BLUE RHINO, a division of Ferrellgas Greater Denver Metro, Colorado RON WEBERT Principal 303.501.8777 rwebert@lee-associates.com J. MARK LARSON Vice Chairman 213.623.2022 mark.larson@lee-associates.com BRE License #00546735 HERRICK JOHNSON Senior Vice President 951.276.3632 hjohnson@leeriverside.com BRE License #01013436
TABLE OF CONTENTS SECTION I - EXECUTIVE OVERVIEW Executive Summary... 4 Property Overview... 5 SECTION II - PROPERTY DESCRIPTION Property Description... 7 Property Photos... 8 Aerial View... 10 Leased Area Aerial View... 11 Local Map... 12 Regional Map... 13 Denver Metro Map... 14 SECTION III - VALUATION UNDERWRITING SUPPORT Investment Analysis... 16 SECTION IV - TENANT INFORMATION Rent Roll... 18 Tenant Summary... 19 Page 2
SECTION I EXECUTIVE OVERVIEW
EXECUTIVE SUMMARY PRICE: $6,900,000 AREA: 14,410± SF plus 4.8 acres NET OPERATING INCOME: $368,208 TENANT: LEASE GUARANTOR: Blue Rhino, a division of Ferrellgas, LP Ferrellgas, LP - NYSE: FGP OCCUPANCY: 100% LEASE EXPIRATION: September 30, 2025 USE: Natural Gas Refueling Facility - Tenant requires entire site to facilitate operations, storage and distribution. Page 4
PROPERTY OVERVIEW Blue Rhino, a division of Ferrellgas LP, the nation s second largest provider of propane in the United States, is located at 9771 Hanover Court East in Commerce City, Colorado, also home to industrial users FedEx, Sinclair Oil, Midwest Motor Express, Saia Freightlines, Weyerhauser, Purina, a regional distribution facility for Home Depot, among many. This mission critical propane canister refueling facility is just south of Interstate I-76 and north of East 96th Avenue, in the greater Denver Metro Area. It is a central and critical location for servicing the 3 million people in the Denver area, as well as the 7 million potential customers of the Intermountain West; including Utah to the west, Kansas and Nebraska to the east, Wyoming and Idaho to the north as well as New Mexico to the south. Introduction This is only one of nine filling and distribution locations in the U.S. The single tenant industrial asset is comprised of two buildings totaling 14,410 square feet (including 3,500 square feet of mezzanine), one 6,500 square feet and the other containing 4,410 square feet. One building is for canister refurbishment while the other is for filling and palletizing canisters. Blue Rhino, in order to facilitate its operations, must utilize the entire 4.8+ acres of land which includes the improvements and a large tarmac that is an integral part of the property as it is utilized for storage of filled canisters ready to be shipped and empty canisters ready for refurbishment, re-filled and shipped. The property was a build to suit in 2003 and has permitting that is difficult to obtain as well as custom piping and plumbing designed to accommodate this use, which obviously insures the likelihood of continued long term tenancy. The facility ships approximately 1.5 million canisters annually to a wide array of customers including Lowes, Home Depot, C-Stores, among many. The property is within a 20 minute drive of the Denver International Airport and the asset is a perfect investment for an investor looking for a long term hold of a well located, stabilized Net Leased property, with an excellent credit tenant. Property Highlights Net Leased Single Tenant Industrial Asset - Multiple Renewal Options Outstanding Credit - NYSE: FGP - $2 Billion Annual Revenue Well Located Property 100% Leased - Stabilized Income Annual Rent Increases of 2% Outstanding 1031 Exchange Opportunity Convenient Access to I-76, I-70, I-235 & I-25 Freeways Page 5
SECTION II PROPERTY DESCRIPTION
PROPERTY DESCRIPTION Property Description Address: Building Square Footage: Land Area: Parking: Construction Type: Number Of Buildings: Clear Height: 9771 Hanover Court East Commerce City, Colorado 80640 14,410± Square Feet 4.8± Acres - Includes.7 acres leased on adjacent property 21 Spaces plus 12 spaces for delivery vehicles and trailers Steel and Masonry Two Buildings (6,500± SF and 7,910± SF, including 3,500± SF of mezzanine space) 20 Feet Assessor s Parcel Number: 1721-15-4-01-008 Zoning: M-2 / Medium Density Industrial Year Built: 2003 Doors: Roof: Ingress/Egress: Cylinder Storage: Storage Tank: Two Dock High and Three Ground level Flat Via Hanover Court East, just off of East 96th Avenue and Heinz Way Approximately 63,000 units on premises One 30,000± gallon propane tank Page 7
PROPERTY PHOTOS Page 8
PROPERTY PHOTOS Page 9
AERIAL Page 10
AERIAL Leased Area of.7 Acres 9731 Hanover Court East Commerce City, CO 80640 Page 11
LOCAL MAP Page 12
REGIONAL MAP Page 13
DENVER METRO MAP Page 14
SECTION III VALUATION UNDERWRITING SUPPORT
INVESTMENT ANALYSIS Blue Rhino Denver MSA 5-Year Cash Flow Analysis INITIAL INVESTMENT Purchase Price $6,900,000 +Acquisition Costs $0 -Mortgage(s) $0 +Loan Fees & Points $0 Initial Investment $6,900,000 CASH FLOW For the Year Ending Fiscal Year Beginning July 2018 Year 1 Jun-2019 Year 2 Jun-2020 MORTGAGE DATA 1ST LIEN Loan Amount $0 Interest Rate 5.000% Amortization Period 25 Years Periodic Payment $0 Annual Debt Service $0 Year 3 Jun-2021 Year 4 Jun-2022 Year 5 Jun-2023 POTENTIAL RENTAL INCOME (PRI) $378,000 $385,560 $393,271 $401,137 $409,159 -Vacancy / Credit Loss $0 $0 $0 $0 $0 EFFECTIVE RENTAL INCOME $378,000 $385,560 $393,271 $401,137 $409,159 +Other Income $0 $0 $0 $0 $0 GROSS OPERATING INCOME (GOI) $378,000 $385,560 $393,271 $401,137 $409,159 -Operating Expenses $9,792 $12,000 $12,240 $12,485 $12,734 NET OPERATING INCOME (NOI) $368,208 $373,560 $381,031 $388,652 $396,425 NET OPERATING INCOME (NOI) $368,208 $373,560 $381,031 $388,652 $396,425 -Annual Debt Service 1st Lien $0 $0 $0 $0 $0 CASH FLOW BEFORE TAXES $368,208 $373,560 $381,031 $388,652 $396,425 Value using Acquisition Cap Rate $7,000,000 $7,140,000 $7,283,000 $7,429,000 $7,577,000 Loan Balance $0 $0 $0 $0 $0 Loan to Value 0.00% 0.00% 0.00% 0.00% 0.00% Debt Service Coverage Ratio 0.00 0.00 0.00 0.00 0.00 Before Tax Cash on Cash 5.34% 5.41% 5.52% 5.63% 5.75% Blue Rhino Denver MSA 5-Year Cash Flow Analysis INITIAL INVESTMENT Purchase Price $6,900,000 +Acquisition Costs $0 -Mortgage(s) $4,140,000 +Loan Fees & Points $41,400 Initial Investment $2,801,400 CASH FLOW For the Year Ending Fiscal Year Beginning July 2018 Year 1 Jun-2019 Year 2 Jun-2020 MORTGAGE DATA 1ST LIEN Loan Amount $4,140,000 Interest Rate 5.000% Amortization Period 25 Years Periodic Payment $24,202 Annual Debt Service $290,424 Year 3 Jun-2021 Year 4 Jun-2022 Year 5 Jun-2023 POTENTIAL RENTAL INCOME (PRI) $378,000 $385,560 $393,271 $401,137 $409,159 -Vacancy / Credit Loss $0 $0 $0 $0 $0 EFFECTIVE RENTAL INCOME $378,000 $385,560 $393,271 $401,137 $409,159 +Other Income $0 $0 $0 $0 $0 GROSS OPERATING INCOME (GOI) $378,000 $385,560 $393,271 $401,137 $409,159 -Operating Expenses $9,792 $12,000 $12,240 $12,485 $12,734 NET OPERATING INCOME (NOI) $368,208 $373,560 $381,031 $388,652 $396,425 NET OPERATING INCOME (NOI) $368,208 $373,560 $381,031 $388,652 $396,425 -Annual Debt Service 1st Lien $290,424 $290,424 $290,424 $290,424 $290,424 CASH FLOW BEFORE TAXES $77,784 $83,136 $90,607 $98,228 $106,001 Value using Acquisition Cap Rate $7,000,000 $7,140,000 $7,283,000 $7,429,000 $7,577,000 Loan Balance $4,054,637 $3,964,907 $3,870,586 $3,771,439 $3,667,220 Loan to Value 57.92% 55.53% 53.14% 50.77% 48.40% Debt Service Coverage Ratio 1.27 1.29 1.31 1.34 1.36 Before Tax Cash on Cash 2.78% 2.97% 3.23% 3.51% 3.78% SALES PROCEEDS INVESTMENT PERFORMANCE SALES PROCEEDS INVESTMENT PERFORMANCE Projected Sales Price (EOY 5) $7,702,000 Cost of Sale $308,080 Mortgage Balance 1st Lien $0 Sales Proceeds Before Tax $7,393,920 Internal Rate of Return (IRR) 6.69% Acquisition CAP Rate 5.34% Year 1 Cash-on-Cash 5.34% Gross Rent Multiplier 18.25 Loan to Value 0.00% Debt Service Coverage Ratio 0.00 Projected Sales Price (EOY 5) $7,702,000 Cost of Sale $308,080 Mortgage Balance 1st Lien $3,667,220 Sales Proceeds Before Tax $3,726,700 Internal Rate of Return (IRR) 8.59% Acquisition CAP Rate 5.34% Year 1 Cash-on-Cash 2.78% Gross Rent Multiplier 18.25 Loan to Value 57.92% Debt Service Coverage Ratio 1.27 Page 16
SECTION IV TENANT INFORMATION
RENT ROLL Property: 9771 Hanover Court East Commerce City, Colorado 80640 Tenant: Blue Rhino, a division of Ferrellgas, LP, a Missouri Limited Partnership Lease Commencement: January 1, 2004 Lease Expiration: September 30, 2025 Lease Guarantor: Ferrellgas, LP - NYSE: FGP Current Rent: $31,500 per month; next increase April 1, 2019 Use: Natural Gas Refueling Facility Option: Two Seven and One Half (7.5) Year Options Square Feet: Approximately 14,410 square feet; 10,910 SF in two buildings & 3,500 SF of Mezzanine Rent Increases: Two percent (2%) annual increases Security Deposit: None Page 18
TENANT SUMMARY The company was founded in 1939 by Alfred Carl (A.C.) Ferrell in Kansas. Established as A.C. Ferrell Butane Gas Company, the business prospered during World War II and the immediate postwar years. The company sold gas heaters and floor furnaces from its storefront on Commercial Street in downtown Atchison. In 1947, A.C. Ferrell erected a bulk plant on a rail siding in East Atchison to help supply bottled gas to local customers In 1965, the company had reverted to selling strictly propane and had dwindled to only four employees. James Ferrell, the son, renamed the company Ferrellgas. The company expanded across the Missouri River to acquire a Rushville, Missouri dealer in 1968. In the next 10 years, the company acquired other Midwestern dealers and established a wholesale operation, and profited amid the energy crises of 1973 and 1979. During that time, the Ferrellgas headquarters shifted, moving first to Platte City, Missouri before moving further east to Kearney. Its expansion continued, opening Ferrell North America, a propane and feedstock distribution arm, in 1977. To accommodate a growing staff, new offices were constructed in Liberty, Missouri, in 1981 and 1983. Those offices, which remain in use by corporate support employees today, would serve as Ferrellgas headquarters until 2004, with the company moved its executive offices to their current location in nearby Overland Park, Kansas. On February 9, 2004, Ferrellgas announced its blockbuster merger with Blue Rhino Corporation, the nation s largest provider of propane by portable tank exchange. Under the terms of the agreement, Ferrellgas purchased shares of Blue Rhino (the company was traded on the Nasdaq under the symbol RINO) in a transaction worth approximately $340 million. On the day of the merger agreement, James Ferrell called tank exchange the fastest growing portion of the retail propane industry. In 2004 the company had a nationwide exchange network of 29,000 selling locations. That number has since grown to more than 45,000 selling locations. Blue Rhino was founded in 1994, around the same time of Ferrellgas Partners, L.P. s initial public offering, and remains headquartered in Winston-Salem, North Carolina. Known mostly for its exchange of 20-pound barbeque grill tanks, Blue Rhino boasts other product lines. Global Sourcing, a company acquired by Blue Rhino in 2000, is the world s largest supplier of barbeque grills. Its products are sold across North America, South America, Europe, and Asia. Global Sourcing products include Uniflame-branded barbeque grills, as well as patio heaters, outdoor fireplaces, mosquito eliminators, charcoal and electric grills, and indoor fireplaces sold under SkeeterVac, Endless Summer, and other private labels. Page 19