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BLYTHE VILLAGE CENTER Blythe, CA

OFFERING MEMORANDUM

N O N - E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E

Confidentiality and Disclaimer The information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap and should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB's or asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant's plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable; however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of the information set forth herein. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. Â© 2017 Marcus & Millichap. All rights reserved. Non-Endorsement Notice Marcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation's logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers. ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY. PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS. BLYTHE VILLAGE CENTER Blythe, CA ACT ID Y0080210

TABLE OF CONTENTS

SECTION

INVESTMENT OVERVIEW 01 Offering Summary Regional Map Local Map

Aerial Photo

Site Plan

FINANCIAL ANALYSIS 02 Tenant Summary

Lease Expiration Chart

Operating Statement

Notes

Pricing Detail

Acquisition Financing

MARKET COMPARABLES 03 Comparable Shopping Centers

MARKET OVERVIEW 04 Market Analysis

Demographic Analysis

BLYTHE VILLAGE CENTER


4

INVESTMENT

OVERVIEW


#

EXECUTIVE SUMMARY

OFFERING SUMMARY

MAJOR EMPLOYERS

EMPLOYER # OF EMPLOYEES

Aztec Harvesting 800

Palo Verde Hospital 315

Sheriffs Dept 170

Palo Verde High School 150

Army Jrotc 121

Assoc Ready Mixed Concrete 120

Albertsons 954 100

Fisher Ranch LLC 99

Kmart 88

Palo Verde Irrigation District 85

Palo Verde College 80

Halums Markets Inc 75

DEMOGRAPHICS

1-Miles 3-Miles 5-Miles

2016 Estimate Pop 3,778 13,524 15,231

2010 Census Pop 3,559 12,825 14,282

2016 Estimate HH 1,255 4,521 5,345

2010 Census HH 1,179 4,267 4,957

Median HH Income $29,273 $40,568 $40,273

Per Capita Income $16,165 $19,602 $20,491

Average HH Income $46,841 $57,849 $57,713

5

VITAL DATA

YEAR 1 YEAR 2 Price $6,950,000 CAP Rate 8.48% 8.48%

Down Payment 100% / $6,950,000 Net Operating Income $589,232 $589,232

Loan Type All Cash Net Cash Flow After Debt Service 8.48% / $589,232 8.48% / $589,332

Gross Leasable Area (GLA) 91,175 SF Total Return 8.48% / $589,232 8.48% / $589,232 Price/SF $76.23 Current Occupancy 73.72% Year Built / Renovated 1993 Lot Size 14.38 acre(s) MAJOR TENANTS

TENANT GLA LEASE EXPIRATION LEASE TYPE

O'Reilly Auto Parts 6,000 4/30/2020 NNN

Riverside County DPSS 16,100 6/30/2017 Gross

Riverside County MH 9,660 11/30/2021 Gross

U.S. Dept of V.A. 3,750 4/30/2021 Gross

Riverside County HS 1,845 6/20/2019 Gross


#

OFFERING SUMMARY

One block North from Interstate 10

Limited big box retail shopping centers

Captured residential customer base & incidental commuter traffic

Opportunity to increase NOI through rent increases & long term leases

INVESTMENT HIGHLIGHTS

Marcus & Millichap is pleased to present a prime opportunity for growth along Blythe's main thoroughfare. Blythe Village Center is the first point of interest upon entrance to the City of Blythe. Close proximity to Interstate 10 and nearby national quick service restaurants provides an excellent option for a service oriented center. Strong existing tenancy to include O’Reilly’s Auto Parts, Department of Veteran Affairs, Social Security Administration, Department of Public Social Services, and Riverside County Health Systems.

INVESTMENT OVERVIEW

6


#

PROPERTY SUMMARY

OFFERING SUMMARY

THE OFFERING

Property Blythe Village Center

Price $6,950,000

Property Address 1277 - 1295, 1315, 1335-1455 W Hobsonway, Blythe, CA

7

REGIONAL MAP


8

LOCAL MAP


9

AERIAL PHOTO


10

BHaulley

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BHaulley

Text Box

government office tenants, rents of $X annually

BHaulley

Text Box

O'Reilly's Auto Parts, rent of $X annually

BHaulley

Text Box

45,000 SF inline retail, rents of $X annually

BHaulley

Text Box

1.65 acre pad, suitable for c-store, motel

BHaulley

Text Box


11

FINANCIAL

ANALYSIS

FINANCIAL ANALYSIS


12

TENANT SUMMARY

12

TENANT SUMMARY FINANCIAL ANALYSIS


13

FINANCIAL ANALYSIS


OPERATING STATEMENT

14

FINANCIAL ANALYSIS


NOTES (Operating Statement and Tenant Summary)

15

FINANCIAL ANALYSIS


PRICING DETAIL

16

TENANT SUMMARY

#

Fiscal Year Ended December 31, 2016

O'Reilly Automotive, Inc.

CREDIT RATING: B1 www.fdreports.com | www.creditntell.com | December 31, 2016

O'Reilly Automotive provides American drivers with a lot of good back up to support their

voracious driving habits. The fast-growing company sells automotive aftermarket parts (both new

and remanufactured), maintenance supplies, professional service equipment, tools, and

accessories through some 4,570 stores across some 44 US states and online. Many O'Reilly

stores also offer customers a range of services, including oil and battery recycling, battery testing,

paint mixing, and tool rental. The family founded and operated company wheels and deals with

automotive professionals, as well as do-it-yourself customers.

PRICING AND VALUATION MATRIX

PROPERTY NAME BLYTHE VILLAGE CENTER

PRICING AND VALUATION MATRIX

PROPERTY NAME


17

TENANT SUMMARY

General Information

Address 233 South Patterson , Springfield, Missouri, 65802, United States

Phone 417-862-6708 Website www.oreillyauto.com

Store Base Store Count 4,829 TTM Sales $8,593,096,000

Key Personnel President & Chief Executive Officer Greg L. Henslee Executive Vice President & Chief Financial Officer Thomas McFall

Financial Markets Stock Ticker ORLY Current Price $254.91 as of 4/10/17 52 Week High/Low $292.84 / $248.02

12

TENANT PROFILES


18

Blythe Ranch market

Local full-service grocer to include meat, seafood, and produce department.

General Information

Tenant Name Blythe Ranch market

Rentable Square Feet 15,000 SF

No. of Locations 1

12

TENANT PROFILE


19

Department of Veteran Affairs - Outpatient Clinic

General Information

Tenant Name Department of Veteran Affairs - Outpatient Clinic

Website https://www.lomalinda.va.gov/locations/Blythe.asp


No. of Locations 1700

The U.S. Department of Veterans Affairs operates the nation's largest integrated

health care system, with more than 1,700 hospitals, clinics, community living centers,

domiciliaries, readjustment counseling centers, and other facilities.

Riverside County Department of Public Social Services

General Information

Tenant Name Riverside County Department of Public Social Services

Website http://dpss.co.riverside.ca.us/


The Riverside County Department of Public Social Services provides temporary

financial assistance and employment services for families and individual. In addition

to programs and services to protect children and adults from abuse and/or neglect.

Low income individuals and families are also granted access to health coverage.

12

TENANT PROFILE


20

Riverside County Mental Health

General Information

Tenant Name Riverside County Mental Health

Website http://www.rcdmh.org/


This program provides treatment and support services to transition age youth, adults

and older adults who have a mental illness and children who are seriously

emotionally disturbed. Services include outpatient services, medication, peer

recovery services, education, housing, residential care, as well as subacute and

acute care. Peer-to-peer support services are a component of the program and are

provided in clinics and by contract providers. Services to individuals who are

homeless and mentally

Riverside County Health Services

General Information

Tenant Name Riverside County Health Services

Website http://www.rivcoph.org/


Riverside County Health Systems (WIC) helps pregnant women, new mothers and

young children eat well, stay healthy and be active. The program is funded by the

U.S. Department of Agriculture (USDA).

12

TENANT PROFILE


21

U.S. Social Security Administration

General Information

Tenant Name U.S. Social Security Administration

Website https://www.ssa.gov/


The Social Security Administration is committed to helping maintain the basic well-

being and protection of the people we serve. We pay benefits to over 60 million

people including retirees, children, widows, and widowers. From birth, to marriage,

and into retirement, we are there to provide support throughout life's journey.

ACQUISITION FINANCING


22

MARCUS & MILLICHAP CAPITAL CORPORATION CAPABILITIES MMCC—our fully integrated, dedicated financing arm—is committed to providing superior capital market expertise, precisely managed execution, and unparalleled access to capital sources providing the most competitive rates and terms.

We leverage our prominent capital market relationships with commercial banks, life insurance companies, CMBS, private and public debt/equity funds, Fannie Mae, Freddie Mac and HUD to provide our clients with the greatest range of financing options.

Our dedicated, knowledgeable experts understand the challenges of financing and work tirelessly to resolve all potential issues to the benefit of our clients.

National platform operating

within the firm’s brokerage offices

$5.1 billion total national volume

in 2016

Access to more capital sources than any other

firm in the industry

Optimum financing solutions to enhance value

Our ability to enhance buyer pool by expanding finance options

Our ability to enhance seller control

• Through buyer qualification support

• Our ability to manage buyers finance expectations

• Ability to monitor and manage buyer/lender progress, insuring timely, predictable closings

• By relying on a world class set of debt/equity sources and presenting a tightly underwritten credit file

WHY MMCC?

Closed 1,651 debt and equity financings in 2016


23

MARKET

COMPARABLES

8


SALES COMPARABLES MAP

24


Needles Towne Center

Calexico Commons

Plaza 75

C-A-L Ranch

Camelback Plaza

SALES COMPARABLES

1

2

3

4

5

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1

rentpropertyaddress1

rentpropertyname1


rentpropertyname1


25

SALES COMPARABLES

Annual Per SF Income $865,644 $9.49

Expenses $311,903 $3.42

NOI $589,232 $6.46

Occupancy 73.72%

BLYTHE VILLAGE CENTER 1277 - 1295, 1315, 1335-1455 W HOBSOWAY, BLYTHE,

CA, 92225

Tenants Lease Type Asking Price: $6,950,000 O'Reilly Auto Parts NNN

Price/SF: $76.23 Riverside County DPSS Gross

CAP Rate: 8,48% Riverside County MH Gross

Year Built: 1993 U.S. Dept of V.A. Gross

Vacant Gross

Riverside County HS Gross

1

NEEDLES TOWNE CENTER 1004 E BROADWAY ST, NEEDLES, CA, 92363

Close Of Escrow: 4/11/2016

Days On Market: 545

Sales Price: $6,700,000

Price/SF: $80.45

CAP Rate: 7.90%

Year Built: 1988

2

CALEXICO COMMONS 2300 N IMPERIAL AVE, CALEXICO, CA, 92231


Days On Market: 1078


Price/SF: $53.65

Year Built: 1980

PROPERTY NAME

MARKETING TEAM


SALES COMPARABLES

rentpropertyname1


rentpropertyname1


rentpropertyname1


26

SALES COMPARABLES

3

PLAZA 75 7307 W INDIAN SCHOOL RD, PHOENIX, AZ, 85033



Price/SF: $35.55

Year Built: 1975

4

C-A-L RANCH 529 W 32ND ST, YUMA, AZ, 85364


Days On Market: 224


Price/SF: $41.96

Year Built: 1982

5

CAMELBACK PLAZA 4240 W CAMELBACK RD, PHOENIX, AZ, 85019


Days On Market: 76


Price/SF: $35.09

Year Built: 1978

8


COMPARABLE SHOPPING CENTERS


Sears Center

Blythe Town Center

Strip Center

Calexico Retail Center

Coachella Shopping Center

Coachella Plaza

4

7

8

9

11

20

12

14

15

16

17

13

18

10

4

1

2

3

5

6

27

PROPERTY NAME

MARKETING TEAM




1277 - 1295, 1315, 1335-1455 W HOBSOWAY, BLYTHE, CA, 92225





28

MAJOR TENANTS

O'Reilly Auto Parts

Riverside County DPSS

Riverside County MH

U.S. Dept of V.A.

Total GLA Available SF Asking Rent/SF

91,175 SF 33,520 SF $9

YEAR BUILT: 1993

BLYTHE VILLAGE CENTER 1277 - 1295, 1315, 1335-1455 W HOBSOWAY, BLYTHE,

CA, 92225

OCCUPANCY: 48% | YEAR BUILT: 1980


64,500 SF 33,450 SF $1

SEARS CENTER 601 E HOBSONWAY, BLYTHE, CA, 92225

MAJOR TENANTS

Sears

1

NOTES $0.65 - $1.00/NNN



86,337 SF 20,000 SF $1

BLYTHE TOWN CENTER 812 E HOBSONWAY, BLYTHE, CA, 92225

MAJOR TENANTS

Albertsons

Rite Aid

AutoZone

Starbucks

2

PROPERTY NAME

MARKETING TEAM



STRIP CENTER

600 E HOBSONWAY, BLYTHE, CA, 92225

STRIP CENTER


STRIP CENTER


29

OCCUPANCY: 17%


7,620 SF 6,360 SF $1

STRIP CENTER 600 E HOBSONWAY, BLYTHE, CA, 92225

MAJOR TENANTS

Superior Medical Clinic

3

NOTES $0.60 - $1.00/NNN



15,890 SF 3,500 SF $2

CALEXICO RETAIL CENTER 2536 ROCKWOOD AVE, CALEXICO, CA, 92231

MAJOR TENANTS

WalMart

Chase

Sprint

Fred Loya Insurance

4



125,835 SF 23,200 SF $1

COACHELLA SHOPPING CENTER 49617 HARRISON ST, COACHELLA, CA, 92236

MAJOR TENANTS

Coachella ranch market

U-Haul

DolEx

5

NOTES $1.15/NNN


30

MARKET

OVERVIEW

MARKET OVERVIEW

Riverside-San Bernardino Counties

Market Highlights

Strategic location

Near LAX and Ontario International airports and ports in Long Beach and Los Angeles, Riverside-San Bernardino has vast air, rail and interstate systems.

Dominant industrial market

The metro is one of the nation’s leading industrial markets in terms of sales, construction and absorption.

Strong demographic trends

Jobs, colleges, new home construction and more affordable housing will draw 372,600 new residents to the Inland Empire by 2020.

Growing distribution market

Many Fortune 500 companies have massive distribution centers in the area. Available land allows for further development.

RIVERSIDE-SAN BERNARDINO

The Riverside-San Bernardino metro, also referred to as the Inland Empire, is a 28,000-square-mile region in Southern California composed of San Bernardino and Riverside counties. Valleys in the southwestern portion of the region, adjacent to Los Angeles, Orange County and San Diego County, are the most populous in the metro. These areas abut the San Bernardino and San Jacinto mountains, behind which lies the high desert area of Victorville/Barstow to the north and the low-desert Coachella, home of Palm Springs, to the east.

Geography


31

MARKET OVERVIEW

Riverside-San Bernardino features three interstate freeways, I-10, I-215 and I-15, that form a triangle around one of the region’s core growth centers. Additionally, the completion of the 210 freeway extension made commuting to and from Rialto and San Bernardino considerably easier. The Riverside-San Bernardino metro has two major airports: Ontario International and Palm Springs International. The region also has a cargo-dedicated facility, the Southern California Logistics Airport, located just north of Victorville in the High Desert. Two rail lines serve Riverside-San Bernardino, and the region boasts one of the largest and most modern intermodal facilities in the nation. Amtrak provides passenger rail service, and MetroLink connects the area to Orange County and Los Angeles. Local transit agencies run bus service throughout the area.

Infrastructure

The Riverside-San Bernardino Metro is: 60 miles from Los Angeles 100 miles from San Diego 113 miles from Tijuana 400 miles from San Francisco

Airports Ontario International Palm Springs International 33 smaller airports

Major Roadways Interstates 10, 15 and 215 Highways 60, 71, 91 and 210

Rail Freight – BNSF and Union Pacific Passenger – Amtrak Commuter – MetroLink

The Riverside-San Bernardino metro contains a population of more than 4.4 million. The largest city is Riverside with 319,500 residents, followed by San Bernardino. Although population growth has slowed compared with the previous five years, the metro's population is still expected to increase by 1.3 percent annually through 2020, well above the national figure.

Metro

Largest Cities in Metro by Population

Riverside 319,500

San Bernardino 216,700

Moreno Valley 204,500

Fontana 203,000

Rancho Cucamonga 171,700

Ontario 169,000

* Forecast Sources: Marcus & Millichap Research Services; U.S. Census Bureau; Experian



32

MARKET OVERVIEW

The Riverside-San Bernardino metro has one of the largest economies in the United States. While the region’s economic expansion has been fueled by a number of factors, robust population growth has been the primary demand driver. High home prices throughout much of Southern California leave residents seeking more affordable options in the Inland Empire. The resulting increase in population will continue to heighten the need for housing, retail goods, personal services and government services. There has also been exceptional growth in wholesale trade and warehousing as the area is an important distribution hub for the Southwest. Riverside-San Bernardino is the premier location in the Los Angeles Basin for new distribution facilities. This is because of its large pool of experienced workers, relatively inexpensive land and highly efficient intermodal transportation system that reduces

the cost of both aggregating and distributing shipments. Amazon and Deckers have huge warehouses in the region, and growth in the distribution industry is expected to impact all other sectors. During the past year, the Riverside-San Bernardino metro recorded higher industrial absorption than most other industrial markets in the state. The distribution system also benefits two major cargo airports: Ontario International and the Southern California Logistics Airport in Victorville.

Economy

* Forecast Sources: Marcus & Millichap Research Services; Bureau of Economic Analysis; Moody's Analytics; U.S. Census Bureau; CoStar Group, Inc.



33

MARKET OVERVIEW

The Riverside-San Bernardino metro employment base contains more than 1.3 million workers, and new jobs are projected to be generated at an annual average pace of 1.7 percent through the next five years, above the national growth rate of 1.3 percent. Traditionally, area residents who relocated from neighboring Los Angeles County or Orange County continued to commute to these markets for work. In recent years though, a rise in commercial development in the Inland Empire has generated more local jobs. As such, the job pool is becoming increasingly diverse, and many of the metro’s population-serving industries are growing. The metro’s infrastructure and proximity to the Los Angeles and Long Beach ports attract companies seeking West Coast distribution hubs. As a result, the trade, transportation and utilities sector accounts for 24 percent of all metro jobs. Given the prevalence of military installations and numerous cities and municipalities in the region, the government sector makes up another 17 percent of total employment and is poised to grow by 0.3 percent annually throughout 2020. Education and health services is another large sector, with 201,300 employees, equaling 15 percent of the workforce. Employment in this segment is expected to grow 3.9 percent annually during the coming five years. Construction will also expand at 3.9 percent annually in that time. Additionally, freeway improvements providing easier access to the eastern part of the metro and cities, including Moreno Valley, Palm Springs and Palm Desert, should promote healthy employment growth as companies move into these areas in the years ahead.

Labor

* Forecast Sources: Marcus & Millichap Research Services; BLS; Moody’s Analytics



34

MARKET OVERVIEW

Government entities account for some of the largest employers in the region, including Fort Irwin and March Air Reserve Base. As the base downsized, unused land was transformed into the March Inland Port, a 350-acre aviation-based industrial business park. March Inland Port Airport is a public joint-use airport and its 13,000-foot runway is one of the longest runways on the West Coast. Another significant employer is Ontario International Airport. The facility provides thousands of jobs at the airport and more than 50,000 indirect, off-site positions. Strong growth will continue at the airport, given the limits to expansion placed on neighboring airports in Los Angeles and Orange counties. Major healthcare providers such as Loma Linda University Medical Center and Kaiser Permanente also provide a big portion of the region’s jobs. Demand for medical services is projected to rise rapidly in the coming years because of the area’s increasing population and the baby-boomer generation’s move into its retirement years. While Riverside-San Bernardino has a significant share of large employers, the majority of companies are small. This emphasis on small firms encourages innovation and flexibility and is positive for the area’s long-term outlook, as most of the growth taking place in the economy is occurring in the small-business sector.

Employers

Major Employers

San Bernardino County

Riverside County

Stater Bros.

Loma Linda University Medical Center

Kaiser Permanente

Wal-Mart Stores Inc.

University of California, Riverside

Fort Irwin

Ontario International Airport

March Air Reserve Base

* Forecast Sources: Marcus & Millichap Research Services; BLS; Moody's Analytics; Experian



35

MARKET OVERVIEW

The Riverside-San Bernardino metro consists of nearly 1.4 million households and more than 4.4 million residents, making it one of the largest metropolitan areas in the nation. While expansion will slow from earlier in the decade, the Inland Empire is still on pace to grow 1.3 percent per year during the next five years, above the national rate of 0.8 percent annually. This population gain is driving new housing construction. The majority of recent population growth in the area was due to in-migration rather than natural increases. Factors fueling in-migration include the strong local economy, relatively affordable housing, large parcels of developable land and a lack of available land in Los Angeles County. The median existing home price in Riverside-San Bernardino, at $299,700, also remains much lower than medians in adjacent counties, allowing 63 percent of households to afford to own their home. Residents are becoming more educated, as more than 50 percent of the metro’s adults have at least some college education, and almost 20 percent of those ages 25 and older have attained a bachelor’s degree or higher. Increasing education levels have helped to raise household earnings in the metro. The median household income rests at $56,100 per year, on par with the national median.

Demographics


* Forecast Sources: Marcus & Millichap Research Services; Moody's Analytics; U.S. Census Bureau


36

MARKET OVERVIEW

Riverside-San Bernardino offers a diversity of landscapes, including the palm-tree-lined and pool-studded Coachella Valley, the mountain communities of Big Bear and Lake Arrowhead, the rolling hills and wineries of Temecula Valley and the suburban communities of the West San Bernardino Valley and Moreno Valley. A temperate climate offers moderate winters, warm summers and generally low humidity. One of the greatest draws of the metro is relatively affordable housing. The median home price in Riverside-San Bernardino is nearly 40 percent lower than in Los Angeles County and nearly 60 percent less than in Orange County. The Inland Empire provides a number of cultural opportunities, including the Riverside Metropolitan Museum, the Mission Inn Museum and the Museum of History and Art in Ontario. The California Theatre of Performing Arts in San Bernardino stages a number of performances through the year, as does the refurbished Fox Center for the Performing Arts. The Riverside County Philharmonic provides classical music concerts throughout the area. Shopping opportunities are plentiful no matter where you live in the metro, as are parks and golf courses. The region features an impressive offering of more than 20 college campuses, including nine community colleges, two California State University campuses and the University of California, Riverside.

* Forecast Sources: Marcus & Millichap Research Services; National Association of Realtors; Moody’s Analytics; U.S. Census Bureau

Quality of Life



37

MARKET OVERVIEW

2016 Retail Forecast

Construction: Advancing retail sales and strong demographics will drive up construction this year. Builders are forecast to complete approximately 1 million square feet of retail space in 2016, after completing 721,000 square feet the previous year.

Vacancy: After increasing 10 basis points in 2015, the vacancy rate will drop 50 basis points this year to 8.9 percent as net absorption exceeds 1.6 million square feet of retail space.

Rents: As vacancy continues to tighten across the Inland Empire, the average asking rent will increase 1.9 percent in 2016 to $16.30 per square foot of retail space. In the previous annual period, asking rent inched up 0.8 percent.

Employment: After hiring 47,800 workers in 2015, Inland Empire employers are expected to create 43,000 jobs this year, expanding the employment base 3.1 percent. Many companies are planning to further expand in the metro, including UPS and Amazon.


38

RIVERSIDE-SAN BERNARDINO METRO AREA

Climbing Retail Sales Draw Investors Inland

Strong demographics support retail sales; tenant demand tightens vacancy and boosts construction. A lower cost of living and the relatively close proximity to the employment hubs of Los Angeles and Orange County are spurring population growth in Riverside-San Bernardino and driving up retail sales. High home prices and climbing rents have also encouraged many households to move to the metro from other Southern California markets. In particular, millennials are flocking to the Inland Empire, comprising nearly 30 percent of the new growth as they seek out relatively affordable housing costs. This expanding consumer base has increased retail sales, sparking demand for retail space. As a result, builders have ramped up construction, focusing on necessity retailers as many fast-food establishments, drugstores and supermarkets break ground. The South Riverside area, specifically, is garnering interest from many national tenants. Wal-Mart, Marshalls and Rite Aid are among the many retailers leasing up available space. Despite a spike in construction this year, high absorption will improve vacancy and place upward pressure on rents.

Tightening operations and favorable demographic trends intensify the bidding environment. Strong market fundamentals are driving many California retail buyers who want to diversify their portfolios to the Inland Empire. Transaction velocity continues to surge in the metro, as investors snatch up a large majority of single-tenant properties with cap rates in the mid-5 percent range. In particular, fast-food chains and restaurants are growing in popularity, as evidenced by a rise in sales. These assets typically exchange hands at first-year yields between the high-4 and low-6 percent range. Additionally, several buyers are seeking to blend their portfolios with multi-tenant assets renting at or below market rates. However, limited listings will push some buyers to consider well-located, lower-occupied properties that can be filled with credit-worthy tenants for value-add opportunities. Overall, multi-tenant properties across the metro changed hands with average cap rates in the low-6 percent span, with assets in ideal locations trading up to 100 basis points less.

increase in total employment

1 million

3.1%

sq. ft. will be completed

basis point decrease in vacancy

50

1.9% increase in asking rents

MARKET OVERVIEW

Economy

Construction

* Forecast Sources: Marcus & Millichap Research Services; CoStar Group, Inc.

* Forecast Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; Economy.com


39


Over the year ending in June, Inland Empire employers increased hiring by 3.3 percent with the addition of 44,000 jobs. This dropped the unemployment rate 80 basis points to 5.7 percent during the same time period. In the previous year, nearly 58,000 jobs were created.

Employment gains over the last four quarters were particularly strong in the construction sector, rising 5.1 percent with 4,400 jobs. The trade, transportation and utilities sector created the most jobs overall, increasing payrolls by 14,200 workers.

The growing employment base has driven up retail sales over the prior 12-month period. Average retail sales advanced 2.8 percent during this time, after jumping 5.2 percent the prior year.

Outlook: As companies continue to move and expand in the metro, the employment base will increase 3.1 percent this year as 43,000 jobs are created. In 2015, employers hired 47,800 workers.

In the last 12 months ending at midyear, developers completed more than 677,000 square feet of retail space. The majority of space was located in eastern San Bernardino and southern locations within Riverside. In the prior year, 687,000 square feet was constructed.

More than 400,000 square feet of retail space is currently underway with delivery dates scheduled through 2017. Approximately 60 percent of this development will be single-tenant assets in the Inland Empire East submarket.

One of the largest projects under construction is the Town Center Marketplace in the city of Menifee. The project will sit on 12 acres and contain about 90,000 square feet of retail space. Signed tenants include a Buffalo Wild Wings, Rubio’s and Sonic.

Outlook: High demand for retail space is expected to increase completions to 1 million square feet in 2016. The previous year, builders delivered nearly 721,000 square feet of retail space.

MARKET OVERVIEW

Vacancy

Rents

* Forecast Sources: Sources: Marcus & Millichap Research Services; CoStar Group, Inc.

* Forecast Sources: Marcus & Millichap Research Services; CoStar Group Inc.


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During the year ending in June, the vacancy rate for retail space fell 10 basis points to 9.2 percent as new space leased up. In the prior annual period, vacancy fell 30 basis points.

Assets in the western portion of San Bernardino and Riverside had vacancy in the high-6 percent range ending the second quarter of 2016. Retail properties near the Ontario International Airport registered vacancy in the high-5 percent area.

The vacancy rate for multi-tenant assets in the Inland Empire fell 10 basis points over the last four quarters to 9.8 percent. In the prior year, vacancy declined 40 basis points.

Outlook: Despite a rise in construction this year, the growing demand for retail space will trim the vacancy rate 50 basis points to 8.9 percent. In 2015, vacancy ticked up 10 basis point.

The average asking rent fell slightly, by 0.1 percent, during the last four quarters ending at midyear to $15.94 per square foot. During the previous year, asking rent inched up 0.3 percent.

Marketwide, asking rent was higher than average at the end of the second quarter of 2016 in the city of Riverside and within Coachella Valley. It stood in the high-$16 per square foot range. More affordable rents could be found in the eastern and northern parts of San Bernardino between $12 to $13 per square foot.

Over the last 12 months, average asking rent edged up 0.8 percent for single-tenant assets to $15.98 per square foot. On the other hand, rent for multi-tenant properties fell 2.2 percent to $15.83 per square foot.

Outlook: After the average rent nudged up 0.8 percent in 2015, tightening vacancy will further increase asking rent 1.9 percent this year to $16.30 per square foot.


MARKET OVERVIEW

Single-Tenant Sales Trends**

Multi-Tenant Sales Trends**

** Trailing 12-month period through 2Q Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics

** Trailing 12-month period through 2Q Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics


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Trading in multi-tenant assets increased by approximately 11 percent during the last 12 months as properties in Riverside gained popularity. In the previous year, transaction velocity rose 20 percent.

As more buyers snatched up multi-tenant assets during the last four quarters, the average price lifted 9 percent to $250 per square foot. Neighborhood centers were more affordable, averaging around $170 per square foot.

The average first-year yield compressed 60 basis points during the year ending in the second quarter to the low-6 percent range. Properties in Riverside and the western portion of San Bernardino traded with cap rates in the low- to high-5 percent range during the same time period.

Outlook: Many buyers from other Southern California metros will seek assets in the Inland Empire to further add yield to their portfolios as returns compress in their home markets.

Interest in single-tenant assets is growing in the Inland Empire as transaction velocity jumped more than 20 percent during the last four quarters ending at midyear. Nearly 50 percent of the sales occurred in the San Bernardino area. In the prior annual period, the number of transactions ticked up 5 percent.

Increased demand drove the average price up 9 percent over the last 12 months to $375 per square foot. Several fast-food establishments sold at prices double this average. Single-tenant properties within Riverside were more affordable, averaging around $320 per square foot.

First-year returns fell 40 basis points over the year ending in June to the high-5 percent range. Assets near the airport traded with cap rates in the mid-4 to low-5 percent range, while properties in Riverside and Coachella Valley changed hands with cap rates in the high-5 to low-6 percent span.

Outlook: Strong net absorption and an overall rise in rents will further entice single-tenant buyers to the Inland Empire. Demand will remain strong in fast-food chains and restaurant establishments.


MARKET OVERVIEW

Capital Markets

Local Highlights


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Global capital markets have remained stable over the past few weeks, even as Brexit and the continued devaluation of the Chinese yuan have induced bouts of volatility into stock and bond markets. Meanwhile, U.S. economic data has proved resilient, with increases in retail sales and steady hiring supporting a measured pace of growth. Additionally, higher bond prices have lowered prospective yields, boosting the appeal of commercial real estate.

As the current economic cycle has continued, retail vacancy descended to 5.8 percent by the end of the second quarter. A focus on net-leased construction for pre-leased tenants and mixed-use developments has limited development activity in relation to prior cycles, supporting robust increases in average asking rents. Builders will deliver 46 million square feet of retail space this year, with more than two-thirds of new supply slated as single-tenant structures. This environment will sponsor a fourth straight year of average asking rent growth, with advancement projected to exceed inflation over the same period.

Capital markets remain highly competitive, with a broad assortment of fixed-rate products available through commercial banks, life-insurance companies and CMBS lenders. Loans are generally offered at terms up to 10 years at maximum leverage of 65 to 75 percent. For 10-year terms, rates will typically reside in the high-3 to mid-4 percent range, depending on leverage and underwriting criteria. Floating bridge loans and financing for repositionings are typically underwritten with LTVs above 80 percent, while pricing at 300 basis points above Libor for recourse deals and extending to 470 basis points above Libor for non-recourse transactions.

The city of Moreno Valley has approved the construction of a large warehouse named The World Logistics Center. The 40 million-square-foot center will be one of the largest warehouse complexes in the United States. The World Logistics Center is forecast to bring nearly 20,000 jobs to the area and serve as a catalyst for new housing and retail construction.

Hiring continues to remain healthy across the Inland Empire. UPS has announced plans to add nearly 500 jobs to its location at the LA/Ontario International Airport over the next five years. The company recently completed construction on a 416,000-square-foot building to keep pace with the growing demand for e-commerce. Additionally, Amazon is planning on opening a new fulfilment center in the city of San Bernardino. This development will bring approximately 1,000 jobs to the area.

A new 50,000-square-foot shopping center is under construction in the area of Rancho Cucamonga in the Inland Empire West submarket. The development, named Epicentre Rancho Cucamonga, is expected to be delivered in the fourth quarter of 2016 and will be located at one of the busiest intersections in the community.

PROPERTY NAME

MARKETING TEAM


DEMOGRAPHICS

Source: © 2016 Experian

Created on April 2017

POPULATION 1 Miles 3 Miles 5 Miles 2021 Projection

Total Population 535 1,501 2016 Estimate

Total Population 586 1,498 2010 Census

Total Population 453 1,284 2000 Census

Total Population 2,078 2,786 Current Daytime Population

2016 Estimate 967 2,106 HOUSEHOLDS 1 Miles 3 Miles 5 Miles 2021 Projection

Total Households 323 651 2016 Estimate

Total Households 352 662 Average (Mean) Household Size 2.74 2.75

2010 Census Total Households 267 547

2000 Census Total Households 300 544

Occupied Units 2021 Projection 323 651 2016 Estimate 513 880

HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles 2016 Estimate

$150,000 or More 0.00% 2.46% 4.63% $100,000 - $149,000 0.00% 7.97% 12.14% $75,000 - $99,999 0.00% 14.69% 15.71% $50,000 - $74,999 0.00% 12.32% 13.08% $35,000 - $49,999 0.00% 20.47% 16.13% Under $35,000 0.00% 41.48% 36.98%

Average Household Income $55,626 $67,335 Median Household Income $40,588 $46,870 Per Capita Income $33,526 $29,915

HOUSEHOLDS BY EXPENDITURE 1 Miles 3 Miles 5 Miles Total Average Household Retail Expenditure $58,414 $65,275 Consumer Expenditure Top 10 Categories

Shelter $12,406 $13,400 Transportation $8,717 $9,781 Food $6,234 $6,862 Utilities $3,143 $3,345 Health Care $3,564 $3,941 Entertainment $2,319 $2,557 Household Furnishings and Equipment $1,219 $1,411

Apparel $1,497 $1,609 Household Operations $1,222 $1,368 Gifts $885 $1,058

POPULATION PROFILE 1 Miles 3 Miles 5 Miles Population By Age

2016 Estimate Total Population 586 1,498 Under 20 0.00% 28.63% 28.45% 20 to 34 Years 0.00% 16.72% 15.78% 35 to 39 Years 0.00% 5.72% 5.73% 40 to 49 Years 0.00% 12.38% 13.45% 50 to 64 Years 0.00% 21.16% 22.37% Age 65+ 0.00% 15.40% 14.22% Median Age 39.08 40.02

Population 25+ by Education Level 2016 Estimate Population Age 25+ 386 991 Elementary (0-8) 0.00% 12.58% 7.73% Some High School (9-11) 0.00% 14.20% 11.55% High School Graduate (12) 0.00% 26.05% 25.47% Some College (13-15) 0.00% 22.70% 29.30% Associate Degree Only 0.00% 7.33% 9.86% Bachelors Degree Only 0.00% 11.29% 10.42% Graduate Degree 0.00% 3.57% 4.32%

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