CHELSEA PLACE & OXFORD PLACE CHELSEA & OXFORD PLACE 1

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1 CHELSEA PLACE & OXFORD PLACE A T I M P E R I A L C E N T E R R A L E I G H - D U R H A M N O R T H C A R O L I N A CHELSEA & OXFORD PLACE 1

2 N o. 01 EXECUTIVE SUMMARY investment highlights EXECUTIVE SUMMARY 1

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4 CHELSEA & OXFORD PLACE INVESTMENT OPPORTUNITY Holliday Fenoglio Fowler, L.P. acting by and through Holliday GP Corp. a North Carolina licensed real estate broker ( HFF ) has been retained as the exclusive sales representative for Chelsea & Oxford Place (the Property or Portfolio ), a 121,511 square foot office portfolio located in Raleigh-Durham s premier business park, Imperial Center. Currently 86.5% occupied, as a result of a large tenant vacating in 2017, the Property offers a unique value-add opportunity in Imperial Center which is currently 98.9% occupied and achieving rental rates in the upper $20s per square foot. With an attractive mark-to-market opportunity and immediate lease up potential, investors have the opportunity to realize value-add returns with a Property that boasts strong historical performance. In addition, the investment offering provides highly coveted longterm stability with a weighted average lease term of more than four years and an attractive STEM-oriented tenant roster that is representative of the Research Triangle's core industries. Moreover, the Property features significant capital improvements completed in the past two years, providing investors with attractive leasing advantages in the highly competitive Raleigh-Durham office market. Chelsea & Oxford Place presents an exceptional opportunity to acquire two institutionally maintained assets at an attractive basis that is well below replacement cost in the country s fastest growing metropolitan area since EXECUTIVE SUMMARY 3

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6 INVESTMENT SUMMARY Chelsea & Oxford offer the opportunity to acquire two assets located in one of Raleigh-Durham s premier office parks featuring a center-of-the-market location and a market-leading amenity package. Investors have the opportunity to gain an instant foothold in one of the country s largest innovation markets with unmatched competitive advantages in Imperial Center driving tenant demand and achieving premier rental rates. Positioned in the heart of the Triangle region, the assets are leased to STEM and healthcare tenants with significant remaining term offering investors a stable cash flow stream and immediate upside potential through the lease up of existing vacancy. A PREMIER BUSINESS PARK IN THE TRIANGLE INCREASINGLY URBAN INFILL LOCATION INSTITUTIONALLY MAINTAINED ASSETS FEATURING RECENT CAPITAL IMPROVEMENTS AND AN ATTRACTIVE ON-SITE AMENITY PACKAGE VALUE-ADD POTENTIAL WITH STRONG HISTORICAL PERFORMANCE ATTRACTIVE STEM-ORIENTED TENANT ROSTER OFFERING EXCEPTIONAL REMAINING TERM INVESTMENT FLEXIBILITY OPPORTUNITY TO INVEST AT AN ATTRACTIVE BASIS WELL BELOW REPLACEMENT COST FLOURISHING CENTER-OF-THE-MARKET LOCATION RALEIGH-DURHAM CHELSEA & OXFORD PLACE PRESENTS AN EXCEPTIONAL INVESTMENT OPPORTUNITY IN THE COUNTRY S FASTEST GROWING METROPOLITAN AREA SINCE 2000 INVESTMENT SUMMARY ADDRESSES Chelsea Place 1007 Slater Road Durham, NC Oxford Place 1005 Slater Road Durham, NC RENTABLE BUILDING AREA Chelsea Place 76,493 SF Oxford Place 45,018 SF TOTAL 121,511 SF YEAR BUILT Chelsea Place 1989 Oxford Place 1988 PERCENT OCCUPIED Chelsea Place 97.4% Oxford Place 67.9% TOTAL 86.5% TOP TENANTS INDUSTRY RSF % OF TOTAL RSF Principled Technologies, Inc. Technology 41, % Gordon Asset Management, LLC Financial Services 9, % Social & Scientific Systems, Inc. (SSS) Healthcare 5, % 55, % EXECUTIVE SUMMARY 5

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8 INVESTMENT HIGHLIGHT N O.1 A PREMIER BUSINESS PARK IN THE TRIANGLE IMPERIAL CENTER Imperial Center is Raleigh-Durham s largest premier business park with more than four million square feet of mixed-use space situated on 456 beautifully landscaped acres in the Triangle Region. Ideally positioned at the interchange of I-40 and I-540, Imperial Center is located at the epicenter of the Raleigh-Durham market offering unparalleled access to the area s main economic drivers, including the world-renowned Research Triangle Park and the RDU International Airport. As a result, the park attracts the region s top companies including QuintilesIMS, EMC Corporation, Biogen, BB&T, Pfizer, Fidelity Investments, LabCorp and Zoetis many of which have a long-standing history at the park. QuintilesIMS, the world's largest provider of drug development services to pharmaceutical and life sciences companies, is headquartered in a state-of-the-art, 252,000 square foot office building at the primary entrance to Imperial Center highlighting the prestigious reputation of the park. In addition to housing major operations of a number of Fortune 500 companies, Imperial Center supports the growth of numerous businesses local to the Triangle region. The diverse tenant base represents STEM-sector firms, the healthcare industry, and research organizations, all of which have strong ties to the Raleigh-Durham area. With 69 companies and over 5,000 employees in the park, Imperial Center is consistently recognized as one of the premier business parks in the Southeast. In addition to the ideal location and prominent tenant roster at the park, Imperial Center offers a market-leading amenity package including various dining options, multiple retail destinations, four name brand hotels, and a host of health & fitness amenities. Notable retail centers include the Shops at Imperial Point and the Shiloh Crossing Retail Center which collectively offer a Starbucks, Mez Contemporary Mexican Restaurant, Page Road Bar & Grill, Jimmy John s, Bruegger's Bagels, Sam s Club, Walmart, and a FedEx Office store. Imperial Center also includes a full-service Fitness Connection gym and well-maintained jogging trails that run throughout the park. Prospective investors have the opportunity to gain access to these rare competitive advantages in the highly competitive Raleigh-Durham office market, further strengthening the investment opportunity at Chelsea & Oxford. IMPERIAL CENTER'S INCREDIBLE HISTORICAL PERFORMANCE Imperial Center Occupancy ( YTD) YTD IMPERIAL CENTER 90.4% 91.1% 90.9% 94.6% 91.7% 99.1% 98.5% 98.9% NOTABLE TENANTS AT IMPERIAL CENTER EXECUTIVE SUMMARY 7

9 INVESTMENT HIGHLIGHT N O.2 INCREASINGLY URBAN INFILL LOCATION The RTP/I-40 submarket is experiencing unprecedented economic growth resulting in increased urbanization of the area. Historically recognized as a suburban office hub, the RTP/I-40 submarket boasts a development pipeline largely made up of retail and multifamily projects that will further amenitize the area and position the submarket as a true urban infill location. While traditional suburban office locations are characterized by sprawling layouts with limited nearby amenities, Chelsea & Oxford offer close proximity to numerous restaurants and retail options. Given the notable future developments in the area, the assets are poised for long-term success. RTP/I-40 SUBMARKET DEVELOPMENT PIPELINE N ,546 TOTAL NUMBER OF UNDER CONSTRUCTION APARTMENTS/TOWNHOMES WATKINS ROAD IMPROVMENT TOTAL NUMBER OF UNDER CONSTRUCTION OFFICE SF CHELSEA & OXFORD MIXED-USE HOSPITALITY MULTIFAMILY OFFICE/FLEX RETAIL OTHER 54 MCCRIMMON PARKWAY EXTENSION (U/C) 214,000 20, TOTAL NUMBER OF UNDER CONSTRUCTION RETAIL SF RALEIGH-DURHAM INTERNATIONAL AIRPORT LAKE CRABTREE TOTAL NUMBER OF UNDER CONSTRUCTION HOTEL ROOMS UMSTEAD STATE PARK ,000 TOTAL NUMBER OF UNDER CONSTRUCTION MIXED-USE SF NO. PROJECT NAME 1 Davis Park West Davis Drive & Hopson Road 2 Davis Park East Hopson Road 3 Churchill Hall Page Road & S Miami Blvd DEVELOPER PRODUCT TYPE DEVELOPMENT SIZE STATUS COMMENTS Pollack Shores Mixed-Use 330 Multifamily Units 20,000+ SF of Street-Level Retail Davis Development Tri Properties and Principle Real Estate Investors Mixed-Use Mixed-Use 1,414 Multifamily Units 201 Townhomes 120,000 SF of Mixed-Use Development 150,000 SF of Office 25,000 SF Medical Office Building 5 Street-Level Retail Outparcels Under Scheduled to deliver Construction in 2017 Proposed 4 Limited Service Hotel Crown Realty Hospitality Proposed South Miami Blvd & Old Page Road 5 Multifamily Development Site Page Road & Slater Road Crown Realty Multifamily Proposed 6 Hilton Home2 Suites 1100 Shiloh Glenn Drive 7 Shiloh Park Slater Road, Imperial Center 8 Shiloh Crossing Lower Shiloh Way 9 Sorrell at Perimeter Park Slater Road & Carrington Mill Blvd 10 INC Research BTS Carrington Mill Blvd 11 Perimeter Park - Six & Seven Carrington Mill Blvd 12 Wake Tech RTP Campus Paramount Parkway 13 Town Hall North McCrimmon Parkway & Harris Mill Road 14 Twin Lakes Center Davis Drive & Airport Blvd 15 Bainbridge Lake Crabtree 5005 Evans Road 16 Wake Competition Center Nova Drive & Aviation Parkway 17 Aerial Center Business Park 3000 Aerial Center Parkway 18 Element RDU 804 Airport Blvd 19 Ovation at Weston Weston Parkway & Evans Road RevPar Management Hospitality 99 Hotel Rooms Under Construction Tri Properties Office/Flex 138,000 SF of Office 61,000 SF of Flex Proposed - Multifamily 330 Multifamily Units Under Construction Davis Development Trinity Capital Advisors and Starwood Capital Trinity Capital Advisors and Starwood Capital - Educational Facility Multifamily 262 Multifamily Units Under Construction Under Scheduled to deliver Construction Q Office 214,000 SF of Office Under Class A office space Construction that will serve as the new headquarters for INC Research. Scheduled to deliver in Office 2 Office Sites Totaling Proposed 536,000 SF 109,000 SF Educational Facility Under Plans for the 94-acre Construction site include up to 10 educational facilities CalAtlantic Multifamily 116 Townhomes Under Construction Leyland Alliance Retail 5 buildings with 173,000 SF of Retail, Restaurant, and Office Proposed Bainbridge Multifamily 200 Multifamily Units Under Construction Ammons Building Corporation (Jeff Ammons) Recreational 30-acre indoor and outdoor multi-sport facility Proposed Wegmans will anchor the retail development. A second phase could include 12 acres of additional retail and a possible residential component $15 million building project will include two ice skating rinks, turf soccer fields and championshiplevel volleyball and gymnastics facilities Sentinel Office - Proposed 4.83-acre site with additional office development proposed OHM Hotels Hospitality 100 Hotel Rooms Under Construction Woodfield Investments Multifamily 308 Multifamily Units Under Construction CHELSEA & OXFORD PLACE 8

10 INVESTMENT HIGHLIGHT NO. 3 INSTITUTIONALLY MAINTAINED ASSETS CHELSEA & OXFORD CAPITAL IMPROVEMENTS FEATURING RECENT CAPITAL IMPROVEMENTS AND AN ATTRACTIVE ON-SITE AMENITY PACKAGE DESCRIPTION OF IMPROVEMENTS BUILDING CAPITAL INVESTED YEAR COMPLETED Chelsea & Oxford offer two institutionally maintained assets that have been recently upgraded with more than $541,000 of capital improvements on interior renovations. Over the past two years, ownership has completed newly renovated corridors, lobbies, and restrooms, significantly enhancing the marketability of the assets and serving as a highly coveted competitive advantage for investors leasing efforts with this investment opportunity. In addition, the offering presents an attractive on-site amenity base with the Chelsea Café, Imperial Center s premier dining option, locker rooms and shower facilities, complementing Imperial Center s fitness center and the park s walking trails, and the highly popular food trucks that serve the park twice a week. These amenities are available for all tenants at the assets and further distinguish Chelsea & Oxford from their competitive set. Major capital improvements as well as an attractive on-site amenity base will help future owners consistently attract new tenants, successfully retain existing tenants, and push rental rates, positioning the Property for long-term success. Complete restroom modernization; Complete corridor modernization; 1st floor front and rear lobby area modernizations 1st and 2nd Floor Corridor Modernization; 1st Floor Lobby Modernization HVAC Rooftop Unit #6 Replaced Oxford Place Chelsea Place Chelsea Place $250, $244, $46, $541,707 EXECUTIVE SUMMARY 9

11 INVESTMENT HIGHLIGHT N O.4 VALUE-ADD POTENTIAL WITH STRONG HISTORICAL PERFORMANCE Chelsea & Oxford present a unique opportunity for investors to capitalize on upside potential with two assets that boast exceptional historical performance. As a result of a large tenant vacate in 2017, occupancy at the Property dropped from 94.5% to 86.5% offering investors immediate upside leasing potential. With a 12-year average historical occupancy of 91%, Chelsea & Oxford have demonstrated the ability to attract new tenants and retain existing tenants at the Property providing investors with attractive stability. This strong performance is expected to continue as the vacancy rate in Imperial Center is currently 1.1% and tenants seek quality buildings in amenity-rich business parks. In addition, the offering features in-place rents of $20.74/SF which is approximately 6.1% below market, allowing for additional upside potential with a mark-to-market opportunity in a rising rental rate environment. Given the assets unprecedented historical performance, prospective investors are poised to achieve significant upside in a rare value-add opportunity within Imperial Center. HISTORICAL OCCUPANCY: CHELSEA & OXFORD, IMPERIAL CENTER % 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Chelsea & Oxford % 93.28% 95.03% 87.48% 91.15% 81.80% 86.12% 80.59% 91.73% 98.21% 92.97% 94.62% Imperial Center 79.50% 77.30% 85.90% 90.40% 90.40% 91.10% 90.90% 94.60% 91.70% 99.10% 98.50% 98.90% CHELSEA & OXFORD PLACE 10

12 FINANCIAL SERVICES 9% OTHER 9% STEM 46% INVESTMENT HIGHLIGHT NO. 5 ATTRACTIVE STEM-ORIENTED TENANT ROSTER OFFERING EXCEPTIONAL REMAINING TERM Chelsea & Oxford feature an impressive tenant roster anchored by some of the Research Triangle s core industries, such as STEM (Science, Technology, Engineering, and Mathematics) and healthcare. The assets contain a blend of rapidly expanding regional companies and well established national and international firms, some of which are headquartered at Chelsea & Oxford. With 71% of the property leased to STEM and healthcare companies, the tenant roster is strongly tied to the flourishing life sciences and innovation hub in the Raleigh-Durham market, offering highly coveted long-term stability to investors. The largest tenant, Principled Technologies Inc., has a growing presence in the region and occupies 33.9% of the offering. Currently, Principled Technologies employs more than 100 professionals in the Raleigh- Durham area and the company has completed multiple expansions and renewals at Chelsea Place in order to support its future growth in the Triangle region. As the offering s anchor tenant, Principled Technologies offers attractive stability with more than seven years of term on its current lease and strong ties to Chelsea Place, which serves as the company s headquarters. The stability of the offering is further supported by the exceptional term of the tenant roster which boasts a weighted average lease term of over four years. Currently 86.5% leased, as a result of a large tenant vacate in 2017, Chelsea & Oxford provide investors with the unique dynamic of long-term stability with significant upside potential. Moreover, Chelsea & Oxford are located in one of the region s premier business parks, Imperial Center, which draws unprecedented tenant demand and consistently achieves higher than market rents for investors. The attractive tenant rostered coupled with immediate lease up potential offers an exceptional investment opportunity in one of the country s fastest growing markets. PROFESSIONAL SERVICES 11% TENANT MAKEUP BY INDUSTRY HEALTHCARE 25% INDUSTRY SF % OF LEASED SF STEM 48,172 46% Healthcare 25,465 25% Professional Services 12,497 11% Financial Services 9,537 9% Other 9,462 9% EXECUTIVE SUMMARY 11

13 INVESTMENT HIGHLIGHT NO. 6 INVESTMENT FLEXIBILITY Chelsea & Oxford include two multi-tenant office buildings that are well-positioned to accommodate a range of small, mid-size, and large users. The two assets within the offering sit on separate tax parcels, providing a future investor with the flexibility to finance or sell the assets individually. This investment flexibility allows potential investors to acquire two assets while maintaining various exit strategies that will attract a broader range of investors and drive pricing in the event of a sale. ASSET ADDRESS COUNTY PARCEL ID PIN ACRES CHELSEA PLACE 1007 Slater Road Durham OXFORD PLACE 1005 Slater Road Durham INVESTMENT HIGHLIGHT NO. 7 OPPORTUNITY TO INVEST AT AN ATTRACTIVE BASIS WELL BELOW REPLACEMENT COST Chelsea & Oxford present investors with the opportunity to acquire two assets at an attractive basis as comparable properties in the RTP/I-40 submarket are trading north of $200 per square foot. The ability to acquire assets in the Raleigh-Durham office market has become increasingly competitive as the area is the fastest growing metropolitan in the country since Moreover, Chelsea & Oxford are positioned in Raleigh-Durham s premier business park, benefiting from strong tenant demand as an economic alternative to newer assets within the park, making opportunities such as this truly rare. As a result of the region s rapid growth and tightening market conditions, assets are achieving premier pricing demonstrating the incredible exit opportunity for prospective buyers. Access to two office assets in Imperial Center that are currently 86.5% occupied and poised for immediate upside potential is an exceptional prospect for investors. Additionally, with an estimated replacement cost of $260 per square foot, investors are presented with an excellent below replacement cost opportunity. CHELSEA & OXFORD PLACE 12

14 DURHAM 40 Research Triangle Park RALEIGH-DURHAM INTERNATIONAL AIRPORT CHELSEA & OXFORD PLACE 40 Morrisville UMSTEAD P ARK RALEIGH 440 INVESTMENT HIGHLIGHT CHELSEA & OXFORD ARE PRIMED FOR SIGNIFICANT LONG-TERM SUCCESS AS UNPRECEDENTED GROWTH IN THE AREA RESULTS IN AN INCREASINGLY INFILLED LOCATION N O.8 FLOURISHING CENTER-OF-THE-MARKET LOCATION RALEIGH-DURHAM Chelsea & Oxford are strategically located at the geographic center of the Raleigh-Durham market, offering convenient access to Interstate 40 (0.5 mi) and Interstate 540 (1 mi), the area s two primary transportation arteries. As a result, this location affords easy commutes from Raleigh s primary residential nodes in Cary (8 mi), West Raleigh (13 mi), and North Raleigh (15 mi) as well as convenient access to the Raleigh-Durham International Airport (3 mi) and the world-renowned Research Triangle Park (3 mi). With an ideal south-rtp location, Chelsea & Oxford benefit from close proximity to some of the fastest growing communities in the country such as Apex, Morrisville, and Holly Springs. Recent economic expansion in the area, specifically in innovative industries, attracts an increasingly young population to the Triangle region as evidenced by Cary s recognition as a top ten city in the US for millennials. Access to a talented growing population supporting Raleigh-Durham s innovation hub positions Chelsea & Oxford as a premier office destination for new-to-market companies as well as local expansions, making investments such as this increasingly rare. Chelsea & Oxford are primed for significant long-term success as unprecedented growth in the area has resulted in an increasingly infilled location. The assets offer convenient access to over one million square feet of retail amenities within a five mile radius including the Shops at Imperial Point, the Shiloh Crossing Retail Center, and the Creekstone Crossing Shopping Center. Prominent power retail centers such as the Brier Creek Shopping Center (5 mi) and the Streets at Southpoint (7 mi) are also within a short drive of the property. EXECUTIVE SUMMARY 13

15 WILLIAM B. UMSTEAD STATE PARK (5,599 ACRES) TO RALEIGH PERIMETER PARK RDU INTERNATIONAL AIRPORT 540 MARRIOTT HOTEL OXFORD PLACE CHELSEA PLACE SHILOH CROSSING SHOPPING CENTER WALMART SAM'S CLUB BRUEGGER'S BAGELS SHERATON HOTEL RESEARCH TRIANGLE PARK FITNESS CONNECTION HEADQUARTERS COMFORT SUITES WINGATE BY WYNDHAM IMPERIAL CENTER 40 DOUBLE TREE HOTEL HOTEL INDIGO THE SHOPS AT IMPERIAL POINT STARBUCKS MEZ MEXICAN RESTAURANT PAGE ROAD BAR & GRILL JIMMY JOHN'S FEDEX OFFICE STORE TO DURHAM / CHAPEL HILL HOMEWOOD SUITES S MIAMI BLVD CHELSEA & OXFORD PLACE 14

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17 investment advisors SCOT HUMPHREY Senior Director RYAN CLUTTER Senior Managing Director CHRIS NORVELL, SIOR Senior Managing Director CHRIS LINGERFELT Director analyst WILLIAM MORRIS Real Estate Analyst debt & structured finance TRAVIS ANDERSON Senior Managing Director ROGER EDWARDS Senior Director CORY FOWLER Senior Director NORTH TRYON STREET SUITE 1400 CHARLOTTE, NORTH CAROLINA SIX FORKS ROAD SUITE 876 RALEIGH, NORTH CAROLINA 27522

18 Atlanta Austin Boston Carolinas Chicago Dallas Denver Houston Indianapolis Los Angeles Miami New Jersey New York City Orange County Orlando Philadelphia Phoenix Pittsburgh Portland San Diego San Francisco Tampa Washington, D.C. London EXECUTIVE SUMMARY NORTH TRYON STREET SUITE 1400 CHARLOTTE, NORTH CAROLINA SIX FORKS ROAD SUITE 876 RALEIGH, NORTH CAROLINA 27522