Net Lease Investment Services

Single Tenant Net Lease Investment Overview

Fall 2013

Big Picture Update
Limited Availability Driving Action for New Net Lease Property Types Investment activity surged at the close of last year. The looming impact of tax changes brought many sellers back into the market— While Walgreen’s or McDonald’s might still be at the top of most looking to cash out of their investments before new tax hikes kicked in wish lists, more buyers are seeking net lease investment of any either at the federal or state level (or both). Since that time, however, type. This is fueling the rise of interest in a slew of retail types for investment activity has fallen by roughly 25% and kept a relatively which there was only minimal net lease activity just a few years ago. steady pace. The challenge for nearly all asset classes has been the This range from health clubs to other freestanding restaurant types lack of available quality properties for sale. Though investors are outside of the fast food arena, but among the strongest growth has slowly ratcheting up their tolerance of risk, it still remains low. As been in the field of dollar stores and convenience stores. That is such, demand is highest for core assets regardless of the property why we have begun tracking trends for these property types starting type. In the office arena, this is CBD Class A office (preferably in with this issue and have forensically compiled gateway cities). For industrial product, it is historical stats for these asset classes going modern distribution space—typically single back a number of years. tenant and with long-term leases in place to While the investor top credit tenants (in other words, premium The rise in interest in dollar and convenience industrial net lease properties). In the retail emphasis may still be stores as a net lease investment types is all arena, this emphasis on security over yield about availability. With a shortage of quality security over risk, the has focused on trophy shopping centers… available assets in place for virtually every or premium net lease investment. Lastly, tolerance for risk class of net lease investment, these two multifamily product—which has seen the product types are continuing to see some of continues to increase greatest overall improvement in underlying the most aggressive expansion in the retail fundamentals of any commercial real estate as economic and world. We tracked over 1,800 new dollar asset class—has seen a surge in demand for stores that were opened in the United States retail fundamentals nearly all classes and types, with investment last year, with chains like Family Dollar, Dollar grade properties leading the way and valueimprove. General and Dollar Tree all averaging annual add product bringing up the rear. unit growth of 300 new stores or more. Dollar General alone opened about 600 stores last So where does that leave us in terms of year and should close 2013 with about 635 new locations—in other net lease investments? Obviously, a continued investor focus on words, typically two new store openings each day this year. They security over yield is bound to put these assets firmly in the sights have been on a 600 new store annual pace going on three years now of buyers. The challenge, of course, has been in finding available and expect a similar level of growth in 2014. We estimate just over quality product. The gold standard still remains drug store and half of those to be in freestanding retail buildings—in other words, fast food properties with long-term corporate leases in place to the about 350 new net lease opportunities annually from just one user strongest chains. The reason is simple; most drug store and fast alone. Dollar General tends to look for space ranging from 7,500 food chains typically operate with longer lease terms—nearly all to 12,000 square feet and their leases tend to be 15-year deals. of the major drug store chains tend to work with 25-year deals to Family Dollar hasn’t been far behind and will close this year with as start. The same is true of most major fast food players, but there many as 500 new locations. They typically work with ten-year deals is more divergence here—particularly when one takes into account and space in the 10,000 square foot range. the differences between franchisees and corporate users as well as some differences in place between local and regional chains. If lease terms are the driving force behind investor demand (and they largely are), it is only natural that the net lease property type next on the investor food chain are automotive retail buildings. This is because so many of the national chains operate in leases of 15 years or more. One could continue to follow this logic and make the assumption that freestanding retail buildings with shorter lease terms are not in much demand. But they would be wrong. While the investor emphasis may still be security over risk, the tolerance for risk continues to increase as economic and retail fundamentals improve. Convenience store growth has also been explosive, thanks to industry giant 7 Eleven. They also tend to be a ten-year user and their current expansion has included both convenience store/gas station facilities as well as both standalone and inline retail only stores. Regardless, the chain has been averaging roughly 300 new stores annually for the last couple of years and has plans to keep this rate of growth in 2014. By comparison, though most drug store and fast food chains remain in growth mode, the numbers of new store openings pale by comparison. While restaurant growth is white hot nationally, much of it is being driven by fast casual players who, more often than not, opt for inline space at multitenant centers. And so while we estimate that deal activity for the traditional net lease property types that we track (single tenant automotive, drug stores and fast food) will close 2013 down roughly 20% to 25% from the levels of activity that we saw last year, overall net lease investment is up. Because of the shorter lease terms in place,
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Single Tenant Net Lease Investment Overview Fall 2013
occupancy growth for most of the past six years; discounters and off-price concepts. Dollar stores certainly fall into this category, but this also includes everything from Big Lots to Costco to grocery chains like Grocery Outlet. And it should come as no surprise that chains would want to straddle both the discount and grocery fence, because the other factor impacting retailer growth is e-commerce. Which is why the strongest levels of retail expansion now are coming from food users—whether grocery or restaurants. For the net lease marketplace, the issue of grocery expansion is a curious one as nearly all of the new concepts that are growing are using smaller Again, this all comes down to availability. Investor demand remains footprints and typically using junior box strong for all net lease investment types space. The few exceptions would be and not just from private investors, who continued Superstore growth from Target have historically been thought of as the and Walmart and a few regional players. Because of the minimal primary drivers for this marketplace. Meanwhile, many local or regional chains Because of the minimal property (particularly those that are unionized) property management management requirements of net lease are struggling and consolidating. Most requirements of net lease investment, these properties have of these users have tended to be active always been attractive to buyers looking with larger footprints of 50,000 square investment, these properties for stable income streams and minimal feet or more. For big box net lease headaches. But institutional players have always been attractive to investment, this means the smaller the continue to play a huge role in driving box the much higher the tenancy pool buyers looking for stable the marketplace as well. and less risk. The reverse is also true— the bigger the box, the bigger the risk, income streams and minimal We continue to see plenty of activity but also typically the bigger the yield. from some key institutional players. headaches. But institutional Cole Net Lease was bought in October players continue to play a by American Realty Capital Properties Is Industrial the Next Hot Thing? (ARCP) for $11.2 billion in a move that huge role in driving the makes ARCP the largest institutional What is interesting is that we are seeing marketplace as well. net-lease player with a portfolio of over a retail growth surge from many of the 3,700 properties. Prior to this, both players that we are used to seeing in our had been active in picking up portfolios malls—but it is in the form of industrial over the past year. Cole had a diverse buildings. Chains like Macy’s, Nordstrom, Walmart, Williams-Sonoma mix of mostly retail net lease in its portfolio before the sale, while and others are all rushing to keep up with a changing marketplace ARCP had a strong mix of fast food and dollar stores. Meanwhile, that has been dictated by Amazon. Amazon currently has about 55 we continue to see strong growth from players like Realty Income million square feet of distribution center space in the United States. (strong with industrial and convenience stores), National Retail By 2016, they plan to have 90 million square feet. Nearly all of Properties (convenience stores), W.P. Carey (all retail) and others. this has been done via build-to-suits as these properties tend to be All of these players have helped to boost demand and keep deals extremely unique. It is not uncommon for a building that costs $40 flowing. We anticipate that while an interest rate increase in 2014 to $60 per square foot to build to feature $100 per square foot or may have some short-term impact on deal flow—particularly from more in tenant improvement upgrades for the automation systems private investors—that the pipeline from institutional players will required for e-commerce fulfillment. Meanwhile, we are increasingly only be minimally impacted. seeing retailers inking deals for industrial buildings well above the 500,000 square foot mark that can serve both as e-commerce fulfillment and local distribution centers. This trend is only going Junior Boxes Reign Supreme as Retailers Shrink Footprints and to escalate in the coming years—we anticipate that e-commerce Store Counts related industrial could account for as much as 70 million square feet of occupancy growth in the next three years. Ironically, we now see growth in the retailer world limited by two big picture factors. The first is the ongoing subpar performance The driving force has been Amazon’s push to create same day of the economy. It is getting better each year but middle class delivery capabilities, which they are going to start rolling out on a consumers are still in frugality mode. Meanwhile, while the luxury market by market basis in the next year. Retailers understand that shopper is back and luxury retailers are also back in conservative this could be a lights out game changer and are rushing to meet growth mode. That leaves us with the group that has been driving that challenge. We have yet to see a significant uptick in demand for these new asset classes are typically viewed with more risk and have cap rates that reflect that. While we are still seeing prime McDonald’s, Chick Fil-A, CVS or Walgreen’s properties (we would typically define prime for drug store or fast food properties as ideal, urban locations in relatively new construction with long-term leases in place) trading in the 5% or less cap rate range, the equivalent gold standard for dollar stores (new, rural locations in areas with limited competition and long-term leases in place) to Family Dollar or Dollar General are still usually averaging in the 7.0% range.
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Big Picture Update Continued
question is whether we will see these as early as February or as late as July. Policy issues continue to hang over the economy and reduce economic output. It is unclear if we will see another political dogfight in January/February of 2014 as the issues of government funding and the debt ceiling come back to the forefront, but the possibility of another ugly, protracted debate are high. Regardless, perhaps the most telling recent economic indicator of all is that Of course, in the meantime, FedEx and UPS have continued to of personal income growth. The Census Bureau’s September 2013 arguably benefit the most from all of this and that is why they remain numbers indicated a strong 0.5% growth in personal income for the gold standard for industrial net lease investment. While overall the second month in a row. Numbers have been slightly positive industrial net lease pricing nationally has averaged in the $40 to since February of this year. Assuming this trend continues, it will $50 range, these facilities have regularly sustain the ongoing housing economy commanded up to $250 per square foot and it will also eventually translate into or more. One question hanging over the improved consumer spending totals. The key question ahead is marketplace is whether Amazon may be In other words, this is one of the final creating a massive distribution network missing pieces of economic recovery and whether continued strong not just to deliver the goods they sell if it continues, the Fed will be boosting investor demand will be on a same day basis, but whether their interest rates before inflation starts to ultimate goal might be to compete become an issue. While this may cause enough to offset the increased head-to-head with FedEx or UPS in the some short-term growing pains in the price of borrowing next year. delivery game. We wouldn’t rule anything investment world, it is ultimately great out, but we’ll believe that when we see it. news. An improved economy will also So long as the climb is not too translate into all of those other things that But what does all of this mean for the steep or too fast, we see ultimately are more important to income net lease investment world? We have streams than mere cap rates alone. Better pricing pressures to gently yet to see much in the way of activity retail sales, more secure tenancy, higher for pure e-commerce industrial space, impact the marketplace rents all will come as well. But pricing for but we expect this to happen. Nearly many net lease investments—particularly starting with the value-adds all of the action, so far, has been in the those deemed riskier—will likely flatten form of build-to-suits. Yet, users are still and properties with less stable somewhat. leasing most of this space as opposed to occupancy first. purchasing it. So far, the developers and The key question ahead is whether investors that have built these properties continued strong investor demand will have wanted to hold on to them. Terms be enough to offset the increased price vary depending on the users, but nearly of borrowing next year. We anticipate all of the deals we have tracked have been at least ten-year deals interest rates to start to climb by April. So long as the climb is not with 20-year leases not all that uncommon. The upside to these too steep or too fast, we see pricing pressures to gently impact the properties commanding top dollar is clear—a structure with a longmarketplace starting with the value-adds and properties with less term lease in place to Amazon would be viewed as bulletproof in stable occupancy first. The gold standards of net lease investment terms of credit and stability. The downside, of course, is that these (FedEx or UPS for industrial; CVS and Walgreens for drug stores; buildings are often so built out for specialty use that backfilling an McDonald’s, Chick Fil-A or In-N-Out for fast food) may not see eventual vacancy may prove to be daunting. Still, we think that we much of a difference at all. In general, however, we anticipate will eventually start to see more of these properties being brought that there will be a period of flat pricing overall—properties with to a marketplace hungry for product. While the immense size and weaker occupancy or other issues will bear the brunt of this while prices involved would rule out most private investors, there are highest-end product will likely still command top dollar. Look for plenty of institutional players that would be more than interested cap rates to remain relatively stable through the end of this year and that would pay top dollar under the right circumstances. Look and in Q1 2014. Once debt costs start to increase (we believe in for industrial net lease investment to heat up significantly in the Q2 2014), we anticipate these averages to go up slightly (again, with years ahead. a couple of key exceptions for strongest product). As for industrial smaller warehousing space for this need, but we will. The goal will be to get away from mega-distribution centers in the middle of the country (where every market may be a two to three day drive) and towards centers that can quickly get goods to the consumers. This will mean that many chains suddenly will need multiple warehousing locations near urban markets to fulfill this need. net lease investment, look for institutional demand to climb and for e-commerce related industrial buildings to start to come into play. Looking Ahead Looking ahead to 2014, barring a completely unforeseen financial collapse, rising interest rates are pretty much a given. The only
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Single Tenant Net Lease Investment Overview Fall 2013
National Drug Store Credit Rating Concept Credit Rating Typical Footprint MIN SF CVS Fred's Rite Aid Walgreens A2 B2 D2 B1 12,000 15,000 11,000 12,000 MAX SF 18,000 19,000 17,000 17,000 25 Years 15 Years 25 Years 25 Years 7-Eleven Casey's Quiktrip Sheetz WaWa National Fast Food Credit Rating Concept Credit Rating Typical Footprint MIN SF Arby's Burger King Carl's Jr/Hardees Checkers Chick Fil-A Chipotle Mexican Grill Del Taco In-N-Out Jack in the Box McDonald's Panda Express Popeye's Starbucks Steak N Shake Sonic Drive In Tim Hortons Wendy's White Castle C1 C2 C2 NR A A NR A C2 A NR NR AB NR NR C1 2,000 2,000 2,000 1,000 2,000 2,000 1,700 2,000 2,000 3,000 2,000 2,500 1,500 3,000 1,500 2,000 3,000 2,000 MAX SF 3,000 3,000 3,000 1,500 3,000 3,000 2,500 3,000 2,500 4,000 2,500 3,000 2,000 3,500 2,000 3,000 4,000 3,000 20 Years 20 Years 20 Years 20 Years 20 Years 10 Years 20 Years 20 Years 20 Years 20 Years 10 Years 20 Years 10 Years 20 Years 20 Years 20 Years 20 Years 20 Years Advance Auto Parts AutoZone Bridgestone/ Firestone CarMax Discount Tire Company Jiffy Lube Midas National Tire & Battery O'Reilly Auto Parts Pep Boys Tire Kingdon Tuffy Auto Service Center B2 C1 NR NR NR NR NR NR B1 C2 NR NR Typical Lease Term RaceTrack Petroleum AAB1 NR NR B NR Typical Lease Term National Convenience Store Credit Rating Concept Credit Rating Typical Footprint MIN SF 2,000 3,000 4,000 5,000 3,000 5,000 MAX SF 3,000 4,500 50,000 7,000 4,000 6,000 10 Years 10 Years 10 Years 10 Years 10 Years 10 Years Typical Lease Term

National Automotive Retail Credit Rating Concept Credit Rating Typical Footprint MIN SF 6,000 5,000 7,000 20,000 7,000 1,000 4,000 4,000 6,000 5,000 3,000 3,000 MAX SF 8,000 8,000 9,000 40,000 8,000 2,500 6,000 9,000 9,000 10,000 6,000 6,000 15 Years 15 Years 15 Years 20 Years 10 Years 10 Years 10 Years 20 Years 20 Years 15 Years 10 Years 10 Years Typical Lease Term

National Dollar Store Credit Rating Concept Credit Rating Typical Footprint MIN SF 99 Cents Only Dollar General Dollar Tree Family Dollar C2 B1 A2 B1 15,000 9,000 8,000 8,000 MAX SF 20,000 12,000 15,000 10,000 10 Years 15 Years 10 Years 10 Years Typical Lease Term

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National Box Users Credit Rating Junior Boxes (20,000 SF - 39,999 SF) Concept Credit Rating Typical Footprint MIN SF 24 Hour Fitness Alco Aldi Ashley Furniture Bed Bath & Beyond Best Buy Big Lots DSW Fresh Market Gold's Gym HH Gregg LA Fitness Marshall's Michael's Nordstrom Rack Office Depot/ Office Max Orscheln Farm & House PetSmart Planet Fitness REI Ross Dress for Less Safeway Sprouts Farmers Markets Staples TJ Maxx Tractor Supply Trader Joe's B E1 NR NR BBB+ C1 B2 A2 A2 NR B2 NR A B AC2 NR BB+ NR B2 B1 C1 B2 B2 B1 B2 NR 15,000 25,000 15,000 30,000 20,000 30,000 25,000 18,000 18,000 10,000 25,000 35,000 30,000 15,000 35,000 20,000 25,000 12,000 18,000 20,000 25,000 45,000 20,000 10,000 25,000 20,000 15,000 MAX SF 25,000 30,000 20,000 40,000 40,000 40,000 35,000 23,000 25,000 45,000 45,000 45,000 35,000 25,000 45,000 25,000 45,000 20,000 27,000 25,000 35,000 90,000 30,000 20,000 35,000 27,000 20,000 10 Years 10 Years 10 Years 10 Years 10 Years 10 Years 10 Years 10 Years 15 Years 10 Years 15 Years 15 Years 10 Years 10 Years 10 Years 10 Years 10 Years 10 Years 10 Years 10 Years 10 Years 20 Years 10 Years 10 Years 10 Years 15 Years 15 Years Typical Lease Term

National Box Users Credit Rating Mid Boxes (40,000 SF - 79,999 SF) Concept Credit Rating Typical Footprint MIN SF Academy Sports Burlington Coat Factory Dick's Sporting Goods Giant Eagle Harris Teeter Hobby Lobby Kohl's Kroger Marsh Piggly Wiggly Price Chopper Publix Roundy's Schnuck's Sports Authority Stater Brothers Whole Foods Winn Dixie C2 BA1 NR B1 A B2 B1 E2 NR NR A2 D2 NR BD1 A1 NR 65,000 60,000 50,000 50,000 30,000 50,000 65,000 50,000 45,000 25,000 30,000 30,000 50,000 45,000 40,000 40,000 35,000 40,000 MAX SF 73,000 80,000 80,000 70,000 60,000 70,000 90,000 75,000 65,000 65,000 60,000 60,000 70,000 55,000 50,000 50,000 40,000 50,000 20 Years 10 Years 10 Years 20 Years 20 Years 15 Years 20 Years 20 Years 20 Years 20 Years 20 Years 20 Years 20 Years 20 Years 10 Years 20 Years 20 Years 20 Years Typical Lease Term

National Box Users Credit Rating Mega Boxes (80,000 SF or more) Concept Credit Rating Typical Footprint MIN SF BJ's Wholesale Club Cabela's Costco Home Depot Lifetime Fitness Lowe's Meijer Menards Sam's Club Target Walmart Wegman's B A2 B1 A2 NR B1 NR NR AA B1 A2 BBB+ 85,000 100,000 145,000 100,000 100,000 100,000 180,000 100,000 120,000 85,000 125,000 120,000 MAX SF 125,000 125,000 160,000 110,000 125,000 120,000 210,000 130,000 150,000 150,000 160,000 140,000 20 Years 20 Years 20 Years 20 Years 10 Years 20 Years 20 Years 20 Years 20 Years 20 Years 20 Years 20 Years Typical Lease Term

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Drug Store Retail Trends Top Drug Store Deals
• So far, we have been able to confirm 32 sales for Q3 2013. We anticipate that the final deal tally will be in the mid-40s. This compares to 43 deals in Q2 and 30 in Q1 (the year-to-date tally now stands at 105. Last year, we tracked a total of 175 deals. Our estimate is that we will close 2013 with total deal activity down from last year’s levels by about 20%. The limited availability of product remains the greatest challenge facing the marketplace. Investor demand remains extremely strong for drug store properties. • The national average price on the drug store deals we have tracked in Q3 2013 quarter was $367 per square foot. This compares to an average of $390 per square foot in Q2 and $366 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend, however, is one of increasing pricing as economic and commercial real estate fundamentals continue to improve. The trend of rising prices will slow or flatten once we see interest rate hikes next year. • The average capitalization rate for deals that closed in Q3 2013 was 6.9%. This compares to an average of 6.8% in Q2 and a reading of 6.7% exactly one year ago. While this metric has been climbing, the primary factor behind this has been the larger number of Rite Aid locations that have been selling lately. • Typically we see CVS and Walgreen’s properties with long-term leases in place trading in the 5% to 6% range depending on other factors like quality of building, strength of location and/or market. While Rite Aid’s financial situation has improved slightly over the past year, they still have the weakest credit of the three. Most Rite Aid deals we see are trading in the 7% or higher range, with 8% being the norm in most markets. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for drug store opportunities will mean less of an uptick for these properties—particularly first-tier options.

Rite Aid
New York, NY Price: $6,500,000 Cap Rate: 6.0%

Walgreens
North Miami, FL Price: $11,000,000 Cap Rate: 6.0%

Single Tenant Drug Store Properties
CVS
Noblesville, IN Price: $8,465,603 Cap Rate: 6.1%
Average Cap Rate & Sale Price Average Cap Rate &(PSF) Sale Trend Price (PSF) Trend
9% $500
$450 8% $400 $350 7% $300 $250 6% $200 $150 5% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $100

Single Tenant Drug Store Properties

Walgreen’s
Los Angeles, CA Price: $13,600,000 Cap Rate: 5.3%

Cap Rate

Average Price PSF

Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics

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Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics

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Single Tenant Lease Single Tenant Net Net Lease Investment Overview 2013 Investment Overview Fall Fall 2013

National Single Tenant Drug Store Market US Northeast Region Select Major Sale Transactions Property CVS Walgreens Rite Aid Walgreens Rite Aid CVS CVS Rite Aid Rite Aid Rite Aid 1075 Broadway Street, Saugus, MA 30 W Ridge Pike, Limerick, PA 4900 Broadway, New York, NY 1093 N. Main Street, Dayville, CT 869 2nd Avenue, Troy, NY 3016 Route 940, Mount Pocono, PA 1321 Allegheny Street, Jersey Shore, PA 331 Main Street, Nashua, NH 2501 Saw Mill Boulevard, Pittsburgh, PA 78 N. Broad Street, Norwich, NY Total SF 14,693 14,820 9,200 14,820 14,673 13,225 10,125 15,086 10,908 10,908 Sale Date 02/2013 05/2013 05/2013 02/2013 05/2013 09/2013 03/2013 02/2013 01/2013 01/2013 Sale Price $9,361,000 $7,000,000 $6,500,000 $6,420,000 $6,175,000 $5,100,000 $3,800,000 $3,262,533 $3,139,752 $2,555,000 Price PSF $637 $472 $707 $433 $421 $386 $375 $216 $288 $234 Cap Rate 6.9% 6.4% 6.0% 6.0% 8.9% 7.1% 6.7% 8.5% 10.9% 9.0%

National Single Tenant Drug Store Market US Southern Region Select Major Sale Transactions Property Walgreens Walgreens CVS CVS Walgreens Walgreens Walgreens CVS CVS Rite Aid 15050 Biscayne Boulevard, North Miami, FL 3188 Highway 278 NW, Covington, GA 4001 W. William Cannon Drive, Austin, TX 10000 Jefferson Davis Parkway, Fredericksburg, VA 231 E. Dixon Boulevard, Shelby, NC 3028 Clairmont Avenue, Birmingham, AL 2427 Springs Road NE, Hickory, NC 24795 Pinebrook Road, Chantilly, VA 1820 US Highway 1, Rockledge, FL 2005 Maple Street, Rome, GA Total SF 14,550 14,820 12,900 12,900 14,820 13,076 14,820 12,840 11,970 14,673 Sale Date 03/2013 02/2013 07/2013 02/2013 06/2013 04/2013 02/2013 08/2013 06/2013 06/2013 Sale Price $11,000,000 $8,075,000 $7,429,250 $6,970,000 $6,875,100 $6,829,270 $6,796,875 $6,700,000 $6,700,000 $5,152,100 Price PSF $756 $545 $576 $540 $464 $522 $459 $522 $560 $351 Cap Rate 6.0% 6.3% 5.2% 6.5% 5.9% 5.8% 6.4% 5.8% 6.0% 8.0%

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Single Tenant Net Lease Investment Overview Fall 2013

National Single Tenant Drug Store Market US Midwest Region Select Major Sale Transactions Property Walgreens Walgreens CVS Walgreens Walgreens Walgreens Rite Aid Walgreens Walgreens CVS 1050 Waukegan Road, Northbrook, IL 1145 Main Street, Antioch, IL 14575 Mundy Drive, Noblesville, IN 985 N. Arlington Avenue, Indianapolis, IN 7045 S. Pulaski Rd, Chicago, IL 419 E. Michigan Avenue, Ypsilanti, MI 3362 Navarre Avenue, Oregon, OH 6320 E. Main Street, Reynoldsburg, OH 7864 Hamilton Avenue, Cincinnati, OH 30920 A Southfield Road, Southfield, MI Total SF 14,500 14,820 12,900 14,490 12,329 13,650 14,565 15,120 17,110 13,314 Sale Date 05/2013 03/2013 01/2013 04/2013 09/2013 01/2013 06/2013 06/2013 05/2013 06/2013 Sale Price $11,779,661 $8,607,231 $8,465,603 $7,517,355 $6,000,000 $5,600,000 $5,585,000 $5,400,000 $5,097,744 $4,758,000 Price PSF $812 $581 $656 $519 $487 $410 $383 $357 $298 $357 Cap Rate 5.9% 6.7% 6.1% 6.1% 6.8% 6.4% 8.5% 7.9% 6.7% 5.9%

National Single Tenant Drug Store Market US West Region Select Major Sale Transactions Property Walgreens Walgreens Walgreens Walgreens CVS Walgreens Rite Aid Walgreens Rite Aid Walgreens 1050 N. Highlands Avenue, Los Angeles, CA 718 91st Street, Lake Stevens, WA 9800 S. Estrella Parkway, Goodyear, AZ 495 E. Holt Avenue, Pomona, CA 4990 S. Arizona Avenue, Chandler, AZ 28516 N. El Mirage Road, Peoria, AZ 39155 Washington Street, Palm Desert, CA 750 N. Virginia Street, Reno, NV 17615 140th Ave SE, Renton, WA 10601 E. Alameda Avenue, Aurora, CO Total SF 13,387 15,361 14,820 13,680 13,013 14,820 17,272 15,067 16,280 14,783 Sale Date 05/2013 04/2013 06/2013 04/2013 07/2013 03/2013 08/2013 08/2013 07/2013 10/2013 Sale Price $13,600,000 $9,294,605 $9,094,000 $8,250,000 $7,913,500 $7,600,000 $7,150,000 $6,500,000 $6,645,000 $5,833,800 Price PSF $1,016 $605 $614 $603 $608 $513 $414 $431 $408 $395 Cap Rate 5.3% 6.0% 5.8% 5.9% 6.0% 6.3% 7.3% 6.0% 8.4% 6.0%

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Single Tenant Net Lease Investment Overview Fall 2013
Fast Food Retail Trends Top Fast Food Deals
• So far, we have been able to confirm 38 sales for Q3 2013. We anticipate that the final deal tally will be in the low 50s. This compares to 57 deals in Q2 and 31 in Q1 (the year-to-date tally now stands at 126. Last year, we tracked a total of 213 deals. Our estimate is that we will close 2013 with total deal activity down from last year’s levels by about 15%. The limited availability of product remains the greatest challenge facing the marketplace. Investor demand remains extremely strong for fast food properties. • The national average price on the fast food deals we tracked in Q3 2013 was $441 per square foot. This compares to an average of $455 per square foot in Q2 and $401 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend, however, is one of increasing pricing as economic and commercial real estate fundamentals continue to improve. The trend of rising prices will slow or flatten once we see interest rate hikes next year. • The average capitalization rate for deals that closed in Q3 2013 was 6.9%. This compares to an average of 6.5% in Q2 and a reading of 7.0% exactly one year ago. • In general, we are seeing first-tier fast food properties moving with cap rates below the 6% mark nationally, though we have seen some top quality assets (great location in strong market) with the most desirable long-term tenancy in place (McDonald’s., Chick fil-A, In-N-Out, etc.) trade with caps heading into the 4% range. Second-tier fast food properties are averaging in the 6% - 8% rate nationally with some regional variations based upon the strength of the local marketplace. Third-tier and/or value-add fast food properties are generally trading with cap rates above the 8% mark everywhere, with triple digit caps not uncommon in weaker trade areas. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier fast food opportunities will mean less of an uptick for these properties.

McDonald’s
Melville, NY Price: $3,025,000 Cap Rate: 4.4%

Taco Bell
Pensacola, FL Price: $2,700,000 Cap Rate: 6.5%

Single Tenant Fast Food Properties
Burger King
Chicago, IL Price: $2,300,000 Cap Rate: 6.5%
Average Cap Rate & Sale Price Average Cap Rate &(PSF) Sale Trend Price (PSF) Trend
10% 9% 8% 7% 6% $600 $550 $500 $450 $400 $350

Single Tenant Fast Food Properties

Carl’s Jr.
Redondo Beach, CA Price: $3,200,000 Cap Rate: 4.5%

$300
5% 4% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $250 $200

Cap Rate

Average Price PSF

Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics

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Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics 10

National Single Tenant Fast Food Market US Northeast Region Select Major Sale Transactions Property McDonald's Taco Bell Burger King Taco Bell Chipotle McDonald's Five Guys Burgers & Fries Burger King Taco Bell KFC 729 Walt Whitman Road, Melville, NY 1050 2nd Street, Manchester, NH 133 Macy Street, Amexbury, MA 13609 Crayton Boulevard, Hagerstown, MD 3580 Horizon Boulevard, Trevose, PA 174 Hoosick St, Troy, NY 720 Loucks Rd, York, PA 330 Pompton Avenue, Cedar Grove, NJ 1922 Empire Boulevard, Webster, NY 451 Foxon Boulevard, New Haven, CT Total SF 2,317 3,378 4,873 2,675 2,193 3,915 2,715 2,307 2,220 2841 Sale Date 03/2013 02/2013 07/2013 08/2013 03/2013 01/2013 04/2013 05/2013 06/2013 06/2013 Sale Price $3,025,000 $2,297,800 $2,234,394 $1,824,795 $1,800,000 $1,579,411 $1,385,000 $995,000 $700,000 $625,000 Price PSF $1,306 $680 $459 $682 $821 $403 $510 $431 $315 $220 Cap Rate 4.4% N/A N/A 6.6% 5.5% 4.1% 5.6% 6.0% 8.1% 4.6%

National Single Tenant Fast Food Market US Southern Region Select Major Sale Transactions Property McDonald's Taco Bell McDonald's McDonald's McDonald's Bojangle's Wendy's Hardee's Jack in the Box Wendy's 1302 W. Fairbanks Avenue, Winter Park, FL 305 S. New Warrington Road, Pensacola, FL 1473 Hudson Bridge Road, Stockbridge, GA 822 Highway 17 N., Little River, SC 9414 W. Northlake West Drive, Charlotte, NC 7897 E. Brainerd Road, Chattanooga, TN 4849 Bill Gardner Parkway, Locust Grove, GA 4360 Atlanta Highway, Loganville, GA 1765 W. Mount Houston Road, Houston, TX 365 W. 78th Road, Hialeah, FL Total SF 4,150 2,782 4,504 4,623 4,300 3,808 3,300 2,726 2,900 3,183 Sale Date 04/2013 06/2013 05/2013 06/2013 08/2013 07/2013 02/2013 06/2013 02/2013 07/2013 Sale Price $2,926,800 $2,700,000 $2,555,000 $2,385,000 $2,320,000 $2,150,000 $2,020,000 $2,016,000 $1,975,000 $1,845,000 Price PSF $705 $971 $567 $516 $540 $565 $612 $740 $681 $580 Cap Rate 4.1% 6.5% 4.5% 4.2% 4.5% 7.8% 7.2% 6.3% 6.5% 6.1%

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Single Single Tenant Tenant Net Net Lease Lease Investment Investment Overview Overview Fall Fall 2013 2013

National Single Tenant Fast Food Market US Midwest Region Select Major Sale Transactions Property Burger King Wendy's Culver's Wendy's Hardee's/Green Burrito Burger King Arby's Burger King McDonald's McDonald's 3141 S. Ashland Boulevard, Chicago, IL 1202 S. Jeffers Street, North Platte, NE 501 Pingree Road, Crystal Lake, IL 3140 S. Rochester Road, Rochester Hills, MI 4201 S. 11-159, Glen Carbon, IL 1255 N. 21st Street, Newark, OH 1501 E. Morgan Street, Kokomo, IN 1510 N. Bridge Street, Yorkville, IL 630 N. Route 83, Bensenville, IL 1617 Bartlett Avenue, Evansville, IN Total SF 2,897 2,640 4,587 2,915 2,505 3,500 3,276 2,500 3,503 3,900 Sale Date 07/2013 01/2013 01/2013 07/2013 07/2013 06/2013 04/2013 05/2013 07/2013 02/2013 Sale Price $2,300,000 $2,062,000 $1,990,000 $1,748,500 $1,654,736 $1,610,000 $1,494,212 $1,400,000 $1,395,000 $1,200,000 Price PSF $794 $781 $434 $600 $661 $460 $456 $560 $398 $308 Cap Rate 6.5% 7.9% 10.7% 8.0% 6.3% 5.3% 8.5% N/A 5.3% 4.7%

National Single Tenant Fast Food Market US West Region Select Major Sale Transactions Property Carl's Jr. Burger King Carl's Jr./Green Burrito Jack in the Box Burger King Jack in the Box McDonald's Chipotle Carl's Jr. Wendy's 2100 Artesia Boulevard, Redondo Beach, CA 1964 N. Broadway, Santa Maria, CA 222 N. Euclid Street, Fullerton, CA 1191 S. Mt. Vernon Avenue, Colton, CA 6401 Balboa Avenue, San Diego, CA 770 Ramona Expressway, San Jacinto, CA 8556 Blue Diamond Road, Las Vegas, NV 1525 S. Yuma Palms Parkway, Yuma, AZ 2211 S. Havana Street, Aurora, CO 1127 E. Florence Boulevard, Casa Grande, AZ Total SF 2,739 2,408 7,348 2,600 4,078 2,850 3,736 4,200 3,024 2,500 Sale Date 02/2013 06/2013 02/2013 09/2013 04/2013 05/2013 10/2013 04/2013 02/2013 08/2013 Sale Price $3,200,000 $2,946,828 $2,710,000 $2,455,000 $2,330,000 $2,250,000 $2,183,908 $2,040,000 $1,750,000 $1,043,500 Price PSF $1,168 $1,224 $369 $944 $571 $789 $585 $486 $579 $417 Cap Rate 4.5% 5.1% 4.5% 5.5% 4.9% 5.1% 4.4% 7.2% 6.5% 5.8%

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Dollar Store Retail Trends Top Dollar Store Deals
• This is the first report in which we are including dollar stores as one of the net lease asset classes that we track. As a triple net investment, this product really has only come into its own in the last few years thanks to aggressive expansion from dollar store chains at a time in which there has been strong demand for net lease investments but a limited supply of other single-tenant retail asset types. Some have questioned whether demand for dollar stores will be as strong once the overall economy improves to near “normal” levels. However, a number of key demographic factors (including the widening income gap) and the continued frugality of U.S. consumers would seem to ensure that dollar store retailers will remain in demand for now. • The national average price on the dollar store deals we tracked in Q3 2013 was $157 per square foot. This compares to an average of $158 per square foot in Q2 and $140 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend, however, is one of increasing pricing as economic and commercial real estate fundamentals continue to improve. The trend of rising prices will slow or flatten once we see interest rate hikes next year. • The average capitalization rate for deals that closed in Q3 2013 was 7.7%. This compares to an average of 7.6% in Q2 and a reading of 7.4% exactly one year ago. • Due to the fact that most new dollar store leases are ten year deals, we see higher caps here typically than what we see for longer term fast food or drug store deals—despite relatively solid credit from nearly all of the major players. Generally, dollar stores are perceived as being most stable in rural or tertiary markets, though strong locations within primary or secondary markets are also in high demand from investors. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier fast food opportunities will mean less of an uptick for these properties.

Dollar General
Manchester, NH Price: $1,895,000 Cap Rate: 7.4%

Dollar General
Fort Myers, FL Price: $1,956,603 Cap Rate: 7.0%

Single Tenant Dollar Store Properties
Family Dollar
New Baltimore, MI Price: $1,519,000 Cap Rate: 7.7%
Average Cap Rate & Sale Price Average Cap Rate &(PSF) Sale Trend Price (PSF) Trend
9% $200

Single Tenant Dollar Store Properties

8%

$175

$150 7% $125 6%

Dollar Tree
Inglewood, CA Price: $3,525,000 Cap Rate: 6.3%
www.cassidyturley.com

$100

5% 2010 2011 2012 2013

$75

Cap Rate

Average Price PSF

Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics

Cassidy Turley Net Lease Investment Services

Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics

13

Single Tenant Lease Single Tenant Net Net Lease Investment Overview 2013 Investment Overview Fall Fall 2013

National Single Tenant Dollar Store Market US Northeast Region Select Major Sale Transactions Property Dollar General Dollar General Dollar General Dollar General Family Dollar Dollar General Dollar General 116 E. Center St, Manchester, CT 233 S. Bohemia Ave, Cecilton, MD 1406 N. High St, Millville, NJ 4402 State Route 981, Avonmore, PA 4269 US Highway 11, De Kalb Junction, NY 557 Broad St, Waverly, NY 41 W. Main Street, Fonda, NY Total SF 12,000 12,382 8,640 9,100 8,000 9,100 6,494 Sale Date 08/2013 01/2013 05/2013 02/2013 02/2013 01/2013 08/2013 Sale Price $1,895,000 $1,735,000 $1,360,000 $1,276,000 $1,042,700 $640,000 $590,000 Price PSF $158 $140 $157 $140 $130 $70 $91 Cap Rate 7.4% 7.4% 8.0% 7.2% 8.3% 8.4% 9.7%

National Single Tenant Dollar Store Market US Southern Region Select Major Sale Transactions Property Dollar General Fred's Super Dollar Dollar General Family Dollar Dollar General Dollar General Dollar General Family Dollar Dollar General Family Dollar 3409 Dr. Martin Luther King Blvd, Fort Myers, FL 5590 Barksdale Blvd, Bossier City, LA 2331 N. Highway 231, Panama City, FL 951 Doyle Rd, Deltona, FL 15449 O'Neal Rd, Gulfport, MS 6134 Broad St, Douglasville, GA 13807 N. Main Street, Jacksonville, FL 2711 Getwell Rd, Memphis, TN 9940 Route 643, Hurley, VA 10747 Homestead Rd, Houston, TX Total SF 9,100 16,799 9,100 9,600 9,100 9,100 9,026 8,320 12,480 8,320 Sale Date 06/2013 06/2013 07/2013 05/2013 09/2013 04/2013 04/2013 01/2013 05/2013 04/2013 Sale Price $1,956,603 $1,920,000 $1,897,230 $1,700,000 $1,663,752 $1,570,000 $1,546,730 $1,495,954 $1,482,581 $1,477,311 Price PSF $215 $114 $208 $177 $183 $173 $171 $180 $119 $178 Cap Rate 7.0% 9.0% 6.5% 7.8% 7.0% 7.0% 6.7% 8.5% 7.0% 8.1%

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Single Tenant Net Lease Investment Overview Fall 2013

National Single Tenant Dollar Store Market US Midwest Region Select Major Sale Transactions Property Family Dollar Family Dollar Family Dollar Dollar General Dollar General Dollar General Dollar General Family Dollar Family Dollar Dollar General 12299 S. Pulaski St, Alsip, IL 37040 Green St, New Baltimore, MI 225 W. Main St, Crosby, MN 226 S. Somonauk Rd, Cortland, IL 811 E. McDevitt Avenue, Jackson, MI 24199 1st Ave, Siren, WI 1001 W. Walnut Ave, Frankfort, IN 8154 Main St, Birch Run, MI 1432 S. Main St, Rockford, IL 12421 Hayes Street, Detroit, MI Total SF 8,222 8,000 9,500 8,833 9,000 9,026 9,014 9,500 9,180 13,478 Sale Date 04/2013 06/2013 07/2013 01/2013 08/2013 08/2013 02/2013 07/2013 08/2013 08/2013 Sale Price $1,800,000 $1,519,000 $1,150,112 $1,120,000 $1,106,000 $1,105,000 $962,000 $958,878 $855,000 $841,500 Price PSF $219 $190 $121 $127 $123 $122 $107 $101 $93 $62 Cap Rate 9.6% 7.7% 8.0% 7.1% 8.0% 7.7% 8.0% 8.0% 9.6% 8.9%

National Single Tenant Dollar Store Market US West Region Select Major Sale Transactions Property Dollar Tree Dollar General Dollar Tree Dollar General Family Dollar Dollar General Family Dollar Family Dollar Family Dollar Family Dollar 811 N. La Brea Ave, Inglewood, CA 5090 S. Maryland Pkwy, Las Vegas, NV 1895 Howe Ave, Sacramento, CA 1335 W. Ajo Way, Tucson, AZ 5167 E. Belmont Ave, Fresno, CA 1742 N. Ruthrauff Rd, Tucson, AZ 300 N. Village Wy, Dewey, AZ 1685 E. Cottonwood St, Cottonwood, AZ 4915 E. Desert Inn Rd, Las Vegas, NV 347 W. Carr Ave, Cripple Creek, CO Total SF 12,221 12,380 12,928 9,100 8,320 9,100 8,320 9,180 10,187 8,050 Sale Date 05/2013 10/2013 04/2013 05/2013 04/2013 06/2013 05/2013 07/2013 04/2013 04/2013 Sale Price $3,525,000 $3,267,815 $2,350,000 $1,790,000 $1,620,000 $1,587,000 $1,422,000 $1,410,000 $1,206,000 $1,003,000 Price PSF $288 $264 $182 $197 $195 $174 $171 $154 $118 $125 Cap Rate 6.3% 6.0% 6.9% 6.8% 6.9% 7.2% 7.9% 8.5% 7.8% 8.0%

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Single Tenant Net Lease Investment Overview Fall 2013
Single-Tenant Automotive Retail Trends Top Automotive Deals
• The national average price on the automotive deals we tracked in Q3 2013 was $137 per square foot. This compares to an average of $133 per square foot in Q2 and $126 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend has been one of pricing increases as underlying economic and retail real estate fundamentals have improved. The pace of these pricing increases, however, is likely to slow heading into 2014. Rising interest rates next year will eventually flatten pricing as the price of borrowing increases and cap rates climb. • The average capitalization rate for deals that closed in Q3 2013 was 7.5%. This compares to an average of 7.9% in Q2 and a reading of 7.2% exactly one year ago.
$4,734,756 7.6%

Pep Boys
Nashua, NH Sale Price: Cap Rate:

• Because automotive leases tend to be shorter in length than the ones we see for drug stores or fast food—typically averaging 10 to 15-year terms, depending on the user—we see slightly higher cap rates in general for this asset class. • The gold standard for single-tenant automotive investment deals remain corporate leases to strong, national credit players like Jiffy Lube, Firestone, O’Reilly Automotive and Pep Boys. This is assuming, of course, that the location itself is a strong asset and that there is a long-term lease in place. Regardless, we continue to see strong investor demand even for properties leased by weaker credit tenants assuming other positive attributes are in place.

Firestone
Baltimore, MD Sale Price: Cap Rate: $3,800,000 6.8%

• Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for single-tenant automotive retail opportunities will mean less of an uptick for these properties—particularly first-tier options.

National Tire & Battery
Countryside, IL Sale Price: Cap Rate: $2,700,000 7.7%

Single Tenant Automotive Properties
Average Cap Rate & Sale Price Average Cap Rate &(PSF) Sale Trend Price (PSF) Trend
12%
11% 10% 9% 8% 7% $100 $200

Single Tenant Automotive Properties

$250

$150

Meineke
Costa Mesa, CA Price: $1,625,000 Cap Rate: 6.5%

6% 5% 4% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$50

$0

Cap Rate

Average Price PSF

Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics

Cassidy Turley Net Lease Investment Services www.cassidyturley.com

Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics

16

National Single Tenant Automotive Market US Northeast Region Select Major Sale Transactions Property Pep Boys Pep Boys STS Tire & Auto Center Little Neck Auto Care Center Garden State Auto Medix 274 Amherst Street, Nashua, NH 331 Crooked Lane, King of Prussia, PA 2150 Route 33, Hamilton, NJ 47 Little Neck Parkway, Little Neck, NY 965 Rahway Avenue, Union, NJ Total SF 19,300 10,000 6,955 3,500 3,760 Sale Date 01/2013 08/2013 05/2013 04/2013 05/2013 Sale Price $4,734,756 $1,500,000 $1,300,000 $1,200,000 $775,000 Price PSF $245 $150 $187 $343 $206 Cap Rate 7.6% N/A N/A 6.5% N/A

National Single Tenant Automotive Market US Southern Region Select Major Sale Transactions Property Sears Auto Center Firestone Pep Boys Pep Boys Christian Brothers Automotive 160 N. New Hope Road, Gastonia, NC 6581 Eastern Avenue, Baltimore, MD 950 Hooks Street, Clermont, FL 830 SE Military Dr, San Antonio, TX 22120 Highway 290, Cypress, TX Total SF 8,000 8,500 14,360 22,737 4,921 Sale Date 05/2013 01/2013 06/2013 04/2013 08/2013 Sale Price $5,330,500 $3,800,000 $3,300,000 $2,635,000 $2,289,000 Price PSF $666 $447 $230 $116 $465 Cap Rate N/A 6.8% 7.6% 7.7% 7.3%

National Single Tenant Automotive Market US Midwest Region Select Major Sale Transactions Property Firestone National Tire & Battery Tire Discounters Advanced Auto Parts Tire Discounters 590 E. Roosevelt Road, Lombard, IL 9850 Joliet Road, Countryside, IL 1544 Georgesville Road, Columbus, OH 1135 E. Division Street, Diamond, IL 960 S. Shannon Street, Van Wert, OH Total SF 8,500 11,142 6,000 6,125 7,000 Sale Date 04/2013 03/2013 07/2013 02/2013 06/2013 Sale Price $4,178,000 $2,700,000 $1,682,500 $1,639,100 $1,506,860 Price PSF $492 $242 $280 $268 $215 Cap Rate 6.8% 7.7% 8.2% 7.1% 8.0%

National Single Tenant Automotive Market US West Region Select Major Sale Transactions Property Ramona Tire Christian Brothers Auto Jiffy Lube Meineke Jiffy Lube Jiffy Lube Autozone 1488 E. 2nd Street, Beaumont, CA 14755 E. Arapahoe Road, Aurora, CO 4500 Clayton Street, Concord, CA 2049 Harbor Boulevard, Costa Mesa, CA 2517 S. El Camino Real, San Mateo, CA 1209 N. Dysart Road, Avondale, AZ 7659 E. Guadelupe Road, Mesa, AZ Total SF 4,990 4,945 4,170 5,431 4,060 2,134 5,399 Sale Date 07/2013 10/2013 07/2013 05/2013 06/2013 10/2013 04/2013 Sale Price $2,495,000 $2,410,000 $2,016,100 $1,625,000 $1,580,000 $1,310,000 $850,000 Price PSF $500 $487 $483 $299 $389 $614 $157 Cap Rate 6.0% 7.0% 6.3% 6.5% 6.4% 8.2% 5.9% 17

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Single Tenant Net Lease Investment Overview Fall 2013
Top Gas Station / Convenience Store Deals Gas Station / Convenience Store Trends
• The national average price on the convenience store/gas station deals we tracked in Q3 2013 was $662 per square foot. This compares to an average of $702 per square foot in Q2 and $638 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. There are also large disparities in pricing depending upon geography both in terms of local market pricing, but also in terms of urban versus suburban or rural pricing. It is not uncommon for deals above $1,000 per square foot in urban markets. The general trend, however, is one of increasing pricing as economic and commercial real estate fundamentals continue to improve. The trend of rising prices will slow or flatten once we see interest rate hikes next year. • Deal activity this year has been extremely strong in the southeastern United States with robust trading activity in both the Florida and Texas markets. California, Arizona and Nevada are the western markets that have seen the most trading activity so far in 2013. • The average capitalization rate for deals that closed in Q3 2013 was 5.9%. This compares to an average of 6.0% in Q2 and a reading of 6.6% exactly one year ago. • Cap rates for convenience store/gas stations have consistently averaged lowest for corporate owned locations, particularly for 7 Elevens and those of major chain operators, regardless of the banner they operate under. Individual franchises, on the other hand, are largely a matter of individual credit and length of remaining lease. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier fast food opportunities will mean less of an uptick for these properties.

7-Eleven
San Diego, CA Price: $3,700,000 Cap Rate: 5.1%

7-Eleven
Sunrise, FL Price: $4,775,000 Cap Rate: 5.3%

Single Tenant Gas Station/Convenience Store Single Properties Tenant Gas Station / Convenience Store Properties
Average Cap Rate & Sale Price Average Cap Rate &(PSF) Sale Trend Price (PSF) Trend
10% $800

BP
Pittsburgh, PA Price: $1,675,000 Cap Rate: 5.3%

9% $700 8% 7% 6% $500 5% 4% 2010 2011 2012 2013 $400 $600

Cap Rate

Average Price PSF

Kwik Trip
Baraboo, WI Price: $1,053,000 Cap Rate: 10.0%
Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics
Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics

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National Single Tenant Gas Station / Convenience Store Market US Northeast Region Select Major Sale Transactions Property Mobil Mobil 7-Eleven Sheetz Mobil Exxon BP BP Shell Pik Qwik 2001 Barlow Ave, Bronx, NY 2474 Flatbush Ave, Brookkyn, NY 175 W. Sunrise Hwy, Lindenhurst, NY 809 E, Main St, Girard, PA 1501 5th Ave, Bay Shore, NY 75 Route 17, Ramsey, NJ 2269 Noblestown Rd, Pittsburgh, PA 8136 Ohio River Blvd, Pittsburgh, PA 103 Taunton Rd, Medford, NJ 138 Main St, Thomaston, ME Total SF 1,941 2,108 2,640 6,483 1,453 4,102 2,186 2,660 1,305 2,274 Sale Date 07/2013 10/2013 06/2013 08/2013 02/2013 05/2013 05/2013 01/2013 01/2013 09/2013 Sale Price $6,350,000 $3,500,000 $3,000,000 $2,400,000 $2,100,000 $2,030,293 $1,675,000 $1,480,000 $1,025,000 $550,000 Price PSF $3,272 $1,660 $1,136 $370 $1,445 $495 $766 $556 $785 $242 Cap Rate N/A N/A 5.6% 6.0% N/A N/A 5.3% 5.9% 11.0% 12.0%

National Single Tenant Gas Station / Convenience Store Market US Southern Region Select Major Sale Transactions Property Quiktrip 7-Eleven WaWa Sunoco Exxon 7-Eleven Circle K 7-Eleven Exxon BP 9020 S. Tryon Rd, Charlotte, NC 9998 Sunset Strip, Sunrise, FL 8049 E. Colonial Dr, Oralndo, FL 600 S. Courtenay Pkwy, Merritt Island, FL 3501 Grapevine Mills Pkwy, Grapevine, TX 1701 State Highway 276, Rockwell, TX 1801 S. Tamiani Tr, Sarasota, FL 6340 Mechanicsville Tpke, Mechanicsville, VA 1101 Annapolis Rd, Odenton, MD 4592 N. Valdosta Blvd, Valdosta, GA Total SF 4,527 5,576 5,636 2,353 4,297 3,000 4,121 3,162 2,230 3,000 Sale Date 03/2013 04/2013 06/2013 04/2013 07/2013 03/2013 09/2013 06/2013 05/2013 02/2013 Sale Price $4,799,000 $4,775,000 $2,844,827 $2,809,105 $2,713,846 $2,330,000 $2,325,000 $2,243,000 $1,570,500 $1,120,000 Price PSF $1,060 $856 $505 $1,194 $632 $777 $564 $709 $704 $373 Cap Rate 7.3% 5.3% 5.8% 7.5% 6.5% 5.7% 5.9% 6.0% 5.4% 8.8%

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Single Single Tenant Tenant Net Net Lease Lease Investment Investment Overview Overview Fall Fall 2013 2013

National Single Tenant Gas Station / Convenience Store Market US Midwest Region Select Major Sale Transactions Property 7-Eleven SuperAmerica 7-Eleven BP BP Kwik Trip 7-Eleven 7-Eleven White Hen Pantry Kum & Go 5402 E. Superior Dr, Duluth, MN 7525 N. Brooklyn Blvd, Monneapolis, MN 26 W. Main St, Lexington, OH 20420 Chagrin Blvd, Shaker Heights, OH 1201 Omniplex Dr, Cincinnati, OH 602 W. Pine St, baraboo, WI 11202 Midland Blvd, St. Louis, MO 2425 S. Big Bend Blvd, St. Louis, MO 210 W. Fullerton Ave, Addison, IL 1401 Court St, Sioux City, IA Total SF 1,309 5,456 2,700 2,827 2,262 3,254 2,640 2,460 2,520 2,625 Sale Date 08/2013 05/2013 04/2013 05/2013 05/2013 02/2013 09/2013 03/2013 02/2013 05/2013 Sale Price $2,200,000 $2,144,848 $2,040,000 $1,948,625 $1,865,000 $1,053,000 $956,760 $800,000 $405,000 $177,810 Price PSF $1,681 $393 $756 $689 $824 $324 $362 $325 $161 $68 Cap Rate N/A N/A 5.9% N/A N/A 10.0% 7.5% 5.8% 8.0% 8.4%

National Single Tenant Gas Station / Convenience Store Market US West Region Select Major Sale Transactions Property 7-Eleven 7-Eleven Shell 7-Eleven 7-Eleven Arco Shell 7-Eleven Circle K Circle K 7807 Balboa Ave, San Diego, CA 8925 S. Las Vegas Blvd, Las Vegas, NV 26721 Rancho Pkwy, Lake Forest, CA 11945 Peoria St, Henderson, CO 2471 S. 7200 W, Salt Lake City, UT 18025 Magnolia St, Fountain Valley, CA 1810 Main St, Colorado Springs, CO 4500 NE St, Johns Rd, Vancouver, WA 5685 S. Eastern Ave, Las Vegas, NV 965 W. Baseline Rd, Tempe, AZ Total SF 2,200 3,000 4,000 3,000 3,000 1,246 3,000 3,889 2,358 2,781 Sale Date 03/2013 05/2013 07/2013 09/2013 08/2013 03/2013 06/2013 04/2013 04/2013 02/2013 Sale Price $3,700,000 $3,000,000 $2,915,000 $2,150,000 $2,025,000 $1,850,000 $1,730,000 $1,565,000 $1,450,000 $1,107,700 Price PSF $1,682 $1,000 $729 $717 $675 $1,485 $577 $402 $615 $398 Cap Rate 5.1% 6.8% 5.0% 5.6% 5.7% 3.2% 7.3% 5.8% 5.5% 6.5%

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Single Tenant Net Lease Investment Overview Fall 2013
Big Box Retail Trends—Junior Box Properties (20,000 – 39,999 SF)
• The national average price on the junior box deals we tracked in Q3 2013 was $148 per square foot. This compares to an average of $118 per square foot in Q2 and $105 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend, however, is one of increasing pricing as economic and commercial real estate fundamentals continue to improve. The trend of rising prices will slow or flatten once we see interest rate hikes next year. • Junior boxes remain the strongest segment of the big box market, simply because they have the largest potential tenant pool and we continue to see aggressive expansion from key users such as smaller format grocery, off-price apparel and discounters. We expect this trend to continue as larger box users continue to shrink formats—particularly those making the transition from mid-box floorplates to more nimble junior box footprints. • Virtually all of the big box vacancy overhang leftover from the early days of the recession has been backfilled in the 20,000 to 40,000 square foot range. This is certainly the case for Class A properties, where few vacancies remain, and demand from tenants is starting to spur development once again. • The average capitalization rate for deals that closed in Q3 2013 was 7.6%. This compares to an average of 7.5% in Q2 and a reading of 7.6% exactly one year ago. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier opportunities (the best locations with long-term leases in place to the strongest national credit tenants) will mean less of an uptick for these properties.

Big Box Retail Trends—Mid-Box Properties (40,000 – 79,999 SF)
• The average price on the mid-box deals we tracked in Q3 2013 was $131 per square foot. This compares to an average of $122 per square foot during Q2 a metric of $140 per square foot exactly one year ago. The general trend has been one of pricing generally holding its own with Class A space posting increases while Class B and C properties continue to struggle with a competitive environment. Expected interest rate hikes next year will likely have a negative impact on pricing as the cost of borrowing increases. • The average capitalization rate on mid-box deals that closed during the third quarter was 7.9%. This reflects a slight increase from the average cap rate of 7.5% posted in Q2, but a decrease from the 8.1% average that was in place one year ago. This number had been decreasing thanks to the fact that the pool of distressed mid-boxes had slowly been shrinking. However, the movement has been minimal with tenant credit remaining the primary determinant. • While most of the big box vacancy overhang leftover from the early days of the recession has been backfilled in the 40,000 to 80,000 square foot range throughout the nation’s Class A shopping centers, there remain issues for Class B and C space— particularly in tertiary or rural markets. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier opportunities (the best locations with longterm leases in place to the strongest national credit tenants) will mean less of an uptick for these properties.

ig Box Retail Properties unior Junior Boxes (20,000 to 40,000 SF) Box Retail Properties
Average & Sale Price Average Cap Rate &Cap Sale Rate Price (PSF) Trend
10%

(PSF)

Big Box Retail Properties Mid-Boxes (40,000 to 80,000 SF) Mid-Box Retail Properties
Average & Sale Price Average Cap Rate &Cap Sale Rate Price (PSF) Trend
$250 12%
11% 10%

(PSF)
$200
$175 $150 $125

9%

$200

8%

$150

9% 8% 7% $100 $75 $50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

7%

$100

6%

$50 6%

5% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$0

5%

Cap Rate

Average Price PSF

Cap Rate

Average Price PSF

Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics
Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics

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Big Box Retail Trends—Mega-Box Properties (80,000 SF +)
• The average price on mega-box deals we tracked in Q3 2013 was $88 per square foot. This compares to last quarter’s average of $70 per square foot and a reading of $75 per square foot exactly one year ago. These metrics, of course, only reflect what actually has sold. The general trend has been one of pricing generally holding its own. Class A space has posted modest gains but Class B and C properties continue to struggle. Expected interest rate hikes next year will likely have a negative impact on pricing as the cost of borrowing increases. • Mega-box tenancy remains an issue impacting the volatility of this sector of the marketplace. At one end of the scale, we continue to see new Target and Walmart Supercenters being developed and those properties are the gold standard of mega box net lease retail. On the other hand, department stores are generally focusing on building their discount concepts or e-commerce presence and huge questions remain as to the future health of major users like Sears and JCPenney. The pool of tenants is shrinking and though we are likely to see minor improvement from some user types, the overall trend is one of shrinking mega-box usage. • There are some larger user types that we expect to see more active in 2014 as the housing market continues to rebound. So long as personal income levels continue the current trend of moderate increases, the housing market should continue its recovery next year despite the fact that interest rates will likely tick up slightly. This will eventually translate into more demand for housing related retail like D-I-Y stores and furniture retailers who typically operate in this size range. However, the increases in rental demand will be modest at best before 2015. • The average capitalization rate on closed mega-box deals in Q3 2013 was 7.5%. This compares to an average cap rate of 6.2% last quarter and 7.3% exactly one year ago. These averages, however, are a bit misleading and mask the substantial bifurcation that remains in the marketplace. In general, top properties with the best occupancy are moving at 7.0% cap rates or below, but nearly everything else is trading above—often significantly above—that rate. The problem is that most troubled properties are not moving at all, which is why the average numbers appear to reflect cap rate compression when that is only modestly the case for top-tier assets. • Cap rates will likely increase by the final half of 2014 as interest rates rise, however, continued intense competition for first-tier opportunities (the best locations with long-term leases in place to the strongest national credit tenants) will mean less of an uptick for these properties.

Big Box Retail Properties Mid-Boxes (40,000 to 80,000 SF)
Mega Retail Properties Average Cap RateBox & Sale Price (PSF) Trend
12%
11% 10% 9% $125 8% 7% 6% 5% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $100 $75 $50

Average Cap Rate & Sale Price (PSF)
$200
$175 $150

Cap Rate

Average Price PSF

Source: Cassidy Turley BT Commercial Research, Costar, Real Capital Analytics

Cassidy Turley Net Lease Investment Services

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Single Tenant Net Lease Investment Overview Fall 2013

National Single Tenant Big Box Retail Market US Northeast Region Select Major Sale Transactions Property Junior Boxes (20,000 - 40,000 SF) La-Z-Boy Crème de la Crème Learning Center Maybrook Travel Center Tractor Supply PetSmart Mid-Boxes (40,000 - 80,000 SF) PetSmart/Bob's Discount Furniture ShopRite LA Fitness Toys R Us LA Fitness Mega-Boxes (80,000 SF +) Multiplex Cinemas BJ's Wholesale Club BJ's Wholesale Club Costco Lowe's 750 W. Sunrise Hwy, Valley Stream, NY 5 Ward St, Revere, MA 1785 Airport Rd, Allentown, PA 325 Promenade Blvd, Bridgewater, NJ 1605 Macedon Pkwy, Macedon, NY 85,586 120,224 112,230 136,570 139,410 04/2013 09/2013 09/2013 02/2013 08/2013 $22,500,000 $16,400,000 $10,600,000 $7,511,350 $6,565,000 $263 $136 $94 $55 $47 N/A N/A 8.1% N/A N/A 114 Commerce Wy, Woburn, MA 709 Central Ave, Albany, NY 1600 E. Ridge Rd, Rochester, NY 2819 Kennedy Blvd, North Bergen, NJ 3000 Lincoln Pl, Greensburg, PA 56,566 65,000 45,000 41,477 45,000 07/2013 06/2013 09/2013 06/2013 01/2013 $17,600,000 $16,732,586 $10,300,000 $9,025,000 $8,800,000 $311 $257 $229 $218 $196 N/A N/A N/A 8.0% N/A 233 Buckland Hills Dr, Manchester, CT 794 US Highway 202, Bridgewater, NJ 125 Neelytown Rd, Montgomery, NY 2970 Route 940, Mount Pocono, PA 420 Home Dr, Pittsburgh, PA 24,670 21,555 37,889 24,727 26,040 04/2013 05/2013 07/2013 02/2013 05/2013 $7,750,000 $6,900,000 $5,750,000 $5,490,000 $3,458,997 $314 $320 $152 $222 $133 8.3% 8.6% 7.3% 7.1% N/A Total SF Sale Date Sale Price Price PSF Cap Rate

Top Big Box Retail Transactions
LA-Z-BOY
Manchester, CT Sale Price: $7,750,000 Cap Rate: 8.3%

Toys R Us
North Bergen, NJ Sale Price: $9,025,000 Cap Rate: 8.0%

Tractor Supply
Mount Pocono, PA Sale Price: $5,490,000 Cap Rate: 7.1%

BJ’s Wholesale Club
Allentown, PA Sale Price: $10,600,000 Cap Rate: 8.1%

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National Single Tenant Big Box Retail Market US Southern Region Select Major Sale Transactions Property Junior Boxes (20,000 - 40,000 SF) Whole Foods Staples The Container Store Ashley Furniture Fresh Market Mid-Boxes (40,000 - 80,000 SF) Academy Sports Gander Mountain Winn Dixie Hobby Lobby Belk Mega-Boxes (80,000 SF +) Walmart Reasor's Lowe's Lowe's Kohl's 3274 Inner Perimeter Rd, Valdosta, GA 446 S. Elm St, Jenks, OK 1836 US Highway 78 E, Oxford, AL 2470 Whiskey Rd, Aiken, SC 1301 Beaver Creek Commons Dr, Apex, NC 179,958 81,014 135,197 135,197 101360 05/2013 09/2013 07/2013 08/2013 04/2013 $15,105,000 $11,400,000 $11,250,000 $10,600,000 $7,265,000 $84 $141 $83 $78 $72 6.2% 8.0% 7.8% 7.5% 6.4% 455 Norman Rd, Valdosta, GA 1523 Vann Dr, Jackson, TN 4701 Center Point Rd, Pinson, AL 2987 Watson Blvd, Warner Robins, GA 997 Bullsboro Dr, Newnan, GA 71,680 65,000 58,037 55,000 66,412 05/2013 09/2013 01/2013 01/2013 06/2013 $9,790,000 $8,000,000 $6,305,300 $5,250,000 $4,900,000 $137 $123 $109 $95 $74 7.5% 8.7% 7.8% 8.4% N/A 12150 Biscayne Blvd, North Miami, FL 2121 Biscayne Blvd, Miami, FL 8460 Parkwood Boulevard, Plano, TX 1201 S. Earl Rudder Frwy, College Station, TX 3285 Robinhood Dr, Winston-Salem, NC 36,000 20,388 23,286 35,000 21,028 07/2013 05/2013 05/2013 06/2013 03/2013 $19,800,000 $17,375,000 $7,950,000 $5,900,000 $4,640,000 $550 $852 $341 $169 $221 N/A 5.3% 8.2% 8.5% 7.3% Total SF Sale Date Sale Price Price PSF Cap Rate

Top Big Box Retail Transactions
Staples
Miami, FL Sale Price: $17,375,000 Cap Rate: 6.3%

Academy Sports
Valdosta, GA Sale Price: $9,790,000 Cap Rate: 7.5%

Fresh Market
Winston-Salem, NC Sale Price: $4,640,000 Cap Rate: 7.3%

Lowe’s
Aiken, SC Sale Price: $10,600,000 Cap Rate: 7.5%

Cassidy Turley Net Lease Investment Services

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Single Tenant Net Lease Investment Overview Fall 2013

National Single Tenant Big Box Retail Market US Midwest Region Select Major Sale Transactions Property Junior Boxes (20,000 - 40,000 SF) Tractor Supply Best Buy Gander Mountain Fresh Market OfficeMax Bank of America Mid-Boxes (40,000 - 80,000 SF) Kittle's Factory Outlet Cub Foods Econo Foods Big Lots Pamida Mega-Boxes (80,000 SF +) Home Depot Kohl's Kohl's BJ's Wholesale Club K-Mart Otswego Plaza, Plainwell, MI 13900 Aklrich Ave S, Burnsville, MN 1400 Lawson Dr, Howell, MI 6924 Frank Ave NW, North Canton, OH 1825 N. State Route 19, Fremont, OH 96,801 102,412 88,000 108532 172655 05/2013 01/2013 03/2013 02/2013 05/2013 $13,389,430 $12,830,000 $12,441,188 $10,771,900 $4,150,000 $138 $125 $141 $99 $24 6.2% 6.3% 6.8% 7.9% 23.8% 9810 Carney Dr, Fishers, IN 350 McHenry Rd, Buffalo Grove, IL 1000 W. Sharon Ave, Houghton, MI 5112 Miller Rd, Flint, MI 174 James Robertson Dr, Gladwin, MI 62,015 56,192 49,618 40,000 42,128 07/2013 05/2013 08/2013 06/2013 04/2013 $5,300,000 $4,100,000 $3,300,000 $2,287,500 $2,000,000 $85 $73 $67 $57 $47 8.5% N/A 8.5% 8.8% 10.8% 1801 Milwaukee Ave, Burlington, WI 1600 Center Rd, Avon, OH 5114 W. Holiday Dr, Peoria, IL 3033 S.Halsted St, Chicago, IL 2950 5th Ave S, Fort Dodge, IA 510 N. Penn Ave, Independence, KS 22,670 30,814 31,080 20,500 23,516 25,962 02/2013 03/2013 09/2013 01/2013 05/2013 06/2013 $4,180,000 $3,975,000 $3,575,000 $3,500,000 $2,995,000 $600,000 $184 $129 $115 $171 $127 $23 7.2% 6.5% 9.3% N/A N/A 6.7% Total SF Sale Date Sale Price Price PSF Cap Rate

Top Big Box Retail Transactions
Best Buy
Avon, OH Sale Price: $3,975,000 Cap Rate: 6.5%

Big Lots
Flint, MI Sale Price: $2,287,500 Cap Rate: 8.8%

Gander Mountain
Peoria, IL Sale Price: $3,575,000 Cap Rate: 9.3%

Kohl’s
Burnsville, MN Sale Price: $12,830,000 Cap Rate: 6.3%

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National Single Tenant Big Box Retail Market US West Region Select Major Sale Transactions Property Junior Boxes (20,000 - 40,000 SF) Office Depot Tractor Supply Ralph's Big Lots Tractor Supply Mid-Boxes (40,000 - 80,000 SF) Whole Foods Hobby Lobby Dick's Sporting Goods Walmart Neighborhood Market Room Store Mega-Boxes (80,000 SF +) Sam's Club Room Store Fred Meyer's 7817 Park Meadows Dr, Lone Tree, CO 1661 S. Alma School Rd, Mesa, AZ 10201 SE 240th St, Kent, WA 129,715 120,026 167,146 09/2013 03/2013 06/2013 $17,617,000 $6,000,000 $13,338,000 $136 $50 $80 6.3% 10.4% N/A 230 Bay Pl, Oakland, CA 27200 Alicia Pkwy, Laguna Niguel, CA 1030 Green Acres Rd, Eugene, OR 1189 E. March Ln, Stockton, CA 555 N. Litchfield Rd, Goodyear, AZ 57,218 77,867 60,122 54,159 50,046 02/2013 09/2013 03/2013 05/2013 03/2013 $41,400,000 $15,100,000 $13,725,000 $8,574,900 $6,210,155 $724 $194 $228 $158 $124 N/A 5.7% 7.0% 6.0% N/A 4900 25th Ave NE, Seattle, WA 1131 W. Pacheco Blvd, Los Banos, CA 950 N. La Brea Ave, Inglewood, CA 17510 N. 75th Ave, Glendale, AZ 8540 E. Eastridge Rd, Prescott Valley, AZ 29,691 21,680 34,035 34,827 22,000 07/2013 03/2013 02/2013 01/2013 08/2013 $13,744,690 $5,500,000 $5,100,000 $5,001,500 $3,807,634 $463 $254 $150 $144 $173 5.0% 7.3% 5.4% 7.3% N/A Total SF Sale Date Sale Price Price PSF Cap Rate

Top Big Box Retail Transactions
Office Depot
Seattle, WA Sale Price: $13,744,690 Cap Rate: 5.0%

Hobby Lobby
Laguna Niguel, CA Sale Price: $15,100,000 Cap Rate: 5.7%

Ralph’s
Inglewood, CA Sale Price: $5,100,000 Cap Rate: 5.4%

Sam’s Club
Lone Tree, CO Sale Price: $17,617,000 Cap Rate: 6.3%

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Industrial Investment Trends Industrial Investment Deals
• The average price on the deals we tracked in Q3 2013 was $49 per square foot. This compares to $48 per square foot in Q2 and $47 per square foot exactly one year ago. However, there can be a wide divergence of price depending upon the type of industrial space. Modern distribution space with long-term leases in place to top logistics users routinely trade well above the $100 per square foot mark in nearly every major market (we’ve tracked a couple of FedEx deals above $250 per square foot), but pricing for older commodity warehouse tends to fall well below these averages. • Pricing is on the upswing but this is being driven by modern distribution product. In many markets, older warehousing space is only now beginning to show signs of rental rate growth following years of declining and then flat rents. Fundamentals continue to recover at a rapid clip, with occupancy growth for the industrial sector far outpacing that of office or retail. However, much of this has been driven by e-commerce buildto-suits for users like Amazon. Regardless, vacancies are falling for older properties as well and rents are poised to grow. • While we anticipate the trend of rising prices to continue heading into 2014, the likelihood of increased interest rates by midyear might derail this trend. We anticipate that average metrics will slow or flatten, although modern distribution facilities will likely still post increases.

Pearson Education
Cranbury, NJ Price: $98,000,000 Cap Rate: 7.0%

Mitsubishi
Suwanee, GA Price: $38,000,000 Cap Rate: 5.8%

• We have yet to see many e-commerce related properties come to market, but these may well be the next hot commodity for investors. While these tend to be highly specialized buildings (it is not uncommon for structures that cost $40 to $60 per square foot to build to feature $100 per square foot or more in tenant improvements), they also tend to have long lease terms in place. • The average capitalization rate for deals that closed in Q3 2013 was 7.6%. This compares to an average of 7.3% in Q2 and a reading of 7.5% exactly one year ago. Cap rates will increase by the final half of 2014 as interest rates rise, however, modern distribution facilities will see less of an uptick.

Rubbermaid
Kent, OH Price: $34,900,000 Cap Rate: 7.5%

Single Tenant Industrial Properties
Average Cap Rate & Sale Price (PSF) Trend

Single Tenant Industrial Properties Average Cap Rate & Sale Price (PSF) Trend
$90
$75 $60 $45 $30 $15 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

10%
9% 8% 7%

FedEx
San Diego, CA Price: $14,100,000 Cap Rate: 5.2%

6% 5% 4%

Cap Rate
Cassidy Turley Net Lease Investment Services www.cassidyturley.com

Average Price PSF

Source: Cassidy Turley Northern California Research, Costar, Real Capital Analytics

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Single Tenant Net Lease Investment Overview Fall 2013

National Single Tenant Industrial Market US Northeast Region Select Major Sale Transactions Property Pearson Education Barnes & Noble Mohawk Distribution Center BJ's Warehouse Talbots FedEx Ollie's Bargain Market Distribution Center Xpedx Lehigh Group Distribution Center FedEx 258 Prospect Plains Rd, Cranbury, NJ 1 Barnes & Noble Wy, Monroe Township, NJ 698 Route 46, Teterboro, NJ 309 Dulty's Ln, Burlington, NJ 175 Kenneth Welch Dr, Lakeville, MA 456 Sullivan Ave, South Windsor, CT 3300 Espresso Wy, York, PA 261 River Rd, Clifton, NJ 2834 Schoeneck Rd, Macungie, PA 550 Delancy St, Newark, NJ Total SF 886,875 1,145,200 616,992 633,436 555,000 224,061 603,000 230,953 270,000 52,000 Sale Date 09/2013 02/2013 06/2013 07/2013 05/2013 01/2013 03/2013 02/2013 06/2013 07/2013 Sale Price $98,000,000 $83,000,000 $81,000,000 $43,250,000 $36,743,057 $32,200,000 $31,671,000 $26,811,000 $16,550,000 $15,000,000 Price PSF $111 $72 $131 $68 $66 $144 $53 $116 $61 $288 Cap Rate 7.0% 7.5% 6.1% 7.4% N/A 6.4% 6.7% 5.0% 6.5% 5.6%

National Single Tenant Industrial Market US Southern Region Select Major Sale Transactions Property United Natural Foods Braun Medical FedEx Natural Selection Foods Watkins Sheperd Trucking PODS Enterprises FedEx Internal Revenue Service Dimension One Spas Raley's Distribution Center 17901 E. 40th Ave, Aurora, CO 7400 Hazard Ave, Westminster, CA 33104 25th Ave, Kettleman City, CA 3701 S. Avenue 3, Yuma, AZ 13827 Carmenita Rd, Santa Fe Springs, CA 1650 N. Kraemer Blvd, Anaheim, CA 1650 47th St, San Diego, CA 1973 Rulon White Blvd, Ogden, UT 2611 Business Park Dr, Vista, CA 3925 Seaport Boulevard, West Sacramento, CA Total SF 553,757 258,506 84,927 220,000 206,030 122,600 76,822 100,000 128,531 135,885 Sale Date 09/2013 04/2013 06/2013 10/2013 08/2013 04/2013 08/2013 05/2013 02/2013 10/2013 Sale Price $46,350,000 $26,700,000 $21,466,000 $17,850,000 $15,025,000 $14,300,000 $14,100,000 $12,625,000 $10,145,000 $9,675,000 Price PSF $84 $103 $253 $81 $73 $117 $184 $126 $79 $71 Cap Rate 7.2% 5.4% 7.4% 8.0% 7.5% 6.5% 5.2% 8.6% 10.0% 10.2%

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National Single Tenant Industrial Market US Midwest Region Select Major Sale Transactions Property Quaker Oats Rubbermaid Sears Logistics Services Case New Holland Distribution Center Liz Claiborne Sears Logistics Services FedEx Gannett FedEx Penda Corporation 9101 Orly Dr, Indianapolis, IN 212 Progress Blvd, Kent, OH 1600 N. Boudreau Rd, Manteno, IL 300 E. Pence Rd, Cameron, MO 8741 Jacquemin Dr, West Chester, OH 901 Canterbury Rd, Shakopee, MN 4600 Poth Rd, Columbus, OH 8751 N. Zachary Ln, Maple Grove, MN 2900 SW Brookside Dr, Grimes, IA 2344 W. Wisconsin Dt, Portage, WI Total SF 1,119,915 811,200 1,400,000 500,000 601,065 1,100,000 217,627 192,924 186,088 272,000 Sale Date 07/2013 01/2013 03/2013 06/2013 08/2013 09/2013 04/2013 03/2013 03/2013 01/2013 Sale Price $60,623,063 $34,900,000 $24,000,000 $23,500,000 $21,000,000 $17,000,000 $16,675,000 $14,400,000 $11,400,000 $9,965,789 Price PSF $54 $43 $17 $47 $35 $15 $77 $75 $61 $37 Cap Rate N/A 7.5% N/A 7.2% 8.0% N/A 7.5% 8.6% 7.9% 9.6%

National Single Tenant Industrial Market US West Region Select Major Sale Transactions Property United Natural Foods Braun Medical FedEx Natural Selection Foods Watkins Sheperd Trucking PODS Enterprises FedEx Internal Revenue Service Dimension One Spas Raley's Distribution Center 17901 E. 40th Ave, Aurora, CO 7400 Hazard Ave, Westminster, CA 33104 25th Ave, Kettleman City, CA 3701 S. Avenue 3, Yuma, AZ 13827 Carmenita Rd, Santa Fe Springs, CA 1650 N. Kraemer Blvd, Anaheim, CA 1650 47th St, San Diego, CA 1973 Rulon White Blvd, Ogden, UT 2611 Business Park Dr, Vista, CA 3925 Seaport Boulevard, West Sacramento, CA Total SF 553,757 258,506 84,927 220,000 206,030 122,600 76,822 100,000 128,531 135,885 Sale Date 09/2013 04/2013 06/2013 10/2013 08/2013 04/2013 08/2013 05/2013 02/2013 10/2013 Sale Price $46,350,000 $26,700,000 $21,466,000 $17,850,000 $15,025,000 $14,300,000 $14,100,000 $12,625,000 $10,145,000 $9,675,000 Price PSF $84 $103 $253 $81 $73 $117 $184 $126 $79 $71 Cap Rate 7.2% 5.4% 7.4% 8.0% 7.5% 6.5% 5.2% 8.6% 10.0% 10.2%

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Single Tenant Net Lease Investment Overview Fall 2013

Our Net Lease Services team understands the complexities and dynamics of the Net Lease marketplace. Our national platform is managed by an advisory committee composed of industry leaders from across the country. Please contact any of the following advisory committee members for more information on Cassidy Turley Net Lease Investment Services. Ric Russell San Francisco 415.781.8100 Ric.Russell@cassidyturley.com Chuck Klein San Diego 858.546.5473 cklein@cassidyturley.com Andy Bogardus San Francisco 415.677.0421 Andy.Bogardus@ cassidyturley.com Doug Longyear San Francisco 415.677.0458 Doug.Longyear@cassidyturley.com

Visit www.cassidyturley.com for more information on the full range of Cassidy Turley commercial real estate services. Core Services • • • • • Tenant Representation Project Leasing Property Management Project & Development Services Capital Markets - Debt Placement - Investment Sales - Note Sales - Structured Finance • Corporate Services - Facilities Management - Portfolio Administration - Project Management - Strategic Consulting - Transaction Management Real Estate • • • • • Office Industrial Retail Multi-family Land Practices and Specialties • • • • • • • • • Auction Services Distressed Assets Financial Advisory Food and Beverage Golf and Resort Properties Government Contracting Government Services Healthcare Higher Education • • • • • • • • • • Hospitality Law Firm Life Sciences Location Advisory and Incentives Mission Critical Net Lease Not-for-profit Private Client Supply Chain Sustainability Services

About Cassidy Turley Cassidy Turley is a leading commercial real estate services provider with more than 3,600 professionals in more than 60 offices nationwide. The company represents a wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion in 2011, manages 455 million square feet on behalf of institutional, corporate and private clients and supports more than 28,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside of North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley.
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For more information regarding this report, contact: Garrick Brown Director of Research San Francisco 916.329.1558 gbrown@ctbt.com

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