spoke model, with office space in the CBD and in
suburban outposts, could be a benefit to employees.
WORKPLACE TRENDS
U.S. Class A Net Absorption by Year,
Square Footage per O�ce Employee, U.S.
Suburban percentage
Source: Cushman & Wakefield Research
0%
20%
40%
60%
80%
100%
2014 2015 2016 2017 2018 2019 2020 Q1
Suburban (%) YTD
In 2017 & 2018,
over two-
thirds of Class
A absorption
was in CBD
submarkets.

2009 Q3,
212.3
2019 Q4,
192.7
190
195
200
205
210
215
20
08
Q
1
20
09
Q
1
20
10
Q

1
20
11
Q
1
20
12
Q
1
20
13
Q
1
20
14
Q
1
20
15
Q
1
20
16
Q

1
20
17
Q
1
20
18
Q
1
20
19
Q
1
MARKET OVERVIEW
TRENDS BEING REVERSED
DENSIFICATION OF OFFICE
• The best office layouts always incorporated a spectr um of
workspaces to be utilized for different types of work (i.e., focus
vs.
social vs. collaboration vs. meeting, etc.). However, the
movement
towards more dense office space had certainly become a reality.

The average square footage per office worker decreased by
9.2%
between Q3 2009 and the end of 2019. This trend is no longer.
De-
densification is now occuring and expected to accelerate even
post-
Covid-19 as office users demand safe distancing and more
traditional
private office configurations.
U.S. Class A Net Absorption by Year,
Square Footage per O�ce Employee, U.S.
Suburban percentage
0%
20%
40%
60%
80%
100%
2014 2015 2016 2017 2018 2019 2020 Q1
Suburban (%) YTD
In 2017 & 2018,
over two-
thirds of Class

A absorption
was in CBD
submarkets.
2009 Q3,
212.3
2019 Q4,
192.7
190
195
200
205
210
215
20
08
Q
1
20
09
Q
1

20
10
Q
1
20
11
Q
1
20
12
Q
1
20
13
Q
1
20
14
Q
1
20
15
Q
1

20
16
Q
1
20
17
Q
1
20
18
Q
1
20
19
Q
1
TRANSPORTATION AND COMMUTING
• Even though most U.S. workers commuted via cars and public
transportation ridership remained stagnant in a pre-COVID-19
world,
there continued to be a premium for office buildings located
close
to public transportation. This is true in large gateway CBDs as
well
as historically car-centric markets.
• In a post-COVID-19 world, however, commuters reentering

their workplace are going to be more reticent to utilize public
transportation and ridesharing. In China, as reentry was
occurring
in March, only a third of public transportation users were using
their
original mode of transportation, while 40% had shifted to motor
vehicles and the rest to walking or biking. Even if these trends
remain at only half these levels, there will be reverberations in
how
people get around and where employers want or need to be for
their employees to access the office easily and safely.
MARKET OVERVIEW
50
Strong Fundamentals Lead to Strong Rent Growth
SAWGRASS CORPORATE PARK
MICRO MARKET
WEST BROWARD SUBMARKET
7,347,542
10.2%
Q3 VACANCY
145,983 SF
UNDER CONSTRUCTION
3,923,804

7.9%
Q3 VACANCY
0 SF
UNDER CONSTRUCTION
28%
RENT GROWTH
SINCE 2010
26%
RENT GROWTH
SINCE 2010
89%
5-YEAR AVERAGE
OCCUPANCY
94%
5-YEAR AVERAGE
OCCUPANCY
0%
5%
10%

15%
20%
25%
30%
35%
40%
$20
$25
$30
$35
$40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2019 2020
Q3
Vacancy
Gross Rent
0%
5%
10%

15%
20%
25%
30%
35%
40%
$20
$25
$30
$35
$40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2019 2020
Q3
Vacancy
Gross Rent
MARKET OVERVIEW
SUBMARKET # OF BUILDINGS INVENTORY
DIRECT

AVAILABLE
SPACE
SUBLEASE
AVAILABLE
SPACE
DIRECT VACANCY
RATE
DIRECT WTD.
AVG. RENTAL
RATES
YTD LEASING
ACTIVITY
UNDER
CONSTRUCTION
Ft. Lauderdale CBD 42 5,349,612 761,819 73,728 14.20%
$43.01 125,462 312,338
Suburban Broward County 321 22,751,004 2,549,882 220,073
11.20% $30.78 685,526 725,210
Cypress Creek/Commercial 85 6,249,100 804,013 118,681
12.90% $28.57 208,869 0
Hollywood/Hallandale 39 2,964,173 408,821 16,433 13.80%
$31.82 99,906 429,227
WEST BROWARD 91 7,347,542 753,072 57,433 10.20% $32.38
187,370 145,983

Sunrise 36 3,161,135 264,093 40,095 8.40% $32.36 72,213 0
Plantation 40 3,348,944 388,148 17,338 11.60% $31.84 101,416
145,983
Weston 15 837,463 100,831 0 12.00% $33.78 13,741 0
NORTHEAST BROWARD 38 1,766,644 173,872 5,333 9.80%
$26.57 47,753 150,000
Pompano Beach 17 665,953 98,221 2,000 14.70% $24.77 33,651
150,000
Deerfield Beach 21 1,100,691 75,651 3,333 6.90% $28.91
14,102 0
SOUTHWEST BROWARD 39 2,916,139 285,707 22,193 9.80%
$35.65 118,507 0
*Pembroke Pines/Cooper City 16 868,535 134,193 0 15.50%
$33.87 78,822 0
Miramar 23 2,047,604 151,514 22,193 7.40% $37.06 39,685 0
NORTHWEST BROWARD 29 1,507,406 124,397 0 8.30%
$28.05 23,121 0
Coral Springs 21 1,178,839 114,519 0 9.70% $29.08 19,638 0
Tamarac/Margate 8 328,567 9,878 0 3.00% $16.26 3,483 0
BROWARD TOTALS 363 28,100,616 3,311,701 293,801
11.80% $33.85 810,988 1,037,548
BROWARD COUNTY OFFICE STATISTICS 2020 Q3

MARKET OVERVIEW
52
COMPETIVE SET
SUNRISE CORPORATE PLAZA I SAWGRASS LAKE
CENTER LAKE SHORE PLAZA II
Address
1300 Sawgrass Corporate Pkwy
Sunrise, FL
13450 W Sunrise Blvd
Sunrise, FL
1300 Concord Ter
Sunrise, FL
Year Built 1999 2000 2008
Building Size 107,304 239,373 128,470
Occupancy 95.4% 88.4% 68.9%
Asking Rate $22.00 - $23.00 NNN $24.50 - $25.00 NNN $24.50
NNN
Parking Ratio 4.8/1,000 (surface) 4.7/1,000 (structured)
4.4/1,000 (surface)
Stories 3 6 5

Floorplates ± 32,000 SF ± 40,000 SF ± 26,000 SF
COMPETIVE SET
1551 SAWGRASS CENTRE 1560 SAWGRASS CENTRE LAKE
SHORE PLAZA
Address
1551 Sawgrass Corporate Pky
Sunrise, FL
1560 Sawgrass Corp Pky
Sunrise, FL
1301 International Pkwy
Sunrise, FL
Year Built 1997 2000 2006
Building Size 92,243 93,631 140,160
Occupancy 100% 97.3% 98.0%
Asking Rate $23.50 NNN $23.50 NNN $23.00 NNN
Parking Ratio 4.7/1,000 (surface) 4.4/1,000 (surface) 4.0/1,000
(surface)
Stories 4 4 5
Floorplates ± 26,000 SF ± 23,000 SF ± 28,000 SF

54
COMPARABLE OFFICE SALES
SAWGRASS VILLAGE SAWGRASS CENTRE PORFOLIO
CORPORATE CENTER II
Address
789-799 International Pky
Sunrise, FL
1550-1601 Sawgrass Corporate Pky
Sunrise, FL
Sunrise, FL
Sale Date November-19 October-19 March-19
Price $32,650,000 $80,250,000 $20,800,000
Building SF 112,456 348,891 91,221
$ PSF $290 $230 $228
Cap Rate 5.90% 5.10% 7.64%
Occupancy 100% 94% 98%
Year Built 1999 1997-1999 1998
Buyer MG3 Brookdale Vanderbilt JV Barron Colliers

Seller RREEF M-M Properties UBS
Parking 4.9/1,000 (surface) 4.5/1,000 (surface) 4.4/1,000
(surface)
COMPARABLE OFFICE SALES
SAWGRASS POINTE II BALFOUR BEATTY CENTER
SAWGRASS LAKE CENTER
Address
Sunrise, FL
7901 SW 6th Ct
Plantation, FL
13450 W Sunrise Blvd
Sunrise, FL
Sale Date September-18 July-18 March-18
Price $27,250,000 $18,500,000 $57,400,000
Building SF 92,362 79,719 239,373
$ PSF $295 $232 $240
Cap Rate 7.34% 6.50% 5.90%
Occupancy 100% 87% 80%

Year Built 2008 2001 2000
Buyer Barron Collier Companies Green Companies
ARA/Foundry
Seller Starwood Capital Group TA Realty Long Wharf RE
Partners/Foundry
Parking 4.5/1,000 (surface) 4.0/1,000 (surface) 4.7/1,000
(structured)
FIN 445/645 Lease vs. Buy Mini Case
Spring 2021
Due by midnight, Monday May 3, 2021: Email a pdf to
[email protected].
Grad students must do this alone. Undergrads who want to
improve their course grade should do this alone. Other
undergrads can do this in groups of three MAX. You can stay in
the same group as for the first project or you can switch.
1. Pick a U.S. based[footnoteRef:1] publicly traded corporation
that has a presence here or might be thinking about opening an
office in this market. [1: If you would like to do a foreign firm
you can as long as it is publicly traded. You will need to have a
Bloomberg account to get all the relevant information. If you
don’t have one I will send you the information to sign up for
one. Let me know.. ]
2. Send me an email with your choice of firm and wait for me to
tell you it is okay… Only one person or group per firm, first
request wins the firm.
3. The firm should be big enough to be considering leasing
either 107,000 s.f. of office space in Sunrise Corporate Park in
Broward County or 82,500 s.f. in Wynwood. The Wynwood site
does have ground floor retail, assume a firm that purchased that

site would use that space as office space. Parts of the Offering
Memoranda for each property are posted on the Blackboard site
and you should go and look through both of them before you get
much farther in your reading of this assignment. Obviously
these are two very different office sites and the location and the
type of building will enter into your decision. You have to do
some very careful thinking to choose a combination of firm and
site: justify your choice of firm with at least three reasons,
given what you see in the offering memorandum posted on
Blackboard. 10 points
a. Once you find the firm, estimate its cost of debt by finding
its credit rating and using the Aaa and Baa bond yields from
the FRED website that are in the notes for the week of April
5th.5 Points
b. Once you find the firm, get its beta from Yahoo finance.
c. Carefully explain your assumptions for the cost of debt and
each of the three components of the CAPM model.
d. Compute the required return on equity using CAPM 10 Points
5. Estimate a loan to value ratio for a lender that would make
the loan based on the credit quality of the firm you pick.
Assume the loan is amortized over 30 years. Use the
information on the credit market sheet from JLL. Explain your
assumption. 5 Points
6. Estimate the land value of the property you have chosen to
study. The Sunrise site is on 7 acres of land, the Wynwood site
is on 14,625 s.f. of land. You can find comparable properties for
either site by searching on line. Identify the information you
used to estimate the land value and explain your assumptions on
the land valuation. 10 Points
7. You need to assume a triple net lease rate for the Sunrise
site or a gross lease rate for the Wynwood site, (and then
assume reimbursable expenses are $15 a foot). Use the
information on lease comps in each offering memorandum to
make your assumptions. Explain your logic. Do not average
lease rates from the comps, use a weighted average based on
similarity to the target property. Also, do not rely heavily on

lease comps that are far from the subject property for either
site. 5 Points
8. You need to assume an annual average appreciation rate
you think is justified going forward 15 years and a risk premium
that you will add to the discount rate to find the present value
of the reversion cash flows. Explain your decisions on the
appreciation rate and the risk premium. Do not be overly
optimistic on your appreciation rate, it is a really important
assumption and you can let your optimism show in sensitivity
analysis if you want to. 10 Points
9.You will also need to estimate an acquisition price for the
Sunrise site if you pick that site. Use the recent sales comps in
the Offering Memorandum and explain your logic. Assume the
property can be purchased for $40,000,000 if you choose the
Wynwood site. Also, the Wynwood Offering Memorandum has
gross lease rates for the lease comps, not triple net lease rates,
so assume that reimbursable expenses are $15 p.s.f.
Complete the lease vs. buy analysis. Use the firm’s debt cost as
the borrowing rate for an amortized loan. Use 21% as your tax
rate in one analysis and then repeat the analysis using a 28% tax
rate. You can use my spreadsheet or one of your own. This is
great practice for the final. 10 Points
10. Summarize your analysis and make a recommendation to
the target firm as to whether they should lease or buy. (Put the
recommendation, the key assumptions and the main points of
your analysis on a nice cover page as an executive summary.)
Then present the mathematical analysis, explaining your steps
as you go. Cover = 10 Points
11. You don’t have to do any sensitivity analysis unless you
want to, (BIG brownie points for this though…) but you do have
to comment (5 Points for the comments) on whether or not you
think your decision is very unstable, or whether you are very
confident in your choice, and explain why… If you choose to
add the sensitivity analysis it can be on an assumption by
assumption basis using goal seek, best and worst case scenarios,
and a data sensitivity table or two. Explain your assumptions

here.
12. The analysis has to be printed, in presentation form, when
you turn it in. Presentation counts for 20% of the grade. Of this,
the writing style, (concise, impersonal, professional, etc.) is 10
Points

1 Lease vs. Buy Mini Case Darden Restaurants Inc.

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