TRAIL CROSSING. Offering MeMOrandum. Retail Shopping Center Investment Opportunity W Ave N Palmdale CA 93551

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1 TRAIL CROSSING Retail Shopping Center Investment Opportunity Offering MeMOrandum Capital Markets Investment PrOPerties

2 Affiliated Business Disclosure Disclaimer This Memorandum contains select information pertaining to the Property and the Owner, and does not purport to be all-inclusive or contain all or part of the information which prospective investors may require to evaluate a purchase of the Property. The information contained in this Memorandum has been obtained from sources believed to be reliable, but has not been verified for accuracy, completeness, or fitness for any particular purpose. All information is presented as is without representation or warranty of any kind. Such information includes estimates based on forward-looking assumptions relating to the general economy, market conditions, competition and other factors which are subject to uncertainty and may not represent the current or future performance of the Property. All references to acreages, square footages, and other measurements are approximations. This Memorandum describes certain documents, including leases and other materials, in summary form. These summaries may not be complete nor accurate descriptions of the full agreements referenced. Additional information and an opportunity to inspect the Property may be made available to qualified prospective purchasers. You are advised to independently verify the accuracy and completeness of all summaries and information contained herein, to consult with independent legal and financial advisors, and carefully investigate the economics of this transaction and Property s suitability for your needs. ANY RELIANCE ON THE CONTENT OF THIS MEMORANDUM IS SOLELY AT YOUR OWN RISK. The Owner expressly reserves the right, at its sole discretion, to reject any or all expressions of interest or offers to purchase the Property, and/or to terminate discussions at any time with or without notice to you. All offers, counteroffers, and negotiations shall be non-binding and neither CBRE, Inc. nor the Owner shall have any legal commitment or obligation except as set forth in a fully executed, definitive purchase and sale agreement delivered by the Owner. Exclusively Listed By: CBRE, Inc. operates within a global family of companies with many subsidiaries and related entities (each an Affiliate ) engaging in a broad range of commercial real estate businesses including, but not limited to, brokerage services, property and facilities management, valuation, investment fund management and development. At times different Affiliates, including CBRE Global Investors, Inc. or Trammell Crow Company, may have or represent clients who have competing interests in the same transaction. For example, Affiliates or their clients may have or express an interest in the property described in this Memorandum (the Property ), and may be the successful bidder for the Property. Your receipt of this Memorandum constitutes your acknowledgement of that possibility and your agreement that neither CBRE, Inc. nor any Affiliate has an obligation to disclose to you such Affiliates interest or involvement in the sale or purchase of the Property. In all instances, however, CBRE, Inc. and its Affiliates will act in the best interest of their respective client(s), at arms length, not in concert, or in a manner detrimental to any third party. CBRE, Inc. and its Affiliates will conduct their respective businesses in a manner consistent with the law and all fiduciary duties owed to their respective client(s). Confidentiality Agreement Your receipt of this Memorandum constitutes your acknowledgement that (i) it is a confidential Memorandum solely for your limited use and benefit in determining whether you desire to express further interest in the acquisition of the Property, (ii) you will hold it in the strictest confidence, (iii) you will not disclose it or its contents to any third party without the prior written authorization of the owner of the Property ( Owner ) or CBRE, Inc., and (iv) you will not use any part of this Memorandum in any manner detrimental to the Owner or CBRE, Inc. If after reviewing this Memorandum, you have no further interest in purchasing the Property, kindly return it to CBRE, Inc. Copyright Notice 2017 CBRE, Inc. All Rights Reserved. PMStudio_January2017 Alex Kozakov Senior Vice President Lic alex.kozakov@cbre.com Patrick Wade Senior Vice President Lic patrick.wade@cbre.com Alan Krueger Senior Vice President Lic alan.krueger@cbre.com Eric Roy Associate Lic eric.roy@cbre.com Matthew Greenberg Associate Lic matthew.greenberg@cbre.com 2

3 TRAIL CROSSING Table of Contents Investment Overview Financial Overview Tenant Overview Area Overview 3

4 TRAIL CROSSING 4

5 05 Investment Overview 5

6 N Quartz Hill Mini Storage Quartz Hill Elementary School CHASE starbucks TRAIL CROSSING 50th St W (NAP) (NAP) (NAP) W Avenue N 8,889 VPD 12,500 VPD 6

7 Offering Summary Purchase Price: $5,335,000 Current NOI: $346,746 Current Cap Rate: 6.50% Current Occupancy: 100% ProForma NOI: $354,045 ProForma Cap Rate: 6.64% Total GLA: Total Land SF: 9,984 SF 124,759 SF AC* Year Built: 2009 Major Tenants: Pizza Hut, Subway, Walgreens (NAP), Panda Express (NAP), McDonald s (NAP) *Additional 3 parcels included in sale consists of 2 retention basins and land parcel. Potential drive through pad development included in sale but not factored into NOI or Cap Rate. Investment Overview 7

8 Investment Highlights Shadow-Anchored LA County Neighborhood Center with Excellent Cash Flow Six Unit Stabilized Retail Center Offered at Attractive 6.50% Cap Rate - Potential for Strong Cash-on-Cash Return Shadow-Anchored by Walgreens (NAP), McDonald s (NAP), and Panda Express (NAP), which Builds Additional Customer Draw to Center Complimentary Tenant Mix Includes National Tenants Pizza Hut, Subway, and Established Regional Tenants All Tenants on NNN Leases - Full Expense Reimbursement (Including Management Fees) Internet Resistant Service-Oriented Tenant Mix Delivered Free and Clear of Debt: New Financing Available at Attractive Rates Value Add Opportunity - Excess Land Allows for Potential Additional Pad Development Key Demographics Desirable Signalized Corner Location in High Growth LA County Sub-Market Attractive 2009 Construction with Large Shared Parking Field and Multiple Ingress/Egress Points Over 21,300 CPD Pass the Property at the Corner of W. Avenue N and 55th Street West Serving as the Immediate Area s Primary Retail Intersection Located Directly Across the Street from Smart & Final Anchored Shopping Center with Del Taco, Autozone, and Del Taco Excellent Population Growth of Over 11% in 1-Mile Radius Since 2010 Strong Demographic Buying Power Over 124,000 People with an Average Household Income Exceeding $90,925 in a 5-Mile Radius 55,410 Total Population within 3-Mile Radius $110,752 Average Household Income within 1-Mile Radius 31,068 Daytime Employees within 5-Mile Radius $88,367 Median Household Income within 1-Mile Radius 8

9 N Rancho Vista Gold Course Hillview Middle School Gregg Anderson Academy 12,500 VPD 8,889 VPD (NAP) Potential Drive Through Pad Development 50th St W (NAP) W Avenue N (NAP) TRAIL CROSSING Investment Overview 9

10 Site Plan 9,984 SF Medranos Mexican Restaurant 4,500 SF Subway 1,000 SF Premium Cigar 1,000 SF Pizza Hut 1,000 SF Best Barber's Shop 1,000 SF Deluxe Nails 1,484 SF McDonald s 3,425 SF (NAP) Panda Express 2,448 SF (NAP) WEST AVENUE NORTH Walgreens 13,650 SF (NAP) 50TH STREET WEST 10

11 Site Plan - potential pad development (NAP) Potential Drive Through Pad Development (NAP) (NAP) (NAP) 11

12 TRAIL CROSSING 12

13 13 Financial Overview 13

14 Rent Roll Lease TErm Proforma Tenant Square Feet Pro-Rata Begin End Annually Psf/Yr Recovery Type Rental Increases/Options Market Rate Monthly Psf Market Rate Annual Rent ShOP Tenants Deluxe Nails 1, % 3/1/10 2/28/20 $63,768 $42.97 NNN 3% Annual $3.58 $65,681 Best Barber s Shop (Pending) 1, % 5/1/17 4/30/20 $27,000 $27.00 NNN 3% Annual $2.25 $27,000 Pizza Hut 1, % 1/9/13 1/31/18 $25,800 $25.80 NNN 12% at option 2/1/2018 $2.15 $28,896 Premium Cigar 1, % 1/1/17 12/31/21 $27,000 $27.00 NNN 3% Annual $2.25 $27,810 Subway 1, % 1/1/10 12/31/19 $36,456 $36.46 NNN 2% Annual $2.98 $36,456 Medranos Mexican 4, % 11/28/09 11/30/24 $192,044 $42.68 NNN 4% Annual $3.45 $193,909 Occupied 9, % $372,068 $37.27 $38.04 $379,751 TOtals/ AVERAGES 9, % $372,068 $37.27 $38.04 $379,751 *ProForma assumes all tenants next scheduled increase and lease up of vacant unit at $2.25/sf NNN Lease TErm Tenant Square Feet Pro-Rata Begin End Annually Psf/Yr Cam TEnants (Not a Part) Association % Recovery Type Rental Increases/Options Market Rate Monthly Psf Proforma Market Rate Annual Rent Walgreens (NAP) 13, % NA NA $0 $0.00 NNN N/A N/A N/A Panda Express (NAP) 2, % NA NA $0 $0.00 NNN N/A N/A N/A McDonald's (NAP) 3, % NA NA $0 $0.00 NNN N/A N/A N/A Occupied 29, % TOtals/ AVERAGES 29, % 14

15 Income & Expenses Current "in-place" PROFORMA Gross Revenue In-Place Rental Revenue $372,068 $379,751 Reimb. Association CAM* 100% $38,605 $38,605 Reimb. Shops CAM 100% $22,706 $22,706 Reimb. Insurance - Shops 100% $2,067 $2,067 Reimb. Insurance - Association 100% $1,220 $1,220 Reimb. Real Estate Taxes - Association 100% $5,691 $5,691 Reimb. Real Estate Taxes Shops 100% $64,073 $64,073 Total Gross Revenue $506,430 $514,113 Credit Loss / Vacancy Reserve 5.0% ($25,321) ($25,705.67) Effective Gross Revenue $481,108 $488,408 Expenses CAM - Association* Actual ($38,605) ($38,605) CAM - Shops Actual ($22,706) ($22,706) Insurance - Shops Actual ($2,067) ($2,067) Insurance - Association Actual ($1,220) ($1,220) Real Estate Taxes - Association Actual ($5,691) ($5,691) Real Estate Taxes Shops Estimated % ($64,073) ($64,073) Total Operating Expenses ($134,362) ($134,362) Net Operating Income $346,746 $354,045 Total Capital Expenditures $0.20 ($1,997) ($1,997) Cash Flow Before Debt $344,749 $352,049 *Association CAM includes management fee of $13,490 *ProForma assumes all tenants next scheduled increase. Assumes 100% NNN reimbursements. Financial Overview 15

16 Pricing Summary Current Sale Price PRICE $5,335,000 LOAN PRINCIPAL ($2,934,250) LOAN FEE ($29,343) REQUIRED EQUITY $2,371,408 CURRENT "IN-PLACE" NOI $346,746 CURRENT CASH FLOW BEFORE DEBT $344,749 ANNUAL DEBT SERVICE ($178,409) CURRENT CASH FLOW AFTER DEBT $166,340 CAP RATE 6.50% CASH-ON-CASH RETURN 6.46% LEVERAGED CASH RETURN 7.01% PRICE/SF $ Financing SuMMary based on List Price Loan Type Market Loan-to-Value Ratio 60% Interest Rate 4.50% Loan Term 10 Years Amortization Period 30 Years Interest Only Period None Loan Fee 1.00% *Financing Terms are approximate and subject to change. Please contact agent for details. Pro-Forma Sale Price PRICE $5,335,000 LOAN PRINCIPAL ($2,934,250) LOAN FEE ($29,343) REQUIRED EQUITY $2,371,408 PROFORMA NOI $354,045 PROFORMA CASH FLOW BEFORE DEBT $352,049 ANNUAL DEBT SERVICE ($178,409) PROFORMA CASH FLOW AFTER DEBT $173,640 CASH-ON-CASH RETURN 6.64% PROFORMA CAP RATE 6.60% LEVERAGED CASH RETURN 7.32% PRICE/SF $

17 Financial Overview 17

18 TRAIL CROSSING 18

19 19 Tenant Overview 19

20 Tenant Overview Subway is the world s biggest sandwich chain. It overtook McDonald s as America s biggest fast-food restaurant by number of outlets in 2002, and achieved the same feat on a global scale in Growth has been generated partly by Subway s offer of a healthy alternative to burgers and fries, but also a supremely efficient franchising model organized by parent company Doctor s Associates. As a franchising machine it has few equals, voted the #1 franchise opportunity in the US an astonishing 17 times since 1985 because of its levels of franchisee support and development and the potential for growth. The advantage to customers is the flexibility of the menu, as well as its made-before-your-eyes freshness. The privately owned business now has 45,000 restaurants worldwide, all franchised, and continues to expand with astonishing speed, opening an average of 2,000 new outlets each year. Subway Industry: Restaurants Company Type: Privately Held Company Founded: 1965 Founders: Peter Buck & Fred DeLuca Headquarters: Milford, CT Locations: 45,000+ Website: Pizza Hut (corporately known as Pizza Hut, Inc.) is an American restaurant chain and international franchise that offers different styles of pizza along with side dishes including salad, pasta, buffalo wings, breadsticks, and garlic bread. Pizza Hut is a subsidiary of YUM! Brands, Inc., the world s largest restaurant company. According to its corporate website, there are more than 6,000 Pizza Hut restaurants in the United States, and more than 5,600 store locations in 94 other countries and territories around the world. Pizza Hut is split into several different restaurant formats; the original family-style dine-in locations; store front delivery and carry-out locations; and hybrid locations that offer carry-out, delivery, and dine-in options. Many full-size Pizza Hut locations offer lunch buffet, with all-you-can-eat pizza, salad, bread sticks, and a special pasta. Pizza Hut Industry: Restaurants Company Type: Wholly Owned Subsidiary Founded: 1958 Founders: Dan Carney & Frank Carney Headquarters: Plano, TX Locations: 6,300+ (U.S) Website: 20

21 Premium Cigar & Vape Deluxe Nails & Spa Mexican style restaurant Locations in Palmdale, Lancaster and Quartz Hill 21

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23 23 Area Overview 23

24 City of Palmdale For more than 50 years, Palmdale has been on the leading edge of America s newest technologies, with major breakthroughs in aerospace, materials science, energy and the environment. Today, Palmdale is a thriving community of nearly 2,000 businesses that encompass not only world-class engineering and state-of-the-art manufacturing facilities, but remarkable new medical facilities, a strong service sector and a robust retail marketplace. With low taxes, streamlined permitting, creative incentives, modern business parks, and affordable costs, Palmdale is the ideal environment to start and grow a business. The city offers Foreign Trade Zone status; industrial development bonds; free job placement and training for employers and employees; and educational opportunities at AERO Institute which addresses the need for technically skilled workforce and STEM education at all levels. Demographics Current Population 181,139 Median Age 33.2 Average Household Income $72,515 Annual Sales & Use Tax Revenue $19,186,043 Number of Business Licenses 9,730 Residential Units 52,115 Median Housing $141,000 Median Housing $247,200 Median Housing $161,000 Education 105,244 Workforce 68,764 Palmdale offers a rich lifestyle, with diverse housing from starter homes to luxurious executive estates and award winning schools. Palmdale Regional Medical Center is recognized as the area s premier healthcare provider, specializing in cardiology, emergency medicine, rehabilitation, advanced robotics, and bariatric treatment for chronic wounds. Planning is underway to tie California s High Speed Rail system with Palmdale Transportation Center to provide fast and easy travel to downtown LA, the Bay Area and beyond. This regional multi-modal hub offers convenient connections to major ground transportation providers including Metrolink commuter rail, AVTA, Amtrak Thruway and Greyhound. 24

25 N TRAIL CROSSING 50th St W 8,889 VPD W Avenue N 12,500 VPD Area Overview 25

26 5 miles 3 miles 1 mile Trail Crossing 26

27 Demographics One-mile radius three-mile radius five-mile radius 2016 Population 11,793 55, , Population 12,812 60, ,179 POPULATION 2010 Population 10,544 49, , Population 8,360 35,405 79,104 Growth % 11.83% 11.80% Growth % 8.73% 8.38% 2016 Estimated Median Age Estimated Average Age Estimated Households 3,863 17,427 37, Projected Households 4,189 18,790 39,995 HOUSEHOLDS INCOME Race & Origin 2010 Census Households 3,475 15,984 34, Census Households 2,672 11,529 24,896 Growth % 9.03% 8.97% Growth % 7.82% 7.76% 2016 Average Household Size Est. Average Household Income $110,752 $96,137 $90, Prj. Average Household Income $116,378 $102,708 $97, Est. Median Household Income $88,367 $77,738 $74,535 White Population 69.29% 64.01% 54.93% African American Population 9.79% 11.77% 15.26% Asian Population 6.15% 6.22% 6.57% Pacific Islander 0.14% 0.30% 0.28% American Indian / Alaska Native 1.25% 1.06% 0.91% Other Race Population 8.17% 11.12% 16.44% Two or More Races Population 5.22% 5.52% 5.60% Area Overview 27

28 Exclusively Listed by: Alex Kozakov Senior Vice President Lic Patrick Wade Senior Vice President Lic Alan Krueger Senior Vice President Lic Eric Roy Associate Lic Matthew Greenberg Associate Lic CBRE 2017 All Rights Reserved. All information included in this proposal pertaining to CBRE including but not limited to its operations, employees, technology and clients are proprietary and confidential, and are supplied with the understanding that they will be held in confidence and not disclosed to third parties without the prior written consent of CBRE. This letter/proposal is intended solely as a preliminary expression of general intentions and is to be used for discussion purposes only. The parties intend that neither shall have any contractual obligations to the other with respect to the matters referred herein unless and until a definitive agreement has been fully executed and delivered by the parties. The parties agree that this letter/proposal is not intended to create any agreement or obligation by either party to negotiate a definitive lease/purchase and sale agreement and imposes no duty whatsoever on either party to continue negotiations, including without limitation any obligation to negotiate in good faith or in any way other than at arm s length. Prior to delivery of a definitive executed agreement, and without any liability to the other party, either party may (1) propose different terms from those summarized herein, (2) enter into negotiations with other parties and/or (3) unilaterally terminate all negotiations with the other party hereto. This information has been obtained from sources believed reliable. We have not verified it and make no guarantee, warranty or representation about it. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs. CBRE, Inc. operates within a global family of companies with many subsidiaries and/or related entities (each an Affiliate ), engaging in a broad range of commercial real estate businesses including, but not limited to, brokerage services, property and facilities management, valuation, investment fund management, and development. At times different Affiliates may represent various clients with competing interests in the same transaction. For example, this Memorandum may be received by our Affiliates, including CBRE Investors, Inc. or Trammel Crow Company. Those, or other, Affiliates may express an interest in the property described in this Memorandum (the Property ) may submit an offer to purchase the Property and may be the successful bidder for the Property. You hereby acknowledge that possibility and agree that neither CBRE, Inc. nor any involved Affiliate will have any obligation to disclose to you the involvement of any Affiliate in the sale or purchase of the Property. In all instances, however, CBRE, Inc. will act in the best interest of the client(s) it represents in the transaction described in this Memorandum and will not act in concert with or otherwise conduct its business in a way that benefits any Affiliate to the detriment of any other offeror or prospective offeror, but rather will conduct its business in a manner consistent with the law and any fiduciary duties owed to the client(s) it represents in the transaction described in this Memorandum.