rader oes trader joe’s -...

Offering MemorandumInvestment Propert ies | Capital Markets

trader joe’strader joe’s17636-17640 BurBank BOulevard | lOs angeles, Ca 91316

more than 11 years remaining on the lease

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© 2014 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. 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. 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. SF9723_08/2014

ProPertY desCrIPtIoNTenant DescriptionAerialsLocation MapDemographics

6

14

16MarKet oVerVIeWRetail Market InformationDistrict of Encino City of Los Angeles

FINaNCIaL aNaLYsIsLease AbstractValuation

02

03

04

aNdreW [email protected] Lic#: SA35679000

MoLLY [email protected] Lic#: SA653093000

eXCLusIVeLY MarKeted BY:

eXeCutIVe suMMarYThe OpportunityInvestment Highlights Asset Profile

401

taBLe oF CoNteNts

sCott [email protected] Lic#: 0104080

LoCaL MarKet CoNtaCt: *

*This listing will be sold through the California licensed real estate agent/broker above. All communication about the listing should be directed to Scott Riddles.

01 eXeCutIVe suMMarY The Opportunity

Investment Highlights

Asset Profile

trader joe’s trivia

“trader joe’s” was named after its founder, joe Coulombe.

Founder joe Coulombe was inspired to create the “tiki Motif” after a trip to the Caribbean.

CBRE | pagE 5

eXeCutIVe suMMarY

the opportunity

CBRE has been retained as the exclusive representative of a rare, fee-interest

investment opportunity in the heart of the country’s largest MSa, Los angeles,

California. The investment offering is one of the original and still top-performing

Trader Joe’s. Founded in the 1950’s, Trader Joe’s has occupied the premises since

1975 and recently signed a 10-year lease extension with an expiration date of

January 31, 2026. This is an extraordinary opportunity to purchase an absolute

NNN lease with one nation’s most popular and successful grocers. The Trader Joe’s

is in a prime location along a major freeway in the densely populated disctrict of

Los angeles, Ca. This trophy asset will produce a dependable income stream for

many years to come.

asset Profi leTenant's Name: Trader Joe's

Lease Type: Absolute Triple Net (NNN)

Price: $7,332,000

Cap Rate: 4.25%

Net Operating Income: $311,600

Original Lease Date: 10/22/1975

Expiration Date: 1/31/2026

Rentable SF: 8,200

Land SF: 28,610

Parcel Number: 2254-037-003

Rent Increases: CPI Every 5 Years capped at 10%

Traffic Counts: Burbank Blvd @ White Oak is 26,000 CPD White Oak @ Burbank is 31,500 CPD

Ventura Route 101 Freeway is 309,000 CPD

Investment highlights

• In excess of 11 years remaining on the lease

• absolute NNN lease with Trader Joe’s responsible for all maintenance, repairs, and replacement to the building and site.

• The site backs directly up to the 101 Freeway and adjacent to the exit on White Oak ave. More than 500,000 people live within a 5-mile radius and over 300,000 vehicles pass by the site daily.

• Trader Joe’s has occupied the premises since 1975 and entered into a 10 year lease extension, taking the lease expiration out to January 31, 2026.

• Rental increases every 5 years based upon the increase in the CpI not to exceed 10%.

02 ProPertY desCrIPtIoN Tenant Description

Aerials

Location Map

Demographics


the original Pronto Markets were very similar to 7-11. so similar, in fact, that founded joe Coulombe changed his market’s name and concept as he felt trying to compete with 7-11 would be ‘ruinous’.

CBRE | pagE 7

ProPertY desCrIPtIoN

AbOuT TRADER jOE’s

Trader Joe’s is an privately-held american chain of specialty grocery stores headquartered in Monrovia, California, located in the greater Los angeles area. as of 2014, Trader Joe’s had a total of 418 stores with more being added regularly. Most locations average between 8,000 and 12,000 sq ft. approximately half of its stores are in California, with the heaviest concentration in Southern California. The company also has locations in 38 other states and Washington, D.C.

Trader Joe’s was founded by and named for Joe Coulombe and has been owned since 1979 by a german family trust established by aldi Nord’s owner Theo albrecht. The chain began in 1958 as a greater Los angeles area convenient store formerly known as pronto Market and later changed its name to Trader Joe’s Company.

The signature Trader Joe “South Seas Motif” was inspired by a trip to the Caribbean. The Tiki fad of the 1950s and 1960s was in full swing and Trader Vic’s at the height of its popularity with twenty-five locations worldwide. The first store named “Trader Joe’s” opened its doors in 1967. This store, on arroyo parkway in pasadena, California, is still in operation.

Between 1990 and 2001, the chain quintupled its store numbers and increased its profits by ten times. In February 2008, Businessweek reported that the company had the highest sales per square foot of any grocer in the U.S. The May 2009 issue of Consumer Reports ranked Trader Joe’s the second-best supermarket chain in the USa, after Wegmans. One year later, Fortune magazine estimated sales to be $1,750 in merchandise per square foot, more than double the sales generated by Whole Foods. In 2014, Consumer Reports again ranked Trader Joe’s a top scoring supermarket chain.

While a typical grocery store may carry 50,000 items, Trader Joe’s stocks about 4,000 items, 80% of which bear one of its own brand names and 100% environmentally friendly.

Trader Joe’s sells many items under its own private labels, at a significant discount to brand-name equivalents. Trader Joe’s describes itself as “your neighborhood grocery store” or “your unique grocery store”.

tenant description

CBRE | pagE 8


tenant description

1958 pronto Markets, founded by Joe Coulombe, open in the greater Los angeles, Ca area.

1967 pronto Markets changes name to “Trader Joe’s” and the first store opens in pasadena, Ca.

1969 The “Tiki” theme is born.

1972 Trader Joe’s launched its private label series.

1979 Trader Joe’s was sold to a german Family Trust established by aldi Nord’s owner Theo albrecht.

1985 The Fearless Flyer Weekly Newsletter went to press and is still the company’s primary form of marketing.

1988 The Company expanded outside of Southern California to San Rafael in Marin County.

1993 The Company expanded out of state for the first time to the Valley of the Sun aka phoenix, aZ.

1995 The Company expanded into the Northwest starting with Beaverton, OR.

1996 The Company launched www.traderjoes.com

1997 The Company went cross country and opened its first East Coast store in Brookline, Ma.

2000 The Company went Midwest in the Millennium by opening up 2 stores in Chicago, IL.

2002 award-wining “Two Buck Chuck” house label wine was introduced started selling out all over the country.

2006 The Company opened in Manhattan, NYC, NY.

2008 Businessweek reports that the Company had the highest sales per square foot of any grocer in the U.S.

2010 Fortune magazine estimates Company sales to be $1,750 in merchandise per square foot, more than double the sales of Whole Foods.

2014 The Company operates stores in 39 states and counting including Texas, Florida, Kentucky, Louisiana, Colorado, Iowa, and more!

TRADER jOE’s TIMELInE

CBRE | pagE 9


Aerials

ventura route 101 freeway

CBRE | pagE 10


Aerials

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university ofCalifornia

norThriDge5 miles north

SanTa MoniCa beaCheS 20 miles west

orange CounTy iS 60 miles southwest

DownTown la 20 miles southeast

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Aerials

ventura route 101 freeway

burbank bouleVarDw

hite oak avenue

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CBRE | pagE 12


Location Map

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not to scale

CBRE | pagE 13


1 MILE RADIus 3 MILE RADIus 5 MILE RADIus

2014 estimated Population 30,600 173,155 498,5082019 Projected Population 31,671 179,978 518,5872010 Census Population 29,873 168,376 484,2172000 Census Population 28,888 159,300 463,533Growth 2010-2014 2.43% 2.84% 2.95%Growth 2014-2019 3.50% 3.94% 4.03%2014 estimated Median age 42.03 39.33 37.032014 estimated average age 42.52 39.72 38.002014 estimated Households 13,774 62,857 176,0472019 Projected Households 14,247 65,177 183,3042010 Census Households 13,499 61,374 170,9852000 Census Households 13,740 60,015 167,285Growth 2010-2014 2.04% 2.42% 2.96%Growth 2014-2019 3.43% 3.69% 4.12%2014 est. average Household size 2.21 2.74 2.812014 est. Median Household income $49,896 $54,859 $52,4312019 Prj. Median Household income $52,434 $58,960 $55,7102000 Cen. Median Household income $42,999 $46,822 $43,8562014 est. average Household income $74,537 $86,546 $79,8212014 estimated Per Capita income $33,552 $31,417 $28,1892014 estimated Housing Units 14,802 66,635 187,3662014 estimated occupied Units 13,774 62,857 176,0472014 estimated vacant Units 1,027 3,778 11,3192014 est. owner occupied Units 6,534 33,755 81,3772014 est. renter occupied Units 7,240 29,101 94,6692014 est. Median Housing value $379,510 $417,857 $416,0962014 est. average Housing value $479,508 $574,786 $548,767

SOURCE: CBRE

Demographics

03 FINaNCIaL aNaLYsIs Lease Abstract

Valuation


the original trader joe’s in Pasadena still exists and is in business!

in the 60’s, trader joe’s sold every California wine label that was in production.

CBRE | pagE 15

FINaNCIaL aNaLYsIs

Tenant Trader Joe's Company

Address 17636-7640 Burbank Blvd Los angeles, Ca

Lease Type NNN

Rentable square Feet 8,200

Land square Feet 29,500

Lease Term 20 Years

Original Lease: 10/22/1975

Lease Date: 6/26/1995

Commencement Date: 2/1/1996

Expiration Date 1/31/2026

Rent schedule Years annual Rent Rent pSF

2/1/16 - 1/31/21 $311,600.00 $38.00

2/1/21 - 1/31/26* $342,760.00 $41.80

* assumes a 10% increase in the CpI over the 5-year period.

Rental Increases The annual and monthly rental set forth above shall be adjusted every five years during the term by a change in the Consumer price Index during such period but in no event shall the adjustment exceed 10%.

Options Tenant may extend the lease, at its option with at least 360 days notice, for three (3) successive five (5) year periods at the same rental and upon the same terms, covenants, and conditions as the Lease.

Landlord's Obligations None

Tenant Obligations Tenant shall pay before deliquent, all real property taxes and assessments. Tenant will keep the property in good repair and during the term of the Lease, at Tenant's sole cost and expense, maintain the premises, buiding, pavement, structures, fixtures, equipment, and improvements.

Lease History Original Lease Trader Joe’s is successor to pronto Market No.2, Inc. in a lease dated 10/22/1975

primary Lease 6/26/1995First addendum 6/26/1995Second addendum 6/26/1995First amendment 7/19/2014

Lease abstract

Price: $7,332,000

Cap rate: 4.25%

NoI: $311,600

Valuation

04 MarKet oVerVIeW Retail Market Information

District of Encino

City of Los Angeles


as of 1973, trader joe’s was still considered a general store and sold everything from fresh produce to women’s pantyhose.

CBRE | pagE 17

MarKet oVerVIeW

Greater Los Angeles Retai l Market

COnsuMER COnFIDEnCE uPConsumers are feeling good as it relates to the current economic conditions. according to the Conference Board Consumer Confidence Index, consumer confidence improved in June following another increase in May. The Index now stands at 85.2, up from 82.2 in May, and are at the highest level since January 2008. The increasing confidence can be attributed to the improving business climate and the short-term outlook for the overall economy.

EMPLOYMEnT GROWTHEmployment conditions, both on the national and local levels, continue to improve. The most recent report by the U.S. Bureau of Labor Statistics show a gain of 288,000 payroll jobs in June for a national unemployment rate of 6.1% - a rate not seen since the end of 2008. ‘‘The momentum in the labor market and retail job growth will translate into stronger expectations for the second half of 2014,’’ says Jack Kleinhenz, National Retail Federation Chief Economist.

ECOMMERCE sALEsthe convenience and ease of shopping online is a trend that is a way of life for many consumers. in order to keep up with online retail providers such as amazon, traditional retailers have had to adapt their sales strategies and offer the same speed and pricing options. the growth rate of online sales has substantially increased over the last decade and currently represents 6.2% of the total U.s. retail sales, equating to $71.9 billion dollars is sales. since Q1 2005, the percentage of ecommerce sales has increased by 390 basis points (bps). in terms of dollars, ecommerce sales have grown by 243% when compared to 2005.

National retail sales rose in May, increasing modestly by 0.3% over the previous month. Year- over year, retail sales have improved by 4.3% according to the U.S. Census Bureau. Moving into the summer months and back-to-school shopping season, consumer spending is rising at a modest pace. For the past three-month period of March through May, retail sales have increased 4.3% over the same period last year. although retailers are seeing profits improve, the average consumer is spending cautiously, and looking for the best deals.

advanced monthly sales data shows that some retail categories outweighed others, although the majority of retailers experienced positive sales growth. Building material and garden equipment stores experienced the largest monthly gain of 1.1% in sales from april, and are up 4.6% from last year. Sales at furniture and home furniture stores rose 0.5% in May from april, and are up 6.5% compared to last year’s sales. Non-store retailers reported sales growth with a total of 0.6% for the month, and post the largest year-over gain of 7.4% from May of last year. Department stores, however, experienced the largest decline in sales, down 1.6% from april and 2.0% from last year.

Improved retail sales steadily aid the U.S. economy and local retail markets, which continues to make strides towards a full post-recession recovery. Translating over to the commercial real estate market, the increased spending habits of consumers propel the demand of retailers for additional store locations and expansions. In greater Los angeles, the overall vacancy rate for retail space declined to 5.6% in Q2 2014. The vacancy level is also below that of last year when the rate stood at 6.2%. The decreased

CBRE | pagE 18

MarKet oVerVIeW

vacancy level is the result of sustained demand and a lessened amount of vacant space coming onto the market. a total of 369,000 sq. ft. of positive net absorption occurred this quarter, bringing the first half of 2014 total to 431,000 sq. ft. of positive net absorption. The positive net absorption occurring this quarter marks the fifth consecutive quarter of overall positive net absorption. The region’s average asking lease rate demonstrated a substantial increase this quarter and is now tracking at $2.11 per sq. ft., moving towards pre-recessionary rates.

Retail center development is beginning to show some activity in the greater Los angeles market. Four centers totaling 557,000 sq. ft. remain in the construction phase, with the majority scheduled to complete this year. Two centers completed construction in Q2 2014, totaling 309,000 sq. ft. This includes a portion of the azalea Shopping Center in South gate totaling 241,000 sq. ft. additionally, phase II of the gateway Towne Center in Compton completed construction of approximately 68.000 sq. ft.

Total employment along with population and personal income are the primary drivers of retail demand, according to CBRE Econometric advisors. Over the last five years, employment in the Los angeles area has increased at an average annual rate of 0.6%. This is slightly below the U.S. employment, which has increased at an average annual rate of 0.7%. Employment levels in Los angeles County are continuing to improve, as evident in the last 12 months where the region’s employment has outpaced national employment growth of 1.7%, increasing by an annual average of 2.0%. The most recent retail sales total for Los angeles is estimated at $97.9 billion, which accounts for approximately 5.5% of the nation’s total retail sales. Over the last five years, retail sales in Los angeles have increased at an annual rate of 2.9% and are forecasted to continue to grow at an annual rate of 4.0% over the next five years.

Forecasts by CBRE Econometric advisors projects continued overall employment growth. Over the next five years, employment is predicted to grow by 1.2%. The largest growth is expected for the hospitality & leisure sector, which includes food services and restaurants. Employment in this sector is projected to grow by 1.9%.

The unemployment rate for Los angeles County decreased in May to 8.0%, according to the California Economic Development Department. The latest report of unemployment falls below the 8.9% level witnessed in the previous quarter. Over the past 12 months, the unemployment rate has decreased a total of 170 bps. The unemployment rate for Ventura County decreased to 5.9%, which is down 130 bps from the 7.2% rate in May of last year. In comparison, the unemployment rate for California decreased to 7.6% in May, while the national unemployment rate decreased to 6.3%, and more recently to 6.1% in June.

Since May of last year, total non-farm employment in Los angeles County has increased by 89,300 jobs. The industry sector that experienced the largest monthly job gain was education and health services, which added 36,400 jobs. The majority of the employment gains were concentrated in health care and social assistance, which accounted for

© 2014 CBRE, Inc.

Figure 2: Unemployment Rate (%)

Figure 3: Year-Over-Year Job Growth (%)

Figure 4: Asking Lease Rate ($PSF/MO/NNN)

Figure 5: Year-Over-Year Rent Growth (%)

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Total employment along with population and personal incomeare the primary drivers of retail demand, according to CBREEconometric Advisors. Over the last five years, employment inthe Los Angeles area has increased at an average annual rateof 0.6%. This is slightly below the U.S. employment, which hasincreased at an average annual rate of 0.7%. Employmentlevels in Los Angeles County are continuing to improve, asevident in the last 12 months where the region's employmenthas outpaced national employment growth of 1.7%, increasingby an annual average of 2.0%. The most recent retail salestotal for Los Angeles is estimated at $97.9 billion, whichaccounts for approximately 5.5% of the nation's total retailsales. Over the last five years, retail sales in Los Angeles haveincreased at an annual rate of 2.9% and are forecasted tocontinue to grow at an annual rate of 4.0% over the next fiveyears.

Forecasts by CBRE Econometric Advisors projects continuedoverall employment growth. Over the next five years,employment is predicted to grow by 1.2%. The largest growthis expected for the hospitality & leisure sector, which includesfood services and restaurants. Employment in this sector isprojected to grow by 1.9%.

The unemployment rate for Los Angeles County decreased inmay to 8.0%, according to the California EconomicDevelopment Department. The latest report of unemploymentfalls below the 8.9% level witnessed in the previous quarter.Over the past 12 months, the unemployment rate hasdecreased a total of 170 bps. The unemployment rate forVentura County decreased to 5.9%, which is down 130 bpsfrom the 7.2% rate in May of last year. In comparison, theunemployment rate for California decreased to 7.6% in May,while the national unemployment rate decreased to 6.3%, andmore recently to 6.1% in June.

Since May of last year, total non-farm employment in LosAngeles County has increased by 89,300 jobs. The industrysector that experienced the largest monthly job gain waseducation and health services, which added 36,400 jobs. Themajority of the employment gains were concentrated in healthcare and social assistance, which accounted for approximately90% of the gain. Professional and business services alsoexperienced year-over-year employment gains totaling 23,500jobs. The trade, transportation, and utilities sector added12,300 jobs which included gains in retail trade (up 8,500),transportation, warehousing, and utilities (up 4,900) withoffsetting losses in wholesale trade (down 1,100). Themanufacturing sector, however, did experience job losses(down 14,500) over the year.

In Q2 2014, the overall average asking lease rate rose sixcents from the previous quarter to $2.11, denoting the largestgain in the past four years. Since Q2 2010, asking rentalrates have experienced an average year-over-year decline ofapproximately 0.7%. However, since Q2 2013, rents haveincreased an average of 2.1%. The upward trend is expectedto continue, pushing past pre-recession levels.

Average asking lease rates range in Los Angeles County from$1.25 per sq. ft. per month in the Antelope Valley submarket,to a high of $7.43 per sq. ft. per month in West Los Angeleswhich includes the high-street markets of Beverly Hills andSanta Monica. Ventura County falls between the spectrumwith an average rate of $2.42 per sq. ft. per month.

0%

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Source: U.S. Bureau of Labor Statistics, Q2 2014.

Source: CBRE Econometric Advisors, Q2 2014.

Source: CBRE Research, Q2 2014.


unemployment rate

Year-over-Year jobGrowth (%)

asking Lease rate ($PsF/Mo/NNN)


CBRE | pagE 19

MarKet oVerVIeW

approximately 90% of the gain. professional and business services also experienced year-over-year employment gains totaling 23,500 jobs. The trade, transportation, and utilities sector added 12,300 jobs which included gains in retail trade (up 8,500), transportation, warehousing, and utilities (up 4,900) with offsetting losses in wholesale trade (down 1,100). The manufacturing sector, however, did experience job losses (down 14,500) over the year.

In Q2 2014, the overall average asking lease rate rose six cents from the previous quarter to $2.11, denoting the largest gain in the past four years. Since Q2 2010, asking rental rates have experienced an average year-over-year decline of approximately 0.7%. However, since Q2 2013, rents have increased an average of 2.1%. The upward trend is expected to continue, pushing past pre-recession levels.

average asking lease rates range in Los angeles County from $1.25 per sq. ft. per month in the antelope Valley submarket, to a high of $7.43 per sq. ft. per month in West Los angeles which includes the high-street markets of Beverly Hills and Santa Monica. Ventura County falls between the spectrum with an average rate of $2.42 per sq. ft. per month

In Q2 2014, the overall vacancy rate for greater Los angeles retail space decreased and now stands at 5.6%. This reflects a decline of 10 bps from the 5.7% vacancy rate recorded in the previous quarter, and remains below the 6.2% level witnessed in Q2 2013. Vacancy is expected to continue on this downward trend, steadily declining over the next four quarters.

Representing the lowest vacancy rate in the region, the Mid- Wilshire submarket carries a vacancy rate of 2.7%. The South Bay submarket tracks closely behind with an increased vacancy rate of 3.6%, while West Los angeles has a vacancy rate of 3.5%. The Southeast Los angeles submarket reported a rate of 4.1%, which is up from the previous quarter of 3.7%. The vacancy level in the Tri-Cities submarket is slightly higher at 7.3%, while greater Downtown declined to 6.0%, and Mid Cities improved to 5.0%. The vacancy level for the Ventura and Santa Clarita Valley submarkets are similar at 5.8% and 8.4%, respectively, while the San Fernando Valley area has an increased vacancy rate of 6.1%. The San gabriel Valley posts a rate above that level at 6.6%. at 7.8%, the antelope Valley experienced a decline this quarter from the previous quarter’s rate of 8.7%.

Keeping the momentum experienced in the previous quarter, Q2 2014 experienced overall sustained demand. The greater Los angeles market recorded a total of 368,669 sq. ft. of positive net absorption. activity among tenants is expected to continue and demand to outpace supply. In total, more half of the 12 submarkets experienced positive net absorption this quarter. The bulk of the quarter’s positive absorption was seen in the West Los angeles and Mid-Cities submarkets, which together recorded a total of 289,060 sq. ft. of positive net absorption. The San gabriel Valley faired well this quarter with a total of 81,255 sq. ft. of positive net absorption. Ventura County posted near that level with

© 2014 CBRE, Inc.

Figure 6: Overall Vacancy Rate (%)

Figure 7: Vacancy Rate by Center Type (%)

Figure 8: Net Absorption (Thousand SF)

Figure 9: Under Construction (Million SF)

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In Q2 2014, the overall vacancy rate for Greater Los Angelesretail space decreased and now stands at 5.6%. This reflects adecline of 10 bps from the 5.7% vacancy rate recorded in theprevious quarter, and remains below the 6.2% level witnessedin Q2 2013. Vacancy is expected to continue on thisdownward trend, steadily declining over the next four quarters.

Representing the lowest vacancy rate in the region, the Mid-Wilshire submarket carries a vacancy rate of 2.7%. The SouthBay submarket tracks closely behind with an increased vacancyrate of 3.6%, while West Los Angeles has a vacancy rate of3.5%. The Southeast Los Angeles submarket reported a rate of4.1%, which is up from the previous quarter of 3.7%. Thevacancy level in the Tri-Cities submarket is slightly higher at7.3%, while Greater Downtown declined to 6.0%, and MidCities improved to 5.0%. The vacancy level for the Ventura andSanta Clarita Valley submarkets are similar at 5.8% and 8.4%,respectively, while the San Fernando Valley area has anincreased vacancy rate of 6.1%. The San Gabriel Valley posts arate above that level at 6.6%. At 7.8%, the Antelope Valleyexperienced a decline this quarter from the previous quarter'srate of 8.7%.

Keeping the momentum experienced in the previous quarter,Q2 2014 experienced overall sustained demand. The GreaterLos Angeles market recorded a total of 368,669 sq. ft. ofpositive net absorption. Activity among tenants is expected tocontinue and demand to outpace supply. In total, more half ofthe 12 submarkets experienced positive net absorption thisquarter. The bulk of the quarter’s positive absorption was seenin the West Los Angeles and Mid-Cities submarkets, whichtogether recorded a total of 289,060 sq. ft. of positive netabsorption. The San Gabriel Valley faired well this quarter witha total of 81,255 sq. ft. of positive net absorption. VenturaCounty posted near that level with 72,231 sq. ft. of positive netabsorption, while the Antelope Valley recorded 69,697 sq. ft.Mid-Wilshire and Greater Downtown experienced modest netabsorption with 8,260 sq. ft. and 5,228 sq. ft., respectively.Submarkets recording negative demand this quarter includeSan Fernando Valley(-17,316 sq. ft.), Santa Clarita Valley (-29,947 sq. ft.), South Bay (-9,736 sq. ft.), Southeast LosAngeles (-31,674 sq. ft.), and Tri Cities (-168,389 sq. ft.).

Construction of new retail centers remains modest and mainlyconsist of small retail centers, freestanding properties, orresidential mixed-used projects. However, there are a fewlarger centers being developed. Due to complete later thisyear, a 116,950 sq.-ft. center remains under construction inthe San Gabriel Valley, while 200,000 sq. ft. in remains in theconstruction phase in West Los Angeles. Additionally, theShoppes at Westlake Village totaling 240,346 sq. ft. isunderway and portions are due to be completed next quarter.Two centers completed construction in Q2 2014, totaling308,737 sq. ft. This includes a portion of the Azalea ShoppingCenter in South Gate totaling 241,000 sq. ft. Additionally,Phase II of the Gateway Towne Center in Compton completedconstruction of approximately 68.000 sq. ft.

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3%

4%

5%

6%

7%

Q2 20

10Q3

2010

Q4 20

10Q1

2011

Q2 20

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2011

Q4 20

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2012

Q2 20

12Q3

2012

Q4 20

12Q1

2013

Q2 20

13Q3

2013

Q4 20

13Q1

2014

Q2 20

14

-1.0

-0.5

0.0

0.5

1.0

1.5

Q2 20

10

Q3 20

10

Q4 20

10

Q1 20

11

Q2 20

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11

Q4 20

11

Q1 20

12

Q2 20

12

Q3 20

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12

Q1 20

13

Q2 20

13

Q3 20

13

Net Absorption Rolling 4-Quarter Avg

0.0%

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7.0%

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Q2 20

10Q3

2010

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2011

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2012

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2012

Q4 20

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Q2 20

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Q2 20

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OVERALL… DIRECT…





© 2014 CBRE, Inc.

Figure 6: Overall Vacancy Rate (%)

Figure 7: Vacancy Rate by Center Type (%)

Figure 8: Net Absorption (Thousand SF)

Figure 9: Under Construction (Million SF)

Q2 2

014 G

reater Lo

s An

geles

Reta

il | MarketV

iew

3

In Q2 2014, the overall vacancy rate for Greater Los Angelesretail space decreased and now stands at 5.6%. This reflects adecline of 10 bps from the 5.7% vacancy rate recorded in theprevious quarter, and remains below the 6.2% level witnessedin Q2 2013. Vacancy is expected to continue on thisdownward trend, steadily declining over the next four quarters.

Representing the lowest vacancy rate in the region, the Mid-Wilshire submarket carries a vacancy rate of 2.7%. The SouthBay submarket tracks closely behind with an increased vacancyrate of 3.6%, while West Los Angeles has a vacancy rate of3.5%. The Southeast Los Angeles submarket reported a rate of4.1%, which is up from the previous quarter of 3.7%. Thevacancy level in the Tri-Cities submarket is slightly higher at7.3%, while Greater Downtown declined to 6.0%, and MidCities improved to 5.0%. The vacancy level for the Ventura andSanta Clarita Valley submarkets are similar at 5.8% and 8.4%,respectively, while the San Fernando Valley area has anincreased vacancy rate of 6.1%. The San Gabriel Valley posts arate above that level at 6.6%. At 7.8%, the Antelope Valleyexperienced a decline this quarter from the previous quarter'srate of 8.7%.

Keeping the momentum experienced in the previous quarter,Q2 2014 experienced overall sustained demand. The GreaterLos Angeles market recorded a total of 368,669 sq. ft. ofpositive net absorption. Activity among tenants is expected tocontinue and demand to outpace supply. In total, more half ofthe 12 submarkets experienced positive net absorption thisquarter. The bulk of the quarter’s positive absorption was seenin the West Los Angeles and Mid-Cities submarkets, whichtogether recorded a total of 289,060 sq. ft. of positive netabsorption. The San Gabriel Valley faired well this quarter witha total of 81,255 sq. ft. of positive net absorption. VenturaCounty posted near that level with 72,231 sq. ft. of positive netabsorption, while the Antelope Valley recorded 69,697 sq. ft.Mid-Wilshire and Greater Downtown experienced modest netabsorption with 8,260 sq. ft. and 5,228 sq. ft., respectively.Submarkets recording negative demand this quarter includeSan Fernando Valley(-17,316 sq. ft.), Santa Clarita Valley (-29,947 sq. ft.), South Bay (-9,736 sq. ft.), Southeast LosAngeles (-31,674 sq. ft.), and Tri Cities (-168,389 sq. ft.).

Construction of new retail centers remains modest and mainlyconsist of small retail centers, freestanding properties, orresidential mixed-used projects. However, there are a fewlarger centers being developed. Due to complete later thisyear, a 116,950 sq.-ft. center remains under construction inthe San Gabriel Valley, while 200,000 sq. ft. in remains in theconstruction phase in West Los Angeles. Additionally, theShoppes at Westlake Village totaling 240,346 sq. ft. isunderway and portions are due to be completed next quarter.Two centers completed construction in Q2 2014, totaling308,737 sq. ft. This includes a portion of the Azalea ShoppingCenter in South Gate totaling 241,000 sq. ft. Additionally,Phase II of the Gateway Towne Center in Compton completedconstruction of approximately 68.000 sq. ft.

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Q2 20

10Q3

2010

Q4 20

10Q1

2011

Q2 20

11Q3

2011

Q4 20

11Q1

2012

Q2 20

12Q3

2012

Q4 20

12Q1

2013

Q2 20

13Q3

2013

Q4 20

13Q1

2014

Q2 20

14

0%

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3%

4%

5%

6%

7%

Q2 20

10Q3

2010

Q4 20

10Q1

2011

Q2 20

11Q3

2011

Q4 20

11Q1

2012

Q2 20

12Q3

2012

Q4 20

12Q1

2013

Q2 20

13Q3

2013

Q4 20

13Q1

2014

Q2 20

14-1.0

-0.5

0.0

0.5

1.0

1.5

Q2 20

10

Q3 20

10

Q4 20

10

Q1 20

11

Q2 20

11

Q3 20

11

Q4 20

11

Q1 20

12

Q2 20

12

Q3 20

12

Q4 20

12

Q1 20

13

Q2 20

13

Q3 20

13

Net Absorption Rolling 4-Quarter Avg

0.0%

1.0%

2.0%

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4.0%

5.0%

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7.0%

QUAR

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Q2 20

10Q3

2010

Q4 20

10Q1

2011

Q2 20

11Q3

2011

Q4 20

11Q1

2012

Q2 20

12Q3

2012

Q4 20

12Q1

2013

Q2 20

13Q3

2013

Q4 20

13Q1

2014

Q2 20

14

OVERALL… DIRECT…





overall Vacancy rate (%)

under Construction (Million ksF)


CBRE | pagE 20

MarKet oVerVIeW


72,231 sq. ft. of positive net absorption, while the antelope Valley recorded 69,697 sq. ft. Mid-Wilshire and greater Downtown experienced modest net absorption with 8,260 sq. ft. and 5,228 sq. ft., respectively. Submarkets recording negative demand this quarter include San Fernando Valley(-17,316 sq. ft.), Santa Clarita Valley (-29,947 sq. ft.), South Bay (-9,736 sq. ft.), Southeast Los angeles (-31,674 sq. ft.), and Tri Cities (-168,389 sq. ft.).

Construction of new retail centers remains modest and mainly consist of small retail centers, freestanding properties, or residential mixed-used projects. However, there

are a few larger centers being developed. Due to complete later this year, a 116,950 sq.-ft. center remains under construction in the San gabriel Valley, while 200,000 sq. ft. in remains in the construction phase in West Los angeles. additionally, the Shoppes at Westlake Village totaling 240,346 sq. ft. is underway and portions are due to be completed next quarter. Two centers completed construction in Q2 2014, totaling 308,737 sq. ft. This includes a portion of the azalea Shopping Center in South gate totaling 241,000 sq. ft. additionally, phase II of the gateway Towne Center in Compton completed construction of approximately 68.000 sq. ft.

CBRE | pagE 21

MarKet oVerVIeW

Distr ict of Encino

The District of Encino is an affluent neighborhood located in the San Fernando Valley

region of Los angeles, California located to the southwest of the 101 Highway/405

Interstate exchange. Encino is situated in the southern region of the San Fernando

Valley on the north slope of the Santa Monica Mountains. It is flanked on the north

by Reseda and the Sepulveda Basin, on the east by Sherman Oaks, on the southeast by

Bel-air, on the south by Brentwood and on the west by Tarzana.

There are approximately 41,000 residents within the 9.5 square miles (3,030/sq mi).

The average age is 43 years old, which is lower than the state and national average.

Encino is almost equal parts male and female. The average household income

is $98,000, compared to the overall California average of $57,000. The average

household size is smaller than the state average. The percentage of residents possessing

at least a bachelor’s degree is 25% higher than the state and national average.

There are approximately 3,800 businesses employing about 27,000 people in the area.

almost 20% of the jobs in Encino are management positions. The local economy

provides jobs primarily in health care (including one of two Encino-Tarzana Regional

Medical Center hospitals), social services, and professional services (accounting and

financial services, real estate, and legal) sectors. Less than 10% of the residents live

below the poverty level. The average housing price is well above the state and nation

level at $930,000. almost 60% of households have dual income. 63% of K-12 students

attend private school. Encino has three public and eight private schools, including two

private high schools.

CBRE | pagE 22

MarKet oVerVIeW

City of Los Angeles

The City of Los angeles, or Los angeles, is the most populous city in the U.S. state of

California and the second-most populous in the United States, after New York City,

with a population 3,792,621. It has a land area of 469 square miles. Los angeles was

incorporated as a municipality on april 4, 1850, five months before California achieved

statehood.

The city is the focal point of the larger Los angeles–Long Beach–Santa ana

Metropolitan Statistical area. The greater Los angeles area region contains 13 million

people, and over 18 million people in the combined statistical area. The entire Los

angeles area itself has been recognized as the most diverse city in the nation.

The City of Los angeles is located in Los angeles County and is bordered as follows:

east: San gabriel Valley, pomona Valley

West: Beach Cities

south: South Bay, palos Verdes peninsula, South Los angeles, gateway Cities,

North Orange County, South Orange County

North: San Fernando Valley, portions of the antelope Valley and Santa Clarita

Valley

Central: Downtown Los angeles, Mid-Wilshire

Nicknamed the City of angels, Los angeles is a global city with strengths in business,

international trade, entertainment, culture, media, fashion, science, sports, technology,

education, medicine and research. It has been ranked sixth in the global Cities

Index and ninth on the global Economic power Index. The Los angeles combined

statistical area (CSa) has a gross metropolitan product (gMp) of $831 billion (as of

2008), making it the third-largest in the world, after the greater Tokyo and New York

metropolitan areas. If the greater Los angeles CSa were counted as a country it would

have the 15th largest economy in the world in terms of nominal gDp.

CBRE | pagE 23

MarKet oVerVIeW

Metropol i tan Los Angeles

The economy of the Los angeles metropolitan area is famously and heavily based on the

entertainment industry, with a particular focus on television, motion pictures, interactive

games, and recorded music. The Hollywood district of Los angeles and its surrounding areas

are known as the “movie capital of the world”. There is an abundance of tourist attractions in

the area. Consequently, the metropolitan L.a. is one of the most visited areas in the world.

The Los angeles metropolitan area is home to the headquarters of several well-known media

companies including: the Los angeles Times, Fox Broadcasting Company, Universal Studios,

and The Walt Disney Company. The City of Los angeles is home to five Fortune 500

companies: energy company Occidental petroleum, healthcare provider Health Net, metals

distributor Reliance Steel & aluminum, engineering firm aECOM, and real estate group

CBRE.

Other significant sectors include shipping/international trade – particularly at the adjacent

port of Los angeles and port of Long Beach, together comprising the United States’ busiest

seaport – as well as aerospace, technology, petroleum, fashion and apparel, and tourism. The

port of Los angeles and port of Long Beach together comprise the fifth busiest port in the

world being the center of imports and exports for trade on the west pacific Coast as well as

being one of the most significant ports of the western hemisphere.

The port of Long Beach is the 2nd busiest container port in the United States and it adjoins

the separate port of Los angeles. acting as a major gateway for U.S.-asian trade, the port

occupies 3,200 acres (13 km2) of land with 25 miles (40 km) of waterfront in the city of Long

Beach, California. The seaport boasts approximately $100 billion in trade and provides more

than 316,000 jobs in Southern California. The port of Long Beach import and export more

than $100 billion worth of goods every year.

CBRE | pagE 24

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. aF9723_08/2013

Confidential i ty Agreement

aNdreW [email protected] Lic#: SA35679000

MoLLY [email protected] AZ Lic#: AZ AZ Lic#: SA653093000

eXCLusIVeLY MarKeted BY:

sCott [email protected] Lic#: 0104080

LoCaL MarKet CoNtaCt: *

*This listing will be sold through the California licensed real estate agent/broker above. All communication about the listing should be directed to Scott Riddles.

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