OFFERING MEMORANDUM. capital markets investment properties-socal

Transcription

1 OFFERING MEMORANDUM capital markets investment properties-socal

2 Marketed By: Investment Properties-SoCal MATT POURCHO Lic GARY STACHE Lic ANTHONY DELORENZO Lic DOUG MACK Lic CBRE Newport Beach 3501 Jamboree Rd. Ste 100 Newport Beach, CA F Property Information and Offering Materials Available at: CBRE, Inc. The information containing in this document has been obtained for sources believed reliable. While CBRE, Inc. does not doubt its accuracy, CBRE, Inc. has not verified it and makes no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property, The value of this transaction to you depends on tax and other factors which should be evaluated by your tax, financial and legal advisors. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs. Photos herein are the property of their respective owners and use of these images without the express written consent of the owner is prohibited. CBRE and the CBRE logo are service marks of CBRE, Inc. and/or its affiliated or related companies in the United States and other countries. All other marks displayed on this document are the Property of their respective owners.

3 table of contents 01 INVESTMENT SUMMARY 23 MARKET OVERVIEW 03 PROPERTY OVERVIEW 27 TENANT PROFILE 15 AREA OVERVIEW 31 FINANCIAL ANALYSIS

4 1 capital markets investment properties-socal investment summary Address Offering Price Scripps Summit Court San Diego, CA $10,750,000 ($178 PSF) Cap Rate 8.11% (Year 1) Leveraged Cash Return 12.05% (Year 1) Total Building Area Total Land Area Occupancy 100% Project Website ± 60,351 SF ± 3.22 Acres investment highlights

5 10637 scripps summit court, san diego, california 2 investment highlights 100% LONG TERM NNN LEASED STABLE CASH FLOW INVESTMENT 100% NNN leased to Dye Precision CNC (an ISO and ITAR Certified Company), a premier machine shop with over two decades of machining experience for the defense, aerospace, automotive, aviation, medical, electronic and general high technology industries. Dye Precision CNC, an expert in quality, innovation and project management serves both the US and Canada and with a partial client list of Cubic Defense, Space X, ATK Space Systems, Northrop Grumman, Department of Defense, Boeing, NASA, Nuclear Medicine, Solar Turbine and Caterpillar. Exceptional after debt cash-on-cash return of approximately 12% in year 1 due to historically favorable debt markets and the attractive in-place cash flow. 100% Occupancy Rate for Scripps Northridge and Scripps Ranch Industrial buildings above 20,000 SF. The two most relative submarkets, Poway and Scripps Ranch, have overall industrial vacancy rates of 2.9% and 4.3% respectively. All other relative submarkets along the I-15 freeway have an industrial vacancy rate below 6%. Above market loading with 11 grade level doors and 4 dock doors. EXCEPTIONAL I-15 FREEWAY LOCATION Immediate freeway access via the four-way interchange at Scripps Poway Parkway and the I-15 Tremendous amenity base: Within 3 miles of 29 banks, 16 grocery stores, 14 gyms, 11 hotels, 168 restaurants. Strong Demographics: Approximately 250,000 people reside within a five mile radius of the building with an average household income of $95,610. Located less than four miles from Lake Miramar, a popular spot for bicycling, jogging, walking, rollerblading, picnicking, kayaking and fishing. Within the vicinity of the Highway 56 Bike Path, a 10.3 mile route connecting inland and coastal San Diego County allowing cyclists and walkers a smooth paved road from I-15 all the way to the beach in Del Mar. PRICED AT $10,750,000 ($178 PSF), BELOW THE ESTIMATED REPLACEMENT COST OF $12,793,000 ($212 PSF) Flexible Design: multiple entrances and ability to split the building for two tenants ranging from 20,000 to 40,000 SF. Excellent curb appeal with extensive glass line, class A office interior improvements and new construction look (built in 2001).

6 property overview

7 10637 scripps summit court, san diego, california 4 property overview ADDRESS Scripps Summit Court, San Diego, CA APN BUILDING SIZE OFFICE % LAND SIZE 60,351 RSF 30% with 2nd story mezzanine +/ Acres (140,263 SF) YEAR BUILT 2001 CLEAR HEIGHT PARKING RATIO ROOF CONSTRUCTION TYPE LOADING ZONING +/- 2:1,000, expandable to 2.5:1,000 by paving field at east end of site. Flat Concrete 4 Dock Doors & 11 Grade Level IL-2-1

8 10637 scripps summit court, san diego, california 8 Site Plan SCRIPPS SUMMIT CT Unstriped parking (+/- 14 cars) Potential Parking Expansion

9 10637 scripps summit court, san diego, california 10 Parcel Map

10 11 capital markets investment properties-socal Floor Plan - West GD GD GD GD GD GD GD

11 10637 scripps summit court, san diego, california 12 Floor Plan - East GD GD GD GD

12 10637 scripps summit court, san diego, california 14 Floor Plan - West Mezzanine

13 area overview

14 scripps ranch overview scripps summit court, san diego, california 16 SCRIPPS RANCH Scripps Ranch is a vibrant suburb in the City of San Diego that is home to approximately 12,000 households with an average home value of $630,000. Including the affluent Stonebridge Estates neighborhood, the Scripps Ranch community boasts an average household income of $126,000. LAKE MIRAMAR Located less than four miles from Scripps Summit, Lake Miramar is very popular for bicycling, jogging, walking, rollerblading, picnicking and fishing. A 4.92-mile paved service road encircles the lake and there are 18 barbecues and 48 picnic tables. Lake Miramar is stocked with Florida-strain largemouth bass, bluegill, channel catfish, and sunfish for seasonal fishing. In addition to fishing from boats, patrons can use float tubes, waders, or simply fish from shore. ACTIVE OUTDOOR LIFESTYLE In addition to hiking and biking at Lake Miramar, the Scripps Ranch region provides great access to parks, open space, and trails that are a hallmark of San Diego s active outdoor lifestyle. The Highway 56 Bike Path is a 10.3-mile route on a traffic-separated connection between inland and coastal San Diego County where cyclists can ride a smooth paved road from I-15 all the way to the beach in Del Mar. Popular hiking areas within several miles of Scripps Ranch include Los Penasquitos Canyon Preserve, Twin Peaks, and the Mount Woodson Trail hike to the iconic Potato Chip Rock. MARINE CORP AIR STATION MIRAMAR Located approximately eight miles from Northridge Summit, Marine Corp Air Station Miramar is a 24,000-acre military base that is home to the 3rd Marine Aircraft Wing, which is the aviation element of the 1st Marine Expeditionary Force. The base was originally founded in 1917 and annually hosts one of the largest airshows in the nation. The air station was once home to the United States Navy Fighter Weapons School program that inspired the movie Top Gun.

15 17 capital markets investment properties-socal scripps ranch (continued) GOLF COURSES With over 90 golf courses in the county, San Diego is a destination of choice for golf enthusiasts. Several premier golf courses within 10 miles of Northridge Summit include Carmel Mountain Ranch Country Club, Carmel Highland Golf Resort and Spa, Rancho Bernardo Inn, and Maderas Golf Club. A short 16- mile drive away is the world renown Torrey Pines Golf Course, home of the annual PGA Tour tournament The Farmers Insurance Open and the host of the 2008 and 2021 U.S. Open. Expeditionary Force. The base was originally founded in 1917 and annually hosts one of the 2008 and 2021 U.S. Open. RETAIL AMENITIES Scripps Ranch is served by over 750,000 square feet of retail amenities including Scripps Ranch Marketplace, Scripps Mesa Village, Mira Mesa Marketplace, and SR Ranch Shopping Center providing numerous shopping and dining choices. The Watermark (Proposed) - Sudberry Properties has proposed a 375,000 SF mixed-use project which will add to Scripps Northridge s existing 254,000 SF retail base. Scripps Ranch Marketplace - the convenience of a full range of shops and services. Everything from vitamins to your neighborhood veterinarian, dental care to hair care plus a Vons Superstore and a CVS pharmacy. Scripps Ranch Village - a local retail center comprised of national tenants; Subway, Panda Express and Wells Fargo. Scripps Gateway - gas, restaurants and hotel amenities serving the local Scripps Ranch community.

16 Oviedo 15 Carmel Mounta Ted William wy Local Map Darkwood Rd Camino Ruiz SCRIPPS NORTHRIDGE OVERVIEW Scripps Northridge is one of the most scenic and picturesque communities in San Diego. Centrally located along the Interstate 15 Business Corridor, there is easy access throughout San Diego County by using Ted Williams Parkway and Highway 56. Scripps Northridge is close to Downtown San Diego and the San Diego International Airport. Park and Ride systems are available in several areas of the surrounding community. 56In addition, Scripps Northridge benefits from the reverse commute to and from coastal communities via Highway 56 and executive housing in Poway and Scripps Northridge. Carmel Mountain Rd Sundance Ave Menkar Rd Black Mountain Rd The surrounding neighborhood is more conducive to a better quality of living as compared to neighboring submarkets; Scripps Northridge was developed to have a park-like setting with an emphasis placed on a more nature-based feel in housing, schools, parks, etc. Salmon River Rd The master planned community of Scripps Northridge is highly sought after for both its affordable and executive housing. The community has highly ranked schools, and offers numerous new retail centers in close proximity to its commercial areas, including the widely acclaimed Carmel Mountain Ranch Plaza, Mira Mesa Marketplace, and Villages at Scripps Ranch. Mercy Rd Notable tenants within the surrounding submarket include Dart Neurosciences, National Penn, Carl Zeiss, MedImpact, Madkatz, LG, Teledyne, Microsoft, Hitachi, Inova Diagnostics, US Bank, USA Federal Credit Union, Paychex, and Tyco. The small submarket of Sabre Springs is included in the larger Scripps Ranch submarket and notable tenants include General Atomics, Bridgepoint Education, and Labcorp. The Property is located one freeway exit north of approximately 1 million square feet of retail in a variety of projects providing a wide variety of restaurant and retail services, an assortment of fitness options, and residential apartment homes and condominiums. In addition, the property is within walking distance of over 254,000 SF of retail amenities. 15 Interstate 15 Express Scripps Summit Dr Scripps Summit Ct. Scripps Ranch Blvd Sabre Springs Pkwy Scripps Poway Pkwy mar SCRIPPS NORTHRIDGE Del Mar Heights Pines eserve Spruce Run Dr Springhurst Dr C ypress Canyon Rd 5 Spring Canyon Rd Mission Bay Park San Diego International Airport Marine Corps Air Station Miramar 15 Balboa Park San Diego Coronado National City San Diego Bay 52 Mission Trails Regional Park Montgomery Field 8 Scripps Ranch Regional Map La Mesa Spring Valley La Presa Sycamore Canyon County Park Gillespie Field Santee El Cajon Pomerado Rd Sa R L Win Gard Ranc San D

17 19 capital markets investment properties-socal san diego county overview SAN DIEGO COUNTY San Diego County s nearly perfect year-around weather combined with a dynamic economy make the region one of the most desirable places to live and work in the United States. San Diego s quality of life and burgeoning economy attract residents, businesses and visitors from around the world. Over the last two decades, the San Diego region has developed its own progressive identity as a premier tourist destination as well as a leader in defense development, biotechnology, sustainable energy, wireless and telecommunications technologies, and electronics manufacturing. North County San Diego is one of the most affluent regions in California and hosts the world s largest golf manufacturing industry. South County boasts a flourishing industrial and manufacturing base fueled by large defense contractors, mediumsized family-owned companies, and international Maquiladoras. The city of San Diego encompasses 372 square miles in Central San Diego County and includes densely populated coastal and inland communities. San Diego East County is a mix of established older neighborhoods, rural communities, and expansive open space. GEOGRAPHY Framed by the Pacific Ocean to the west, mountains and desert to the east, Camp Pendleton and Riverside County to the north, and the U.S./Mexico border to the south, San Diego County encompasses 4,526 square miles. Unlike markets such as Las Vegas and Phoenix, San Diego is land-constrained resulting in a limited availability of developable land. This land shortage raises high entry barriers for new real estate development but also creates a premium for land values. Pacific Coastline San Diego State University

18 10637 scripps summit court, san diego, california 20 san diego county overview (continued) POPULATION With a total population close to 1.3 million, San Diego is the second largest city in California behind Los Angeles and the eighth largest city in the United States. At approximately 3.1 million people, San Diego County is the second largest county in the state and the fifth largest county in the country. FREEWAYS San Diego is well-served by a large network of interstate freeways and state highways. The four major interstates serving San Diego include I-5, I-15, I-8, and I-805. San Diego Trolly QUALITY OF LIFE The National Weather Service describes the San Diego climate as the most nearly perfect in America, characterized as Mediterranean with warm winters and cool summers. In 2014, San Diego County enjoyed over 300 sunny days with an average daily temperature of 70.5 degrees. San Diego s climate encourages a yearround outdoor lifestyle and is a key component to shaping the region s identity: The sport of triathlon was born on San Diego s Mission Bay in With over 300 sunny days a year, San Diego County is the model region to swim, bike, run and train 12 months out of the year. According to the Washington Times, more Olympians on the 2012 American team in London called San Diego home than any other city in the United States. San Diego s historic surf culture has evolved over the last 30 years into a new subculture called action sports. With hundreds of companies focused on surfing, skating, biking and other new sporting adventures, San Diego is considered the action sports capital of the world. Seaworld

19 21 capital markets investment properties-socal san diego county overview BEACHES San Diego is known for idyllic beaches and magnificent year-round weather. With over 70 miles of coastline, unique beach communities have developed their own identities from Imperial Beach near the Mexican border to Oceanside and Camp Pendleton. The beach communities of La Jolla and Del Mar are two of the most affluent zip codes in the United States while Encinitas is known as the yoga capital of America. As the ultimate beach honor, Dr. Beach ranked San Diego s Coronado beach as the best in the world in SAN DIEGO ECONOMIC OVERVIEW San Diego is a bastion of innovation and boasts a proud entrepreneurial spirit. In 2014, Radius ranked San Diego as the best place to start a business and the Organization for Economic Co-Operation and Development ranked San Diego as the second most inventive city in the world based on the number of patents filed in the region. San Diego s pioneering mentality combined with the region s military/ defense industries, a flourishing tech sector, the third largest biotech cluster in the country, and one of the world s strongest tourism industries, creates a diversified economic engine that produced a Gross Regional Product of $206 billion in EMPLOYMENT According to the Bureau of Labor Statistics (BLS ), San Diego s employment growth over the last year was one of the best in the nation. The San Diego economy added 43,000 jobs in 2014 with 58% of the job growth occurring in the fourth quarter. San Diego s total employment grew by more than 3.2% yearover-year, ranking sixth out of the 25 most populous Metros in the United States. The U.S. average growth rate remained at only 2.0%. San Diego s professional, scientific, and technical sectors grew by 6.7%, the fourth highest growth rate in the nation. San Diego County s unemployment rate dropped to 5.3% in February 2015, down from 5.8% in January and a dramatic decrease from 7.1% in February The current unemployment rate is the lowest since May Torrey Pines State Beach Downtown San Diego

20 10637 scripps summit court, san diego, california 22 san diego county overview GDP San Diego County s Gross Domestic Product (GDP), the region s estimated total value of California s economy, reached $206 billion in 2014 the highest level in the region s history. San Diego s economic output accounts for more than 9.0% of California s Gross State Product (GSP) and 1.2% of the national Gross Domestic Product. If San Diego County were a country, it would rank as the 50th largest economy in the world. Sources: Bureau of Economic Analysis, U.S. Department of Commerce, NUSIPR MAJOR INDUSTRIES According to the California Employment Development Department, 90% of San Diego businesses employ less than 20 people. San Diego s location also creates a unique synergy with manufacturers on both sides of the U.S./Mexico border. Combined with the region s military/defense industries, an elite healthcare industry, the third largest biotech cluster in the country and one of the world s strongest tourism industries, San Diego s economy is one of the most diversified in the United States. Source: California Employment Development Department TOURISM Tourism and travel constitute the second largest traded industry in the region (behind Research/Technology/Innovation) employing 165,000 people. In 2013, 33.1 million people visited San Diego and spent close to $8.4 billion. The overall annual economic impact of the visitor industry on the San Diego regional economy is more than $18.3 billion. Convention booking service Cvent ranked San Diego as the fifth most popular destination for conventions in At the San Diego Convention Center, 111 total conventions and trade shows were held in 2014 with an estimated attendance of 858,000 individuals creating a $1.4 billion economic impact and $20.6 million in tax revenue. San Diego has approximately 461 hotel and motel properties with over 56,000 rooms available to visitors. Source: San Diego Tourism Authority BIOTECHNOLOGY/BIOTECH BEACH San Diego s biotechnology cluster is the third largest concentration of life science companies in the United States behind San Francisco and Boston. There are over 500 life sciences companies employing 36,000 people in the San Diego region with a $7.5 billion annual economic impact. Due to the region s strong concentration of life science and biotech companies, San Diego has earned the moniker Biotech Beach. The region is one of the largest recipients of NIH funding for new projects and advancements in life science research. Source: BIOCOM PORT OF SAN DIEGO The Port of San Diego is the fourth-largest of 11 deep water ports in California and the top port in the state for the movement of breakbulk cargo. The Port of San Diego is comprised of 3,415 acres of land and 3,402 acres of water located within the cities of San Diego, National City, Chula Vista, Imperial Beach and Coronado. The Port s top trading partners include China, Japan, Mexico, Canada, Korea, Australia, Chile and the Pacific Northwest. Top imports include dry bulk such as cement and sand, breakbulk such as lumber and wind turbine products, automobiles and liquid bulk such as diesel and jet fuel. Top exports include dry bulk and automobiles. With 33,356 jobs located at the port tidelands, the Port of San Diego created a direct economic impact of $4.4 billion in CALIFORNIA/MEXICO BORDER San Diego serves as a gateway to Mexico, capitalizing on NAFTA trade agreements, expanding imports through maquiladora factory operations on both sides of the border. Mexico and NAFTA are key factors in San Diego s continued economic prosperity, export production, and growth. International trade accounts for more than one-third of San Diego manufacturing dollars. San Diego County is home to three border crossing terminals including San Ysidro, Otay Mesa and Tecate, comprising the busiest international border crossings in the world. According to the Bureau of Transportation Services, over 30 million people crossed the border from Mexico into the United States through the San Ysidro border crossing in 2014.

21 market overview

22 industrial market scripps summit court, san diego, california 24 Scripps Ranch and I-15 Market Overview The I-15 Corridor is home to a diverse group of industries that are both vital to the well-being of I-15 s micro-market and also helps bring stability to San Diego s overall economy. There is a large contingency of Defense, Aerospace and Technology companies within the area. Some of the more notable tenants include: Lockheed Martin, Sony, Intuit, GEICO Insurance, General Atomics, Nokia, Petco, Hewlett- Packard and Northrop Grumman. According to the San Diego Military Advisory Council, San Diego boasts the largest concentration of military-based companies in the world. Defense technology continues to thrive as development of unmanned aerial vehicles (UAV s) make up the largest segment within San Diego s Defense Industry. San Diego is also home to several cyber security, robotics and shipbuilding companies; making the overall region more appealing to the Defense Industry. Although the I-15 Corridor is often thought of as a hub for Defense, key technology tenants have begun to inundate the region in recent years. San Diego is attractive to these tenants because the region employs five times the national average of R&D jobs, according to the San Diego Economic Development Council. All of this bodes well for the commercial real estate market as the continued investment in San Diego helps create jobs and boosts the economy. The I-15 Corridor Industrial Market flourished during Q as well. There was a total of 61,884 sq. ft. of positive net absorption for the quarter, achieving a year-todate net absorption of 712,208 sq. ft., a number not seen since before Leasing activity of 212,984 sq. ft. boosted the year-to-date total to over 1.3 million sq. ft. In Q4 2014, vacancy decreased an additional 30 bps to 5.6%, the lowest it has been since before the recession. Poway, which continually has one of the lowest vacancy rates of all of the submarkets in San Diego County, enjoyed a second-straight quarterly decrease of 30 bps to finish with a low of 2.6%. The central location of Poway, as well as a concentration of desirable low-finish product has had a positive effect on leasing. Both high-finish and low-finish rates increased quarter-over-quarter, $0.06 and $0.09 respectively. However, both were slightly lower than one year ago. The I-15 Corridor Industrial Market s overall vacancy finished the year down considerably. Q experienced an overall vacancy decrease of 30 bps, decreasing the year-to-date total by 300 bps. The current overall vacancy rate of 5.6% is 820 bps lower than the peak of 13.8% seen in Q Q s decrease can be attributed to General Atomic s lease in Poway. In addition, there were also 6 new leases totaling 55,737 sq. ft. that signed in Q Every industrial subtype posted positive year-to-date net absorption to bring the overall year-to-date number to positive 712,208 sq. ft., a 154,062 sq. ft. improvement from the previous year.

23 I-15 CORRIDOR INDUSTRIAL SCRIPPS RANCH INDUSTRIAL

24 San Diego Industrial Market Overview: Key Statistics The wave of positivity continued in Q as the San Diego Industrial Market enjoyed strong positive net absorption, rental rate growth and yet another quarter of increased construction activity. A milestone was achieved in Q with total vacancy dropping to 5.1%, 30 basis points (bps) below the pre-recession trough of 5.4% in Q also marked the 12th consecutive quarter of positive net absorption bringing year-to-date absorption to over two million square feet. Net absorption was positive for the 12th consecutive quarter. San Diego County posted 893,119 positive sq. ft. bringing year-to-date net absorption to 2,049,645 sq. ft. North County accounted for more than half of that year-to-date absorption with 1,102,298 positive sq. ft. The unemployment rate decreased across the board. San Diego hit a post-recession low posting 4.9% overall unemployment; this is the first time San Diego unemployment has been sub 5.0% since the beginning of The United States continued its steady 15 quarter downward trend; it decreased 20 bps to 5.3%. According to CBRE Econometric Advisors (CBRE EA), San Diego s construction industry grew by 5.4% in the last 12 months. This industry will continue to gather more strength as new building construction increases throughout San Diego. CBRE EA also gauges industrial employment by tracking certain industries that fall into the manufacturing and distribution sectors. These jobs account for approximately 150,000 of the 1.37 million jobs in San Diego and are expected to only see a 0.2% annual growth rate over the next five years. This low growth rate is relative because San Diego is not a typical manufacturing and distribution hub. The overall industrial asking lease rate has been notable over the past three years, increasing more than 35% since Q Every region in San Diego is currently at or below 6.0% total vacancy. UNEMPLOYMENT RATE YEAR-OVER-YEAR JOB GROWTH

25 scripps summit court, san diego, california industrial market (continued) In Q2 2015, industrial rates were once again pushed higher due to the tightening of the market. The asking rate increased nearly 10% to $1.08 quarter-overquarter with every product type posting gains. Low-finish product had a $0.03 gain in Q to bring year-to-date rental growth to 9.8% after more than five years of rates hovering just under $0.70. High-finish product had a $0.13 gain in Q continuing its steady increase over the last four years. A contributing factor to this quarter s increase was the evergrowing San Diego life science sector. Their demand for space has led to the repositioning of several office buildings into high-rate lab buildings. Quarter-over-quarter total vacancy decreased 40 bps to 5.1% and every region is now at or below 6.0% total vacancy. Not only was Q the 12th consecutive quarter of decreasing vacancy, but overall vacancy is now below the pre-recession trough of 5.4% seen back in Southwest Riverside s decrease of 150 bps quarter-over-quarter was the largest, followed closely by both North County and South San Diego which saw 130 bps and 100 bps decreases, respectively. Warehouse and Light Industrial both had a strong quarter, decreasing 90 and 80 bps to 4.1% and 3.3% total vacancy, respectively. OVERALL VACANCY RATE

26 28 industrial market (continued) While Q net absorption decreased from the previous quarter, industrial product nonetheless posted an impressive 893,119 positive sq. ft. It is important to note that Warehouse and Light Industrial product each posted over 400,000 sq. ft. of positive net absorption. As North County is dense with Light Industrial product and South San Diego is dense with Warehouse product, both of these regions posted impressive positive net absorption of 722,942 sq. ft. and 305,839 sq. ft., respectively year-todate positive net absorption is already over two million square feet, more than 60% of 2014 s record total. OVERAL AVAILABILITY RATE GROSS ABSORPTION

27 tenant profile

28 tenant profile scripps summit court, san diego, california 30 DYE CNC is a premier machine shop with over two decades of machining experience for the defense, aerospace, automotive, aviation, medical, electronic and general high technology industries. DYE CNC is a key supplier for the country s leading corporations of these industries. DYE CNC was established in 2010 as a result of many talented machinists that were eager to maintain a presence at DYE Precision and promote their CNC precision machining strengths utilizing machine tools with 3 Axis capabilities. As DYE CNC s reputation exploded so did its customer base, to keep up many more machine tools were added to complement and broaden the CNC machining capability of DYE CNC to include 4 and 5 Axis capability. With this new machine offering, DYE CNC has strategically differentiated itself and gained a foothold in the Aerospace and Defense industries. This coupled with full offering of metal processing and assembly has become its distinction that promotes DYE CNC as the best machine shop in San Diego County. DYE is one of the few companies in the United States fully capable of producing professional grade custom products for; Military and Commercial Aircraft, Satellites and other Aerospace Projects, Medical, and Missiles and other Defense products. Earlier this year DYE Precision CNC surpassed its goals by shipping more than 500,000 automotive products YTD for its OEM customers. This is in support of its 3 year contract to provide precise aluminum products for next generation cars and SUV s. DYE CNC additionally offers customers engineering support and solutions to address the ever expanding needs of their markets. As of February 2015 DYE CNC successfully went through the two days audit for AS9100 second stage with ZERO Findings. DYE CNC received the AS9100 Certification in April to put a closure for the successful plan that was originated in The AS9100 Certification assures customer satisfaction, aerospace industry manufacturers must produce world class quality products at the lowest possible cost. This document standardizes, to the greatest extent possible, the quality system requirements of the aerospace industry. Standardization of compliance requirements results in cost savings due to the elimination or reduction of unique requirements developed for each different customer.

29 31 capital markets investment properties-socal tenant profile (continued) The company holds full ISO 9001, an international standard that gives requirements for an organization s quality management system (QMS), in addition to International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) Certifications through DNV. ITAR contains a United States Munitions List (USML) of restricted articles and services. EAR contains a Commerce Control List (CCL) of regulated commercial items, including those items that have both commercial and military applications. The legislation seeks to control access to specific types of technology and the associated data. Its goal is to prevent the disclosure or transfer of sensitive information to a foreign national. Partial Client List: Cubic Defense, Space X, ATK Space Systems, Northrop Grumman, Department of Defense, Boeing, NASA, Nuclear Medicine, Solar Turbine and Caterpillar Ownership: Private Headquarters: San Diego, CA Website: jpg?v=

30 lease abstract scripps summit court, san diego, california 32 Prepared by: CBRE Financial Consulting Date: 7/9/2015 Tenant: Dye Precision CNC Property: Scripps Summit Court Original Start Date: Close of Escrow (TBD) Suite(s): Size: 60,351 SF Expiration Date: 10 Years from COE Suite(s): Size: Term (months): 120 Months Suite(s): Size: Building Size (if stated): 60,351 SF Pro-Rata: % Total: 60,351 SF Initial Base Rent Schedule: Monthly Date: Year 1 $ 72, /Mo $1.20 PSF/Mo Date: Year 2 $ 74, /Mo $1.24 PSF/Mo Date: Year 3 $ 77, /Mo $1.28 PSF/Mo Date: Year 4 $ 79, /Mo $1.32 PSF/Mo Date: Year 5 $ 81, /Mo $1.35 PSF/Mo Date: Year 6 $ 84, /Mo $1.40 PSF/Mo Date: Year 7 $ 86, /Mo $1.44 PSF/Mo Date: Year 8 $ 89, /Mo $1.48 PSF/Mo Date: Year 9 $ 92, /Mo $1.52 PSF/Mo Date: Year 10 $ 94, /Mo $1.57 PSF/Mo 1st Option Term: Date: Years 1-5 Fair Market Value Reimbursements: Method: NNN Gross w/ BY Full Service Other Tenant shall pay all Utilities, Insurance, and Real Property Taxes direct. Options: Renewal Options: Yes Tenant shall have one (1) - five (5) year option at the greater of prior rent or fair market value. Notes: Lease shall be standard AIR lease form to be executed at close of escrow.

31 financial analysis

32 executive summary scripps summit court, san diego, california 36 PROPERTY DESCRIPTION Property Type Industrial Size of Improvements 60,351 SF Property Address Scripps Summit Court Currently Vacant as of 7/1/15 0 SF San Diego, CA Current Occupancy as of 7/1/ % ACQUISITION AND RESIDUAL SUMMARY LEVERAGE SUMMARY MARKET LOAN Purchase Price as of October 1, 2015 $178 PSF $10,750,000 Initial Loan Funding (as of Oct-15) $5,912,500 Loan-To-Price 55.00% Funding Date Oct-15 Maturity Date Sep-26 Loan Term 11.0 Years Amortization Period 30 Years Initial Interest Only Period (If Any) 24 Months Interest Rate 4.75% Year 1 Year 2 Year 3 Origination Fee on Initial Loan Funding 1.00% Physical Occupancy % % % Exit Fee on Balance at Maturity 0.00% Capitalization Rate 8.11% 8.35% 8.60% Loan Constant 6.26% Cash Return 8.05% 8.29% 8.54% Debt Service Coverage Ratio (NOI) 2.36x Leveraged Cash Return 11.94% 12.47% 11.19% Debt Service Coverage Ratio (CF) 2.34x Purchase Price as of October 1, 2015 $10,750,000 Net Residual Value as of September 30, 2026 $17,685,000 Total Initial Loan Principal (5,912,500) Net Residual Per Square Foot $293 Total Initial Loan Fees 59,125 Residual Capitalization Rate 7.50% Holdbacks and Escrows 0 Residual Cost of Sale 2.00% Initial Equity $4,896,625 ALL CASH IRR 11.90% LEVERAGED IRR 17.84% EQUITY REQUIRED $10,750,000 EQUITY REQUIRED $4,896,625 PROFIT $17,326,574 PROFIT $14,374,787 ALL CASH EQUITY MULTIPLE 2.61x LEVERAGED EQUITY MULTIPLE 3.94x [1] Leveraged analysis is based on financing that a particular investor may or may not be able to obtain. This information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property. The value of this transaction to you depends on tax and other factors which should be evaluated by your tax, financial, and legal advisors. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs. THIS IS AN OPINION OF VALUE OR COMPARATIVE MARKET ANALYSIS AND SHOULD NOT BE CONSIDERED AN APPRAISAL. In making any decisions that rely upon this analysis, it should be noted that we have not followed the guidelines for development of an appraisal or analysis contained in the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation.

33 37 capital markets investment properties-socal financial assumptions GLOBAL VACANT SPACE LEASING SECOND GENERATION LEASING Analysis Period Occupancy and Absorption Retention Ratio 70% Commencement Date October 1, 2015 Projected Vacant at 10/1/15 0 SF End Date September 30, 2026 Currently Vacant as of 7/1/15 0 SF Financial Terms Term 11 Years Percentage Vacant at 7/1/ % 2015 Monthly Market Rent $1.20 PSF Rent Adjustment 3.00% Annually Area Measures Lease Term 5 Years Building Square Feet (NRSF) 60,351 SF EXPENSES Expense Reimbursement Type NNN Growth Rates Operating Expense Source Estimates Tenanting Costs Consumer Price Index (CPI) 3.00% Rent Abatements Other Income Growth Rate 3.00% Management Fee (% of EGR) None New 3 Month(s) Operating Expenses 3.00% Renewal 0 Month(s) Year One Actual $2.89 PSF/Yr Real Estate Taxes Reassessed Yes [4] Weighted Average 0.90 Month(s) Year One Pro-Forma at 100% Occupancy $2.89 PSF/Yr Millage Rate % Real Estate Taxes 2.00% Special Assessments $6,919 Tenant Improvements ($/NRSF) Market Rent Growth [1] W/A Market Rent In-Place Rent [2] New $3.00 PSF CY % FY $1.27 PSF - $1.20 PSF Renewal $0.50 PSF CY % FY $1.37 PSF - $1.24 PSF Weighted Average $1.25 PSF CY % FY $1.44 PSF - $1.28 PSF CY % FY $1.48 PSF - $1.32 PSF Commissions CY % FY $1.53 PSF - $1.35 PSF New 6.00% CY % FY $1.58 PSF - $1.40 PSF Renewal 3.00% CY % FY $1.62 PSF - $1.44 PSF Weighted Average 3.90% CY % FY $1.67 PSF - $1.48 PSF CY % FY $1.72 PSF - $1.52 PSF Downtime CY % FY $1.77 PSF - $1.57 PSF New 9 Month(s) Weighted Average 3 Month(s) General Vacancy Loss 0.00% [3] Capital Reserves (CY 2015 Value) $0.10 PSF Notes: Market rent growth is calculated on a calendar-year basis. All in-place and market rental rates above are stated on a fiscal-year basis. [1] Market rent growth is based on the CBRE Econometric Advisors Industrial Outlook for the 1-15 Corridor submarket as of Q [2] In-place rent equal to Scheduled Base Rent including Fixed/CPI Increases divided by the weighted-average physical occupancy during each fiscal year. [3] General Vacancy Loss factor includes losses attributable to projected lease-up, rollover downtime, and fixturing downtime. All tenants are subject to this loss factor. [4] Real Estate Taxes have been reassessed at the estimated purchase price based on a millage rate of % plus special assessments of $6,919.

34 0 cash flow scripps summit court, san diego, california 38 Fiscal Year Ending - September Physical Occupancy % % % % % % % % % % 75.00% % Overall Economic Occupancy [1] % % % % % % % % % % 69.72% % Weighted Average Market Rent $1.27 $1.37 $1.44 $1.48 $1.53 $1.58 $1.62 $1.67 $1.72 $1.77 $1.83 $1.88 Weighted Average In Place Rent [2] $1.20 $1.24 $1.28 $1.32 $1.35 $1.40 $1.44 $1.48 $1.52 $1.57 $1.66 $1.88 Total Operating Expenses PSF Per Month $0.24 $0.25 $0.25 $0.26 $0.26 $0.27 $0.28 $0.28 $0.29 $0.30 $0.30 $0.38 [3] FY 2016 REVENUES $/SF/MO Scheduled Base Rent Gross Potential Rent $1.20 $871,646 $897,796 $924,730 $952,472 $981,046 $1,010,477 $1,040,791 $1,072,015 $1,104,176 $1,137,301 $1,322,257 $1,361,925 Absorption & Turnover Vacancy (323,290) 0 Base Rent Abatements (99,897) 0 Total Scheduled Base Rent , , , , ,046 1,010,477 1,040,791 1,072,015 1,104,176 1,137, ,070 1,361,925 Expense Reimbursements , , , , , , , , , , , ,364 TOTAL GROSS REVENUE ,046,156 1,076,365 1,107,454 1,139,455 1,172,390 1,206,291 1,241,181 1,277,095 1,314,062 1,352,110 1,074,080 1,625,289 General Vacancy Loss EFFECTIVE GROSS REVENUE ,046,156 1,076,365 1,107,454 1,139,455 1,172,390 1,206,291 1,241,181 1,277,095 1,314,062 1,352,110 1,074,080 1,625,289 OPERATING EXPENSES CAM (0.05) (37,025) (38,136) (39,280) (40,459) (41,672) (42,923) (44,210) (45,536) (46,903) (48,310) (49,759) (51,252) Insurance (0.03) (22,215) (22,882) (23,568) (24,275) (25,003) (25,754) (26,526) (27,322) (28,142) (28,986) (29,855) (30,751) Property Taxes (0.16) (115,270) (117,551) (119,876) (122,249) (124,669) (127,137) (129,654) (132,222) (134,841) (137,513) (140,238) (189,823) TOTAL OPERATING EXPENSES (0.24) (174,510) (178,569) (182,724) (186,983) (191,344) (195,814) (200,390) (205,080) (209,886) (214,809) (219,852) (271,826) NET OPERATING INCOME , , , , ,046 1,010,477 1,040,791 1,072,015 1,104,176 1,137, ,228 1,353,463 CAPITAL COSTS Tenant Improvements (104,425) 0 Leasing Commissions (271,894) 0 Capital Reserves (0.01) (6,171) (6,356) (6,547) (6,743) (6,945) (7,154) (7,368) (7,589) (7,817) (8,052) (8,293) (8,542) TOTAL CAPITAL COSTS (0.01) (6,171) (6,356) (6,547) (6,743) (6,945) (7,154) (7,368) (7,589) (7,817) (8,052) (384,612) (8,542) OPERATING CASH FLOW $1.20 $865,475 $891,440 $918,183 $945,729 $974,101 $1,003,323 $1,033,423 $1,064,426 $1,096,359 $1,129,249 $469,616 $1,344,921 ACQUISITION & RESIDUAL SALE Purchase Price ($10,750,000) All Cash Net Residual Value [4] ,685,250 IRR CASH FLOW BEFORE DEBT ($10,750,000) $865,475 $891,440 $918,183 $945,729 $974,101 $1,003,323 $1,033,423 $1,064,426 $1,096,359 $1,129,249 $18,154, % MARKET LOAN [5] Loan Funding / Payoff 5,912, (4,912,495) Loan Fees (59,125) Leveraged Annual Debt Service 0 (280,844) (280,844) (370,109) (370,109) (370,109) (370,109) (370,109) (370,109) (370,109) (370,109) (370,109) IRR CASH FLOW AFTER DEBT ($4,896,625) $584,631 $610,596 $548,074 $575,620 $603,992 $633,214 $663,314 $694,317 $726,250 $759,140 $12,872, % UNLEVERAGED Basis (Purchase Price + All Capital Costs) $10,756,171 $10,762,527 $10,769,074 $10,775,817 $10,782,762 $10,789,916 $10,797,284 $10,804,873 $10,812,690 $10,820,742 $11,205,354 NOI Yield (NOI/UNLEVERAGED Basis) 8.10% 8.34% 8.59% 8.84% 9.10% 9.37% 9.64% 9.92% 10.21% 10.51% 7.62% NOI Return (NOI/Total Investment) 8.11% 8.35% 8.60% 8.86% 9.13% 9.40% 9.68% 9.97% 10.27% 10.58% 7.95% UNLEVERAGED Cash Return (Operating CF/Total Investment) 8.05% 8.29% 8.54% 8.80% 9.06% 9.33% 9.61% 9.90% 10.20% 10.50% 4.37% LEVERAGED Basis (Initial/Future Equity + Principal Paydown) $4,902,796 $4,909,152 $5,006,933 $5,109,340 $5,216,593 $5,328,924 $5,446,576 $5,569,802 $5,698,871 $5,834,061 $6,351,984 LEVERAGED Cash-on-Cash (LEVERAGED NOI/LEVERAGED Basis) 12.05% 12.57% 12.90% 13.27% 13.63% 13.99% 14.34% 14.68% 15.01% 15.33% 9.72% LEVERAGED Cash Return (CFAD/Initial Equity + Costs to Stabilize) 11.94% 12.47% 11.19% 11.76% 12.33% 12.93% 13.55% 14.18% 14.83% 15.50% 2.03% Debt Service Coverage Ratio (NOI) 3.10x 3.20x 2.50x 2.57x 2.65x 2.73x 2.81x 2.90x 2.98x 3.07x 2.31x Debt Service Coverage Ratio (CF) 3.08x 3.17x 2.48x 2.56x 2.63x 2.71x 2.79x 2.88x 2.96x 3.05x 1.27x Rolling - All Cash IRR 17.18% 13.96% 12.91% 12.39% 12.08% 11.87% 11.73% 11.62% 11.54% 9.28% 11.90% Rolling - Leveraged IRR 30.77% 23.80% 21.47% 20.21% 19.39% 18.79% 18.33% 17.96% 17.64% 13.95% 17.84% [1] This figure takes into account vacancy/credit loss, absorption vacancy, turnover vacancy, and base rent abatements. [2] This figure does not include any amount related to expense reimbursements. Only Scheduled Base Rent and Fixed/CPI Increases are included in this calculation, which is based on the weighted-average physical occupancy during each fiscal year. [3] Based on 60,351 square feet. [4] Net Residual Value is calculated by dividing Year 12 NOI by the Residual Cap Rate of 7.50% and applying a 2.00% Cost of Sale. [5] Market Debt based on 55% Loan-to-Value, 4.75% Interest Rate, 30-Year Amortization, and 1.00% Loan Fee. [6] All Capitalization Rates, Equity Multiples and Cash-on-Cash returns are based on Total Investment or initial equity including costs to stabilize. Internal rate of return and in-place returns are based on Purchase Price or initial equity.

35 39 capital markets investment properties-socal rent roll Market Square % of Lease Term Rental Rates Recovery Rent Abatements Tenant Leasing Assumption / Suite Tenant Name Feet Property Begin End Begin Monthly PSF Annually PSF Type Month # % Abated Improvements Commissions Market Rent Comments/Options Dye Precision CNC 60, % Oct-2015 Sep-2025 Current $72,637 $1.20 $871,646 $14.44 NNN Market Oct-2016 $74,835 $1.24 $898,023 $14.88 $1.20 NNN Oct-2017 $77,048 $1.28 $924,577 $15.32 Oct-2018 $79,362 $1.32 $952,339 $15.78 Oct-2019 $81,776 $1.36 $981,307 $16.26 Oct-2020 $84,190 $1.40 $1,010,276 $16.74 Oct-2021 $86,755 $1.44 $1,041,055 $17.25 Oct-2022 $89,319 $1.48 $1,071,834 $17.76 Oct-2023 $92,035 $1.53 $1,104,423 $18.30 Oct-2024 $94,751 $1.57 $1,137,013 $18.84 Tenant has one (1) - five (5) year option at the greater of prior rent or FMV. TOTALS / AVERAGES 60,351 $72,637 $1.20 $871,646 $14.44 OCCUPIED SqFt 60, % VACANT SqFt 0 0.0% TOTAL SqFt 60, %

36 10637 scripps summit court, san diego, california 40 replacement costs analysis Land Size 140,263 Square Feet Building Size 60,351 Square Feet HARD COSTS Land Acquisition $30.00 $4,207,896 Hard $75.00 $4,526,325 Tenant $50.00 $905,265 TOTAL HARD COSTS $9,639,486 75% SOFT COSTS A & 2.0% $192,790 Insurance $0.37 PSF 22,330 Property Taxes 1.03% Hard Costs 99,287 Development Fees $3.00 PSF of Bldg. Area 181,053 Legal 1% Hard Costs 96,395 Developer s Profit 8% Hard Costs 771,159 Loan Fee 1% Hard Costs 96,395 Contingency 2% Hard Costs 192,790 Interest on Land Carry 3% Land Cost 126,237 Interest on Construction 5% Hard Costs 481,974 Interest on Lease Up 3% Hard Costs 289,185 Leasing Commission $10.00 PSF 603,510 TOTAL SOFT COSTS $3,153,103 25% Total Development Costs $12,792, % Cost Per Square Foot $ Economic Rent Calculation Replacement Costs $ Required Return 8.0% $16.96 Operating Expenses $0 $- Less Vacancy/Credit 5% $0.85 Economic Rent Required, PSF per year (NNN) $17.81 Economic Rent Required, PSF per month (NNN) $1.48

37 by TORREY PINES PACIFIC OCEAN DEL MAR SOLANA BEACH ENCINITAS WELLS FARGO I-5 FREEWAY SCRIPPS POWAY PARKWAY SCRIPPS SUMMIT DRIVE WEXFORD STREET SCRIPPS SUMMIT COURT N

38 10637 scripps summit court, san diego, california 42 AFFILIATED BUSINESS DISCLOSURE CBRE operates within a global family of companies with many subsidiaries and/or related entities (each an Affiliate ) engaging in a broad range of commercial real estate businesses including, but not limited to, brokerage services, property and facilities management, valuation, investment fund management and development. At times different Affiliates may represent various clients with competing interests in the same transaction. For example, this Memorandum may be received by our Affiliates, including CBRE Investors, Inc. or Trammell Crow Company. Those, or other, Affiliates may express an interest in the property described in this Memorandum (the Property ) may submit an offer to purchase the Property and may be the successful bidder for the Property. You hereby acknowledge that possibility and agree that neither CBRE, Inc. nor any involved Affiliate will have any obligation to disclose to you the involvement of any Affiliate in the sale or purchase of the Property. In all instances, however, CBRE Inc. will act in the best interest of the client(s) it represents in the transaction described in this Memorandum and will not act in concert with or otherwise conduct its business in a way that benefits any Affiliate to the detriment of any other offeror or prospective offeror, but rather will conduct its business in a manner consistent with the law and any fiduciary duties owed to the client(s) it represents in the transaction described in this Memorandum. CONFIDENTIALITY AGREEMENT This is a confidential Memorandum intended solely for your limited use and benefit in determining whether you desire to express further interest in the acquisition of the Property. This Memorandum contains selected information pertaining to the Property and does not purport to be a representation of the state of affairs of the property or the owner of all Property (the Owner ), to be allinclusive or to contain all or part of the information are provided for general reference purposes only and are based on assumptions relating to the general economy, market conditions, competition and other factors being the control of the Owner and CBRE,Inc. Therefore, all projections, assumptions and other information provided and made herein are subject to material variation. All references to acreages, square footages, and other measurements are approximations. Additional information and an opportunity to inspect the Property will be made available to interested and qualified prospective purchasers. In this Memorandum, certain documents, including leases and other materials, are described in summary form. These summaries do not purport to be complete nor necessarily accurate descriptions of the full agreements referenced. Interested parties are expected to review all such summaries and other documents of whatever nature independently and not rely on the contents of this Memorandum in any manner. Neither the Owner or CBRE, Inc., nor any of their respectful directors, officers, Affiliates or representatives make an representation or warranty, expressed or implied, as to the accuracy or completeness of this Memorandum or any of its contents; and you are to rely solely on your investigations and inspections of the Property in evaluating a possible purchase of the real property. The Owner expressly reserved the right, at its sole discretion, to reject any or all expressions of interest or offers to purchase the Property, and/or to terminate discussions with any entity at any time with or without notice which may arise as a result of review of this Memorandum. The Owner shall have no legal commitment or obligation to any entity reviewing this Memorandum or making an offer to purchase the Property unless and until written agreement(s) for the purchase of the Property have been fully executed, delivered and approved by the Owner and any conditions to the Owner s obligations therein have been satisfied or waived. By receipt of this Memorandum, you agree that this Memorandum and its contents are of a confidential nature, that you will hold and treat it in the strictest confidence and that you will not disclose this Memorandum or any of its contents to any other entity without the prior written authorization of the Owner or CBRE, Inc. You also agree that you will not use this Memorandum or any of its contents in any manner detrimental to the interest of the Owner or CBRE, Inc. If after reviewing this Memorandum, you have no further interest in purchasing the Property, kindly return this Memorandum to CBRE, Inc. DISCLAIMER 2015 CBRE, Inc. The information containing in this document has been obtained for sources believed reliable. While CBRE, Inc. does not doubt its accuracy, CBRE, Inc. has not verified it and makes no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property, The value of this transaction to you depends on tax and other factors which should be evaluated by your tax, financial and legal advisors. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs. Photos herein are the property of their respective owners and use of these images without the express written consent of the owner is prohibited. CBRE and the CBRE logo are service marks of CBRE, Inc. and/or its affiliated or related companies in the United States and other countries. All other marks displayed on this document are the Property of their respective owners.