OFFERING MEMORANDUM TOWER CENTER US HIGHWAY 18 APPLE VALLEY, CA 92307

Transcription

1 OFFERING MEMORANDUM TOWER CENTER US HIGHWAY 18 APPLE VALLEY, CA 92307

2 NON- ENDORSEMENT AND DISCLAIMER NOTICE Non-Endorsements Marcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation's logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers. ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY. PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS. Disclaimer THIS IS A BROKER PRICE OPINION OR COMPARATIVE MARKET ANALYSIS OF VALUE AND SHOULD NOT BE CONSIDERED AN APPRAISAL. This information has been secured from sources we believe to be reliable, but we make no representations or warranties, express or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. Â 2017 Marcus & Millichap. All rights reserved. TOWER CENTER Apple Valley, CA ACT ID Y

3 SECTION TABLE OF CONTENTS INVESTMENT OVERVIEW 01 Offering Summary Property Summary Regional Map Aerial Map Executive Summary FINANCIAL ANALYSIS 02 Tenant Summary Lease Expiration Chart Operating Statement Pricing Detail Tenant Profiles MARKET COMPARABLES 03 Sold Comparables Rent Comparables MARKET OVERVIEW 04 Market Analysis Demographic Analysis

4 INVESTMENT OVERVIEW 4

5 INVESTMENT OVERVIEW OFFERING SUMMARY Marcus & Millichap is pleased to present Tower Center, a ±14,388 square multi-tenant retail shopping center located along Highway 18 in the city of Apple Valley. Apple Valley is part of a cluster of cities collectively known as the High Desert in San Bernardino County. Tower Center is strategically positioned adjacent Interstate 15 and the main thoroughfare Highway 18, linking to neighbor cities Victorville, Hesperia, and Lucerne Valley. The property provides a broad range of smaller service oriented tenants, perfect for the demand from the small business owners in the area. INVESTMENT HIGHLIGHTS Immediate accessibility and proximity to Interstate 15 Strong traffic along Highway 18 Great demand for service oriented tenants to service the surrounding community Limited retail development in the immediate area # 5

6 OFFERING SUMMARY PROPERTY SUMMARY THE OFFERING Property Tower Center Price $1,095,000 Property Address US Highway 18,Apple Valley,CA Assessors Parcel Number SITE DESCRIPTION Gross Leasable Area 14,388 Ownership Fee Simple Lot Size 1.2 acre(s) 6

7 REGIONAL MAP 7

8 AERIAL PHOTO 8

9 EXECUTIVE SUMMARY VITAL DATA YEAR 1 YEAR 2 Price $1,095,000 CAP Rate 6.03% 6.23% Down Payment 100% / $1,095,000 Net Operating Income $66,012 $68,174 Loan Type All Cash Net Cash Flow After Debt 17.22% / $66, % / $68,174 Service Gross Leasable Area (GLA) 14,358 SF Total Return 17.22% / $66, % / $68,174 Price/SF $76.11 Current Occupancy % Lot Size 1.2 acre(s) MAJOR TENANTS TENANT GLA LEASE EXPIRATION LEASE TYPE Michael Moses Dba Allstate Insurance 1,250 N/A Gross Richard West Medical Billing 770 3/1/2020 Gross Horizon Solar Power 770 9/30/2017 Gross Krisna Tower Center Laundry 1,540 5/30/2020 Gross Verizon 770 3/1/2024 Gross OFFERING SUMMARY MAJOR EMPLOYERS EMPLOYER # OF EMPLOYEES Victor Valley College 850 In-N-Out Burgers 613 Victorville Fire Department 400 Home Depot The 350 Lewis Center For Eductl RES 350 Target 327 Monrovia Ranch Market 320 Ascon Recy 250 Costco 250 Cem - Victorville River Plant 234 Heritage Medical Group 231 City of Victorville 228 DEMOGRAPHICS 1-Miles 3-Miles 5-Miles 2016 Estimate Pop 5,624 32, , Census Pop 5,375 30,628 97, Estimate HH 1,938 10,974 34, Census HH 1,843 10,303 31,884 Median HH Income $55,781 $50,550 $46,778 Per Capita Income $27,563 $24,355 $21,201 Average HH Income $79,747 $71,463 $64,064 # 9

10 FINANCIAL ANALYSIS 10

11 TENANT SUMMARY FINANCIAL ANALYSIS As of October,2017 % Monthly Renewal Options Square Bldg Lease Dates Rent per Total Rent Total Rent Changes Changes Lease and Option Year Tenant Name Suite Feet Share Comm. Exp. Sq. Ft. Per Month Per Year on to Type Rental Information Alsop & Assoc Insurance 1 1, % 8/1/17 7/31/18 $1.26 $1,486 $17,832 Oct-2018 $1, Gross Larina Racobs - Barber % 11/1/14 10/31/19 $0.80 $475 $5,700 Dec-1900 N/A Gross N/A 8/2017 One 3 yr. options - 08/2018 $1, and 8/2000 $1, Michelle Moore - Tax 3 and 4 1, % 4/1/13 N/A $0.85 $1,010 $12,120 Sep-2017 $1, Gross Month to month Michael De Paolo % 10/19/17 10/31/20 $0.70 $414 $4,968 N/A N/A Gross N/A Vacant % N/A N/A $0.00 $0 $0 N/A N/A Gross N/A Vacant % N/A N/A $0.00 $0 $0 N/A N/A Gross N/A Hope Chest 8 and 9 1, % 6/15/15 6/14/18 $0.65 $1,231 $14,772 N/A N/A Gross No option(s) Vacant 10 and 11 1, % N/A N/A $0.00 $0 $0 N/A N/A Gross N/A Vacant % N/A N/A $0.00 $0 $0 N/A N/A Gross N/A Claydon Siddens % 8/15/17 8/14/19 $1.26 $795 $9,540 N/A N/A Gross N/A Vacant % N/A N/A $0.00 $0 $0 Sep-2017 $ Gross N/A Verizon Wireless % 3/1/00 2/29/20 $3.79 $2,922 $35,062 Oct-2017 $ Gross 4% annual increases Richard West % 3/1/17 4/30/17 $0.70 $539 $6,468 N/A N/A Gross N/A Hosopo Inc % 10/1/16 9/30/17 $0.65 $501 $6,012 N/A N/A Gross No reimbursement Tower Center Laundry 19 and 20 1, % 4/10/15 4/9/25 $0.78 $1,200 $14,400 Jan-2018 $1, Gross N/A Vacant % N/A N/A $0.00 $0 $0 N/A N/A N/A Total 14,388 $0.73 $10,573 $126,874 Occupi ed Occupied GLA: Tenants 68.90% Unoccupied Tenants: 6 Unoccupied GLA: 31.10% : 10 11

12 Percentage of Square Footage Expiring TENANT SUMMARY FINANCIAL ANALYSIS Lease Expiration Summary 100% 20 80% 60% 40% 20% Number of Tenants 0% Oct-2017 Oct-2018 Oct-2019 Oct-2020 Oct-2021 Oct-2022 Oct-2023 Oct-2024 Oct-2025 Oct-2026 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 % of SQFT Expiring Cumulative % of SQFT Expiring Number of Commercial Leases/Tenants Expiring

13 Common Area Maintenance (CAM) OPERATING STATEMENT FINANCIAL ANALYSIS Income Year 1 Year 2 Per SF Scheduled Base Rental Income 128, , Expense Reimbursement Income CAM Insurance Real Estate Taxes Management Fees Total Reimbursement Income $ % $ % $0.06 Potential Gross Revenue 128, , Effective Gross Revenue $128,970 $131,132 $9.11 Operating Expenses Year 1 Year 2 Per SF Utilities 46,066 46, Trash Removal Repairs & Maintenance Landscaping Snow Removal Insurance 4,575 4, Real Estate Taxes 11,825 11, Management Fee % % 0.03 Other Expenses - Non Reimbursable Total Expenses $62,958 $62,958 $4.38 Expenses as % of EGR 48.8% 48.0% Net Operating Income $66,012 $68,174 $4.74 Notes and assumptions to the above analysis are on the following page. 13

14 PRICING DETAIL FINANCIAL ANALYSIS Summary Operating Data Price $1,095,000 Down Payment $383,250 35% Income Year 1 Year 2 Number of Suites 16 Scheduled Base Rental Income $128,141 $130,303 Price Per SqFt $76.11 Total Reimbursement Income 0.6% $ % $829 Gross Leasable Area (GLA) 14,388 SF Other Income $0 $0 Lot Size 0.00 Acres Potential Gross Revenue $128,970 $131,132 Year Built/Renovated 0 General Vacancy $0 $0 Occupancy 68.93% Effective Gross Revenue $128,970 $131,132 Less: Operating Expenses 48.8% ($62,958) 48.0% ($62,958) Net Operating Income $66,012 $68,174 Returns Year 1 Year 2 Tenant Improvements $0 $0 CAP Rate 6.03% 6.23% Leasing Commissions $0 $0 Cash-on-Cash 17.22% 17.79% Capital Expenditures $0 $0 Debt Coverage Ratio Cash Flow $66,012 $68,174 Debt Service $0 $0 Net Cash Flow After Debt Service 17.22% $66, % $68,174 Financing 1st Loan Principal Reduction $0 $0 Loan Amount $711,750 Total Return 17.22% $66, % $68,174 Loan Type New Interest Rate 5.25% Operating Expenses Year 1 Year 2 Amortization 0 Years CAM $46,066 $46,066 Year Due 2037 Insurance $4,575 $4,575 Loan information is subject to change. Contact your Marcus & Millichap Capital Corporation representative. Real Estate Taxes $11,825 $11,825 Other Expenses - Non Reimbursable $0 $0 Total Expenses $62,958 $62,958 Expenses/SF $4.38 $

15 TENANT PROFILE Racobs Barber Shop Verizon Wireless General Information General Information Tenant Name Racobs Barber Shop Tenant Name Verizon Wireless Rentable Square Feet 625 Square Foot Rentable Square Feet 770 Square Foot Percentage of RBA Percent Percentage of RBA Percent Lease Commencement 11/1/2014 Lease Expiration 10/31/2019 Lease Commencement 3/1/2000 Lease Expiration 2/28/

16 TENANT PROFILE Hope Chest Thrift Store Horizon Solar Power General Information General Information Tenant Name Hope Chest Thrift Store Tenant Name Horizon Solar Power Rentable Square Feet 1,895 Square Foot Rentable Square Feet 770 Square Foot Percentage of RBA Percent Percentage of RBA Percent Lease Commencement 6/15/2015 Lease Expiration 6/14/2018 Lease Commencement 10/1/2016 Lease Expiration 9/17/

17 TENANT PROFILE Krisna/Tower Center Laundry General Information Richard West Medical Billing General Information Tenant Name Krisna/Tower Center Laundry Tenant Name Richard West Medical Billing Rentable Square Feet 1,540 Square Foot Rentable Square Feet 770 Square Foot Percentage of RBA Percent Percentage of RBA Percent Lease Expiration 5/30/2020 Lease Commencement 3/1/2017 Lease Expiration 3/1/

18 MARKET COMPARABLES 18

19 PROPERTY NAME SALES MARKETING COMPARABLES TEAM SALES COMPARABLES I AVENUE PLAZA I AVENUE, HESPERIA, CA KIOWA PLAZA KIOWA ROAD, APPLE VALLEY, CA HESPERIA TIME SQUARE MAIN STREET, HESPERIA, CA Sale Price: $1,550,000 Price/SF: $53.99 Year Built: 1986 Sale Date: 8/12/2016 Sale Price: $921,500 Price/SF: $ Year Built: 1985 Sale Date: 9/1/2016 Sale Price: $1,300,000 Price/SF: $81.25 Year Built: 1754 Sale Date: 5/20/2016 rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1 19

20 PROPERTY NAME RENT MARKETING COMPARABLES TEAM RENT COMPARABLES NAVAJOPLAZA NAVAJO ROAD, APPLE VALLEY, CA STRIP CENTER OUTER HIGHWAY 18, APPLE VALLEY, CA APPLE VALLEY VILLAGE YUCCA LOMA ROAD, APPLE VALLEY, CA Total GLA: 11,714 SF Total GLA: 11,247 SF Total GLA: 11,020 SF Available SF: 1,293 SF Available SF: 1,550 SF Available SF: 4,140 SF Asking Rent/SF: $12.00/NNN Asking Rent/SF: $10.20/MG Asking Rent/SF: $9.60/NNN rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1 20

21 MARKET OVERVIEW 21

22 TOWER CENTER RIVERSIDE-SAN BERNARDINO Market Highlights Strategic location Near LAX and Ontario International airports and ports in Long Beach and Los Angeles, Riverside-San Bernardino has vast air, rail and interstate systems. Dominant industrial market The metro is one of the nation s leading industrial markets in terms of sales, construction and absorption. Strong demographic trends Jobs, colleges, new home construction and more affordable housing will draw 372,600 new residents to the Inland Empire by Growing distribution market Many Fortune 500 companies have massive distribution centers in the area. Available land allows for further development. Geography The Riverside-San Bernardino metro, also referred to as the Inland Empire, is a 28,000-square-mile region in Southern California composed of San Bernardino and Riverside counties. Valleys in the southwestern portion of the region, adjacent to Los Angeles, Orange County and San Diego County, are the most populous in the metro. These areas abut the San Bernardino and San Jacinto mountains, behind which lies the high desert area of Victorville/Barstow to the north and the low-desert Coachella, home of Palm Springs, to the east. Riverside-San Bernardino Counties

23 TOWER CENTER RIVERSIDE-SAN BERNARDINO Metro The Riverside-San Bernardino metro contains a population of more than 4.4 million. The largest city is Riverside with 319,500 residents, followed by San Bernardino. Although population growth has slowed compared with the previous five years, the metro's population is still expected to increase by 1.3 percent annually through 2020, well above the national figure. Infrastructure Riverside-San Bernardino features three interstate freeways, I-10, I-215 and I-15, that form a triangle around one of the region s core growth centers. Additionally, the completion of the 210 freeway extension made commuting to and from Rialto and San Bernardino considerably easier. The Riverside-San Bernardino metro has two major airports: Ontario International and Palm Springs International. The region also has a cargo-dedicated facility, the Southern California Logistics Airport, located just north of Victorville in the High Desert. Two rail lines serve Riverside-San Bernardino, and the region boasts one of the largest and most modern intermodal facilities in the nation. Amtrak provides passenger rail service, and MetroLink connects the area to Orange County and Los Angeles. Local transit agencies run bus service throughout the area. The Riverside-San Bernardino Metro is: Major Roadways 60 miles from Los Angeles Interstates 10, 15 and miles from San Diego Highways 60, 71, 91 and miles from Tijuana Rail 400 miles from San Francisco Freight BNSF and Union Pacific Airports Passenger Amtrak Ontario International Commuter MetroLink Palm Springs International 33 smaller airports Largest Cities in Metro by Population Riverside 319,500 San Bernardino 216,700 Moreno Valley 204,500 Fontana 203,000 Rancho Cucamonga 171,700 Ontario 169,000 * Forecast Sources: Marcus & Millichap Research Services; U.S. Census Bureau; Experian Marcus & Millichap

24 TOWER CENTER RIVERSIDE-SAN BERNARDINO Economy The Riverside-San Bernardino metro has one of the largest economies in the United States. While the region s economic expansion has been fueled by a number of factors, robust population growth has been the primary demand driver. High home prices throughout much of Southern California leave residents seeking more affordable options in the Inland Empire. The resulting increase in population will continue to heighten the need for housing, retail goods, personal services and government services. There has also been exceptional growth in wholesale trade and warehousing as the area is an important distribution hub for the Southwest. Riverside-San Bernardino is the premier location in the Los Angeles Basin for new distribution facilities. This is because of its large pool of experienced workers, relatively inexpensive land and highly efficient intermodal transportation system that reduces the cost of both aggregating and distributing shipments. Amazon and Deckers have huge warehouses in the region, and growth in the distribution industry is expected to impact all other sectors. During the past year, the Riverside-San Bernardino metro recorded higher industrial absorption than most other industrial markets in the state. The distribution system also benefits two major cargo airports: Ontario International and the Southern California Logistics Airport in Victorville. * Forecast Sources: Marcus & Millichap Research Services; Bureau of Economic Analysis; Moody's Analytics; U.S. Census Bureau; CoStar Group, Inc.

25 TOWER CENTER RIVERSIDE-SAN BERNARDINO Labor The Riverside-San Bernardino metro employment base contains more than 1.3 million workers, and new jobs are projected to be generated at an annual average pace of 1.7 percent through the next five years, above the national growth rate of 1.3 percent. Traditionally, area residents who relocated from neighboring Los Angeles County or Orange County continued to commute to these markets for work. In recent years though, a rise in commercial development in the Inland Empire has generated more local jobs. As such, the job pool is becoming increasingly diverse, and many of the metro s population-serving industries are growing. The metro s infrastructure and proximity to the Los Angeles and Long Beach ports attract companies seeking West Coast distribution hubs. As a result, the trade, transportation and utilities sector accounts for 24 percent of all metro jobs. Given the prevalence of military installations and numerous cities and municipalities in the region, the government sector makes up another 17 percent of total employment and is poised to grow by 0.3 percent annually throughout Education and health services is another large sector, with 201,300 employees, equaling 15 percent of the workforce. Employment in this segment is expected to grow 3.9 percent annually during the coming five years. Construction will also expand at 3.9 percent annually in that time. Additionally, freeway improvements providing easier access to the eastern part of the metro and cities, including Moreno Valley, Palm Springs and Palm Desert, should promote healthy employment growth as companies move into these areas in the years ahead. * Forecast Sources: Marcus & Millichap Research Services; BLS; Moody s Analytics

26 TOWER CENTER RIVERSIDE-SAN BERNARDINO Employers Government entities account for some of the largest employers in the region, including Fort Irwin and March Air Reserve Base. As the base downsized, unused land was transformed into the March Inland Port, a 350-acre aviation-based industrial business park. March Inland Port Airport is a public joint-use airport and its 13,000-foot runway is one of the longest runways on the West Coast. Another significant employer is Ontario International Airport. The facility provides thousands of jobs at the airport and more than 50,000 indirect, off-site positions. Strong growth will continue at the airport, given the limits to expansion placed on neighboring airports in Los Angeles and Orange counties. Major healthcare providers such as Loma Linda University Medical Center and Kaiser Permanente also provide a big portion of the region s jobs. Demand for medical services is projected to rise rapidly in the coming years because of the area s increasing population and the baby-boomer generation s move into its retirement years. While Riverside-San Bernardino has a significant share of large employers, the majority of companies are small. This emphasis on small firms encourages innovation and flexibility and is positive for the area s long-term outlook, as most of the growth taking place in the economy is occurring in the small-business sector. Major Employers San Bernardino County Riverside County Stater Bros. Loma Linda University Medical Center Kaiser Permanente Wal-Mart Stores Inc. University of California, Riverside Fort Irwin Ontario International Airport March Air Reserve Base * Forecast Sources: Marcus & Millichap Research Services; BLS; Moody's Analytics; Experian

27 RIVERSIDE-SAN BERNARDINO Demographics The Riverside-San Bernardino metro consists of nearly 1.4 million households and more than 4.4 million residents, making it one of the largest metropolitan areas in the nation. While expansion will slow from earlier in the decade, the Inland Empire is still on pace to grow 1.3 percent per year during the next five years, above the national rate of 0.8 percent annually. This population gain is driving new housing construction. The majority of recent population growth in the area was due to in-migration rather than natural increases. Factors fueling in-migration include the strong local economy, relatively affordable housing, large parcels of developable land and a lack of available land in Los Angeles County. The median existing home price in Riverside-San Bernardino, at $299,700, also remains much lower than medians in adjacent counties, allowing 63 percent of households to afford to own their home. Residents are becoming more educated, as more than 50 percent of the metro s adults have at least some college education, and almost 20 percent of those ages 25 and older have attained a bachelor s degree or higher. Increasing education levels have helped to raise household earnings in the metro. The median household income rests at $56,100 per year, on par with the national median. * Forecast Sources: Marcus & Millichap Research Services; Moody's Analytics; U.S. Census Bureau

28 TOWER CENTER RIVERSIDE-SAN BERNARDINO Quality of Life Riverside-San Bernardino offers a diversity of landscapes, including the palm-tree-lined and pool-studded Coachella Valley, the mountain communities of Big Bear and Lake Arrowhead, the rolling hills and wineries of Temecula Valley and the suburban communities of the West San Bernardino Valley and Moreno Valley. A temperate climate offers moderate winters, warm summers and generally low humidity. One of the greatest draws of the metro is relatively affordable housing. The median home price in Riverside-San Bernardino is nearly 40 percent lower than in Los Angeles County and nearly 60 percent less than in Orange County. The Inland Empire provides a number of cultural opportunities, including the Riverside Metropolitan Museum, the Mission Inn Museum and the Museum of History and Art in Ontario. The California Theatre of Performing Arts in San Bernardino stages a number of performances through the year, as does the refurbished Fox Center for the Performing Arts. The Riverside County Philharmonic provides classical music concerts throughout the area. Shopping opportunities are plentiful no matter where you live in the metro, as are parks and golf courses. The region features an impressive offering of more than 20 college campuses, including nine community colleges, two California State University campuses and the University of California, Riverside. * Forecast Sources: Marcus & Millichap Research Services; National Association of Realtors; Moody s Analytics; U.S. Census Bureau

29 TOWER CENTER RIVERSIDE-SAN BERNARDINO Climbing Retail Sales Draw Investors Inland Strong demographics support retail sales; tenant demand tightens vacancy and boosts construction. A lower cost of living and the relatively close proximity to the employment hubs of Los Angeles and Orange County are spurring population growth in Riverside-San Bernardino and driving up retail sales. High home prices and climbing rents have also encouraged many households to move to the metro from other Southern California markets. In particular, millennials are flocking to the Inland Empire, comprising nearly 30 percent of the new growth as they seek out relatively affordable housing costs. This expanding consumer base has increased retail sales, sparking demand for retail space. As a result, builders have ramped up construction, focusing on necessity retailers as many fast-food establishments, drugstores and supermarkets break ground. The South Riverside area, specifically, is garnering interest from many national tenants. Wal-Mart, Marshalls and Rite Aid are among the many retailers leasing up available space. Despite a spike in construction this year, high absorption will improve vacancy and place upward pressure on rents. Tightening operations and favorable demographic trends intensify the bidding environment. Strong market fundamentals are driving many California retail buyers who want to diversify their portfolios to the Inland Empire. Transaction velocity continues to surge in the metro, as investors snatch up a large majority of single-tenant properties with cap rates in the mid-five percent range. In particular, fast-food chains and restaurants are growing in popularity, as evidenced by a rise in sales. These assets typically exchange hands at first-year yields between the high-four and low-six percent range. Additionally, several buyers are seeking to blend their portfolios with multi-tenant assets renting at or below market rates. However, limited listings will push some buyers to consider well-located, loweroccupied properties that can be filled with credit-worthy tenants for value-add opportunities. Overall, multi-tenant properties across the metro changed hands with average cap rates in the low-six percent span, with assets in ideal locations trading up to 100 basis points less Retail Forecast 3.1% increase in total employment 1 million sq. ft. will be completed 50 basis point decrease in vacancy 1.9% increase in asking rents Employment: After hiring 47,800 workers in 2015, Inland Empire employers are expected to create 43,000 jobs this year, expanding the employment base 3.1 percent. Many companies are planning to further expand in the metro, including UPS and Amazon. Construction: Advancing retail sales and strong demographics will drive up construction this year. Builders are forecast to complete approximately 1 million square feet of retail space in 2016, after completing 721,000 square feet the previous year. Vacancy: After increasing 10 basis points in 2015, the vacancy rate will drop 50 basis points this year to 8.9 percent as net absorption exceeds 1.6 million square feet of retail space. Rents: As vacancy continues to tighten across the Inland Empire, the average asking rent will increase 1.9 percent in 2016 to $16.30 per square foot of retail space. In the previous annual period, asking rent inched up 0.8 percent.

30 RIVERSIDE-SAN BERNARDINO Economy Economy Over the year ending in June, Inland Empire employers increased hiring by 3.3 percent with the addition of 44,000 jobs. This dropped the unemployment rate 80 basis points to 5.7 percent during the same time period. In the previous year, nearly 58,000 jobs were created. Employment gains over the last four quarters were particularly strong in the construction sector, rising 5.1 percent with 4,400 jobs. The trade, transportation and utilities sector created the most jobs overall, increasing payrolls by 14,200 workers. The growing employment base has driven up retail sales over the prior 12-month period. Average retail sales advanced 2.8 percent during this time, after jumping 5.2 percent the prior year. Outlook: As companies continue to move and expand in the metro, the employment base will increase 3.1 percent this year as 43,000 jobs are created. In 2015, employers hired 47,800 workers. * Forecast Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; Economy.com Construction In the last 12 months ending at midyear, developers completed more than 677,000 square feet of retail space. The majority of space was located in eastern San Bernardino and southern locations within Riverside. In the prior year, 687,000 square feet was constructed. More than 400,000 square feet of retail space is currently underway with delivery dates scheduled through Approximately 60 percent of this development will be single-tenant assets in the Inland Empire East submarket. One of the largest projects under construction is the Town Center Marketplace in the city of Menifee. The project will sit on 12 acres and contain about 90,000 square feet of retail space. Signed tenants include a Buffalo Wild Wings, Rubio s and Sonic. Outlook: High demand for retail space is expected to increase completions to 1 million square feet in The previous year, builders delivered nearly 721,000 square feet of retail space. * Forecast Sources: Marcus & Millichap Research Services; CoStar Group, Inc.

31 TOWER CENTER RIVERSIDE-SAN BERNARDINO METRO AREA Vacancy During the year ending in June, the vacancy rate for retail space fell 10 basis points to 9.2 percent as new space leased up. In the prior annual period, vacancy fell 30 basis points. Assets in the western portion of San Bernardino and Riverside had vacancy in the high-6 percent range ending the second quarter of Retail properties near the Ontario International Airport registered vacancy in the high- 5 percent area. The vacancy rate for multi-tenant assets in the Inland Empire fell 10 basis points over the last four quarters to 9.8 percent. In the prior year, vacancy declined 40 basis points. Outlook: Despite a rise in construction this year, the growing demand for retail space will trim the vacancy rate 50 basis points to 8.9 percent. In 2015, vacancy ticked up 10 basis point. * Forecast Sources: Marcus & Millichap Research Services; CoStar Group Inc. Rents The average asking rent fell slightly, by 0.1 percent, during the last four quarters ending at midyear to $15.94 per square foot. During the previous year, asking rent inched up 0.3 percent. Marketwide, asking rent was higher than average at the end of the second quarter of 2016 in the city of Riverside and within Coachella Valley. It stood in the high-$16 per square foot range. More affordable rents could be found in the eastern and northern parts of San Bernardino between $12 to $13 per square foot. Over the last 12 months, average asking rent edged up 0.8 percent for single-tenant assets to $15.98 per square foot. On the other hand, rent for multi-tenant properties fell 2.2 percent to $15.83 per square foot. Outlook: After the average rent nudged up 0.8 percent in 2015, tightening vacancy will further increase asking rent 1.9 percent this year to $16.30 per square foot. * Forecast Sources: Sources: Marcus & Millichap Research Services; CoStar Group, Inc.

32 TOWER CENTER RIVERSIDE-SAN BERNARDINO METRO AREA Single-Tenant Sales Trends** Interest in single-tenant assets is growing in the Inland Empire as transaction velocity jumped more than 20 percent during the last four quarters ending at midyear. Nearly 50 percent of the sales occurred in the San Bernardino area. In the prior annual period, the number of transactions ticked up 5 percent. Increased demand drove the average price up nine percent over the last 12 months to $375 per square foot. Several fast-food establishments sold at prices double this average. Single-tenant properties within Riverside were more affordable, averaging around $320 per square foot. First-year returns fell 40 basis points over the year ending in June to the high-5 percent range. Assets near the airport traded with cap rates in the mid-four to low-five percent range, while properties in Riverside and Coachella Valley changed hands with cap rates in the high-five to low-six percent span. Outlook: Strong net absorption and an overall rise in rents will further entice single-tenant buyers to the Inland Empire. Demand will remain strong in fastfood chains and restaurant establishments. ** Trailing 12-month period through 2Q Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics Multi-Tenant Sales Trends** Trading in multi-tenant assets increased by approximately 11 percent during the last 12 months as properties in Riverside gained popularity. In the previous year, transaction velocity rose 20 percent. As more buyers snatched up multi-tenant assets during the last four quarters, the average price lifted nine percent to $250 per square foot. Neighborhood centers were more affordable, averaging around $170 per square foot. The average first-year yield compressed 60 basis points during the year ending in the second quarter to the lowsix percent range. Properties in Riverside and the western portion of San Bernardino traded with cap rates in the low- to high-five percent range during the same time period. Outlook: Many buyers from other Southern California metros will seek assets in the Inland Empire to further add yield to their portfolios as returns compress in their home markets. ** Trailing 12-month period through 2Q Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics

33 TOWER CENTER RIVERSIDE-SAN BERNARDINO METRO AREA Capital Markets Global capital markets have remained stable over the past few weeks, even as Brexit and the continued devaluation of the Chinese yuan have induced bouts of volatility into stock and bond markets. Meanwhile, U.S. economic data has proved resilient, with increases in retail sales and steady hiring supporting a measured pace of growth. Additionally, higher bond prices have lowered prospective yields, boosting the appeal of commercial real estate. As the current economic cycle has continued, retail vacancy descended to 5.8 percent by the end of the second quarter. A focus on net-leased construction for pre-leased tenants and mixed-use developments has limited development activity in relation to prior cycles, supporting robust increases in average asking rents. Builders will deliver 46 million square feet of retail space this year, with more than two-thirds of new supply slated as single-tenant structures. This environment will sponsor a fourth straight year of average asking rent growth, with advancement projected to exceed inflation over the same period. Capital markets remain highly competitive, with a broad assortment of fixed-rate products available through commercial banks, life-insurance companies and CMBS lenders. Loans are generally offered at terms up to 10 years at maximum leverage of 65 to 75 percent. For 10-year terms, rates will typically reside in the high-three to mid-four percent range, depending on leverage and underwriting criteria. Floating bridge loans and financing for repositionings are typically underwritten with LTVs above 80 percent, while pricing at 300 basis points above Libor for recourse deals and extending to 470 basis points above Libor for non-recourse transactions. Local Highlights The city of Moreno Valley has approved the construction of a large warehouse named The World Logistics Center. The 40 million-square-foot center will be one of the largest warehouse complexes in the United States. The World Logistics Center is forecast to bring nearly 20,000 jobs to the area and serve as a catalyst for new housing and retail construction. Hiring continues to remain healthy across the Inland Empire. UPS has announced plans to add nearly 500 jobs to its location at the LA/Ontario International Airport over the next five years. The company recently completed construction on a 416,000-square-foot building to keep pace with the growing demand for e-commerce. Additionally, Amazon is planning on opening a new fulfilment center in the city of San Bernardino. This development will bring approximately 1,000 jobs to the area. A new 50,000-square-foot shopping center is under construction in the area of Rancho Cucamonga in the Inland Empire West submarket. The development, named Epicentre Rancho Cucamonga, is expected to be delivered in the fourth quarter of 2016 and will be located at one of the busiest intersections in the community.

34 PROPERTY NAME MARKETING DEMOGRAPHICS TEAM POPULATION 1 Miles 3 Miles 5 Miles 2021 Projection Total Population 6,018 34, , Estimate Total Population 5,624 32, , Census Total Population 5,375 30,628 97, Census Total Population 4,236 25,390 74,835 Current Daytime Population 2016 Estimate 5,451 32, ,792 HOUSEHOLDS 1 Miles 3 Miles 5 Miles 2021 Projection Total Households 2,076 11,628 37, Estimate Total Households 1,938 10,974 34,521 Average (Mean) Household Size Census Total Households 1,843 10,303 31, Census Total Households 1,547 8,941 25,839 Occupied Units 2021 Projection 2,076 11,628 37, Estimate 2,036 11,732 37,102 HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles 2016 Estimate $150,000 or More 9.67% 7.00% 4.92% $100,000 - $149, % 13.91% 12.00% $75,000 - $99, % 10.73% 11.13% $50,000 - $74, % 17.24% 18.32% $35,000 - $49, % 12.44% 13.65% Under $35, % 37.12% 38.90% Average Household Income $79,747 $71,463 $64,064 Median Household Income $55,781 $50,550 $46,778 Per Capita Income $27,563 $24,355 $21,201 HOUSEHOLDS BY EXPENDITURE 1 Miles 3 Miles 5 Miles Total Average Household Retail Expenditure $67,698 $64,908 $62,607 Consumer Expenditure Top 10 Categories Housing $20,461 $19,840 $19,347 Shelter $13,278 $12,997 $12,790 Transportation $10,404 $10,076 $9,747 Food $7,170 $6,951 $6,772 Personal Insurance and Pensions $5,856 $5,395 $5,063 Health Care $4,515 $4,152 $3,888 Utilities $3,456 $3,337 $3,246 Entertainment $2,643 $2,511 $2,396 Cash Contributions $1,932 $1,811 $1,675 Apparel $1,626 $1,614 $1,607 POPULATION PROFILE 1 Miles 3 Miles 5 Miles Population By Age 2016 Estimate Total Population 5,624 32, ,988 Under % 28.39% 30.31% 20 to 34 Years 18.01% 19.06% 20.58% 35 to 39 Years 4.55% 4.90% 5.39% 40 to 49 Years 11.50% 11.78% 11.70% 50 to 64 Years 21.41% 19.88% 17.73% Age % 16.02% 14.26% Median Age Population 25+ by Education Level 2016 Estimate Population Age 25+ 3,781 20,928 65,098 Elementary (0-8) 2.82% 5.76% 4.91% Some High School (9-11) 8.53% 9.49% 10.94% High School Graduate (12) 25.14% 27.02% 28.81% Some College (13-15) 30.26% 28.39% 28.26% Associate Degree Only 11.89% 9.43% 9.45% Bachelors Degree Only 12.75% 11.28% 9.31% Graduate Degree 8.19% 7.38% 6.78% Source: 2016 Experian 34

35 PROPERTY NAME MARKETING DEMOGRAPHICS TEAM Population In 2016, the population in your selected geography is 5,624. The population has changed by 32.77% since It is estimated that the population in your area will be 6, five years from now, which represents a change of 7.01% from the current year. The current population is 49.38% male and 50.62% female. The median age of the population in your area is 41.29, compare this to the US average which is The population density in your area is 1, people per square mile. Race and Ethnicity The current year racial makeup of your selected area is as follows: 71.68% White, 8.11% Black, 0.62% Native American and 3.21% Asian/Pacific Islander. Compare these to US averages which are: 70.77% White, 12.80% Black, 0.19% Native American and 5.36% Asian/Pacific Islander. People of Hispanic origin are counted independently of race. People of Hispanic origin make up 28.86% of the current year population in your selected area. Compare this to the US average of 17.65%. Households There are currently 1,938 households in your selected geography. The number of households has changed by 25.27% since It is estimated that the number of households in your area will be 2,076 five years from now, which represents a change of 7.12% from the current year. The average household size in your area is 2.76 persons. Housing The median housing value in your area was $217,826 in 2016, compare this to the US average of $187,181. In 2000, there were 1,011 owner occupied housing units in your area and there were 536 renter occupied housing units in your area. The median rent at the time was $497. Income In 2016, the median household income for your selected geography is $55,781, compare this to the US average which is currently $54,505. The median household income for your area has changed by 28.21% since It is estimated that the median household income in your area will be $69,779 five years from now, which represents a change of 25.09% from the current year. Employment In 2016, there are 1,080 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed that 67.53% of employees are employed in white-collar occupations in this geography, and 36.95% are employed in blue-collar occupations. In 2016, unemployment in this area is 6.65%. In 2000, the average time traveled to work was minutes. The current year per capita income in your area is $27,563, compare this to the US average, which is $29,962. The current year average household income in your area is $79,747, compare this to the US average which is $78,425. Source: 2016 Experian 35

36 O F F E R I N G M E M O R A N D U M E X C L U S I V E L Y L I S T E D B Y Jon Mitchell Vice President Investments Newport Beach Office Tel: (949) Jon.Mitchell@MarcusMillichap.com CA License: Janine Peltier, CCIM Senior Associate Retail Ontario Office Tel: (909) Janine.Peltier@MarcusMillichap.com CA License: