red lobster 1460 east shaw avenue fresno, california 93710 e shaw ave fresno ca-omp.pdf · 1460...

R e d L o b s t e r1 4 6 0 E a s t S h a w A v e n u eF r e s n o , C a l i f o r n i a 9 3 7 1 0

OFFERING MEMORANDUM

Representative Photo

Marcus & Millichap hereby advises all prospectivepurchasers of Net Leased property as follows:

The information contained in this Marketing Brochure hasbeen obtained from sources we believe to be reliable.However, Marcus & Millichap has not and will not verifyany of this information, nor has Marcus & Millichapconducted any investigation regarding these matters.Marcus & Millichap makes no guarantee, warranty orrepresentation whatsoever about the accuracy orcompleteness of any information provided.

As the Buyer of a net leased property, it is the Buyer’sresponsibility to independently confirm the accuracy andcompleteness of all material information beforecompleting any purchase. This Marketing Brochure is nota substitute for your thorough due diligence investigationof this investment opportunity. Marcus & Millichapexpressly denies any obligation to conduct a due diligenceexamination of this Property for Buyer.

Any projections, opinions, assumptions or estimates usedin this Marketing Brochure are for example only and donot represent the current or future performance of thisproperty. The value of a net leased property to youdepends on factors that should be evaluated by you andyour tax, financial and legal advisors.

Buyer and Buyer’s tax, financial, legal, and constructionadvisors should conduct a careful, independentinvestigation of any net leased property to determine toyour satisfaction with the suitability of the property foryour needs.

Like all real estate investments, this investment carriessignificant risks. Buyer and Buyer’s legal and financialadvisors must request and carefully review all legal andfinancial documents related to the property and tenant.While the tenant’s past performance at this or otherlocations is an important consideration, it is not aguarantee of future success. Similarly, the lease rate for

some properties, including newly-constructed facilities ornewly-acquired locations, may be set based on a tenant’sprojected sales with little or no record of actualperformance, or comparable rents for the area. Returnsare not guaranteed; the tenant and any guarantors mayfail to pay the lease rent or property taxes, or may fail tocomply with other material terms of the lease; cash flowmay be interrupted in part or in whole due to market,economic, environmental or other conditions. Regardlessof tenant history and lease guarantees, Buyer isresponsible for conducting his/her own investigation of allmatters affecting the intrinsic value of the property andthe value of any long-term lease, including the likelihoodof locating a replacement tenant if the current tenantshould default or abandon the property, and the leaseterms that Buyer may be able to negotiate with apotential replacement tenant considering the location ofthe property, and Buyer’s legal ability to make alternateuse of the property.

By accepting this Marketing Brochure you agree to releaseMarcus & Millichap Real Estate Investment Services andhold it harmless from any kind of claim, cost, expense, orliability arising out of your investigation and/or purchaseof this net leased property.

CONFIDENTIALITY AND DISCLAIMER

The information contained in the following MarketingBrochure is proprietary and strictly confidential. It isintended to be reviewed only by the party receiving itfrom Marcus & Millichap and should not be made availableto any other person or entity without the written consentof Marcus & Millichap. This Marketing Brochure has beenprepared to provide summary, unverified information toprospective purchasers, and to establish only a preliminarylevel of interest in the subject property. The informationcontained herein is not a substitute for a thorough duediligence investigation. Marcus & Millichap has not madeany investigation, and makes no warranty orrepresentation, with respect to the income or expenses for

the subject property, the future projected financialperformance of the property, the size and square footageof the property and improvements, the presence orabsence of contaminating substances, PCB’s or asbestos,the compliance with State and Federal regulations, thephysical condition of the improvements thereon, or thefinancial condition or business prospects of any tenant, orany tenant’s plans or intentions to continue its occupancyof the subject property. The information contained in thisMarketing Brochure has been obtained from sources webelieve to be reliable; however, Marcus & Millichap hasnot verified, and will not verify, any of the informationcontained herein, nor has Marcus & Millichap conductedany investigation regarding these matters and makes nowarranty or representation whatsoever regarding theaccuracy or completeness of the information provided. Allpotential buyers must take appropriate measures to verifyall of the information set forth herein.

NON-ENDORSEMENT NOTICE

Marcus & Millichap Real Estate Investment Services, Inc.(“M&M”) is not affiliated with, sponsored by, or endorsedby any commercial tenant or lessee identified in thismarketing package. The presence of any corporation’slogo or name is not intended to indicate or implyaffiliation with, or sponsorship or endorsement by, saidcorporation of M&M, its affiliates or subsidiaries, or anyagent, product, service, or commercial listing of M&M,and is solely included for the purpose of providing tenantlessee information about this listing to prospectivecustomers.

ALL PROPERTY SHOWINGS ARE BY APPOINTMENTONLY. PLEASE CONSULT YOUR MARCUS & MILLICHAPAGENT FOR MORE DETAILS.

CONFIDENTIALITY AND DISCLAIMER

Table of Contents

I. Investment Overview II. Pricing and Financial Analysis III. Property Overview IV. DemographicsInvestment Overview Financial Overview Location Overview Demographic ReportTenant Overview Aerial Photo

Property PhotoSurrounding Property PhotosLocal Map Regional Map

TABLE OF CONTENTS

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify theinformation and bears all risk for any inaccuracies. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap Real Estate InvestmentServices is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2013 Marcus & Millichap 4

Property Name Red Lobster

Location 1460 East Shaw AvenueFresno, CA 93710

Price $7,410,014

CAP Rate 5.25%

NOI $389,026*

Price Per SF $875

Building Size 8,467 SF

Lot Size 1.48 Acres

Date of Remodel 7/27/2012

*Priced off of 2016 Rent Increase

Executive Summary | Investment Highlights

Investment Overview

Marcus & Millichap is pleased to present the exclusive listing for RedLobster located at 1460 East Shaw Avenue in Fresno, California. Theproperty is roughly 8,467 square feet and is situated on approximately1.48 acres of land.

This Red Lobster is subject to a 25-year triple-net (NNN) lease, withroughly 23 years remaining on the lease. Current annual rent is$389,026. The rent is scheduled to increase by two percent annually,including through the four, five year tenant renewal options.

Red Lobster is the largest seafood restaurant concept in the world andis an iconic full service brand with broad demographic appeal andsignificant advertising budget. Red Lobster is led by an experiencedmanagement team with a history of success leading the brand(average27+ years experience across executive team). The company generates$2.5 billion in revenue and is the 5th largest causal dining concept inNorth America. Red Lobster was recently acquired by Golden GateCapital.

Long-Term Triple-Net Lease | Above Market Lease TermThis Red Lobster is subject to a brand new 25-year absolute triple-net(NNN) lease, with 23 years remaining.

Corporate Guarantor | 705 Locations in the US & CanadaThe lease is subject to a corporate guarantee, adding additional securitythroughout the term of the lease, through 705 corporate locations.

Attractive Rental Increases & Renewal OptionsThe rent will increase by two percent annually, including through the four,five year tenant renewal options, providing investors with a stronginflation hedge.

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Executive Summary

Tenant Overview

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify theinformation and bears all risk for any inaccuracies. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap Real Estate InvestmentServices is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2013 Marcus & Millichap

• Red Lobster is the largest seafood restaurant concept in theworld and is an iconic full service brand with broaddemographic appeal and a significant advertising budget (2nd

largest in casual dining).

• The Company was founded in 1968 and currently operates705 restaurants throughout the United States and Canadaand has 43 franchised restaurants in international markets.

• Red Lobster is led by an experienced management team witha history of success leading the brand (average 27+ yearsexperience across executive team).

• The company generates $2.5B in revenue and is the 5th

largest casual dining concept in North America.

• On July 28th, 2014, Golden Gate Capital (“GGC”) acquiredRed Lobster from Darden Restaurants.

• Red Lobster is now an independently owned company,completely separate from Darden Restaurants.

• Red Lobster is well capitalized with >$200M net worth and>$200M of liquidity.

• Golden Gate Capital has a long, successful track record andsignificant experience with multi-unit restaurant and retailbusinesses.

The Transaction

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Executive Summary

Tenant Overview


OUR HISTORY

FRESH IS IN OUR FOODEach day, you’ll find an updated selection of fresh fish onour Today’s Fresh Fish menu, not to mention live Mainelobster, freshly baked Cheddar Bay Biscuits™, crisp saladsand a host of fresh seafood recipes waiting to beexplored.

FRESH IS IN OUR KNOWLEDGENo one knows seafood better than we do. As globalseafood buyers, we have employees stationedthroughout the world who inspect our seafood themoment it comes out of the water. They ensure it meetsstandards that are second to none. Then, the renownedchefs at our culinary center deliver the fresh expertisethat turns it all into something truly special.

FRESH IS IN OUR DEDICATIONWe hold ourselves to the highest standards for service,quality and a welcoming atmosphere. And we’re focusedon doing what’s right – for our employees, in ourcommunities and in the world.

FRESH IS IN OUR COMMITMENTYou deserve the freshest food and thinking. So every timeyou visit one of our seafood restaurants or our onlineseafood store, you’ll find an uncommon commitment todeliver the best of the sea with fresh energy and freshideas that we hope will make you want to come backagain and again.

We invite you to come in and experience our commitment to quality for yourself. Whether it’s choosing your favorite fresh fish from our “Today’s

Fresh Fish” menu, or selecting your favorite seafood to be prepared over our wood-fired grill, Red Lobster is the place you can enjoy fresh, delicious

seafood now and for generations.

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Executive Summary

Tenant Overview


Red Lobster Timeline 1968

Bill Darden opens the first Red Lobster in Lakeland, Florida1970

General Mills acquires Red Lobster and rapidly expands nationally 1983

Our 1st Canadian restaurant opens in Ontario

Out Lobsterfest® promotion begins, giving guests the best variety of lobster anywhere

1984

We introduce our famous and delicious Cheddar Bay Biscuits®

1988

1989

We operate 450 US and 55 Canadian restaurants

We introduce "Walt's Favorite Shrimp", named after one of our earliest employees

1996

2003

We celebrate our 35th anniversary of serving fresh, delicious seafood 2004

Endless Shrimp® is introduced, and becomes an annual guest-favorite promotion2006

"Today's Fresh Fish" gives guests a daily selection of national and local fresh fish favorites 2008

We introduce Wood-Fire Grills and Certified Grill Masters in every restaurant2013

We celebrate our 45th anniversary and operate more than 700 locations worldwide 2014

Acquisition by Golden Gate Capital (“GGC”)

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Executive Summary

Tenant Overview


• Red Lobster is the largest seafood restaurant concept in the world and the 5th largest casual dining concept in the United States with over $2.5 billion in annual sales and 705 restaurants.

• The Company is the category killer in the seafood casual dining space, holding almost 50% market share.

- Largest share of any restaurant concept in any segment.

• 5th largest overall casual dining concept in the US.

Strong Market Position Significant Scale With Broad Geographic Reach

~50% Share in Seafood Casual Dining 5th Largest Casual Dining Concept in the US

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Executive Summary

Tenant Overview


Before After

Iconic Brand With Unparalleled Customer Loyalty

Indispensability vs. Peers

• Red Lobster has strong consumer appeal and broad usage across multiple dining out occasions, including high-crave, healthier “good for you” and special meal occasions.

• The brand has a strong foundation of loyal guests, who visit 1-2 times per month and account for more than 50% of sales.

• Red Lobster is the clear leader in casual dining seafood, and the most indispensable brand among major casual dining concepts, further indicating strong consumer loyalty.

• Over $320 million invested in remodels covering >90% of restaurants over the past 7 years.

• $1.4 billion in overall capital expenditure investment over the past 10 years.

• New Bar Harbor format has strong appeal across customer base.

• 99% of restaurants are cash flow positive.

Indispensability (How difficult it would be for me to ‘give up’ ever going there again ) - % very difficult (10 out of 10) shown

Healthy and Recently Remodeled Restaurant Base

New Bar Harbor Format

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Executive Summary

Tenant Overview


Kim LopdrupCEO

(28 years in Restaurant Industry)

Salli SettaPresident


Bill LambertCFO


•Salli was named President of Red Lobster in July of 2013

•Prior to her promotion to President, Salli served as Red Lobster’s EVP of Marketing, before which she held numerous roles in Marketing and Culinary at Olive Garden during its turnaround, including VP Marketing and SVP Culinary and Beverage

•24 years of experience in restaurant marketing, advertising and menu development; named “Menu Strategist of the Year” in 2003; recipient of three Menu Masters’ Awards and a Silver Effie for her work on the “Hospitaliano” ad campaign

•BA, University of Central Florida; MBA, Florida Institute of Technology

•Bill served as CFO of Red Lobster from FY2006 to FY2010

•Prior to his return to Red Lobster, Bill served as CFO of LongHorn Steakhouse

•Prior to joining Darden and Red Lobster, Bill spent 21 years with Federated Department Stores in various roles including CFO of Macy’s Central

•BS, Duke University; MBA, University of Michigan

Chip WadeEVP

Operations(27 years in Restaurant

Industry)

•Darryl “Chip” Wade is EVP of Operations at Red Lobster

•Previously, Chip held positions in Enterprise Operations at Darden and as SVP of its Smokey Bones brand

•Outside of Darden, Chip previously served as COO of Legal Sea Foods and in various operations management roles at TGI Friday’s

•BA, Widener University; MBA, University of Texas

•Kim served as President of Red Lobster from FY2005 to FY2011, a period of consistent, above-market growth for the brand

•Prior to his return to Red Lobster, Kim served as President of Specialty Restaurant Group and New Business

•Before joining Darden, Kim served as EVP and COO of North America for Burger King, and at Dunkin’ Brands as VP of Marketing and CEO of its international division

•BBA, College of William & Mary; MBA with distinction, Harvard Business School

Red Lobster is led by an experienced management team with prior success leading the brand.

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Executive Summary

Private Equity Sponsor


Select Restaurant and Retail Investments

• Golden Gate Capital (GGC) is a San Francisco-based Private Equity firm with over $12 billion ofcapital under management.

• GGC has been one of the most active acquirers of multi-unit restaurant and retail companies.- Over the past 10 years, GGC has invested in restaurant and retail companies with annual revenues in excess of $15

billion.

• GGC’s investors include leading educational endowments, non-profit foundations, andselected entrepreneurs and managers.

• Investment approach is to partner with strong management teams to acquire strong,established brands with an opportunity to grow earnings through better execution,productivity improvements and unit growth.

• Excellent track record with acquiring and growing divisions of corporations.

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Annualized Operating Data

Financial Analysis

Financial Offering Summary


Property Name Red Lobster

Property Type Net Leased Restaurant

Ownership Private

Private Equity Sponsor

Tenant Red Lobster Hospitality, LLC

Guarantor Red Lobster Intermediate Holdings, LLC

Lease Term 25 Years

Lease Commencement 7/28/2014

Lease Expiration 7/31/2039

Lease Term Remaining 23 Years

Lease Type Triple-Net (NNN)

Roof & Structure Tenant Responsible

Options to Renew Four, Five Year Option Periods

Rental Increases Two Percent Annually

Rent Increases Annual Rent Monthly RentYear 3 $318,917 $26,576.42Year 4 $325,295 $27,107.95Year 5 $331,801 $27,650.10Year 6 $338,437 $28,203.11Year 7 $345,206 $28,767.17Year 8 $352,110 $29,342.51Year 9 $359,152 $29,929.36

Year 10 $366,335 $30,527.95Year 11 $373,662 $31,138.51Year 12 $381,135 $31,761.28Year 13 $388,758 $32,396.50Year 14 $396,533 $33,044.43Year 15 $404,464 $33,705.32Year 16 $412,553 $34,379.43Year 17 $420,804 $35,067.02Year 18 $429,220 $35,768.36Year 19 $437,805 $36,483.72Year 20 $446,561 $37,213.40Year 21 $455,492 $37,957.67Year 22 $464,602 $38,716.82Year 23 $473,894 $39,491.16Year 24 $483,372 $40,280.98Year 25 $493,039 $41,086.60

Annual Rent $318,917*CAP Rate 5.25%

Price $7,410,014*Priced off of 2016 Rent Increase

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LOCATION OVERVIEW

This Red Lobster is located on 1460 East Shaw Avenue in Fresno,California. Fresno is the fifth largest city in the state of California withover 520,000 in population. Located in central California, Fresno islocated three hours South of San Francisco and three hours North ofLos Angeles.

There are approximately 153,000 people within a three-mile radius ofthis property and more than 402,000 within a five-mile radius. Theproperty is situated off of East Shaw Avenue, with an average dailytraffic count of over 43,000 vehicles.

The subject property is well-positioned in a strong retail corridorbenefitting from proximity to Fresno State University, with over 23,000students. The University stadium is located less than half a mile fromthis Red Lobster, making it a great option for food near by. In additionto Fresno State, there are many major national and local retailersdriving traffic to the subject property. Food Brand located in theimmediate area include Flemings' Steakhouse, The CheesecakeFactory, BJ’s Brew house, Wingstop, Starbucks, Denny's and Carl’s Jr..Additional nationally recognized retailers can be found at the FashionFair Mall, Anchored by JC Penny, Forever 21 and Macys.

Fresno – Yosemite International Airport, located a mere 5 miles fromthe subject property, services over 1.3 million passengers annually,servicing not only the Fresno area but also traffic to the nearbyYosemite National Park with over 1,100 Square miles of wildlifesupported by over 3.7 million visitors each year.

Strong Traffic Counts: East Shaw Avenue has an average dailytraffic count of over 43,000

Fresno State University, with over 23,000 Students is less than Halfa mile

Retailers in proximity: Wingstop, Starbucks, Carl's Jr., Chic- Fil-A,Flemings' and Cheesecake Factory

Located in Central California, Three hours South of San Franciscoand three hours North of Los Angeles

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Location OverviewProperty Overview

Location Highlights | Property Description


14

Aerial Photo | Surrounding Area


Property Overview

15

Property Overview

Property Photo


16

Property Overview

Surrounding Area Photos


17

Property Overview

Local Map


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Property Overview

Regional Map


PopulationIn 2014, the population in your selected geography is 401,573. The population haschanged by 7.88% since 2000. It is estimated that the population in your area will be410,816 five years from now, which represents a change of 2.30% from the currentyear. The current population is 48.57% male and 51.42% female. The median age of thepopulation in your area is 31.5, compare this to the Entire US average which is 37.3. Thepopulation density in your area is 5,109.11 people per square mile.

IncomeIn 2014, the median household income for your selected geography is $41,303,compare this to the Entire US average which is currently $51,972. The medianhousehold income for your area has changed by 20.78% since 2000. It is estimated thatthe median household income in your area will be $48,671 five years from now, whichrepresents a change of 17.83% from the current year.

The current year per capita income in your area is $21,879, compare this to the EntireUS average, which is $28,599. The current year average household income in your areais $61,785, compare this to the Entire US average which is $74,533.

EmploymentIn 2014, there are 140,424 employees in your selected area, this is also known as thedaytime population. The 2000 Census revealed that 61.41% of employees are employedin white-collar occupations in this geography, and 38.59% are employed in blue-collaroccupations. In 2014, unemployment in this area is 12.78%. In 2000, the average timetraveled to work was 21.4 minutes.

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Demographics

Demographic Summary Report


1-Mile 3-Mile 5-Mile

2010 21,329 149,156 393,452

2014 21,728 152,753 401,574

2019 21,821 154,007 410,816

POPULATION

1-Mile 3-Mile 5-Mile

Average $45,328 $53,351 $61,785

Median $31,201 $37,701 $41,304

2014 HOUSEHOLD INCOMES

Employer # of Employees

Community Medical Centers 6,000

Kaiser Permanente 2,603

Pelco 2,150

TOP EMPLOYERS IN FRESNO

Offering Memorandum | 1460 East Shaw Avenue, Fresno, CA 93710

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