502 grand avenue...mo./sf yearly rent lease type rent comm. lease term rental increases options...

CONFIDENTIAL OFFERING MEMORANDUM

INVESTMENT OFFERING 2015

502 Grand Avenue

South San Francisco, CA

Capital Markets | Investment Properties

SITE

AFFILIATED BUSINESS DISCLOSURE & CONFIDENTIALITY AGREEMENT

CBRE, Inc. operates within a global family of companies with many subsidiaries

and/or related entities (each an “Affiliate”) engaging in a broad range of

commercial real estate businesses including, but not limited to, brokerage

services, property and facilities management, valuation, investment fund

management and development. At times different Affiliates may represent

various clients with competing interests in the same transaction. For example,

this Memorandum may be received by our Affiliates, including CBRE Investors,

Inc. or Trammell Crow Company. Those, or other, Affiliates may express an

interest in the property described in this Memorandum (the “Property”) may

submit an offer to purchase the Property and may be the successful bidder for

the Property. You hereby acknowledge that possibility and agree that neither

CBRE, Inc. nor any involved Affiliate will have any obligation to disclose to you

the involvement of any Affiliate in the sale or purchase of the Property. In all

instances, however, CBRE, Inc. will act in the best interest of the client(s) it

represents in the transaction described in this Memorandum and will not act

in concert with or otherwise conduct its business in a way that benefits any

Affiliate to the detriment of any other offeror or prospective offeror, but rather

will conduct its business in a manner consistent with the law and any fiduciary

duties owed to the client(s) it represents in the transaction described in this

Memorandum.

This is a confidential Memorandum intended solely for your limited use and

benefit in determining whether you desire to express further interest in the

acquisition of the Property.

This Memorandum contains selected information pertaining to the Property and

does not purport to be a representation of the state of affairs of the Property or

the owner of the Property (the “Owner”), to be all-inclusive or to contain all or

part of the information which prospective investors may require to evaluate a

purchase of real property. All financial projections and information are provided

for general reference purposes only and are based on assumptions relating

to the general economy, market conditions, competition and other factors

beyond the control of the Owner and CBRE, Inc. Therefore, all projections,

assumptions and other information provided and made herein are subject

to material variation. All references to acreages, square footages, and other

measurements are approximations. Additional information and an opportunity

to inspect the Property will be made available to interested and qualified

prospective purchasers. In this Memorandum, certain documents, including

leases and other materials, are described in summary form. These summaries

do not purport to be complete nor necessarily accurate descriptions of the

full agreements referenced. Interested parties are expected to review all such

summaries and other documents of whatever nature independently and not

rely on the contents of this Memorandum in any manner.

Neither the Owner or CBRE, Inc, nor any of their respective directors, officers,

Affiliates or representatives make any representation or warranty, expressed or

implied, as to the accuracy or completeness of this Memorandum or any of its

contents, and no legal commitment or obligation shall arise by reason of your

receipt of this Memorandum or use of its contents; and you are to rely solely

on your investigations and inspections of the Property in evaluating a possible

purchase of the real property.

The Owner expressly reserved the right, at its sole discretion, to reject any

or all expressions of interest or offers to purchase the Property, and/or to

terminate discussions with any entity at any time with or without notice which

may arise as a result of review of this Memorandum. The Owner shall have no

legal commitment or obligation to any entity reviewing this Memorandum or

making an offer to purchase the Property unless and until written agreement(s)

for the purchase of the Property have been fully executed, delivered and

approved by the Owner and any conditions to the Owner’s obligations therein

have been satisfied or waived.

By receipt of this Memorandum, you agree that this Memorandum and its

contents are of a confidential nature, that you will hold and treat it in the

strictest confidence and that you will not disclose this Memorandum or any

of its contents to any other entity without the prior written authorization of the

Owner or CBRE, Inc. You also agree that you will not use this Memorandum

or any of its contents in any manner detrimental to the interest of the Owner

or CBRE, Inc.

If after reviewing this Memorandum, you have no further interest in purchasing

the Property, kindly return this Memorandum to CBRE, Inc.

Andrew Reeder

Lic. 01297374

+1 415 772 0162

[email protected]

Don LeBuhn

Lic. 01821805

+1 415 772 0248

[email protected]

INVESTMENT CONTACTSSAN FRANCISCO

3502 Grand Avenue | South San Francisco, CA

INVESTMENT SUMMARY

CBRE, as exclusive listing agent, is pleased to present 502 Grand Avenue, South San Francisco, CA (the “Property”.) The

Property is a 4,200 SF fully-leased retail building on a 14,000 SF corner parcel. Located at the corner of Grand Avenue

& Spruce Avenue, the property is part of South San Francisco’s downtown corridor. The Property consists of four small

shop tenants, with spaces ranging from 944sf to 1,325sf.

The Property is 100% net leased to four tenants that have all been at the property for over 20 years. All four tenants have

five years remaining on their lease term and all have 3% annual increases.

502 Grand Avenue offers investors the unique opportunity to acquire a fully leased corner lot property in the highly sought

after San Francisco Peninsula submarket.

INVESTMENT HIGHLIGHTS

• High barrier-to-entry market with little planned supply

• Long standing tenants that have been at the property for 20+ years.

• Multi-tenant building with parking

• Strong retail corridor serving a dense, middle income trade area

• Corner parcel with good visibility

• NNN Leases / Below market rents

04

OFFERING SUMMARY

Address: 502 Grand Avenue, South San Francisco, CA 94080

Square Footage: 4,200 sf

Land Area: 14,000 sf

Year Built: 1989

Percentage Leased: 100%

In-place NOI: $95,156.16

Purchase Price: $1,800,000

CAP Rate: 5.28%



PROPERTY SUMMARY

Rentable Square Footage: 4,200 sf

Gross Site Area: 14,000 sf

APN Number 012-282-540

Year Built: 1989

Primary Road Frontage: Grand Avenue ±100’

Zoning District: Downtown Commercial

Sprinklers: No

Parking: 16 spaces

DEMOGRAPHICS

Distance 2014 Estimated Population 2019 Projected Population 2014 Est. Median Household Income

1 Mile Radius 126,455 134,005 $41,276

3 Mile Radius 383,146 405,368 $65,620

5 Miles Radius 643,920 677,890 $71,405

06

SITE PLAN

LOCATION MAP

SITE

GRAND AVE

SPRU

CE

AVE

4TH LN

PureWater

DonutKing

TheBack Doctor

GrandDental Care



FINANCIAL INFORMATION

SUMMARY OF FINANCIAL ASSUMPTIONS

GLOBAL LEVERAGE SUMMARY SECOND GENERATION LEASING

MARKET LOANAnalysis Period Initial Loan Funding (as of Apr-15) $1,080,000 Retention Ratio 70%

Commencement Date April 1, 2015 Loan-To-Value Ratio (Initial Funding) 60.00%End Date March 31, 2020 Funding Date Apr-15 Financial TermsTerm 5 Years Maturity Date Mar-20 2015 Monthly Market Rent $2.15 & $2.25 PSF

Remaining Loan Term During Analysis 5.0 Years Rent Adjustment 3.00% AnnuallyArea Measures Amortization Period 30 Years Lease Term 5 Years

Building Square Feet (NRSF) 4,201 SF Initial Interest Only Period (If Any) - Expense Reimbursement Type NNNInterest Rate 4.50%

Growth Rates Loan Constant 6.08% Tenanting CostsConsumer Price Index (CPI) 3.00% Origination Fee on Initial Loan Funding 1.00% Rent AbatementsOther Income Growth Rate 3.00% Initial Debt Yield 8.88% New 0 Month(s)Operating Expenses 3.00% Debt Service Coverage Ratio (NOI) 1.46x Renewal 0 Month(s)Real Estate Taxes 2.00% Debt Service Coverage Ratio (CF) 1.45x Weighted Average 0.00 Month(s)Market Rent Growth [1]

CY 2016 - 3.00% Tenant Improvements ($/NRSF)CY 2017 - 3.00% Purchase Price as of April 1, 2015 $1,800,000 New $10.00 PSFCY 2018 - 3.00% Total Initial Loan Principal (1,080,000) Renewal $5.00 PSFCY 2019 - 3.00% Total Initial Loan Fees 10,800 Weighted Average $6.50 PSFCY 2020 - 3.00% Holdbacks and Escrows 0CY 2021 - 3.00% Initial Equity $730,800 CommissionsCY 2022 - 3.00% New 6.00%CY 2023 - 3.00% LEVERAGED IRR 6.77% Renewal 3.00%CY 2024 - 3.00% Weighted Average 3.90%

CY 2025+ - 3.00%EXPENSES Downtime

General Vacancy Loss 0.00% [2] New 6 Month(s)Operating Expense Source Per Tenant Leases Weighted Average 2 Month(s)

Capital Reserves (CY 2015 Value) $0.10 PSFManagement Fee (% of EGR) 5.00%

Real Estate Taxes Reassessed Yes [3]

Summary of Financial Assumptions

EXISTING VERSUS MARKET COMPARISON

PercentageSquare Lease Lease Existing Rent Market Rent Above/(Below)

Suite Tenant at April 1, 2015 Feet Start End as of Apr 1, 2015 as of Apr 1, 2015 Market Rent [1]

Existing Tenants

A Dentist 1,325 Jan-15 Dec-19 $2.01 PSF NNN $2.15 PSF NNN -6.40%B Back Doctor 1,109 Jan-15 Dec-19 $1.83 PSF NNN $2.15 PSF NNN -14.82%C Donut King 823 Jan-15 Dec-19 $1.99 PSF NNN $2.25 PSF NNN -11.36%D Spring Water 944 Jan-15 Dec-19 $1.69 PSF NNN $2.25 PSF NNN -25.11%

Total Existing Square Feet 4,201 $1.89 $2.19 -13.89%

Weighted-Average Lease Term Remaining: 4.75 Years

[1] The calculation of total "Percentage Above/(Below) Market Rent" only includes existing tenants as noted in this schedule.

Existing Versus Market Comparison

08

Rent Roll

Tenant SF ProRata Mo.Rent

Mo./SF Yearly Rent Lease Type

Rent Comm.

Lease Term

Rental Increases

Options

Dental Office

1325 31.54% $2,666.40 $2.01 $31,996.80 NNN 1/1/2015 5 Years 3%/Year 1 5-Yr Option with 3% yearly increases

The Back Doctor


Donut King


Spring Water Store


Totals 4201 100% $7,929.68 $95,156.16


CASH FLOW PROJECTIONSCASH FLOW PROJECTIONS

Fiscal Year Ending - March 31 2016 2017 2018 2019 2020 2021

Physical Occupancy 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Overall Economic Occupancy [1] 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Weighted Average Market Rent $2.21 $2.28 $2.34 $2.41 $2.49 $2.56Weighted Average In Place Rent [2] $1.90 $1.96 $2.02 $2.08 $2.14 $2.20Total Operating Expenses PSF Per Year $8.23 $8.42 $8.62 $8.83 $9.04 $9.25

[3]FY 2016

REVENUES $/SF/MOScheduled Base Rent

Gross Potential Rent $1.90 $95,870 $98,746 $101,708 $104,759 $107,899 $111,119Absorption & Turnover Vacancy 0.00 0 0 0 0 0 0Base Rent Abatements 0.00 0 0 0 0 0 0

Total Scheduled Base Rent 1.90 95,870 98,746 101,708 104,759 107,899 111,119Expense Reimbursements 0.69 34,566 35,384 36,224 37,085 37,964 38,871

TOTAL GROSS REVENUE 2.59 130,436 134,130 137,932 141,844 145,863 149,990General Vacancy Loss 0.00 0 0 0 0 0 0

EFFECTIVE GROSS REVENUE 2.59 130,436 134,130 137,932 141,844 145,863 149,990OPERATING EXPENSES

Operating Expenses (0.26) (12,856) (13,241) (13,639) (14,048) (14,469) (14,903)Property Tax (0.43) (21,708) (22,142) (22,585) (23,037) (23,497) (23,967)

TOTAL OPERATING EXPENSES (0.69) (34,564) (35,383) (36,224) (37,085) (37,966) (38,870)NET OPERATING INCOME 1.90 95,872 98,747 101,708 104,759 107,897 111,120CAPITAL COSTS

Tenant Improvements 0.00 0 0 0 0 0 0Leasing Commissions 0.00 0 0 0 0 0 0Capital Reserves (0.01) (423) (436) (449) (462) (476) (491)

TOTAL CAPITAL COSTS (0.01) (423) (436) (449) (462) (476) (491)OPERATING CASH FLOW $1.89 $95,449 $98,311 $101,259 $104,297 $107,421 $110,629ACQUISITION & RESIDUAL SALE

Acquisition Cost ($1,800,000) 0 0 0 0 0 All CashNet Residual Value [4] 0 0 0 0 0 1,796,440 IRR

CASH FLOW BEFORE DEBT ($1,800,000) $95,449 $98,311 $101,259 $104,297 $1,903,861 5.58%MARKET LOAN [5]

Loan Funding / Payoff 1,080,000 0 0 0 0 (984,506)Loan Fees (10,800) 0 0 0 0 0 LeveragedAnnual Debt Service 0 (65,666) (65,666) (65,666) (65,666) (65,666) IRR

CASH FLOW AFTER DEBT ($730,800) $29,783 $32,645 $35,593 $38,631 $853,689 6.77%

NOI Return 5.33% 5.49% 5.65% 5.82% 5.99%

LEVERAGED Cash Return 4.08% 4.47% 4.87% 5.29% 5.71%

[1] This figure takes into account vacancy/credit loss, absorption vacancy, turnover vacancy, and base rent abatements.

[3] Based on 4,201 square feet.[4] Net Residual Value is calculated by dividing Year 6 NOI by the Residual Cap Rate of 6.00% and applying a 3.00% Cost of Sale.[5] Market Debt based on 60% Loan-to-Value, 4.50% Interest Rate, 30-Year Amortization, and 1.00% Loan Fee.

[2] This figure does not include any amount related to expense reimbursements. Only Scheduled Base Rent and Fixed/CPI Increases are included in this calculation, which is based on the weighted-average physical occupancy during each fiscal year.

10

NEARBY RETAILERS


Grand Ave

CITY HALL WELLSFARGO

Sp

ruce

Ave

SITE

The San Francisco Bay Area is one of the most desirable regions in the world for institutional, private and off-shore investors.

The combination of banks, financial services, high technology, leading biotechnology and life science companies, as well

as nearly 50% of the country’s annual investment capital is being allocated to Bay Area companies. The Bay Area economy

continues to be diverse and will continue to experience strong growth.

The San Francisco Bay Area, located in Northern California, is home to more than 7 million people. The area consists of

nine counties, 101 cities, and comprises 7,000 square miles. All of the region’s nine counties touch the San Francisco Bay.

The region is one of the most appealing places to live in the United States. It has a mild climate, a splendid natural setting,

and an informed, sophisticated culture. Its geographic hub, San Francisco, is considered one of the most beautiful and

cosmopolitan cities in the world and a famed destination for travelers.

Chinatown

MARKET OVERVIEW

The Bay Area has world-class research facilities

and the venture capital to fund risky but potentially

breakthrough ideas. Among the research centers

that dot the region are federal institutions (like

Lawrence Berkeley National Lab, Lawrence

Livermore National Lab, NASA Ames Research

Center, and Sandia National Labs), new state

facilities (e.g., the California Institute of Regenerative

Medicine for stem cell research, QB3, and CITRIS),

renowned universities like Stanford, UC Berkeley,

UC San Francisco, UC Davis, and UC Santa

Cruz, and many private laboratories operating in

advanced science fields.

California leads the nation in the number of

doctorate-level scientists and engineers, small

business innovation awards, patents, and federal,

academic and industry R&D expenditure. The Bay

Area contributes to this leadership. Several local

universities rank in the top 20 in the United States

as recipients of R&D funding from the National

Science Foundation. The Bay Area is also home

to the largest number of Top 10-ranked graduate

programs among comparable regions.

Innovation Hotbed

Capital Markets | Investment Properties

502 Grand AvenueSouth San Francisco, CA

INVESTMENT CONTACT

Andrew Reeder

Lic. 01297374

+1 415 772 0162

[email protected]

Don LeBuhn

Lic. 01821805

+1 415 772 0248

[email protected]

© 2015 CBRE, Inc. The information contained in this document has been obtained from sources believed reliable. While CBRE, Inc. does not doubt its accuracy, CBRE, Inc. has not verified it and makes no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property. The value of this transaction to you depends on tax and other factors which should be evaluated by your tax, financial and legal advisors. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs. CBRE and the CBRE logo are service marks of CBRE, Inc. and/or its affiliated or related companies in the United States and other countries. All other marks displayed on this document are the property of their respective owners. Photos herein are the property of their respective owners and use of these images without the express written consent of the owner is prohibited.

502 grand avenue...mo./sf yearly rent lease type rent comm. lease term rental increases options...

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