Offering Memorandum. Walmart Neighborhood Market (Ground Lease) Highland Knolls Drive Katy, TX Representative Photo

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Representative Photo Walmart Neighborhood Market (Ground Lease) 20903 Highland Knolls Drive Katy, TX 77450

1 Representative Photo Walmart Neighborhood Market (Ground Lease) Highland Knolls Drive Katy, TX Offering Memorandum THE NET LEASE AUTHORITY Atlanta Chicago Houston Los Angeles New York Phoenix San Francisco Tulsa

2 Confidential Disclaimer This Confidential Memorandum has been prepared by Stan Johnson Company ( SJC ) and is being furnished to you solely for the purpose of your review of the commercial property located at Highland Knolls Drive, TX (the Property ). The material contained in this Offering Memorandum shall be used for the purposes of evaluating the Property for acquisition and shall not be used for any purpose or made available to any other person without the express written consent of Stan Johnson Company ( Broker ). By accepting the Confidential Memorandum, you acknowledge and agree that: (1) all of the information contained herein and any other information you will be receiving in connection with this transaction, whether oral, written or in any other form (collectively, the Materials ), is confidential; (2) you will not reproduce the Confidential Memorandum in whole or in part; (3) if you do not wish to pursue this matter, you will return this Confidential Memorandum to SJC as soon as practicable together with all other materials relating to the Property which you may have received from SJC; and (4) any proposed actions by you which are inconsistent in any manner with the foregoing agreements will require the prior written consent of SJC. This Confidential Memorandum has been prepared by SJC, based upon certain information pertaining to the Property and any information obtained from SJC to assist interested parties in making their own evaluation of the Property is offered on a no representation or warranty provision other than customary warranties of title and is sold on an as-is, where-is basis and with all faults. The material and transaction does not purport to be all inclusive. This Confidential Memorandum contains descriptive materials, financial information and other data compiled for the convenience of parties interested in the Property. The Materials are being delivered by SJC to prospective investors with the understanding that it is not all inclusive and that it is qualified in its entirety by independent investigation by prospective investors of those matters which they deem appropriate in evaluating this offering without reliance upon SJC, the Broker or any of their respective affiliates or any of the information set out in the Materials. Neither SJC, the Broker, nor any of their respective affiliates have independently verified any of the information contained herein or in any of the Materials, and no representations or warranties as to the accuracy or completeness thereof or of any other kind whatsoever are made or intended and none should be inferred. SJC, for itself and its affiliates of the Property, expressly disclaim any and all liability for statements or representations, express or implied, contained herein or for omissions from the Materials or for any other written, oral or other format of communication transmitted to a prospective investor in the course of its evaluation of the proposed transaction. All summaries and discussions of documentation and/or financial information contained herein are qualified in their entirety by reference to the actual documents and/or financial statements, which upon request may be made available. The terms and conditions described herein are subject to change without notice. This Confidential Memorandum does not constitute an offer to accept any investment proposal but is merely a solicitation of interest with respect to the investment described herein. The Confidential Memorandum does not constitute an offer of security. The investment described herein may be financed or withdrawn from the market, without prior notice. By accepting this Confidential Memorandum you agree to release SJC and hold it harmless from any kind of claim, expense, or liability arising out of your discovery or purchase of the Property. SJC reserves the right to request the return of the Materials at any time. Ownership of the Property reserves the right to negotiate with one or more prospective investors at any time. Offered Exclusively By Brett Butler Senior Director bbutler@stanjohnsonco.com TX Lic. # Andrew Peeples Director apeeples@stanjohnsonco.com Jeff Jackson Associate jjackson@stanjohnsonco.com Neal Maranuk Analyst nmaranuk@stanjohnsonco.com Stan Johnson Company Richmond Avenue Suite 740 Houston, TX P: F: Page 2 Houston Office THE NET LEASE AUTHORITY

Representative Photo Representative Photo Subject Representative Property Photo Purchase Price $6,444,444 Cap Rate 4.

The property is located in the Houston-The Woodlands- Sugar Land metropolitan area, the fifth-largest metropolitan area in the United States. Situated on a 4.

The lease includes 5% rent increases every five years, during the option periods.

3 Representative Photo Representative Photo Subject Representative Property Photo Purchase Price $6,444,444 Cap Rate 4.50% Stan Johnson Company is pleased to offer for sale to qualified investors a brand new Walmart Neighborhood Market Ground Lease located at Highland Knolls Drive in Katy, Texas. The property is located in the Houston-The Woodlands- Sugar Land metropolitan area, the fifth-largest metropolitan area in the United States. Situated on a 4.65 acre site, the subject Property is 100% Leased to Walmart Neighborhood Market under a twenty (20) year absolute NNN Ground Lease with fifteen (15), five (5) year renewal options. The lease includes 5% rent increases every five years, during the option periods. The Property is located on the corner of Westgreen Boulevard and Highland Knolls Drive in Katy, Texas just outside the Houston city limit. Katy has won national accolades for growth and sustainability. The subject Property is located in the Houston-The Woodlands- Sugar Land metropolitan area, which has a population exceeding 6.49 million. The location boasts excellent demographics with the average household income exceeding $130,000 within a 1-mile radius and a population growth in excess of 10% within a 5-mile radius. Investment Highlights Best In Class Corporate Guaranty Lease guaranteed by Wal-Mart Stores, Inc. with Standard & Poor s rating of AA and Moody s rating of Aa2 Renewal Options & Rent Increases Fifteen (15), Five (5) year renewal options with 5% rent increases during the option periods Absolute Net Ground Lease The lease offers an extremely passive investment with no Landlord responsibilities whatsoever Growth Concept Walmart Neighborhood Market is a key growth concept for the World s #1 Retailer Excellent Investment Fundamentals Superior credit, real estate economics and lease structure compared to other available net lease investments Robust Demographics The Property features an average household income exceeding $130,000 within a 1-mile radius and a population growth in excess of 10% within a 5-mile radius Major Retail Tenants Nearby Chick-fil-a, Sears, Garden Ridge, Starbucks, Whataburger, Sonic, Michaels, Home Depot, Walgreens, Mattress Firm, OfficeMax, Petco, Best Buy, JCPenny and many more Page 3 Houston Office THE NET LEASE AUTHORITY

Lease Abstract 20903 Highland Knolls Drive Katy, TX 77450 Tenant Walmart Neighborhood Market Guarantor Walmart Stores, Inc.

) Term Expiration November 15, 2035 (approx.

20903 Highland Knolls Drive Katy, TX 77450 Year Rent 1-20 $290,000 Option 1 (21-25) $304,500 Option 2 (26-30) $319,725 Option 3 (31-35) $335,711 Option 4 (36-40)

4 Lease Abstract Highland Knolls Drive Katy, TX Tenant Walmart Neighborhood Market Guarantor Walmart Stores, Inc. (S&P AA rated) Lease Type Ground Lease Building Size +/- 41,983 SF Land Area +/ Acres Rent Commencement November 15, 2015 (approx.) Term Expiration November 15, 2035 (approx.) Primary Term Twenty (20) years Renewal Options Fifteen (15), Five (5) year options Current Annual Rent $290,000 Rent Increases 5% with each extension Rent Schedule Highland Knolls Drive Katy, TX Year Rent 1-20 $290,000 Option 1 (21-25) $304,500 Option 2 (26-30) $319,725 Option 3 (31-35) $335,711 Option 4 (36-40) $352,496 Option 5 (41-45) $370,121 Option 6 (46-50) $388,627 Option 7 (51-55) $408,059 Option 8 (56-60) $428,462 Option 9 (61-65) $449,885 Option 10 (66-70) $472,379 Option 11 (71-75) $495,998 Option 12 (76-80) $520,798 Option 13 (81-85) $546,838 Option 14 (86-90) $574,180 Option 15 (91-95) $602,889 Page 4 Houston Office THE NET LEASE AUTHORITY

Tenant Overview Walmart Neighborhood Market is a chain of grocery stores launched by Walmart in 1998.

Walmart Neighborhood Market stores offer a variety of products including a full line of groceries.

Walmart Markets employ 80 100 employees and offer about 28,000 items.

The company is the world s largest public corporation, according to the Fortune Global 500 list in 2014, the biggest private employer in the world with over

Walmart remains a family-owned business, as the company is controlled by the Walton family, who own over 50 percent of Walmart.

Walmart was founded by Sam Walton in 1962 with the opening of the first Walmart store in Rogers, Arkansas.

For the fiscal year ended January 2014, Walmart reported total revenues $476.2 billion, a net income of $16.0 billion and a net worth in excess of $76.

5 Tenant Overview Walmart Neighborhood Market is a chain of grocery stores launched by Walmart in These stores are designed to be the opposite of vastly larger superstores. These smaller stores have easier parking, less crowded aisles and quicker checkout. Walmart Neighborhood Market stores offer a variety of products including a full line of groceries. Walmart Markets range around 40,000 square feet, which is a quarter of the size of a typical Walmart Supercenter in the United States. Walmart Markets employ employees and offer about 28,000 items. Walmart is an American multinational retail corporation that runs chains of large discount department stores and warehouse stores. The company is the world s largest public corporation, according to the Fortune Global 500 list in 2014, the biggest private employer in the world with over two million employees, and the largest retailer in the world. Walmart remains a family-owned business, as the company is controlled by the Walton family, who own over 50 percent of Walmart. It is also one of the world s most valuable companies. Walmart was founded by Sam Walton in 1962 with the opening of the first Walmart store in Rogers, Arkansas. The company was incorporated as WalMart Stores, Inc. in 1969 and was first publicly traded on the New York Stock Exchange in For the fiscal year ended January 2014, Walmart reported total revenues $476.2 billion, a net income of $16.0 billion and a net worth in excess of $76.2 billion. #1 on FORTUNE 500 #1 on FORTUNE 1000 (2013 & 2014) (2014) AA Credit Rating Aa2 Credit Rating TENANT PROFILE Company: Walmart Stores, Inc. (NYSE:WMT) Walmart serves customers more than 200 million times per week at more than 11,000 retail units in 27 countries. Credt Rating: S&P: AA / Moody s: Aa2 Walmart employs 2.2 million associates globally, including approximately 1.3 million in the United States. Walmart is one of the largest private employers in the U.S. and Canada. Founded: 1962 Headquarters: Bentonville, AR Website: Page 5 Houston Office Representative Photo No. of Locations: 11,000 No. of Employees: 2.2 million Representative Photo THE NET LEASE AUTHORITY

6 News for Walmart Neighborhood Market Walmart U.S. accelerates small store growth BENTONVILLE, Ark., Feb. 20, 2014 Behind a real estate strategy focused on providing the broadest selection of products and convenient access through a digitally connected, multi-format portfolio, Wal-Mart Stores Inc. (NYSE: WMT) today announced it is significantly accelerating its capital plan for U.S. small store format openings for the current fiscal year. The company is expanding its original capital forecast provided last October, and now expects to add approximately 270 to 300 small stores during the fiscal year, doubling the initial forecast of 120 to150 stores. Walmart U.S. will continue its plan to open approximately 115 new supercenters this year. Customers needs and expectations are changing. They want to shop when they want and how they want, and we are transforming our business to meet their expectations, said Bill Simon, Walmart U.S. president and CEO. Customers appreciate the broad assortment of our supercenters for their stock-up trips as well as our small store formats for fill-in trips. By unlocking this growth opportunity and further combining our supercenters and small store formats with an unlimited selection available through ecommerce, we provide our customers with anytime, anywhere access to our brand. The small store fleet has continued to deliver positive comp sales and traffic increases each quarter. Comp sales for Neighborhood Market stores grew approximately 4 percent for fiscal year 2014, driven by fresh and pharmacy. Neighborhood Market is performing comparable or favorable to leading grocers, said Simon. Our small store expansion, in addition to providing customers access to a wide variety of products, including fresh, pharmacy and fuel, will help us usher in the next generation of retail. This will combine thousands of points of physical access with digital retail experiences that include initiatives such as Site to Store and Pay with Cash. Walmart currently operates 346 Neighborhood Markets and 20 Walmart Express stores. The Express units have performed well and are being expanded beyond the initial three-market pilot. As a result of its more aggressive plan, Walmart U.S. projects to end fiscal year 2015 with net retail square footage growth of approximately 21 to 23 million square feet across all formats, versus its original projection of approximately 19 to 21 million square feet. The projected capital expenditures and square footage details exclude the impact of future acquisitions. We have a healthy pipeline of stores in development, and we systematically work to improve our real estate and construction processes, reduce building costs and shorten the time needed to open our stores, said Simon. In addition to providing best-in-class one-stop shopping at supercenters, we believe that accelerating our small store expansion will allow customers to choose where and when to shop based on their needs. Our small store expansion will also strengthen our market share and create greater efficiencies in our supply chain through a tethered approach that uses supercenters as a supply chain base, links our resources and provides a unique and connected customer experience. Our small store expansion, in addition to providing customers access to a wide variety of products, including fresh, pharmacy and fuel, will help us usher in the next generation of retail. To fund this additional growth, the company is revising its capital expenditures forecast for the Walmart U.S. segment to $6.4 to $6.9 billion, up from an initial range of $5.8 to $6.3 billion. This reflects the increased small store growth and the current pipeline of supercenters, which remain an essential part of the company s strategy. In total, across supercenter and small store formats, Walmart U.S. plans to open 385 to 415 units in fiscal 2015, adding considerably to the more than 4,200 stores currently open. Source: Page 6 Houston Office THE NET LEASE AUTHORITY

Location Overview Katy is a city in Texas, within the Houston The Woodlands Sugar Land metropolitan area. The city encompasses the counties of Harris, Fort Bend, and Waller.

Almost 270,000 people live in the Katy area, which has won national accolades for growth and sustainability. Greater Katy includes new upscale developments and master planned communities.

In 2009 the Gadberry Group named Katy as one of 9 from 2009 most notable high growth areas in the United States. Houston The Woodlands Sugar Land is the fifth-largest metropolitan area in the U.S. with a population of 6.

The population of the metropolitan area is centered in the city of Houston the largest economic and cultural center of the American South, with a population of 2.1 million.

2 percent between the 1990 and 2000 censuses (adding more than 950,000 people) while the nation s population increased 13.2 percent over the same period.

7 Location Overview Katy is a city in Texas, within the Houston The Woodlands Sugar Land metropolitan area. The city encompasses the counties of Harris, Fort Bend, and Waller. Katy is a thriving area west of Houston but is often further defined as either old Katy or the Katy area. Almost 270,000 people live in the Katy area, which has won national accolades for growth and sustainability. Greater Katy includes new upscale developments and master planned communities. The city of Houston s extraterritorial jurisdiction (ETJ) stretches well west of the City of Katy which means most of the Katy area may be annexed by the City of Houston at some time in the future. In 2009 the Gadberry Group named Katy as one of 9 from 2009 most notable high growth areas in the United States. Houston The Woodlands Sugar Land is the fifth-largest metropolitan area in the U.S. with a population of 6.18 million, as of U.S. Census Bureau s July 1, 2012 estimates. The population of the metropolitan area is centered in the city of Houston the largest economic and cultural center of the American South, with a population of 2.1 million. Katy, TX Katy, TX Katy Mills Mall Entrance Katy Mills Mall Houston is among the fastest-growing metropolitan areas in the U.S. The area grew 25.2 percent between the 1990 and 2000 censuses (adding more than 950,000 people) while the nation s population increased 13.2 percent over the same period. From 2000 to 2007, the area grew by 912,994 people. From 2000 to 2030, the metropolitan area is projected by Woods & Poole Economics to rank fifth in the nation in population growth, adding 2.66 million people. The Property is located off I-10, near the Grand Parkway, with over 295,000 combined vehicles per day (VPD). The Property is located less than 5 miles from Katy Mills, an outlet shopping mall featuring over 200 stores. The Property is located in a dense retail corridor with surrounding tenants including Sam s Club, Bass Pro Shop, Walmart, Academy Sports & Outdoors, Bed Bath & Beyond, Kroger, H-E-B, and Walgreens, among many others. Houston, TX Skyline Page 7 Houston Office THE NET LEASE AUTHORITY

8 I-10 (189,683 VPD) Houston Methodist West Hospital & Texas Children s Hospital Second Baptist Church W WESTGREEN BLVD (14,515 VPD) Katy Mills Mall West Memorial Elementary & Jr. High MAS ON RD (48,055 VPD) ) K WAY (63,0 57 V PD G R A N D PA R Memorial Hermann Katy Hospital Memorial Parkway ES TH EI M ER PK W Kelliwood Trails Y 0, ( VP Kelliwood Westgreen Place Park Kelliwood Place D) Cinco Ranch High School RobertaWright Rylander Elementary School La Centerra at Cinco Ranch Obra D. Tompkins High School Page 8 Houston Office THE NET LEASE AUTHORITY

MEMORIAL PARKWAY CREEK STONE S MAS ON RD (48,055 VPD) MEMORIAL

The Lord Catholic Church Retail Center PLANNED RETAIL Memorial

HIGHLAND KNOLLS DR (19,355 VPD) OAK PARK TRAILS Page 9 Houston

School WESTGREE N BLVD (14,515 VPD) Epiphany - The Lord

9 MEMORIAL PARKWAY CREEK STONE S MAS ON RD (48,055 VPD) MEMORIAL PARKWAY Memorial Parkway Elementary PLANNED RETAIL Epiphany - The Lord Catholic Church Retail Center PLANNED RETAIL Memorial Parkway Jr High School WEST I-10 FIRE DEPT KELLIWOOD TRAILS HIGHLAND KNOLLS DR (19,355 VPD) OAK PARK TRAILS Page 9 Houston Office WESTGREEN PARK Memorial Parkway Jr High School WESTGREE N BLVD (14,515 VPD) Epiphany - The Lord Catholic Church WEST I-10 FIRE DEPT KELLIWOOD TRAILS THE NET LEASE AUTHORITY

10 Demographics Highland Knolls Dr, Katy, TX mi. 0-3 mi. 0-5 mi. Population 2010 Population 17,755 91, , Population 18,148 97, , Population 19, , , Annual Rate 0.42% 1.22% 1.90% Annual Rate 1.21% 1.67% 2.49% Households 2010 Households 5,685 31,332 69, Total Households 5,811 33,567 77, Total Households 6,168 36,613 87, Annual Rate 0.42% 1.32% 1.94% Annual Rate 1.20% 1.75% 2.49% Race and Ethnicity 2015 White Alone 72.1% 71.0% 63.6% 2015 Black Alone 6.0% 6.9% 11.2% 2015 American Indian/Alaska Native Alone 0.5% 0.5% 0.5% 2015 Asian Alone 13.6% 11.9% 12.7% 2015 Pacific Islander Alone 0.0% 0.1% 0.1% 2015 Other Race 4.4% 6.2% 8.3% 2015 Two or More Races 3.4% 3.4% 3.6% 2015 Hispanic Origin (Any Race) 19.1% 24.3% 28.9% 2015 Median Household Income $109,964 $102,737 $92, Average Household Income $130,271 $128,587 $116,914 Page 10 Houston Office THE NET LEASE AUTHORITY

11 Brett Butler Senior Director TX Lic. # Andrew Peeples Director Jeff Jackson Associate Neal Maranuk Analyst Stan Johnson Company Richmond Ave. Suite 740 Houston, Texas P: F: The information contained herein was obtained from sources believed reliable, however, Stan Johnson Company makes no guaranties, warranties or representations as to the completeness thereof. The presentation of this property for sale, rent or exchange is submitted subject to errors, omissions, change of price or conditions, or withdrawal without notice.

12 Approved by the Texas Real Estate Commission for Voluntary Use Texas law requires all real estate licensees to give the following information about brokerage services to prospective buyers, tenants, sellers and landlords. Information About Brokerage Services efore working with a real estate broker, you should Bknow that the duties of a broker depend on whom the broker represents. If you are a prospective seller or landlord (owner) or a prospective buyer or tenant (buyer), you should know that the broker who lists the property for sale or lease is the owner s agent. A broker who acts as a subagent represents the owner in cooperation with the listing broker. A broker who acts as a buyer s agent represents the buyer. A broker may act as an intermediary between the parties if the parties consent in writing. A broker can assist you in locating a property, preparing a contract or lease, or obtaining financing without representing you. A broker is obligated by law to treat you honestly. IF THE BROKER REPRESENTS THE OWNER: The broker becomes the owner s agent by entering into an agreement with the owner, usually through a written - listing agreement, or by agreeing to act as a subagent by accepting an offer of subagency from the listing broker. A subagent may work in a different real estate office. A listing broker or subagent can assist the buyer but does not represent the buyer and must place the interests of the owner first. The buyer should not tell the owner s agent anything the buyer would not want the owner to know because an owner s agent must disclose to the owner any material information known to the agent. IF THE BROKER REPRESENTS THE BUYER: The broker becomes the buyer s agent by entering into an agreement to represent the buyer, usually through a written buyer representation agreement. A buyer s agent can assist the owner but does not represent the owner and must place the interests of the buyer first. The owner should not tell a buyer s agent anything the owner would not want the buyer to know because a buyer s agent must disclose to the buyer any material information known to the agent. IF THE BROKER ACTS AS AN INTERMEDIARY: A broker may act as an intermediary between the parties if the broker complies with The Texas Real Estate License Act. The broker must obtain the written consent of each party to the transaction to act as an intermediary. The written consent must state who will pay the broker and, in conspicuous bold or underlined print, set forth the broker s obligations as an intermediary. The broker is required to treat each party honestly and fairly and to comply with The Texas Real Estate License Act. A broker who acts as an intermediary in a transaction: (1) shall treat all parties honestly; (2) may not disclose that the owner will accept a price less than the asking price unless authorized in writing to do so by the owner; (3) may not disclose that the buyer will pay a price greater than the price submitted in a written offer unless authorized in writing to do so by the buyer; and (4) may not disclose any confidential information or any information that a party specifically instructs the broker in writing not to disclose unless authorized in writing to disclose the information or required to do so by The Texas Real Estate License Act or a court order or if the information materially relates to the condition of the property. With the parties consent, a broker acting as an intermediary between the parties may appoint a person who is licensed under The Texas Real Estate License Act and associated with the broker to communicate with and carry out instructions of one party and another person who is licensed under that Act and associated with the broker to communicate with and carry out instructions of the other party. If you choose to have a broker represent you, you should enter into a written agreement with the broker that clearly establishes the broker s obligations and your obligations. The agreement should state how and by whom the broker will be paid. You have the right to choose the type of representation, if any, you wish to receive. Your payment of a fee to a broker does not necessarily establish that the broker represents you. If you have any questions regarding the duties and responsibilities of the broker, you should resolve those questions before proceeding. Real estate licensee asks that you acknowledge receipt of this information about brokerage services for the licensee s records. Buyer, Seller, Landlord or Tenant Date Texas Real Estate Brokers and Salespersons are licensed and regulated by the Texas Real Estate Commission (TREC). If you have a question or complaint regarding a real estate licensee, you should contact TREC at P.O. Box 12188, Austin, Texas or EQUAL HOUSING OPPORTUNITY 01A TREC No. OP-K

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