Matthews™ Spring/Summer 2018 Publication

SPRING/SUMMER 2018 TM

20 18 Re st auran t O ut l o o k S i x Tre n d in g Cit ies Net L e a s e Te n an t Re p o rt Gro ce r y In s i g h t Albe rts on s & Kro ge r

â„¢

A NE W GENER ATI ON OF LEADERS FOCUSED ON

ON E O BJ ECTIVE: R ED E FI N IN G THE TRADITIONAL

BROKERAGE EXPERIENCE

R E TA I L | M U LT I FA M I LY | I N D U S T R I A L | L E A S I N G | M A N AG E M E N T

w w w. m a t t h e w s . c o m

88%

TOTAL CRE TRANSACTION VOLUME & PRICING SOURCE: RCA

TRANSACTION VOLUME YOY VOLUME CHANGE YOY PRICE CHANGE

2017

JAN 2018

FEB 2018

MAR 2018

$463B

$34B

$23B

$40B

-7%

-3%

-10%

-10%

7.10%

8.10%

8.10%

-

APARTMENT

OFFICE

6 | SPRING/SUMMER 2018

INDUSTRIAL

OFFICE, INDUSTRIAL/MANUFACTURING, WAREHOUSE AND RETAIL CONSTRUCTION, 2016 AND 2017 SOURCE: NAIOP BUILDING TYPES

SQUARE FEET (BILLIONS)

CONSTRUCTION VALUE ($B)

$ CHANGE

2016

2017

2016

2017

2016-2017

OFFICE

102.80

117.60

$36.61

$36.45

-$0.61

INDUSTRIAL

53.50

53.90

$15.54

$23.86

$8.32

WAREHOUSE

167.00

267.90

$13.57

$21.13

$7.56

RETAIL

86.80

84.20

$17.24

$17.10

-$0.14

TOTAL

410.10

523.60

$82.96

$98.55

$15.59

MOST ACTIVE MARKETS 2017 SOURCE: RCA MARKET

SALES VOL ($M)

YOY

LOS ANGELES

$27,971

-2%

MANHATTAN

$23,290

-43%

DALLAS

$20,143

-4%

CHICAGO

$17,167

-15%

ATLANTA

$16,940

-4%

2015-17 DEVELOPMENT STATISTICS SOURCE: RCA

PROPERTY TYPE VOL ($B)

 2014

 2015

 2016

 2017

APARTMENT

$306.90

RES CONDO

$66.80

QUANTITY 1,254,069 UNITS 117,893 UNITS

SNR HOUSING

$31.40

MULTIFAMILY

$405.10

1,515,525 UNITS

OFFICE

$118.90

294,793,233 SQFT

INDUSTRIAL

$61.30

605,983,833 SQFT

RETAIL

$51.50

164,416,385 SQFT

HOTEL

$69.60

SELF-STORAGE

$8.80

TOTAL

$715.20

143,563 UNITS

321,814 UNITS 66,726,747 SQFT

INDUSTRIAL TRANSACTION VOLUME & PRICING SOURCE: RCA

TRANSACTION VOLUME YOY VOLUME CHANGE YOY PRICE CHANGE

2017

JAN 2018

FEB 2018

MAR 2018

$72.2B

$8.9B

$2.9B

$6.7B

20%

70%

-14%

-4%

6.10%

8.10%

9.30%

-

 INDIVIDUAL  PORTFOLIO

 ENTITY

2018 Q1 INDUSTRIAL TRANSACTIONS REPORTED CLOSED SOURCE: RCA AREA

VOLUME

PRICING

VOL ($M)

YOY CHANGE

# PROPS

YOY CHANGE

AVG PRICE PER SQ FT

AVG CAP RATE

MID-ATLANTIC

$1,405.00

45%

136

28%

$77

7.50%

MIDWEST

$3,174.90

47%

329

29%

$52

7.10%

NORTHEAST

$1,654.00

-39%

149

-10%

$116

5.70%

SOUTHEAST

$2,345.30

-14%

233

-22%

$58

6.70%

SOUTHWEST

$2,796.80

22%

246

1%

$91

7.00%

WEST

$5,305.00

26%

509

21%

$148

5.80%

RETAIL TRANSACTION VOLUME & PRICING SOURCE: RCA

TRANSACTION VOLUME

2017

JAN 2018

FEB 2018

MAR 2018

$63.4B

$3.7B

$8.1B

$4.9B

YOY VOLUME CHANGE

-18%

-31%

-8%

-51%

YOY PRICE CHANGE

1.10%

2.00%

11.10%

-

Most Active Retail Markets SOURCE: RCA

SALES VOL ($M)

YOY

LOS ANGELES

MARKET

$3,671

-14%

CHICAGO

$2,961

-31%

MANHATTAN

$2,381

-25%

DALLAS

$1,943

5%

HOUSTON

$1,756

9%

2017: RETAIL VOLUME & CHANGE SOURCE: RCA

VOL ($B)

 INDIVIDUAL  PORTFOLIO

YOY

RETAIL TOTAL

$63.40

-18%

CENTERS

$40.40

-23%

SHOPS

$23.00

-8%

SINGLE ASSET

$48.00

-15%

PORTFOLIO

$15.40

-26%

REGIONAL MALL

$2.80

-75%

GROCERY

$15.30

13%

SINGLE-TENANT

$7.20

9%

URBAN/ STOREFRONT

$8.60

-21%

 ENTITY

2018 Q1 RETAIL TRANSACTIONS REPORTED CLOSED SOURCE: RCA AREA

VOLUME

PRICING

VOL ($M)

YOY CHANGE

# PROPS

YOY CHANGE

AVG PRICE PER SQ FT

AVG CAP RATE

MID-ATLANTIC

$866.30

-32%

99

2%

$158

6.80%

MIDWEST

$1,816.70

-40%

244

-15%

$106

7.00%

NORTHEAST

$1,994.20

-31%

192

-15%

$377

5.60%

SOUTHEAST

$2,417.90

-52%

309

-31%

$148

7.10%

SOUTHWEST

$2,030.30

6%

245

-4%

$149

6.40%

WEST

$4,059.30

-16%

377

0%

$252

5.80%

MATTHEWS TM |

9

MULTIFAMILY TRANSACTION VOLUME & PRICING SOURCE: RCA

TRANSACTION VOLUME YOY VOLUME CHANGE YOY PRICE CHANGE

2017

JAN 2018

FEB 2018

MAR 2018

$150.1B

$8.9B

$8.1B

$12.4B

-7%

-5%

-8%

27%

10.60%

10.90%

11.10%

-

Most Active multifamily Markets SOURCE: RCA MARKET

SALES VOL ($M)

YOY

$9,556

-1%

DALLAS ATLANTA

$7,509

-16%

LOS ANGELES

$6,857

-2%

DENVER

$6,544

-3%

CHICAGO

$5,012

10%

2017: MULTIFAMILY VOLUME & PRICING SOURCE: RCA

VOL ($B)

YOY

APARTMENT TOTAL

$150.10

-7%

GARDEN

$102.00

-4%

$48.10

-12%

MID/HIGHRISE

 INDIVIDUAL  PORTFOLIO

 ENTITY

SINGLE ASSET

$116.10

-3%

PORTFOLIO

$34.00

-19%

STUDENT HOUSING

$7.50

-24%

SENIORS HOUSING & CARE

$16.80

14%

2018 Q1 MULTIFAMILY TRANSACTIONS REPORTED CLOSED SOURCE: RCA AREA

VOLUME

PRICING

VOL ($M)

YOY CHANGE

# PROPS

YOY CHANGE

AVG PRICE PER UNIT

MID-ATLANTIC

$3,154.60

27%

113

10%

$181,130

5.90%

MIDWEST

$3,191.90

20%

220

11%

$93,147

6.50%

NORTHEAST

$5,358.90

39%

309

17%

$310,455

4.60%

SOUTHEAST

$7,635.40

14%

381

15%

$111,124

6.40%

SOUTHWEST

$8,182.90

37%

393

26%

$124,533

6.10%

WEST

$7,229.10

18%

519

15%

$203,859

5.00%

10 | SPRING/SUMMER 2018

AVG CAP RATE

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Tlocation’s raditionally, commercial real estate investors measured restaurant performance prospects by the average household income, and extrapolating traffic counts. Today’s market requires a more

strategic approach. Successful restaurants are increasingly becoming a destination with a unique atmosphere, where a consumer can grab something in the most efficient way possible. An investor needs to take into account the neighborhood they are trying to serve, the surrounding competition, and if they can cater to both the daytime and nighttime crowd. Here’s a look at today’s hot restaurant markets, and the factors that contribute to their success.

BY GARY CHOU

SVP & SENIOR DIRECTOR, STNL GARY.CHOU@MATTHEWS.COM (310) 919-5827

12 | SPRING/SUMMER 2018

5.7M

5.8M

At lan t a - S an dy S pri n gs - Roswell G A

At lan t a

1.5%

Population Estimate (as of July 1)

Population Estimate (as of July 1)

Percent change

2016

2017

2016-2017

Source: U.S. Census Bureau

Atlanta is Georgia’s most populous city and the third largest metropolitan region in the Southeast. Buoyed by a booming job market and rapid Atlanta MSA development, independent restaurant owners have seen their businesses flourish throughout 2017. As evidence of the growth, Atlanta restaurant sales volume increased one percent in Q3 2017 compared to Q3 2016, according to Atlanta-based Net Financials. Atlanta restaurant owners anticipate that the positive momentum of 2017 will continue throughout 2018. Owners need that momentum not only to fatten their returns, but also to hedge the growing saturation within the restaurant sector. According to industry professionals, more than 650 new restaurants, from fast casual to fine dining, opened in Georgia last year, 80 percent of which were in the Metro Atlanta area. In contrast, only around 86 metro Atlanta restaurants closed in 2017 and Q1 2018.

Site availability is back to 2007 levels, and competition for prime location real estate is running high for new independent and franchise restaurants. Restaurant revenues will need to meet or exceed those attained in 2007 to operate profitably, or the industry could reach a tipping point. Some positive signs for restaurant growth are the influx of out-of-state and in-state population, and the relocation of people chasing new job opportunities. The apartment component of mixed-use developments is a popular destination for these newbies. Many of these new residents dine out more than three times a week. In terms of fare, chefdriven restaurants are the darlings of retail developers across Metro Atlanta. Atlanta has approximately two years of continued job growth. The surplus of job seekers is expected to help buffer the rapid increase in the number of restaurant outlets. Additionally, the current wave of development is expected to drop off in 2018 as restaurant owners begin downsizing.

With rapid growth in Metro Atlanta, availability of commercial real estate is becoming an issue, particularly with restaurants.

- Top Trends -

chef driven

going healthy

redesigning interior

delivery

pop-up concepts MATTHEWS TM |

13

Los A n geles - Lon g Beach - An ah ei m C A

Los A n g e le s 13.3M

13.3M

0.2%

Population Estimate (as of July 1)

Population Estimate (as of July 1)

Percent change

2016

2017

2016-2017

Source: U.S. Census Bureau

For the third consecutive year, Los Angeles has been ranked as the most attractive commercial real estate market - not only in the United States, but the entire Western Hemisphere, according to the Los Angeles Business Journal. In addition, Los Angeles overtook New York City in 2017 as the top destination for overseas money, bringing in around $23 billion in foreign investments, as reported by the Association of Foreign Investors in Real Estate. As a result of this foreign investment explosion, Los Angeles, and particularly the downtown area, is undergoing a construction boom. Foreign investment is adding thousands of residences, construction jobs, shops and restaurants to the market. Chinese and Korean investors are major investment sources for new restaurants. The drivers of restaurant growth downtown are millennials. Los Angeles saw an 8.1 percent increase in millennials moving to the city from 2010 to 2015, according to RCLCO. These new Angelinos tend to eat out much more often than other demographic groups, and are willing to drive 45 minutes in Los Angeles traffic to get to the latest trendy restaurant. The restaurant market has responded accordingly, with new outlets flocking to neighborhoods in and around the Los Angeles downtown market.

However, low vacancy rates and high operating costs are posing a problem for new and existing restaurants. Restaurant unit sales for 2018 are projected to be flat compared to 2017, potentially causing a financial squeeze for operators from multiple directions. Many restaurants are being forced out of business and are being replaced by others that are willing to pay higher rents for prime locations. With the shortage of locations, second generation restaurant space is becoming increasingly favorable and pre-leasing 18 to 24 months out is becoming an option. As Los Angeles restaurant goers gravitate toward more healthful fare, competition among fast food chains has also increased. Chains such as McDonald’s, Burger King, Subway, and IHOP are all competing to offer the lowest-priced menu. For example, McDonald’s has a $1, $2, and $3 menu, Burger King offers two Whoppers, French fries, and a drink for $5, Subway has $5 foot-longs, and kids eat for free at IHOP. Despite the challenges, Los Angeles continues to ride on a wave of strong economic growth. With a healthy stock market, low unemployment, and the potential that the new tax bill will put additional dollars in consumer pockets, restaurant owners and investors are bullish.

- Top Trends -

ethnic concepts 14 | SPRING/SUMMER 2018

food trucks

food halls

online delivery services

instagrammable atmosphere

N as h v i lle - Dav i ds on - M urfrees b oro - Fra n kli n T N

Nas h v ille

1.8M

1.9M

1.8%

Population Estimate (as of July 1)

Population Estimate (as of July 1)

Percent change

2016

2017

2016-2017

Source: U.S. Census Bureau

Nashville is one of the fastest growing cities in the country, and the restaurant industry has grown 16 to 17 percent year-overyear for the past five years. Since 2010, Nashville has added 490 restaurants for a total of +2,600 locations, which is half of Tennessee state’s 5,300 restaurant count. The growth in Nashville’s quick service restaurants (QSR) is alluring. Nashville had 2,887 QSR locations in 2016, and this number is projected to grow six percent from 2015 to 2020, according to The NPD Group. Many QSR restaurants are taking Nashville’s food trends and incorporating them into national menus. For example, Arby’s introduced Nashville Hot Fish, and KFC introduced Nashville Hot Chicken.

Nashville has big plans for the future, with rosy prospects for restaurants. The city plans to open a giant food hall and music venue Downtown in 2020 that includes a restaurant complex showcasing dozens of regional chefs, restaurateurs, and entrepreneurs. It is expected to be a major culinary destination drawing locals and tourists alike. With all the new development, the Nashville market may become oversaturated. Some restaurant industry experts are bearish, noting too many restaurants and too few customers are the recipe for a struggling dining market. The restaurant count has grown every year since 2010 but dropped slightly in 2016 as a result of increased competition. Increased competition is not the only challenge for Nashville restaurants. Labor shortages are leading to growing labor costs, while rising property values and rental rates are squeezing operators. Restaurant closings in 2018 include longtime favorites, high-profile restaurants, and trendy newcomers.

But Nashville’s restaurant growth is not limited to QSR. The number of new restaurants, retail, hotels, and residential complexes in downtown Nashville has skyrocketed. Dining communities are springing up all over the city, from chef-driven restaurants to trendy eateries. In 2017, 92 new restaurants opened, and according to Nashville’s Convention and Visitors Corporation, 2018 is expected to bring 51 new restaurants to downtown Nashville. As evidence of Nashville’s new status as an up-and-coming culinary scene, a number of Tennessee restaurants are gaining traction nationwide. In 2017, Nashville-based chains with three or more locations grew by two percent.

Nashville is a major tourist attraction, and that population keeps the restaurants busy. But fundamentally, the city needs more employment from non-restaurant businesses and an influx of instate and out-of-state restaurant lovers to sustain its continued growth.

- Top Trends -

food halls

chef driven restaurants

delivery services

healthy local food

regional fLavors served nationwide MATTHEWS TM |

15

Aus t i n - Roun d Rock T X

2.0M

A us t in 2.1M

2.7%

Population Estimate (as of July 1)

Population Estimate (as of July 1)

Percent change

2016

2017

2016-2017

Source: U.S. Census Bureau

As one of the top destinations in the country for job seekers, Austin is growing at a very healthy rate, surpassing two million people in 2016. The city has one of the highest percentage growth rates among major metropolitan areas in the United States: a 19.82 percent increase in population growth from 2010 to 2016. Austin’s employment and economic growth is particularly strong in the tech sector. This is fueling a strong real estate market, with a marketing focus on making the city an attractive destination for young professionals and college graduates. In formulating their strategies, developers are targeting a millennial workforce and building workplaces to match evolving trends. New and existing restaurants are finding Austin to be a challenging environment, resulting in increased turnover rates. Rents, property taxes, and operating costs were all high in 2017. Triple net properties are paying rents as high as $28.78, according to CoStar.

restaurants in Austin have remained relatively steady: 92 restaurants opened and 62 closed in 2017. The pace in 2018 is expected to be more conservative, with the opening of 22 more new restaurants. Restaurant landlords may need to come up with new strategies. Austin is experiencing high turnover rates, especially near the University of Texas, where restaurants are not financially strong enough to make it through school breaks. Even restaurants with favorable locations cannot survive if rent increases continue to outpace revenues. Restaurant mix is changing, too. In newly-gentrified areas like East Austin, many restaurants are changing fare and format to cater to millennial needs. Owners are closing once-popular concept restaurants and converting them to casual dining, pop-up restaurants, sandwich shops and the old Texas standby diners. These old-but-new restaurant formats are a good match for Austin’s laid-back atmosphere.

After a shaky 2016, Austin’s restaurant market is expected to find its footing again in 2018. The supply and demand of

- Top Trends -

pop-up restaurants 16 | SPRING/SUMMER 2018

sandwich shops

Community Driven Restaurants

diners

culinary diversity

C h i cago - N aperv i lle - Elgi n I L

C h ica g o

9.5M

9.5M

-0.1%

Population Estimate (as of July 1)

Population Estimate (as of July 1)

Percent change

2016

2017

2016-2017

Source: U.S. Census Bureau

With a metro population of 9.5 million people, Chicago is the third-most populous city in the United States. However, for the third year in a row, Chicago is also the only major metropolitan area in the nation that has shown signification population loss. Despite the influx of a number of large employers moving back to the Windy City, longer-term trends of an aging population, and an exodus of young residents seeking better opportunities elsewhere result in a net loss in population. Despite these trends, Chicago is in the midst of a restaurant boom. In 2016, Chicago saw a significant amount of highquality, first-rate restaurants open in the market, ultimately making 2016 the city’s greatest dining year ever. Fueled by the success of other restaurants in the city, Chicago is now seeing other chefs and investors expand their business to the city at a rapid pace. In the summer of 2017 alone, 43 new and coming-soon restaurants opened up in Chicago. Whether Chicago’s restaurant growth is sustainable is open to question. There is turbulence in the market, with the closing of a number of high-profile restaurants and the disappearance of more mom-and-pop eateries. As the restaurant market expands and everyone begins competing for the same dollar,

there are fewer destination establishments, and restaurants are starting to compete with adjacent restaurant strips for business. Challenges in Chicago’s restaurant sector are a reflection of the overall struggle in the market’s retail sector. Many small retail businesses are going under as they try to compete with online retailers. As closures continue, chefs and owners see opportunities. As a result, real estate brokers are turning to restaurants and bars as a solution to fill retail vacancies in and around the city. Chicago’s neighborhoods are changing, too. Apartment rents in many neighborhoods have increased to the point where millennials are moving outside of city neighborhoods to areas where they can afford to live. As the population shifts, more restaurants and bars open up in West Loop, River North, Ukrainian Village, Bridgeport and Logan Square. In Andersonville alone, there are 73 restaurants, cafes, and bars. Additionally, the craft beer industry has exploded - there are 65+ breweries within Chicago’s borders and another 100+ in the suburbs.

- Top Trends -

craft breweries

chef-driven restaurants

new neighborhoods

retail products

bars MATTHEWS TM |

17

D a lla s - Fort Wort h - Arli n gt on T X

7.2M

D a llas 7.3M

2%

Population Estimate (as of July 1)

Population Estimate (as of July 1)

Percent change

2016

2017

2016-2017

Source: U.S. Census Bureau

The restaurant world is changing as chefs and restaurateurs see the opportunity that Dallas-Fort Worth’s new population provides. The most significant of these trends is fast-casual healthy food. Another strong trend is food halls as destinations in retail centers. Growth is expected to be strong in underserved markets such as Fort Worth and Lake Highlands, where a shortage of better quality restaurants presents opportunities.

Dallas-Fort Worth is one of the country’s economic powerhouses. Spurred by a growing economy and an increasing number of job opportunities, the area attracted an influx of domestic and international residents and gained 146,000 people in 2017. That growth has spurred investment, $5 billion in capital entered the market, fueling a large supply of new apartments in the pipeline. The Dallas-Fort Worth restaurant sector is struggling to keep pace. In 2016, Dallas-Fort Worth had a total of 14,965 restaurants, with around 6 percent of them being quick service restaurants (QSR). The region accounts for just under four percent of the total QSR market, a direct result of the area’s population growth, business-friendly climate and absence of state tax.

As might be expected in such a hot market, restaurant landlords are increasing rents. Consequently, industry experts predict an increased number of restaurant closings and turnovers, especially in oversaturated neighborhoods such as Plano, Frisco, The Colony and Deep Ellum. Another challenge for restaurant operators are online food delivery and catering services. Once a minor factor in the industry, these services are a favorite of millennials and are eating away at revenues in some neighborhoods. Overall, 2018 will likely be a shake-out year as Dallas-Fort Worth restaurants adapt to a changing landscape.

Primarily dominated by a mix of national players like McDonalds and Starbucks, Dallas-Fort Worth also has a strong performance of regional players like Whataburger. However, despite the cities love for burgers, new concepts and trends are entering the market to cater to an influx of millennial professionals and Gen-Xers who have relocated to Dallas.

- Top Trends -

“California” inspired Restaurants

18 | SPRING/SUMMER 2018

Healthy Food Concepts

Food Halls

moving online

fast casual

in Casual Dining, Quick Service Restaurants, Auto Services, Auto Parts and Convenience Stores

™

20 | SPRING/SUMMER 2018

MATTHEWS TM |

21

A L B E R T S O N S

C O M P A N I E S

Albertsons Market

Acme

Amigos

Randallas

Star Market

Carrs

Pavilions

Market Street

Albertsons

United Supermarket

Tom Thumb

Vons

Jewel Osco

Safeway

Shaws

22 | SPRING/SUMMER 2018

MATTHEWS TM |

23

A L B E R T S O N S O W N E D

B R A N D S

O Organics®

Signature Select™

Open Nature™

Signature Kitchens™

A L B E R T S O N S : BEFORE & AFTER MERGER

L O C AT I O N S

S TAT E S

B E F O R E 2,300 A F T E R 4,000

B E F O R E 15 A F T E R 38

Lucerne® Dairy Farms Signature Farms+

mom to mom®

Bright Green®

Signature Cafe®

Signature Home™

Signature Care™

debi lilly™ design

Primo Taglio®

waterfrontBISTRO®

The Snack Artist™

Fresh Décor

refreshe®

Eating Right®

24 | SPRING/SUMMER 2018

Priority Total Pet Care®

R E V E N U E

VA L U E

B E F O R E $60B A F T E R $83B

B E F O R E Private A F T E R $24B

MATTHEWS TM |

25

By: Daniel Withers Senior Vice President, Multifamily Although selling a multifamily building is substantially more complex than other assets, the goal tends to remain the same: maximizing value. While there are several ways to achieve maximum value throughout an asset’s life time, minimizing leverage during the sale process will play a considerable role in preventing renegotiation of sale price. Prior to going on the market, an owner can take the following steps to set the stage and prevent any sort of renegotiation, leading to a smoother experience and a higher success rate of achieving the best terms and maximum value for their asset.

26 | SPRING/SUMMER 2018

1. Increase Curb Appeal This is one of the most important steps to take. Think of marketing your property the same way you would present yourself during a job interview. A clean and well maintained exterior can set the tone for the way potential buyers view the rest of your property. On the other hand, a poorly kept exterior can give potential buyers the impression that you haven’t taken care of the rest of your property. There are several relatively inexpensive and simple solutions which will make a tremendous difference in enhancing your property’s curb appeal.

Give it a Good Power Wash

Dirt and rust stains make your property appear older than it really is and will give the illusion of neglect.

Paint the Building

Buy Tenants Out

If you own a rent-controlled property, there are still ways to get around low paying tenants. In the City of Los Angeles, many owners are implementing the Cash for Keys program. This program allows owners to offer tenants monetary compensation with the notion that, if accepted, the tenant will vacate the unit. Cash for Keys has helped owners increase revenue, in return maximizing the overall value of the property. Keep in mind it is important to understand the laws in your area and consult with a professional prior to utilizing the Cash for Keys program.

Leverage Your Matthews™ Agent

A professional can provide additional data and sub-market information.

There’s no denying that a new paint job can make your property look fresh and even take off a few years of its life.

Declutter the Property

This could be a zero-cost effort that shows your property is clean and organized. Remove any trash or unnecessary items/furniture laying around the grounds. In an age of aerial drone footage, this includes the roof as well.

Prune & Landscape

Not only do unkempt trees and bushes make your property look shabby but they can also block out sunlight, which can make units less desirable and promote mold.

2. Do Your Research Higher revenue = higher sales price. If you’re not doing the right research and staying up to date on the market rent for your properties area, you are losing money.

Match the Market

Once you assess what market rent should be, if the property is not subject to rent stabilization you will want to raise the rents to match the market. If the property is subject to rent stabilization, issue month-to-month lease tenants the allocated percent increase allowed by the city. Within the City of Los Angeles, the current allowed increase is four percent.

MATTHEWS TM |

27

3. Address Deferred Maintenance The majority of properties that Matthews™ sells have some sort of deferred maintenance. Since this is a common theme, buyers usually anticipate that there will be some deferred maintenance for them to resolve. While deferred maintenance can be left to the buyer, we strongly encourage owners to address any kind of health and safety issues prior to marketing the property. Typically, health and safety issues can be taken care of quickly and are cost-efficient. Physically Inspect the Building Check for health and safety issues. Mold or bed bugs are the two biggest problems you want to look for and address immediately. This is also a great opportunity to experience a sense of how the buyer will view the property during a walk-through.

4. Clear and Marketable Title In order to sell your property, you have to be able to deliver a clear and marketable title. This means that the chain of ownership of your property is clear and free of defects. Defects within a title could be a lien, mortgage or judgement. Since other parties can lay claim to the property or asset, the title cannot be legally transferred to another party until the defect has been cleared. Make sure to take these steps to evade the mess a cloudy title can cause: Get Ahead of the Problem Request a preliminary title report. This is one of the first steps a Matthews™ agent will do for you prior to marketing your building. This way, if there is any cloud in the title, it can be cleared during our marketing campaign, prior to entering escrow. Hire Help If cloud in the title is found, work with the title company to get a clear picture as to what steps need to be taken to address the situation. Be Aware Evaluate the loans that are active on the title report and make sure you understand what the prepayment penalties are that may be incurred through the sale.

28 | SPRING/SUMMER 2018

5. Review Your Books & Records To a buyer, a complete set of books and records is a very important piece to the puzzle. Poorly kept books and records can limit the materials provided to a buyer. With limited books and records, a buyer will have to come up with their own numbers to underwrite, which tends to lead to inflated expense estimates and inaccurate totals. Evaluations with discrepancies usually result in a lower purchase price and it is common to see deals blow up due to this. In order to avoid any disconnect, it’s important to do the following and have all documents on hand for buyers to inspect.

Update the Rent Roll

The rent roll will specify tenant names, move in dates, last rent increases, and deposit amounts. If all your rent increases are up-to-date, this will provide proof to the buyer that you have been maintaining market rents.

Review the Profit and Loss Statement (P&L)

The P&L provides buyers with a clear snapshot on the overall operations of an asset. A buyer will typically request to view the last 12 to 24 months.

Organize Paperwork

Make sure to have a copy of the rental agreements, rent increase notices, service contracts, on-site manager agreements and any other written agreements in order to back up your P&L statement.

Compile Bills

Gathering the past six months of utility bills will help outline definite expenses so that the buyer doesn’t have to guess and end up with inflated numbers.

Provide Insurance Policies

Providing a buyer with your current vendor(s) makes it fast and easy for a buyer to secure property insurance.

Layout Property Tax Bills

Disclosing the property tax rate could allow buyers to forecast their future tax bill.

Outline Inventory

Create a written inventory with all terms of personal property to prevent any sort of miscommunication at closing. Buyers will assume all property belongs to them unless otherwise stated.

Round Up Warranties

Supporting documentation on warranties will provide a lower risk for the buyer and help net a higher sales price.

MATTHEWS TM |

29

6. Create a Plan for Your Proceeds

7. Prep Onsite Management

Make sure to have a plan set for your proceeds. If deciding to re-invest your money, it is important to act fast to achieve the maximum benefits. The Matthews™ 1031 Exchange Program utilizes the IRS 1031 Exchange Tax Code to defer capital gains instead of cashing out and allows your investment to grow tax deferred.

When visiting a property, potential buyers will request to speak to the onsite manager. The onsite manager will be your biggest cheerleader. It is important for an owner to inform the manager that they plan to sell the building, prepping them for any questions that may come up during the sale process.

Implement a Plan

Special rules apply when it comes to a 1031 exchange, one of which is the tight 45-day timeframe given to identify three potential properties to trade into. It is important to work closely with an experienced agent to implement a plan that will satisfy your exchange

Address the Basics

Sit down and go through a list of what improvements have been made on the property so that the onsite manager can address them with potential buyers. This will help you both have a clear picture of how the building is running.

Work with an Accountant:

An accountant will help you understand your tax consequences in the event that you do not utilize a 1031 exchange.

While each of these steps can help set you up for success, an expert will be able to an in-depth evaluation of your property and tailor the best solutions to suit your investment goals. With your goals in mind, a Matthews™ agent can provide the expertise to navigate any situation and execute the right plan for your property to help secure the maximum value for your asset. For more information regarding your multifamily investments, please reach out to: Daniel Withers | daniel.withers@matthews.com | Direct: 818.923.6107

30 | SPRING/SUMMER 2018

MATTHEWS TM |

31

32 | SPRING/SUMMER 2018

Supply

0.6%

2.0%

0.6%

2.0%

0.4%

Demand

0.8%

2.1%

0.8%

2.1%

1.0%

Occupancy

0.2%

0.0%

0.2%

0.1%

0.6%

Rent

1.8%

2.1%

5.0%

6.1%

5.6%

Sales

(20.0%)

(7.0%)

(2.0%)

(2.0%)

(2.0%)

MATTHEWS TM |

33

Logistics

Flex

34 | SPRING/SUMMER 2018

Specialized

Industrial 5.7% Specialized 5.6%

Flex & light manufacturing 5.0%

Specialized means the following: Freight & Manufacturing Buildings, Refrigeration and Cold Storage Buildings, Telecom and Data Housing Centers, Food Processing, Showroom, Truck Terminal, and Service.

MATTHEWS TM |

33

36 | SPRING/SUMMER 2018

MATTHEWS TM |

37

Logistics Flex Specialized

Total Acq

Avg Size

Avg $/sf

Avg Cap

($m)

($m)

Cross Border

$5,483

$16.4

$81

6.1%

Institutional / Fund

$14,468

$17.1

$87

6.4%

Listed/REIT

$13,457

$26.8

$99

6.1%

Private

$31,294

$7.6

$76

6.9%

User/ Other

$7,414

$9.6

$82

6.2%

Grand Total

$72,905

$10.9

$82

6.6%

38 | SPRING/SUMMER 2018

MATTHEWS TM |

39

DO YOU REALLY KNOW YOUR TENANT? 4 Essential Questions to Ask Yourself By : Dalton Barnes

Many investors mistake net lease assets to be zero-maintenance investments. Compared to other asset types, net lease investments are at the low end of the scale in terms of building maintenance, but they still require attention. While investors’ landlord responsibilities for the actual property are minimal compared to a multifamily building, it is still important to over see the investment itself. Similar to how a stock investor proactively monitors the companies and industries they own shares in, a commercial real estate investor should periodically check in on their investment too. Monitoring

40 | SPRING/SUMMER 2018

investments allows landlords to spot red flags early, providing them with the time needed to divulge and possibly implement a back-up plan before any major damage occurs. The first step in monitoring a net lease investment is getting to know the property inside and out, and that means understanding who the tenant is and how they operate. To minimize the risks involved with net lease investments and to better prepare for the future, here are crucial questions every investor should know the answers to and why.

01

WHO GUARANTEES THE LEASE ON YOUR PROPERTY? There are two types of operators that could be on the lease of a net lease investment: corporate or franchisee. The easiest way to find out if an operation is owned by a corporate or a franchise operator is to look at who signed the lease. Both guarantees have positive and negative aspects to them, and it is important to understand the difference to better assess your tenant’s strengths and weaknesses.

corporately-owned Investing in a property that has the name of a large corporation behind the tenant would appear to be a no-brainer: the investment is secured by the corporation’s assets. With a corporate backed lease, the landlord has the benefit of being able to access the tenant company’s 10k, assess how that company is doing, determine the amount of assets guaranteeing the tenant’s lease, and see into the performance of the company. Without this information, or the tenant’s revenue, the health of the tenant is purely speculation. unfortunately, for many net lease retail landlords, the safety net of having a corporate backed operator as a tenant may just be an illusion. Jiffy Lube, Carl’s Jr., Hardee’s, Applebee’s, and Burger King are examples of corporations that operate less than six percent of their sites. A number of corporations have a 100 percent franchise model, although they may guarantee the lease for some locations. This means that while lease payments may be issued from a corporate parent account, the actual tenant is a

much smaller company. As such, the security of rental income depends entirely on the tenant’s ability to generate enough revenue to make the monthly payment and the landlord will have no insight into how the operator is performing. This is why it is important to thoroughly read the lease and truly understand who is responsible for payment.

franchisee While smaller operators may have fewer assets to back their leases, they are more likely to report direct store-level sales to their landlord. With this information, a landlord may keep running tabs on the business’s financial health, and remain confident that the operation will continue to make its monthly rental payment. The issue of receiving monthly sales volume reports is sometimes a tug-of-war occurs, as tenants seek to keep store sales tallies private, perhaps as leverage in seeking rent concessions. However, the landlord needs to prevail or they risk jeopardizing the security of his or her investment in the property.

MATTHEWS TM |

41

02

WHAT IS THE FINANCIAL STRENGTH OF YOUR TENANT? For an investor, a tenant with a substantial amount of assets provides a safety net for any defaulted lease payments. Verifying that the tenant has the assets available to cover defaulted payments guarantees that in the event the tenant misses any payment(s), the property landlord will be able to sue the company for any rent owed. On the flip side, it is highly unlikely a landlord will receive

compensation from a tenant with insufficient assets to ensure payment, and they will probably be left with just a vacant building. It is common for small operators to sign a one to three-unit guarantee on their lease and then sell off their company-owned real estate. This practice leaves the retail operation itself as the only guarantor of

the lease, with no assets to back it. Without a personal guarantee tied to the lease, an operator can walk away from their operation, free of any penalties. In this case, the landlord’s only remedy is to seek the value of the tenant’s defaulted payments through liquidation of the operation’s business assets.

03

IS YOUR TENANT ENGAGED IN STRATEGIES THAT AFFECT YOUR PROPERTY’S VALUE? expansions, consolidations, renovating, re-locating, acquisitions, sales, store closings & selling of operations. No matter who the guarantor is on a lease, it is important to pay attention to any movement in the tenant’s business. Landlords frequently fall into a false sense of security with their tenant because the rent payments are being made every month. They often forget about the possibility of their tenant leaving the site. For both franchisee and corporately-operated stores, landlords need to keep track of the financial moves of their tenant and their tenant’s competitors. This includes expansions, consolidations, renovating, relocating, acquisitions, sales, store closings and in particular, the selling of operations. With this information, a landlord has a greater understanding of the tenant’s operating environment and can better predict future

financial performanceof their specific site. It is not uncommon for a company to sell their operations to other, sometimes smaller, operators. In such instances, the guarantee of the lease changes. This could affect the value of that guarantee positively if backed by a larger operator, or negatively, if the size of the guarantee is reduced. Sometimes a tenant will only want to sell off the operations in a certain region. In doing so, a tenant will usually package a mix of desirable and undesirable operations together as a portfolio. To attain the desirable locations, the operator who buys the portfolio is coerced into purchasing the undesirable locations. After the sale, the operator will typically try to shed

the less desirable sites if they are not advantageous to hold any longer. This puts landlords of those sites in a precarious position. Thus, if a tenant is actively involved in acquisitions or dispositions, the security of your investment is much less certain than with a stable tenant. Often, if not written into the lease, landlords may not even be notified if an operator sells their business. The language written into the lease will outline whether the tenant is required to notify the landlord if they decide to sell their operations. If the lease was written by a good lawyer, the language may allow the tenant to sublease with consent of the landlord but there are many clauses that do allow tenants to sublease without landlord consent or notification.

With the pace of change in the retail landscape, a property owner must have a strategy in place for replacing an existing retail operator beyond simply believing that they’ll find a tenant to backfill their location when that time comes. Without a plan to re-tenant, even owning a property with a tenant that has favorable terms can still be risky for landlords.

04

IS YOUR PROPERTY RE-TENANTABLE?

over the last five years, Goodyear surprised more than 500 landlords with store closures. Investors who had kept up with industry news were aware of their tenant company’s strategy and were able to arrange back-up tenants to minimize the financial impact. On the other hand, vulnerable landlords were presented with the challenge of trying to re-tenant vacant auto service properties while they were still responsible for property taxes and other costs. The vulnerable landlords ended up having to sell the building vacant for a fraction of what they could have sold it for when it had a lease. Up-sizing and building a “relocation store” in the same market is another retail store trend. If a tenant is over-performing in a smaller retail operation, they may move down the street to reopen with a larger footprint. In their smaller markets, where land is inexpensive, Family Dollar has found success with this practice. Often times, Family Dollar will have a developer build them a new store nearby with an additional 2,000 square feet of retail space on a lot with 50 percent more parking, and the only cost will be a slight increase in rent. up-sizing leaves a landlord in a precarious situation: losing the tenant wipes out rental income and reduces the assessed value of the property. Finding a replacement tenant is challenging when the dominant operator has just opened a larger store in the immediate market area. As with any investment, an owner of net lease properties needs to stay highly informed of current tenant trends and have a strategy in place to replace a tenant - no matter how good the lease may be.

While answering these questions will give you a clearer picture into the health of your tenant and the level of risk your investment holds, there are always other factors to consider. Make sure to periodically check in and monitor your investment for any indications of trouble. Where there’s smoke, there’s usually fire, so if you start to see red flags pop up, spring into action and implement a plan to help minimize future loss.

Matthews™ is actively engaged with both corporate and franchisee operators across the country, staying up to date with the latest data, trends and news of store closures, mergers and more. In the case that you were not able to answer the questions above, or have other questions regarding your investment, our specialized agents are equipped to help find you the answers and solutions you need.

For more information contact DALTON BARNES dalton.barnes@matthews.com +1 214 692 2930

154,958

C-stores in the United States in 2017

160M

customers served by c-stores every day

$140B

in sales from in-store c-store purchases in 2017

$6.75 Average spent in a c-store shopping trip SOURCE: KOUPON MEDIA, NIELSEN

Barriers to Convenience Store Consideration

PERCIEVED VALUE & QUALITY, & NOT IN-STORE ENVIRONMENT PERCENT RESPONDENTS - TOP BARRIERS

35% Products aren’t good value for the money

23% Minimal product selection

21%

C-Stores Set to Survive the E-Commerce Takeover

Products are not high quality

17% Products don’t taste good

SOURCE: KOUPON MEDIA

15% Products are stale / not fresh SOURCE: NIELSEN

 Convenience

↑0.30% ↓0.11%

 Supermarkets

 E-Commerce

2017 increase in c-store locations 2017 decrease in grocery locations

SOURCE: KOUPON MEDIA

84%

Item’s purchased in c-stores are consumed within the hour

61%

Percent of shopping trips driven by immediate needs SOURCE: KOUPON MEDIA

44%

Of consumers say they are visiting c-stores more often

 1983

When Do Most People Fill Up? SOURCE: NACS

 19% | 6-10AM  36% | 10-3PM  35% | 3-7PM  10% | 3-12AM

 2008

 2011

 2014

GAME ON

Drug Stores Battle to Compete with Amazon | Bill Pedersen Over the past couple of years, the retail sector has seen significant changes. With the Amazon threat now looming over the pharmacy industry, we’ve seen mergers and acquisitions heavily increase to compete with the e- commerce giant. According to leading research, the drug store industry generates $271 billion in annual revenue with retailers CVS, Walgreens, and Rite Aid capturing a significant amount of the market share. Matthews™ reviews the top three drugstore unions recently made in the sector, where Amazon stands between them, and what investors should expect from this activity.

ANALYTICS MEETS HUMAN TOUCH: CVS ACQUIRES AETNA In December 2017, CVS announced a merger, under which CVS Health would acquire all outstanding shares of Aetna for a combination of cash and stock. The transaction values Aetna at approximately $207 per share or $69 billion. Including the assumption of Aetna’s debt, the total value of the transaction is $77 billion. This transaction, expected to close in the second half of 2018, claims to “fill an unmet need in the current health care system and present a unique opportunity to redefine access to high-quality care in lower cost, local settings whether in the community, at home, or through digital tools.” If completed, the merger would be the largest health insurance deal on record, creating a new hybrid in health care industry consolidation. “When this merger is complete, the combined company will be well-positioned to reshape the consumer health care

experience, putting people at the center of health care delivery to ensure they have access to high-quality, more affordable care where they are, when they need it,” said Larry Merlo, CVS Health president and CEO in the company’s press release. “At the same time, our company will benefit from a stronger market position, with the potential to deliver increased value through the development of innovative new products and services and generate long-term growth opportunities that help produce stronger, more consistent results for shareholders as a uniquely integrated health care company,” Merlo concluded. Adding ammunition to its artillery, the CVS-Aetna merger would pair up the largest retail pharmacy chain and one of the largest Pharmacy Benefit Managers (PBMs) with the third largest health insurer in the United States.

CVS would now be equipped with the capability to collect massive amounts of consumer data and develop highly targeted recommendations for individuals based on previous purchase patterns or that of similar customer profiles. Intermixing this consumer data not only allows a deeper reach into patient health behaviors, but it may allow CVS to incorporate the retail analytics of a storefront with the health management analytics of a healthcare provider. As of March 2018, growing opposition continues to try and block the merger as the American Antitrust Institute (AAI) joined the American Medical Association (AMA) in expressing skepticism about the merger, both focusing on the lack of competition we’ll see in the market if this merger closes.

A Diminished Deal:

Possible Impact for Investors While the impacts of the merger won’t be felt for some time, the effect of the Aetna acquisition should favor CVS landlords. With the threat of e-commerce and Amazon, the CVS-Aetna merger is a great opportunity for CVS to evolve beyond a traditional brickand-mortar retailer. Once the deal closes, the industry should anticipate more health clinicservices at CVS stores.

Operating 1,100 Minute Clinics, over twice as many as Walgreens, CVS is likely to double down on enhancing customer care, and has already begun testing vision and audiology centers in their stores. With the average CVS store occupying 10,000 to 13,000 square feet, they have the space available to repurpose their floorplans and implement such programs. If the merger is successful, CVS pharmacy will maintain a relevancy that cannot be duplicated by traditional competition (Walgreens) or new competitors (Amazon and other e-commerce threats). Eventually, we may start to see less focus on everyday items at CVS stores as they make more room for the higher value health care services; a move telegraphed by the company in 2014, when they changed their name from CVS Caremark to CVS Health. After all, you can buy dental floss at a number of places, but you can’t get your blood pressure checked just anywhere. As for expansion, CVS will continue to selectively build new stores, but one should not anticipate any rapid development. CVS has already slowed construction, only building new stores in the case of a relocation, or to enter new markets that have a void.

WALGREENS ACQUISITION OF RITE AID For quite some time now Walgreens, the largest pharmacy chain in the U.S. and Europe has been trying to merge with Rite Aid Corporation. The ongoing saga between the two companies reaches back to 2015.

Acquisition still pending under review with the Federal Trade Commission (FTC).

Oct 2015

Sep 2016

Walgreens Boots Alliance and Rite Aid announce extension of merger agreement end date to January 2017.

Walgreens Boots Alliance announces Rite Aid acquisition for $17.2 billion in all cash transaction.

Walgreens Boots Alliance and Rite Aid enter into an agreement to sell 865 Rite Aid stores to Fred’s Pharmacy for $950 million in an all-cash transaction. Agreement subject to FTC review and the approval of pending Walgreens/Rite Aid acquisition.

Oct 2016

Walgreens Boots Alliance and Rite Aid enter into amendment and extension to their merger agreement reducing the price for each share at a maximum of $7.00 and a minimum of $6.50. Walgreens will be required to divest up to 1,200 Rite Aid stores and certain additional related assets if required to obtain regulatory approval. End date of merger extended to July 2017.

Dec 2016

Jan 2017 Walgreens Boots Alliance secures regulatory clearance for an amended asset purchase agreement of 1,932 stores, three distribution centers and related inventory from Rite Aid Corporation for $4.375 billion in cash and other consideration.

Jun 2017 Walgreens Boots Alliance calls off previous deal to buy Rite Aid and enters into a new agreement to buy 2,186 Rite Aid stores, three distribution centers and related inventory for $5.175 billion in cash. Walgreens agrees to pay Rite Aid $325 million in termination fees for the previous merger agreements. Walgreens will begin acquiring the stores and related assets over a period of six months and intends to convert acquired stores to the Walgreens brand over time.

Sep 2017

Pro-Forma Store Profile 139 1 6

73

9

62 274

CT 22 535

1

577

217

Rite Aid States & Store Count

8

4

1

MD 13 80

2

1

NJ 100 DE 42

2

4

.

2

4

Rite Aid Distribution Centers

As of now, the long suffering acquisition of 1,932 stores is expected to close in the spring of 2018. After all locations are acquired, stores are expected to be fully converted to the Walgreens brand in carefully planned phases anticipated to be completed at the end of 2020. The stores to be purchased are located primarily in the Northeast and Southern U.S., and the three distribution centers to be purchased are located in Dayville, CT, Philadelphia, PA, and Spartanburg, SC. The transition

of these distribution centers to Walgreens will not begin for at least 12 months. When the dust settles, Walgreens will have about as many U.S. stores as top competitor CVS Health, which has about 9,600 locations. At the end of March 2018, Rite Aid Corporation completed transferring stores and related assets to Walgreens Boots Alliance and received the cash proceeds of $4.157 billion in cash. The company will also move forward with its previously announced plan to close 600

MA10

143

locations after the deal is complete. Those closures will take place over an 18-month period starting in Spring 2018. According to reports, integrating all of the locations will cost $750 million. In addition, Walgreens will invest $500 million in store improvements while aiming for $300 million in annual savings by 2020 for items such as overlapping expenses.

Possible Impact for Investors Walgreens and Rite Aid landlords should be conscious of the 600 store closures beginning this spring. In the instance both a Rite Aid (that has been acquired by Walgreens) and a Walgreens are in close proximity, the Rite Aid will likely close. The rebranding of a store and transferring all Walgreens technology is time consuming and expensive. It would be a rare circumstance where the Walgreens would be shuttered, and the Rite Aid remain open. There will likely be additional transformation for Walgreens landlords as Walgreens continues to digest the additional 1,900+ stores into their chain. For Rite Aid owners, they’re safe (for now) in terms of store closures, but there could be a shakeup should the merger with Albertsons get approved.

RI 1

GOING PUBLIC: ALBERTSONS PARTAKES IN RITE AID ROUND UP

A majority of Albertsons Companies pharmacies will be rebranded as Rite Aid and the company will continue to operate Rite Aid stand-alone pharmacies.

During the tail end of the Walgreens and Rite Aid debacle, privately held Albertsons Companies intends to grab up the remaining 2,500 Rite Aid locations not being sold to Walgreens Boots Alliance. The grocery chain, comprised of Safeway and 19 additional supermarket chains, has agreed to merge with publicly traded Rite Aid as a combined entity. In a joint press release announced in February 2018, the integrated company will operate approximately 4,900 locations, 4,350 pharmacy counters, and 320 clinics across 38 states, serving over 40 million customers per week.

The merger, expected to close early in the second half of 2018, enables Albertsons Companies to go public after being controlled by private equity giant, Cerberus Capital Management. Albertsons Companies’ executives report that the deal would create a company with expected 2018 revenue of $83 billion and potential annual earnings of $3.7 billion before interest, taxes, depreciation and amortization. The transaction has been approved unanimously by the boards of directors of both companies but is still subject to the approval of regulatory approvals and other customary closing conditions.

Possible Impact for Investors Rite Aid owners should be excited about the potential created by the Albertson-Rite Aid merger. While Rite Aid has fallen significantly behind main competitors, Albertsons sees the advantages of driving pharmacy customers into their stores. Albertsons noted on their quarterly investor call, that pharmacy customers are among the most valuable in the grocery business, spending more than twice as much on groceries per week as the average customer and more than three times overall. Rite Aid’s well-known brand and pharmacy expertise should help Albertsons attract new customers to its in-grocery pharmacies. The possible merger will have a particularly strong presence on the West Coast and Albertsons may help revive Rite Aid’s “front-of-store” retail business in its remaining stand-alone pharmacies with a more-compelling grocery option. The deal with Albertsons underlines the change in course that retailers are taking, as they are no longer looking to expand their physical footprint alone, but also their capabilities. There is also the opportunity to use store footprints as a base for drug delivery and pick up, combating against the e-commerce and Amazon threat.

There has been significant concern regarding what would happen to the leftover Rite Aid locations not included in the Walgreens merger. Fortunately, Albertsons’ acquisition of Rite Aid will save some of the remaining Rite Aid stores. Under the Albertsons’ brand, if the deal closes, Rite Aid owners will once again own real estate with a publicly traded tenant. In the months since Amazon announced its acquisition of Whole Foods, Albertsons has worked to reposition itself as a digitally focused, modern grocer. It acquired meal kit company, Plated, in September and has been expanding its partnership with the delivery service, Instacart. These developments are significant for landlords as it keeps the chain in competition with increasingly powerhouse rivals, CVS and Walgreens. Until the merger has been approved, it appears all new development for Rite Aid has been put on hold. Currently, it is hard to say when these projects will pick up again. The industry may have to wait until after the merger to reassess the situation.

AMAZON MOVING INTO HEALTHCARE Though Amazon has yet to publicly comment on its pharmacy ambitions, the rumor mill is buzzing with potential moves we might see from the online retail giant. According to top analysts, here are some of the ways Amazon could enter the pharmacy market and disrupt the drugstore industry: •

Using its massive logistics operations with services like Alexa, Prime, and Dash buttons, Amazon could start its own mail based drug delivery business

•

With the Whole Foods acquisition in 2017, Amazon could bring drug counters to stores or partner with local independent pharmacies

•

Already owning wholesale distribution licenses in at least 13 states, Amazon could build its own pharmacy business from scratch, restructuring the drug supply chain in the process.

•

Amazon could buy a drug distributor or a PBM

As these rumors swarmed, drug stores companies (i.e., CVS Health Corporation, Walgreens Boots Alliance, Inc., etc.) took a hit. Amazon’s threat of disruption is clearly ripping through the market, as even a slight push into pharmaceuticals and healthcare is sending companies into frenzy. Recent consolidations in the grocery and drugstore industries occurred as many are trying to fend off the rising competition of Amazon in these segments. As Amazon continues to innovate and crush its competition, leaving no industry untouchable, we’ll have to wait and see what they do next.

Next Steps With the changing landscape of the drugstore industry, it is better to be prepared than investing on a whim. If you own a Walgreens, Rite Aid, or CVS it is in your best interest to get a full evaluation of where your property stands and any potential options. Your property may be more valuable today or it may be at risk of being vacated. Improve your investment position and preserve your wealth by speaking with a Matthews™ specialist today.

BILL PEDERSEN (949) 432-4501 bill.pedersen@matthews.com

MATTHEWS AWARDED 2017 â„¢

COSTAR POWER BROKER AWARD RECOGNIZED AS TOP CRE FIRM IN THE LOS ANGELES & DALLAS MARKET

60 | SPRING/SUMMER 2018

MATTHEWS TM |

61

1.

4.

2.

5. 3.

62 | SPRING/SUMMER 2018

MATTHEWS TM |

63

01

02

03

04

Matthews™ exclusively represents 20+ tenants including local mom-and-pop shops, regional franchises, and national corporate tenants.

7409C

™

7527C

PMS BLACK PMS WHITE

Wit h interest rates t rend ing upward towards the end of last yea r, on December 14 th , 2 017 , t he Federa l Reserve officially raised the federal funds rate from 1.25 perc ent to 1 .5 0 percent , a nd announced they will continue down this path with three additional rate hikes in the forec ast for 2018 . As a reaction to this initial rate hike, during the first few mont hs of 2 018 , commercia l

mortgage rates ac ros s a ll product t ypes inc reas ed by roughly 50 basis points. On March 2 2 nd, 2 018 , the Federa l R es erve a n nounc ed it s most recent inc reas e, pus h ing t he federa l funds rate an additional 25 basis point to 1.75 percent. This did not have an immediate effect simply because it was widely a nt icipated . However, it would not be

hard to imagine that over the next few mont hs , t here could be a not her 5 0 bas is point s wing as new policies from the Trump Administration cont inue to priorit ize economic growt h . At this point, interest rates in t he t h ree percent ra nge a re a thing of the past. Investors are realizing that the long discussed “rates won’t stay low forever,� was correct , a nd is now a reality.

Fixed Rate Term

Portfolio Lenders LTV

Fixed Rate

Interest Rates

Conduit (CMBS)

Term

LTV

Interest Rates

5 Yr.

55% to 75%

4.70% to 5.20%

5 Yr.

55% to 75%

4.96% to 5.46%

7 Yr.

55% to 75%

4.81% to 5.31%

7 Yr.

55% to 75%

4.89% to 5.39%

10 Yr.

55% to 75%

4.84% to 5.34%

10 Yr.

55% to 75%

4.78% to 5.28%

Fixed Rate as of 4-30-18 3-Year Swap

2.84%

5-Year Treasury

5-Year Swap

2.91%

7-Year Treasury

2.80% 2.91%

7-Year Swap

2.94%

10-Year Treasury

2.94%

10-Year Swap

2.98%

Prime

4.75%

5 Yr.

55% to 80%

4.35% to 4.76%

5 Yr.

55% to 75%

7 Yr.

55% to 80%

4.51% to 4.92%

7 Yr.

55% to 75%

4.40% to 4.80% 4.51% to 4.91%

10 Yr.

55% to 80%

4.59% to 4.84%

10 Yr.

55% to 75%

4.54% to 4.94%

5 Yr.

55% to 80%

4.40% to 4.80%

5 Yr.

55% to 75%

4.50% to 4.90%

7 Yr.

55% to 80%

4.56% to 4.96%

7 Yr.

55% to 75%

4.61% to 5.01%

10 Yr.

55% to 80%

4.64% to 5.04%

10 Yr.

55% to 75%

4.64% to 5.04%

Started in 1883, The Kroger Company (Kroger Co.) is the largest supermarket chain by revenue, posting sales of 122.7 billion in 2017. It is the second-largest grocery retailer in the U.S., behind Walmart, and the third-largest in the world.

CURRENTLY KROGER OPERATES: 2,782

1,489

2,268

stores in 35 state

supermarket fuel stations

pharmacies

(Superstores, supermarkets, & multi-line stores)

274

38

42

jewelry stores

food processing & manufacturing facilities

distribution centers

T H E S E A R E N OT H Y P OT H E T I C A L S I T UAT I O N S

+23 MORE

MATTHEWS

™

LEASING

SERVICES Representing landlords across shopping centers, high street retail and ground-up construction projects.

M A T T H E W S™ L E A S I N G SERVICES AIDS IN: Creating the right tenant mix for your property Providing a synergistic tenant relationship Capitalizing on emerging opportunities Effectively positioning your property in the marketplace

In a transformative retail landscape, the combination of an experienced real estate consultant and calculated market information is key to maximizing the value of your asset.

™

NET LEASE TENANT

REPORT

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

AA±$14.96B ± 10,000 (U.S.) Irving, TX

CAP RATE COMPARISON New Construction 4.50% - 5.15% (15Years) 10 Years Remaining 5.00% - 5.60% 5 Years Remaining 5.75% - 6.50%

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

NNN or Ground Lease

CURRENT ON MARKET DATA 40 # of Properties Average Cap Rate 5.11% Average Lease 9.35 Years Term Remaining $2,532,275 Average Price 3.75% Lowest Cap Rate Highest Cap Rate 8.00%

10% Every 5 Years

Average Annual Rent

Lease Term

NNN: $140k-$170k ($90k-$120k w/ no gas) Ground Lease: $80k-$110k ($70-$90k w/ no gas)

15 Years

Typical SF

Average Sales

2,400 - 3,000 SF

$1,780,000 (Inside sales only)

CAP RATE CORRELATION 7.00% 6.75

2017

72

64

5.44%

5.56%

8 Years

7 Years

5.00%

$2,167,365

4.50%

Transactions

$2,283,350

CAP RATE

2016

TRANSACTIONS Average Cap Rate Average Term Remaining Average Sale Price

6.50% 6.25

6.00% 5.75

5.50% 5.25

4.75

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date 2/21/18

Manassas

VA

$1,330,000

4.76%

13.8 Years

1964

Cleveland

OH

$1,035,630

6.12%

7.6 Years

1990

2/7/18

Hudson

FL

$2,150,000

5.58%

9.7 Years

1998

1/26/18

Frisco

TX

$5,295,894

5.43%

11.6 Years

2001

1/22/18

Denver

CO

$2,740,000

5.00%

14.7 Years

2017

12/29/17

Las Vegas

NV

$1,270,000

5.48%

5.5 Years

1978/R2016

12/7/17

Vancouver

WA

$1,615,000

5.59%

4.5 Years

2012

10/20/17

Fort Myers

FL

$2,900,000

4.91%

9.9 Years

2012

9/28/17

San Diego

CA

$3,000,000

4.80%

5.3 Years

1988

9/28/17

Virginia Beach (Ground Lease)

VA

$2,925,000

5.19%

10.3 Years

2007

5/8/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.50% - 6.00% (15-20 Years) 10 Years Remaining 6.25% - 6.75% 5 Years Remaining 7.50% - 8.00%

BBB±$9.74B (2015) ± 5,372 (2015) Roanoke, VA

TYPICAL LEASE STRUCTURE

CURRENT ON MARKET DATA 62 # of Properties Average Cap Rate 7.12% Average Lease 7 Years Term Remaining $1,359,294 Average Price 5.00% Lowest Cap Rate Highest Cap Rate 12.57%

Lease Type NN or NNN

Rent Increases Custom or Flat 5 - 10% in Options

Lease Term 15 Years

Average Annual Rent $90,000

Typical SF ±7,000 SF

Average Sales $1,500,000

CAP RATE CORRELATION 2016 70

2017 72

Average Cap Rate Average Term Remaining Average Sale Price

6.76%

6.66%

8 Years

7 Years

$1,628,472

$1,906,057

9.00% CAP RATE

TRANSACTIONS Transactions

8.5%

8.0% 7.5%

7.00% 6.5%

6.00% 5.5%

5.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cincinnati

OH

$1,920,000

Tacoma

WA

$2,214,740

Kernersville

NC

$1,045,000

Cap Rate

Term Remaining

Year Built

Sale Date

7.42%

5 Years

2003

2/12/18

5.40%

15 Years

2017

1/5/18

7.81%

6 Years

2002

1/3/18

Xenia

OH

$1,130,000

7.12%

9 Years

2005

12/7/17

Lexington

NC

$1,395,000

8.03%

3 Years

2004

10/5/17

Pooler

GA

$1,641,670

7.93%

5 Years

2006

7/20/17 6/30/17

Sand Springs

OK

$1,509,650

8.01%

5 Years

2007

Williamstown

NJ

$2,260,000

5.95%

12 Years

2014

6/9/17

Elkin

NC

$2,045,121

5.90%

15 Years

2017

3/16/17

Norcross

GA

$2,083,970

6.55%

10 Years

2005

2/21/17

CURRENT ON MARKET DATA 14 # of Properties Average Cap Rate 5.39% Average Lease 19.43 Years Term Remaining $12,239,900 Average Price 4.50% Lowest Cap Rate Highest Cap Rate 6.85%

B+ Private ± 1,883 Boise, ID

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

TRANSACTIONS Tenant

2016

2017

8

10

4.91%

5.75%

-

13 Years

Transactions Average Cap Rate Average Term Remaining Average Sale Price

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

5-10% Every 5 Years

20 to 25 Years

$14,072,400 $15,420,000

$653,000

Typical SF ±52,100 SF

Average Sales

$428 Per Square Foot

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Pollock Pines

CA

$8,947,000

5.75%

-

-

2/26/18

Colorado Springs

CO

$9,100,000

6.20%

25 Years

-

5/5/17

Rio Rancho

NM

$7,330,000

7.50%

5 Years

-

3/27/17

Eugene

OR

$11,656,000

5.25%

-

-

12/29/16

Seattle

WA

$8,778,100

4.50%

25 Years

1994

7/14/16

Tujunga

CA

$13,982,500

5.00%

24 Years

-

4/8/16

Rancho Cucamonga

CA

$13,781,000

4.83%

-

-

4/7/16

CURRENT ON MARKET DATA 19 # of Properties Average Cap Rate 5.50% Average Lease 10 Years Term Remaining $3,500,000 Average Price 4.05% Lowest Cap Rate Highest Cap Rate 7.25%

Private Private ± 1,358 Essen, Germany

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

Ground Lease

TRANSACTIONS Tenant

2016

2017

16

19

5.25%

5.50%

9 Years

10 Years

Transactions Average Cap Rate Average Term Remaining Average Sale Price

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

5-10% Every 5 Years

15 to 20 Years

$3,000,000 $3,000,000

$215,000

Typical SF ±18,000 SF

Average Sales $8,840,052

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Kenosha

WI

$2,555,555

4.60%

-

-

2/13/18

Fort Pierce

FL

$2,511,111

4.65%

-

-

1/11/18

Chicago

IL

$2,515,000

7.12%

-

-

12/28/17

Lenoir City

TN

$2,200,000

4.50%

-

-

6/28/17

Brooksville

FL

-

4.76%

-

-

5/3/17

Grand Rapids

MN

$2,200,000

5.20%

-

-

4/3/17

Tullahoma

TN

$1,889,000

4.50%

-

-

1/13/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

N/A ±$1.34B ± 1,900 Kansas City, MO

CAP RATE COMPARISON New Construction 6.50% (15-20 Years) 10 Years Remaining 6.85% 5 Years Remaining 7.50%

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN

CURRENT ON MARKET DATA 50 # of Properties Average Cap Rate 6.65% Average Lease 11 Years Term Remaining $2,927,106 Average Price 5.00% Lowest Cap Rate Highest Cap Rate 9.00%

10% Every 5 years

$180,000

± 5,000 SF

$2,200,000

CAP RATE CORRELATION 8.75% 8.50%

2016

2017

34

65

Transactions Average Cap Rate Average Term Remaining Average Sale Price

6.22% 13 Years

6.50%

CAP RATE

TRANSACTIONS

8.25% 8.00%

7.75% 7.50%

7.25% 7.00%

6.75%

11 Years

6.50%

6.25%

$2,857,593 $2,764,683

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Schererville

IN

Lincoln

NE

McDonough

Year Built

Sale Date

$2,593,000

6.75%

15 Years

1993

12/11/17

$2,878,000

6.85%

15 Years

1999

11/29/17

GA

$2,240,500

7.90%

7 Years

1999

11/17/17 11/17/17

Atlanta

GA

$4,635,000

6.15%

15 Years

1999

Savannah

GA

$1,825,000

5.75%

15 Years

1999

11/7/17

Oklahoma City

OK

$1,662,600

7.15%

14 Years

2002

10/9/17

South Boston

VA

$2,000,000

7.00%

11 Years

1998

8/11/17

Spring Hill

FL

$5,231,770

6.10%

10.5 Years

1998

8/4/17

Rochester

MN

$4,300,000

6.49%

13 Years

2001

7/31/17

Brunswick

GA

$3,389,243

7.40%

12 Years

1994

11/7/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.50% (15-20 Years) 10 Years Remaining 6.10% 5 Years Remaining 7.25%

Private Private ± 3,300 Atlanta, GA

TYPICAL LEASE STRUCTURE

CURRENT ON MARKET DATA 22 # of Properties Average Cap Rate 6.10% Average Lease 12.88 Years Term Remaining $1,481,000 Average Price 5.30% Lowest Cap Rate Highest Cap Rate 7.02%

Lease Type NNN

Rent Increases 5-10% Every 5 Years

Lease Term 15-20 Years

Average Annual Rent $110,000

Typical SF ± 3,051 SF

Average Sales $1,117,000

CAP RATE CORRELATION 2016

2017

49

52

Average Cap Rate Average Term Remaining Average Sale Price

6.03%

6.24%

12 Years

13 Years

$1,507,000 $1,605,000

10.00% 9.50%

9.00% CAP RATE

TRANSACTIONS Transactions

8.50%

8.00% 7.50%

7.00% 6.50%

6.00% 5.50%

5.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date 12/15/17

Effingham

IL

$1,784,500

5.25%

15 Years

1986

Mebane

NC

$1,728,000

5.49%

20 Years

2017

12/1/17

Bloomington

IN

$1,365,000

5.70%

12.7 Years

1998

11/27/17

Leesville

LA

$927,000

6.50%

12 Years

1990

11/17/17

Wadesboro

NC

$1,695,100

7.70%

15 Years

2001

11/10/17

Lake Wylie

SC

$2,910,000

5.77%

20 Years

2017

11/8/17

Dacula

GA

$2,800,000

6.22%

7.5 Years

2005

10/31/17

Palatine

IL

$1,315,000

6.75%

9 Years

1990

10/18/17

Gainesville

GA

$2,287,117

5.10%

20 Years

2016

10/16/17

Warren

MI

$1,590,000

6.00%

10 Years

1970

10/4/17

19

20

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

BBB+ ±$234.48B ± 1,344 Dallas, TX

CAP RATE COMPARISON New Construction (15-20 Years) 10 Years Remaining 6.50% 5 Years Remaining 7.75%

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term 10 Years

Average Annual Rent

Typical SF

Average Sales

NN

CURRENT ON MARKET DATA 9 # of Properties Average Cap Rate 6.65% Average Lease 7.5 Years Term Remaining $2,440,870 Average Price 5.00% Lowest Cap Rate Highest Cap Rate 11.92%

Custom

$148,423

4,322 SF

N/A

CAP RATE CORRELATION 12.00% 11.00%

2016

2017

12

10

Transactions Average Cap Rate Average Term Remaining Average Sale Price

6.96%

CAP RATE

TRANSACTIONS

10.00%

6.36%

7 Years

9 Years

$1,624,697

$2,622,833

9.00%

8.00% 7.00%

6.00% 5.00%

4.00% 3.00%

2.00%

1

2

3

4

5

6

7

8

9

10

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Tallahassee

FL

$2,525,000

6.87%

9 Years

2016

12/8/17

Woodbury

NY

$3,230,000

5.10%

8 Years

2001

10/3/17

Saraland

AL

$625,000

6.75%

9 Years

2016

5/19/17

Danville

KY

$3,700,000

7.05%

4 Years

2002

3/30/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 4.75% (15-20 Years) 10 Years Remaining 6.00% 5 Years Remaining 7.25%

BBB ±$17.87B ±6,029 Memphis, TN

TYPICAL LEASE STRUCTURE

CURRENT ON MARKET DATA 28 # of Properties Average Cap Rate 5.23% Average Lease 9.75 Years Term Remaining $1,969,142 Average Price 4.16% Lowest Cap Rate Highest Cap Rate 6.50%

Lease Type

Rent Increases

Lease Term

Average Annual Rent

Ground Lease

5-10% Every 5 Years

15 Years

$80,000

Typical SF

Average Sales

±7,225 SF

$1,806,103

CAP RATE CORRELATION 2016

2017

32

31

Average Cap Rate Average Term Remaining Average Sale Price

5.70%

5.70%

12 Years

11 Years

$1,666,680

$1,760,673

9.00% 8.50%

8.00% CAP RATE

TRANSACTIONS Transactions

7.50%

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Clearfield

UT

$2,156,000

5.25%

8 Years

2005

1/15/18

Southington

CT

$2,500,000

7.40%

5 Years

1995

12/20/17

Seattle

WA

$2,150,000

4.50%

12 Years

1959

12/4/17

Irmo

SC

$1,830,000

6.00%

8 Years

2005

12/1/17

Puyallup

WA

$2,144,000

4.65%

11 Years

2004

12/1/17

Atlanta

GA

$2,800,000

5.20%

14 Years

1998

11/20/17

Citrus Heights

CA

$1,200,000

6.10%

3.5 Years

1983

10/25/17

Alameda

CA

$4,420,000

4.07%

15 Years

2017

9/29/17

Boulder City

NV

$2,222,250

6.95%

6.5 Years

1998

7/14/17

Tamarac

FL

$1,675,000

6.00%

9 Years

2006

6/30/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

A+ ±$325.64B ±4,600 Charlotte, NC

CAP RATE COMPARISON New Construction 4.00%-4.50% (15-20 Years) 10 Years Remaining 5.25%-5.75% 5 Years Remaining 6.00%

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN or Ground Lease

CURRENT ON MARKET DATA 16 # of Properties Average Cap Rate 4.79% Average Lease 12.75 Years Term Remaining $3,772,003 Average Price 4.00% Lowest Cap Rate Highest Cap Rate 7.00%

10% Every 5 Years

N/A

3,500 SF

N/A

CAP RATE CORRELATION 9.00% 8.50%

2016

2017

14

12

Transactions

Average Cap Rate 5.50% 5.00% Average Term 10 Years 10 Years Remaining Average Sale Price $2,800,000 $2,784,636

CAP RATE

TRANSACTIONS

8.00% 7.50%

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Ventura

CA

$3,610,000

3.94%

5 Years

1978

9/1/17

Bakersfield

CA

$3,000,000

5.25%

-

-

7/28/17

Monroe

WA

$3,125,000

5.97%

6.5 Years

1994

7/27/17

North Las Vegas

NV

$3,960,000

5.50%

9.5 Years

2007

7/19/17

Old Saybrook

CT

$3,000,000

5.15%

10 Years

1950

7/6/17

Folsom

PA

$3,821,000

4.91%

20 Years

2017

6/15/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.50% (15 Years) 10 Years Remaining 5.95% 5 Years Remaining 6.90%

N/A ±$490M ±725 Charlotte, NC

TYPICAL LEASE STRUCTURE

CURRENT ON MARKET DATA 15 # of Properties Average Cap Rate 5.97% Average Lease 13 Years Term Remaining $2,629,047 Average Price 5.40% Lowest Cap Rate Highest Cap Rate 7.77%

Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

1.25% Every Year

15 Years

$138,000

Typical SF

Average Sales

± 3,800 SF

$1,800,000

CAP RATE CORRELATION 2016

2017

25

34

Average Cap Rate Average Term Remaining Average Sale Price

6.09%

6.24%

12 Years

12 Years

$2,390,425

$2,369,169

10.50% 10.00%

9.50% CAP RATE

TRANSACTIONS Transactions

9.00%

8.50% 8.00%

7.50% 7.00%

6.50% 6.00%

5.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

China Grove

NC

Duluth

GA

Winston-Salem

NC

Year Built

Sale Date

$2,855,000

5.31%

$2,636,000

5.70%

15 Years

2017

11/21/17

12 Years

2014

$2,672,411

4/21/17

5.50%

15 Years

2017

3/31/17

Wise

VA

$2,045,021

5.50%

15 Years

2017

3/31/17

Locust

NC

$2,050,500

6.25%

8 Years

2009

3/30/17

Winston-Salem

NC

$2,491,000

5.25%

15 Years

2017

3/1/17

Greensboro

NC

$1,684,500

5.75%

7 Years

1993

11/16/16

Marietta

GA

$1,450,000

6.87%

5 Years

2005

9/1/16

Winston-Salem

NC

$2,853,306

6.20%

11 Years

2012

6/14/16

Doraville

GA

$2,885,000

5.25%

15 Years

2016

6/2/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

N/A ±$2.44B ±1,238 Minneapolis, MN

CAP RATE COMPARISON New Construction 5.35% (15-20 Years) 10 Years Remaining 6.20% 5 Years Remaining 7.15%

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term 15 to 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN

CURRENT ON MARKET DATA 11 # of Properties Average Cap Rate 6.37% Average Lease 10 Years Term Remaining $3,532,000 Average Price 5.50% Lowest Cap Rate Highest Cap Rate 7.78%

7.50% Every 5 Years

$168,000

5,500 - 7,500 SF

$3,200,000

CAP RATE CORRELATION 8.50% 8.00%

2016

2017

16

9

Transactions Average Cap Rate Average Term Remaining Average Sale Price

6.14% 12 Years

CAP RATE

TRANSACTIONS

7.50%

6.17%

7.00%

6.50% 6.00%

5.50% 5.00

4.50%

11 Years

4.00

3.50%

$2,970,000 $2,724,545

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Gilroy

CA

$2,900,000

5.00%

9 Years

2004

10/6/17

Olive Branch

MS

$2,210,000

7.35%

4 Years

2003

8/24/17

Mansfield

OH

$2,600,000

6.00%

17 Years

2014

7/14/17

Mooresville

NC

$1,850,000

6.21%

11 Years

2012

6/2/17

Cumberland

MD

$4,000,000

6.98%

10 Years

2016

5/15/17

Sierra Vista

AZ

$2,295,000

6.54%

10 Years

2007

9/12/16

Avon Lake

OH

$2,500,000

6.26%

12 Years

2004

3/17/16

Olive Branch

MS

$2,166,000

7.50%

3 Years

2003

3/16/16

Alamogordo

NM

$2,478,000

5.75%

13 Years

2015

3/15/16

Smithfield

NC

$4,755,000

5.65%

15 Years

2015

2/17/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters CAP RATE COMPARISON New Construction 5.65% (15-20 Years) 10 Years Remaining 6.50% 5 Years Remaining 7.50%

B+ ±$12.49B ± 15,000 Miami, FL

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN or Ground Lease

CURRENT ON MARKET DATA 90 # of Properties Average Cap Rate 5.93% Average Lease 13 Years Term Remaining $2,261,738 Average Price 4.50% Lowest Cap Rate Highest Cap Rate 8.51%

7.5% Every 5 Years

20 Years

$90,000

Typical SF

Average Sales

± 3,000 SF

$1,305,000

CAP RATE CORRELATION 9.00% 8.50%

2016

2017

176

126

Average Cap Rate Average Term Remaining Average Sale Price

6.16%

5.94%

14 Years

17 Years

$1,634,699

CAP RATE

TRANSACTIONS Transactions

8.00% 7.50%

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.00%

$1,880,882

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Corpus Christi

TX

$1,800,000

6.25%

St. Augustine

FL

$1,348,000

5.12%

11 Years

2008

1/20/18

13 Years

2008

Memphis

TN

$1,743,688

5.59%

19 Years

10/4/17

1992

9/28/17 9/22/17

Clayton

NC

$2,050,000

5.71%

18 Years

1988

Roseville

MI

$2,700,000

5.67%

17 Years

2006

9/7/17

Lawrence

MA

$1,565,000

6.20%

9 Years

2010

5/26/17 4/26/17

Buford

GA

$2,005,600

5.60%

20 Years

1989

Orland

CA

$2,775,000

5.50%

16 Years

1995

4/5/17

Cordova

TN

$1,855,000

5.39%

19 Years

2002

3/27/17

Salt Lake City

UT

$2,500,000

5.60%

7 Years

1990

2/13/17

20

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

Private Private ± 1,400 Franklin, TN

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 4.75% (15-20 Years) 10 Years Remaining 6.00% 5 Years Remaining 6.75%

Lease Type

Rent Increases

Lease Term 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN or Ground Lease

CURRENT ON MARKET DATA 8 # of Properties Average Cap Rate 5.21% Average Lease 13.15 Years Term Remaining $2,782,625 Average Price 4.25% Lowest Cap Rate Highest Cap Rate 6.00%

5-10% Every 5 Years

$130,000

± 3,000 SF

$1,415,000

CAP RATE CORRELATION 8.00% 7.50%

2016

2017

20

14

Transactions Average Cap Rate Average Term Remaining Average Sale Price

5.45% 10 Years

5.79%

CAP RATE

TRANSACTIONS

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.00%

11 Years

3.50%

3.00%

$2,388,469 $2,257,200

2

3

5

4

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Huntington Beach

CA

$2,000,000

4.35%

Henderson

NV

$3,175,000

5.67%

2 Years

1972

2/14/18

10 Years

2004

Willcox

AZ

$1,415,000

6.20%

20 Years

1/17/18

1984

1/3/18

Tucson

AZ

$2,000,000

5.38%

16 Years

1983

11/13/17

Fresno

CA

$1,515,000

5.50%

-

1980

10/20/17

Las Vegas

CA

$1,885,000

5.44%

-

1982

6/21/17

Happy Valley

OR

$2,860,000

5.00%

14 Years

2011

6/13/17

Arcata

CA

$1,889,000

5.40%

-

-

5/31/17

Portland

OR

$2,300,000

5.84%

5.5 Years

2002

5/18/17

Phoenix

AZ

$1,398,000

10.47%

6 Years

1985

5/11/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters CAP RATE COMPARISON New Construction 4.00% (15-20 Years) 10 Years Remaining 5.00% 5 Years Remaining 6.00%

A+ ±$394.47B ±5,200 New York, NY

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN or Ground Lease

CURRENT ON MARKET DATA 10 # of Properties Average Cap Rate 4.70% Average Lease 10 Years Term Remaining $4,120,200 Average Price 4.00% Lowest Cap Rate Highest Cap Rate 6.00%

10% Every 5 Years

20 Years

$200,000

Typical SF

Average Sales

± 3,500 SF

N/A

CAP RATE CORRELATION 9.00% 8.50%

2016

2017

7

8

Average Cap Rate Average Term Remaining Average Sale Price

4.10%

4.25%

12 Years

10 Years

$3,824,265

CAP RATE

TRANSACTIONS Transactions

8.00% 7.50%

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.00%

$4,721,406

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Vancouver

WA

$3,085,000

5.25%

8.5 Years

1990

12/12/17

Brandon

FL

$3,175,000

4.16%

20 Years

2007

10/9/17

Palm Coast

FL

$3,125,000

-

18 Years

2017

7/21/17

Westminster

CA

$6,880,000

4.23%

10 Years

1998

4/18/17

Sacramento

CA

$2,650,000

5.69%

-

2007

10/21/16

Plantation

FL

$5,646,000

4.50%

9.5 Years

1998

6/17/16

Dallas

TX

$2,662,000

5.27%

9 Years

1963

4/26/16

20

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

Private Private ± 2,200 Atlanta, GA

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term 15 to 20 Years

Average Annual Rent

Typical SF

Average Sales

Ground Lease or NNN

CAP RATE COMPARISON New Construction 3.75% (15-20 Years) 10 Years Remaining 4.54% 5 Years Remaining -

± 4,500 SF

CURRENT ON MARKET DATA 10 # of Properties Average Cap Rate 3.85% Average Lease 16.72 Years Term Remaining $4,195,000 Average Price 3.00% Lowest Cap Rate Highest Cap Rate 5.00%

TRANSACTIONS

10% Every 5 Years

$128,000

$4,400,000

2016

2017

14

17

Transactions

Average Cap Rate 4.15% 4.21% Average Term 20 Years 18 Years Remaining Average Sale Price $3,500,000 $3,059,000

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Ankeny

IA

$1,762,500

4.54%

12 Years

2014

11/27/17

Chanhassen

MN

$3,333,000

4.50%

20 Years

2017

10/31/17

Salina

KS

$1,610,000

4.35%

15 Years

2016

5/12/17

Manassas

VA

$2,889,000

4.12%

13 Years

2004

3/10/17

Hicksville

NY

$6,238,348

4.00%

15 Years

2016

3/9/17

Fort Worth

TX

$2,450,000

3.98%

15 Years

2017

3/3/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters CAP RATE COMPARISON New Construction 5.15% (15-20 Years) 10 Years Remaining 5.55% 5 Years Remaining 7.50%

BBB±$1.67B ±1,606 Dallas, TX

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

Ground Lease

CURRENT ON MARKET DATA 5 # of Properties Average Cap Rate 5.33% Average Lease 7.2 Years Term Remaining $2,605,640 Average Price 4.46% Lowest Cap Rate Highest Cap Rate 7.50%

10% Every 5 Years

10 Years

$140,000

Typical SF

Average Sales

± 5,000 SF

$3,000,000

CAP RATE CORRELATION 7.50% 7.25%

Average Cap Rate Average Term Remaining Average Sale Price

2016

2017

10

10

5.53% 10.25 Years

6.10%

CAP RATE

TRANSACTIONS Transactions

7.00% 6.75%

6.50% 6.25%

6.00% 5.75%

5.50%

8 Years

5.25%

5.00%

$2,625,400 $3,083,673

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Sumter

SC

$3,175,000

7.39%

5 Years

2004

12/28/17

Midlothian

VA

$2,250,000

6.00%

10 Years

2005

8/30/17

Alcoa

TN

$1,630,000

6.00%

4 Years

2005

6/14/17 4/28/17

Simi Valley

CA

$2,250,000

4.58%

5 Years

1992

Saint Peters

MO

$2,063,333

6.00%

5 Years

1999

3/2/17

Rosemont

IL

$5,965,219

6.40%

12 Years

2001

2/10/17

New Lenox

IL

$2,625,000

5.30%

15 Years

-

2/10/17

Alexandria

VA

$3,351,000

5.41%

5 Years

2007

11/15/16

Saint Joseph

MO

$3,000,000

6.00%

20 Years

2004

11/1/16

Temecula

CA

$2,625,000

5.00%

5 Years

1998

10/20/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

TYPICAL LEASE STRUCTURE

N/A ±$8.88B ±2,400 Denver, CO

Lease Type

Rent Increases

Lease Term 10 to 15 Years

Average Annual Rent

Typical SF

Average Sales

NNN or Ground Lease

CAP RATE COMPARISON New Construction 4.71% (15-20 Years) 10 Years Remaining 5.14% 5 Years Remaining 5.75%

± 2,400 SF

CURRENT ON MARKET DATA 8 # of Properties Average Cap Rate 5.02% Average Lease 11.5 Years Term Remaining $2,310,187 Average Price 4.75% Lowest Cap Rate Highest Cap Rate 5.15%

TRANSACTIONS

10% Every 5 Years

$116,364

$1,625,000

2016

2017

11

4

5.14%

4.90%

9 Years

11 Years

$1,910,276

$2,405,083

Transactions Average Cap Rate Average Term Remaining Average Sale Price

RECENT SALES COMPARABLES City

State

Sales Price

Fort Worth

TX

$3,462,000

Sidney

OH

$1,558,333

Pittsburgh

PA

$2,725,000

Cap Rate

Term Remaining

Year Built

Sale Date

4.19%

14 Years

2016

7/11/17

5.50%

10 Years

2015

4/10/17

4.70%

10 Years

2017

3/23/17

Port Richey

FL

$1,875,000

5.24%

10 Years

1995/R 2016

1/13/17

Phoenix

AZ

$2,551,000

4.90%

10 Years

1995/R 2016

12/30/16

Ukiah

CA

$2,125,000

4.23%

10 Years

2016

12/22/16

Bexley

OH

$1,700,000

4.65%

8 Years

1998

12/21/16

Circleville

OH

$1,635,000

5.00%

10 Years

2016

12/12/16

Plainfield

IN

$1,312,500

6.47%

10 Years

2016

12/1/16

Indianapolis

IN

$1,325,000

5.75%

2 Years

2004

11/2/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.95% (15-20 Years) 10 Years Remaining 6.45% 5 Years Remaining 7.90%

Private Private ±1,700 Atlanta, GA

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

CURRENT ON MARKET DATA 19 # of Properties Average Cap Rate 6.19% Average Lease 11 Years Term Remaining $1,147,037 Average Price 5.25% Lowest Cap Rate Highest Cap Rate 7.71%

5-10% Every 5 Years

15 to 20 Years

$75,000

Typical SF

Average Sales

2,500 SF

$1,100,000

CAP RATE CORRELATION 9.00%

2016

2017

9

17

Average Cap Rate Average Term Remaining Average Sale Price

7.25%

6.85%

8 Years

9 Years

$841,227

$1,036,990

8.50%

8.00% CAP RATE

TRANSACTIONS Transactions

7.50%

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.00%

2

3

4

5

6

7

8

9

10

11

12

13

15

14

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date 10/27/17

North Charleston

SC

$1,457,500

6.59%

20 Years

2006

Decatur

GA

$1,200,000

6.75%

12 Years

1977

10/16/17

Panama City

FL

$1,865,000

6.10%

17 Years

1976

10/10/17

Compton

CA

$1,080,000

5.54%

7 Years

1969

9/8/17

Topeka

KS

$640,000

7.47%

8 Years

1975

7/21/17

Lubbock

TX

$1,585,000

5.80%

14 Years

2016

5/11/17

Houston

TX

$1,234,483

6.00%

16 Years

1977

9/1/16

Albuquerque

NM

$1,371,000

7.50%

15 Years

2001

6/17/16

East Point

GA

$775,000

7.74%

6 Years

1977

4/26/16

Panama City

FL

$1,000,000

6.50%

18 Years

1976

3/21/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.00% (15-20 Years) 10 Years Remaining 6.25% 5 Years Remaining 7.00%

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN or Ground Lease

CURRENT ON MARKET DATA 20 # of Properties Average Cap Rate 6.15% Average Lease 8 Years Term Remaining $1,693,000 Average Price 4.50% Lowest Cap Rate Highest Cap Rate 7.75%

$120,000

Typical SF

Average Sales

2,500 SF

$1,500,000

CAP RATE CORRELATION 8.50%

2016

2017

50

99

7.03%

6.20%

5.16 Years

9 Years

$1,464,646

$1,200,000

8.00%

7.50% CAP RATE

Average Cap Rate Average Term Remaining Average Sale Price

Custom

15 Years

TRANSACTIONS Transactions

BBB ±$36.11B ± 15,000 Tempe, AZ

7.00%

6.50% 6.00%

5.50% 5.00%

4.50% 4.00%

3.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Tampa

FL

$1,400,000

6.26%

9 Years

1987

12/1/17

Cohutta

GA

$785,000

7.82%

6.5 Years

1975

10/30/17

Albuquerque

NM

$1,322,000

7.35%

1.5 Years

1996

10/5/17

Tucson

AZ

$1,353,000

6.50%

4 Years

1988

10/2/17

Bradenton

FL

$1,335,000

6.40%

4 Years

1984

9/25/17

Tucson

AZ

$1,131,000

5.18%

10 Years

1988

8/11/17 6/16/17

Phoenix

AZ

$2,565,000

7.20%

7 Years

1987

Jacksonville

FL

$620,000

6.22%

1 Years

1971

6/8/17

Loveland

OH

$1,076,000

7.08%

5 Years

1995

3/30/17

Tampa

FL

$740,000

7.59%

3.5 Years

1976

1/31/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

Baa1/BBB+ ±$78.98B ± 9,800 Woonsocket, RI

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 5.00% (25 Years) 10 Years Remaining 6.25% 5 Years Remaining 7.00%

Lease Type

Rent Increases

Lease Term 20 to 25 Years

Average Annual Rent

Typical SF

Average Sales

NNN

CURRENT ON MARKET DATA 157 # of Properties Average Cap Rate 6.18% Average Lease 12.8 Years Term Remaining $4,801,298 Average Price 3.25% Lowest Cap Rate Highest Cap Rate 20.26%

Flat Lease with Rent Increases in Options

$325,000

± 14,600 SF

N/A

CAP RATE CORRELATION 9.00% 8.50%

TRANSACTIONS

2016

2017

197

180

Transactions Average Cap Rate Average Term Remaining Average Sale Price

CAP RATE

8.00% 7.50%

7.00% 6.50%

6.00% 5.50%

6.03%

5.00%

13.84 Years

12.50 Years

4.00%

$5,241,135

$5,099,081

6.02%

4.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Madison

TN

$2,925,000

6.50%

6 Years

1999

1/17/18

Hyannis

MA

$13,950,000

5.13%

20 Years

2017

11/16/17

Auburn

ME

$3,500,000

5.14%

20 Years

1998

9/20/17

Ambler

PA

$9,650,000

5.25%

20 Years

2012

7/15/17

Raleigh

NC

$7,013,000

5.55%

19 Years

2001

6/30/17

Bartlesville

OK

$7,766,000

5.15%

22 Years

2014

5/28/17

Wayland

NY

$3,275,000

5.71%

15 Years

2007

4/17/17

Kingsport

TN

$4,308,649

5.33%

23 Years

2015

4/10/17

Los Angeles

CA

$7,550,000

4.64%

11 Years

2002

2/28/17

Norfolk

VA

$5,954,940

5.00%

22 Years

2014

2/9/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.00% (15-20 Years) 10 Years Remaining 5.13% 5 Years Remaining 7.25%

BB/Ba2 ±$13.09B ± 2,510 Denver, CO

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NN

CURRENT ON MARKET DATA 18 # of Properties Average Cap Rate 6.02% Average Lease 9.26 Years Term Remaining $3,559,342 Average Price 5.00% Lowest Cap Rate Highest Cap Rate 12.00%

5-10% Every 5 Years

10 to 15 Years

$20-$30 Per Square Foot

Typical SF

Average Sales

±7,500 - 12,000 SF

N/A

CAP RATE CORRELATION 9.00%

2016

2017

16

28

Average Cap Rate Average Term Remaining Average Sale Price

7.17%

6.04%

8.5 Years

9.26 Years

$2,790,270

$4,225,349

8.50%

8.00% CAP RATE

TRANSACTIONS Transactions

7.50%

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Eufaula

AL

$550,000

8.94%

4 Years

2003

1/8/18

Leland

NC

$2,970,000

5.64%

15 Years

2016

2/13/18

Inglewood

CA

$4,436,000

5.00%

15 Years

1989/R2017

12/11/17 8/24/17

Sandusky

OH

$2,400,000

5.87%

14 Years

2006/R2017

Decatur

GA

$4,000,000

7.50%

10 Years

1970/R1988

8/17/17

San Jose

CA

$11,229,000

5.00%

15 Years

2017

10/19/17

Fort Myers

FL

$2,255,000

5.40%

14 Years

2016

4/4/17

Evans

GA

$3,157,830

6.15%

15 Years

2016

2/9/17

Seguin

TX

$2,200,000

7.09%

9.9 Years

2012

7/6/17

Oxnard

CA

$3,060,000

5.13%

10 Years

2006

7/28/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

N/A ±$485M ± 560 Lake Forest, CA

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 4.60% (25 Years) 10 Years Remaining 5.50% 5 Years Remaining 6.50%

Lease Type

Rent Increases

Lease Term 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN

CURRENT ON MARKET DATA 11 # of Properties Average Cap Rate 4.56% Average Lease 16 Years Term Remaining $2,668,925 Average Price 4.00% Lowest Cap Rate Highest Cap Rate 6.00%

10% Every 5 Years or CPI Every 5 Years

$123,152

±2,420 SF

$1,360,000

CAP RATE CORRELATION 8.00% 7.50%

TRANSACTIONS

2016

2017

17

15

Transactions Average Cap Rate Average Term Remaining Average Sale Price

CAP RATE

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.71%

4.00%

16 Years

16 Years

3.00%

$2,156,764

$2,902,760

4.98%

3.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Lynwood

CA

$3,400,000

4.40%

20 Years

1965

12/21/17

Jurupa Valley

CA

$2,253,000

4.75%

13 Years

1979

12/21/17

Hesperia

CA

$2,100,000

4.19%

15 Years

1979

9/1/17

Mesquite

NV

$1,875,000

5.76%

15 Years

2009

8/11/17

Henderson

NV

$2,952,623

4.25%

20 Years

2016

7/19/17

Costa Mesa

CA

$7,995,000

4.50%

20 Years

1975

6/15/17

Placentia

CA

$4,100,000

4.29%

15 Years

1995

7/25/16

Phoenix

AZ

$2,080,000

5.88%

10 Years

2004

5/27/16

Las Vegas

NV

$2,900,000

4.45%

20 Years

2016

4/29/16

Las Vegas

NV

$2,640,000

6.46%

11 Years

1996

3/5/14

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.75% (15-20 Years) 10 Years Remaining 6.50% 5 Years Remaining 7.25%

N/A ±$980.5M ±1,733 Spartanburg, SC

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

CURRENT ON MARKET DATA 7 # of Properties Average Cap Rate 5.53% Average Lease 16 Years Term Remaining $2,554,983 Average Price 4.50% Lowest Cap Rate Highest Cap Rate 7.35%

5-10% Every 5 Years

20 Years

$140,000

Typical SF

Average Sales

±5,000 SF

$1,600,000

CAP RATE CORRELATION 8.00%

2016

2017

19

22

Average Cap Rate Average Term Remaining Average Sale Price

6.30%

5.91%

17.46 Years

14.61 Years

$2,053,323

$2,339,931

7.50%

7.00% CAP RATE

TRANSACTIONS Transactions

6.50%

6.00% 5.50%

5.00% 4.50%

4.00% 3.50%

3.00%

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Henderson

NC

$2,520,000

5.85%

20 Years

1993

10/27/17

Colonial Heights

VA

$1,126,000

6.22%

9 Years

2009

9/14/17

Fayetteville

NC

$1,938,000

6.39%

20 Years

1991

9/12/17

Albuquerque

NM

$1,550,000

6.73%

3 Years

-

8/29/17

Oakland Park

FL

$2,138,888

5.00%

10 Years

1978

8/15/17

Venic

FL

$1,350,000

6.30%

10 Years

1984

6/8/17 5/23/17

McKinney

TX

$1,688,596

5.70%

20 Years

1999

Stockbridge

GA

$1,075,000

6.36%

20 Years

2003

5/18/17

El Cajon

CA

$3,800,000

5.07%

5 Years

1998

4/28/17

Fruitland

MD

$2,517,500

5.75%

20 Years

2005

4/28/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

BBB ±$23.67B ±14,000 Goodlettesville,TN

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term 15 Years

Average Annual Rent

Typical SF

Average Sales

NNN

CAP RATE COMPARISON New Construction 6.51% (15-20 Years) 10 Years Remaining 7.49% 5 Years Remaining 8.04% CURRENT ON MARKET DATA 309 # of Properties Average Cap Rate 7.07% Average Lease 13.2 Years Term Remaining $1,290,218 Average Price 5.12% Lowest Cap Rate Highest Cap Rate 10.50%

Custom

$102,362

±9,100 SF

N/A

CAP RATE CORRELATION 11.00% 10.50%

TRANSACTIONS

2016

2017

522

330

Transactions Average Cap Rate Average Term Remaining Average Sale Price

CAP RATE

10.00% 9.50%

9.00% 8.50%

8.00% 7.50%

6.81%

7.00%

8 Years

11 Years

6.00%

$1,244,687

$1,481,190

7.07%

6.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Texarkana

AR

$1,105,000

7.00%

12 Years

2013

9/28/17

Walnut

MS

$1,095,130

7.00%

15 Years

2017

9/5/17

Lakeland

FL

$1,864,740

5.95%

14 Years

2016

6/29/17

Baxley

GA

$840,000

7.74%

6 Years

2006

3/23/17

CAP RATE COMPARISON New Construction 5.25% (15-20 Years) 10 Years Remaining 7.25% 5 Years Remaining 8.75%

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CURRENT ON MARKET DATA 247 # of Properties Average Cap Rate 6.13% Average Lease 7 Years Term Remaining $1,720,433 Average Price 5.30% Lowest Cap Rate Highest Cap Rate 10.40% TRANSACTIONS Transactions Average Cap Rate Average Term Remaining Average Sale Price

Private Private ±6,000 Minneapolis, MN

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

2016

2017

113

119

6.24%

6.13%

6 Years

5 Years

$870,000

$920,000

20 Years

Typical SF ± 2,800 SF

1.5-2% Annually or 8-10% Every 5 Years

$105,463

Average Sales $1,200,000

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

N/A ±$4.88B ± 11,300 Canton, MA

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 5.35% (25 Years) 10 Years Remaining 5.50% 5 Years Remaining 6.50%

Lease Type

Rent Increases

Lease Term 10 Years

Average Annual Rent

Typical SF

Average Sales

NNN

CURRENT ON MARKET DATA 15 # of Properties Average Cap Rate 5.62% Average Lease 12.85 Years Term Remaining $1,491,000 Average Price 4.25% Lowest Cap Rate Highest Cap Rate 6.25%

10% Every 5 Years

$85,000

± 2,300 SF

$850,000

CAP RATE CORRELATION 8.00% 7.50%

TRANSACTIONS

2016

2017

59

60

Transactions Average Cap Rate Average Term Remaining Average Sale Price

CAP RATE

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

5.67%

4.00%

13 Years

12 Years

3.00%

$1,239,399

$1,434,101

5.55%

3.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date 8/23/17

Clearwater

FL

$1,575,000

5.19%

15 Years

1987

Powder Springs

GA

$1,600,000

4.95%

10 Years

2017

1/9/18

Chalmette

LA

$1,950,000

5.31%

15 Years

2017

12/19/17

Davenport

FL

$1,400,000

5.71%

10 Years

2017

9/29/17

Palatka

FL

$1,900,000

6.32%

10 Years

1994

9/25/17

Cleveland

GA

$1,500,000

6.30%

15 Years

2017

9/7/17

Folsom

CA

$1,992,000

5.25%

12 Years

1982

7/28/17

Cypress

TX

$1,675,000

5.67%

15 Years

2014

6/1/17

Fort Pierce

FL

$1,700,000

5.63%

9 Years

2006

5/1/17

Groveland

FL

$2,125,000

5.60%

19 Years

2016

3/13/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 4.75% (15-20 Years) 10 Years Remaining 5.25% 5 Years Remaining 6.50%

N/A ±$547M ± 703 Costa Mesa, CA

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

CURRENT ON MARKET DATA 4 # of Properties Average Cap Rate 4.75% Average Lease 20 Years Term Remaining $2,156,500 Average Price 4.75% Lowest Cap Rate Highest Cap Rate 4.75%

10% Every 5 Years

20 Years

$115,055

Typical SF

Average Sales

2,768 SF

$1,850,000

CAP RATE CORRELATION 8.00%

2016

2017

7

7

Average Cap Rate Average Term Remaining Average Sale Price

5.16%

4.87%

15.3 Years

18 Years

$2,610,000

$2,191,000

7.50%

7.00% CAP RATE

TRANSACTIONS Transactions

6.50%

6.00% 5.50%

5.00% 4.50%

4.00% 3.50%

3.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Las Vegas

NV

$2,100,000

5.00%

20 Years

1967

7/27/17

Las Vegas

NV

$2,266,000

4.50%

15 Years

1998

6/2/17

Tucson

AZ

$1,800,000

5.10%

19 Years

2016

4/20/17

Marana

AZ

$2,560,000

5.88%

20 Years

1986

12/9/16

San Antonio

TX

$2,916,666

4.80%

20 Years

1993

11/18/16

Anaheim

CA

$2,490,000

4.25%

6 Years

1987

7/7/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

BB+ ±$21.65B ± 8,000 Matthews, NC

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 5.70% (25 Years) 10 Years Remaining 5 Years Remaining -

Lease Type

Rent Increases

Lease Term 15 Years

Average Annual Rent

Typical SF

Average Sales

NN

CURRENT ON MARKET DATA 178 # of Properties Average Cap Rate 7.50% Average Lease 8 Years Term Remaining $1,200,000 Average Price 5.00% Lowest Cap Rate Highest Cap Rate 11.61%

Custom

$103,000

± 8,500 SF

N/A

CAP RATE CORRELATION 12.00% 11.00%

TRANSACTIONS

2016

2017

281

232

Transactions Average Cap Rate Average Term Remaining Average Sale Price

CAP RATE

10.00% 9.00%

8.00% 7.00%

6.00% 5.00%

7.30%

4.00%

-

-

2.00%

$1,400,000

$1,425,000

7.40%

3.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Houston

TX

$1,715,815

5.70%

14 Years

2015

12/14/17

Big Run

PA

$1,530,060

6.15%

13 Years

2010

12/1/17

El Paso

TX

$1,880,387

6.30%

14 Years

2016

11/17/17

Dayton

OH

$730,000

9.45%

4 Years

2003

9/7/17

Dacula

GA

$1,446,952

7.20%

8 Years

-

8/24/17

Lake Placid

FL

$1,617,495

6.15%

15 Years

2017

8/17/17

Clarkton

NC

$1,228,000

6.50%

8 Years

2014

8/14/17

Greensboro

NC

$1,708,707

5.95%

15 Years

2017

6/8/17

Glenn Hights

TX

$121,945

8.41%

3 Years

2011

5/26/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.75% (15 Years) 10 Years Remaining 6.50% 5 Years Remaining 7.75%

BBB ±$65.28B ± 700 Memphis, TN

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NN

CURRENT ON MARKET DATA 6 # of Properties Average Cap Rate 5.70% Average Lease 9.33 Years Term Remaining $4,214,000 Average Price 3.10% Lowest Cap Rate Highest Cap Rate 6.50%

5% in Options or Custom

10 Years

$550,000

Typical SF

Average Sales

20,000 200,000 SF

N/A

CAP RATE CORRELATION 9.00%

2016

2017

4

5

Average Cap Rate Average Term Remaining Average Sale Price

6.48%

6.33%

11.37 Years

7 Years

$16,555,575

$15,155,759

8.50%

8.00% CAP RATE

TRANSACTIONS Transactions

7.50%

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.00%

2

3

4

5

6

7

8

9

10

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Carlsbad

CA

$24,500,000

-

-

1999

11/15/17

Miami

FL

$37,250,000

4.30%

12 Years

1999

6/30/17

Decatur

GA

$3,795,000

7.24%

4 Years

1995

6/1/17

Lake Worth

FL

$7,433,795

5.65%

9 Years

1991

5/1/17

West Chester

PA

$2,800,000

8.10%

3 Years

1987

2/23/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

Ground

Private Private ± 600 Moon Township, PA

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 6.00% (25 Years) 10 Years Remaining 6.75% 5 Years Remaining 8.25%

Lease Type

Rent Increases

Lease Term 10 Years

Average Annual Rent

Typical SF

Average Sales

NN

CURRENT ON MARKET DATA 7 # of Properties Average Cap Rate 8.18% Average Lease 5.92 Years Term Remaining $9,979,254 Average Price 6.64% Lowest Cap Rate Highest Cap Rate 12.01%

5% in Options or Custom

$400,000

30,000 300,000 SF

N/A

CAP RATE CORRELATION 10.00% 9.50%

2016

2017

12

12

Transactions Average Cap Rate Average Term Remaining Average Sale Price

6.48% 9.2 Years

CAP RATE

TRANSACTIONS

9.00%

9.18%

8.50%

8.00% 7.50%

7.00% 6.50%

6.00%

7.35 Years

5.50%

5.00%

$11,028,529 $16,408,267

2

3

4

5

6

7

8

9

10

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Littleton

NH

$7,392,000

7.52%

6 Years

2008

11/30/17

Dothan

AL

$2,650,000

11.90%

3 Years

2008

10/25/17

Miamisburg

OH

$27,115,000

6.75%

10 Years

2017

7/26/17

Miami

FL

$37,250,000

4.30%

12 Years

1999

6/30/17

West Chester

PA

$2,800,000

8.10%

3 Years

1987

2/23/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.50% (15-20 Years) 10 Years Remaining 6.50% 5 Years Remaining 7.50%

BBB+ ±$9B ± 8,000 Akron, OH

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

CURRENT ON MARKET DATA 10 # of Properties Average Cap Rate 6.07% Average Lease 8 Years Term Remaining $3,625,228 Average Price 5.00% Lowest Cap Rate Highest Cap Rate 9.00%

6.5% Every 5 Years

15 Years

$220,051

Typical SF

Average Sales

±8,500 SF

$1,700,000

CAP RATE CORRELATION 9.00%

2016

2017

28

18

Average Cap Rate Average Term Remaining Average Sale Price

6.60%

6.50%

8 Years

9 Years

8.50%

8.00% CAP RATE

TRANSACTIONS Transactions

7.50%

7.00% 6.50%

6.00% 5.50%

5.00%

$2,100,000 $2,500,000

4.50%

4.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

West Springfield

MA

Lincoln

CA

Knoxville

TN

Year Built

Sale Date

$2,850,000

6.18%

11 Years

1948

4/13/18

$5,043,929

5.65%

5 Years

2007

12/15/17

$3,167,000

8.41%

-

2017

11/21/17 8/24/17

Clermont

FL

$3,420,000

5.00%

15 Years

2017

Oakland

CA

$2,500,000

4.72%

5 Years

1920

8/7/17

Peoria

AZ

$3,900,000

5.80%

10 Years

2007

6/29/17

Oxford

FL

$1,600,000

4.50%

15 Years

2016

6/9/17

Mesa

AZ

$4,094,350

6.00%

10 Years

2011

11/29/16

Waterbury

CT

$843,000

7.25%

5 Years

1976

7/16/16

Cary

NC

$1,900,000

5.01%

13 Years

2011

12/30/15

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

BBB± $31.86B ± 2,200 Bad Homburg, Germany

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 5.75% (25 Years) 10 Years Remaining 6.50% 5 Years Remaining 7.25%

Lease Type

Rent Increases

Lease Term 15 Years

Average Annual Rent

Typical SF

Average Sales

NN

CURRENT ON MARKET DATA 17 # of Properties Average Cap Rate 6.25% Average Lease 12 Years Term Remaining $2,000,000 Average Price 5.25% Lowest Cap Rate Highest Cap Rate 8.50%

10% Every 5 Years

$250,000

7,500-12,000 SF

N/A

CAP RATE CORRELATION 9.00% 8.50%

TRANSACTIONS Transactions Average Cap Rate Average Term Remaining Average Sale Price

2016

2017

50

36

7.20% 11 Years

CAP RATE

8.00% 7.50%

7.00% 6.50%

6.00% 5.50%

7.10%

5.00%

12 Years

4.00%

4.50%

2

3

4

5

6

7

8

9

10

11

12

13

15

14

YEARS REMAINING ON LEASE

$3,300,000 $3,300,000 RECENT SALES COMPARABLES

City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date 2/2/18

Liburn

GA

$5,365,000

5.75%

15 Years

2017

Richmond

VA

$3,689,000

5.50%

15 Years

2017

1/9/18

Chicago

IL

$5,209,016

6.10%

15 Years

2017

12/15/17

Lexington

KY

$2,425,000

7.10%

4 Years

1972

11/21/17

Palatka

FL

$2,200,000

8.31%

5 Years

2001

11/10/17

Neenah

WI

$4,900,000

6.54%

11 Years

2008

10/19/17

Central City

KY

$3,719,100

6.25%

15 Years

2017

10/16/17

Orem

UT

$6,616,791

5.68%

15 Years

2017

10/10/17

Wadesboro

NC

$2,085,000

7.75%

4 Years

2009

9/1/17

Columbus

OH

$1,720,000

6.85%

6 Years

1989

6/16/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.63% (15-20 Years) 10 Years Remaining 6.33% 5 Years Remaining 7.49%

BB ±$8.86B ± 1,000 Akron, OH

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NN or NNN

CURRENT ON MARKET DATA 10 # of Properties Average Cap Rate 6.88% Average Lease 4.31 Years Term Remaining $2,339,750 Average Price 5.50% Lowest Cap Rate Highest Cap Rate 8.00%

Custom 10% Every 5 Years, 10% in Option

15 Years

$120,921

Typical SF

Average Sales

7,004 SF

$1,150,000

CAP RATE CORRELATION 8.00%

2016

2017

13

12

Average Cap Rate Average Term Remaining Average Sale Price

7.30%

6.87%

6 Years

9 Years

$1,259,482

$2,360,977

7.50%

7.00% CAP RATE

TRANSACTIONS Transactions

6.50%

6.00% 5.50%

5.00% 4.50%

4.00% 3.50%

3.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Huntsville

AL

$4,363,000

5.75%

15 Years

2016

1/31/17

Colorado Springs

CO

$2,100,000

6.85%

4 Years

1974

12/18/17

Milwaukee

WI

$1,055,000

6.20%

5 Years

1964

12/12/17

Magnolia

TX

$3,892,073

5.50%

15 Years

2016

8/2/17

Fort Worth

TX

$1,200,000

7.26%

2 Years

1989

6/30/17

Waxhaw

NC

$3,829,565

5.75%

15 Years

2016

5/15/17

Davie

FL

$1,600,000

5.00%

10 Years

1993

3/1/17

Kihei

HI

$1,500,000

5.18%

5 Years

2002

9/16/16

Eatontown

NJ

$1,570,000

6.43%

3 Years

1960

4/20/16

Jacksonville

FL

$930,000

7.00%

5 Years

1995

3/4/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

Private Private ± 1,900 Franklin, TN

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 5.50% (25 Years) 10 Years Remaining 6.50% 5 Years Remaining 7.50%

Lease Type

Rent Increases

Lease Term 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN Ground Lease

CURRENT ON MARKET DATA 10 # of Properties Average Cap Rate 5.81% Average Lease 15.9 Years Term Remaining $1,647,705 Average Price 4.00% Lowest Cap Rate Highest Cap Rate 7.50%

5-10% Every 5 Years

$110,000

3,000 SF

$1,100,000

CAP RATE CORRELATION 9.00% 8.50%

TRANSACTIONS

2016

2017

39

32

Transactions Average Cap Rate Average Term Remaining Average Sale Price

CAP RATE

8.00% 7.50%

7.00% 6.50%

6.00% 5.50%

6.39%

5.00%

12 Years

14 Years

4.00%

$1,354,797

$1,525,414

6.13%

4.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date 2/27/18

Luvurne

AL

$1,145,000

6.50%

7.5 Years

1985

Mount Pleasant

IA

$1,726,500

6.00%

15 Years

1977

2/6/18

Petersburg

IL

$810,000

9.27%

7.5 Years

1996

1/16/18

Huber Heights

OH

$1,680,000

5.65%

20 Years

2017

1/11/18

Belleview

FL

$2,475,000

6.06%

20 Years

2016

1/2/18

Crossville

TN

$2,212,500

5.70%

14.5 Years

2010

12/12/17 11/11/17

Butler

AL

$1,845,000

6.00%

14.5 Years

2010

Tar Heel

NC

$1,780,000

6.00%

20 Years

2017

11/8/17

Louisville

KY

$533,200

5.50%

20 Years

1986

9/20/17

Kennett

MO

$326,800

5.50%

20 Years

1989

9/20/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 6.50% (15-20 Years) 10 Years Remaining 6.85% 5 Years Remaining 7.50%

N/A ±$1.34B ±1,650 Glendale, CA

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

10% Every 5 Years

NNN

CURRENT ON MARKET DATA 50 # of Properties Average Cap Rate 6.65% Average Lease 11 Years Term Remaining $2,927,106 Average Price 5.00% Lowest Cap Rate Highest Cap Rate 9.00%

20 Years

$160,000

Typical SF

Average Sales

±4,500 SF

$2,000,000

CAP RATE CORRELATION 8.00%

2016

2017

23

65

Average Cap Rate Average Term Remaining Average Sale Price

6.30%

6.65%

11 Years

10 Years

$2,550,425

$2,739,690

7.50%

7.00% CAP RATE

TRANSACTIONS Transactions

6.50%

6.00% 5.50%

5.00% 4.50%

4.00% 3.50%

3.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Bridgeview

IL

$3,225,000

5.95%

15 Years

1990

11/27/17

Rapid City

SD

$2,875,000

6.81%

15 Years

2005

10/10/17

Florissant

MO

$2,688,000

6.82%

6 Years

2001

9/13/17

Cincinatti

OH

$3,875,000

5.77%

12 Years

2004

9/5/17

Lancaster

OH

$2,025,000

6.67%

12 Years

1998

8/9/17

Lexington

SC

$3,600,000

7.15%

10.5 Years

2007

7/28/17

El Paso

TX

$3,800,000

5.65%

10 Years

2007

7/25/17

Gilbert

AZ

$4,093,000

5.72%

10 Years

2002

7/24/17

Greenville

NC

$2,507,500

6.70%

5.5 Years

1997

3/15/17

Columbus

GA

$2,250,000

6.64%

15 Years

1985

1/11/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

N/A ±$2.68B ± 2,251 San Diego, CA

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 4.81% (25 Years) 10 Years Remaining 5.27% 5 Years Remaining 5.77%

Lease Type

Rent Increases

Lease Term 15 to 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN or Ground Lease

CURRENT ON MARKET DATA 28 # of Properties Average Cap Rate 5.04% Average Lease 11.17 Years Term Remaining $2,536,000 Average Price 3.20% Lowest Cap Rate Highest Cap Rate 7.60%

5-10% Every 5 Years

$116,000

±2,541 SF

$1,475,000

CAP RATE CORRELATION 16.00% 14.50%

TRANSACTIONS

2016

2017

45

59

Transactions Average Cap Rate Average Term Remaining Average Sale Price

CAP RATE

13.00% 11.50%

10.00% 8.50%

7.00% 5.50%

6.13%

4.00%

10 Years

10 Years

1.00%

$2,000,000

$2,100,000

6.04%

2.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date 11/28/17

Denton

TX

$2,250,000

5.33%

2 Years

2001

Redmond

OR

$2,325,000

6.11%

14 Years

2011

11/10/17

Yermo

CA

$2,475,000

5.05%

11 Years

2002

10/31/17

Des Moines

WA

$3,600,000

4.80%

12 Years

2009

10/24/17

Nashville

TN

$2,083,000

6.24%

20 Years

2000

9/26/17

Charlotte

NC

$2,635,000

5.37%

11 Years

1999

9/26/17

Killeen

TX

$1,556,349

6.30%

5 Years

1970

9/21/17

Pomona

CA

$3,550,000

4.50%

15 Years

1994

9/20/17

Brownsville

TX

$1,538,779

5.50%

10 Years

2001

9/13/17

Las Vegas

NV

$2,225,000

4.81%

11 Years

1998

9/8/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.50% (15-20 Years) 10 Years Remaining 6.25% 5 Years Remaining 7.25%

Private Private ± 2,250 Houston, TX

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

10% Every 5 Years

NNN

CURRENT ON MARKET DATA 45 # of Properties Average Cap Rate 6.50% Average Lease 8 Years Term Remaining $1,750,000 Average Price 4.75% Lowest Cap Rate Highest Cap Rate 8.25%

20 Years

$70,000

Typical SF

Average Sales

±2,500 SF

$750,000

CAP RATE CORRELATION

2016

2017

50

45

Average Cap Rate Average Term Remaining Average Sale Price

6.70%

6.88%

12 Years

8 Years

$1,437,900

$1,187,000

9.00% 8.50%

8.00% CAP RATE

TRANSACTIONS Transactions

7.50%

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Austin

TX

$2,150,000

5.95%

10 Years

1995

2/7/18

Lubbock

TX

$1,725,000

5.75%

20 Years

2017

12/29/17

Jacksonville

FL

$940,000

7.25%

8 Years

1988

9/26/17

Austin

TX

$2,013,423

5.96%

10 Years

1992

8/14/17

South Ogden

UT

$1,250,000

6.38%

11 Years

1997

7/12/17

Worth

IL

$700,000

8.29%

2 Years

1985

6/1/17

Yucca Valley

CA

$425,000

8.00%

4 Years

1992

4/18/17

Orlando

FL

$2,535,000

5.15%

20 Years

2017

3/31/17

Mesa

AZ

$1,361,000

7.00%

6 Years

1982

3/2/17

Sierra Vista

AZ

$1,835,000

7.15%

9 Years

2006

2/1/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

Ba3 ±$26.81B ± 21,487; ± 4,082 (US) Louisville, KY

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 6.03% (25 Years) 10 Years Remaining 6.32% 5 Years Remaining 6.84%

Lease Type

Rent Increases

Lease Term 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN Ground Lease

CURRENT ON MARKET DATA 36 # of Properties Average Cap Rate 5.70% Average Lease 14.7 Years Term Remaining $1,479,000 Average Price 4.20% Lowest Cap Rate Highest Cap Rate 6.75%

5-10% Every 5 Years

$82,000

±2,815 SF

$1,140,922

CAP RATE CORRELATION 9.00% 8.50%

TRANSACTIONS

2016

2017

92

64

Transactions Average Cap Rate Average Term Remaining Average Sale Price

CAP RATE

8.00% 7.50%

7.00% 6.50%

6.00% 5.50%

6.30%

5.00%

15 Years

15 Years

4.00%

$1,368,000

$1,316,000

5.98%

4.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date 12/29/17

Lapeer

MI

$1,758,000

5.65%

20 Years

1985

Wichita

KS

$1,250,000

6.25%

19 Years

1980

12/4/17

Murrieta

CA

$2,800,000

4.20%

13 Years

1998

11/21/17

Topeka

KS

$1,200,000

5.25%

20 Years

1974

9/11/17

Winona

MS

$1,200,000

5.95%

20 Years

1998

9/8/17

Wichita

KS

$1,750,000

6.75%

10 Years

1990

8/3/17

Warsaw

NC

$827,500

8.50%

4 Years

2000

7/20/17

Dumas

TX

$1,048,347

5.75%

10 Years

-

7/17/17

Los Angeles

CA

$720,000

4.50%

4 Years

1968

7/3/17

Staunton

VA

$1,660,000

7.25%

20 Years

-

6/21/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

BBB ±$23.11B ± 2,793 Cincinnati, OH

TRANSACTIONS Transactions

2016

2017

3

2

Average Cap Rate Average Term Remaining Average Sale Price

6.50%

7.55%

10 Years

4 Years

$8,276,000

$7,150,000

CURRENT ON MARKET DATA 5 (Only 2 w/ # of Properties Cap Rate Data) Average Cap Rate 7.13% Average Lease Term Remaining $6,416,000 Average Price 6.75% Lowest Cap Rate Highest Cap Rate 7.50%

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Ter Term

Average Annual Rent

NNN

10 to 20 Years

Typical SF

35,000 to 100,000 SF

Custom

$6 to $12 Per Square Foot

Average Sales $35,457,000

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Las Vegas

NV

$5,300,000

9.51%

4 Years

1993

Sale Date 8/3/17

Germantown

MD

$9,000,000

5.59%

_

2006

1/30/17

Lapeer

MI

$4,425,000

6.00%

10 Years

1991

10/25/16

Hamilton

OH

$10,254,000

6.15%

10.5 Years

2006

5/10/16

Appleton

WI

$10,149,000

7.35%

9 Years

2003

1/5/16

1985

12/23/15

Louisville

KY

$3,200,000

6.78%

_

Charleston

SC

$7,300,000

6.36%

_

Hendersonville

TN

$4,600,000

6.55%

_

12/11/15 1982

4/17/15

Disclaimer: Data is taken only from Krogers that are sold as single tenant assets, and not part of a portfolio or shopping center. Please note, Krogers are not generally traded as single tenant properties

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

N/A ±$2.4B ±3,400 Houston, TX

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction N/A (15-20 Years) 10 Years Remaining 6.60% 5 Years Remaining 7.75%

Lease Type

Rent Increases

Lease Term 10 to 15 Years

Average Annual Rent

Typical SF

Average Sales

NNN or NN

CURRENT ON MARKET DATA 22 # of Properties Average Cap Rate 6.82% Average Lease 8 Years Term Remaining $2,740,000 Average Price 5.00% Lowest Cap Rate Highest Cap Rate 9.00%

10% Every 5 Years

N/A

±4,000 SF

$1,000,000

CAP RATE CORRELATION 9.00% 8.50%

TRANSACTIONS

2016

2017

22

20

Transactions Average Cap Rate Average Term Remaining Average Sale Price

7.50%

7.00% 6.50%

6.00% 5.50%

6.85%

5.00%

10 Years

4.00%

6.75% 10 Years

CAP RATE

8.00%

4.50%

2

3

4

5

6

7

8

9

10

11

12

YEARS REMAINING ON LEASE

$2,368,000 $2,280,000 RECENT SALES COMPARABLES

City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Lawton

OK

$2,085,000

6.86%

10 Years

2016

12/18/17

Gulf Shores

AL

$2,100,000

7.19%

9 Years

2015

11/22/17

Florence

KY

$2,600,000

7.30%

12 Years

2017

10/2/17

Rifle

CO

$1,913,000

7.42%

10 Years

2016

9/21/17

Marion

IN

$2,088,250

6.80%

10 Years

2017

6/30/17

Gaffney

SC

$1,700,000

7.59%

10 Years

2016

6/22/17

Sarasota

FL

$2,145,000

6.44%

11 Years

2017

5/8/17

Aurora

CO

$3,067,600

6.25%

11 Years

2016

4/20/17

Montrose

CO

$2,535,000

7.10%

10 Years

2016

3/21/17

Grand Junction

CO

$3,582,000

6.70%

10 Years

2016

2/8/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 4.05% (20 Years) 10 Years Remaining 4.85% 5 Years Remaining 5.50%

BBB+ ±$123.29B ±37,000 Chicago, IL

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

5-10% Every 5 Years

Ground Lease

CURRENT ON MARKET DATA 14 # of Properties Average Cap Rate 4.55% Average Lease 10 Years Term Remaining $2,258,000 Average Price 3.24% Lowest Cap Rate Highest Cap Rate 7.00%

20 Years

$85,000

Typical SF

Average Sales

±4,500 SF

$2,600,000

CAP RATE CORRELATION 6.50%

2016

2017

22

11

Average Cap Rate Average Term Remaining Average Sale Price

4.31%

4.56%

14 Years

13 Years

$2,036,000

$2,406,490

6.25%

CAP RATE

TRANSACTIONS Transactions

6.00% 5.75%

5.50% 5.25%

5.00% 4.75%

4.50% 4.25%

4.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

League City

TX

$1,562,000

4.99%

10 Years

2007

9/21/17

Kenosha

WI

$1,662,000

4.65%

19 Years

1995/R2015

6/22/17

Cordova

TN

$1,209,487

5.85%

11 Years

2008

5/18/17

West Jordan

UT

$2,371,428

3.50%

18 Years

2015

1/5/17

Rochester

NH

$1,575,000

5.80%

6 Years

2002

12/15/16

Quincy

IL

$1,650,000

4.40%

20 Years

2016

10/28/16

Limerick

PA

$1,970,000

4.35%

15 Years

2010

9/13/16

Charlotte

NC

$2,443,000

4.00%

18 Years

1998

8/18/16

Orlando

FL

$1,000,000

5.16%

6 Years

1980

6/16/16

Bakersfield

CA

$2,260,000

3.50%

20 Years

2015

4/15/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

Private Private ±1,200 Palm Beach Gardens, FL TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 5.50% (15-20 Years) 10 Years Remaining 6.25% 5 Years Remaining 7.50%

Lease Type

Rent Increases

Lease Term 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN or NN

CURRENT ON MARKET DATA 3 # of Properties Average Cap Rate 5.48% Average Lease 13 Years Term Remaining $3,029,149 Average Price 4.70% Lowest Cap Rate Highest Cap Rate 6.25%

Custom

$163,834

±9,199 SF

N/A

CAP RATE CORRELATION 8.50% 8.00%

2016

2017

8

8

Transactions Average Cap Rate Average Term Remaining Average Sale Price

6.90%

6.10%

10 Years

11 Years

$2,534,192

$2,463,855

CAP RATE

TRANSACTIONS

7.50% 7.00%

6.50% 6.00%

5.50% 5.00%

4.50% 4.00%

3.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

YEARS REMAINING ON LEASE

19

20

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Brentwood

TN

$4,115,000

5.50%

12 Years

2009

5/26/17

Dallas

TX

$3,850,000

5.54%

18 Years

2009

12/7/16

Canton

GA

$3,400,000

5.49%

14 Years

2011

2/3/17

Baltimore

MD

$2,782,609

5.75%

15 Years

2016

5/31/16

Decatur

GA

$1,700,000

5.32%

10 Years

1993

12/1/17

Dayton

OH

$1,325,000

8.15%

11 Years

2001

12/1/16

St. Peters

MO

$1,250,000

7.28%

7.5 Years

1990

2/13/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.25% - 5.75% (15-20 Years) 10 Years Remaining 6.00% - 6.50% 5 Years Remaining 6.75% - 7.25%

BBB+ ±$8.6B ±5,000 Springfield, MO

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN or NN

CURRENT ON MARKET DATA 24 # of Properties Average Cap Rate 5.94% Average Lease 7 Years Term Remaining $1,664,229 Average Price 5.00% Lowest Cap Rate Highest Cap Rate 8.30%

Custom or 5 - 10% in Year 11 and 16

20 Years

$110,000

Typical SF

Average Sales

±7,000 SF

$1,600,000

CAP RATE CORRELATION 8.00%

2016

2017

42

36

Average Cap Rate Average Term Remaining Average Sale Price

5.87%

6.09%

9 Years

8 Years

$1,722,010

$1,921,993

7.75%

CAP RATE

TRANSACTIONS Transactions

7.50% 7.25%

7.00% 6.75%

6.50% 6.25%

6.00% 5.75%

5.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Surprise

AZ

$2,350,000

5.83%

8 Years

2005

2/14/18

Crawfordville

FL

$1,640,000

5.75%

20 Years

2017

1/26/18

Shafter

CA

$1,480,000

6.49%

5 Years

1998

1/23/18

La Grange

KY

$1,725,000

5.50%

20 Years

2017

11/21/17

Knoxville

TN

$1,752,260

5.35%

20 Years

2017

11/2/17

Athens

GA

$1,755,000

5.70%

20 Years

2017

10/17/17

Metter

GA

$1,220,000

6.10%

14 Years

2012

8/8/17

Rome

GA

$935,000

6.85%

6.5 Years

1996

8/3/17

Seymour

WI

$850,000

7.05%

13 Years

2006

7/10/17

Knoxville

TN

$1,745,000

5.79%

15 Years

2014

6/22/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

TYPICAL LEASE STRUCTURE

Private Private ±2,200 Sunset Hills, MO

Lease Type

Rent Increases

Lease Term 15 Years

Average Annual Rent

Typical SF

Average Sales

NNN or Ground Lease

CAP RATE COMPARISON New Construction 4.63% (15 Years) 10 Years Remaining 5.32% 5 Years Remaining -

± 4,000-5,000 SF

CURRENT ON MARKET DATA 4 # of Properties Average Cap Rate 5.23% Average Lease 12 Years Term Remaining $3,061,000 Average Price 4.80% Lowest Cap Rate Highest Cap Rate 6.00%

5-10% Every 5 Years

$150,000

$2,586,000

TRANSACTIONS

2016

2017

11

19

5.38%

5.06%

15 Years

14 Years

$2,685,714

$3,014,563

Transactions Average Cap Rate Average Term Remaining Average Sale Price

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Smyrna

TN

$3,333,000

4.95%

10 Years

2012

12/1/17

Skokie

IL

$3,973,000

5.40%

14 Years

2016

11/22/17

Chandler

AZ

$4,315,000

4.25%

15 Years

2017

6/23/17

Fayetteville

AR

$2,592,592

5.40%

20 Years

2000

6/16/17

Dover

NH

$1,701,654

5.70%

10.5 Years

2009

5/15/17

Richmond

VA

$2,094,845

4.85%

11.5 Years

2012

3/14/17

Greenwood

SC

$3,020,000

4.75%

14 Years

2016

2/23/17

Munster

IN

$2,799,000

5.58%

9.5 Years

2011

2/3/17

Hendersonville

TN

$2,952,380

5.25%

11 Years

2006

1/5/17

Gallatin

TN

$2,678,745

5.60%

11 Years

2014

1/4/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.25% (15-20 Years) 10 Years Remaining 6.00% 5 Years Remaining 7.50%

Private Private ± 16,172 Plano, TX

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

CURRENT ON MARKET DATA 50 # of Properties Average Cap Rate 6.67% Average Lease 13.5 Years Term Remaining $1,068,000 Average Price 5.00% Lowest Cap Rate Highest Cap Rate 10.00%

10% Every 5 Years

20 Years

$67,955

Typical SF

Average Sales

±2,600 SF

$715,000

CAP RATE CORRELATION

2016

2017

32

33

Average Cap Rate Average Term Remaining Average Sale Price

7.89%

6.50%

7 Years

11 Years

$756,815

$1,079,000

10.00% 9.50%

9.00% CAP RATE

TRANSACTIONS Transactions

8.50%

8.00% 7.50%

7.00% 6.50%

6.00% 5.50%

5.00% 2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Newport Phoenix

TN

$784,000

6.75%

AZ

$2,525,000

6.15%

Bakersfield

CA

$1,282,051

5.85%

Hallettsville

TX

$725,000

Carroll

IA

$787,000

Oakland Park

FL

$918,000

Term Remaining

Year Built

Sale Date

9 Years

1974

12/13/17

15 Years

2003

9/29/17

15 Years

-

9/1/17

6.34%

15 Years

2014

8/16/17

6.48%

15 Years

1969

7/26/17

9.13%

4 Years

1985

9/7/16

Lantana

FL

$1,525,000

6.35%

10 Years

1986

7/1/16

Hurricane

WV

$350,000

8.25%

5 Years

-

5/5/16

Moon Township

PA

$1,400,100

6.50%

20 Years

1985

4/14/16

Waukesha

WI

$800,000

7.09%

6 Years

1978

3/2/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

TYPICAL LEASE STRUCTURE

Private Private ± 2,600 Atlanta, GA

Lease Type

Rent Increases

Lease Term 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN or Ground Lease

CAP RATE COMPARISON New Construction 5.65% (20 Years) 10 Years Remaining 5.97% 5 Years Remaining -

±2,200 SF

CURRENT ON MARKET DATA 29 # of Properties Average Cap Rate 5.77% Average Lease 17 Years Term Remaining $2,090,000 Average Price 4.00% Lowest Cap Rate Highest Cap Rate 7.00%

TRANSACTIONS

10% Every 5 Years

$97,000

$1,420,000

2016

2017

11

6

6.30%

5.95%

15 Years

17 Years

$1,431,340

$1,996,395

Transactions Average Cap Rate Average Term Remaining Average Sale Price

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Quincy

FL

$1,943,380

5.65%

15 Years

2017

12/15/17

Birmingham

AL

$1,180,000

5.76%

18 Years

1999

10/5/17

Columbia

MO

$2,350,000

6.15%

20 Years

1972

9/8/17

Portland

OR

$2,880,000

5.00%

20 Years

2000

8/1/17

Macon

GA

$1,515,000

5.94%

20 Years

1998

9/14/16

Hattiesburg

MS

$2,066,360

6.85%

9 Years

2000

8/11/16

Gastonia

NC

$2,215,000

5.33%

19 Years

1993

3/8/16

Tulsa

OK

$2,255,000

5.52%

15 Years

2007

1/22/16

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.75% (15-20 Years) 10 Years Remaining 7.00% 5 Years Remaining 8.50%

B ±$1.86B ±4,600 Camp Hill, PA

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN or NN

CURRENT ON MARKET DATA 59 # of Properties Average Cap Rate 7.03% Average Lease 8 Years Term Remaining $6,016,094 Average Price 4.75% Lowest Cap Rate Highest Cap Rate 11.50%

Custom

20 Years

$250,000

Typical SF

Average Sales

11,000 SF

$6,000,000

CAP RATE CORRELATION 10.00%

2016

2017

52

74

Average Cap Rate Average Term Remaining Average Sale Price

6.96%

7.80%

12.00%

9.00%

$4,049,807 $4,500,000

9.50%

9.00% CAP RATE

TRANSACTIONS Transactions

8.50%

8.00% 7.50%

7.00% 6.50%

6.00% 5.50%

5.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Holly Springs

NC

$2,700,000

Richmond

VA

$1,307,000

10.04%

3 Years

2002

2/16/18

9.50%

5 Years

1997

Decatur

GA

11/1/17

$1,925,000

10.78%

3.5 Years

1995

10/30/17

Fall River Irmo

MA

$8,612,500

5.60%

20 Years

2016

6/15/17

SC

$3,250,000

8.33%

7 Years

2003

Yuba City

6/6/17

CA

$3,450,000

8.00%

2 Years

1999

4/18/17

Manchester

TN

$1,950,000

11.50%

3 Years

1999

4/13/17

Dayton

OH

$2,101,908

11.74%

1 Years

1998

3/9/17

Antelope

CA

$4,540,000

7.05%

2 Years

1998

1/20/17

Warren

OH

$2,270,000

8.40%

8 Years

1999

1/18/17

20

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

TYPICAL LEASE STRUCTURE

B/B3 ±$501.61M ± 316 Commerce, CA

Rent Increases

Lease Term 15 to 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN

CAP RATE COMPARISON New Construction 5.00%-5.50% (25 Years) 10 Years Remaining 5.50%-6.00% 5 Years Remaining 6.50% CURRENT ON MARKET DATA 6 # of Properties Average Cap Rate 5.50% Average Lease 15 Years Term Remaining $13,000,000 Average Price 4.50% Lowest Cap Rate Highest Cap Rate 5.95%

Lease Type

24,400 SF

TRANSACTIONS

10% Every 5 Years

$500,000

$14,700,000

2016

2017

3

5

Transactions

Average Cap Rate 5.25% 5.50% Average Term 15-20 years 10-15 years Remaining Average Sale Price $8,000,000 $7,500,000

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Colton

CA

$8,900,000

5.51%

15 Years

2017

11/14/17

Whittier

CA

$6,720,000

5.50%

7 Years

2014

6/30/17

Bakersfield

CA

$5,875,000

5.25%

10 Years

2001

3/30/17

Citrus Heights

CA

$11,800,000

5.15%

20 Years

2016

12/14/16

Elk Grove

CA

$7,400,000

5.48%

14 Years

2015

5/10/16

Coachella

CA

$8,400,000

5.30%

15 Years

2015

9/1/15

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.85% (15-20 Years) 10 Years Remaining 6.50% 5 Years Remaining 7.25%

N/A ±$946.45M ±3,557 Oklahoma City, OK

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

CURRENT ON MARKET DATA 44 # of Properties Average Cap Rate 6.23% Average Lease 9.77 Years Term Remaining $1,158,694 Average Price 4.50% Lowest Cap Rate Highest Cap Rate 9.00%

10% Every 5 Years

15 Years

$77,000

Typical SF

Average Sales

+ 1,400 SF

$1,200,000

CAP RATE CORRELATION 9.00%

2016

2017

104

130

Average Cap Rate Average Term Remaining Average Sale Price

6.13%

6.71%

11.3 Years

11.7 Years

$1,129,906

$871,466

8.50%

8.00% CAP RATE

TRANSACTIONS Transactions

7.50%

7.00% 6.50%

6.00% 5.50%

5.00% 4.50%

4.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Cartersville

GA

Ripon

CA

$1,422,764

6.15%

14 Years

2000

10/14/16

$2,300,000

6.92%

9 Years

2000

Hannibal

MO

$2,004,000

4/28/17

6.25%

13 Years

1998

4/19/17

Pearland

TX

$1,100,000

7.09%

8 Years

1997

4/12/17

Kemah

TX

$800,000

6.00%

8 Years

2001

6/23/17

Elk River

MN

$1,536,000

6.25%

13 Years

2002

11/30/16

Kingston Springs

TN

$1,168,855

7.00%

4 Years

1995

9/27/17

Laurens

SC

$1,459,000

6.19%

15 Years

2002

12/20/17

Gainesville

GA

$1,560,000

6.15%

20 Years

2002

4/21/17

Clinton

SC

$1,169,500

6.15%

15 Years

2008

9/14/17

20

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.50% (25 Years) 5.90% 10 Years Remaining 5 Years Remaining

B2 ±$3.34B ± 256 Phoenix, AZ

CURRENT ON MARKET DATA 7 # of Properties Average Cap Rate 6.26% Average Lease 9.25 Years Term Remaining $10,500,000 Average Price 5.75% Lowest Cap Rate Highest Cap Rate 6.55%

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term 15 Years

Average Annual Rent

Typical SF

Average Sales

NNN or NN

TRANSACTIONS Transactions

2016

2017

35

33

Average Cap Rate Average Term Remaining Average Sale Price

5.85%

5.87%

11.00%

12.50%

25,000 SF

5-10% Every 5 Years

$555,000

$17,000,000

$10,500,000 $10,000,000

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Arvada

CO

$10,100,00

5.50%

15 Years

2017

12/20/17

Larence

KS

$8,100,000

6.19%

13 Years

2015

11/27/17

Edmond

OK

$7,600,000

7.07%

10 Years

1964

10/19/17

Pearland

TX

$9,170,000

5.70%

13 Years

2015

9/30/17

Loveland

CO

$9,850,000

5.50%

14 Years

2016

9/22/17

Calabasas

CA

$ 12,500,000

4.78%

10 Years

2013

8/25/17

Lawrence

KS

$8,970,000

6.10%

13 Years

2015

1/26/16

Whittier

CA

$11,000,000

5.08%

10 Years

2013

9/6/14

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 3.75% (15-20 Years) 10 Years Remaining 5.00% 5 Years Remaining 6.00%

A ±$82.00B ± 13,172 Seattle, WA

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

CURRENT ON MARKET DATA 70 # of Properties Average Cap Rate 4.98% Average Lease 9 Years Term Remaining $2,223,771 Average Price 3.50% Lowest Cap Rate Highest Cap Rate 7.50%

10% Every 5 Years

10 Years

$100,000

Typical SF

Average Sales

1,800 SF

$1,300,000

CAP RATE CORRELATION 6.75% 6.50%

Transactions Average Cap Rate Average Term Remaining Average Sale Price

2016

2017

108

112

5.24%

5.12%

10 Years

9 Years

4.75%

$2,030,616

4.25%

$1,885,662

CAP RATE

TRANSACTIONS

6.25% 6.00%

5.75% 5.50%

5.25% 5.00%

4.50%

2

3

4

5

6

7

8

9

10

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Baltimore

MD

$2,950,000

5.16%

Cypress

TX

$2,170,000

5.00%

Tarzana

CA

$3,600,000

3.92%

Term Remaining

Year Built

Sale Date

10 Years

2017

12/19/17

10 Years

2017

12/4/17

10 Years

2007

11/28/17 11/17/17

Wylie

TX

$1,400,000

5.50%

9 Years

2014

Boone

NC

$2,400,000

5.00%

10 Years

2017

9/5/17

Little Rock

AR

$1,275,000

6.59%

7 Years

2006

8/27/17 7/27/17

Tomah

WI

$1,300,000

5.50%

9 Years

2016

Maumelle

AR

$1,650,000

6.00%

10 Years

2007

6/5/17

Holland

OH

$1,100,000

5.86%

7 Years

1990

3/10/17

Hamilton

NJ

$1,415,000

6.70%

5 Years

1968

1/20/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

Private ±$27.58B ±5,604 Irvine, CA

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 5.50 % (25 Years) 10 Years Remaining 6.25 % 5 Years Remaining 7.00 %

Lease Type

Rent Increases

Lease Term 20 Years

Average Annual Rent

Typical SF

Average Sales

NNN

CURRENT ON MARKET DATA 44 # of Properties Average Cap Rate 6.23% Average Lease 9.77 Years Term Remaining $1,158,694 Average Price 4.50% Lowest Cap Rate Highest Cap Rate 9.00%

10% Every 5 Years

$108,000

±2,548 SF

$1,500,100

CAP RATE CORRELATION 9.00% 8.50

TRANSACTIONS Transactions Average Cap Rate Average Term Remaining Average Sale Price

2016

2017

276

279

CAP RATE

8.00% 7.50

7.00% 6.50

6.00% 5.50

5.85%

5.00%

14 Years

15 Years

4.00%

$1,325,000

$1,450,000

5.45%

4.50

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Jackson

MS

$3,150,000

5.86%

19 Years

1990

4/24/17

Fleming Island

FL

$2,898,000

5.50%

18 Years

2016

4/26/17

Greenville

SC

$2,710,000

5.35%

19 Years

2001

9/26/17

La Habra

CA

$2,300,000

4.26%

19 Years

1965

1/3/17

Corbin

KY

$2,262,400

5.00%

19 Years

2016

10/5/17

Fresno

CA

$2,200,000

5.00%

16 Years

1994

12/1/17

Stow

OH

$2,177,451

7.37%

9 Years

1989

2/8/17

Waterville

ME

$2,067,000

5.95%

19 Years

2016

3/23/17

Port Orchard

WA

$2,000,000

5.00%

11 Years

1997

10/4/17

Las Vegas

NV

$1,925,000

5.19%

11 Years

1998

1/6/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.65% (15-20 Years) 10 Years Remaining 6.50% - 6.75% 5 Years Remaining 7.25% - 7.50%

Private Private ± 1,200 Palm Beach Gardens, FL

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NNN

CURRENT ON MARKET DATA 2 # of Properties Average Cap Rate 5.75% Average Lease 11 Years Term Remaining $2,350,000 Average Price 5.75% Lowest Cap Rate Highest Cap Rate 5.75%

10% Every 5 Years

15 Years

$100,000

Typical SF

Average Sales

5,000 - 8,000 SF

N/A

CAP RATE CORRELATION 8.50% 8.00%

7.50%

2016

2017

4

5

Average Cap Rate Average Term Remaining Average Sale Price

6.75%

6.05%

6 Years

14 Years

4.50%

$2,211,077

3.50%

$1,533,750

CAP RATE

TRANSACTIONS Transactions

7.00%

6.50% 6.00%

5.50% 5.00%

4.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Crystal River

FL

$1,375,000

6.25%

15 Years

2003

1/26/18

Spring Hill

FL

$1,425,000

6.04%

15 Years

1990

10/6/17

Jacksonville

FL

$3,047,000

-

-

2014

6/5/17

Orlando

FL

$4,000,000

5.65%

19 Years

2011

5/30/17

New Smyrna Beach

FL

$1,208,386

-

-

1998

3/28/17

20

A ±$8B ± 1,617 Brentwood, TN

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 6.10% (25 Years) 10 Years Remaining 6.30% 5 Years Remaining 7.10%

Transactions Average Cap Rate Average Term Remaining Average Sale Price

Rent Increases

Lease Term 15 Years

Average Annual Rent

Typical SF

Average Sales

NN

CURRENT ON MARKET DATA 21 # of Properties Average Cap Rate 6.49% Average Lease 10.5 Years Term Remaining $3,050,000 Average Price 5.85% Lowest Cap Rate Highest Cap Rate 7.50% TRANSACTIONS

Lease Type

10% Every 5 Years

$250,000

20,000 SF

$4,042,000

CAP RATE CORRELATION 8.50% 8.25%

8.00%

2016

2017

56

52

6.70%

6.60%

9 Years

10 Years

$4,000,000

$4,100,000

CAP RATE

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

7.75%

7.50% 7.25%

7.00% 6.75%

6.50% 6.25%

6.00%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Socorro

NM

$3,538,477

6.50%

15 Years

2017

12/27/17

Gardendale

AL

$3,914,672

6.15%

13 Years

2015

11/14/17

Pueblo

CO

$5,163,000

6.10%

15 Years

2017

11/8/17

Smithfield

VA

$4,050,000

6.30%

10 Years

2011

9/29/17

Waynesboro

GA

$3,126,980

6.20%

13 Years

2015

9/29/17

Watertown

WI

$3,600,000

7.45%

4 Years

2005

6/17/17

Sierra Vista

AZ

$4,010,000

6.14%

11 Years

2013

5/25/17

Tahlequah

OK

$3,315,000

7.66%

5 Years

2007

5/17/17

Philadelphia

MS

$2,840,000

6.94%

11 Years

2013

3/16/17

Marysville

OH

$2,100,000

7.00%

6 Years

1997

2/17/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 5.00% (15-20 Years) 10 Years Remaining 5.25% 5 Years Remaining +5.75% TRANSACTIONS Transactions Average Cap Rate Average Term Remaining Average Sale Price

2016

2017

-

1

-

4.75%

-

11

- $13,474,000

Private Private ± 474 Monrovia, CA

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NN

10% Every 5 Years

15 Years

$300,000

Typical SF

Average Sales

12,500 SF

$1,750 Per Square Foot

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Houston

TX

$13,474,000

4.75%

11 Years

2012

3/28/17

Houston

TX

$6,800,000

-

10 Years

2016

10/1/15

Los Angeles

CA

$7,000,000

-

-

1961

9/1/15

Southlake

TX

$8,400,000

-

10 Years

2015

7/1/15

Tampa

FL

$8,200,000

5.70%

10 Years

2014

4/4/14

Evanston

IL

$11,000,000

5.10%

15 Years

2013

10/3/13

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

TYPICAL LEASE STRUCTURE A1 ±$93.74B ± 800 Atlanta, GA

Lease Type

Rent Increases

Lease Term 10 Years

Average Annual Rent

Typical SF

Average Sales

NN

CAP RATE COMPARISON New Construction (25 Years) 10 Years Remaining 6.00% 5 Years Remaining 7.34%

5-10% Every 5 Years

N/A

25,000 SF

CURRENT ON MARKET DATA 4 # of Properties Average Cap Rate Average Lease Term Remaining $1,100,000 Average Price 6.00% Lowest Cap Rate Highest Cap Rate 7.34%

N/A

Tenant

2016

2017

13

7

6.93%

7.03%

Transactions Average Cap Rate Average Sale Price

$13,400,000 $22,400,000

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Indianapolis

IN

$8,790,000

7.37%

-

-

10/11/16

Londonderry

NH

$44,953,846

6.48%

-

-

9/30/15

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 6.45% (15-20 Years) 10 Years Remaining 7.05% 5 Years Remaining 8.20%

BB ±$15.3B ± 950 Stamford, CT

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NN or NNN

CURRENT ON MARKET DATA 5 # of Properties Average Cap Rate 8.40% Average Lease 2.6 Years Term Remaining $2,148,030 Average Price 6.50% Lowest Cap Rate Highest Cap Rate 10.53%

Custom Flat or 2-3% Annually

5 Years

± $150,000

Typical SF

Average Sales

±12,000 SF

N/A

CAP RATE CORRELATION 9.50% 9.00%

8.50%

2016

2017

30

28

Average Cap Rate Average Term Remaining Average Sale Price

8.46%

7.86%

5 Years

7 Years

5.50%

$1,809,595

4.50%

$1,768,673

CAP RATE

TRANSACTIONS Transactions

8.00%

7.50% 7.00%

6.50% 6.00%

5.00%

2

3

4

5

6

7

8

9

10

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Marble Falls

TX

$2,491,357

7.05%

10 Years

2001

1/1/2017

Saint Louis

MO

$2,245,000

7.25%

8 Years

1980

8/4/2017

Nederland

TX

$3,150,000

7.45%

7.5 Years

1995

8/23/2016

Earth City

MO

$2.840,000

8.00%

5 Years

1976

5/3/2016

Jacksonville

FL

$2,050,000

8.65%

1.5 Years

2006

12/31/2016

Mechanicsburg

PA

$2,100,000

9.32%

1.5 Years

1985

12/27/2016

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction (10 Years) 10 Years Remaining 5 Years Remaining

N/A 6.00% 7.25%

BBB+ ±$201.07B ± 2,330 New York, NY

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

NN

5-10% Every 5 Years

CURRENT ON MARKET DATA # of Properties Average Cap Rate Average Lease Term Remaining Average Price Lowest Cap Rate Highest Cap Rate

12 6.32%

10 Years

$128,000

7 Years $2,029,027 4.17% 7.78%

Typical SF

Average Sales

±4,000 SF

N/A

CAP RATE CORRELATION 9.0%

Transactions Average Cap Rate Average Term Remaining Average Sale Price

2016

2017

42

30

6.56%

6.71%

6 Years

7 Years

$2,220,795

$2,187,279

8.50

8.0% CAP RATE

Tenant

7.50

7.0% 6.50

6.0% 5.50

5.0% 4.50

4.0%

2

3

4

5

6

7

8

9

10

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Denton

TX

$3,306,000

5.99%

9 Years

2016

12/20/17

Las Cruces

NM

$620,000

6.50%

7 Years

2014

11/3/17

Plainfield

IL

$2,200,000

5.89%

10 Years

2017

9/15/17

Madison

WI

$1,658,000

7.25%

5 Years

1997

7/11/17

Greenville

NC

$2,250,000

7.67%

7 Years

1998

5/12/17

Snellville

GA

$1,775,000

6.42%

9 Years

2016

3/15/17 3/8/17

Joliet

IL

$1,900,000

8.30%

5 Years

1995

Porterville

CA

$900,000

6.67%

5 Years

1981

3/2/17

Newnan

GA

$950,000

8.00%

2 Years

1996

2/23/17

New Smyrna Beach

FL

$2,000,000

6.00%

10 Years

2017

1/5/17

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

BBB ±$69.89B ± 8,100 Deerfield, IL

TYPICAL LEASE STRUCTURE

CAP RATE COMPARISON New Construction 5.10% (20 Years) 10 Years Remaining 6.25% 5 Years Remaining 7.25%

Lease Type

Rent Increases

Lease Term 20 to 25 Years

Average Annual Rent

Typical SF

Average Sales

NNN or NN

CURRENT ON MARKET DATA 210 # of Properties Average Cap Rate 6.15% Average Lease 12 Years Term Remaining $6,118,865 Average Price 3.80% Lowest Cap Rate Highest Cap Rate 10.00%

Flat

$360,000

±14,500 SF

$10,600,000

CAP RATE CORRELATION 8.50% 8.00%

Tenant

2016

2017

332

257

6.13%

6.10%

12 Years

13 Years

$6,018,085

$5,988,702

Transactions Average Cap Rate Average Term Remaining Average Sale Price

CAP RATE

7.50% 7.00%

6.50% 6.00%

5.50% 5.00%

4.50% 4.00%

3.50%

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

YEARS REMAINING ON LEASE

RECENT SALES COMPARABLES City

State

Sales Price

Cap Rate

Term Remaining

Year Built

Sale Date

Chicago

IL

$3,710,000

8.00%

2 Years

1998

12/29/17

Eden Prarie

MN

$6,302,521

5.50%

18 Years

2011

12/22/17

McDonough

GA

$3,840,000

9.10%

3 Years

2001

12/1/17

Elizabeth City

NC

$5,416,000

6.00%

15 Years

2007

10/5/17

Daytona Beach

FL

$3,036,000

7.45%

5 Years

1997

7/17/17

Alexandria

MN

$5,583,333

5.95%

16 Years

2008

6/1/17

Leland

NC

$4,200,000

6.10%

12 Years

2004

5/5/17

Columbia

TN

$5,100,000

6.30%

10 Years

2002

4/6/17

Portland

OR

$8,075,000

5.25%

19 Years

2016

3/16/17

Holland

MI

$7,078,000

6.20%

14 Years

2006

1/27/17

20

KEY STATISTICS Credit Rating Market Cap # of Locations Headquarters

CAP RATE COMPARISON New Construction 4.50% - 5.00% (15-20 Years) 10 Years Remaining 5.50% - 5.85% 5 Years Remaining 6.10% - 6.50%

Private ±$9.5B ± 750 Chester Heights, PA

TYPICAL LEASE STRUCTURE Lease Type

Rent Increases

Lease Term

Average Annual Rent

5-10% Every 5 Years Beginning Year 11 or Custom

Ground Lease

CURRENT ON MARKET DATA 17 # of Properties Average Cap Rate 4.56% Average Lease 18.8 Years Term Remaining $5,954,530 Average Price 4.35% Lowest Cap Rate Highest Cap Rate 5.35%

20 Years

$250,000

Typical SF

Average Sales

±4,700-6,000 SF

N/A

CAP RATE CORRELATION 9.00%

2017

12

18

Average Cap Rate Average Term Remaining Average Sale Price

4.83%